SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
WEINER'S STORES, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 76-0355003
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification no.)
6005 WESTVIEW DRIVE, HOUSTON, TEXAS 77055
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 688-1331
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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NONE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of class)
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS REGISTRATION STATEMENT, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY WEINER'S STORES, INC. THIS REGISTRATION STATEMENT IS FOR
INFORMATIONAL PURPOSES AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO PURCHASE THE COMMON STOCK OF WEINER'S STORES, INC.
OR ANY OTHER SECURITIES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
REGISTRATION STATEMENT.
Weiner's Stores, Inc. intends to furnish its stockholders with annual
audited financial statements and the related independent auditors' report and
with quarterly unaudited summary financial information for the first three
quarters of each fiscal year.
TABLE OF CONTENTS
Page
Item 1. Business........................................................ 4
General......................................................... 4
Retailing Strategy.............................................. 4
No Prior Market for the Common Stock............................ 5
Absence of Public Market........................................ 5
Limited Post-Chapter 11 Case Operating History.................. 5
Significant Stockholder......................................... 5
Registration Rights Agreement................................... 6
Seasonality..................................................... 6
Secured Debt; Ability to Refinance.............................. 6
Capital Expenditure Needs....................................... 6
Competition..................................................... 7
Certain Tax Matters............................................. 7
Dividend Matters................................................ 7
Preferred Stock................................................. 7
"Fresh Start" Reporting......................................... 8
Merchandising................................................... 8
Store Presentation.............................................. 9
Advertising and Promotion.......................................10
Management Information Systems..................................10
Method of Payment...............................................10
Managers and Other Employees....................................11
Trademarks and Service Marks....................................11
Other Information...............................................11
Item 2. Financial Information...........................................11
Selected Historical and Interim Financial Data..................11
Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................13
Forward-Looking Statements.................................13
General....................................................13
"Fresh Start" Reporting Presentation and Recent Accounting
Pronouncements..........................................14
Results of Operations......................................15
Liquidity and Capital Resources............................19
Impact of Inflation........................................23
Item 3. Properties......................................................23
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Item 4. Security Ownership of Certain Beneficial Owners and Management..24
Item 5. Directors and Executive Officers................................26
Item 6. Executive Compensation..........................................29
Summary Compensation Table......................................29
Employment Agreements...........................................29
Option Grants in Fiscal Year 1997...............................30
1997 Stock Incentive Plan.......................................31
General ..................................................31
Administration.............................................32
Number of Shares Available.................................32
Awards Under the Stock Plan................................33
Duration, Amendment and Termination........................34
Certain Limitations on Deductibility of Executive
Compensation..............................................35
Incentive Compensation Plan................................35
Pension Plan....................................................35
Directors Compensation..........................................35
Compensation Committee Interlocks and Insider Participation.....36
Board Compensation Committee Report on Executive Compensation...36
Item 7. Certain Relationships and Related Transactions..................37
Item 8. Legal Proceedings...............................................39
Item 9. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters................................39
Item 10. Recent Sales of Unregistered Securities.............................40
Item 11. Description of Registrant's Securities to Be Registered.............40
Certain Provisions of the Certificate of Incorporation and Bylaws..41
Item 12. Indemnification of Directors and Officers...........................43
Item 13. Financial Statements and Supplementary Data.........................43
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................43
Item 15. Financial Statements and Exhibits...................................43
INDEX TO HISTORICAL FINANCIAL STATEMENTS......................................46
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ITEM 1. BUSINESS
GENERAL
Weiner's Stores, Inc., a Delaware corporation (the "Company"),
incorporated in December 1991, is a neighborhood family retailer of branded
products for value-conscious customers. The Company operates 128 stores located
primarily in strip shopping centers in Texas and Louisiana, and employs
approximately 3600 full- and part-time employees. References herein to "Weiner's
Stores, Inc." or the "Company" are to Weiner's Stores, Inc., together with its
subsidiary, unless the context otherwise indicates.
The majority of the Company's stores are in strip shopping centers and
free standing structures. The current store prototype is approximately 25,000
square feet, with approximately 20,000 square feet for selling space, with the
remaining space for office, receiving and layaway storage. The current stores
range in total size from approximately 16,000 square feet to 51,000 square feet.
After achieving peak sales of $323 million in 1992, the Company
experienced two years of declining sales and profitability. Numerous factors
contributed to the declining results in such periods: the increasing entrance of
competition into the Company's markets, the general weak apparel market
experienced by many retailers across the United States, and weather cycles that
had a negative impact on apparel purchasing. In addition, in early 1995,
primarily as a result of such factors, the Company experienced a decline in
credit availability from both vendors and its lender.
On April 12, 1995 (the "Commencement Date"), the Company commenced its
case (Case No. 95-417(PJW)) (the "Chapter 11 Case") under chapter 11 ("Chapter
11") of title 11 of the United States Code (the "Bankruptcy Code") before the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). The Company operated its business and managed its properties as a
debtor in possession in bankruptcy until August 26, 1997, when the Company's
Amended Plan of Reorganization under chapter 11 of the Bankruptcy Code, dated
June 24, 1997, as amended (the "Plan"), was confirmed by order of the Bankruptcy
Court on August 13, 1997.
An entirely new management team was installed shortly after the filing
of the Chapter 11 Case. The new management team has taken initiatives to refocus
the retailing strategy, re-establish positive vendor relationships, remodel
store presentation, update and modernize systems, revise promotional strategies
based on demographic analyses, operate more efficiently and inexpensively, and
maximize value in real estate. The Company emerged from bankruptcy on August 26,
1997 (the "Effective Date").
RETAILING STRATEGY
The Company's retailing strategy is to closely focus on its unique
markets and on the buying habits of its largely ethnic customer base. This
strategy was undertaken after a review of the markets that the Company serves,
including the demographics and income level of its customers. The Company
performed an in-depth analysis with a view toward better understanding the
productivity of the merchandising assortment at a department level in terms of
sales per square foot and gross margin dollars.
The Company's retailing strategy is intended to enhance the Company's
ability to compete effectively with off-price retailers, specialty stores,
discount stores and department stores. The Company believes its position as a
local neighborhood retailer enables it to understand the needs of its shoppers,
focus on the distinct priorities and tastes of its primarily ethnic customer
base, provide more complete assortments than off-price retailers and specialty
stores, sell major branded merchandise that is not available to discount stores
and provide more convenient locations and offer better pricing than department
stores.
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NO PRIOR MARKET FOR THE COMMON STOCK
Substantially all of the presently outstanding common stock, par value
$.01 per share, of the Company ("Common Stock") was issued on the Effective Date
pursuant to the Company's Plan which was confirmed August 13, 1997 by order of
the Bankruptcy Court. The consummation of the Plan on the Effective Date
resolved the Chapter 11 Case which the Company had commenced on April 12, 1995.
Pursuant to the Plan, 18,600,000 shares of Common Stock were issued to holders
of general unsecured claims against the Company, some of whom may prefer to
dispose of their shares rather than to retain them.
The actual market value of the Common Stock issued pursuant to the Plan
may have been and may continue to be affected by prevailing interest rates,
conditions in the financial markets, the initial issuance of Common Stock to
holders of claims and other factors. There is currently no established public
trading market for the Common Stock nor is it known whether or when one will
develop. There can be no assurance that an active market will develop. Further,
there can be no assurance as to the degree of price volatility in any such
particular market. While the Plan was developed based on an assumed
reorganization value of $3.36 per share of the Common Stock, such valuation is
not an estimate of the price at which the Common Stock may trade in the market.
The Company has not attempted to make any such estimate in connection with the
development of the Plan. No assurance can be given as to the market prices that
will prevail for the Common Stock following the Effective Date.
ABSENCE OF PUBLIC MARKET
The Company expects to file an application for the Common Stock to be
included for quotation in the NASDAQ National Market System and will comply with
applicable state securities and "blue sky" laws. There can be no assurance that
such application will be approved or as to the timing of such approval.
LIMITED POST-CHAPTER 11 CASE OPERATING HISTORY
The Company's emergence from Chapter 11 reorganization occurred very
recently, and consequently the Company's subsequent operating history is
limited. No historical financial statements or other financial information for
any period subsequent to the Effective Date is yet available for evaluating the
Company's post- emergence performance. Financial statements for such future
periods will not be comparable to the historical financial statements included
herein, for the reasons discussed under "Financial Information -- Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General."
SIGNIFICANT STOCKHOLDER
Chase Bank of Texas (formerly known as Texas Commerce Bank N.A.)
("Chase") holds approximately 45.0% of the outstanding shares of the Common
Stock. See "Security Ownership of Certain Beneficial Owners and Management."
Accordingly, Chase may be in a position to control the outcome of actions
requiring stockholder approval, including the election of directors. This
concentration of ownership could also facilitate or hinder a negotiated change
of control of the Company and, consequently, have an impact upon the value of
the Common Stock.
Further, the possibility that Chase may determine to sell all or a
large portion of its shares of Common Stock in a short period of time may
adversely affect the market price of the Common Stock. See "-- Absence of Public
Market."
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REGISTRATION RIGHTS AGREEMENT
The Company and Chase have entered into a Registration Rights
Agreement. Under this agreement, Chase may, at any time after the date that is
(i) 24 months after the Effective Date and prior to the Termination Date
(defined as the earlier of (a) the date on which Chase ceases to own any
Registrable Securities (any securities issued or issuable with respect to the
Common Stock received by Chase pursuant to the Plan) and (b) the date that is
seven years after the Effective Date), Chase may make a written request of the
Company (a "Demand Request") for registration under the Securities Act of 1933,
as amended (the "Securities Act") (a "Demand Registration") of all or part of
Chase's Registrable Securities and (ii) 60 months after the Effective Date and
prior to the Termination Date, Chase may make an additional Demand Request for a
Demand Registration of all or part of Chase's Registrable Securities; provided
that in each case the number of Registrable Securities proposed to be sold by
Chase must be equal to no less than 20% of the number of Registrable Securities
received by Chase pursuant to the Plan. See "Market Price of and Dividends on
the Registrant's Common Equity and Related Stockholder Matters" and "Description
of Registrant's Securities to Be Registered." Sales of or offers to sell a
substantial number of shares of Common Stock by Chase at any time, or the
perception by investors, investment professionals and securities analysts of the
possibility of such sales, could adversely affect the market for and prevailing
prices with respect to the Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management" and "Market Price of and Dividends on the
Registrant's Common Equity and Related Stockholder Matters."
SEASONALITY
The Company's business is seasonal with approximately 44% of the
Company's annual sales being generated during the back-to-school selling season
in July and August and the Christmas selling season of November and December.
Consequently, substantially all of the Company's operating income is earned in
those four months and the Company typically sustains an operating loss in many
of the other months. In addition, the Company's performance, like that of many
other retailers, is sensitive to the overall U.S. economic cycle and related
economic conditions which influence consumer trends and spending patterns.
SECURED DEBT; ABILITY TO REFINANCE
On the Effective Date, the Company entered into a Credit Agreement (the
"Credit Facility") with The CIT Group/Business Credit, Inc. ("CIT"), as Agent
and Lender. The Credit Facility provides for a subfacility of $15 million for
letters of credit. Funds borrowed under the Credit Facility will be available
for working capital in the ordinary course of business and for other general
corporate purposes. See "Financial Information -- Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for a description of the Credit Facility.
CAPITAL EXPENDITURE NEEDS
The capital plan is designed to allocate funds to projects that are
necessary to support the Company's strategic plan. Over the plan period, the
Company plans to commit funds to the opening of new stores, major remodels at
stores, the maintenance and upgrading of existing locations and the replacement
of management information systems and store point-of-sale systems. The Company
expects to open 30 locations in existing and contiguous markets over the next
five-year period. See "Financial Information -- Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." The funds for such capital expenditures are expected to be
obtained from the Company's operating cash flow and borrowings under the Credit
Facility. The Company is subject to certain limitations under the Credit
Facility. The Credit Facility limits the Company's capital expenditures for
1997, 1998 and 1999 to $7,000,000 in each of those years, and $5,000,000 for the
period from January 30, 2000 to August 31, 2000. There can be no assurances that
the Company will have the resources to fulfill its capital plan.
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There can be no assurance that the Company, upon expiration of the
Credit Facility, will be able to obtain replacement financing to fund future
borrowings and letters of credit or that such replacement financing, if
obtained, would be on terms equally as favorable to the Company.
COMPETITION
The retailing industry is intensely competitive. The Company is in
competition with numerous retail outlets in the geographic areas in which they
operate, including general merchandise stores, off-price stores, large national
discount chains and department stores. Many of the retailers with which the
Company competes have greater financial resources than the Company's stores and
may have various other financial or other competitive advantages over the
Company.
CERTAIN TAX MATTERS
In the Company's financial statements included elsewhere in this
Registration Statement, the Company reports consolidated federal income tax net
operating loss ("NOL") carryforwards of approximately $50 million as of January
25, 1997. As a result of the implementation of the Plan, such NOL carryforwards
and certain other income tax attributes of the Company will be reduced by
approximately $19 million, representing cancellation of indebtedness, and will
be subject to certain significant limitations on annual utilization in the
future. In accordance with Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), issued by
the American Institute of Certified Public Accountants, the income tax benefit
resulting from any future realization of the NOL carryforwards not recognized as
of the Effective Date will be credited to reorganization value in excess of
amounts allocable to identifiable assets and then to additional paid-in capital.
See "Financial Information -- Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 8 of the Notes to Financial
Statements included elsewhere in this Registration Statement.
DIVIDEND MATTERS
The Company presently does not intend to pay cash dividends in the
foreseeable future. In addition, the terms of the Credit Facility prohibit
payment of cash dividends on the Common Stock. The payment of cash dividends, if
any, will be made only from assets legally available for that purpose, and will
depend on the Company's financial condition, results of operations, current and
anticipated capital requirements, restrictions under then existing debt
instruments and other factors deemed relevant by the Board of Directors of the
Company.
PREFERRED STOCK
Until such time (if any) as the Board of Directors of the Company
determines that the Company should issue shares of the Company's preferred
stock, without par value ("Preferred Stock"), and establishes the respective
rights of the holders of one or more series thereof, it is not possible to state
the actual effect of authorization of the Preferred Stock upon the rights of
holders of Common Stock. The effects of such issuance could include, however,
among others: (i) reduction of the amount of cash otherwise available for
payment of dividends on Common Stock if dividends are also payable on the
Preferred Stock, (ii) restrictions on dividends on Common Stock if dividends on
the Preferred Stock are in arrears, (iii) dilution of the voting power of Common
Stock (if the Preferred Stock has voting rights (including, without limitation,
votes pertaining to the removal of directors)) and (iv) restriction of the
rights of holders of Common Stock to share in the Company's assets upon
liquidation until satisfaction of any liquidation preference granted to the
holders of Preferred Stock. In addition, so called "blank check" preferred stock
(such as the Preferred Stock) may be viewed as having possible anti-takeover
effects, if it were used to make a third party's attempt to gain control of the
Company more difficult, time consuming or costly. The Company has no current
plans pursuant to which Preferred Stock would be issued as an anti-takeover
device or otherwise.
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"FRESH START" REPORTING
The interim financial information for the thirty weeks ended August 25,
1997 and as of October 25, 1997 included under "Selected Historical and Interim
Financial Data" reflects the effectiveness of the Plan and the application of
the principles of "fresh start" reporting in accordance with SOP 90-7, which
provides guidance for financial reporting by Chapter 11 debtors during and upon
emergence from Chapter 11 cases. SOP 90-7 is applicable because the Company's
pre-reorganization stockholders received less than 50% of the reorganized
Company's newly issued Common Stock and the enterprise value of the reorganized
Company is less than the total of all prepetition allowed claims and
post-petition liabilities. Accordingly, such interim financial information is
not comparable to the Company's historical financial information included
elsewhere herein.
The reorganization value used as a basis for the "fresh start"
reporting was determined to be in a range of $70.0 million to $80.0 million.
After cash distributions of $11.1 million provided for in the Plan, the midpoint
value is approximately $63.9 million. Based upon the midpoint reorganization
value, the equity value of the Company as of August 26, 1997 was calculated to
be approximately $63.9 million. The range of reorganization values of the
Company was determined based upon a number of assumptions, including a
successful reorganization of the Company's business and finances in a timely
manner, the achievement of the forecasts reflected in the financial projections,
and the availability of certain tax attributes.
Estimates of value do not purport to be appraisals or necessarily
reflect the values which may be realized if assets are sold. The estimates of
value represent hypothetical reorganization values of the Company as the
continuing owner and operator of its business and assets. Such estimates reflect
computations of the estimated reorganization value of the Company through the
application of various valuation techniques and do not purport to reflect or
constitute appraisals, liquidation values or estimates of the actual market
value that may be realized through the sale of any securities to be issued
pursuant to the Plan, which may be significantly different than the amounts set
forth herein.
"Fresh start" accounting adjustments have been made to reflect the
estimated adjustments necessary to adopt "fresh start" reporting in accordance
with SOP 90-7. "Fresh start" reporting requires that the reorganization value of
the Company be allocated to its assets in conformity with Accounting Principles
Bulletin Opinion No. 16, "Business Combinations," for transactions reported on
the basis of the purchase method. Any reorganization value greater than the fair
value of specific tangible or identified intangible assets is to be included on
the Balance Sheet as Reorganization Value in Excess of Amount Allocable to
Identifiable Assets and amortized over time.
MERCHANDISING
The Company's merchandising strategy is to closely focus on its markets
and on the desires and preferences of its largely ethnic customer base. This
strategy was undertaken after a review of the markets that the Company serves,
including the demographics and income levels of its customers. In addition, the
Company performed an in-depth analysis with the view toward better understanding
the productivity of the merchandising assortment at a department level in terms
of sales per square foot and gross margin dollars. The Company recognizes that
one of its competitive strengths relative to many discounters is the
availability of several key brands such as Nike, Reebok, Fila, Champion, Levi,
Lee and Starter. Much of the in-store and overall marketing strategies will
focus on such brands. Management has and will invest appropriate resources and
priority to strengthening these relationships and adding incremental products
from these vendors. Additionally, the Company has identified several additional
brands that will enhance the assortment and is developing action plans to
address appropriate vendors. The Company has also identified several merchandise
departments and classifications that have been nonexistent or insufficiently
funded or spaced. The Company is defining classifications and/or items,
identifying vendors, creating space allocations and developing pricing
strategies to properly address these businesses.
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Fiscal 1996 Percentage of Sales by Merchandise Categories
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Shoes................................................. 18.9%
Children's............................................ 21.3%
Accessories........................................... 2.9%
Women's............................................... 28.3%
Men's................................................. 28.6%
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100.0%
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Pricing. The Company offers substantially the same merchandise
assortments and prices company-wide. The Company prices its merchandise to be
perceived as a good value at fair prices. The pricing structure must reflect the
environment in which the stores and the customers are located. Sales prices of
merchandise must be sharp and extremely competitive with respect to national
mass merchandise discounters and better than the department stores.
Purchasing. The Company purchases merchandise from many top brand name
companies primarily through domestic sources. Since January 28, 1995, the
Company has narrowed and consolidated its total number of vendors from over 775
to fewer than 475. This reduction resulted from the narrowing of the merchandise
mix and from management's initiatives to develop selected vendor relationships
which will result in long-term partnerships. The Company focused on merchandise
categories and product lines to enable the Company to work with fewer vendors
than do most mall-based retailers. The Company has established relationships
with many of its vendors to plan promotions, review marketing strategies,
exchange information through electronic data interchange, manage stock levels
and develop quick response inventory replenishment systems. Management believes
the appeal of the Company's merchandising strategy to quality brand name vendors
leads to cooperative advertising funding.
During fiscal 1996, the Company had two major vendors that accounted
for approximately 15% and 10%, respectively, of total Company purchases. The
Company's 20 largest vendors accounted for approximately 56% of total Company
purchases during fiscal 1996. The Company believes that its relationship with
its vendors is strong. The Company's business is driven by brand names, and the
loss of the use of a brand name could have a material adverse effect on its
business.
STORE PRESENTATION
The Company designed a prototype store to test whether well executed
merchandise strategies, merchandise presentation, a customer friendly store and
an organized layout could impact sales performance. The store remodel
encompassed the prototype shell, layout, fixturization, signage and presentation
standards that management believes are appropriate to possibly roll out to other
stores.
Since the prototype remodel, the Company has completed three additional
full remodels in similar format. The Company has also developed a hybrid remodel
where the shoe department and stock rooms are not moved, but substantially all
other aspects of prototype are incorporated. As of the date of this Registration
Statement, the Company has completed 16 of these stores. In addition, the
Company has completed a mini-remodel at approximately 100 other locations. As of
the date of this Registration Statement, substantially all of the stores have
been upgraded. Mini-remodels encompass many of the concepts of the full remodel
at a significantly lower cost. In addition to adjusted layouts and adjacencies
and upgraded signage, mini-remodels get most of the new fixture package, the
valance with logos and, depending on the store configuration, new lighting and
power aisles. In addition to opening four new stores in the prototype format,
the Company plans to remodel additional stores to this format annually. These
capital expenditures will be funded with cash generated by operations and
borrowings under the Credit Facility. See "Financial Information -- Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources -- Capital Expenditures."
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ADVERTISING AND PROMOTION
All advertising and promotion decisions are made by the Company's
central merchandising and advertising staff. Key advertising and promotional
programs include:
o adjusting the calendar to introduce new events and replace old
events;
o improving the quality of media with more thematic
presentations that appeal to the Company's ethnic customer
base, illustration of products with greater impact and color
assortment, and specialized merchandise classifications;
o coordinating with buyers to maximize return, ensure in-stock
position on ad items, and evaluate pricing programs;
o moving the mix of media to more focused promotional booklets;
o targeting print mailings in a more efficient manner and
focusing on the ethnicity of different markets; and
o upgrading in-store signage.
The Company has strategically laid out marketing strategies that target
its demographic strengths. These demographic strengths are: the ethnic make-up
of its customers, value conscious women shoppers with more than one child in the
household, fashion oriented young adult males with strong demand for
identification with branded products, and the Company's neighborhood presence.
MANAGEMENT INFORMATION SYSTEMS
The Management Information Systems (MIS) at the Company are in the
process of being overhauled. In the fall of 1996, the Company began the
installation of the STS System, an integrated merchandising package (the "STS
System") which includes modules for Accounts Payable, General Ledger, Planning,
Allocation, Merchandise Analysis, Stores and the Distribution Center. The
accounts payable and the general ledger package were installed in fall 1996. In
spring 1997, the allocations module was installed and in early fall 1997, the
planning module was installed. The remaining portion of the installation is
scheduled for completion in early 1998.
The complete implementation of the STS System will generate benefits in
the following areas: a more defined merchandise reporting system with
incremental classification, improved open-to-buy reporting, better information
with regard to markdowns, price line reporting, vendor analysis reporting,
open-to-ship reporting for improved allocation and auto-allocation capabilities
and marketing profitability analysis. Following the installation, the Company
will be in a position to install upgraded point-of-sale ("POS") systems and
hardware at the store level.
METHOD OF PAYMENT
Approximately 90% of the Company's net sales are made by cash or check,
and 10% by national credit cards. Under the related credit card agreements, the
Company receives daily payments on amounts charged on those cards. Such a
payment is not subject to recovery by such companies unless the charge in
question involved the invalid use of such card. The Company does not have its
own credit card program, but does offer a lay-away program.
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MANAGERS AND OTHER EMPLOYEES
A typical Company store has three salaried managers and approximately
20 other employees, of which approximately 6 are full-time. During fiscal 1996,
the total number of employees (including part-time and seasonal employees)
ranged from a low of 3,500 to a high of approximately 3,800 during the Christmas
selling season. Approximately 63% of the Company's non-salaried employees are
part-time. None of the Company's employees are covered by collective bargaining
agreements. The Company considers its relationship with its employees to be
good.
TRADEMARKS AND SERVICE MARKS
The mark "Weiner's" and other marks using the Company's distinctive
logos are federally registered service marks of the Company, and the Company
considers these marks and the accompanying goodwill and customer recognition to
be valuable to its business. The Company has registrations for other trademarks
and service marks routinely used in the Company's marketing, advertising and
promotions. Such registrations can be kept in force in perpetuity through
continued use of the marks and timely applications for renewal.
OTHER INFORMATION
The Company has not experienced, and does not expect to experience, any
material effects on its capital expenditures, operating performance or
competitive position from the Company's compliance with applicable environmental
laws and regulations.
The Company has no export sales and no foreign-based operations. The
Company is engaged in one line of business, the retail sale of merchandise.
Accordingly, no data with respect to industry segments is reported herein.
The Company has not spent and does not plan to spend material amounts
on Company-sponsored research and development activities.
ITEM 2. FINANCIAL INFORMATION
SELECTED HISTORICAL AND INTERIM FINANCIAL DATA
The following table presents selected historical financial data as of
and for each of the fiscal years in the five-year period ended January 25, 1997
and as of and for each of the thirty-nine weeks ended October 26, 1996 and
October 25, 1997, respectively. The following selected historical financial data
should be read in conjunction with the financial statements and the related
notes and other information contained elsewhere in this Registration Statement,
including information set forth herein under "-- Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The historical financial data as of and for each of the fiscal years in
the three year period ended January 25, 1997 are derived from financial
statements audited by Deloitte & Touche LLP, independent auditors. Additionally,
information for each of the fiscal years in the two year period ended December
31, 1993 has been derived from audited financial statements.
The historical financial data as of and for the thirty-nine weeks ended
October 26, 1996 and October 25, 1997 are derived from the unaudited financial
statements which, in the opinion of the Company, reflect all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the financial condition and results of operations as of and for
the thirty-nine weeks ended October 26, 1996 and October 25, 1997. Operating
results for the thirty-nine weeks ended October 25, 1997 are not necessarily
indicative of
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operating results for the full fiscal year and are presented to reflect the 1997
operations of the Company for the 30 weeks prior to and the nine weeks
subsequent to the reorganization.
The financial condition and results of operations of the Company, after
giving effect to the Plan and the transactions contemplated thereby, will not be
comparable to the historical financial condition or results of operations of the
Company due to the Plan and the transactions contemplated thereby. See "--
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
------------------- ---------
Thirty-nine Thirty Nine
Fiscal years ended (a) weeks ended weeks ended weeks ended
December 31, December 31, January 28, January 27, January 25, October 26, August 25, October 25,
1992 1993 1995 (b) 1996 1997 1996 1997 (c) 1997
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share and per square foot data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $ 322,805 $ 308,869 $ 307,256 $ 260,136 $ 263,043 $ 200,071 $ 160,315 $ 35,800
Operating income (loss) 7,370 (3,930) (19,124) (25,114) (17,268) (1,114) 1,391 (2,904)
Net income (loss) 4,664 363 (19,664) (25,605) (17,220) (1,114) 18,541 (2,928)
Pro forma net income (loss)
per share of common
stock (e) $ (0.86) $ (0.15)
BALANCE SHEET DATA:
Working capital $ 35,626 $ 34,927 $ (2,686) $ 64,925 $ 54,728 $ 64,164 $ 39,722
Total assets 114,935 113,231 94,106 103,242 91,285 108,092 93,410
Long-term debt 15,960 19,328 -- -- -- -- --
SELECTED OPERATING DATA:
Comparable store net sales
(decrease) increase N/A (2.9)% (0.4)% (11.9)% 6.7% 10.1% (0.2)% (d)
Number of stores
Beginning of period 145 149 155 158 139 139 131 134
Opened 6 8 4 -- -- -- 3 1
Closed 2 2 1 19 8 -- -- --
End of period 149 155 158 139 131 139 134 135
Total sales square feet at end
of period (000's) 2,882 2,999 3,012 2,890 2,740 2,741 2,884
Average net sales per store $ 2,196 $ 2,032 $ 1,963 $ 1,752 $ 1,949 $ 1,439 $ 1,475 (d)
Average net sales per square
foot $ 112 $ 103 $ 102 $ 90 $ 96 $ 73 $ 68 (d)
</TABLE>
- -------------------------------------
NOTES:
(a) In fiscal years 1992 and 1993, the Company was on a calendar year that ended
on December 31, 1992 and December 31, 1993, respectively. Fiscal year 1994
was a thirteen month period that ended on January 28, 1995. Fiscal years
1995 and 1996 both contained 52 weeks and ended on January 27, 1996 and
January 25, 1997, respectively. Fiscal 1997, which contains 53 weeks, will
end on the Saturday closest to January 31st (January 31, 1998).
(b) As of January 1, 1994, the Company changed its fiscal year from a calendar
year to a 52 or 53 week fiscal year. As a result of this change, the
financial information for the period ended January 28, 1995 (fiscal 1994)
includes the results of the calendar year ended December 31, 1994 and the
results from the month of January 1995, a period of 13 months. The Company
has not restated the results of operations on a comparative 52 week basis.
(c) Net income includes $1,519 in fresh start expense and $18,683 in
extraordinary gain related to debt discharge.
(d) Amount presented is for the thirty-nine weeks ended October 25, 1997.
(e) Pro forma net income (loss) per share of common stock has been calculated
assuming the 19,900,000 shares of common stock and common stock equivalents
issued on or about August 26, 1997, in connection with the reorganization of
the Company, were issued and outstanding for all periods presented.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking statements. The
words "anticipate," "believe," "expect," "plan," "intend," "seek," "estimate,"
"project," "will," "could," "may" and similar expressions are intended to
identify forward-looking statements. These statements include, among others,
information regarding future operations, future capital expenditures and future
net cash flow. Such statements reflect the Company's current views with respect
to future events and financial performance and involve risks and uncertainties,
including, without limitation, general economic and business conditions, changes
in foreign, political, social and economic conditions, regulatory initiatives
and compliance with governmental regulations, the ability to achieve further
market penetration and additional customers, and various other matters, many of
which are beyond the Company's control, including, without limitation, the risks
described under the caption "Business." Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove to be incorrect,
actual results may vary materially and adversely from those anticipated,
believed, estimated or otherwise indicated. Consequently, all of the
forward-looking statements made in this Registration Statement are qualified by
these cautionary statements and there can be no assurance that the actual
results or developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company or its business or operations.
GENERAL
The Company's financial results have changed significantly over the
past three years, principally as a result of the filing for reorganization under
Chapter 11 on April 12, 1995. Immediately before and after the Company's filing
for reorganization, the Company experienced a decline in sales and gross
margins, primarily as a result of the increased competition in the Texas market.
At the same time, the Company experienced a decline in credit availability from
both vendors and its lender.
Since the commencement of the Chapter 11 Case, the Company has focused
on the stabilization of operations and on the strengthening of vendor
relationships. The Company anticipates continued improvement in payment terms
for merchandise inventory purchases subsequent to the Effective Date.
The Company has also developed and begun to implement a comprehensive
retailing concept and related operating strategies and to implement real estate
initiatives that encompass the closing of underperforming stores, the assumption
of leases and remodeling of continuing stores and opening of new stores.
As part of the Company's development and implementation of its business
plan, and the related evaluation of its long-term market strategies, the Company
determined to close certain stores with the goal of reducing its operating
expenses and improving its overall operating results. In the fiscal year ended
January 27, 1996 (fiscal 1995), the Company closed 19 stores. In the fiscal year
ended January 25, 1997 (fiscal 1996), the Company closed eight stores. Further,
the Company has provided for seven store closings which were completed in
December 1997. Operating results related to the closed stores for periods prior
to their closing are included in the respective captions in the statements of
operations.
In April 1995, the Company obtained a postpetition working capital
facility (the "DIP Credit Facility"). The Company's vendor relationships were
strengthened by the availability of the DIP Credit Facility, as well as by the
new management team's expanded communication efforts with vendors and its
initiatives to develop long-term partnerships with vendors. The DIP Credit
Facility expired on the Effective Date of the Plan.
The Company entered into the new Credit Facility on the Effective Date.
It provides a $40 million revolving credit facility and a subfacility of $15
million for letters of credit. The interest rate is either CIT's
13
<PAGE>
reference rate plus 0.375% or the Eurodollar Rate (as defined in the Credit
Facility) plus 2.25%, at the Company's option. The working capital facility
requires an annual unused line fee of 1/4 of 1% per annum on the excess of any
of the commitment over the sum of the outstanding loans and letters of credit
exposure. Under the terms of the Credit Facility, capital expenditures are
limited to $7 million in fiscal years 1997, 1998 and 1999, and to $5 million in
the period commencing January 30, 2000 and ending August 31, 2000. The Credit
Facility expires in August 2000.
As a result of the financial condition of the Company just prior to
filing for Chapter 11 protection and during the Chapter 11 Case, the Company
incurred reorganization and bankruptcy-related expenses of approximately $24.8
million. Approximately $8.9 million of these expenses related to the closing of
34 unprofitable stores and one warehouse facility. The Company also incurred
professional fees of approximately $8.4 million, systems and store
reorganization costs of $3.2 million, organizational reorganization costs of
$2.8 million, and approximately $1.5 million of miscellaneous restructuring
costs.
"FRESH START" REPORTING PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS
On the Effective Date, the Company, among other things, restructured
its capitalization in accordance with the Plan and the transactions contemplated
thereby. Additionally, the application of "fresh start" reporting as of the
Effective Date included adjustments to certain assets. As a result, the
financial condition and results of operations of the Company after giving effect
to the Plan and the transactions contemplated thereby will not be comparable to
the financial condition and results of operations of the Company as of any dates
and for any periods prior to the Effective Date.
At the beginning of fiscal 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." In fiscal
1996, the Company adopted Statement of Financial Accounting Standards No. 121
("FAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." There are no other recently issued
accounting pronouncements that have been or will be adopted by the Company that
are expected to have a material impact on the Company's financial statements.
14
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the results of operations for each of
the past three fiscal years in the three-year period ended January 25, 1997 and
for the thirty-nine weeks ended October 26, 1996 and October 25, 1997, expressed
as a percentage of net sales:
<TABLE>
<CAPTION>
Thirty-nine weeks
Fiscal years ended ended
------------------ -----------------
1/28/95 1/27/96 1/25/97 10/26/96 10/25/97
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES:
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Other income............................ 0.9% 0.8% 0.7% 0.7% 0.6%
Interest................................ 0.0% 0.3% 0.2% 0.3% 0.1%
------------- -------------- -------------- -------------- -------------
Total............................... 100.9% 101.1% 100.9% 101.0% 100.7%
------------- -------------- -------------- -------------- -------------
COSTS AND EXPENSES:
Cost of goods sold...................... 68.2% 68.9% 67.9% 66.2% 66.9%
Selling, administrative and other
operating costs..................... 36.9% 36.6% 33.0% 32.8% 31.8%
Depreciation and amortization........... 1.4% 1.4% 1.4% 1.4% 1.5%
Reorganization expense.................. 0.6% 3.7% 4.1% 1.2% 1.2%
Impairment of assets.................... 0.0% 0.0% 1.2% 0.0% 0.0%
------------- -------------- -------------- -------------- -------------
Total 107.1% 110.6% 107.6% 101.6% 101.4%
------------- -------------- -------------- -------------- --------------
OPERATING LOSS.............................. -6.2% -9.5% -6.7% -0.6% -0.7%
INTEREST EXPENSE............................ 1.2% 0.3% 0.0% 0.0% 0.0%
FRESH START ADJUSTMENTS..................... 0.0% 0.0% 0.0% 0.0% 0.8%
------------- -------------- -------------- -------------- ---------------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN...................... -7.4% -9.8% -6.7% -0.6% -1.5%
INCOME TAX BENEFIT.......................... 1.0% 0.1% 0.0% 0.0% 0.0%
------------- -------------- -------------- -------------- -------------
LOSS BEFORE EXTRAORDINARY GAIN.............. -6.4% -9.7% -6.7% -0.6% -1.5%
EXTRAORDINARY GAIN.......................... 0.0% 0.0% 0.0% 0.0% 9.5%
------------- -------------- -------------- -------------- -------------
NET (LOSS) INCOME........................... -6.4% -9.7% -6.7% -0.6% 8.0%
============= ============== ============== ============== ==============
</TABLE>
Comparison of Thirty-Nine Weeks Ended October 25, 1997 and Thirty-Nine Weeks
Ended October 26, 1996
Net sales decreased $4.0 million or 2.0% from $200.1 million for the
thirty-nine weeks of fiscal 1996 to $196.1 million for the thirty-nine weeks of
fiscal 1997. The decrease in sales was primarily attributable to the closing of
eight stores in late fiscal 1996, a slight decline in same-store sales (0.2%),
offset by the opening of four new stores in fiscal 1997. The stabilization of
same-store sales can be primarily attributed to improving the quality of the
overall merchandise assortment, better store presentation and enhanced sales
promotion efforts.
Cost of goods sold decreased $1.0 million or 0.8% from $132.3 million
for the thirty-nine weeks of fiscal 1996 to $131.3 million for the same period
of fiscal 1997. As a percentage of net sales, cost of goods sold increased from
66.2% in the thirty-nine weeks of fiscal 1996 to 66.9% in the same period of
fiscal 1997. Gross margin decreased $2.9 million or 4.3% from $67.7 million for
the thirty-nine weeks of fiscal 1996 to $64.8
15
<PAGE>
million for the thirty-nine weeks of fiscal 1997, primarily as a result of the
sales decline discussed above. The gross margin rate for the thirty-nine weeks
of fiscal 1997 was 33.1% compared to 33.8% for the same period of fiscal 1996.
This decline of 0.7% was primarily due to an increase in inventory shortage of
0.6%.
Other income, including interest income, decreased $0.6 million from
$2.0 million for the thirty-nine weeks of fiscal 1996 to $1.4 million for the
same period of fiscal 1997. The decline in other income is primarily due to the
reduction in cash available for investment in 1997 as compared to 1996, lowering
interest income significantly. It was further impacted by the tightening of the
layaway program which increased the minimum dollar layaway transaction from any
amount to $50. This change has reduced layaway transactions, thus reducing the
layaway service charge, restocking fee and abandonment fee.
Selling, general and administrative expenses decreased 4.9% from $65.6
million for the thirty-nine weeks of fiscal 1996 to $62.4 million for the same
period of fiscal 1997. As a percentage of net sales, selling, general and
administrative expenses decreased from 32.8% for the thirty-nine weeks of fiscal
1996 to 31.8% for the corresponding period for fiscal 1997. This performance
reflects the Company's continued efforts to control and reduce expenses.
Depreciation and amortization expense increased $0.3 million or 11.1%
from $2.7 million in the thirty-nine weeks of fiscal 1996 to $3.0 million in the
thirty-nine weeks of 1997. This increase is primarily attributable to the
increased capital expenditures in fiscal 1996 and fiscal 1997 and the
amortization of the reorganization value in excess of amounts allocable to
identifiable assets, which was offset by the decrease in depreciation from the
closed stores in fiscal 1996.
Reorganization expense of $2.5 million for the thirty-nine weeks of
fiscal 1996 did not differ significantly from $2.4 million for the thirty-nine
weeks of fiscal 1997 and resulted primarily from professional fees related to
the reorganization.
Interest expense increased slightly from zero in the thirty-nine weeks
of fiscal 1996 to $38,000 in the thirty-nine weeks of fiscal 1997. During the
bankruptcy proceedings, the Company discontinued accruing interest on
substantially all of its prepetition debt. Interest expense will increase in
future periods as the result of the Company's emergence from Chapter 11
reorganization on August 26, 1997. See "-- Liquidity and Capital Resources."
The Company recorded $1.5 million in "fresh start" expense in relation
to its emergence from Chapter 11 reorganization in fiscal 1997. Related "fresh
start" adjustments of $15.9 million were credited to retained earnings in fiscal
1997 to eliminate the Company's cumulative deficit as of the Effective Date.
The Company recorded no current or deferred income tax benefit for
either the thirty-nine weeks ended October 26, 1996 or October 25, 1997. The
recognition of income tax benefits in both periods has been affected by
limitations on the Company's ability to utilize NOL carryforwards. See "Business
- - Certain Tax Matters" and Note 8 of the Notes to Financial Statements included
elsewhere in this Registration Statement.
Extraordinary gain of $18.7 million related to debt discharged in the
Company's emergence from Chapter 11 reorganization was recognized in August
1997.
As a result of the foregoing, the Company recorded net income of $15.6
million for the thirty-nine weeks of 1997 as compared to net loss of $1.1
million in the thirty-nine weeks of 1996.
16
<PAGE>
Comparison of Fiscal Years Ended January 25, 1997 (Fiscal 1996) and January 27,
1996 (Fiscal 1995)
On April 12, 1995, the Company filed for Chapter 11 reorganization. Net
sales increased $2.9 million or 1.1% from $260.1 million in fiscal 1995 to
$263.0 million in fiscal 1996. This increase was primarily attributable to a
6.7% increase in same-store sales. The Company attributes the growth in
same-store sales to its operating strategy of improving the quality of the
overall merchandise assortment by refocusing merchandise categories and product
mix, as well as to its enhanced sales promotion efforts. The same-store sales
increase was partially offset in fiscal 1996 by the closing of 27 stores (19 in
fiscal 1995 and eight in fiscal 1996), bringing the total number of stores
opened at year end fiscal 1996 to 131 from 158 at year end 1994.
Cost of goods sold decreased $0.9 million or 0.5% from $179.4 million
in fiscal 1995 to $178.5 million in fiscal 1996. As a percentage of sales, cost
of goods sold decreased from 68.9% in fiscal 1995 to 67.9% in fiscal 1996. Gross
margin increased $3.7 million or 4.6% from $80.8 million in fiscal 1995 to $84.5
million in fiscal 1996. The increase in gross margin from 31.1% in fiscal 1995
to 32.1% in fiscal 1996 was due to both the above mentioned sales increase and
decrease in cost of goods sold.
Other income including interest income decreased $0.5 million from $2.9
million for fiscal 1995 to $2.4 million for fiscal 1996. The decline in other
income was primarily due to a reduction of interest income which was impacted by
the cash available for investment in fiscal 1996 as compared to fiscal 1995.
Fiscal 1996 was further impacted by the outsourcing of the bad check collection
operation which reduced bad check fee income.
Selling, general and administrative expenses decreased $8.6 million or
9.0% from $95.3 million in fiscal 1995 to $86.7 million in fiscal 1996,
primarily due to the closing of 27 unprofitable stores in fiscal 1996 and 1995.
As a percentage of net sales, selling, general and administrative expenses
decreased from 36.6% in fiscal 1995 to 33.0% in fiscal 1996. This decrease as a
percentage of net sales was primarily the result of continued improvement in the
productivity of store sales employees and corporate personnel through effective
utilization of technology and the closing of unprofitable stores.
Depreciation and amortization expense was $3.7 million for fiscal 1995
and fiscal 1996. The depreciation expense associated with fiscal 1996 capital
expenditures was offset by the elimination of depreciation expense for those
stores closed in late fiscal 1996 and fiscal 1995.
Reorganization items increased $0.9 million or 9.2% from $9.8 million
in fiscal 1995 to $10.7 million in fiscal 1996. Reorganization items represent
expenses incurred as a result of the Chapter 11 Case and subsequent
reorganization efforts and include professional fees and related expenses and
provisions for closed stores. The increase in fiscal 1996 is primarily a result
of professional fees and related expenses and provisions for closed stores in
fiscal 1996 as compared to fiscal 1995.
Interest expense decreased $0.8 million or 100% from $0.8 million in
fiscal 1995 to zero in fiscal 1996. Upon filing for Chapter 11 reorganization,
the Company discontinued accruing interest on substantially all of its
prepetition debt. Interest expense will increase significantly in future years
as a result of the Company's having emerged from Chapter 11 reorganization on
August 26, 1997.
During March 1995, the Financial Accounting Standards Board issued FAS
121. The Company adopted FAS 121 in fiscal 1996. As a result of management's
decision to replace the Company's point-of-sale equipment with more advanced
equipment in the future, an impairment charge of approximately $3.0 million was
recorded in fiscal 1996.
The Company recorded minor current or deferred income tax benefit for
fiscal 1996 and 1995. The recognition of income tax benefits in fiscal 1996 and
fiscal 1995 has been affected by limitations on the Company's ability to utilize
NOL carryforwards. See "Business -- Certain Tax Matters."
17
<PAGE>
As a result of the foregoing, the net loss decreased $8.4 million or
32.8% from $25.6 million in fiscal 1995 to $17.2 million in fiscal 1996 and, as
a percentage of net sales, the net loss was reduced from 9.7% in fiscal 1995 to
6.7% in fiscal 1996.
Comparison of Fiscal Years Ended January 27, 1996 (Fiscal 1995) and January 28,
1995 (Fiscal 1994)
In 1994, the Company adjusted its operating calendar from a calendar
year to a fiscal year; therefore, fiscal 1994 contains thirteen months. See the
information in Note 13 of the Notes to Financial Statements included elsewhere
in this Registration Statement.
On April 12, 1995, the Company filed for Chapter 11 reorganization. Net
sales decreased $47.2 million or 15.4% from $307.3 million in fiscal 1994 to
$260.1 million in fiscal 1995. This decrease was primarily attributable to the
closing of 19 stores in fiscal 1995, to an 11.9% decrease in same store-sales
and to the above-mentioned extra month in fiscal 1994.
Cost of goods sold decreased $30.2 million or 14.4% from $209.6 million
in fiscal 1994 to $179.4 in fiscal 1995. As a percentage of sales, cost of goods
sold increased from 68.2% in fiscal 1994 to 68.9% in fiscal 1995. Gross margin
decreased $16.9 million or 17.3% from $97.7 million in fiscal 1994 to $80.8
million in fiscal 1995. The increase in cost of goods sold as a percentage of
sales and the corresponding decrease in gross margin is primarily the result of
the more aggressive pricing of out-of-date merchandise, as well as an increase
in the proportion of merchandise sold at promotional prices.
Other income including interest income increased $0.3 million from $2.6
million for fiscal 1994 to $2.9 million for fiscal 1995. The increase in other
income was due primarily to an increase in interest income as a result of the
increased cash available for investment in fiscal 1995.
Selling, general and administrative expenses decreased $18.1 million or
16.0% from $113.4 million in fiscal 1994 to $95.3 million in fiscal 1995,
primarily due to the closing of 19 unprofitable stores in fiscal 1995. As a
percentage of net sales, selling, general and administrative expenses decreased
from 36.9% in fiscal 1994 to 36.6% in fiscal 1995. This decrease as a percentage
of net sales was primarily due to the downsizing efforts in corporate areas
following the fiscal 1995 store closings, aggressive management of variable
expenses and more efficient use of promotional expense. In addition, the
Company's control of scheduling hours in relation to sales at the stores
generated payroll savings.
Depreciation and amortization expense decreased $0.5 million or 11.9%
from $4.2 million in fiscal 1994 to $3.7 million in fiscal 1995, and as a
percentage of net sales was 1.4% in both fiscal years.
Reorganization items increased $7.9 million from $1.9 million in fiscal
1994 to $9.8 million in fiscal 1995. Reorganization items represent expenses
incurred as a result of the Chapter 11 Case and subsequent reorganization
efforts and include professional fees and related expenses and provisions for
closed stores. The increase in reorganization items is due to the filing of the
Chapter 11 Case on April 12, 1995 and its related professional fees and expenses
related to store closings.
Interest expense decreased $2.8 million or 78.0%, from $3.6 million in
fiscal 1994 to $0.8 million in fiscal 1995. The majority of interest expense in
these fiscal years related to the interest on the Company's revolving credit
agreement with its bank. The decrease in interest expense is primarily a result
of the Company's discontinued accrual of interest on substantially all of its
prepetition debt.
The Company recorded minor current or deferred income tax benefit for
fiscal 1995. Fiscal 1995 has been affected by limitations in the Company's
ability to utilize NOL carryforwards. See "Business -- Certain Tax Matters." In
fiscal 1994, the Company recorded a tax benefit of $3.0 million as it related to
its ability to carryback its operating loss and recover prior period tax
payments.
18
<PAGE>
As a result of the foregoing, the net loss increased from $19.7 million
in fiscal 1994 to $25.6 million in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents as of October 25, 1997 were
$5.4 million. The following analysis of the Company's liquidity and capital
resources includes discussions of its cash flows, capital expenditures, debt,
credit facilities and income tax matters.
Cash Flows
The Company's operating cash and other working capital needs fluctuate
during the year in relation to its seasonal inventory levels. During fiscal
1994, fiscal 1995 and fiscal 1996, these cash and other working capital needs
were financed by cash on hand, internally generated funds and bank borrowings.
Sources and uses of cash flows during each of the three fiscal years ended
January 27, 1997, and for the thirty-nine week periods ended October 26, 1996
and October 25, 1997, are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Thirty-nine weeks
Fiscal years ended ended
------------------ -----------------
January 28, January 27, January 25, October 26, October 25,
1995 1996 1997 1996 1997
-------------- -------------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C>
Net (loss) income adjusted for noncash items.. $ (13,533) $ (11,529) $ 490 $ 4,050 $ 4,508
Working capital decreases (increases)......... 6,513 35,126 (4,897) (14,792) (12,469)
-------------- -------------- -------------- -------------- -------------
Net cash (used for) provided by operating
activities................................ (7,020) 23,597 (4,407) (10,742) (7,961)
Net cash used for investing activities........ (1,209) (957) (3,948) (2,608) (5,309)
Net cash provided by financing activities..... 7,122 1,479 - - -
-------------- -------------- -------------- -------------- ------------
Net (decrease) increase in cash and cash
equivalents................................... $ (1,107) $ 24,119 $ (8,355) $ (13,350) $ (13,270)
============== ============== ============== ============== =============
</TABLE>
Thirty-Nine Weeks Ended October 25, 1997 and Thirty-Nine Weeks Ended
October 26, 1996
Net cash used for operating activities was $8.0 million or 4.1% of net
sales for the thirty-nine weeks ended October 25, 1997 compared to $10.7 million
or 5.4% of net sales for the thirty-nine weeks ended October 26, 1996. This $2.7
million decrease is attributable to a reduced 1997 inventory increment, offset
partially by decreases in current liabilities in 1997 compared to increases in
1996.
Net cash used for investing activities was $5.3 million for the
thirty-nine weeks ended October 25, 1997 and $2.6 million for the thirty-nine
weeks ended October 26, 1996. The increase is due to the capital expenditure
program being higher in 1997 as it relates to four new stores that opened in
1997 (one in March 1997, two in July 1997 and one in October 1997) and the
installation of new integrated systems and related hardware.
Net cash provided by financing activities was zero in both fiscal
periods.
Fiscal 1996, Fiscal 1995 and Fiscal 1994
For fiscal 1996, the Company experienced a deficit in net cash provided
by operating activities of $4.4 million or 1.7% of net sales compared to net
cash provided by operating activities of $23.6 million or 9.1% of net sales for
fiscal 1995. For fiscal 1994, the Company experienced a deficit in net cash
provided by operating activities in the amount of $7.0 million or 2.3% of net
sales. Cash flows from operating activities consist primarily of the Company's
net loss adjusted for certain noncash expenses, such as depreciation and
amortization expense, deferred income taxes and noncash reorganization items, as
well as changes in working capital amounts,
19
<PAGE>
such as merchandise inventories and accounts payable. Comparing fiscal 1996 to
fiscal 1995, the $28.0 million decrease in net cash provided by operating
activities was due to a $12.0 million increase in the net loss adjusted for
non-cash items, and a $40.0 million decrease in cash from the net decrease in
working capital items. Comparing fiscal 1995 to fiscal 1994, the $30.6 million
improvement in net cash provided by operating activities was due to a $2.0
million improvement in the net loss adjusted for non-cash items, including
non-cash reorganization items and an additional $28.6 million in cash from the
net increase in working capital items. Both fiscal 1995 and fiscal 1996 were
impacted by the Company's filing the Chapter 11 Case on April 12, 1995.
Net cash used for investing activities was $4.0 million in fiscal 1996,
$1.0 million in fiscal 1995 and $1.2 million in fiscal 1994. Purchases of
property and equipment were $4.0 million, $1.1 million and $1.2 million for
fiscal 1996, fiscal 1995 and fiscal 1994, respectively. These property and
equipment additions related primarily to the remodeling of existing stores, as
well as technology expenditures and new stores in fiscal 1994 as discussed in
more detail herein under "-- Capital Expenditures."
Net cash provided by financing activities was zero in fiscal 1996, $1.5
million in fiscal 1995 and $7.1 million in fiscal 1994.
Capital Expenditures
The Company's primary capital requirements have been for the remodeling
of existing stores, the opening of new stores and the enhancement of management
information systems. The Company spent a total of $4.6 million during the three
year period ended January 25, 1997 to upgrade/remodel existing stores. Also
during the past three years, approximately $1.2 million was invested in new
management information systems that included an upgraded technology
infrastructure throughout the organization and improved distribution center
technology.
In connection with the technology upgrade, management believes that the
new management information system is Year 2000 compliant and that the Company
will not incur any additional significant costs for Year 2000 compliance. The
Company is not certain whether its customers, suppliers and other constituents
are Year 2000 compliant. If such customers, suppliers and other constituents are
not Year 2000 compliant, the resolution of their Year 2000 issues could
represent a material event or uncertainty that could reasonably be expected to
significantly impact the Company's future results of operations.
Capital spending is expected to be approximately $5.0 million to $6.5
million in each of fiscal 1997 and fiscal 1998 for the opening of new stores,
remodeling of existing stores and new management information systems. The
Company will fund these capital expenditures from cash generated by operations
and borrowings under the Credit Facility. The Company expects to remodel
additional stores and to open six to seven stores in each of the next several
years. The remaining capital expenditures will be expended primarily to further
enhance the technology platform throughout the Company. During the thirty-nine
weeks ended October 25, 1997, the Company spent $5.4 million on capital
expenditures.
Credit Facilities
At January 25, 1997, the Company was a party to the DIP Credit
Facility, which provided up to $30 million to fund working capital needs and for
general corporate purposes. The Company did not utilize the DIP Credit Facility
for any direct borrowings in fiscal 1996 or 1995. The Company limited the use of
the DIP Credit Facility to the issuance of letters of credit. The DIP Credit
Facility terminated on August 26, 1997, the date the Company emerged from
Chapter 11 reorganization.
On August 26, 1997, the Company entered into the three-year Credit
Facility, under which CIT acts as Agent for the Lenders. The Credit Facility
provides a $40 million revolving credit facility, including a $15.0 million
subfacility for the issuance of letters of credit. The Credit Facility is
secured by substantially all of the Company's assets. The Credit Facility
provides further that proceeds may be used solely to fund working capital
20
<PAGE>
in the ordinary course of business and for other general corporate purposes. The
loans bear interest at the CIT reference rate plus .375% or, at the option of
the Company, the Eurodollar Rate plus 2.25%.
Under the terms of the Credit Facility, capital expenditures are
limited to $7.0 million in fiscal years 1997, 1998 and 1999 and to $5.0 million
for the period commencing January 30, 2000 and ending August 31, 2000, the
expiration date of the Credit Facility. The Credit Facility further stipulates
certain borrowing limitations based on the Company's inventory levels. The
Credit Facility also requires that the Company maintain certain financial
covenants.
At October 25, 1997, the Company had approximately $26.8 million of
availability under the Credit Facility, after considering outstanding letters of
credit of approximately $4.1 million.
Income Tax Matters
Pursuant to the Plan, Administrative Expenses and Priority Claims
generally will be paid in full. Other claims against the Company will be paid at
a discount. Payments of claims at a discount result in cancellation of
indebtedness ("COD") income. An estimated $19 million of COD income may arise
from payment of claims at a discount.
This COD income ultimately may be excluded from the Company's taxable
income pursuant to certain bankruptcy exclusion rules, which the Company plans
to use. However, if the Company excludes COD income from its taxable income
because of the bankruptcy exclusion rules, generally, after the determination of
the Company's tax for the taxable year of discharge, the amount excluded from
the gross income must be applied to permanently reduce the following relevant
tax attributes of the Company in the order and in the amounts set forth below.
o first NOLs for the taxable year of the discharge and then NOL
carryovers to such taxable year, dollar-for-dollar;
o general business credit carryovers to or from the taxable year of
discharge, 33-1/3 cents for each dollar of excluded income;
o the minimum tax credit available under Section 53(b) of the
Tax Code as of the beginning of the taxable year immediately
following the taxable year of discharge, 33-1/3 cents for each
dollar of excluded income;
o any net capital losses for the taxable year of the discharge and
any capital loss carryover to such taxable year,
dollar-for-dollar;
o the basis of the taxpayer's assets, both depreciable and
nondepreciable, held by the taxpayer at the beginning of the
taxable year following the taxable year in which the discharge
occurs dollar-for-dollar, but the basis reduction shall not
exceed the excess of the aggregate bases of the property held
by the taxpayer immediately after the discharge over the
aggregate of the liabilities of the taxpayer immediately after
the discharge.
In the Company's financial statements and the related notes included
elsewhere in this Registration Statement, the Company reported a federal income
tax NOL carryforward of approximately $50 million as of January 25, 1997. The
amount of the NOL carryforwards along with the NOL for the thirty-nine weeks
ended October 25, 1997, and certain other tax attributes available to the
Company as of the Effective Date, will be reduced substantially, to
approximately $31 million, as a result of the discharge and cancellation of
various prepetition liabilities under the Plan.
Tax attributes remaining after the application of the above COD rules
would then be subject to limitation- on-utilization rules. The Tax Code imposes
limitations on the utilization of tax attributes, such as NOL carryovers, after
certain changes in the ownership of a loss company. The Company is a loss
company.
21
<PAGE>
In general, pursuant to Tax Code Section 382, an ownership change of
more than 50% of the value of stock of a loss corporation within a three-year
testing period (an "Ownership Change") will trigger limitations as to the use of
a loss corporation's NOL carryovers ("Section 382 Limitation"). After an
Ownership Change, the amount of a loss corporation's taxable income that can be
offset by existing NOL carryovers cannot exceed an amount equal to the value of
the loss corporation (excluding certain contributions to capital) multiplied by
a specific rate of return periodically published by the Internal Revenue Service
("IRS") (the U.S. long-term, tax exempt bond rate). In any given year, this
Section 382 Limitation may be increased by certain built-in gains realized
after, but accruing economically before, the ownership change and the carryover
of unused Section 382 limitations from prior years. (The long-term tax-exempt
rate as of the date of this Registration Statement is 5.27%).
No NOL carryovers or credit carryovers will survive an Ownership Change
if a continuity of business enterprise requirement is not met during the
two-year period beginning on the date of the Ownership Change of the loss
corporation. Under this continuity requirement, the loss corporation is required
to continue its historic business or to use a significant portion of its assets
in such a business. The Company believes that the continuity of business
enterprise requirement will be met.
Under the Plan, all of the shares of the Company held by its former
stockholders were canceled and 100% of the outstanding Common Stock was issued
to the Company's creditors (other than 400,000 shares of Common Stock issued to
management; see "Executive Compensation - 1997 Stock Incentive Plan - General").
Accordingly, the Company will have an Ownership Change within the meaning of Tax
Code Section 382.
Section 382 of the Tax Code also contains a provision, Section
382(l)(5), which provides that in a Title 11 or similar case under the
jurisdiction of a Bankruptcy Court (a "Title 11 Case"), the Section 382
Limitation will not apply to certain Ownership Changes. In the case of the
Company, there are specific rules which make Section 382(l)(5) undesirable. The
Company may elect instead to be subject to a special valuation rule under Tax
Code Section 382(l)(6). Under this special valuation rule, for purposes of
computing the annual Section 382 Limitation, the value of the loss corporation
is determined by including the increase in the value of such stock that occurs
as the result of any surrender or cancellation of the claims of creditors. This
special rule might result in a greater value for the Company, and therefore a
less onerous Section 382 Limitation on the use of the Company's NOL or credit
carryovers.
The Company intends to elect to have its NOL be governed by the Section
382(l)(6) exception. Based on its federal income tax returns as filed and
projections for subsequent periods, the Company believes it will have an NOL of
approximately $50 million. However, the amount of the NOL could be reduced
because of (i) audit adjustments by the IRS and (ii) any COD income as a result
of the attribution reduction rules discussed above. For example, assuming COD
income of $19 million, the NOL carryover would be approximately $31 million,
rather than approximately $50 million.
Thus, the Company believes that under the Section 382(l)(6) limitation,
if the fair market value of the equity of the Company immediately after the
reorganization were approximately $63 million and the long-term tax-exempt rate
were 5.27%, the annual utility of the Company's NOL would be approximately $3.3
million, subject to certain adjustment. If the Company has a net unrealized
built-in gain with respect to its assets, the annual limitation may be augmented
to the extent the Company realizes such gain within the five-year recognition
period following the reorganization.
The amount of NOLs available to the Company is based on factual and
legal issues with respect to which there can be no certainty. The actual annual
utility of the NOL carryovers will be determined by actual market value and the
actual long-term exempt rate at the date of reorganization and may be different
from amounts estimated herein. Therefore, the amount of NOL carryovers is
subject to adjustments by the IRS and it is entirely possible that the NOLs
could be significantly less than $31 million.
22
<PAGE>
A corporation is required to pay alternative minimum tax to the extent
that 20% of "alternative minimum taxable income" ("AMTI") exceeds the
corporation's regular tax liability for the year. AMTI is generally equal to
regular taxable income with certain adjustments. For purposes of computing AMTI,
a corporation is entitled to offset no more than 90% of its AMTI with NOLs (as
computed for alternative minimum tax purposes). Section 382 is applicable to the
alternative minimum tax net operating loss. If the Company's consolidated group
is subject to the alternative minimum tax in future years, a federal tax of 2%
(20% of the 10% of AMTI not offset by NOLs) will apply to any net taxable income
earned by the Company's consolidated group in future years that is otherwise
offset by NOLs.
Summary
The Company believes that its cash and cash equivalents and cash
provided by operations, as well as cash available under the Credit Facility, are
sufficient to meet the Company's working capital needs, debt repayments and
future capital expenditures for the foreseeable future. Any material shortfall
in operating cash flows could require management to seek alternative sources of
financing or to reduce its capital expenditure plan.
IMPACT OF INFLATION
In recent years, the impact of inflation on the Company's results of
operations has been insignificant. As operating expenses have increased, the
Company has been unable, due to competitive pressure, to recover these increases
in costs by increasing prices over time. Future results of the Company will
depend on, among other things, the competitive environment, the prevailing
economic climate and the ability of the Company to adapt to these conditions.
ITEM 3. PROPERTIES
The Company's principal owned or leased properties include 128 leased
stores, of which 109 are in Texas and 19 are in Louisiana, as well as the
Company-owned and operated distribution center/headquarters facility located in
Houston, Texas.
The Company leases all of its 128 stores. Most leases are long-term net
leases (i.e., lease contracts without a purchase option) which expire on varying
dates through 2008. Most of the store leases include renewal options for an
additional 5 to 15 years and require the Company to pay taxes, insurance and
certain common area maintenance costs in addition to specified minimum rent.
Most of the leases also require the payment of contingent rent based upon a
specified percentage of sales in excess of a base amount.
The following table sets forth, as of December 1, 1997, the number of
leases that will expire in each of the indicated calendar years (excluding
renewal options):
Number of
Calendar Year Leases Expiring
------------- ---------------
1998 23
1999 33
2000 26
2001 21
2002 15
Thereafter 10
---
Total 128
Most of the Company's stores are either free standing structures or
anchors in strip shopping centers. The vast majority of the stores were opened
from the mid-1970's to the early 1990's. The Company did not open any new stores
in fiscal 1995 or fiscal 1996. Consistent with the Company's operating
strategies, the Company
23
<PAGE>
opened four new stores in fiscal 1997. Furthermore, in fiscal 1996 and 1997, the
Company remodeled 20 existing stores to the prototype format. The Company enters
into and terminates leases from time to time in the ordinary course of business
as new stores are opened and stores are closed.
The Company's distribution center/headquarters facility in Houston,
Texas contains approximately 376,000 square feet and is located on approximately
8.2 acres of land. Such real property is subject to an encumbrance created by
the Deed of Trust, Assignment of Rents, Security Agreement and Financing
Statement entered into by the Company for the benefit of CIT in connection with
the Credit Facility.
The Company considers its stores and its distribution
center/headquarters facility to be suitable and adequate for its operations for
the foreseeable future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the best knowledge of the Company, the following table sets forth
certain information concerning the beneficial ownership as of October 25, 1997
of Common Stock by (a) each stockholder known by the Company to own beneficially
in excess of five percent of the Common Stock, (b) each executive officer named
in "Executive Compensation -- Summary Compensation Table" and each member of the
Board of Directors and (c) all such executive officers and members of the Board
of Directors as a group. Except as otherwise indicated, to the best knowledge of
the Company, all persons listed below have (i) sole voting power and investment
power, except to the extent that authority is shared by spouses under applicable
law, and (ii) both record and beneficial ownership with respect to the shares of
Common Stock indicated as being beneficially owned by them.
24
<PAGE>
Name of Number of Shares Estimated
Beneficial Owner Beneficially Owned Percentage Ownership (1)
---------------- ------------------ ------------------------
Chase Bank of Texas. .................... 8,558,252 45.0%
707 Travis Street
Houston, Texas 77002
Magten Asset Management Corp. (2)........ 1,214,006 6.4%
35 East 21st Street
New York, New York 10010
Herbert R. Douglas (3)................... 160,000 *
Raymond J. Miller (3).................... 80,000 *
Jerome L. Feller (3)..................... 80,000 *
James L. Berens (3)...................... 40,000 *
Joseph J. Kassa (3)...................... 40,000 *
Michael G. Klaiman (3)................... -- --
Richard B. Stark......................... -- --
F. Hall Webb............................. (4) (4)
Merwin F. Kaminstein..................... -- --
Gasper Mir............................... -- --
Melvyn L. Wolff.......................... -- --
Randall L. Lambert....................... -- --
All directors and named executive officers
as a group (12 persons) (3), (4)......... 8,958,252 47.1%
- -----------------------------
(1) Based on the total number of shares of Common Stock required to be issued
pursuant to the Plan. The Plan required the Company to issue an aggregate
of 18,600,000 shares of Common Stock (excluding 400,000 shares of
Restricted Stock issuable pursuant to the Weiner's Stores, Inc. 1997 Stock
Incentive Plan (the "Stock Plan")), assuming the allowed amount of all
claims filed against the Company by its general unsecured creditors will
not exceed $85.2 million, the Company's current estimate of the total
amount needed to settle such claims. See "Market Price of and Dividends on
the Registrant's Common Equity and Related Stockholder Matters" and
"Description of Registrant's Securities to Be Registered."
(2) Magten Asset Management Corp. is a registered investment advisor that, to
the best of the Company's knowledge, manages a number of discretionary
accounts including Magten Partners, LP, Magten Group Trust, The Saturn
Fund, and Hughes Master Retirement Trust. Magten Asset Management Corp.
disclaims any beneficial ownership of such Common Stock.
(3) Does not include shares subject to options granted members of management,
including Messrs. Douglas (250,000), Miller (125,000), Feller (125,000),
Berens (75,000), Kassa (75,000) and Klaiman (25,000), respectively, as
well as 225,000 shares subject to options granted to other executives, in
each case pursuant to the Stock Plan. See "Executive Compensation --
Options Granted in Fiscal Year 1997."
25
<PAGE>
(4) Mr. Webb, who is a Director of the Company, is Senior Vice President of
Chase Bank of Texas and may therefore be deemed to share beneficial
ownership of the shares of Common Stock shown as beneficially owned by
Chase Bank of Texas. Mr. Webb disclaims beneficial ownership of such
Common Stock.
* Less than one percent of the Common Stock.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages, and positions with the
Company of executive officers and members of the Board of Directors, as well as
the year each joined the Company and/or its Board:
<TABLE>
<CAPTION>
Year Joined
Name Age Company Position Held
- ----------------------------- ------- -------------- --------------------------------------------------------
<S> <C> <C> <C>
Herbert R. Douglas........... 55 1995 Chairman, President, Chief Executive Officer and Director
Raymond J. Miller............ 46 1995 Vice President, Chief Financial Officer and Director
Jerome L. Feller............. 56 1995 Vice President, General Merchandise Manager
James L. Berens.............. 48 1996 Vice President, Stores
Joseph J. Kassa.............. 42 1996 Vice President, Marketing, Sales Promotion and Real Estate
Merwin F. Kaminstein......... 63 1997 Director
Randall L. Lambert........... 40 1997 Director
Gasper Mir................... 51 1997 Director
F. Hall Webb................. 49 1997 Director
Melvyn L. Wolff.............. 66 1997 Director
</TABLE>
Messrs. Douglas and Miller are the only members of the Board who are
also officers of the Company. Each of the remaining directors listed below
became a member of the Board of Directors on the Effective Date. In connection
with the development of the Plan, representatives of the Company consulted with
the committee of unsecured creditors appointed by the United States Trustee (the
"Creditors Committee") regarding the composition of the Board of Directors.
The Board of Directors elects officers to hold office until the next
annual meeting of the Board of Directors or until their successors are elected,
or until their resignation or removal. The Chairman may appoint additional
officers to hold office until their successors are appointed, or until their
resignation or removal. The current officers were most recently elected by the
Board of Directors on September 4, 1997. No family relationships exist among the
directors and executive officers of the Company.
Herbert R. Douglas, Chairman, President, Chief Executive Officer and
Director. Mr. Douglas has served as a Director of the Company and as Chief
Executive Officer and President since December 1995 and was elected as Chairman
of the Board of Directors in September 1997. Mr. Douglas served as President and
Chief Executive Officer of Jamesway Corporation, a New Jersey-based discount
store chain, from 1994, beginning after the commencement of its bankruptcy
proceedings under Chapter 11 of the Bankruptcy Code, and continuing through its
emergence from Chapter 11 reorganization and until its liquidation under Chapter
11 in 1995. Prior to his service with Jamesway Corporation, he served in various
executive positions with Bradlees, Inc., a Massachusetts-based discount store
chain, most recently as Senior Vice President Merchandising.
Raymond J. Miller, Vice President, Chief Financial Officer and
Director. Mr. Miller has served as a Director of the Company since August 1997
and has held his current position since January 1996. Mr. Miller served as Chief
Financial Officer from February 1995 until January 1996. Mr. Miller served as
Executive Vice President Finance and Operations of Carlisle Retailers, Inc., an
Ohio-based specialty retail store chain, from 1988 to 1995. Carlisle Retailers,
Inc. commenced bankruptcy proceedings under Chapter 11 of the Bankruptcy
Code in 1993 and emerged from Chapter 11 reorginzation in 1994. Prior to his
service with Carlisle Retailers, Inc., he served as Vice President - North
America Operations of Industrial Equity Pacific Limited, a Hong Kong-based
international investment firm.
26
<PAGE>
Jerome L. Feller, Vice President, General Merchandise Manager. Mr.
Feller has served as Vice President, General Merchandise Manager since December
1995. Mr. Feller served as Senior Vice President, General Merchandise Manager of
Jamesway Corporation, a New Jersey-based discount store chain, in 1995. Prior to
his service with Jamesway Corporation, he was an owner of a women's specialty
clothing store in Florida.
James L. Berens, Vice President, Stores. Mr. Berens has served as
Vice President, Stores since January 1996. Mr. Berens served as Vice President
Regional Store Management of Jamesway Corporation, a New Jersey- based discount
store chain, in 1995. Prior to his service with Jamesway Corporation, he served
in various executive positions with Caldor Corporation, a Connecticut-based
discount store chain.
Joseph J. Kassa, Vice President, Marketing, Sales Promotion and Real
Estate. Mr. Kassa has served as Vice President, Marketing, Sales Promotion and
Real Estate since April 1997. Prior thereto, Mr. Kassa served as Vice President,
Marketing and Sales Promotion since February 1996. Mr. Kassa served as Senior
Vice President of Advertising, Marketing & Sales Promotion of Jamesway
Corporation, a New Jersey-based discount store chain, from 1991 to 1995. Prior
to his service with Jamesway Corporation, he served as Vice President of
Marketing and Advertising with Consumers/Singers, a manufacturer and catalog
retailer based in New Jersey.
Merwin F. Kaminstein, Director. Mr. Kaminstein is Chairman of the
Board of Brookstone Company, Inc. ("Brookstone"), a specialty retail store chain
based in Massachusetts. From 1990 until 1995, Mr. Kaminstein served Brookstone
as Chairman of the Board and Chief Executive Officer. Prior to his employment
with Brookstone, Mr. Kaminstein was an independent consultant and a partner at
the Pyramid Companies, a retail real estate development company based in upstate
New York.
Randall L. Lambert, Director. Mr. Lambert is the Managing Director of
Chanin Kirkland Messina LLC, a distressed and specialty situation brokerage firm
based in New York. Mr. Lambert is currently a director of Today's Man Inc., a
publicly traded retailer of men's apparel. Prior to his service with Chanin
Kirkland Messina LLC, he served as Managing Director of Private Transactions of
BDS Securities, LLC, a distressed and specialty situation brokerage firm based
in New York, from 1995 to 1997. Prior to his service with BDS Securities, LLC,
he served in various executive positions with Brian M. Freeman Companies, an
investment banking firm in Millburn, New Jersey.
Gasper Mir, Director. Mr. Mir is the founder of the professional
accounting firm of Mir-Fox & Rodriguez, P.C., based in Houston, Texas, and has
served as its President since 1983.
F. Hall Webb, Director. Mr. Webb is the Senior Vice President,
Special Loans Group, with Chase Bank of Texas based in Houston, Texas, since
1987. Mr. Webb held various executive positions with Chemical Bank/Chase Bank
from 1973 to present.
Melvyn L. Wolff, Director. Mr. Wolff is the Chairman of the Board and
Chief Executive Officer of Star Furniture Company, a furniture retailer based in
Texas. He has held both positions for over five years, prior to which he was the
owner and President for 30 years.
Election of Directors. The Company's Restated Bylaws (the "Bylaws") fix
the size of the Board of Directors at no fewer than five and no more than nine
members, to be elected annually by a plurality of the votes cast by the holders
of the Common Stock, and to serve until the next annual meeting of stockholders
and until their successors have been elected, or until their earlier resignation
or removal. The Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation") does not provide for cumulative voting or
classification of directors into separate classes. The Bylaws require the first
annual stockholders meeting to be held in May 1998 and succeeding meetings to be
held annually in May thereafter, or such other date designated by the Board of
Directors. The Certificate of Incorporation requires any amendment by the
stockholders which
27
<PAGE>
would increase the size of the Board of Directors to be approved by the
affirmative vote of the holders of at least two-thirds (2/3) of the outstanding
shares of Common Stock. For additional discussion of these and other corporate
governance matters, see "Certain Relationships and Related Transactions" and
"Description of Registrant's Securities to Be Registered," as well as the
Certificate of Incorporation, Bylaws and other documents referred to under such
sections and filed as exhibits to this Registration Statement.
Board Committees. The Company's Bylaws require the Board of Directors
to create an Audit Committee and permit the Board of Directors to create
additional committees comprised of members of the Board of Directors appointed
by the Board of Directors. Following the Effective Date, the Board of Directors
established the committees described below.
The Audit Committee consists of three directors independent of
management and free of any relationship that, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment as a
committee member. The Audit Committee recommends the selection of the Company's
independent auditors, periodically reviews the adequacy of the Company's
internal financial controls, reviews with the Company's independent auditors the
annual audit, and periodically reviews the terms of material transactions
between the Company and its affiliates and subsidiaries. The Audit Committee
currently consists of Messrs. Mir, as its chairman, Webb and Lambert.
The Compensation Committee consists of three directors independent of
management, and its function includes administration of the Stock Plan and other
management compensation matters. The Compensation Committee currently consists
of Messrs. Wolff, as its chairman, Kaminstein and Mir.
The Executive Committee consists of three directors and functions such
that, between meetings of the Board of Directors, it has and may exercise,
except as otherwise provided by law, all the powers of the Board of Directors in
the management of the property, business and affairs of the Company. The
Executive Committee currently consists of Messrs. Douglas, as its chairman, Webb
and Wolff.
The Nominating Committee functions will be performed by the Executive
Committee, which will recommend to the Board of Directors the names of persons
to be nominated for election as members of the Board of Directors of the
Company.
28
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for
the Company's last completed fiscal year, to the extent applicable, earned by
(i) the Chairman, President and Chief Executive Officer, (ii) the four other
most highly compensated executive officers of the Company who were serving as
executive officers of the Company on January 25, 1997 and (iii) two additional
individuals who would have been included among the four other most highly
compensated executive officers of the Company for the fiscal year ended January
25, 1997 but for the fact that such individuals were not serving as executive
officers of the Company on January 25, 1997.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- Awards
------
Other Restricted Securities
Annual Stock Underlying
Salary Bonus Compensation Awards Options/ All Other
($) ($) ($) ($) SARS(#)(1) Compensation(2)
------ ----- ------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Herbert R. Douglas............... $ 450,000 $ 325,000 $ 4,381 - - $ 35,086
Chairman, President & Chief
Executive Officer
Raymond J. Miller................ 200,000 - - - - 25,411
Vice President & Chief Financial
Officer
Jerome L. Feller................. 200,000 - - - - 22,378
Vice President, General
Merchandise Manager
James L. Berens.................. 148,856 - - - - 19,023
Vice President, Stores
Joseph J. Kassa.................. 120,681 - 6,622 - - 37,095
Vice President, Marketing, Sales
Promotion & Real Estate
Michael G. Klaiman............... 150,000 - - - - -
Divisional Merchandise Manager
Richard B. Stark................. 150,000 - - - - -
Divisional Merchandise Manager
</TABLE>
- --------------------------------
(1) Options were granted in September 1997 and November 1997 pursuant to
the Stock Plan. See "- Option Grants in Fiscal Year 1997."
(2) Reflects the dollar value of insurance payments by the Company with
respect to term life insurance for the benefit of each named executive
officer. Also includes the cost of relocation for each named executive
officer and, for Mr. Kassa, a relocation bonus in the amount of
$23,310.
EMPLOYMENT AGREEMENTS
Herbert R. Douglas. On December 5, 1995, the Company entered into an
employment agreement with Mr. Douglas, as President and Chief Executive Officer
of the Company, which was subsequently amended on May 1, 1997 (as amended, the
"Douglas Agreement"). The Douglas Agreement terminates on January 31, 1999. The
Douglas Agreement provides that Mr. Douglas will receive a base salary of not
less than $450,000 per year. In addition, Mr. Douglas is entitled to performance
bonuses as follows in each of fiscal years 1996, 1997 and 1998: (1) 3% of first
$2 million of EBIT; plus (2) 4% of next $3.5 million of EBIT in excess of $2
million (i.e., total potential performance bonus of $200,000 each fiscal year);
plus (3) an amount equal to the amount calculated pursuant to (2), provided that
aggregate amount of performance bonuses under (3) shall not exceed $300,000
29
<PAGE>
during the term of the Douglas Agreement. For fiscal 1996 Mr. Douglas was
guaranteed a minimum performance bonus of $200,000 and for fiscal 1997 Mr.
Douglas was guaranteed a minimum performance bonus of $100,000. Performance
bonuses (1) and (2) are earned if Mr. Douglas is employed as of October 31 of
each fiscal year and are payable 30 days after completion of audited financial
statements for each fiscal year. Performance bonuses earned pursuant to (3)
shall be earned if Mr. Douglas is employed on October 31 of each fiscal year but
shall be payable 30 days after completion of audited financial statements for
fiscal year 1998. The minimum portion of the performance bonuses for the fiscal
years 1996 and 1997 are to be paid on the first business day of January 1997 and
1998, respectively.
Raymond J. Miller. On February 24, 1995, the Company entered into an
employment agreement with Mr. Miller as Chief Financial Officer of the Company
which was subsequently amended on April 7, 1995 and May 1, 1997 (the "Miller
Agreement"). Such amended employment agreement terminates on January 31, 2000.
Pursuant to the Miller Agreement, Mr. Miller will be paid a base salary of
$200,000 for fiscal 1997 and $220,000 per year thereafter.
Jerome L. Feller. On December 13, 1995, the Company entered into an
employment agreement with Jerome L. Feller as General Merchandise Manager and
Vice President which was subsequently amended May 1, 1997 (the "Feller
Agreement"). The Feller Agreement terminates on January 31, 2000. Pursuant to
the Feller Agreement, Mr. Feller is paid a base salary of $200,000 for fiscal
1997 and $220,000 per year thereafter.
Other Employment Agreements. The Company has entered into agreements
with certain key employees in an effort to retain the continuity of the core
management team for a meaningful period following the Effective Date. In
addition, with respect to certain of its officers, other than Messrs. Douglas,
Miller and Feller, the Company has, while not in any way altering such
employees' employment at will status, provided for a separation payment equal to
twelve months base salary in the event of their termination other than for
cause. The Company has also in respect to certain key employees, while not in
any way altering such employees' employment at will status, provided for a
separation payment equal to six months base salary in the event of their
termination other than for cause. The purpose of such agreements is to provide
the Company with continuity of management by providing its officers and key
employees with appropriate assurances of employment security sufficient to allow
them to concentrate on their duties for the Company without distraction.
The above-mentioned agreements, including the employment agreements of
Messrs. Douglas, Miller and Feller, provide for severance payments if the
executives are terminated for other than for cause (as such term is defined in
each respective agreement), varying from six months to two years' salary and
bonus. If all of the executives and key employees were terminated, the Company's
estimated aggregate severance payment obligation would be approximately
$1,750,000.
OPTION GRANTS IN FISCAL YEAR 1997
On September 4, 1997 and November 17, 1997, pursuant to the Plan and
the Stock Plan, the Company granted options to purchase Common Stock to certain
officers and key employees of the Company at an exercise price of $1.15 per
share, the fair market value as determined by the Compensation Committee. The
following table sets forth information concerning the stock options granted
under the Stock Plan to the named executive officers:
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<PAGE>
<TABLE>
<CAPTION>
Number of Potential Realizable Value at
Securities % Total Assumed Annual Rates of Stock
Underlying Options Exercise Price
Options Granted to Price Expiration Appreciation for Option Term
Granted (#) Employees ($/Sh) Date 5% ($) 10% ($)
----------------- ------------ ----------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Herbert R. Douglas........ 250,000 27.8 $1.15 09/04/2007 $180,807 $458,201
Raymond J. Miller......... 125,000 13.9 1.15 09/04/2007 90,404 229,100
Jerome L. Feller.......... 125,000 13.9 1.15 09/04/2007 90,404 229,100
James L. Berens........... 75,000 8.3 1.15 09/04/2007 54,242 137,460
Joseph J. Kassa........... 75,000 8.3 1.15 09/04/2007 54,242 137,460
Michael G. Klaiman........ 25,000 2.8 1.15 09/04/2007 18,081 45,820
</TABLE>
- --------------------------------
(1) The options for Mr. Douglas vest one-third on January 15, 1998 and the
remainder on January 15, 1999. All other options vest equally over three
years, at a rate of one-third of such options per year on each anniversary
of the date of the grant, beginning one year from the date of the grant. All
options expire in ten years. The Stock Plan provides for an acceleration of
the vesting in the event of a change in control (as defined therein).
(2) Pursuant to the Stock Plan, the exercise price of the options shall not be
less than 100% of the Fair Market Value (as therein defined) on the date the
stock option is granted.
The options listed above were the only options covering the Company's
securities held as of January 15, 1998 by the persons named. Other than the
83,333 options for Mr. Douglas that vested on January 15, 1998, none of the
options are currently exercisable.
1997 STOCK INCENTIVE PLAN
GENERAL
The Board of Directors has adopted the 1997 Stock Incentive Plan (the
"Stock Plan"), which became effective on the Effective Date, and which is
administered by the Compensation Committee of the Board of Directors (the "Stock
Plan Committee"), which consisted of at least three Board Members who were
"disinterested persons" (as such term is defined in the rules and regulations
under Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")). The Stock Plan is intended to provide incentives to eligible
employees to remain employed by the Company and achieve the performance goals
and objectives of the Company. The Chief Executive Officer and 38 other officers
and other management employees (collectively, the "Eligible Employees") were
deemed by the Stock Plan Committee to be eligible to participate in the Stock
Plan. Pursuant to the Stock Plan, the Stock Plan Committee in September 1997 and
November 1997 granted to Eligible Employees, subject to vesting, incentive stock
options to purchase 900,000 shares of Common Stock.
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Also, in September 1997, pursuant to the Plan, the Stock Plan Committee
granted stock awards to the following persons in the following total numbers of
shares of Common Stock:
Name and Title Total
-------------- -----
Herbert R. Douglas,................................................... 160,000
President & Chief Executive Officer
Raymond J. Miller,.................................................... 80,000
Vice President & Chief Financial Officer
Jerome L. Feller,..................................................... 80,000
Vice President, General Merchandise Manager
Joseph J. Kassa,...................................................... 40,000
Vice President, Marketing, Sales Promotion & Real Estate
James L. Berens,...................................................... 40,000
---------
Vice President, Stores
TOTAL................................................................. 400,000
One hundred percent of each stock award shall become transferable on
January 15, 2000, except that one hundred percent of the stock award granted to
Mr. Douglas shall become transferable on January 15, 1999. The stock awards
granted to Messrs. Douglas, Miller, Feller, Kassa and Berens shall become
transferable upon a "change in control" of the Company, as defined in the Stock
Plan. These five individuals will also receive an additional amount from the
Company equal to the income tax gross-up at such person's marginal tax rate in
the year(s) that income on the stock award(s) resulting from the removal of
restrictions on such stock award(s) becomes taxable. In addition, these five
individuals have agreed to waive their right to make elections under Section
83(b) of the Tax Code with respect to such stock awards.
The following summary of certain terms of the Stock Plan is qualified
in its entirety by reference to the full text thereof, which is set forth as
Exhibit 10.1 to this Registration Statement.
ADMINISTRATION
Unless the Board of Directors otherwise determines, the Stock Plan will
be administered by a committee or subcommittee appointed by the Board of
Directors from among its members, all of which will qualify as (i) a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor
rule) promulgated under the Exchange Act and (ii) an "outside director" within
the meaning of Section 162(m) of the Tax Code. Subject to the limitations set
forth in the Stock Plan, such plan vests broad powers to the Stock Plan
Committee to administer the Stock Plan, including authority to (1) select the
persons to be granted awards thereunder, (2) determine the size and type of
awards granted thereunder, (3) construe and interpret the Stock Plan and (4)
establish rules and regulations for the administration of such plan.
NUMBER OF SHARES AVAILABLE
The Stock Plan provides for the grant of up to 1,400,000 shares of
Common Stock in any one, or a combination, of stock options or stock awards. The
maximum number of shares of Common Stock with respect to which stock awards may
be granted under the Stock Plan during the term of the Stock Plan shall not
exceed 400,000 shares. The maximum number of shares of Common Stock with respect
to which awards may be granted or measured to any individual participant under
the Stock Plan during the term of the Stock Plan shall not exceed 750,000
shares, provided that the maximum number of shares of Common Stock with respect
to which stock
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<PAGE>
options may be granted to an individual participant under the Stock Plan during
the term of the Stock Plan shall not exceed 500,000 shares (in each case,
subject to certain adjustments).
Any shares subject to an award that remain unissued upon termination of
the award will become available for additional awards under the Stock Plan. In
the event of a stock split, recapitalization or similar event, or a corporate
transaction, such as a merger, consolidation or similar event, an adjustment
will be made to each outstanding stock option and the Stock Plan Committee will
have the authority to equitably adjust the aggregate number and kind of shares
subject to such plan and the number, kind and price of shares subject to
outstanding awards.
AWARDS UNDER THE STOCK PLAN
Awards and Eligibility. The Stock Plan permits the issuance of the
following awards: (1) nonqualified stock options ("NQSOs") and incentive stock
options ("ISOs") and (2) stock awards. Participants shall consist of such key
employees and non-employee directors of the Company and any of its subsidiaries
as the Stock Plan Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Stock Plan Committee may designate from time to time to
receive awards under the Stock Plan. Notwithstanding the foregoing, only key
employees of the Company or any of its subsidiaries on the date of grant are
eligible to receive grants of ISOs.
Stock Options. Under the Stock Plan, the Stock Plan Committee has the
authority to grant to any participant one or more ISOs, NQSOs, or both. Each
stock option granted under the Stock Plan will have such per share exercise
price as the Stock Plan Committee may determine on the date of grant, provided
that the per-share exercise price shall not be less than 100 percent of the Fair
Market Value (as defined in the Stock Plan) of the Common Stock on the date the
stock option is granted. Fair Market Value is defined in the Stock Plan as (i)
the closing price of the Common Stock on the date of calculation (or on the last
preceding trading date if Common Stock was not traded on such date) if the
Common Stock is readily tradeable on a national securities exchange or other
market system or (ii) if the Common Stock is not readily tradeable, the amount
determined in good faith by the Board of Directors as the fair market value of
the Common Stock.
The stock option exercise price may be paid in cash or, at the
discretion of the Stock Plan Committee, by the delivery of shares of Common
Stock then owned by the participant, by the withholding of shares of Common
Stock for which a stock option is exercisable, or by a combination of these
methods. At the discretion of the Stock Plan Committee, payment may also be made
by delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. The Stock Plan
Committee may prescribe any other method of paying the exercise price that it
determines to be consistent with applicable law and the purpose of the Stock
Plan, including, without limitation, in lieu of the exercise of a stock option
by delivery of shares of Common Stock then owned by a participant, providing the
Company with a notarized statement attesting to the number of shares owned,
where upon verification by the Company, the Company would issue to the
participant only the number of incremental shares to which the participant is
entitled upon exercise of the stock option.
Stock options granted under the Stock Plan will be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Stock Plan Committee, provided that no stock option shall be exercisable
later than 10 years after the date it is granted.
The aggregate market value (determined as of the time the stock option
is granted) of the Common Stock with respect to which ISOs (under all option
plans of the Company) are exercisable for the first time by a participant during
any calendar year shall not exceed $100,000. For the purposes of the preceding
sentence, (i) ISOs will be taken into account in the order in which they are
granted and (ii) ISOs granted before 1987 will not be taken into account. ISOs
may not be granted to any participant who, at the time of grant, owns stock
possessing (after the application of the attribution rules of Section 424(d) of
the Tax Code) more than 10% of the
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<PAGE>
total combined voting power of all outstanding classes of stock of the Company
or any of its subsidiaries, unless the option price is fixed at not less than
110% of the Fair Market Value of the Common Stock on the date of grant and the
exercise of such option is prohibited by its terms after the expiration of five
years from the date of grant of such option. In addition, no ISO shall be issued
to a participant in tandem with an NQSO.
All stock options granted pursuant to the foregoing provisions, and the
compensation attributable to such stock options, are intended to (i) qualify as
Performance-Based Awards (as described below) or (ii) be exempt from the
deduction limitation imposed by Section 162(m) of the Tax Code.
Stock Awards. The Stock Plan Committee may, in its discretion, grant
stock awards consisting of Common Stock issued or transferred to participants
with or without other payments as additional compensation for services to the
Company. Stock awards may be subject to such terms and conditions as the Stock
Plan Committee determines appropriate, including, without limitation,
restrictions on the sale or other disposition of such shares, and the right of
the Company to reacquire such shares for no consideration upon termination of
the participant's employment within specified periods. The Stock Plan Committee
may require that the stock certificates evidencing such shares be held in
custody or bear restrictive legends until the restrictions thereon shall have
lapsed. The stock award agreement shall specify whether the participant shall
have, with respect to the shares of Common Stock subject to a stock award, all
of the rights of a holder of shares of Common Stock, including the right to
receive dividends and to vote the shares. Certain stock awards granted under the
foregoing provisions, and the compensation attributable to such stock awards,
are intended to (i) qualify as Performance-Based Awards (as described below) or
(ii) be exempt from the deduction limitation imposed by Section 162(m) of the
Tax Code.
Performance-Based Awards. Certain awards granted under the Stock Plan
may be granted in a manner such that the awards qualify for the
performance-based compensation exemption of Section 162(m) of the Tax Code
("Performance-Based Awards"). Unless otherwise exempt from the deduction
limitation imposed by Section 162(m) of the Tax Code, all stock options granted
under the Stock Plan are intended to qualify as Performance- Based Awards. With
respect to stock awards that are intended to qualify as Performance-Based
Awards, the Stock Plan Committee, in its sole discretion, will determine that
the granting or vesting (or both) of such Performance-Based Awards will be based
on certain performance measures. Performance-Based Awards will be based on one
or more of the following factors: net sales; pre-tax income before allocation of
corporate overhead and bonus; budget; earnings per share; net income; division,
group or corporate financial goals; return on stockholders' equity; return on
assets; attainment of strategic and operational initiatives; appreciation in
and/or maintenance of the price of the Common Stock or any other publicly traded
securities of the Company; market share; gross profits; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
economic value-added models; comparisons with various stock market indices;
and/or reductions in costs. In addition, with respect to stock awards that are
intended to qualify as Performance-Based Awards, (i) the Stock Plan Committee
will establish in writing (x) the objective performance-based goals applicable
to a given period and (y) the individual employees or class of employees to
which such performance-based goals apply by certain specified deadlines and (ii)
no Performance-Based Awards shall be payable to or vest with respect to, as the
case may be, any participant for a given period until the Stock Plan Committee
certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied. In addition, with
respect to stock awards intended to qualify as Performance-Based Awards, after
establishment of a performance goal, the Stock Plan Committee will not revise
such performance goal or increase the amount of compensation payable thereunder
(as determined in accordance with Section 162(m) of the Tax Code) upon the
attainment of such performance goal. Notwithstanding the preceding sentence, the
Stock Plan Committee may reduce or eliminate the number of shares of Common
Stock or cash granted or the number of shares of Common Stock vested upon the
attainment of such performance goal.
DURATION, AMENDMENT AND TERMINATION
No award will be granted more than 10 years after the effective date of
the Stock Plan, provided that the terms and conditions applicable to any award
granted prior to such date may thereafter be amended or modified by
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<PAGE>
mutual agreement between the Company and the participant or such other persons
as may then have an interest therein. Also, by mutual agreement between the
Company and a participant under the Stock Plan, under the Stock Plan or under
any other present or future plan of the Company, awards may be granted to such
participant in substitution and exchange for, and in cancellation of, any awards
previously granted such participant under the Stock Plan, or any other present
or future plan of the Company. The Board of Directors may amend the Stock Plan
from time to time or suspend or terminate the Stock Plan at any time but no such
action shall reduce the amount of any existing award or change the terms and
conditions thereof without the participant's consent. No amendment of the Stock
Plan shall, without approval of the stockholders of the Company, (i) increase
the total number of shares which may be issued under the Stock Plan, (ii)
increase the maximum number of shares with respect to stock options and stock
awards that may be granted to any individual under the Stock Plan, (iii) modify
the requirements as to eligibility for the awards under the Stock Plan or (iv)
disqualify any ISOs granted under the Stock Plan.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
With certain exceptions, Section 162(m) of the Tax Code denies a
deduction to publicly held corporations for compensation paid to certain
executive officers in excess of $1.0 million per executive per taxable year
(including any deduction with respect to the exercise of an NQSO or the
disqualifying disposition of stock purchased pursuant to an ISO). One such
exception applies to certain performance-based compensation provided that such
compensation has been approved by stockholders in a separate vote and certain
other requirements are met. Also, the limitations of Section 162(m) do not apply
to corporations that are not publicly held corporations. It is possible that the
Stock Plan may qualify for the performance-based compensation exception to
Section 162(m) or that Section 162(m) would not apply because the Company was
not a publicly held corporation at the time the Stock Plan was adopted. However,
this conclusion is not free from doubt.
INCENTIVE COMPENSATION PLAN
In January 1996, the Company adopted a Management Incentive
Compensation Plan (the "Incentive Compensation Plan") for the purpose of
maximizing operating results of the Company by instilling in key employees a
sense of participation in the Company's success. Pursuant to the Incentive
Compensation Plan, cash awards are payable based upon the Company meeting
pre-determined earnings before depreciation and amortization, interest, taxes
and reorganization items amount. No cash awards were earned in 1996. The Company
intends to continue the incentive compensation plan.
PENSION PLAN
The Company sponsors a profit sharing plan for its employees.
Contributions to the profit sharing plan are at the discretion of the Board of
Directors and are limited to the amount deductible under the Tax Code.
The Company also sponsors a 401(k) defined contribution plan that
covers all salaried employees. Employees may contribute up to 15% of their
compensation for any year. Company contributions are at the discretion of the
Board of Directors.
DIRECTORS COMPENSATION
The Board of Directors may fix the compensation of Directors and may
provide for the payment of all expenses incurred by them in attending meetings
of the Board of Directors. Any Director who is an employee of the Company
receives no compensation for service on the Board of Directors or its
committees. No outside directors' compensation was paid by the Company during
fiscal 1996.
As of the Effective Date, the outside directors' compensation consists
of (i) a $25,000 annual retainer, (ii) a $2,000 per meeting fee for attendance
in person and (iii) a $3,000 Committee Chairman retainer. The annual
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<PAGE>
retainer is designed to cover the annual stockholders meeting, regular board
meetings, and up to six telephonic meetings. There are no fees for committee
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of three directors, all of whom are
independent of management, and its function includes administration of the Stock
Plan and other management compensation matters. The Compensation Committee
currently consists of Mr. Wolff, as its chairman, Mr. Kaminstein and Mr. Mir,
none of whom was, during fiscal 1996 or prior thereto, an officer or employee of
the Company or of its subsidiary.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report concerning the specific factors, criteria and
goals underlying decisions on payments and awards of compensation to each of the
executive officers of the Company for fiscal 1996 is provided by the
Compensation Committee of the Company's Board of Directors.
The Compensation Committee was not formed until after the Effective
Date and neither it (nor any other committee of the Board of Directors, or the
Board as a whole) made any recommendations or decisions concerning compensation
of the Company's executive officers during fiscal 1996. Going forward,
recommendations regarding compensation of the Company's executive officers
(other than the Chief Executive Officer) will be prepared by Herbert R. Douglas
and submitted to the Compensation Committee of the Board of Directors for
approval. Herbert R. Douglas and Raymond J. Miller, who are ad hoc members of
the Compensation Committee, do not participate in the preparation of
recommendations, or the review, modification or approval thereof, with respect
to their own compensation, and do not vote on proposals before the Compensation
Committee. With regard to the Chief Executive Officer, such compensation for
fiscal 1996 was determined pursuant to the Douglas Agreement in accordance with
the Plan. See "Executive Compensation - Employment Agreements - Herbert R.
Douglas." Going forward, decisions regarding compensation of the Company's Chief
Executive Officer will be made by the Compensation Committee, subject to and in
accordance with the Douglas Agreement and the Plan. Such decisions may be
determined subjectively, and not necessarily tied to corporate performance, with
consideration given to the Chief Executive Officer's level of responsibility and
importance to the Company relative to other executives of the Company, his time
served with the Company, individual performance and contributions to the
successful implementation of significant initiatives that are expected to
benefit the Company in the future. No fixed, relative weights are assigned to
these subjective factors.
The objectives of the Company's executive compensation policy are to
align the interests of the stockholders and management while motivating and
retaining key employees. The Company's executive compensation policies combine
annual base compensation, incentive bonuses based on operating performance, and
long term equity based incentives in order to achieve their overall objective.
The Company believes that its programs, taken together, will attract and retain
qualified executives who have a significant stake in the long term success of
the Company.
All compensation for the other executive officers will be determined
annually by the Compensation Committee and may be increased based on (a) the
contribution of the individual to the Company, (b) increases in the scope and
complexity of the individual's primary responsibilities, (c) increases in the
cost of living, (d) increases in competitive salaries and (e) individual
performance and contributions to the successful implementation of significant
initiatives that are expected to benefit the Company. Such decisions may be
determined subjectively, and not necessarily tied to corporate performance. No
fixed, relative weights are assigned to these subjective factors.
Long term incentives are provided by the grant of stock options. The
purposes of these equity based incentives are to retain these employees and to
align the long term interests of management with the stockholders.
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<PAGE>
Stock options are granted at their fair market value. Options vest over a period
of time, as determined by the Compensation Committee. Factors determining stock
option grants are similar to the factors determining increases in base pay.
The Compensation Committee believes that the Company's overall
compensation policies are appropriate to align the interests of management and
the stockholders and to retain key executives.
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Melvyn L. Wolff, Chairman
Merwin F. Kaminstein
Gasper Mir
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no relationships or related transactions between the Company
and its officers, directors and other related parties, except for certain
transactions and certain settlements related to the Chapter 11 Case described
below (i) with certain persons who on the Effective Date held five percent or
more of the outstanding Common Stock and (ii) with persons who were formerly
members of the Board of Directors. Each such transaction and settlement was
negotiated on an arms length basis.
Transactions and Settlements with Chase Bank of Texas. In respect to
claims of Chase against the Company, pursuant to the Plan, Chase was issued, on
the Effective Date, 8,558,252 shares of Common Stock. Also on the Effective
Date, the Company and Chase entered into a Registration Rights Agreement. See
"Business -- Registration Rights Agreement." As of the Effective Date, the
Company executed and delivered the General Release to Chase. In consideration of
such release provided for in Section 13.6 of the Plan, Chase has agreed to waive
its claims, if any, for an administration expense on account of having made a
substantial contribution pursuant to section 503(b) of the Bankruptcy Code. See
"Market Price of and Dividends on the Registrant's Common Equity and Related
Stockholder Matters" and "Description of Registrant's Securities to Be
Registered."
Settlement with Former Owners and Certain Members of the Board of
Directors. All of the outstanding Equity Interests (as defined in the Plan) were
previously held by Messrs. Sol and Leon Weiner, members of their respective
families or trusts for the benefit of immediate members of their respective
families or relatives. Additionally, Messrs. Sol and Leon Weiner were previously
members of the Board of Directors of the Company. Messrs. Sol and Leon Weiner
retained, at their expense, certain professionals who provided them with
independent advice in their capacities as members of the Board of Directors and
as holders of Equity Interests. Based on the advice of their professionals
regarding the potential value of the Company, it is the Company's understanding
that, notwithstanding that the Plan does not provide for any distributions to
holders of Equity Interests, Messrs. Sol and Leon Weiner believe that such value
is sufficient to enable the Company to make distributions to both holders of
Allowed Claims (as defined in the Plan) and holders of Equity Interests.
Additionally, they had asserted Debenture Claims (as defined in the Plan) in the
aggregate amount of $8.2 million and Dividend Claims (as defined in the Plan)
aggregating $1.1 million. It is the Company's further understanding that, as
part of an overall resolution of issues and disputes regarding the treatment
afforded to the Debenture Claims and the Dividend Claims pursuant to Sections
4.6(f) and 5.5(e) of the Plan, which provide for the allowance of the Debenture
Claims in the aggregate amount of $5.860 million and the disallowance of the
Dividend Claims, respectively, and in consideration of the releases and
exculpations provided in Sections 13.4, 13.5 and 13.7 of the Plan, Messrs. Sol
and Leon Weiner were willing to forgo their arguments and positions regarding
the potential value of the Company under the consensual treatment afforded to
Debenture Claims under the Plan.
The treatment afforded to the Debenture Claims and the Dividend Claims
pursuant to Sections 4.6(f) and 5.5(e) of the Plan shall be deemed a compromise
and settlement as of the Effective Date pursuant to section 1123
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of the Bankruptcy Code and Bankruptcy Rule 9019 of Causes of Action of the
Debtor (as defined in the Plan) and the holders of Debenture Claims and Dividend
Claims in respect to the extent, validity and priority of the Debenture Claims
and the Dividend Claims and in respect of the potential value of the Company.
Debtors Limited Release of Directors and Officers. Section 13.4 of the
Plan provides that as of the Effective Date, the Company shall be deemed to have
waived and released its present and former directors and officers who were
directors and officers, respectively, during the Chapter 11 Case and on or
before the Commencement Date from any and all claims of the Company, including,
without limitation, claims which the Company otherwise has legal power to
assert, compromise or settle in connection with the Chapter 11 Case; provided,
however, that Section 13.4 of the Plan shall not operate as a waiver or release
of any claim (i) in respect of any loan, advance or similar payment by the
Company to any such person and (ii) in respect of any contractual obligation
owed by such person to the Company.
Claim Holders' Release of Directors and Officers from Claims and
Liabilities. Section 13.5 of the Plan provides that as of the Effective Date,
each of the Company's present and former directors and officers who were
directors and officers, respectively, during the Chapter 11 Case and on or
before the Commencement Date (a "Released Director or Officer") shall be
released and discharged from any and all claims, obligations, rights, Causes of
Action and liabilities which any holder of a Claim against the Company may be
entitled to assert, whether known or unknown, foreseen and unforeseen, existing
or hereafter arising, based in whole or in part upon any act or omission or
other event occurring on or at any time prior to the Effective Date in any way
relating to the Company, the Chapter 11 Case or the Plan; provided, however,
such release shall not operate as a waiver or release of any claim (i) in
respect of any loan, advance or similar payment by any holder of a Claim to a
Released Director or Officer and (ii) in respect of any contractual obligation
owed by a Released Director or Officer to a holder of a Claim; provided,
further, however, a Released Director or Officer retains the right to assert and
prosecute (x) any direct claim, counterclaim, cross-claim, separate action or
similar claim against any entity which maintains that it has a Cause of Action
against a Released Director or Officer that has not been released and discharged
under the Plan or (y) any claim for indemnification, contribution or otherwise,
however denominated, against any entity relating to any Cause of Action against
a Released Director or Officer that has not been released and discharged under
the Plan. Each holder of a Claim, other than the United States of America, shall
be deemed to have agreed to the provisions of Section 13.5 of the Plan, and
shall be bound thereby, by reason of, among other things, its acceptance of the
Plan and its receipt of any distributions under the Plan.
Exculpation. In accordance with the Plan and subject to Sections 13.4
("Debtor's Limited Release of Directors and Officers") and 13.5 ("Claim Holders'
Release of Directors and Officers from Claims and Liabilities") of the Plan,
neither the Company nor the Creditors Committee nor any of their respective
members, officers, directors, employees, advisors or agents will have or incur
any liability to any holder of a Claim or Equity Interest for any act or
omission in connection with, or arising out of, the Chapter 11 Case, the pursuit
of confirmation of the Plan, the consummation of the Plan or the administration
of the Plan or the property to be distributed under the Plan except for willful
misconduct or gross negligence, and, in all respects, the Company, the Creditors
Committee and each of their respective members, officers, directors, employees,
advisors and agents shall be entitled to rely upon the advice of counsel with
respect to their duties and responsibilities under the Plan; provided, however,
that nothing contained in the Plan shall exculpate, satisfy, discharge or
release any claims against officers, directors or employees of the Company in
their individual capacities.
Worthless Stock Deduction. The Company will have available certain NOL
carryforwards and will utilize the same to offset taxable income. The ability of
the Company to utilize such carryforwards may be adversely affected by the
actions of the equity security holders of the Company in taking worthless stock
deductions with respect to the Equity Interests in the Company during certain
tax years. See "Business -- Certain Tax Matters" and "Financial Information --
Management's Discussion and Analysis of Financial Condition on Results of
Operations." Accordingly, the Company received from "50-percent shareholders" of
the Company (as that term is defined in the Tax Code) an executed stipulation,
approved by the Bankruptcy Court, pursuant to which they
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will agree not to claim a worthless stock deduction for any taxable year of such
stockholders ending prior to the Effective Date.
ITEM 8. LEGAL PROCEEDINGS
General. The Company is party to ordinary routine litigation,
arbitrations and proceedings incidental to its business, the disposition of
which is not expected to have a material adverse effect on the Company's
business or financial condition.
Consummation of the Chapter 11 Case and Related Matters. On August 13,
1997, the Bankruptcy Court entered an order confirming the Plan. As of the
Effective Date, all property of the Company is free and clear of all claims and
interests that arose prior to such Confirmation Date, unless the Plan provided
otherwise. As of the Effective Date, except as otherwise provided in the Plan,
in exchange for the treatment and rights under the Plan, all such claims against
and equity interests in the Company were satisfied, discharged, and released in
full and all persons are precluded from asserting against the Company, its
assets or properties any other or further claims or equity interests based upon
any act or omission, transaction, or other activity of any kind or nature that
occurred prior to the Confirmation Date. The Bankruptcy Court retains
jurisdiction to hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan. For further
information, reference is made to the Plan, a copy of which is filed as an
exhibit to this Registration Statement.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information. The Company expects to file an application for the
Common Stock to be included for quotation in the NASDAQ National Market System
and will comply with applicable state securities and "blue sky" laws. There can
be no assurance that such application will be approved or, if it is approved, as
to the timing of such approval.
Substantially all of the presently outstanding Common Stock was issued
on or about the Effective Date pursuant to the Plan. The consummation of the
Plan on the Effective Date resolved the Chapter 11 Case. Pursuant to the Plan,
all shares of Common Stock presently outstanding were issued to holders of
certain claims against the Company, some of whom may prefer to dispose of their
shares rather than retain them. With respect to amounts of Common Stock subject
to outstanding options or that could be sold pursuant to Rule 144 under the
Securities Act or that the Company has agreed to register under the Securities
Act, see "Executive Compensation -- Option Grants in Fiscal Year 1997,"
"Security Ownership of Certain Beneficial Owners and Management," "Certain
Relationships and Related Transactions -- Transactions and Settlements with
Chase Bank of Texas" and "Business -- Significant Stockholder" and "--
Registration Rights Agreement."
The actual market value of the Common Stock issued pursuant to the Plan
may have been and may continue to be affected by prevailing interest rates,
conditions in the financial markets, the initial issuance of Common Stock to
holders of claims and other factors. There is currently no established public
trading market for the Common Stock nor is it known whether or when one will
develop. There can be no assurance that an active market will develop therefor.
Further, there can be no assurance as to the degree of price volatility in any
such particular market. While the Plan was developed based on an assumed
reorganization value of $3.36 per share of the Common Stock, such valuation is
not an estimate of the price at which the Common Stock may trade in the market.
The Company has not attempted to make any such estimate in connection with the
development of the Plan. No assurance can be given as to the market prices that
will prevail for the Common Stock following the Effective Date.
Holders. There were approximately 500 record holders of the Company's
Common Stock as of January 15, 1998.
39
<PAGE>
Dividends. The Company did not declare or pay any cash dividends with
respect to the Common Stock during fiscal 1995, fiscal 1996 or the first three
quarters of fiscal 1997. The Company presently does not intend to pay cash
dividends in the foreseeable future. In addition, the terms of the Credit
Facility prohibit payment of cash dividends on the Common Stock. The payment of
cash dividends, if any, will be made only from assets legally available for that
purpose, and will depend on the Company's financial condition, results of
operations, current and anticipated capital requirements, restrictions under
then existing debt instruments and other factors deemed relevant by the Board of
Directors.
Registration Rights Agreement. The Company and Chase have entered into
a Registration Rights Agreement. Under this agreement, Chase may, at certain
times, make certain Demand Requests for Demand Registration of all or part of
Chase's Registrable Securities, provided that in each case the number of
Registrable Securities proposed to be sold by Chase must be equal to no less
than 20% of the number of Registrable Securities received by Chase pursuant to
the Plan. See "Business -- Registration Rights Agreement." Moreover, most of the
stockholders will be permitted to dispose of their shares of Common Stock in
public market transactions not requiring registration under federal or state
securities laws. Sales of or offers to sell a substantial number of shares, or
the perception by investors, investment professionals and securities analysts of
the possibility of such sales, could adversely affect the market for and
prevailing prices with respect to the Common Stock. See "Security Ownership of
Certain Beneficial Owners and Management."
The Plan required the Company to issue an aggregate of 18,600,000
shares of Common Stock, which were allowed in respect of all claims filed
against the Company by its general unsecured creditors. See "Business -- No
Prior Market for the Common Stock."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to the Plan, the Company has issued or is in the process of
issuing shares of Common Stock in the amounts and on the terms summarized
elsewhere in this Registration Statement. See "Market Price of and Dividends on
the Registrant's Common Equity and Related Stockholder Matters" and "Description
of Registrant's Securities to Be Registered," without registration under the
Securities Act, or state or local law, in reliance on the exemptions provided
for in Section 1145(b) of the Bankruptcy Code. The Company has not issued any
other securities within the past three years.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company is authorized to issue up to 50,000,000 shares of Common
Stock. There are currently no outstanding securities which are convertible into,
or exchangeable or exercisable for, shares of Common Stock. Following
consummation of the transactions contemplated by the Plan on the Effective Date,
18,600,000 shares of Common Stock were issued and outstanding.
Holders of Common Stock are entitled to one vote for each share held
and are not entitled to cumulative voting for the purpose of electing directors
and have no preemptive or similar right to subscribe for, or to purchase, any
shares of Common Stock or other securities to be issued by the Company in the
future. Accordingly, the holders of more than 50% in voting power of the shares
of Common Stock voting generally for the election of directors will be able to
elect all of the Company's directors.
Holders of shares of Common Stock have no exchange, conversion or
preemptive rights and such shares are not subject to redemption. All outstanding
shares of Common Stock, upon issuance thereof pursuant to the Plan, are duly
authorized, validly issued, fully paid and non-assessable. Subject to the prior
rights, if any, of holders of any outstanding class or series of capital stock
having a preference in relation to the Common Stock as to distributions upon the
dissolution, liquidation and winding-up of the Company and as to dividends,
holders of Common Stock are entitled to share ratably in all assets of the
Company which remain after payment in full of all
40
<PAGE>
debts and liabilities of the Company, and to receive ratably such dividends, if
any, as may be declared by the Company's Board of Directors from time to time
out of funds and other property legally available therefor.
Preferred Stock. The Company is authorized to issue up to 10,000,000
shares of Preferred Stock. The Board of Directors, without further action by the
stockholders, is authorized to designate and issue in series Preferred Stock and
to fix as to any series the dividend rate, redemption prices, preferences on
dissolution, the terms of any sinking fund, conversion right, voting rights, and
any other preferences or special rights and qualifications. Shares of Common
Stock are subject to the preferences or special rights and powers of any such
shares of Preferred Stock as set forth in the Certificate of Incorporation and
in the resolutions establishing one or more series of Preferred Stock. Holders
of the Preferred Stock, if and when issued, will be entitled to vote as required
under applicable Delaware law. Such law includes provisions for the voting of
the Preferred Stock in the case of any amendment to the Certificate of
Incorporation affecting the rights of holders of the Preferred Stock, the
payment of certain stock dividends, merger or consolidation, sale of all or
substantially all of the Company's assets and dissolution. The Company has no
agreements or understandings for the designation of any series of Preferred
Stock or the issuance of shares thereunder.
Until such time as the Board of Directors determines the Company should
issue one or more series of its Preferred Stock, and establishes the respective
rights of the holders of such series, it is not possible to state the actual
effect of the authorization of the Preferred Stock upon the rights of holders of
Common Stock. The effects of such issuance could include, however: (i) reduction
of the amount of cash otherwise available for payment of dividends on Common
Stock if dividends are also payable on the Preferred Stock, (ii) restrictions on
dividends, if any, on Common Stock if dividends on the Preferred Stock are in
arrears, (iii) dilution of the voting power of holders of Common Stock and (iv)
restriction of the rights of holders of Common Stock to share in the Company's
assets upon any liquidation until satisfaction of any liquidation preference
granted to the holders of Preferred Stock. In addition, so-called "blank check"
preferred stock (such as the Preferred Stock) may be viewed as having possible
anti-takeover effects, if it were used to make a third party's attempt to gain
control of the Company more difficult, time consuming or costly. The Company has
no present intention to issue any Preferred Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The following summary of certain terms of the Certificate of
Incorporation and Bylaws is qualified in its entirety by reference to the full
text thereof, which are set forth as Exhibits 3.1 and 3.2, respectively, to this
Registration Statement.
Board of Directors. Under applicable provisions of Delaware law and the
Bylaws, the size of the Board of Directors may be changed by action of the
stockholders or, within certain limits, by the Board of Directors. The
Certificate of Incorporation provides that any action to increase the size of
the Board (which is currently set at seven members) requires the approval of the
holders of at least two-thirds (2/3) of the outstanding shares of Common Stock.
The Bylaws also provide that no person will be eligible for election as
a director at a meeting of stockholders unless nominated by the Board of
Directors or by a stockholder who gives timely written notice thereof to the
Company in the manner specified in the Bylaws and who is a stockholder of record
both at the time such notice is given and on the record date for the meeting. To
be timely, a stockholder's notice must be given at the Company's principal
office, either by personal delivery to the Secretary of the Company or by United
States mail, postage prepaid, addressed to the Secretary of the Company. Any
such notice must be received (i) with respect to an election to be held at the
Annual Meeting of Stockholders, not less than 60 calendar days prior to the
anniversary date of the date of the immediately preceding Annual Meeting (or if
there was no such prior annual meeting, not less than 60 calendar days prior to
the date which represents the fourth Thursday in May of the current year), and
(ii) in the case of a special meeting called for the purpose of electing
directors, not later than the close of business on the fifth calendar day
following the day on which notice of the special meeting is first
41
<PAGE>
delivered to stockholders. The notice must contain the information specified in
the Bylaws regarding the stockholder giving the notice and each person whom the
stockholder wishes to nominate for election as a director and must be
accompanied by the written consent of each proposed nominee to serve as a
director if elected.
Meetings of Stockholders. The Bylaws require the first annual
stockholders meeting to be held on such date as may be designated by resolution
of the Board of Directors or, if no such date is designated, in May 1998 and
succeeding meetings to be held annually in May, or such other date designated by
the Board of Directors. Special meetings of the stockholders may be called by
the Chairman or the Chief Executive Officer, by a majority of the Board of
Directors of the Company or by stockholders holding of record at least 40% of
the issued and outstanding shares of Common Stock.
The Bylaws also require that a stockholder desiring to bring any
business before an annual meeting (other than business which the stockholder has
sought to have included in the Company's proxy statement for such meeting) must
give timely written notice thereof to the Company and must be a stockholder of
record both at the time such notice is given and on the record date for the
meeting. To be timely, a stockholder's notice must be given at the Company's
principal office, either by personal delivery to the Secretary of the Company or
by United States mail, postage prepaid, addressed to the Secretary of the
Company. Any such notice must be received not less than 60 calendar days in
advance of the anniversary date of the previous year's annual meeting of
stockholders (or if there was no such prior annual meeting, not less than 60
calendar days prior to the date which represents the fourth Thursday in May of
the current year); provided, however, that in the event that the date of the
annual meeting is advanced by more than 20 days, or delayed by more than 60
days, from such anniversary date, then, to be considered timely, notice by the
stockholder must be received not later than the close of business on the later
of (x) the 60th day prior to such annual meeting or (y) the seventh day
following the date on which the notice of the date of the annual meeting was
mailed to stockholders or public disclosure thereof was otherwise made. The
notice must set forth a brief description of the business desired to be brought
before the meeting and the reasons for wanting to conduct such business as well
as certain information concerning the stockholder proposing such business,
including the stockholder's name and address, the class and number of shares of
the Company's stock beneficially owned, any interest which the stockholder may
have in such business and a representation that such stockholder is a
stockholder of record at the time notice is given and intends to appear in
person or by proxy at the meeting to present such business.
Special Voting Requirements. Under applicable provisions of Delaware
law, (i) action by stockholders of a Delaware corporation on certain significant
matters, including, in most cases, amendment of the certificate of
incorporation, merger, sale of all or substantially all of the corporation's
assets and dissolution of the corporation, requires the approval of the holders
of a majority of the outstanding shares entitled to vote on the matter unless
the certificate of incorporation provides for a greater or lesser vote and (ii)
stockholder action on most other matters requires the approval of a majority of
the votes cast with respect to such matters unless the certificate of
incorporation provides for a greater vote. The Certificate of Incorporation of
the Company requires the affirmative vote of the holders of at least two-thirds
(2/3) of the outstanding shares of Common Stock to (i) remove any director(s)
from the Board of Directors or increase the number of directors constituting the
entire Board of Directors or (ii) amend the Certificate of Incorporation (except
as set forth in the paragraph NINTH thereof) or the Bylaws or (iii) approve any
merger or other business combination, share exchange, or the sale, lease or
exchange of all or substantially all of the Company's assets and property (other
than in the usual and regular course of business) or a reclassification of
securities or recapitalization of the Company or (iv) change the state of
incorporation of the Company.
Registration Rights Agreement with Chase. For discussion of the
Company's Registration Rights Agreement with Chase, see "Market Price of and
Dividends on the Registrant's Common Equity and Related Stockholder Matters."
Potential Effect of Certain Provisions upon an Attempt to Acquire
Control of the Company. Certain of the foregoing provisions of the Certificate
of Incorporation, Bylaws and agreements with stockholders summarized
42
<PAGE>
above may discourage or make more difficult the acquisition of control of the
Company by means of a tender offer, open market purchase, proxy fight or
otherwise, including certain types of coercive takeover practices and inadequate
takeover bids. These provisions are intended to encourage persons seeking to
acquire control of the Company first to negotiate with the Company. The Company
believes the foregoing measures, many of which are substantially similar to the
takeover-related measures in effect for many other publicly held companies,
provide benefits by enhancing the Company's potential ability to negotiate with
the proponent of any unfriendly or unsolicited proposal to take over or
restructure the Company that outweigh the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms.
Transfer Agent. The Transfer Agent for the Common Stock is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or to its stockholders for monetary damages for a breach of his
fiduciary duty as a director, except in the case where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of the DGCL or obtained an improper personal
benefit. The Company's Certificate of Incorporation contains a provision which,
in substance, eliminates directors' personal liability as set forth above.
Section 145 of the DGCL allows a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director or officer of
the corporation, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company's Certificate
of Incorporation contains a provision which, in substance, provides for
indemnification as set forth above, effective as of noon on August 26, 1997, to
the fullest extent and in the manner set forth in and permitted by the DGCL, and
any other applicable law, as from time to time in effect.
See also "Certain Relationships and Related Transactions -- Claim
Holders' Release of Directors and Officers from Claims and Liabilities."
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For the information required by this item, refer to the Index to
Historical Financial Statements appearing on Page 46 of this Registration
Statement.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
See the Index to Historical Financial Statements.
43
<PAGE>
(b) Exhibits:
Exhibit
No. Description
-------- -----------
2.1 Weiner's Stores, Inc.'s Amended Plan of Reorganization
Under Chapter 11 of the Bankruptcy Code, dated June
24, 1997
2.2 Modification of the Weiner's Stores, Inc.'s
Amended Plan of Reorganization Under Chapter
11 of the Bankruptcy Code, made pursuant to
the order of the Bankruptcy Court confirming
the Plan pursuant to section 1129 of the
Bankruptcy Code, dated August 13, 1997
3.1 Restated Certificate of Incorporation of the Company
3.2 Restated Bylaws of the Company
4.1 Registration Rights Agreement between the Company and
Texas Commerce Bank N.A. dated August 26, 1997
4.2 Form of Specimen Common Stock Certificate
10.1 Weiner's Stores, Inc. 1997 Stock Incentive Plan
10.2 Form of Incentive Stock Option Agreement
between the Company and each of the eligible
employees pursuant to Schedule A of the
Stock Plan
10.3 Form of Nonqualified Stock Option Agreement
between the Company and each of the eligible
employees pursuant to Schedule A of the
Stock Plan
10.4 Form of Restricted Stock Agreement between
the Company and each of the named executive
officers named on Schedule B to the Stock
Plan
10.5 Employment Agreement between the Company and Herbert
R. Douglas dated December 5, 1995
10.6 Amendment, dated May 1, 1997, to Employment Agreement
between the Company and Herbert R. Douglas
10.7 Employment Agreement between the Company and Raymond
J. Miller dated February 24, 1995
10.8 Amendment, dated April 7, 1995, to Employment
Agreement between the Company and Raymond J. Miller
10.9 Amendment, dated May 1, 1997, to Employment Agreement
between the Company and Raymond J. Miller
10.10 Employment Agreement between the Company and Jerome L.
Feller dated December 14, 1995
44
<PAGE>
10.11 Amendment, dated May 1, 1997, to Employment Agreement
between the Company and Jerome L. Feller
10.12 Severance Agreement between the Company and
James L. Berens dated January 29, 1996,
conformed as amended May 1, 1997
10.13 Severance Agreement between the Company and
Joseph J. Kassa dated February 5, 1996,
conformed as amended May 1, 1997
10.14 Credit Agreement among the Company, various
Lending Institutions and The CIT
Group/Business Credit, Inc., as Agent, dated
August 26, 1997
10.15 First Amendment, dated as of September 30, 1997, to
the Credit Agreement
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
45
<PAGE>
WEINER'S STORES, INC.
INDEX TO HISTORICAL FINANCIAL STATEMENTS
Page
----
Annual Financial Statements
Independent Auditors' Report...........................................48
Balance Sheets as of January 25, 1997 and January 27, 1996.............49
Statements of Operations and Retained Earnings (Deficit) for the Years
Ended January 25, 1997 and January 27, 1996 and the Thirteen
Months Ended January 28, 1995.................................51
Statements of Changes in Stockholders' Equity (Deficiency) for the
Years Ended January 25, 1997 and January 27, 1996 and the
Thirteen Months Ended January 28, 1995........................52
Statements of Cash Flows for the Years Ended January 25, 1997 and
January 27, 1996 and the Thirteen Months Ended
January 28, 1995..............................................53
Notes to Financial Statements .........................................54
Financial Statement as of August 26, 1997
Independent Auditors' Report...........................................62
Balance Sheet as of August 26, 1997....................................63
Notes to Financial Statement...........................................64
Interim Financial Statements (Unaudited)
Balance Sheet as of October 25, 1997 (Unaudited) ......................70
Statements of Operations for the Successor Company for the Nine Weeks
From Inception (August 26, 1997) to October 25, 1997 and for
the Predecessor Company for the Thirty Weeks Ended August 25,
1997 and the Thirty-Nine Weeks Ended October 26, 1996
(Unaudited)...................................................71
Statements of Cash Flows for the Successor Company for the Nine Weeks
From Inception (August 26, 1997) to October 25, 1997 and for
the Predecessor Company for the Thirty Weeks Ended August 25,
1997 and the Thirty-Nine Weeks Ended October 26, 1996
(Unaudited)...................................................72
Notes to Interim Financial Statements (Unaudited)......................73
Note: The financial condition and results of operations of the Company after
giving effect to the Plan and the transactions contemplated thereby
will not be comparable to the financial condition and results of
operations of the Company as of any dates or for any periods prior to
the Plan Effective Date. See "Financial Information -- Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
46
<PAGE>
WEINER'S STORES, INC.
BALANCE SHEETS AS OF
JANUARY 25, 1997 AND JANUARY 27, 1996 AND
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT),
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY), AND
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JANUARY 25, 1997 AND
JANUARY 27, 1996 AND THE THIRTEEN MONTHS ENDED
JANUARY 28, 1995 AND INDEPENDENT AUDITORS' REPORT
47
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of Weiner's Stores, Inc.
Houston, Texas
We have audited the accompanying balance sheets of Weiner's Stores, Inc.
(Debtor-In-Possession) (the "Company") as of January 25, 1997 and January 27,
1996, and the related statements of operations and retained earnings (deficit)
and of cash flows for the years ended January 25, 1997 and January 27, 1996 and
the thirteen months ended January 28, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Weiner's Stores, Inc. as of January 25, 1997
and January 27, 1996, and the results of its operations and its cash flows for
the years ended January 25, 1997 and January 27, 1996 and the thirteen months
ended January 28, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1, the Company has filed for reorganization under Chapter
11 of the Federal Bankruptcy Code. The accompanying financial statements do not
purport to reflect or provide for the consequences of the bankruptcy
proceedings. In particular, such financial statements do not purport to show (a)
as to assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to prepetition liabilities, the
amounts that may be allowed for claims or contingencies, or the status and
priority thereof; (c) as to stockholder accounts, the effect of any changes that
may be made in the capitalization of the Company; or (d) as to operations, the
effect of any changes that may be made in its business.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company's
operating losses, stockholders' deficiency and filing for reorganization
described above raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are discussed in Notes 1
and 3. The financial statements do not include adjustments that might result
from the outcome of these uncertainties.
/s/ Deloitte & Touche LLP
Houston, Texas
March 20, 1997
48
<PAGE>
WEINER'S STORES, INC.
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS
JANUARY 25, 1997 AND JANUARY 27, 1996
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------------- ------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 18,718,546 $ 27,073,642
Accounts receivable (no allowance for doubtful accounts
considered necessary)............................................. 2,701,843 4,430,313
Merchandise inventories................................................ 53,616,805 50,102,858
Prepaid expenses and other assets...................................... 2,154,874 2,980,796
Refundable income taxes................................................ - 411,741
------------------ -------------------
Total current assets.............................................. 77,192,068 84,999,350
------------------ -------------------
PROPERTY AND EQUIPMENT, at cost:
Land................................................................... 319,265 319,265
Building - distribution center and office facility..................... 5,771,250 5,421,410
Furniture, fixtures and leasehold improvements......................... 40,744,796 42,529,688
------------------ -------------------
Total............................................................. 46,835,311 48,270,363
Less accumulated depreciation and amortization......................... 32,742,439 30,028,005
------------------- -------------------
Total property and equipment, net................................. 14,092,872 18,242,358
------------------- -------------------
TOTAL........................................................................ $ 91,284,940 $ 103,241,708
================== ====================
</TABLE>
See notes to financial statements.
49
<PAGE>
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
------------------ -----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<S> <C> <C>
CURRENT LIABILITIES:
Trade accounts payable.................................................. $ 9,672,735 $ 10,542,871
Accrued expenses and other current liabilities.......................... 9,096,308 6,144,088
Accrued reorganization expenses......................................... 3,695,113 3,386,720
----------------- -----------------
Total current liabilities.......................................... 22,464,156 20,073,679
----------------- -----------------
DEFERRED INCOME TAXES, net.................................................... 450,000 498,300
----------------- -----------------
LIABILITIES SUBJECT TO SETTLEMENT UNDER
REORGANIZATION PROCEEDINGS.............................................. 92,817,095 89,895,986
----------------- -----------------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' DEFICIENCY:
Common Stock:
Class A, voting, $100 par value; 10,000 shares issued and
outstanding................................................... 1,000,000 1,000,000
Class A, nonvoting, $100 par value; 90,000 shares issued and
outstanding................................................... 9,000,000 9,000,000
Retained deficit........................................................ (34,446,311) (17,226,257)
Total stockholders' deficiency..................................... (24,446,311) (7,226,257)
------------------ ------------------
TOTAL......................................................................... $ 91,284,940 $ 103,241,708
================== ==================
</TABLE>
See notes to financial statements.
50
<PAGE>
WEINER'S STORES, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE YEARS ENDED JANUARY 25, 1997 AND
JANUARY 27, 1996 AND THE THIRTEEN MONTHS ENDED JANUARY 28, 1995
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27, JANUARY 28,
1997 1996 1995
------------------- ------------------- -----------------
<S> <C> <C> <C>
REVENUES:
Net sales........................................... $ 263,043,211 $ 260,136,377 $ 307,255,761
Other income........................................ 1,752,897 2,121,142 2,621,231
Interest............................................ 640,694 774,552 19,838
------------------- ------------------- ------------------
Total.......................................... 265,436,802 263,032,071 309,896,830
------------------- ------------------- ------------------
COSTS AND EXPENSES:
Cost of goods sold.................................. 178,541,430 179,358,726 209,588,924
Selling, administrative and other operating costs... 86,734,400 95,327,999 113,380,205
Depreciation and amortization....................... 3,643,776 3,706,406 4,176,879
Reorganization expense.............................. 10,741,975 9,752,576 1,875,000
Impairment of assets................................ 3,043,575 -- --
------------------- ------------------- ------------------
Total.......................................... 282,705,156 288,145,707 329,021,008
------------------- ------------------- ------------------
OPERATING LOSS............................................ (17,268,354) (25,113,636) (19,124,178)
INTEREST EXPENSE.......................................... -- 791,132 3,539,887
------------------ ------------------- ------------------
LOSS BEFORE INCOME TAXES.................................. (17,268,354) (25,904,768) (22,664,065)
INCOME TAX BENEFIT........................................ 48,300 300,000 3,000,000
------------------- ------------------- ------------------
NET LOSS.................................................. (17,220,054) (25,604,768) (19,664,065)
RETAINED (DEFICIT) EARNINGS:
Beginning of period................................. (17,226,257) 8,378,511 28,042,576
------------------- ------------------- ------------------
End of period....................................... $ (34,446,311) $ (17,226,257) $ 8,378,511
=================== =================== ==================
</TABLE>
See notes to financial statements.
51
<PAGE>
WEINER'S STORES, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED JANUARY 25, 1997
AND JANUARY 27, 1996 AND THE THIRTEEN MONTHS ENDED JANUARY 28, 1995
<TABLE>
<CAPTION>
Additional Retained
Common Stock paid-in Earnings
Shares Amounts capital (Deficit) Total
------- ------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1994....... 100,000 $ 10,000,000 $ -- $ 28,042,576 $ 38,042,576
Net loss.................... -- -- -- (19,664,065) (19,664,065)
-------------- --------------- -------------- ------------------ ----------------
Balances at January 28, 1995...... 100,000 10,000,000 -- 8,378,511 18,378,511
Net loss.................... -- -- -- (25,604,768) (25,604,768)
-------------- --------------- -------------- ------------------ ----------------
Balances at January 27, 1996...... 100,000 10,000,000 -- (17,226,257) (7,226,257)
Net loss.................... -- -- -- (17,220,054) (17,220,054)
-------------- --------------- -------------- ------------------ ----------------
Balances at January 25, 1997...... 100,000 $ 10,000,000 $ - $ (34,446,311) $ (24,446,311)
============== =============== ============== ================== ================
</TABLE>
See notes to financial statements.
52
<PAGE>
WEINER'S STORES, INC.
(DEBTOR-IN-POSSESSION)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JANUARY 25, 1997 AND JANUARY 27, 1996
AND THE THIRTEEN MONTHS ENDED JANUARY 28, 1995
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27, JANUARY 28,
1997 1996 1995
----------------- ------------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..............................................$(17,220,054) $ (25,604,768) $ (19,664,065)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization..................... 3,643,776 3,706,406 4,176,879
Reorganization expense............................ 10,741,975 9,752,576 1,875,000
Impairment of assets.............................. 3,043,575 -- --
Loss on disposition of assets..................... 329,384 916,300 --
Deferred taxes.................................... (48,300) (300,000) 79,596
Change in operating assets and liabilities:
Accounts receivable.......................... 1,728,470 (1,498,282) (796,550)
Merchandise inventories...................... (3,513,947) 9,991,771 16,730,018
Prepaid expenses and other assets............ 825,922 236,411 (1,015,952)
Refundable income taxes...................... 411,741 2,484,686 (630,033)
Accounts payable, accrued expenses and
other liabilities...................... (4,349,336) 23,911,689 (7,774,940)
---------------- ----------------- -----------------
Net cash (used in) provided by
operating activities.............. (4,406,794) 23,596,789 (7,020,047)
----------------- ------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (3,956,702) (1,139,278) (1,209,099)
Proceeds on disposition of assets...................... 8,400 182,471 --
----------------- ------------------- ----------------
Net cash used in investing activities........ (3,948,302) (956,807) (1,209,099)
----------------- ------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal reduction in long-term debt.................. -- (26,390) (3,643,381)
Net borrowings under prepetition bank line of credit... -- 1,505,000 10,765,000
----------------- ------------------- ----------------
Net cash provided by financing activities.... -- 1,478,610 7,121,619
----------------- ------------------- ----------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.................................................. (8,355,096) 24,118,592 (1,107,527)
CASH AND CASH EQUIVALENTS:
Beginning of year...................................... 27,073,642 2,955,050 4,062,577
----------------- ------------------- ----------------
End of year............................................ $18,718,546 $ 27,073,642 $ 2,955,050
================= =================== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest................. -- $ 827,813 $ 3,189,251
================= =================== ================
Cash refunded during the year for income taxes......... $ 411,741 $ 2,484,686 $ 1,476,016
================= =================== ================
</TABLE>
See notes to financial statements.
53
<PAGE>
WEINER'S STORES, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 25, 1997 AND
JANUARY 27 1996 AND THE THIRTEEN MONTHS ENDED JANUARY 28, 1995
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business - Weiner's Stores, Inc. ("WSI" or the
"Company") as of January 25, 1997 operated 131 family retail specialty
stores located in Texas and Louisiana.
On April 12, 1995 (the "Petition Date"), the Company filed a petition
for reorganization under Chapter 11 ("Chapter 11") of the Federal
Bankruptcy Code ("Bankruptcy Code") in the United States Bankruptcy
Court for the District of Delaware ("Court" or "Bankruptcy Court").
This Chapter 11 case is being administered by the Court, with the
Company managing its business as debtor-in-possession subject to Court
approval for certain actions the Company takes.
Under Chapter 11 proceedings, actions by creditors to collect claims in
existence at the filing date ("prepetition") are stayed ("deferred"),
absent specific Court authorizations to pay such claims, while the
Company continues to manage its business as debtor-in-possession. These
financial statements include adjustments and reclassifications that
have been made to reflect the liabilities which have been deferred
under the Chapter 11 proceedings. Those noncurrent liabilities which
have been deferred are expected to be settled as part of the plan or
plans of reorganization and are classified as liabilities subject to
settlement under reorganization proceedings. As of March 20, 1997, the
Company cannot accurately predict the outcome, if any, of the plan of
reorganization submitted to the Court on February 4, 1997 (Note 3).
The Company believes appropriate provisions have been made in the
accompanying financial statements for prepetition claims which are
recorded as liabilities subject to settlement under reorganization
proceedings and include long-term debt, claims associated with the
rejection of certain store leases, trade accounts payable as of the
Petition Date and unsecured bank debt. The amounts of the claims filed
by some claimants may be significantly in excess of the related
liabilities recorded by the Company.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company's operating losses, stockholders' deficiency and filing for
reorganization described above raise substantial doubt about its
ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary as a
consequence of the bankruptcy proceedings or should the Company be
unable to continue as a going concern. The appropriateness of using the
going concern basis for a company operating under Chapter 11 of the
Bankruptcy Code is dependent on several factors, including the success
of future operations, the ability to generate sufficient cash from
operations and financing to meet its obligations and, eventually, the
confirmation of a plan of reorganization (see notes 3 and 4).
54
<PAGE>
2. SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
FISCAL YEAR - The Company follows a 52- or 53-week fiscal year. As a
result, the financial statements for the period ended January 25, 1997
(fiscal 1996) and the period ended January 27, 1996 (fiscal 1995)
include the results for the 52-week periods then ended. As of January
1, 1994, the Company changed its fiscal year from a calendar year to a
52- or 53-week fiscal year ending on the last Saturday in January. As a
result of this change in fiscal year, the financial statements for the
period ended January 28, 1995 (fiscal 1994) include the results for the
52-week period then ended and the results for the month of January
1994.
CASH EQUIVALENTS - Cash equivalents are primarily short-term,
interest-bearing government securities and are subject to minimal risk.
These investments have maturities at the date of purchase of not
greater than three months. At the Petition Date, WSI was permitted by
the Court to continue to consolidate and manage its cash.
MERCHANDISE INVENTORIES - Merchandise inventories are valued at the
lower of average cost or market as determined by the retail inventory
method and include certain capitalized costs for procurement and
distribution.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Normal repairs and maintenance costs are charged to earnings as
incurred, and additions and major improvements are capitalized. The
cost of assets retired or otherwise disposed of and the related
allowance for depreciation are eliminated from the accounts in the year
of disposal, and the resulting gain or loss is credited or charged to
earnings.
Depreciation of the distribution center and office facility is provided
using the 150% declining-balance method of accounting based on an
average life of 28 years. Equipment is depreciated using the
straight-line method of accounting based on an average life of ten
years. Store fixtures and leasehold improvements are amortized using
the straight-line method, over the shorter of their estimated useful
life of ten years or the term of the lease.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates, particularly those
estimates related to Chapter 11 proceedings (see Notes 1 and 3).
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial
instruments include cash and cash equivalents, accounts receivable and
trade accounts payable, with fair values that approximate recorded
amounts as a result of the short-term nature of these accounts, and
liabilities subject to settlement under reorganization proceedings.
Because of the uncertainties inherent in the Chapter 11 proceedings, it
is not practical to estimate the fair value of liabilities subject to
settlement under reorganization proceedings.
RECLASSIFICATION - Certain amounts for 1995 have been reclassified to
conform with the 1996 presentation.
3. PLAN OF REORGANIZATION
The Company submitted a plan of reorganization to the Court on February
4, 1997. The February 4, 1997 plan of reorganization, among other
things, effectively eliminates the Company's prepetition unsecured
indebtedness; cancels all prepetition equity interests; provides for
payment in full of allowed
55
<PAGE>
priority claims, including tax claims and lease cure payments; provides
for payment in full or other treatment providing the present value of
the Security Pacific secured claim (holds secured interest on the
Company's office and distribution center facility); provides for
payment in cash equal to sixty-seven percent of claims of $1,000 or
less; and issues substantially all of a new common stock pro rata among
holders of general unsecured claims. Notwithstanding the filing of the
February 4, 1997 plan of reorganization, the Company has continued to
negotiate with the statutory unsecured creditors' committee and other
constituencies regarding the terms of the plan of reorganization, and
the Company currently anticipates filing an amended plan of
reorganization within the next thirty days.
Until a plan of reorganization is confirmed by the Bankruptcy Court and
that plan becomes effective, it is not possible to predict with
certainty the ultimate recoveries for creditors and shareholders, the
length of time WSI will operate under the protection of Chapter 11, the
outcome of the Chapter 11 proceedings in general, the effects of the
proceedings on the business of WSI or the extent of the negative
effects on the interests of the various creditors and shareholders.
While management currently believes the Company has made adequate
provision for the liabilities to be incurred in connection with Chapter
11 claims, there can be no assurance as to the final amount of such
liabilities or the final impact of such liabilities on a confirmed plan
of reorganization.
4. LIABILITIES SUBJECT TO SETTLEMENT UNDER REORGANIZATION PROCEEDINGS
The Court established the date ("Bar Date") of March 27, 1996 by which
claims must be filed. Claims subject to the order which are not filed
by the Bar Date are barred from voting upon or receiving distribution
under any plan of reorganization of WSI unless the Court were to order
otherwise.
Those liabilities which are ultimately expected to be settled as part
of a plan of reorganization are classified as liabilities subject to
settlement under reorganization proceedings and are approximately as
follows at January 25, 1997:
Administrative and other claims.................. $ 4,000,000
Priority tax claims.............................. 2,600,000
Security Pacific secured claim................... 279,000
Unsecured claims................................. 85,938,000
-----------
Total........................................... $92,817,000
===========
While management currently believes that it has made an adequate
provision for liabilities to be incurred in connection with Chapter 11
claims, including executory contracts and store rationalization, there
can be no assurance as to the amount of the ultimate liabilities, the
impact of such liabilities on a plan of reorganization or how such
liabilities will be treated in a confirmed plan of reorganization.
5. REORGANIZATION EXPENSE
In connection with the Chapter 11 proceedings, WSI initiated a
restructuring program designed to improve profitability and liquidity.
This program included the closing of 27 of the Company's stores during
fiscal years 1995 and 1996. Reorganization expense of approximately
$10,742,000 in 1996, $9,753,000 in 1995 and $1,875,000 in 1994 includes
losses from store closings, bankruptcy related professional fees,
employee severance, compensation related to changes in management,
write-offs of unusable assets, adjustment of claims filed under the
bankruptcy filing and other related restructuring costs. The 1996
expense also includes the estimated cost for approximately five more
store closings in fiscal 1997.
56
<PAGE>
6. IMPAIRMENT OF LONG-LIVED ASSETS
During March 1995 the Financial Accounting Standard Board issued
Statement of Financial Accounting Standards No. 121 ("FAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long- Lived
Assets to Be Disposed Of." FAS 121 requires that, beginning in fiscal
years starting after December 15, 1995, long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Long-lived
assets and certain identifiable intangibles to be disposed of are
generally to be reported at the lower of carrying value amount or fair
value, less cost to sell.
The Company adopted FAS 121 at the beginning of fiscal 1996. As a
result of management's decision to replace their store point-of-sale
equipment with more advanced equipment in 1998 and 1999, an impairment
charge of $3,043,575 was recorded in fiscal 1996. This charge reduces
the carrying value of such equipment to a minimal amount based on
management's opinion that the fair value of the equipment at the time
of its disposal will be minimal.
7. DEBT
The Company has available a debtor-in-possession financing agreement
(the "Agreement"). The Agreement includes, among other things, a
revolving credit facility aggregating $30,000,000. The credit facility
is available for general corporate purposes, $10,000,000 of which may
be used to secure letters of credit. As of January 25, 1997, letters of
credit aggregating approximately $6,400,000 were outstanding; there
have been no direct borrowings outstanding under the Agreement.
The Agreement expires on the earlier of April 12, 1998 or the date of
the substantial consummation of a plan of reorganization (Note 3) that
has been confirmed by an order of the Bankruptcy Court. Borrowings
under the Agreement bear interest at a rate per annum equal to, at the
Company's option, (a) the prime rate plus 1/2% or (b) the LIBOR rate
plus 2 1/2%. Borrowings are limited to a borrowing base which
approximates 55% of eligible inventory less $1,500,000. The Agreement
requires a fee of 3/8 of 1% per annum applicable to the unused portion
of the facility, a fee of 1.5% per annum applicable to outstanding
undrawn letters of credit and an annual administrative fee of $50,000.
Compensating balances are not required.
Amounts borrowed under the Agreement may be used by the Company solely
to fund working capital and for other general corporate purposes in the
ordinary course of business. The Agreement also contains, among other
things, restrictions on additional indebtedness, capital expenditures,
payment of dividends and sale of assets and requires the Company to
meet or maintain certain inventory balances and operating results. As
of January 25, 1997, the Company was in compliance with the covenants
of the Agreement. Pursuant to orders of the Bankruptcy Court, amounts
outstanding under the Agreement are unsecured but are entitled to a
superpriority claim status under the Bankruptcy Code.
8. INCOME TAXES
A federal income tax benefit has been recorded only to the extent such
benefit can be offset against existing deferred income tax liabilities.
Deferred income taxes and benefits are provided for the tax effect of
temporary differences between the financial statement carrying amount
of existing assets and liabilities and their respective tax bases.
57
<PAGE>
The income tax benefit consists of the following for the years ended
January 25, 1997 and January 27, 1996 and the thirteen months ended
January 28, 1995:
<TABLE>
<CAPTION>
January 25, January 27, January 28,
1997 1996 1995
---------------- --------------- -----------------
<S> <C> <C> <C>
Current federal benefit.................................... $ -- $ -- $ (3,079,596)
Deferred federal (benefit) provision....................... (48,300) (300,000) 79,596
--------------- -------------- ----------------
Total...................................................... $ (48,300) $ (300,000) $ (3,000,000)
============== ============= ================
</TABLE>
Deferred tax assets and liabilities and the related valuation allowance
are as follows:
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
---------------- ----------------
<S> <C> <C>
Deferred tax liabilities.............................................. $ 450,000 $ 1,888,593
Deferred tax assets................................................... (18,942,146) (14,748,697)
Less: Valuation allowance............................................. 18,942,146 13,358,404
------------- --------------
Deferred income taxes, net............................................ $ 450,000 $ 498,300
============= ==============
</TABLE>
The Company's temporary differences and carryforwards giving rise to
deferred tax assets and liabilities include property and equipment
basis differences, net operating losses, targeted job credits, accrued
restructuring expenses, impairment of assets and inventory reserves.
The net operating loss carryforwards of approximately $50,000,000 and
the targeted jobs credit carryforward of approximately $779,000 expire
in various years through 2012. The valuation allowance reduces deferred
tax assets to the amount that the Company believes is more likely than
not to be realized.
9. BENEFIT PLANS
The Company sponsors a profit sharing plan for its employees.
Contributions to the profit sharing plan are at the discretion of the
Board of Directors and are limited to the amount deductible under the
Internal Revenue Code. The Company contributed $5,000 during fiscal
1996 and 1995 and $35,000 during fiscal 1994.
The Company also sponsors a 401(k) defined contribution plan that
covers all salaried employees. Employees may contribute up to 15% of
their compensation for any year. There have been no Company
contributions to the plan.
10. RELATED PARTIES
During fiscal 1995, the Company had "split-dollar insurance"
arrangements with two officers/stockholders of the Company. Under such
arrangements, the Company did not own the policies but agreed to pay a
certain portion of the premium costs. The excess of premiums paid by
the Company and not reimbursed by the insureds was recorded as an
asset. On April 11, 1995, the insureds paid the Company $984,000 for
the Company's entitlement to future benefits and thereafter the
insureds assumed full responsibility for the insurance policies.
Accrued liabilities at January 25, 1997 and January 27, 1996 include
approximately $28,000 and $27,000, respectively, in percentage rentals
owed to two stockholders (see Note 11). The Company currently leases
three store sites from related parties.
58
<PAGE>
11. LEASES
The Company leases all of its stores and certain other facilities under
operating leases that expire in various years through 2006. Store
leases normally have an initial lease period of five to ten years;
however, the leases are generally renewed for option periods or
replaced by similar leases at other sites in the same area.
Under Chapter 11 proceedings (see Note 1), the Company has the right,
subject to Court approval, to assume or reject executory contracts and
unexpired leases. In this context, "assumption" means that the Company
agrees to perform its obligation under the contract or lease agreement
and "rejection" means that the Company is relieved from its obligation
to perform further under the contract or lease but is subject to a
claim of damages for the breach thereof.
Future minimum rental payments for leases which have not been rejected
as of January 25, 1997 are approximately as follows:
1997...............................$ 9,003,000
1998................................ 8,237,000
1999................................ 6,502,000
2000................................ 4,738,000
2001................................ 2,671,000
Thereafter.......................... 2,706,000
-----------
Total..............................$ 33,857,000
============
Store leases generally specify minimum rentals plus common area
maintenance charges and possible additional rentals based on a
percentage of sales in excess of stipulated amounts. The following
schedule reflects the composition of total rental expense, including
contingent percentage rentals, for all operating leases:
<TABLE>
<CAPTION>
January 25, January 27, January 28,
1997 1996 1995
----------------- ----------------- ------------------
<S> <C> <C> <C>
Related parties - store facilities and
other (including percentage
rentals of approximately $54,000,
$46,000 and $29,000,
respectively)....................... $ 377,000 $ 739,000 $ 781,000
Other - store facilities (including
percentage rentals of $438,000,
$327,000 and $346,000,
respectively)....................... 10,109,000 11,918,000 13,932,000
----------------- ---------------- ------------------
Total................................... $ 10,486,000 $ 12,657,000 $ 14,713,000
================= ================ ==================
</TABLE>
12. CONTINGENCIES
The Company is involved in lawsuits related to a fiscal 1995 traffic
accident involving a truck driven by an employee of the Company. In the
accident occupants of a second vehicle were fatally injured and the
driver of the truck was severely injured. While certain settlements
(covered by insurance) have been reached with certain parties, there
continues to exist outstanding litigation against the Company with
respect to these matters. Management believes that it has meritorious
defenses and adequate insurance coverage for the remaining claims.
59
<PAGE>
There are various other suits and claims against the Company that have
arisen in the normal course of business, none of which, in the opinion
of management, will have a material effect on the Company.
13. FISCAL 1994 RESULTS OF OPERATIONS (UNAUDITED)
As discussed in Note 2, as of January 1, 1994, the Company changed its
fiscal year from a calendar year to a 52- or 53-week fiscal year ending
on the last Saturday in January. As a result, the financial statements
for the period ended January 28, 1995 include the results for the
52-week period then ended and the results for the month of January
1994.
The following table summarizes the effect of the inclusion of January
1994 on the results of operations reported for fiscal 1994 (in
thousands):
<TABLE>
<CAPTION>
52 weeks Thirteen months
Month of ended ended
January January 28, January 28,
1994 1995 1995
-------------- ------------ ----------------
<S> <C> <C> <C>
Total revenues.......................... $ 17,870 $ 292,027 $ 309,897
Total costs and expenses................ 17,326 311,695 329,021
--------------- -------------- ------------------
Operating (loss) income................. 544 (19,668) (19,124)
Interest expense........................ 65 3,475 3,540
--------------- -------------- ------------------
(Loss) income before income taxes....... 479 (23,143) (22,664)
Income tax benefit (expense)............ (63) 3,063 3,000
--------------- -------------- ------------------
Net (loss) income....................... $ 416 $ (20,080) $ (19,664)
============== ============= ==================
</TABLE>
* * *
60
<PAGE>
WEINER'S STORES, INC.
BALANCE SHEET AS OF AUGUST 26, 1997
AND INDEPENDENT AUDITORS' REPORT
61
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of Weiner's Stores, Inc.
Houston, Texas
We have audited the accompanying balance sheet of Weiner's Stores, Inc. (the
"Company") as of August 26, 1997. This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
As discussed in Note 3 to the financial statements, on August 13, 1997, the
Bankruptcy Court entered an order confirming the plan of reorganization which
became effective after the close of business on August 25, 1997. Accordingly,
the accompanying financial statement has been prepared in conformity with AICPA
Statement of Position 90-7, "Financial Reporting for Entities in Reorganization
Under the Bankruptcy Code," for the successor company as a new entity with
assets, liabilities, and a capital structure having carrying values not
comparable with prior periods as described in Note 4.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the Company at August 26, 1997 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Houston, Texas
January 23, 1998
62
<PAGE>
WEINER'S STORES, INC.
BALANCE SHEET
AUGUST 26, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 15,673
Accounts receivable 4,443
Merchandise inventories 55,269
Prepaid expenses and other assets 2,346
-------------
Total current assets 77,731
-------------
PROPERTY AND EQUIPMENT, AT COST:
Land 259
Building - distribution center and office facility 1,666
Furniture, fixtures and leasehold improvements 13,680
-------------
Total 15,605
-------------
REORGANIZATION VALUE IN EXCESS OF
AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS 5,905
------------
TOTAL $ 99,241
============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Trade accounts payable $ 10,783
Accrued expenses and other current liabilities 23,514
-------------
Total current liabilities 34,297
-------------
OTHER LIABILITIES 1,090
-------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 shares
authorized; 19,000,000 shares issued and outstanding 190
Additional paid-in capital 63,664
--------------
Total stockholders' equity 63,854
--------------
TOTAL $ 99,241
==============
63
<PAGE>
WEINER'S STORES, INC.
NOTES TO BALANCE SHEET AS OF AUGUST 26, 1997
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Weiner's Stores, Inc. (the "Company") as of August 26, 1997 operated 134
family retail specialty stores located in Texas and Louisiana.
As more fully described in Notes 3 and 4, the Company emerged from Chapter
11 bankruptcy on August 26, 1997 and adopted the recommended "fresh start"
reporting as set forth in the American Institute of Certified Public
Accountants' Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7").
2. SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
Fiscal Year - The Company follows a 52- or 53-week fiscal year ending on
the Saturday closest to January 31.
Cash Equivalents - Cash equivalents are investments that have maturities
at the date of purchase of not greater than three months.
Merchandise Inventories - Merchandise inventories are valued at the lower
of average cost or market as determined by the retail inventory method and
include certain capitalized costs for procurement and distribution.
Property and equipment - Pursuant to SOP 90-7, property and equipment is
stated at approximate fair market value at August 26, 1997. Additions
subsequent to August 26, 1997 will be recorded at cost. Normal repairs and
maintenance costs are charged to earnings as incurred, and additions and
major improvements are capitalized. The cost of assets retired or
otherwise disposed of and the related allowance for depreciation are
eliminated from the accounts in the year of disposal, and the resulting
gain or loss is credited or charged to earnings.
Depreciation of the distribution center and office facility is provided
using the 150% declining-balance method of accounting based on an average
life of 15 years. Equipment is depreciated using the straight-line method
of accounting based on an average life of five to ten years. Store
fixtures and leasehold improvements are amortized using the straight-line
method over the shorter of their estimated useful life of ten years or the
term of the lease.
Reorganization Value in Excess of Amounts Allocable to Identifiable Assets
- Reorganization Value in Excess of Amounts Allocable to Identifiable
Assets ("Excess Reorganization Value") is being amortized on a
straight-line basis over 15 years.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those
estimates.
64
<PAGE>
Fair Value of Financial Instruments - The Company's financial instruments
include cash and cash equivalents, accounts receivable, trade accounts
payable and accrued expenses, with fair values that approximate recorded
amounts as a result of the short-term nature of these accounts.
3. REORGANIZATION
On April 12, 1995 (the "Petition Date"), the predecessor to the Company
("Predecessor") filed a petition for reorganization under Chapter 11
("Chapter 11") of the Federal Bankruptcy Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). Subsequent to the Petition Date, the Predecessor
operated its business as a debtor-in-possession under the supervision of
the Bankruptcy Court. As of the Petition Date, actions to collect
prepetition indebtedness were stayed and other contractual obligations
could not be enforced against the Predecessor. In addition, under the
Bankruptcy Code, the Predecessor could reject leases and executory
contracts. Parties affected by these rejections could file claims with the
Bankruptcy Court in accordance with the reorganization process.
Substantially all liabilities as of the Petition Date were subject to
settlement under a plan of reorganization to be voted by the creditors and
approved by the Bankruptcy Court.
As a result of extensive negotiations, the Predecessor reached a
compromise agreement with representatives of all of its major creditor
constituencies, as well as the Predecessor's common stockholders. This
compromise agreement was then incorporated into and became the Plan of
Reorganization. On August 13, 1997, the Bankruptcy Court commenced a
hearing that resulted in the entering of a court order confirming the Plan
of Reorganization. The Plan of Reorganization subsequently became
effective August 26, 1997 (the "Effective Date").
Pursuant to the Plan of Reorganization, on the Effective Date, all
outstanding shares of common stock and any options, warrants or other
agreements requiring the issuance of any such stock of the Predecessor
were extinguished. The Plan of Reorganization was designed to repay all
priority creditors in full on the Effective Date or thereafter as provided
in the Plan of Reorganization and to repay secured creditors in full over
time with interest. Allowed unsecured claims totaling approximately $85.2
million were canceled in exchange for $5.0 million of cash and 18.6
million shares of newly issued common stock, par value $.01 per share, of
the Company. An additional 400,000 shares of the newly issued common stock
were issued to senior management. Consequently, a total of 19.0 million
shares of newly issued common stock of the Company were issued under the
Plan of Reorganization. In addition, the Plan of Reorganization authorized
the issuance of options to purchase up to 1,000,000 shares of the newly
issued common stock of the Company for purposes of providing incentives
which will attract, retain and motivate highly competent persons as key
employees of the Company. The per-share exercise price of such options is
determined by a committee appointed by the Board of Directors of the
Company (see Note 8).
4. FRESH START REPORTING
In accounting for the effects of the reorganization, the Company has
adopted the fresh start reporting provisions of SOP 90-7 and reflected the
effects of such adoption in the balance sheet as of August 26, 1997. SOP
90-7 is applicable because the pre-reorganization shareholders received
less than 50% of the reorganized company's newly issued common stock and
the enterprise value of the assets of the reorganized company is less than
the total of all prepetition allowed claims and post-petition liabilities.
In adopting fresh start reporting, the Company, with the assistance of its
financial advisors, was required to determine its enterprise value, which
represents the fair value of the entity before considering its
liabilities. The Company's enterprise value was determined to be within a
range that centered around a point estimate of $75.0 million. The
enterprise value of the Company was determined by consideration of several
factors and reliance on various valuation methods, including discounted
future cash flows and market comparable company multiple methodologies.
All of the valuations depended in large part upon the Company's
65
<PAGE>
projected future operating results and cash flows; such projections
included assumptions as to anticipated sales and margins, marketing plans,
operating expense levels and capital expenditure programs.
The effect of the Plan of Reorganization and fresh start reporting on the
Company's balance sheet as of August 26, 1997 is as follows ($ in
thousands):
<TABLE>
<CAPTION>
Post
Pre Fresh Start Fresh Start
Balance Sheet Extraordinary Fresh Start Balance Sheet
8/25/97 Gain (a) Adjustments (b) Other (c) 8/26/97
--------------- ------------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 15,673 $ - $ - $ - $ 15,673
Accounts receivable 4,662 - (219) - 4,443
Merchandise inventories 56,069 - (800) - 55,269
Prepaid expenses and other assets 2,396 - (50) - 2,346
-------------- -------------- --------------- -------------- ------------
Total current assets 78,800 - (1,069) - 77,731
PROPERTY AND EQUIPMENT, NET 15,605 - - - 15,605
EXCESS REORGANIZATION VALUE - - - 5,905 5,905
--------------- -------------- --------------- -------------- ------------
TOTAL $ 94,405 $ - $ (1,609) $ 5,905 $ 99,241
============= ============= ============== ============= ===========
LIABILITIES AND STOCKHOLDERS'
(DEFICIENCY) EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 10,633 $ - $ 150 $ - $ 10,783
Accrued expenses and other current liabilities 12,068 11,146 300 - 23,514
Accrued reorganization expenses 2,640 (2,640) - - -
--------------- -------------- --------------- -------------- ------------
Total current liabilities 25,341 8,506 450 - 34,297
--------------- -------------- --------------- -------------- ------------
OTHER LIABILITIES 450 640 - - 1,090
--------------- -------------- --------------- -------------- ------------
LIABILITIES SUBJECT TO SETTLEMENT
UNDER REORGANIZATION
PROCEEDINGS 91,683 (91,683) - - -
--------------- -------------- --------------- -------------- ------------
STOCKHOLDERS' (DEFICIENCY) EQUITY:
Common stock:
Class A, voting 1,000 - - (1,000) -
Class A, non-voting 9,000 - - (9,000) -
$.01 par value, voting - 190 - - 190
Additional paid-in capital - 63,664 - - 63,664
Retained (deficit) earnings (33,069) 18,683 (1,519) 15,905 -
--------------- -------------- --------------- -------------- ------------
Total stockholders' (deficiency) equity (23,069) 82,537 (1,519) 5,905 63,854
--------------- -------------- --------------- -------------- ------------
TOTAL $ 94,405 $ - $ (1,069) $ 5,905 $ 99,241
============== ============= ============== ============= ============
</TABLE>
(a) To record the settlement of liabilities subject to settlement under the Plan
of Reorganization (see Note 5).
(b) To record the adjustments to state assets and liabilities at fair value
as of August 25, 1997.
(c) To record the adjustments to cancel old stock, eliminate the cumulative
deficit and adjust assets to reflect the $75 million enterprise value.
66
<PAGE>
5. EXTRAORDINARY GAIN
The Plan of Reorganization resulted in the discharge of an estimated
$85.5 million of prepetition claims against the Predecessor through the
distribution of $5.0 million in cash and the issuance of 18.6 million
shares of new common stock. The value of the cash and securities
distributed was less than the claims, resulting in an extraordinary
gain of $18.7 million.
6. LONG-TERM DEBT
As of August 26, 1997, the Company entered into an agreement with the
CIT Group/Business Credit Inc., as agent, to provide financing to fund
general corporate and working capital requirements and letters of
credit through a $40 million revolving credit facility (the "Revolving
Credit Facility"). The Revolving Credit Facility can be used, if
necessary, to provide financing to fund general corporate and working
capital needs, including letters of credit. The Revolving Credit
Facility matures on August 25, 2000 and bears interest on direct
borrowings, if any, at 0.375% over the prime rate or, at the Company's
option, 2.25% over the Eurodollar rate. The Revolving Credit Facility
is secured by generally all the assets of the Company. The Revolving
Credit Facility also contains, among other things, restrictions on
additional indebtedness, capital expenditures, payment of dividends and
sale of assets and requires the Company to meet or maintain certain
inventory balances and operating results.
7. INCOME TAXES
Deferred income taxes and benefits are provided for the tax effect of
temporary differences between the financial statement carrying amount
of existing assets and liabilities and their respective tax bases.
Deferred taxes are included in other liabilities in the balance sheet
and relate primarily to liabilities of $450,000 as of August 26, 1997.
As of January 25, 1997, the Predecessor reported federal income tax net
operating loss ("NOL") carryforwards of approximately $50 million. The
amount of the NOL carryforwards, and certain other tax attributes
available to the Company as of the Effective Date, will be reduced
substantially, to approximately $31 million, as a result of the
discharge and cancellation of various prepetition liabilities under the
Plan of Reorganization. Additionally, the tax code imposes limitations
on the utilization of tax attributes such as NOL carryforwards, after
certain changes in the ownership of a company. The income tax benefit,
if any, resulting from any future realization of the NOL carryforwards
will be credited to reorganization value in excess of amounts allocable
to identifiable assets and then to additional paid-in capital.
8. BENEFIT PLANS
Profit sharing and 401(k) Plans - The Company sponsors a profit sharing
plan for its employees. Contributions to the profit sharing plan are at
the discretion of the Board of Directors and are limited to the amount
deductible under the Internal Revenue Code. The Company also sponsors a
401(k) defined contribution plan that covers all salaried employees.
Employees may contribute up to 15% of their compensation for any year.
1997 Stock Incentive Plan - The Board of Directors adopted the 1997
Stock Incentive Plan (the "Stock Plan") which became effective on the
Effective Date. Pursuant to the 1997 Stock Incentive Plan, the Board of
Directors may grant stock options to purchase up to 1,000,000 shares of
the Company's common stock at exercise prices not less than 100% of the
fair market value of the common stock on the date of grant. The options
generally vest equally over a three-year period and expire after ten
years; an acceleration of vesting may occur in the event of a change in
control of the Company.
67
<PAGE>
In September 1997 and November 1997, the Compensation Committee of the
Board of Directors granted, subject to vesting, stock options to
purchase 900,000 shares of common stock at an exercise price of $1.15
per share. As of January 15, 1998, 83,333 options became exercisable.
9. COMMITMENTS AND CONTINGENCIES
Leases - The Company leases all of its stores and certain other
facilities under operating leases that expire in various years through
2008. Store leases normally have an initial lease period of five to ten
years; however, the leases are generally renewed for option periods or
replaced by similar leases at other sites in the same area.
Future minimum rental payments as of August 26, 1997 are approximately
as follows (in thousands):
Fiscal Year
-----------
1998 $ 8,957
1999 7,535
2000 5,770
2001 3,854
2002 1,863
Thereafter 4,120
------------
Total $ 32,099
============
Contingencies - The Company is involved in lawsuits related to a fiscal
1995 traffic accident involving a truck driven by an employee of the
Predecessor. In the accident occupants of a second vehicle were fatally
injured and the driver of the truck was severely injured. While certain
settlements (covered by insurance) have been reached with certain
parties, there continues to exist outstanding litigation against the
Company with respect to these matters. Management believes that it has
meritorious defenses and adequate insurance coverage for the remaining
claims.
There are various other suits and claims against the Company that have
arisen in the normal course of business, none of which, in the opinion
of management, will have a material effect on the Company.
* * *
68
<PAGE>
WEINER'S STORES, INC.
INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
69
<PAGE>
WEINER'S STORES, INC.
BALANCE SHEET
(UNAUDITED)
OCTOBER 25, 1997
SUCCESSOR
COMPANY
----------
(Dollar
amounts in
thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 5,449
Accounts receivable.......................................... 3,986
Merchandise inventories...................................... 59,683
Prepaid expenses and other assets............................ 1,998
-----------
Total current assets.................................... 71,116
-----------
PROPERTY AND EQUIPMENT, net........................................ 16,454
-----------
REORGANIZATION VALUE IN EXCESS OF AMOUNTS
ALLOCABLE TO IDENTIFIABLE ASSETS, net........................ 5,840
-----------
TOTAL.............................................................. $ 93,410
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable....................................... $ 12,483
Accrued expenses and other current liabilities............... 17,116
Accrued reorganization expenses.............................. 1,795
-----------
Total current liabilities............................... 31,394
-----------
OTHER LIABILITIES.................................................. 1,090
-----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 shares authorized,
19,000,000 shares issued and outstanding................ 190
Additional paid-in capital................................... 63,664
Retained deficit............................................. (2,928)
------------
Total stockholders' equity.............................. 60,926
------------
TOTAL.............................................................. $ 93,410
============
See notes to interim financial statements.
70
<PAGE>
WEINER'S STORES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Successor Company Predecessor Company
----------------- -------------------
Nine Weeks from
Inception Thirty Weeks Thirty-nine Weeks
(August 26, 1997) Ended Ended
to October 25, 1997 August 25, 1997 October 26, 1996
---------------------- --------------------- ------------------
(Dollar amounts in
thousands) (Dollar amounts in thousands)
<S> <C> <C> <C>
REVENUES:
Net sales $ 35,800 $ 160,315 $ 200,071
Other income 448 809 1,379
Interest - 167 586
---------------------- --------------------- --------------------
Total 36,248 161,291 202,036
---------------------- --------------------- --------------------
COSTS AND EXPENSES:
Cost of goods sold 24,933 106,350 132,380
Selling, administrative and other operating costs 13,447 48,903 65,606
Depreciation and amortization 772 2,241 2,714
Reorganization expense -- 2,406 2,450
---------------------- --------------------- --------------------
Total 39,152 159,900 203,150
---------------------- --------------------- --------------------
OPERATING (LOSS) INCOME (2,904) 1,391 (1,114)
INTEREST EXPENSE 24 14 -
---------------------- --------------------- --------------------
(LOSS) INCOME BEFORE FRESH START
ADJUSTMENTS, INCOME TAXES AND
EXTRAORDINARY GAIN (2,928) 1,377 (1,114)
FRESH START ADJUSTMENTS (Note 3) - (1,519) -
---------------------- --------------------- --------------------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY GAIN (2,928) (142) (1,114)
INCOME TAX BENEFIT - - -
---------------------- --------------------- --------------------
LOSS BEFORE EXTRAORDINARY GAIN (2,928) (142) (1,114)
EXTRAORDINARY GAIN (Note 4) - 18,683 -
---------------------- --------------------- --------------------
NET (LOSS) INCOME $ (2,928) $ 18,541 $ (1,114)
===================== ==================== ====================
</TABLE>
71
<PAGE>
WEINER'S STORES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Successor Company Predecessor Company
----------------- -------------------
Nine Weeks from
Inception Thirty Weeks Thirty-nine
(August 26, 1997) Ended Weeks Ended
to October 25, 1997 August 25, 1997 October 26, 1996
----------------------------- ----------------- -------------------
(Dollar amounts in thousands) (Dollar amounts in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (2,928) $ 18,541 $ (1,114)
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization 772 2,241 2,714
Reorganization expense - 2,406 2,450
Fresh start adjustments - 1,519 -
Extraordinary gain - (18,683) -
Change in operating assets and liabilities:
Accounts receivable 457 (1,960) 152
Merchandise inventories (4,414) (2,452) (19,017)
Prepaid expenses and other assets 348 (241) 147
Refundable income taxes - - 412
Trade accounts payable, accrued
expenses and other liabilities (2,903) (664) 3,514
------------- -------------- --------------
Net cash (used in) provided by
operating activities (8,668) 707 (10,742)
------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,556) (3,813) (2,608)
Proceeds from sale of assets - 60 -
------------- -------------- --------------
Net cash used in investing activities (1,556) (3,753) (2,608)
------------- -------------- ---------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (10,224) (3,046) (13,350)
CASH AND CASH EQUIVALENTS:
Beginning of period 15,673 18,719 27,074
------------- -------------- --------------
End of period $ 5,449 $ 15,673 $ 13,724
============ ============= =============
</TABLE>
See notes to interim financial statements.
72
<PAGE>
WEINER'S STORES, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Weiner's
Stores Inc. (the "Company") have been prepared by the Company pursuant
to the rules and regulations of the Securities and Exchange Commission
in accordance with generally accepted accounting principles for interim
financial information. These financial statements reflect all
adjustments (consisting of normal recurring adjustments) necessary for
fair statement in all material respects of the results for the interim
periods presented. The results of operations for the reorganized
successor company for the nine weeks from inception (August 26, 1997)
to October 25, 1997 and for the predecessor company for the thirty
weeks ended August 25, 1997 and the thirty-nine weeks ended October 26,
1996 are not necessarily indicative of results to be expected for the
full year. The accounting policies followed by the Company are set
forth in Note 1 to the audited financial statements presented elsewhere
herein. These unaudited interim financial statements should be read in
conjunction with the audited financial statements and notes thereto.
2. PLAN OF REORGANIZATION
On April 12, 1995 (the "Petition Date"), the Company filed a petition
for reorganization under Chapter 11 ("Chapter 11") of the Federal
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). Subsequent
to the Petition Date, the Company operated its business as a
debtor-in-possession under the supervision of the Bankruptcy Court. As
of the Petition Date, actions to collect prepetition indebtedness were
stayed and other contractual obligations could not be enforced against
the Company. In addition, under the Bankruptcy Code, the Company could
reject leases and executory contracts. Parties affected by these
rejections could file claims with the Bankruptcy Court in accordance
with the reorganization process. Substantially all liabilities as of
the Petition Date were subject to settlement under a plan of
reorganization to be voted on by the creditors and approved by the
Bankruptcy Court.
As a result of extensive negotiations, the Company reached a compromise
agreement with representatives of all of its major creditor
constituencies, as well as the predecessor company's common
stockholders. This compromise agreement was then incorporated into and
became the Plan of Reorganization. On August 13, 1997, the Bankruptcy
Court commenced a hearing that resulted in the entering of a court
order confirming the Plan of Reorganization. The Plan of Reorganization
subsequently became effective August 26, 1997 (the "Effective Date").
Pursuant to the Plan of Reorganization, on the Effective Date, all
outstanding shares of common stock and any options, warrants or other
agreements requiring the issuance of any such stock were extinguished.
The Plan of Reorganization was designed to repay all priority creditors
in full on the Effective Date or thereafter as provided in the Plan of
Reorganization and to repay secured creditors in full over time with
interest. Allowed unsecured claims totaling approximately $85.2 million
were canceled in exchange for $5.0 million of cash and 18.6 million
shares of newly issued common stock, par value $.01 per share, of the
reorganized successor company. An additional 400,000 shares of the
newly issued common stock were issued to senior management.
Consequently, a total of 19.0 million shares of newly issued common
stock of the reorganized successor company were issued under the Plan
of Reorganization. In addition, the Plan of Reorganization authorized
the issuance of options to purchase up to 1,000,000 shares of the newly
issued common stock of the reorganized successor company for purposes
of providing incentives which will attract, retain and motivate highly
competent persons as key
73
<PAGE>
employees of the reorganized successor company. The per-share exercise
price of such options was determined by a committee appointed by the
Board of Directors of the reorganized successor company.
3. FRESH START REPORTING
In accounting for the effects of the reorganization, the Company has
adopted the fresh start reporting provisions of Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), and reflected the effects of such
adoption in the financial statements for the nine weeks from inception
(August 26, 1997) to October 25, 1997. SOP 90-7 is applicable because
the pre-reorganization shareholders received less than 50% of the
reorganized company's newly issued common stock and the enterprise
value of the assets of the reorganized successor company is less than
the total of all prepetition allowed claims and post-petition
liabilities.
In adopting fresh start reporting, the Company, with the assistance of
its financial advisors, was required to determine its enterprise value,
which represents the fair value of the entity before considering its
liabilities. The Company's enterprise value was determined to be within
a range that centered around a point estimate of $75.0 million. The
enterprise value of the Company was determined by consideration of
several factors and reliance on various valuation methods, including
discounted future cash flows, market comparables and price/earnings
ratios. All of the valuations depended in large part upon the Company's
projected future operating results and cash flows; such projections
included assumptions as to anticipated sales and margins, marketing
plans, operating expense levels and capital expenditure programs.
The adjustments to reflect the adoption of fresh start reporting,
including the adjustments to record assets and liabilities at their
fair market values, have been reflected in the accompanying financial
statements as of August 25, 1997 as fresh start adjustments. In
addition, the reorganized successor company's opening balance sheet was
further adjusted to eliminate existing equity and to reflect the
aforementioned $75.0 million enterprise value, which includes the
establishment of $5.9 million of reorganization value in excess of
amounts allocable to identifiable assets ("Excess Reorganization
Value"). The Excess Reorganization Value is being amortized using the
straight-line method over a 15-year useful life. Accordingly, a
vertical black line is shown in the financial statements to separate
post-emergence operations from those prior to August 26, 1997, since
they have not been prepared on a comparable basis.
The effect of the Plan of Reorganization and fresh start reporting on
the reorganized successor company's unaudited balance sheet as of
August 26, 1997 is as shown on the following page ($ in thousands):
74
<PAGE>
<TABLE>
<CAPTION>
Pre Fresh Start Post Fresh Start
Balance Sheet Extraordinary Fresh Start Balance Sheet
August 25, 1997 Gain (a) Adjustments (b) Other (c) August 26, 1997
----------------- --------------- --------------- ------------ ----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 15,673 $ -- $ -- $ -- $ 15,673
Accounts receivable 4,662 -- (219) -- 4,443
Merchandise inventories 56,069 -- (800) -- 55,269
Prepaid expenses and other assets 2,396 -- (50) -- 2,346
----------------- --------------- --------------- ------------ ---------------
Total current assets 78,800 -- (1,069) -- 77,731
PROPERTY AND EQUIPMENT, net 15,605 -- -- -- 15,605
EXCESS REORGANIZATION VALUE -- -- -- 5,905 5,905
----------------- --------------- --------------- ------------ ---------------
TOTAL $ 94,405 $ -- $ (1,069) $ 5,905 $ 99,241
================= =============== =============== ============ ===============
LIABILITIES AND STOCKHOLDERS'
(DEFICIENCY) EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 10,633 $ -- $ 150 $ -- $ 10,783
Accrued expenses and other current liabilities 12,068 11,146 300 -- 23,514
Accrued reorganization expenses 2,640 (2,640) -- -- --
----------------- --------------- --------------- ------------ ---------------
Total current liabilities 25,341 8,506 450 -- 34,297
----------------- --------------- --------------- ------------ ---------------
OTHER LIABILITIES 450 640 -- -- 1,090
----------------- --------------- --------------- ------------ ---------------
LIABILITIES SUBJECT TO SETTLEMENT
UNDER REORGANIZATION
PROCEEDINGS 91,683 (91,683) -- -- --
----------------- --------------- --------------- ------------ ---------------
STOCKHOLDERS' (DEFICIENCY) EQUITY:
Common stock:
Class A, voting, $100 par value 1,000 -- -- (1,000) --
Class A, non-voting, $100 par value 9,000 -- -- (9,000) --
$.01 par value, voting -- 190 -- -- 190
Additional paid-in capital -- 63,664 -- -- 63,664
Retained (deficit) equity (33,069) 18,683 (1,519) 15,905 --
----------------- --------------- --------------- ------------ ---------------
Total stockholders' (deficiency) equity (23,069) 82,537 (1,519) 5,905 63,854
--------------- -------------- -------------- ----------- --------------
TOTAL $ 94,405 $ -- $ (1,069) $ 5,905 $ 99,241
================ ============== ============== =========== ==============
</TABLE>
(a) To record the settlement of liabilities subject to settlement under the Plan
of Reorganization (see Note 4).
(b) To record the adjustments to state assets and liabilities at fair value as
of August 25, 1997.
(c) To record the adjustments to cancel old stock, to eliminate the cumulative
deficit and to adjust assets to reflect the $75.0 million enterprise value.
75
<PAGE>
The following unaudited Pro Forma Statements of Operations reflect the
financial results of the Company for the year ended January 25, 1997
and the thirty-nine weeks ended October 25, 1997 as if the Plan of
Reorganization had been effective January 28, 1996 and January 26,
1997, respectively ($ in thousands):
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended October 25, 1997
----------------------------------------
Historical (a) Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
SALES AND OTHER REVENUES $ 197,539 $ -- $ 197,539
---------------- ------------- -------------
COSTS AND EXPENSES:
Cost of goods sold 131,283 -- 131,283
Selling, administrative and other operating costs 62,350 -- 62,350
Depreciation and amortization 3,013 230 (b) 3,243
Reorganization expense 2,406 (2,406) (c) --
----------------- -------------- --------------
Total 199,052 (2,176) 196,876
----------------- -------------- --------------
OPERATING (LOSS) INCOME (1,513) 2,176 663
INTEREST EXPENSE 38 -- 38
----------------- -------------- --------------
(LOSS) INCOME BEFORE FRESH START ADJUSTMENTS,
INCOME TAXES AND EXTRAORDINARY GAIN (1,551) 2,176 625
FRESH START ADJUSTMENTS (1,519) 1,519 (c) --
INCOME TAX BENEFIT -- -- --
----------------- -------------- -------------
(LOSS) INCOME BEFORE EXTRAORDINARY GAIN (3,070) 3,695 625
EXTRAORDINARY GAIN 18,683 (18,683) (c) --
----------------- -------------- --------------
NET INCOME $ 15,613 $ (14,988) $ 625
================ ============= =============
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 25, 1997
---------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
SALES AND OTHER REVENUES $ 265,437 $ -- $ 265,437
---------------- ------------- -------------
COSTS AND EXPENSES:
Cost of goods sold 178,542 -- 178,542
Selling, administrative and other operating costs 86,734 -- 86,734
Depreciation and amortization 3,644 394 (b) 4,038
Reorganization expense 10,742 (10,742) (c) --
Impairment of assets 3,043 -- 3,043
----------------- -------------- --------------
Total 282,705 (10,348) 272,357
----------------- -------------- --------------
OPERATING (LOSS) INCOME (17,268) 10,348 (6,920)
INCOME TAX BENEFIT 48 -- 48
----------------- ------------- ---------------
NET LOSS $ (17,220) $ 10,348 $ (6,872)
================ ============= ==============
</TABLE>
(a) Includes operating results for the nine weeks from inception (August 26,
1997) to October 25, 1997 for the reorganized successor company and for
the thirty weeks ended August 25, 1997 for the predecessor company.
(b) To record amortization of the Excess Reorganization Value.
(c) To eliminate the fresh start adjustments and the reorganization expenses.
4. EXTRAORDINARY GAIN
The Plan of Reorganization resulted in the discharge of an estimated
$85.5 million of prepetition claims against the Company through the
distribution of $5.0 million in cash and the issuance of 18.6 million
shares of new Common Stock. The value of the cash and securities
distributed was less than the claims, resulting in an extraordinary
gain of $18.7 million.
76
<PAGE>
5. LONG-TERM DEBT
On August 26, 1997, the Company entered into an agreement with the CIT
Group/Business Credit Inc., as agent, to provide financing to fund
general corporate and working capital requirements and letters of
credit through a $40 million revolving credit facility (the "Revolving
Credit Facility"). The Revolving Credit Facility can be used, if
necessary, to provide financing to fund general corporate and working
capital needs, including letters of credit. The Revolving Credit
Facility matures on August 25, 2000 and bears interest on direct
borrowings, if any, at 0.375% over the prime rate, or at the Company's
option, 2.25% over the Eurodollar rate. The Revolving Credit Facility
is secured by generally all the assets of the Company. The Revolving
Credit Facility also contains, among other things, restrictions on
additional indebtedness, capital expenditures, payments of dividends
and sale of assets and requires the Company to meet or maintain certain
inventory balances and operating results.
6. STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES
Net cash (used in) provided by operating activities includes the
following cash payments and receipts ($ in thousands):
<TABLE>
<CAPTION>
Reorganized
Successor Company Predecessor Company
----------------- -------------------
Nine Weeks from Thirty-Nine
Inception Thirty Weeks Weeks
(August 26, 1997) Ended Ended
to October 25, 1997 August 25, 1997 October 26, 1996
--------------------------- --------------- ----------------
<S> <C> <C> <C>
Interest paid $24 $14 -
Cash refunded for income taxes -- -- $412
</TABLE>
Reference is made to the analysis of the reorganized successor
company's opening balance sheet at August 26, 1997 (see Note 3) for a
complete description of the non-cash financing activities recorded upon
emergence from Chapter 11 bankruptcy reorganization and the resultant
adoption of fresh start reporting.
7. INCOME TAXES
As of January 25, 1997, the Company had federal income tax net
operating loss ("NOL") carry-forwards of approximately $50 million. The
amount of the NOL carryforwards along with the NOL for the thirty-nine
weeks ended October 25, 1997, and certain other tax attributes
available to the Company as of the Effective Date, will be reduced
substantially, to approximately $31 million, as a result of the
discharge and cancellation of various prepetition liabilities under the
Plan of Reorganization. Tax attributes remaining after the application
of cancellation of indebtedness rules would then be subject to
limitation- on-utilization rules. The federal tax code imposes
limitations on the utilization of tax attributes, such as NOL
carryovers, after certain changes in the ownership of a loss company.
The Company is a loss company. The income tax benefit, if any,
resulting from any future realization of the NOL carryforwards will be
credited to reorganization value in excess of amounts allocable to
identifiable assets and then to additional paid-in capital.
77
<PAGE>
8. CONTINGENCIES
The Company is involved in lawsuits related to a fiscal 1995 traffic
accident involving a truck driven by an employee of the Company. In the
accident occupants of a second vehicle were fatally injured and the
driver of the truck was severely injured. While certain settlements
(covered by insurance) have been reached with certain parties, there
continues to exist outstanding litigation against the Company with
respect to these matters. Management believes that it has meritorious
defenses and adequate insurance coverage for the remaining claims.
There are various other suits and claims against the Company that have
arisen in the normal course of business, none of which, in the opinion
of management, will have a material effect on the Company.
* * *
78
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized.
WEINER'S STORES, INC.
Date: January 26, 1998 BY: /s/ Raymond J. Miller
---------------------
RAYMOND J. MILLER
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
2.1 Weiner's Stores, Inc.'s Amended Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code, dated June 24, 1997
2.2 Modification of the Weiner's Stores, Inc.'s Amended Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, made
pursuant to the order of the Bankruptcy Court confirming the
Plan pursuant to section 1129 of the Bankruptcy Code, dated
August 13, 1997
3.1 Restated Certificate of Incorporation of the Company
3.2 Restated Bylaws of the Company
4.1 Registration Rights Agreement between the Company and Texas
Commerce Bank N.A., dated August 26, 1997
4.2 Form of Specimen Common Stock Certificate
10.1 Weiner's Stores, Inc. 1997 Stock Incentive Plan
10.2 Form of Incentive Stock Option Agreement between the Company
and each of the eligible employees pursuant to Schedule A of
the Stock Plan
10.3 Form of Nonqualified Stock Option Agreement between the
Company and each of the eligible employees pursuant to
Schedule A of the Stock Plan
10.4 Form of Restricted Stock Agreement between the Company and
each of the named executive officers named on Schedule B to
the Stock Plan
10.5 Employment Agreement between the Company and Herbert R.
Douglas dated December 5, 1995
10.6 Amendment, dated May 1, 1997, to Employment Agreement
between the Company and Herbert R. Douglas
10.7 Employment Agreement between the Company and Raymond J.
Miller dated February 24, 1995
10.8 Amendment, dated April 7, 1995, to Employment Agreement
between the Company and Raymond J. Miller
10.9 Amendment, dated May 1, 1997, to Employment Agreement
between the Company and Raymond J. Miller
10.10 Employment Agreement between the Company and Jerome L.
Feller dated December 14, 1995
10.11 Amendment, dated May 1, 1997, to Employment Agreement
between the Company and Jerome L. Feller
<PAGE>
10.12 Severance Agreement between the Company and James L. Berens
dated January 29, 1996, conformed as amended May 1, 1997
10.13 Severance Agreement between the Company and Joseph J. Kassa
dated February 5, 1996, conformed as amended May 1, 1997
10.14 Credit Agreement among the Company, various Lending
Institutions and The CIT Group/Business Credit, Inc., as
Agent, dated August 26, 1997
10.15 First Amendment, dated as of September 30, 1997, to the
Credit Agreement
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
2
EXHIBIT 2.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
:
In re : CHAPTER 11
:
WEINER'S STORES, INC., : Case No. 95-417 (PJW)
:
Debtor. :
:
DEBTOR'S AMENDED PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
---------------------------------------
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
and
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
ATTORNEYS FOR DEBTOR
AND DEBTOR IN POSSESSION
Dated: Wilmington, Delaware
June 24, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS AND CONSTRUCTION OF TERMS ...... 1
1.1. Accounts Payable Balance.................................... 1
1.2. Administrative Expense Claim................................ 1
1.3. Affiliate................................................... 1
1.4. Allowed..................................................... 1
1.5. Amended Bylaws.............................................. 2
1.6. Amended Certificate of Incorporation........................ 2
1.7. Ballot...................................................... 2
1.8. Bankruptcy Code............................................. 2
1.9. Bankruptcy Court............................................ 2
1.10. Bankruptcy Rules............................................ 2
1.11. Business Day................................................ 2
1.12. Cash........................................................ 2
1.13. Cash Distribution Date...................................... 2
1.14. Cash Distribution Pool...................................... 2
1.15. Causes of Action............................................ 2
1.16. Chapter 11 Case............................................. 2
1.17. Claim....................................................... 2
1.18. Class....................................................... 2
1.19. Collateral.................................................. 3
1.20. Commencement Date........................................... 3
1.21. Confirmation Date........................................... 3
1.22. Confirmation Hearing........................................ 3
1.23. Confirmation Order.......................................... 3
1.24. Contingent Cash Distribution Date........................... 3
1.25. Contingent Cash Distribution Pool........................... 3
1.26. Convenience Claim........................................... 3
1.27. Creditors' Committee........................................ 3
1.28. Debenture Claims............................................ 3
1.29. Debtor...................................................... 3
1.30. Debtor in Possession........................................ 3
1.31. Disclosure Statement........................................ 3
1.32. Disputed.................................................... 3
1.33. Disputed Claim Amount....................................... 4
1.34. Dividend Claims............................................. 4
1.35. EBITDA...................................................... 4
1.36. Effective Date.............................................. 4
1.37. Equity Interest............................................. 4
1.38. Final Order................................................. 4
1.39. General Release............................................. 4
1.40. General Unsecured Claims.................................... 4
1.41. Initial Distribution Date................................... 4
1.42. Insured Claim............................................... 4
1.43. Lien........................................................ 4
1.44. Management Stock Plan....................................... 4
1.45. New Common Stock............................................ 4
1.46. Options..................................................... 5
Exhibit 2.1 - i
<PAGE>
1.47. Other Priority Claim........................................ 5
1.48. Other Secured Claim......................................... 5
1.49. Plan........................................................ 5
1.50. Plan Supplement............................................. 5
1.51. Priority Tax Claim.......................................... 5
1.52. Pro Rata Share.............................................. 5
1.53. Quarter..................................................... 5
1.54. Registration Rights Agreement............................... 5
1.55. Released Director or Officer................................ 5
1.56. Reorganized Weiner's Stores................................. 5
1.57. Reorganized Debtor.......................................... 5
1.58. Reserve..................................................... 5
1.59. Schedules................................................... 5
1.60. Secured Claim............................................... 5
1.61. Secured Tax Claim........................................... 5
1.62. Security Pacific............................................ 6
1.63. Security Pacific Secured Claim.............................. 6
1.64. Stock Distribution Pool..................................... 6
1.65. Subsequent Distribution Date................................ 6
1.66. Surplus Distribution........................................ 6
1.67. Tort Claim.................................................. 6
1.68. Unsecured Claim............................................. 6
1.69. Interpretation; Application of Definitions and Rules of
Construction............................................... 6
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS....... 6
2.1. Administrative Expense Claims................................ 6
2.2. Professional Compensation and Reimbursement Claims........... 7
2.3. Priority Tax Claims.......................................... 7
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS... 7
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS...... 8
4.1. CLASS 1 -- OTHER PRIORITY CLAIMS............................. 8
(a) Impairment and Voting.......................... 8
(b) Distributions.................................. 8
4.2. CLASS 2 -- SECURED TAX CLAIMS................................ 8
(a) Impairment and Voting.......................... 8
(b) Distributions.................................. 8
(c) Retention of Liens............................. 8
4.3. CLASS 3 -- SECURITY PACIFIC SECURED CLAIM.................... 8
(a) Impairment and Voting.......................... 8
(b) Distribution/Reinstatement of Claim............ 8
4.4. CLASS 4 -- OTHER SECURED CLAIMS.............................. 9
(a) Impairment and Voting.......................... 9
(b) Distributions/Reinstatement of Claims.......... 9
4.5. CLASS 5 -- CONVENIENCE CLAIMS................................ 9
(a) Impairment and Voting.......................... 9
Exhibit 2.1 - ii
<PAGE>
(b) Distributions.................................. 9
4.6. CLASS 6 -- GENERAL UNSECURED CLAIMS.......................... 9
(a) Impairment and Voting.......................... 9
(b) Initial Distributions of New Common Stock...... 9
(c) Initial Distributions of Cash.................. 9
(d) Contingent Distributions of Cash............... 9
(e) Subsequent Distributions....................... 9
(f) Debenture Claims...............................10
4.7. CLASS 7 -- EQUITY INTERESTS..................................10
(a) Impairment and Voting..........................10
ARTICLE V.
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS AND CLAIMS.............10
5.1. Voting of Claims and Equity Interests........................10
5.2. Subtraction and Addition of Classes and Subclasses...........10
(a) Deletion of Classes and Subclasses.............10
(b) Addition of Subclasses.........................10
5.3. Nonconsensual Confirmation...................................10
5.4. Method of Distributions Under the Plan.......................10
(a) In General.....................................10
(b) Distributions of Cash..........................11
(c) Timing of Distributions........................11
(d) Hart-Scott-Rodino Compliance...................11
(e) Minimum Distributions..........................11
(f) Fractional Shares..............................11
(g) Unclaimed Distributions........................11
5.5. Disputed General Unsecured Claims............................11
(a) Distributions Withheld for Disputed General
Unsecured Claims.............................. 11
(b) Distributions Upon Allowance of Disputed
General Unsecured Claims...................... 11
(c) Surplus Distribution to Holders of Allowed
General Unsecured Claims...................... 12
(d) Tort Claims................................... 12
(e) Dividend Claims............................... 12
5.6. Objections to and Resolution of Disputed Administrative
Expense Claims and Disputed Claims......................... 12
5.7. Distributions Relating to Allowed Insured Claims............ 12
5.8. Cancellation and Surrender of Existing Securities and
Agreements................................................. 13
5.9. Registration of New Common Stock............................ 13
5.10. Listing of New Common Stock................................. 14
ARTICLE VI.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES..... 14
6.1. Assumption or Rejection of Executory Contracts and Unexpired
Leases.................................................... 14
(a) Executory Contracts and Unexpired Leases...... 14
(b) Schedules of Rejected Executory Contracts and
Unexpired Leases; Inclusiveness............... 14
(c) Insurance Policies............................ 14
(d) Approval of Assumption or Rejection of Executory
Contracts and Unexpired Leases................ 14
Exhibit 2.1 - iii
<PAGE>
(e) Cure of Defaults.............................. 15
(f) Bar Date for Filing Proofs of Claim Relating to
Executory Contracts and Unexpired Leases Rejected
Pursuant to the Plan.......................... 15
6.2. Indemnification Obligations................................. 15
6.3. Compensation and Benefit Programs........................... 15
6.4. Retiree Benefits............................................ 15
ARTICLE VII.
COMPROMISE OF DISPUTES.............. 15
7.1. Equity Interests............................................ 15
7.2. Compromise and Settlement of Debenture Claims and Dividend
Claims..................................................... 16
ARTICLE VIII.
CONSOLIDATION OF THE SUBSIDIARIES........ 16
8.1. Merger of Corporate Entities................................ 16
ARTICLE IX.
PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTOR....... 16
9.1. General..................................................... 16
9.2. Meetings of Reorganized Weiner's Stores Stockholders........ 16
9.3. Directors and Officers of Reorganized Debtor................ 16
(a) Boards of Directors........................... 16
(b) Officers...................................... 17
9.4. Amended Bylaws and Amended Certificate of Incorporation..... 17
9.5. Issuance of New Securities.................................. 17
9.6. Adoption of Management Stock Plan........................... 17
9.7. Management Stock Grant and Options on the Effective Date.... 17
9.8. Employment Contracts........................................ 17
ARTICLE X.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN 17
10.1. Term of Bankruptcy Injunction or Stays...................... 17
10.2. Revesting of Assets......................................... 17
10.3. Causes of Action............................................ 17
10.4. Discharge of Debtor......................................... 18
10.5. Injunction.................................................. 18
ARTICLE XI.
EFFECTIVENESS OF THE PLAN............ 18
11.1. Conditions Precedent to Effectiveness....................... 18
11.2. Waiver of Conditions........................................ 19
ARTICLE XII.
RETENTION OF JURISDICTION............ 19
Exhibit 2.1 - iv
<PAGE>
ARTICLE XIII.
MISCELLANEOUS PROVISIONS............. 20
13.1. Effectuating Documents and Further Transactions............. 20
13.2. Corporate Action............................................ 20
13.3. Exemption from Transfer Taxes............................... 20
13.4. Debtor's Limited Release of Directors and Officers.......... 20
13.5. Claim Holders' Release of Directors and Officers from Claims
and Liabilities............................................ 20
13.6. General Release of Texas Commerce Bank, National Association 21
13.7. Exculpation................................................. 21
13.8. Committee................................................... 21
13.9. Post-Confirmation Date Fees and Expenses.................... 21
13.10. Payment of Statutory Fees................................... 22
13.11. Amendment or Modification of the Plan....................... 22
13.12. Severability................................................ 22
13.13. Revocation or Withdrawal of the Plan........................ 22
13.14. Binding Effect.............................................. 22
13.15. Notices..................................................... 22
13.16. Governing Law............................................... 23
13.17. Withholding and Reporting Requirements...................... 23
13.18. Plan Supplement............................................. 23
13.19. Headings.................................................... 23
13.20. Exhibits.................................................... 23
13.21. Filing of Additional Documents.............................. 24
Exhibit 2.1 - v
<PAGE>
INDEX OF EXHIBITS
Exhibit 1 - Form of Management Stock Plan
Exhibit 2.1 - vi
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
:
In re : CHAPTER 11
:
WEINER'S STORES, INC., : Case No. 95-417 (PJW)
:
Debtor. :
:
DEBTOR'S AMENDED PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
----------------------------------------
Weiner's Stores, Inc., a Delaware corporation, proposes
the following amended plan of reorganization under section 1121(a) of title 11
of the United States Code.
ARTICLE I.
DEFINITIONS AND CONSTRUCTION OF TERMS
-------------------------------------
Definitions. As used herein, the following terms have the respective
-----------
meanings specified below, unless the context otherwise requires:
1.1. Accounts Payable Balance means, for purposes of computing the
amount, if any, of the Contingent Cash Distribution Pool, liabilities for
merchandise where title has transferred and for certain expense goods, services
and capital expenditures accounted for as accounts payable, determined
consistently with the Debtor's or the Reorganized Debtor's historic payment
procedures and accounting practices.
1.2. Administrative Expense Claim means any right to payment
constituting a cost or expense of administration of the Chapter 11 Case under
sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without
limitation, any actual and necessary costs and expenses of preserving the estate
of the Debtor, any actual and necessary costs and expenses of operating the
business of the Debtor, any indebtedness or obligations incurred or assumed by
the Debtor in Possession in connection with the conduct of its business,
including, without limitation, for the acquisition or lease of property or an
interest in property or the rendition of services, all compensation and
reimbursement of expenses to the extent Allowed by the Bankruptcy Court under
section 330 or 503 of the Bankruptcy Code, and any fees or charges assessed
against the estate of the Debtor under section 1930 of chapter 123 of title 28
of the United States Code.
1.3. Affiliate means, with reference to any entity, any other entity
that, within the meaning of Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended, "controls," is "controlled by" or is under "common
control with" such entity.
1.4. Allowed means any Claim against the Debtor (a) which has been
listed by the Debtor in its Schedules, as such Schedules have been and may be
amended by the Debtor from time to time in accordance with
<PAGE>
Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and
for which no contrary proof of claim has been filed, (b) which is allowed
hereunder, (c) which is not Disputed or (d), if Disputed, (i) which has been
allowed by Final Order or (ii) as to which, pursuant to the Plan or a Final
Order of the Bankruptcy Court, the liability of the Debtor and the amount
thereof are determined by final order of a court of competent jurisdiction other
than the Bankruptcy Court; provided, however, that any Claims allowed solely for
the purpose of voting to accept or reject the Plan pursuant to an order of the
Bankruptcy Court shall not be considered "Allowed Claims" hereunder. Unless
otherwise specified herein or by order of the Bankruptcy Court, "Allowed
Administrative Expense Claim," or "Allowed Claim" shall not, for purposes of
computation of distributions under the Plan, include interest on such
Administrative Expense Claim or Claim from and after the Commencement Date.
1.5. Amended Bylaws means the amended and restated Bylaws of
Reorganized Weiner's Stores, which shall be in substantially the form contained
in the Plan Supplement.
1.6. Amended Certificate of Incorporation means the amended and
restated Certificate of Incorporation of Reorganized Weiner's Stores, which
shall be in substantially the form contained in the Plan Supplement.
1.7. Ballot means the form distributed to each holder of an impaired
Claim on which is to be indicated acceptance or rejection of the Plan.
1.8. Bankruptcy Code means title 11 of the United States Code, as
amended from time to time, as applicable to the Chapter 11 Case.
1.9. Bankruptcy Court means the United States District Court for the
District of Delaware having jurisdiction over the Chapter 11 Case and, to the
extent of any reference under section 157 of title 28 of the United States Code,
the unit of such District Court under section 151 of title 28 of the United
States Code.
1.10. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure
as promulgated by the United States Supreme Court under section 2075 of title 28
of the United States Code, and any Local Rules of the Bankruptcy Court.
1.11. Business Day means any day other than a Saturday, Sunday or any
other day on which commercial banks in New York, New York are required or
authorized to close by law or executive order.
1.12. Cash means legal tender of the United States of America and
equivalents thereof.
1.13. Cash Distribution Date means January 15, 1998, or as soon
thereafter as is practicable.
1.14. Cash Distribution Pool means Cash in the amount of $5,000,000.
1.15. Causes of Action means, without limitation, any and all actions,
causes of action, liabilities, obligations, rights, suits, debts, sums of money,
damages, judgments, claims and demands whatsoever, whether known or unknown, in
law, equity or otherwise.
1.16. Chapter 11 Case means the case under chapter 11 of the Bankruptcy
Code commenced by the Debtor, styled In re Weiner's Stores, Inc. Chapter 11 Case
No. 95-417 (PJW), currently pending in the Bankruptcy Court.
1.17. Claim has the meaning set forth in section 101 of the Bankruptcy
Code.
1.18. Class means a category of holders of Claims or Equity Interests
as set forth in Article III of the Plan.
Exhibit 2.1 - Page 2
<PAGE>
1.19. Collateral means any property or interest in property of the
estate of the Debtor subject to a Lien to secure the payment or performance of a
Claim, which Lien is not subject to avoidance under the Bankruptcy Code or
otherwise invalid under the Bankruptcy Code or applicable state law.
1.20. Commencement Date means April 12, 1995, the date on which the
Debtor commenced the Chapter 11 Case.
1.21. Confirmation Date means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order on the docket.
1.22. Confirmation Hearing means the hearing held by the Bankruptcy
Court to consider confirmation of the Plan pursuant to section 1129 of the
Bankruptcy Code, as such hearing may be adjourned or continued from time to
time.
1.23. Confirmation Order means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
1.24. Contingent Cash Distribution Date means April 30, 1998, or as
soon thereafter as is practicable.
1.25. Contingent Cash Distribution Pool means that amount, if any, of
Cash equal to the sum of (i) fifty percent (50%) of the amount by which the
Reorganized Debtor's EBITDA for its fiscal year ended January 31, 1998 exceeds
$7,250,000 plus (ii) fifty percent (50%) of the amount by which the Reorganized
Debtor's Accounts Payable Balance exceeds $11,224,000 measured as of January 31,
1998.
1.26. Convenience Claim means any Unsecured Claim in the amount of
$1,000 or less and any Unsecured Claim that is reduced to $1,000 by the election
of the holder thereof on such holder's Ballot.
1.27. Creditors' Committee means the statutory committee of unsecured
creditors appointed in the Chapter 11 Case pursuant to section 1102 of the
Bankruptcy Code.
1.28. Debenture Claims means all Claims arising under or related to
those certain 16-Year Variable Rate Debentures issued on or about December 28,
1979 by Weiner's Enterprises, Inc., a predecessor in interest to the Debtor, and
any of the documents and instruments relating thereto, as amended, supplemented
or modified.
1.29. Debtor means Weiner's Stores, Inc., a Delaware corporation.
1.30. Debtor in Possession means the Debtor in its capacity as debtor
in possession in the Chapter 11 Case pursuant to sections 1101, 1107(a) and 1108
of the Bankruptcy Code.
1.31. Disclosure Statement means the disclosure statement relating to
the Plan, including, without limitation, all exhibits and schedules thereto, as
approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy
Code.
1.32. Disputed means any Claim proof of which was timely and properly
filed and which has been or hereafter is listed on the Schedules as
unliquidated, disputed or contingent, and in either case or in the case of an
Administrative Expense Claim, any Administrative Expense Claim or Claim as to
which the Debtor or, if not prohibited by the Plan, any other party in interest
has interposed a timely objection and/or request for estimation in accordance
with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018, which
objection and/or request for estimation has not been withdrawn or determined by
a Final Order, and any Claim proof of which was required to be filed by order of
the Bankruptcy Court but as to which a proof of claim was not timely or properly
filed.
Exhibit 2.1 - Page 3
<PAGE>
1.33. Disputed Claim Amount means the amount set forth in the proof of
claim relating to a Disputed Claim or, if the amount of a Disputed Claim is not
specified in the proof of claim or is unliquidated, in whole or in part, an
amount estimated in accordance with section 502(c) of the Bankruptcy Code and
Bankruptcy Rule 3018 for purposes of, inter alia, Section 5.5 of the Plan
pursuant to an order of the Bankruptcy Court.
1.34. Dividend Claims means any Claims for dividends relating to the
Equity Interests.
1.35. EBITDA means earnings before interest, taxes, depreciation and
amortization, excluding any extraordinary or non-recurring gains or losses,
determined in accordance with generally accepted accounting principles
consistently applied.
1.36. Effective Date means the first Business Day on which the
conditions specified in Section 11.1 of the Plan have been satisfied or waived.
1.37. Equity Interest means any share of stock (voting and non-voting)
or other instrument evidencing an ownership interest in the Debtor, whether or
not transferable, and any option, warrant or right, contractual or otherwise, to
acquire any such interest.
1.38. Final Order means an order of the Bankruptcy Court as to which
the time to appeal, petition for certiorari, or move for reargument or rehearing
has expired and as to which no appeal, petition for certiorari, or other
proceedings for reargument or rehearing shall then be pending or as to which any
right to appeal, petition for certiorari, reargue, or rehear shall have been
waived in writing in form and substance satisfactory to the Debtor or the
Reorganized Debtor or, in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been sought, such order of the Bankruptcy
Court shall have been determined by the highest court to which such order was
appealed, or certiorari, reargument or rehearing shall have been denied and the
time to take any further appeal, petition for certiorari or move for reargument
or rehearing shall have expired; provided, however, that the possibility that a
motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any
analogous rule under the Bankruptcy Rules, may be filed with respect to such
order shall not cause such order not to be a Final Order.
1.39. General Release means that certain release dated as of the
Effective Date pursuant to which the Debtor will release the "Bank Entities" and
the "Releases," as each is defined therein, from certain Causes of Action as
described in the General Release, which shall be in substantially the form
contained in the Plan Supplement.
1.40. General Unsecured Claims means Unsecured Claims exclusive of
Convenience Claims.
1.41. Initial Distribution Date means the date that is no later than
sixty days subsequent to the Effective Date, or as soon thereafter as is
practicable.
1.42. Insured Claim means any Claim arising from an incident or
occurrence that is covered under the Debtor's insurance policies.
1.43. Lien has the meaning set forth in section 101 of the Bankruptcy
Code.
1.44. Management Stock Plan means the stock based management incentive
compensation plan, which shall be in substantially the form annexed hereto as
Exhibit 1.
1.45. New Common Stock means the common stock of Reorganized Weiner's
Stores authorized and to be issued pursuant to the Plan. The New Common Stock
shall have a par value of $.01 per share and such rights with respect to
dividends, liquidation, voting and other matters as are provided for by
applicable nonbankruptcy law or in the Amended Certificate of Incorporation and
the Amended Bylaws.
Exhibit 2.1 - Page 4
<PAGE>
1.46. Options means the options to purchase shares of New Common Stock
pursuant to the Management Stock Plan.
1.47. Other Priority Claim means any Claim, other than an
Administrative Expense Claim or a Priority Tax Claim, entitled to priority in
right of payment under section 507(a) of the Bankruptcy Code.
1.48. Other Secured Claim means any Secured Claim, other than the
Security Pacific Secured Claim or a Secured Tax Claim.
1.49. Plan means this chapter 11 plan of reorganization, including,
without limitation, the Plan Supplement and all exhibits, supplements,
appendices and schedules hereto, either in its present form or as same may be
altered, amended or modified from time to time.
1.50. Plan Supplement means the forms of documents specified in Section
13.18 of the Plan.
1.51. Priority Tax Claim means any Claim of a governmental unit of the
kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.52. Pro Rata Share means a proportionate share, so that the ratio of
the consideration distributed on account of an Allowed Claim in a Class to the
amount of such Allowed Claim is the same as the ratio of the amount of the
consideration distributed on account of all Allowed Claims in such Class to the
amount of all Allowed Claims in such Class.
1.53. Quarter means the period beginning on the Effective Date and
ending on the next of October 31, January 31, April 30 and July 31, and each
three month period thereafter.
1.54. Registration Rights Agreement means a registration rights
agreement to be entered into pursuant to Section 5.9 of the Plan between
Reorganized Weiner's Stores and any entity entitled to become a party to such
registration rights agreement under Section 5.9 of the Plan, which shall be in
substantially the form contained in the Plan Supplement.
1.55. Released Director or Officer shall have the meaning set forth in
Section 13.5 of the Plan.
1.56. Reorganized Weiner's Stores means Weiner's Stores or any
successor thereto by merger, consolidation or otherwise, on and after the
Effective Date.
1.57. Reorganized Debtor means Reorganized Weiner's Stores or any
successor thereto by merger, consolidation or otherwise, on and after the
Effective Date.
1.58. Reserve shall have the meaning set forth in Section 5.5(a) of the
Plan.
1.59. Schedules means the schedules of assets and liabilities, the list
of holders of Equity Interests, and the statements of financial affairs filed by
the Debtor under section 521 of the Bankruptcy Code and Bankruptcy Rule 1007,
and all amendments and modifications thereto through the Confirmation Date.
1.60. Secured Claim means any Claim, to the extent reflected in the
Schedules or a proof of claim as a Secured Claim, which is secured by a Lien on
Collateral to the extent of the value of such Collateral, as determined in
accordance with section 506(a) of the Bankruptcy Code, or, in the event that
such Claim is subject to setoff under section 553 of the Bankruptcy Code, to the
extent of such setoff.
1.61. Secured Tax Claim means any Secured Claim which, absent its
secured status, would be entitled to priority in right of payment under section
507(a)(8) of the Bankruptcy Code.
Exhibit 2.1 - Page 5
<PAGE>
1.62. Security Pacific means Security Pacific National Bank.
1.63. Security Pacific Secured Claim means all Claims and Liens arising
under or related to that certain Texas Fixed Monthly Payment Note dated July 29,
1971, that certain Texas Deed of Trust dated July 29, 1971, that certain
Conditional Assignment of Rentals dated July 29, 1971, executed by the Debtor or
its predecessor(s) in interest, and any of the documents and instruments
relating thereto, as amended, supplemented or modified.
1.64. Stock Distribution Pool means 18,600,000 shares of New Common
Stock.
1.65. Subsequent Distribution Date means, in respect of distributions
of New Common Stock, the twentieth day after the end of the Quarter following
the Quarter in which the Initial Distribution Date occurs and the twentieth day
after the end of each subsequent Quarter and means, in respect of distributions
of Cash, the twentieth day after the end of the Quarter following the Quarter in
which the Cash Distribution Date or the Contingent Cash Distribution Date, as
applicable, occurs and the twentieth day after the end of each subsequent
Quarter; provided, however, that for purposes of Section 4.6(e) of the Plan, the
first Subsequent Distribution Date shall occur on the twentieth day after the
end of the fourth Quarter following the Quarter in which the Initial
Distribution Date occurs.
1.66. Surplus Distribution shall have the meaning set forth in Section
5.5(c) of the Plan.
1.67. Tort Claim means any Claim relating to personal injury, property
damage or products liability or other similar Claim asserted against the Debtor
that has not previously been compromised and settled or otherwise resolved.
1.68. Unsecured Claim means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim or Other Priority Claim.
1.69. Interpretation; Application of Definitions and Rules of
Construction. Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include both the singular and the
plural and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter. Unless otherwise specified, all
section, article, schedule or exhibit references in the Plan are to the
respective Section in, Article of, Schedule to, or Exhibit to, the Plan. The
words "herein," "hereof," "hereto," "hereunder" and other words of similar
import refer to the Plan as a whole and not to any particular section,
subsection or clause contained in the Plan. The rules of construction contained
in section 102 of the Bankruptcy Code shall apply to the construction of the
Plan. A term used herein that is not defined herein, but that is used in the
Bankruptcy Code, shall have the meaning ascribed to that term in the Bankruptcy
Code. The headings in the Plan are for convenience of reference only and shall
not limit or otherwise affect the provisions of the Plan.
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
--------------------------------------
2.1. Administrative Expense Claims. Except to the extent that any
entity entitled to payment of any Allowed Administrative Expense Claim agrees to
a different treatment, each holder of an Allowed Administrative Expense Claim
shall receive Cash in an amount equal to such Allowed Administrative Expense
Claim on the later of the Effective Date and the date such Administrative
Expense Claim becomes an Allowed Administrative Expense Claim, or as soon
thereafter as is practicable; provided, however, that Allowed Administrative
Expense Claims representing liabilities incurred in the ordinary course of
business by the Debtor in Possession or liabilities arising under loans or
advances to or other obligations incurred by the Debtor in
Exhibit 2.1 - Page 6
<PAGE>
Possession, to the extent authorized and approved by the Bankruptcy Court if
such authorization and approval was required under the Bankruptcy Code, shall be
paid in full and performed by the Reorganized Debtor in the ordinary course of
business in accordance with the terms and subject to the conditions of any
agreements governing, instruments evidencing or other documents relating to,
such transactions.
2.2. Professional Compensation and Reimbursement Claims. All entities
seeking an award by the Bankruptcy Court of compensation for services rendered
or reimbursement of expenses incurred through and including the Confirmation
Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the
Bankruptcy Code (a) shall file their respective final applications for
allowances of compensation for services rendered and reimbursement of expenses
incurred through the Confirmation Date by the date that is forty-five days after
the Effective Date or such other date as may be fixed by the Bankruptcy Court
and, if granted such an award by the Bankruptcy Court, (b) shall be paid in full
in such amounts as are Allowed by the Bankruptcy Court (i) on the date such
Administrative Expense Claim becomes an Allowed Administrative Expense Claim or
(ii) upon such other terms as may be mutually agreed upon between such holder of
an Administrative Expense Claim and the Debtor in Possession or, on and after
the Effective Date, the Reorganized Debtor.
2.3. Priority Tax Claims. Except to the extent that a holder of an
Allowed Priority Tax Claim has been paid by the Debtor prior to the Effective
Date or agrees to a different treatment, each holder of an Allowed Priority Tax
Claim shall receive, at the sole option of Reorganized Weiner's Stores, (a) Cash
in an amount equal to such Allowed Priority Tax Claim on the later of the
Effective Date and the date such Priority Tax Claim becomes an Allowed Priority
Tax Claim, or as soon thereafter as is practicable, or (b) equal annual Cash
payments in an aggregate amount equal to such Allowed Priority Tax Claim,
together with interest at a fixed annual rate equal to eight and one-quarter
percent (8 1/4%), over a period through the sixth anniversary of the date of
assessment of such Allowed Priority Tax Claim, or upon such other terms
determined by the Bankruptcy Court to provide the holder of such Allowed
Priority Tax Claim deferred Cash payments having a value, as of the Effective
Date, equal to such Allowed Priority Tax Claim.
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
---------------------------------------------
Claims, other than Administrative Expense Claims and Priority Tax
Claims, and Equity Interests are classified for all purposes, including voting,
confirmation and distribution pursuant to the Plan, as follows:
Class Status
- ----- ------
Class 1 -- Other Priority Claims..............Unimpaired
Class 2 -- Secured Tax Claims...................Impaired
Class 3 -- Security Pacific Secured Claim.....Unimpaired
Class 4 -- Other Secured Claims...............Unimpaired
Class 5 -- Convenience Claims...................Impaired
Class 6 -- General Unsecured Claims.............Impaired
Class 7 -- Equity Interests.....................Impaired
Exhibit 2.1 - Page 7
<PAGE>
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS
----------------------------------------
4.1. CLASS 1 -- OTHER PRIORITY CLAIMS.
(a) Impairment and Voting. Class 1 is unimpaired by the Plan. Each
holder of an Allowed Other Priority Claim is conclusively presumed to have
accepted the Plan and is not entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Other Priority Claim shall
receive Cash in an amount equal to such Allowed Other Priority Claim on the
later of the Effective Date and the date such Allowed Other Priority Claim
becomes an Allowed Other Priority Claim, or as soon thereafter as is
practicable.
4.2. CLASS 2 -- SECURED TAX CLAIMS.
(a) Impairment and Voting. Class 2 is impaired by the Plan. Each holder
of an Allowed Secured Tax Claim is entitled to vote to accept or reject the
Plan.
(b) Distributions. Except to the extent that a holder of an Allowed
Secured Tax Claim agrees to a different treatment, each holder of an Allowed
Secured Tax Claim shall receive, at the sole option of Reorganized Weiner's
Stores, (a) Cash in an amount equal to such Allowed Secured Tax Claim, including
any interest on such Allowed Secured Tax Claim required to be paid pursuant to
section 506(b) of the Bankruptcy Code, on the later of the Effective Date and
the date such Allowed Secured Tax Claim becomes an Allowed Secured Tax Claim, or
as soon thereafter as is practicable, or (b) equal annual Cash payments in an
aggregate amount equal to such Allowed Secured Tax Claim, together with interest
at a fixed annual rate equal to eight and one-quarter percent (8 1/4%), over a
period through the sixth anniversary of the date of assessment of such Allowed
Secured Tax Claim, or upon such other terms determined by the Bankruptcy Court
to provide the holder of such Allowed Secured Tax Claim deferred Cash payments
having a value, as of the Effective Date, equal to such Allowed Secured Tax
Claim.
(c) Retention of Liens. Each holder of an Allowed Secured Tax Claim
shall retain the Liens (or replacement Liens as may be contemplated under
nonbankruptcy law) securing its Allowed Secured Tax Claim as of the Effective
Date until full and final payment of such Allowed Secured Tax Claim is made as
provided herein, and upon such full and final payment, such Liens shall be
deemed null and void and shall be unenforceable for all purposes.
4.3. CLASS 3 -- SECURITY PACIFIC SECURED CLAIM.
(a) Impairment and Voting. Class 3 is unimpaired by the Plan. The
holder of an Allowed Security Pacific Secured Claim is conclusively presumed to
have accepted the Plan and is not entitled to vote to accept or reject the Plan.
(b) Distribution/Reinstatement of Claim. Except to the extent that a
holder of the Allowed Security Pacific Secured Claim agrees to a different
treatment, at the sole option of Reorganized Weiner's Stores, (i) the Allowed
Security Pacific Claim shall be reinstated and rendered unimpaired in accordance
with section 1124(2) of the Bankruptcy Code, notwithstanding any contractual
provision or applicable nonbankruptcy law that entitles the holder of the
Allowed Security Pacific Secured Claim to demand or receive payment of such
Claim prior to its stated maturity from and after the occurrence of a default or
(ii) the holder of the Allowed Security Pacific Secured Claim shall receive Cash
in an amount equal to such Claim, including interest on such Claim and any other
amounts required to be paid pursuant to section 506(b) of the Bankruptcy Code,
on the later of the Effective Date and the date such Claim becomes an Allowed
Security Pacific Secured Claim, or as soon thereafter as is practicable.
Exhibit 2.1 - Page 8
<PAGE>
4.4. CLASS 4 -- OTHER SECURED CLAIMS.
(a) Impairment and Voting. Class 4 is unimpaired by the Plan. Each
holder of an Allowed Other Secured Claim is conclusively presumed to have
accepted the Plan and is not entitled to vote to accept or reject the Plan.
(b) Distributions/Reinstatement of Claims. Except to the extent that a
holder of an Allowed Other Secured Claim agrees to a different treatment, at the
sole option of Reorganized Weiner's Stores, (i) each Allowed Other Secured Claim
shall be reinstated and rendered unimpaired in accordance with section 1124(2)
of the Bankruptcy Code, notwithstanding any contractual provision or applicable
nonbankruptcy law that entitles the holder of an Allowed Other Secured Claim to
demand or receive payment of such Claim prior to its stated maturity from and
after the occurrence of a default, (ii) each holder of an Allowed Other Secured
Claim shall receive Cash in an amount equal to such Claim, including any
interest on such Claim required to be paid pursuant to section 506(b) of the
Bankruptcy Code, on the later of the Effective Date and the date such Claim
becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable
or (iii) each holder of an Allowed Other Secured Claim shall receive the
Collateral securing its Claim in full and complete satisfaction of such Claim on
the later of the Effective Date and the date such Claim becomes an Allowed Other
Secured Claim, or as soon thereafter as is practicable.
4.5. CLASS 5 -- CONVENIENCE CLAIMS.
(a) Impairment and Voting. Class 5 is impaired by the Plan. Each holder
of an Allowed Convenience Claim is entitled to vote to accept or reject the
Plan.
(b) Distributions. Each holder of an Allowed Convenience Claim shall
receive Cash in an amount equal to sixty-seven percent (67%) of such Allowed
Convenience Claim on the later of the Effective Date and the date such Allowed
Convenience Claim becomes an Allowed Convenience Claim, or as soon thereafter as
is practicable.
4.6. CLASS 6 -- GENERAL UNSECURED CLAIMS.
(a) Impairment and Voting. Class 6 is impaired by the Plan. Each holder
of an Allowed General Unsecured Claim is entitled to vote to accept or reject
the Plan.
(b) Initial Distributions of New Common Stock. On the Initial
Distribution Date, each holder of an Allowed General Unsecured Claim shall
receive a Pro Rata Share of the Stock Distribution Pool less the number of
shares of New Common Stock in the Reserve.
(c) Initial Distributions of Cash. On the Cash Distribution Date, each
holder of an Allowed General Unsecured Claim shall receive a Pro Rata Share of
the Cash Distribution Pool less the amount of the Cash Distribution Pool in the
Reserve.
(d) Contingent Distributions of Cash. If EBITDA for the Reorganized
Debtor's fiscal year ended January 31, 1998 exceeds $5,800,000 and if the
Contingent Cash Distribution Pool would exceed $1,000,000, then on the
Contingent Cash Distribution Date, each holder of an Allowed General Unsecured
Claim shall receive a Pro Rata Share of the Contingent Cash Distribution Pool
less the amount of the Contingent Cash Distribution Pool in the Reserve. On or
before the Contingent Cash Distribution Date, the Reorganized Debtor shall
furnish to the Creditors' Committee a certificate executed on behalf of the
Reorganized Debtor by its Chief Executive Officer and Chief Financial Officer
certifying as to the calculation of the Contingent Cash Distribution Pool.
(e) Subsequent Distributions. On each Subsequent Distribution Date,
each holder of an Allowed General Unsecured Claim shall receive a Pro Rata Share
of the Surplus Distribution.
Exhibit 2.1 - Page 9
<PAGE>
(f) Debenture Claims. The Debenture Claims are Class 6 Claims, entitled
to the same treatment as all other Claims in that Class. The Debenture Claims
shall be Allowed Debenture Claims in the aggregate amount of $5,860,000, and
accordingly, the holders of such Claims shall receive their Pro Rata Share of
the distribution provided in the Plan for Claims in Class 6.
4.7. CLASS 7 -- EQUITY INTERESTS.
(a) Impairment and Voting. Class 7 is impaired by the Plan. The holders
of Equity Interests shall not receive any distributions on account of such
Equity Interests. On the Effective Date, the Equity Interests shall be
extinguished. Each holder of an Equity Interest is conclusively presumed to have
rejected the Plan as a holder of an Equity Interest, and is not entitled to vote
to accept or reject the Plan.
ARTICLE V.
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS AND CLAIMS
-------------------------
5.1. Voting of Claims and Equity Interests. Each holder of an Allowed
Claim in an impaired Class of Claims shall be entitled to vote separately to
accept or reject the Plan as provided in such order as is entered by the
Bankruptcy Court establishing certain procedures with respect to the
solicitation and tabulation of votes to accept or reject the Plan, or any other
order or orders of the Bankruptcy Court. For purposes of calculating the number
of Allowed Claims in a Class of Claims held by holders of Allowed Claims in such
Class that have voted to accept or reject the Plan under section 1126(c) of the
Bankruptcy Code, all Allowed Claims held by one entity or any Affiliate thereof
shall be aggregated and treated as one Allowed Claim in such Class.
5.2. Subtraction and Addition of Classes and Subclasses.
(a) Deletion of Classes and Subclasses. Any class of Claims that does
not contain as an element thereof an Allowed Claim or a Claim temporarily
allowed under Bankruptcy Rule 3018 as of the date of the commencement of the
Confirmation Hearing shall be deemed deleted from this Plan for purposes of
voting to accept or reject this Plan and for purposes of determining acceptance
or rejection of this Plan by such class under section 1129(a)(8) of the
Bankruptcy Code.
(b) Addition of Subclasses. In the event that Class 2 (Secured Tax
Claims) or Class 4 (Other Secured Claims) would contain as elements thereof two
or more Secured Claims collateralized by different properties or interests in
property or collateralized by Liens against the same property or interest in
property having different priority, such Claims shall be divided into separate
subclasses of such Class 2 (Secured Tax Claims) or Class 4 (Other Secured
Claims), as applicable.
5.3. Nonconsensual Confirmation. The Debtor will request that the
Bankruptcy Court confirm the Plan under section 1129(b) of the Bankruptcy Code
in respect of the treatment provided in the Plan for holders of Equity
Interests. If any impaired class of Claims entitled to vote shall not accept the
Plan by the requisite statutory majorities provided in section 1126(c) of the
Bankruptcy Code, the Debtor will request that the Bankruptcy Court confirm the
Plan under section 1129(b) of the Bankruptcy Code.
5.4. Method of Distributions Under the Plan.
(a) In General. Subject to Bankruptcy Rule 9010, all distributions
under the Plan shall be made by Reorganized Weiner's Stores to the holder as of
the Confirmation Date of each Allowed Claim at the address of such holder as
listed on the Schedules unless the Debtor or Reorganized Debtor has been
notified in writing of
Exhibit 2.1 - Page 10
<PAGE>
a change of address, including, without limitation, by the filing of a proof of
Claim by such holder that provides an address for such holder different from the
address reflected on the Schedules for such holder. The Debtor or the
Reorganized Debtor shall have no obligation to recognize any transfer of a Claim
occurring after the Confirmation Date and shall be entitled instead to recognize
and deal for all purposes herein with only those holders listed on the Schedules
or on the register of proofs of claim maintained by the Clerk of the Bankruptcy
Court or the agent of the Clerk of the Bankruptcy Court appointed for such
purpose in the Chapter 11 Case as of the close of business on the Confirmation
Date.
(b) Distributions of Cash. Any payment of Cash made by Reorganized
Weiner's Stores pursuant to the Plan shall be made by check drawn on a domestic
bank.
(c) Timing of Distributions. Any payment or distribution required to be
made under the Plan on a day other than a Business Day shall be made on the next
succeeding Business Day.
(d) Hart-Scott-Rodino Compliance. Any shares of New Common Stock to be
distributed under the Plan to any entity required to file a Premerger
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, shall not be distributed until the notification and
waiting periods applicable under such Act to such entity shall have expired or
been terminated.
(e) Minimum Distributions. No payment of Cash less than $10 shall be
made by Reorganized Weiner's Stores to any holder of a General Unsecured Claim
unless a request therefor is made in writing to Reorganized Weiner's Stores.
(f) Fractional Shares. No fractional shares of New Common Stock, or
Cash in lieu thereof shall be distributed under the Plan.
(g) Unclaimed Distributions. Any distributions pursuant to the Plan,
including dividends, interest or other amounts earned thereon, that are
unclaimed for a period of one year after distribution thereof shall be unclaimed
distributions and any entitlement of any holder of any Claim to such
distributions shall be extinguished and forever barred. Any unclaimed
distributions existing as of the date of the last distribution under Section
4.6(e) of the Plan shall be distributed to the holders of Allowed General
Unsecured Claims pursuant of Section 4.6(e) of the Plan. Any unclaimed
distributions existing after the date of the last distribution under Section
4.6(e) of the Plan shall be revested in Reorganized Weiner's Stores.
5.5. Disputed General Unsecured Claims.
(a) Distributions Withheld for Disputed General Unsecured Claims. On
the Initial Distribution Date, the Cash Distribution Date, the Contingent Cash
Distribution Date and on each Subsequent Distribution Date, Reorganized Weiner's
Stores shall reserve from the distributions to be made to the holders of Allowed
General Unsecured Claims the number of shares of New Common Stock and the amount
of Cash equal to one hundred percent (100%) of the distributions to which
holders of Disputed General Unsecured Claims would be entitled under the Plan as
of such dates as if such Disputed General Unsecured Claims were Allowed in their
Disputed Claim Amounts (the "Reserve").
(b) Distributions Upon Allowance of Disputed General Unsecured Claims.
The holder of a Disputed General Unsecured Claim that becomes an Allowed Claim
subsequent to the Initial Distribution Date shall receive distributions of New
Common Stock from the Reserve on the next Subsequent Distribution Date that
follows the Quarter during which such Disputed General Unsecured Claim becomes
an Allowed Claim pursuant to a Final Order. The holder of a Disputed General
Unsecured Claim that becomes an Allowed Claim subsequent to the Cash
Distribution Date shall receive distributions of Cash from the Reserve on
account of the Cash Distribution Pool on the next Subsequent Distribution Date
that follows the quarter during which such Disputed General Unsecured Claim
becomes an Allowed Claim pursuant to a Final Order. The holder of a Disputed
General Unsecured Claim that becomes an Allowed Claim subsequent to the
Contingent Cash Distribution Date
Exhibit 2.1 - Page 11
<PAGE>
shall receive distributions of Cash from the Reserve on account of the
Contingent Cash Distribution Pool on the next Subsequent Distribution Date that
follows the quarter during which such Disputed General Unsecured Claim becomes
an Allowed Claim pursuant to Final Order. Such distributions shall be made in
accordance with the Plan based upon the distribution that would have been made
to such holder under the Plan if the Disputed General Unsecured Claim had been
an Allowed Claim on or prior to the Effective Date, without any post-Effective
Date interest thereon.
(c) Surplus Distribution to Holders of Allowed General Unsecured
Claims. To the extent that a Disputed General Unsecured Claim is not Allowed or
becomes an Allowed Claim in an amount less than the Disputed Claim Amount, the
excess of the number of shares of New Common Stock and Cash in the Reserve over
the number of shares of New Common Stock and Cash actually distributed on
account of such Disputed Claim (the "Surplus Distribution") shall be distributed
to the holders of Allowed General Unsecured Claims pursuant to Section 4.6(e) of
the Plan; provided, however, that Reorganized Weiner's Stores shall not be under
any obligation to make any such distributions of New Common Stock unless the
number of shares of New Common Stock to be distributed aggregates 500,000 shares
or more, unless the distribution is the last distribution of New Common Stock
under Section 4.6(e) of the Plan, and shall not be under any obligation to make
any such distributions of Cash unless the amount of Cash to be distributed
aggregates $135,000 or more, unless the distribution is the last distribution of
Cash under Section 4.6(e) of the Plan.
(d) Tort Claims. All Tort Claims are Disputed Claims. Any Tort Claim as
to which a proof of claim was timely filed in the Chapter 11 Case shall be
determined and liquidated (i) in the Bankruptcy Court or, in the case of
personal injury tort and wrongful death claims, in the District Court or, if the
District Court so orders, in the United States District Court for the judicial
district in which the Claim arose, or (ii) if the District Court or the
Bankruptcy Court abstains from exercising jurisdiction over the Claim, in the
administrative or judicial tribunal(s) in which it is pending on the Effective
Date or, if no action was pending on the Effective Date, in any administrative
or judicial tribunal of appropriate jurisdiction, or (iii) in accordance with
any alternative dispute resolution or similar proceeding as same may be approved
by order of the Bankruptcy Court. Any Tort Claim determined and liquidated (x)
pursuant to a judgment obtained in accordance with this Section 5.5(d) and
applicable nonbankruptcy law which is no longer appealable or subject to review,
or (y) in any alternative dispute resolution proceeding or similar proceeding as
same may be approved by order of the Bankruptcy Court, shall be deemed an
Allowed Claim in such liquidated amount and satisfied in accordance with the
Plan. Nothing contained in this Section 5.5(d) shall constitute or be deemed a
waiver of any Cause of Action that the Debtor may hold against any entity,
including, without limitation, in connection with or arising out of any Tort
Claim.
(e) Dividend Claims. All Dividend Claims are Disputed Claims and are
deemed not Allowed. Accordingly, holders of such Claims shall not receive any
distributions in respect of such Claims under the Plan.
5.6. Objections to and Resolution of Disputed Administrative Expense
Claims and Disputed Claims. Except as to applications for allowances of
compensation and reimbursement of expenses under sections 330 and 503 of the
Bankruptcy Code and except as provided in Section 13.8(b) of the Plan, the
Debtor or the Reorganized Debtor shall have the exclusive right to make and file
objections to Administrative Expense Claims and Claims subsequent to the
Confirmation Date. All objections shall be litigated to Final Order; provided,
however, that the Reorganized Debtor shall have the authority to compromise,
settle, otherwise resolve or withdraw any objections, without approval of the
Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court and except as
provided in Section 13.8(b) of the Plan, the Debtor or Reorganized Debtor shall
file all objections to Administrative Expense Claims (other than to applications
for allowances of compensation and reimbursement of expenses) and Claims and
serve such objections upon the holder of the Administrative Expense Claim or
Claim as to which the objection is made as soon as is practicable, but in no
event later than the Initial Distribution Date.
5.7. Distributions Relating to Allowed Insured Claims. Distributions
under the Plan to each holder of an Allowed Insured Claim shall be in accordance
with the treatment provided under the Plan for the Class in which such Allowed
Insured Claim is classified, but solely to the extent that such Allowed Insured
Claim
Exhibit 2.1 - Page 12
<PAGE>
is not satisfied from proceeds payable to the holder thereof under any pertinent
insurance policies and applicable law. Nothing contained in this Section 5.7
shall constitute or be deemed a waiver of any Cause of Action that the Debtor or
any entity may hold against any other entity, including, without limitation,
insurers under any policies of insurance.
5.8. Cancellation and Surrender of Existing Securities and Agreements.
(a) On the Effective Date, the promissory notes, share certificates and
other instruments evidencing any Claim or Equity Interest shall be deemed
canceled without further act or action under any applicable agreement, law,
regulation, order or rule and the obligations of the Debtor under the
agreements, indentures and certificates of designations governing such Claim and
Equity Interest, as the case may be, shall be discharged.
(b) Each holder of a promissory note, share certificate or other
instrument evidencing a Claim shall surrender such promissory note or instrument
to the Reorganized Debtor. No distribution of property hereunder shall be made
to or on behalf of any such holders unless and until such promissory note or
instrument is received by the Reorganized Debtor or the unavailability of such
promissory note, share certificate or instrument is established to the
reasonable satisfaction of the Reorganized Debtor. The Reorganized Debtor may
require any holder that is unable to surrender or cause to be surrendered any
such promissory notes or instruments to deliver an affidavit of loss and
indemnity and/or furnish a bond in form and substance (including, without
limitation, with respect to amount) reasonably satisfactory to the Reorganized
Debtor. Any holder that fails within the later of one year after the
Confirmation Date and the date its Claim is Allowed (i) to surrender or cause to
be surrendered such promissory note, share certificate or instrument, (ii) if
requested, to execute and deliver an affidavit of loss and indemnity reasonably
satisfactory to the Reorganized Debtor, and (iii) if requested, to furnish a
bond reasonably satisfactory to the Reorganized Debtor, shall be deemed to have
forfeited all rights, claims and Causes of Action against the Debtor and the
Reorganized Debtor and shall not participate in any distribution hereunder.
5.9. Registration of New Common Stock. Each person or entity receiving
a distribution of New Common Stock as of the Effective Date representing at
least ten percent (10%) of the fully diluted equity interests in Reorganized
Weiner's Stores shall have the right to become a party to the Registration
Rights Agreement. The Registration Rights Agreement shall include, inter alia,
without limitation, the following terms and conditions:
(a) Each entity entering into a Registration Rights
Agreement with Reorganized Weiner's Stores will be entitled, after the
24-month anniversary of the Effective Date and again after the 60-month
anniversary of the Effective Date, in each case until termination of
such Registration Rights Agreement, to require Reorganized Weiner's
Stores, subject to certain exceptions, to use reasonable efforts to
file with the Securities and Exchange Commission a registration
statement on an appropriate form (the "Registration Statement")
relating to the shares of New Common Stock to be issued to such entity
under the Plan for which registration is required for public resale
thereof; and
(b) Reorganized Weiner's Stores will use reasonable
efforts to cause the Registration Statement to remain effective,
subject to customary exceptions, for a period of not less than 180 days
from the date on which such Registration Statement is declared
effective; provided that notwithstanding the foregoing, Reorganized
Weiner's Stores shall not be required to keep the Registration
Statement effective if all shares of New Common Stock registered
thereby may be resold free of volume limitations pursuant to Rule 144
(including Rule 144(k)) under the Securities Act of 1933, as amended
(the "1933 Act") (or any successor rule or statute) or may otherwise be
freely sold publicly without registration; and
(c) If Reorganized Weiner's Stores proposes to file a
registration statement under the 1933 Act with respect to an offering
of any equity securities by Reorganized Weiner's Stores for its own
account or for the account of any of its equity holders, then such
entity shall, subject to certain customary
Exhibit 2.1 - Page 13
<PAGE>
exceptions, have the opportunity to register such number of shares of
New Common Stock issued to such entity pursuant to the Plan as it may
timely request.
5.10. Listing of New Common Stock. Reorganized Weiner's Stores shall
use reasonable commercial efforts to cause the shares of New Common Stock to be
included for quotation on the NASDAQ National Market System.
ARTICLE VI.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
----------------------------------------
6.1. Assumption or Rejection of Executory Contracts and Unexpired
Leases.
(a) Executory Contracts and Unexpired Leases. Pursuant to sections
365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts and
unexpired leases that exist between the Debtor and any person shall be deemed
assumed by the Reorganized Debtor as of the Effective Date except for any
executory contract or unexpired lease (i) which has been assumed pursuant to an
order of the Bankruptcy Court entered prior to the Confirmation Date, (ii) which
has been rejected pursuant to an order of the Bankruptcy Court entered prior to
the Confirmation Date, (iii) as to which a motion for approval of the rejection
of such executory contract or unexpired lease has been filed and served prior to
the Confirmation Date or (iv) which is set forth in Schedule 6.1(a)(x)
(executory contracts) or Schedule 6.1(a)(y) (unexpired leases), which Schedules
shall be included in the Plan Supplement. The listing of a document on Schedules
6.1(a)(x) and 6.1(a)(y) shall not constitute an admission by the Debtor or
Reorganized Debtor that such document is an executory contract or an unexpired
lease or that the Debtor or Reorganized Debtor has any liability thereunder.
(b) Schedules of Rejected Executory Contracts and Unexpired Leases;
Inclusiveness. Each executory contract and unexpired lease listed or to be
listed on Schedules 6.1(a)(x) or 6.1(a)(y) that relates to the use or occupancy
of real property shall be deemed to include (i) modifications, amendments,
supplements, restatements, or other agreements made directly or indirectly by
any agreement, instrument, or other document that in any manner affects such
executory contract or unexpired lease, without regard to whether such agreement,
instrument or other document is listed on Schedules 6.1(a)(x) or 6.1(a)(y), and
(ii) executory contracts or unexpired leases appurtenant to the premises listed
on Schedules 6.1(a)(x) or 6.1(a)(y), including, without limitation, all
easements, licenses, permits, rights, privileges, immunities, options, rights of
first refusal, powers, uses, usufructs, reciprocal easement agreements, vault,
tunnel or bridge agreements or franchises, and any other interests in real
estate or rights in rem relating to such premises to the extent any of the
foregoing are executory contracts or unexpired leases, unless any of the
foregoing agreements have been assumed or are previously assumed.
(c) Insurance Policies. The Debtor's insurance policies and any
agreements, documents or instruments relating thereto, including, without
limitation, any retrospective premium rating plans relating to such policies,
are treated as executory contracts under the Plan. Notwithstanding the
foregoing, distributions under the Plan to any holder of a Claim covered by any
of such insurance policies and related agreements, documents or instruments that
are assumed hereunder, shall be in accordance with the treatment provided under
Article 4 and Section 5.7 of the Plan. Nothing contained in this Section 6.1(c)
shall constitute or be deemed a waiver of any Cause of Action that the Debtor
may hold against any entity, including, without limitation, the insurer under
any of the Debtor's policies of insurance.
(d) Approval of Assumption or Rejection of Executory Contracts and
Unexpired Leases. Entry of the Confirmation Order shall constitute the approval,
pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the
assumption of the executory contracts and unexpired leases assumed as of the
Effective Date pursuant to Section 6.1(a) hereof, the extension of time,
pursuant to section 365(d)(4) of the Bankruptcy Code, within which the Debtor
may assume or reject the unexpired leases specified in Section 6.1(a) hereof
Exhibit 2.1 - Page 14
<PAGE>
through the date of entry of an order approving the assumption or rejection of
such unexpired leases, and the approval, pursuant to sections 365(a) and
1123(b)(2) of the Bankruptcy Code, of the rejection of the executory contracts
and unexpired leases rejected pursuant to Section 6.1(a) hereof.
(e) Cure of Defaults. Except as may otherwise be agreed to by the
parties, within sixty days after the Effective Date or as soon thereafter as is
practicable, the Reorganized Debtor shall cure any and all undisputed defaults
under any executory contract or unexpired lease assumed pursuant to the Plan in
accordance with section 365(b)(1) of the Bankruptcy Code. All disputed defaults
that are required to be cured shall be cured either within thirty days of the
entry of a Final Order determining the amount, if any, of the Debtor's or
Reorganized Debtor's liability with respect thereto, or as may otherwise be
agreed to by the parties.
(f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts
and Unexpired Leases Rejected Pursuant to the Plan. Claims arising out of the
rejection of an executory contract or unexpired lease pursuant to this Section
6.1 of the Plan must be filed with the Bankruptcy Court no later than thirty
days after the later of notice of entry of an order approving the rejection of
such executory contract or unexpired lease and notice of entry of the
Confirmation Order. Any Claims not filed within such time will be forever barred
from assertion against the Debtor, its estate and its property. Unless otherwise
ordered by the Bankruptcy Court, all Claims arising from the rejection of
executory contracts and unexpired leases shall be treated as Unsecured Claims
under the Plan.
6.2. Indemnification Obligations. For purposes of the Plan, the
obligations of the Debtor to indemnify, reimburse or limit the liability of its
present and any former directors, officers or employees that were directors,
officers or employees, respectively, on or after the Commencement Date against
any obligations pursuant to the Debtor's certificates of incorporation or
bylaws, applicable state law or specific agreement, or any combination of the
foregoing, shall survive confirmation of the Plan, remain unaffected thereby,
and not be discharged irrespective of whether indemnification, reimbursement or
limitation is owed in connection with an event occurring before, on, or after
the Commencement Date.
6.3. Compensation and Benefit Programs. Except as provided in Section
6.1(a) of the Plan, all employment and severance practices and policies, and all
compensation and benefit plans, policies, and programs of the Debtor, if any,
applicable to its directors, officers or employees, including, without
limitation, all savings plans, retirement plans, health care plans, severance
benefit plans, incentive plans, workers' compensation programs and life,
disability and other insurance plans are treated as executory contracts under
the Plan and are hereby assumed pursuant to sections 365(a) and 1123(b)(2) of
the Bankruptcy Code.
6.4. Retiree Benefits. Payments, if any, due to any person for the
purpose of providing or reimbursing payments for retired employees and their
spouses and dependents for medical, surgical, or hospital care benefits, or
benefits in the event of sickness, accident, disability, or death under any
plan, fund, or program (through the purchase of insurance or otherwise)
maintained or established in whole or in part by the Debtor prior to the
Commencement Date shall be continued for the duration of the period the Debtor
has obligated itself to provide such benefits.
ARTICLE VII.
COMPROMISE OF DISPUTES
----------------------
7.1. Equity Interests. All of the outstanding Equity Interests are held
by Messrs. Sol and Leon Weiner, members of their respective families or trusts
for the benefit of immediate members of their respective families or relatives.
Additionally, Messrs. Sol and Leon Weiner are members of the Board of Directors
of Weiner's Stores. Based on the advice of their professionals regarding the
potential value of Reorganized Weiner's Stores, it is the Debtor's understanding
that, notwithstanding that the Plan does not provide for any distributions to
holders of Equity Interests, Messrs. Sol and Leon Weiner believe that such value
is sufficient to enable the
Exhibit 2.1 - Page 15
<PAGE>
Reorganized Debtor to make distributions to both holders of Allowed Claims and
holders of Equity Interests. It is the Debtor's further understanding that as
part of an overall resolution of issues and disputes regarding the treatment
afforded to the Debenture Claims and the Dividend Claims pursuant to Sections
4.6(f) and 5.5(e) of the Plan and in consideration of the releases and
exculpations provided for in Sections 13.4, 13.5 and 13.7 of the Plan, Sol and
Leon Weiner are willing to forego their arguments and positions regarding the
potential value of Reorganized Weiner's Stores under the consensual treatment
afforded to Debenture Claims under the Plan, but that if the Effective Date of
the Plan does not occur, then the holders of Equity Interests reserve the right
to reassert claims and interests that have been waived in the Plan.
7.2. Compromise and Settlement of Debenture Claims and Dividend Claims.
The treatment afforded to the Debenture Claims and the Dividend Claims pursuant
to Sections 4.6(f) and 5.5(e) of the Plan shall be deemed a compromise and
settlement as of the Effective Date pursuant to section 1123 of the Bankruptcy
Code and Bankruptcy Rule 9019 of Causes of Action of the Debtor and the holders
of Debenture Claims and Dividend Claims in respect of the extent, validity and
priority of the Debenture Claims and the Dividend Claims.
ARTICLE VIII.
CONSOLIDATION OF THE SUBSIDIARIES
---------------------------------
8.1. Merger of Corporate Entities. On or as of the Effective Date,
within the sole and exclusive discretion of the Debtor, any or all of its
subsidiaries may be merged into the Debtor or dissolved. Upon the occurrence of
any such merger, all assets, if any, of the merged entities shall be transferred
to and become the assets of the surviving corporation, and all liabilities, if
any, of the merged entities, except to the extent discharged, released or
extinguished pursuant to the Plan and the Confirmation Order, shall be assumed
by and shall become the liabilities of the surviving corporation. All mergers
and dissolutions shall be effective as of the Effective Date pursuant to the
Confirmation Order without any further action by the stockholders or directors
of the Debtor, the Debtor in Possession or the Reorganized Debtor.
ARTICLE IX.
PROVISIONS REGARDING CORPORATE
GOVERNANCE OF THE REORGANIZED DEBTOR
------------------------------------
9.1. General. On the Effective Date, the management, control and
operation of the Reorganized Debtor shall become the general responsibility of
the Board of Directors of the Reorganized Debtor, who shall, thereafter, have
the responsibility for the management, control and operation of the Reorganized
Debtor.
9.2. Meetings of Reorganized Weiner's Stores Stockholders. The first
annual meeting of the stockholders of Reorganized Weiner's Stores shall be held
on a date in 1998 selected by the Board of Directors of Reorganized Weiner's
Stores in accordance with the Amended Certificate of Incorporation and the
Amended Bylaws, as the same may be amended from time to time, and subsequent
meetings of the stockholders of Reorganized Weiner's Stores shall be held at
least once annually each year thereafter.
9.3. Directors and Officers of Reorganized Debtor.
(a) Boards of Directors. The initial Board of Directors of Reorganized
Weiner's Stores shall consist of seven individuals consisting of the Chief
Executive Officer and the Chief Financial Officer of the Debtor and individuals
whose names shall be disclosed prior to the Confirmation Hearing. Each of the
members of such initial Board of Directors shall serve until the first annual
meeting of stockholders of Reorganized Weiner's Stores or their earlier
resignation or removal in accordance with the Amended Certificate of
Incorporation or Amended Bylaws, as the same may be amended from time to time.
Exhibit 2.1 - Page 16
<PAGE>
(b) Officers. The officers of the Debtor immediately prior to the
Effective Date shall serve as the initial officers of the Reorganized Debtor on
and after the Effective Date. Such officers shall serve in accordance with any
employment agreement with the Reorganized Debtor and applicable nonbankruptcy
law.
9.4. Amended Bylaws and Amended Certificate of Incorporation. The
Amended Bylaws and Amended Certificate of Incorporation shall be amended and
restated as of the Effective Date to the extent necessary (a) to prohibit the
issuance of nonvoting equity securities as required by section 1123(a)(6) of the
Bankruptcy Code, subject to further amendment of such certificate of
incorporation and bylaws as permitted by applicable law, and (b) to effectuate
the provisions of the Plan, in each case without any further action by the
stockholders or directors of the Debtor, the Debtor in Possession or the
Reorganized Debtor.
9.5. Issuance of New Securities. The issuance of 50,000,000 shares of
New Common Stock and up to 10,000,000 shares of preferred stock without par
value is hereby authorized without further act or action under applicable law,
regulation, order or rule.
9.6. Adoption of Management Stock Plan. If not theretofore adopted by
Weiner's Stores, on the Effective Date, Reorganized Weiner's Stores shall adopt
the Management Stock Plan.
9.7. Management Stock Grant and Options on the Effective Date.
Reorganized Weiner's Stores is authorized to issue to its senior managers
400,000 shares of New Common Stock and Options to purchase 1,000,000 shares of
New Common Stock pursuant and subject to the Management Stock Plan. Said shares
of New Common Stock and Options not issued on Effective Date shall be reserved
for issuance thereafter pursuant and subject to the Management Stock Plan by the
Reorganized Debtor, on such terms and conditions consistent with the Management
Stock Plan.
9.8. Employment Contracts. As of the Effective Date, the Debtor or
Reorganized Debtor shall have entered into employment agreements or amended
employment agreements with certain key employees as described in the Disclosure
Statement.
ARTICLE X.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN
-------------------------------------------------
10.1. Term of Bankruptcy Injunction or Stays. Unless otherwise provided
herein, all injunctions or stays provided for in the Chapter 11 Case under
sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on
the Confirmation Date, shall remain in full force and effect until the Effective
Date.
10.2. Revesting of Assets.
(a) The property of the Debtor's estate shall revest in the Reorganized
Debtor on the Effective Date.
(b) From and after the Effective Date, the Reorganized Debtor may
operate its business, and may use, acquire and dispose of property free of any
restrictions imposed under the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtor and
Reorganized Debtor shall be free and clear of all liens, claims and interests of
holders of Claims and Equity Interests, except as provided in the Plan.
10.3. Causes of Action. Pursuant to section 1123(b)(3)(B) of the
Bankruptcy Code, as of the Effective Date any and all Causes of Action accruing
to the Debtor and Debtor in Possession, including, without limitation, actions
under sections 545, 549, 550 and 551 of the Bankruptcy Code, but excluding
avoidance or recovery actions under sections 544, 547, 548 and 553 of the
Bankruptcy Code, that are not compromised, settled
Exhibit 2.1 - Page 17
<PAGE>
or satisfied prior thereto, shall become assets of the Reorganized Debtor, and
the Reorganized Debtor shall have the authority to prosecute such Causes of
Action for the benefit of the Debtor's estate. The Reorganized Debtor shall have
the authority to compromise and settle, otherwise resolve, discontinue, abandon
or dismiss all such Causes of Action without approval of the Bankruptcy Court.
10.4. Discharge of Debtor. The rights afforded herein and the treatment
of all Claims and Equity Interests herein shall be in exchange for and in
complete satisfaction, discharge, and release of Claims and Equity Interests of
any nature whatsoever, including any interest accrued on such Claims from and
after the Commencement Date, against the Debtor and the Debtor in Possession, or
any of their assets or properties. Except as otherwise provided herein, (a) on
the Effective Date, all such Claims against, and Equity Interests in, the Debtor
shall be satisfied, discharged, and released in full, and (b) all persons shall
be precluded from asserting against the Reorganized Debtor, its successors, or
its assets or properties any other or further Claims or Equity Interests based
upon any act or omission, transaction or other activity of any kind or nature
that occurred prior to the Confirmation Date.
10.5. Injunction. Except as otherwise expressly provided in the Plan or
the Confirmation Order, all entities who have held, hold or may hold Claims
against or Equity Interests in the Debtor, are permanently enjoined, on and
after the Effective Date, from (a) commencing or continuing in any manner any
action or other proceeding of any kind with respect to any such Claim or Equity
Interest, (b) the enforcement, attachment, collection or recovery by any manner
or means of any judgment, award, decree or order against the Debtor on account
of any such Claim or Equity Interest, (c) creating, perfecting or enforcing any
encumbrance of any kind against the Debtor or against the property or interests
in property of the Debtor on account of any such Claim or Equity Interest, and
(d) asserting any right of setoff, subrogation or recoupment of any kind against
any obligation due from the Debtor or against the property or interests in
property of the Debtor on account of any such Claim or Equity Interest. Such
injunction shall extend to successors of the Debtor (including, without
limitation, the Reorganized Debtor) and their respective properties and
interests in property.
ARTICLE XI.
EFFECTIVENESS OF THE PLAN
-------------------------
11.1. Conditions Precedent to Effectiveness. The Plan shall not become
effective unless and until the following conditions shall have been satisfied or
waived by the Debtor:
(a) the Confirmation Order, in form and substance satisfactory to the
Debtor, shall have become a Final Order;
(b) the Reorganized Debtor would have as of the Effective Date at least
$15,000,000 in Cash and credit available to it under a working capital credit
facility, after giving effect to the distributions of Cash projected to be made
under the Plan;
(c) the Reorganized Debtor shall have credit availability under a
working capital credit facility to provide the Reorganized Debtor with working
capital sufficient to meet its ordinary and peak working capital requirements,
as determined by the Debtor;
(d) the Allowed Priority Tax Claims of the Internal Revenue Service
shall aggregate no more than $82,000;
(e) all actions, documents and agreements necessary to implement the
Plan shall have been effected or executed; and
Exhibit 2.1 - Page 18
<PAGE>
(f) the Debtor shall have received all authorizations, consents,
regulatory approvals, rulings, letters, no-action letters, opinions or documents
that are determined by the Debtor to be necessary to implement the Plan,
including, without limitation, no-action letters from the Securities and
Exchange Commission and letter or other rulings from the Internal Revenue
Service.
11.2. Waiver of Conditions. The Debtor, with the written consent of the
Creditors' Committee (which consent shall not be unreasonably withheld), may
waive, by a writing signed by an authorized representative of the Debtor and
subsequently filed with the Bankruptcy Court, one or more of the conditions
precedent to effectiveness of the Plan set forth in Section 11.1 of the Plan.
ARTICLE XII.
RETENTION OF JURISDICTION
-------------------------
The Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of, and related to, the Chapter 11 Case and the Plan pursuant to,
and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following purposes:
(a) To hear and determine pending applications for the
assumption or rejection of executory contracts or unexpired leases, if
any are pending, and the allowance of Claims resulting therefrom;
(b) To determine any and all adversary proceedings,
applications and contested matters;
(c) To hear and determine any objection to Administrative
Expense Claims, Claims or Equity Interests;
(d) To enter and implement such orders as may be
appropriate in the event the Confirmation Order is for any reason
stayed, revoked, modified or vacated;
(e) To issue such orders in aid of execution and
consummation of the Plan, to the extent authorized by section 1142 of
the Bankruptcy Code;
(f) To consider any amendments to or modifications of the
Plan, to cure any defect or omission, or reconcile any inconsistency in
any order of the Bankruptcy Court, including, without limitation, the
Confirmation Order;
(g) To hear and determine all applications for compensation
and reimbursement of expenses of professionals under sections 330, 331
and 503(b) of the Bankruptcy Code and the Plan;
(h) To hear and determine disputes arising in connection
with the interpretation, implementation or enforcement of the Plan;
(i) To recover all assets of the Debtor and property of the
Debtor's estate, wherever located;
(j) To hear and determine matters concerning state, local
and federal taxes in accordance with sections 346, 505 and 1146 of the
Bankruptcy Code;
(k) To hear any other matter not inconsistent with the
Bankruptcy Code; and
Exhibit 2.1 - Page 19
<PAGE>
(l) To enter a final decree closing the Chapter 11 Case.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
------------------------
13.1. Effectuating Documents and Further Transactions. The Debtor or
the Reorganized Debtor, through its Chief Executive Officer or its Chief
Financial Officer, is authorized to execute, deliver, file or record such
contracts, instruments, releases, indentures and other agreements or documents
and take such actions as may be necessary or appropriate to effectuate and
further evidence the terms and conditions of the Plan and any notes or
securities issued pursuant to the Plan.
13.2. Corporate Action. On the Effective Date, all matters provided for
under the Plan that would otherwise require approval of the stockholders or
directors of the Debtor or Reorganized Debtor, including, without limitation,
the authority to issue preferred stock, the issuance of New Common Stock and the
Options, the adoption and implementation of the Management Stock Plan, the
effectiveness of the Amended Certificate of Incorporation, the Amended Bylaws
and any corporate mergers or dissolutions effectuated pursuant to the Plan, the
election or appointment, as the case may be, of directors and officers of the
Debtor or Reorganized Debtor pursuant to the Plan, and the authorization and
approval of employment agreements or amended employment agreements, shall be
deemed to have occurred and shall be in effect from and after the Effective Date
pursuant to section 303 of the Delaware General Corporation Law without any
requirement of further action by the stockholders or directors of the Debtor or
Reorganized Debtor. On the Effective Date or as soon thereafter as is
practicable, the Reorganized Debtor shall, if required, file the Amended
Certificate of Incorporation with the Secretary of State of Delaware, in
accordance with sections 103 and 303 of the Delaware General Corporation Law.
13.3. Exemption from Transfer Taxes. Pursuant to section 1146(c) of the
Bankruptcy Code, the issuance, transfer or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including, without limitation,
any merger agreements or agreements of consolidation, deeds, bills of sale or
assignments executed in connection with any of the transactions contemplated
under the Plan shall not be subject to any stamp, real estate transfer, mortgage
recording or other similar tax.
13.4. Debtor's Limited Release of Directors and Officers. As of the
Effective Date, the Debtor shall be deemed to have waived and released its
present and former directors and officers who were directors and officers,
respectively, during the Chapter 11 Case and on or before the Commencement Date
from any and all claims of the Debtor, including, without limitation, claims
which the Debtor otherwise has legal power to assert, compromise or settle in
connection with the Chapter 11 Case; provided, however, that this Section 13.4
shall not operate as a waiver or release of any claim (i) in respect of any
loan, advance or similar payment by the Debtor to any such person, and (ii) in
respect of any contractual obligation owed by such person to the Debtor.
13.5. Claim Holders' Release of Directors and Officers from Claims and
Liabilities. As of the Effective Date, each of the Debtor's present and former
directors and officers who were directors and officers, respectively, during the
Chapter 11 Case and on or before the Commencement Date (a "Released Director or
Officer") shall be released and discharged from any and all claims, obligations,
rights, Causes of Action and liabilities which any holder of a Claim against the
Debtor may be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, based in whole or in part upon any
act or omission or other event occurring on or at any time prior to the
Effective Date in any way relating to the Debtor, the Chapter 11 Case or this
Plan; provided, however, that this Section 13.5 shall not operate as a waiver or
release of any claim (i) in respect of any loan, advance or similar payment by
any holder of a Claim to a Released Director or Officer, and (ii) in respect of
any contractual obligation owed by a Released Director or Officer to a holder of
a Claim;
Exhibit 2.1 - Page 20
<PAGE>
provided further, however, that nothing contained in this Section 13.5 shall
affect the rights of a Released Director or Officer to assert and prosecute (x)
any direct claim, counterclaim, cross-claim, separate action or similar claim
against any entity which maintains that it has a Cause of Action of the kind
described in this Section 13.5 against a Released Director or Officer that has
not been released and discharged hereunder or (y) any claim for indemnification,
contribution or otherwise, however denominated, against any entity relating to
any Cause of Action against a Released Director or Officer that has not been
released and discharged hereunder. Each holder of a Claim shall be deemed to
have agreed to the provisions of this Section 13.5, and shall be bound thereby,
by reason of, among other things, its acceptance of this Plan and its receipt of
any distributions hereunder.
13.6. General Release of Texas Commerce Bank, National Association. As
of the Effective Date, the Debtor shall execute and deliver the General Release
to Texas Commerce Bank, National Association. In consideration of the release
provided for in this Section 13.6, Texas Commerce Bank, National Association has
agreed to waive is claims, if any, for an administration expense on account of
having made a substantial contribution pursuant to section 503(b) of the
Bankruptcy Code.
13.7. Exculpation. Subject to Sections 13.4 and 13.5 of the Plan,
neither the Reorganized Debtor, the Creditors' Committee nor any of their
respective members, officers, directors, employees, advisors or agents shall
have or incur any liability to any holder of a Claim or Equity Interest for any
act or omission in connection with, or arising out of, the Chapter 11 Case, the
pursuit of confirmation of the Plan, the consummation of the Plan or the
administration of the Plan or the property to be distributed under the Plan,
except for willful misconduct or gross negligence, and, in all respects, the
Reorganized Debtor, the Creditors' Committee, and each of their respective
members, officers, directors, employees, advisors and agents shall be entitled
to rely upon the advice of counsel with respect to their duties and
responsibilities in the Chapter 11 Case or under the Plan; provided, however,
that nothing contained in this Section 13.7 shall exculpate, satisfy, discharge
or release any claims against officers, directors or employees of the Debtor in
their individual capacities.
13.8. Committee.
(a) The appointment of the Creditors' Committee shall terminate on the
earlier of (i) the first anniversary of the Effective Date and (ii) the date of
the last distribution under Section 4.6(e) of the Plan.
(b) After the Effective Date, the Creditors' Committee's sole functions
will be to (i) prepare and prosecute fee and expense reimbursement applications,
(ii) prepare and prosecute objections, if any, to fee and expense reimbursement
applications, (iii) prepare and prosecute objections, if any, to Administrative
Expense Claims and Claims if after recommendation by the Creditors' Committee
the Debtor or the Reorganized Debtor unreasonably refuses to object to a
particular Administrative Expense Claim or Claim, (iv) monitor the Reorganized
Debtor's progress in (a) reconciling and resolving Disputed Claims and (b)
making distributions on account of such Claims once such Claims become Allowed
Claims and (v) recommend compromises, settlements or other resolutions of
Disputed Claims.
(c) Employment of Attorneys and Reimbursement of Expenses. After the
Effective Date, the Creditors' Committee will be authorized to retain one law
firm. The role of the Creditors' Committee's attorneys will be strictly limited
to assisting the Committee in its functions as set forth herein. The Reorganized
Debtor will pay the actual, necessary, reasonable and documented fees and
expenses of the attorneys retained by the Creditors' Committee, as well as the
actual, necessary, reasonable and documented expenses incurred by each member of
the Creditors' Committee in the performance of its duties, in accordance with
the Reorganized Debtor's normal business practice for compensating and
reimbursing professionals. Other than as specified in the preceding sentence,
the members of the Creditors' Committee will serve without compensation. If
there is any unresolved dispute between the Reorganized Debtor and the
Creditors' Committee, its attorneys or its members as to any fees or expenses,
such dispute will be submitted to the Bankruptcy Court for resolution.
13.9. Post-Confirmation Date Fees and Expenses. From and after the
Confirmation Date, the Debtor and Reorganized Debtor shall, in the ordinary
course of business and without the necessity for any
Exhibit 2.1 - Page 21
<PAGE>
approval by the Bankruptcy Court, pay the reasonable fees and expenses of
professional persons thereafter incurred by the Debtor and Reorganized Debtor
and, subject to Section 13.8(c) of the Plan, the reasonable fees and expenses of
professional persons thereafter incurred by the Creditors' Committee and the
actual reasonable and documented expenses incurred by each member of the
Creditors' Committee in the performance of its duties, including, without
limitation, those fees and expenses incurred in connection with the
implementation and consummation of the Plan.
13.10. Payment of Statutory Fees. All fees payable pursuant to section
1930 of the title 28 of the United States Code, as determined by the Bankruptcy
Court at the Confirmation Hearing, shall be paid on the Effective Date.
13.11. Amendment or Modification of the Plan. Alterations, amendments
or modifications of the Plan may be proposed in writing by the Debtor, with the
written consent of the Creditors' Committee (which consent shall not be
unreasonably withheld), at any time prior to the Confirmation Date, provided
that the Plan, as altered, amended or modified, satisfies the conditions of
sections 1122 and 1123 of the Bankruptcy Code, and the Debtor shall have
complied with section 1125 of the Bankruptcy Code. The Plan may be altered,
amended or modified by the Debtor, with the written consent of the Creditors'
Committee (which consent shall not be unreasonably withheld), at any time after
the Confirmation Date and before substantial consummation, provided that the
Plan, as altered, amended or modified, satisfies the requirements of sections
1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and
a hearing, confirms the Plan, as altered, amended or modified, under section
1129 of the Bankruptcy Code and the circumstances warrant such alterations,
amendments or modifications. A holder of a Claim that has accepted the Plan
shall be deemed to have accepted the Plan, as altered, amended or modified, if
the proposed alteration, amendment or modification does not materially and
adversely change the treatment of the Claim of such holder. Notwithstanding the
foregoing, the Debtor may, with the written consent of the Creditors' Committee
(which consent shall not be unreasonably withheld), alter, amend or modify the
treatment of Claims and Equity Interests provided for under the Plan provided
that the holders of Claims or Equity Interests affected thereby agree or consent
to any such alteration, amendment or modification.
13.12. Severability. In the event that the Bankruptcy Court determines,
prior to the Confirmation Date, that any provision in the Plan is invalid, void
or unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
13.13. Revocation or Withdrawal of the Plan. The Debtor reserves the
right to revoke or withdraw the Plan prior to the Confirmation Date. If the
Debtor revokes or withdraws the Plan prior to the Confirmation Date, then the
Plan shall be deemed null and void. In such event, nothing contained herein
shall constitute or be deemed a waiver or release of any claims by or against
the Debtor or any person or to prejudice in any manner the rights of the Debtor
or any person in any further proceedings involving the Debtor.
13.14. Binding Effect. The Plan shall be binding upon and inure to the
benefit of the Debtor, the holders of Claims and Equity Interests, and their
successors and assigns, including, without limitation, the Reorganized Debtor.
13.15. Notices. All notices, requests and demands to or upon the Debtor
or the Reorganized Debtor to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when actually delivered or, in the
case of notice by facsimile transmission, when received and telephonically
confirmed, addressed as follows:
Exhibit 2.1 - Page 22
<PAGE>
If to the Debtor:
Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attn: Raymond J. Miller
Telephone: (713) 688-1331
Facsimile: (713) 957-0080
with a copy to:
Weil, Gotshal & Manges LLP Richards, Layton & Finger, P.A.
767 Fifth Avenue One Rodney Square
New York, New York 10153 P.O. Box 551
Attn: Richard P. Krasnow, Esq. Wilmington, Delaware 19899
Telephone: (212) 310-8000 Attn: Thomas L. Ambro, Esq.
Facsimile: (212) 310-8007 Telephone: (302) 651-7612
Facsimile: (302) 658-6458
If to the Creditors' Committee:
Siegel, Sommers & Schwartz, LLP Young, Conaway, Stargatt & Taylor
470 Park Avenue South Rodney Square North
New York, New York 10016 P.O. Box 391
Attn: Lawrence C. Gottlieb, Esq. Wilmington, Delaware 19899
Telephone: (212) 889-7570 Attn: Laura Davis Jones, Esq.
Facsimile: (212) 889-0688 Telephone: (302) 571-6600
Facsimile: (302) 571-1253
13.16. Governing Law. Except to the extent the Bankruptcy Code,
Bankruptcy Rules or other federal law is applicable, or to the extent an Exhibit
to the Plan or Plan Supplement provides otherwise, the rights and obligations
arising under this Plan shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
principles of conflicts of law of such jurisdiction.
13.17. Withholding and Reporting Requirements. In connection with the
consummation of the Plan, the Debtor or the Reorganized Debtor, as the case may
be, shall comply with all withholding and reporting requirements imposed by any
federal, state, local or foreign taxing authority and all distributions
hereunder shall be subject to any such withholding and reporting requirements.
13.18. Plan Supplement. Forms of the documents relating to the Amended
Bylaws, the Amended Certificate of Incorporation, the General Release, the
Registration Rights Agreement and Schedules 6.1(a)(x) and 6.1(a)(y) referred to
herein shall be contained in the Plan Supplement and filed with the Clerk of the
Bankruptcy Court at least ten days prior to the last day upon which holders of
Claims may vote to accept or reject the Plan. Upon its filing with the
Bankruptcy Court, the Plan Supplement may be inspected in the office of the
Clerk of the Bankruptcy Court during normal court hours. Holders of Claims or
Equity Interests may obtain a copy of the Plan Supplement upon written request
to the Debtor in accordance with Section 13.15 of the Plan.
13.19. Headings. Headings are used in the Plan for convenience and
reference only, and shall not constitute a part of the Plan for any other
purpose.
13.20. Exhibits. All Exhibits to the Plan, including the Plan
Supplement, are incorporated into and are a part of the Plan as if set forth in
full herein.
Exhibit 2.1 - Page 23
<PAGE>
13.21. Filing of Additional Documents. On or before substantial
consummation of the Plan, the Debtor shall file with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
Dated: June 24, 1997
WEINER'S STORES, INC., a Delaware corporation
By: /s/ Herbert R. Douglas
----------------------------------------
Name: Herbert R. Douglas
Title: President and Chief Executive Officer
- and -
By: /s/ Raymond J. Miller
------------------------------------
Name: Raymond J. Miller
Title: Vice President and Chief Financial
Officer
Exhibit 2.1 - Page 24
<PAGE>
EXHIBIT 1 TO PLAN
[See Exhibits 10.1, 10.2, 10.3 and 10.4
to this Registration Statement on Form 10]
Exhibit 2.1 - Page 25
EXHIBIT 2.2
Modification
of the Weiner's Stores, Inc.'s Amended Plan of Reorganization Under Chapter 11
of the Bankruptcy Code, made pursuant to the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the
Bankruptcy Code, dated August 13, 1997
1. Article XIII, Section 13.5 of the Plan is amended to read in
its entirety as follows:
13.5 Claim Holders' Release of Directors and Officers
from Claims and Liabilities. As of the Effective Date, each of
the Debtor's present and former directors and officers who
were directors and officers, respectively, during the Chapter
11 Case and on or before the Commencement Date (a "Released
Director or Officer") shall be released and discharged from
any and all claims, obligations, rights, Causes of Action and
liabilities which any holder of a Claim against the Debtor may
be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, based in whole or
in part upon any act or omission or other event occurring on
or at any time prior to the Effective Date in any way relating
to the Debtor, the Chapter 11 Case or this Plan; provided,
however, that this Section 13.5 shall not operate as a waiver
or release of any claim (i) in respect of any loan, advance or
similar payment by any holder of a Claim to a Released
Director or Officer, and (ii) in respect of any contractual
obligation owed by a Released Director or Officer to a holder
of a Claim; provided further, however, that nothing contained
in this Section 13.5 shall affect the rights of a Released
Director or Officer to assert and prosecute (x) any direct
claim, counterclaim, cross-claim, separate action or similar
claim against any entity which maintains that it has a Cause
of Action of the kind described in this Section 13.5 against a
Released Director or Officer that has not been released and
discharged hereunder or (y) any claim for indemnification,
contribution or otherwise, however denominated, against any
entity relating to any Cause of Action against a Released
Director or Officer that has not been released and discharged
hereunder, provided further, however, that this Section 13.5
shall not operate to release and discharge any claims,
obligations, rights, Causes of Action and liabilities which
the United States of America may have against a Released
Director or Officer. Each holder of a Claim (other than the
United States of America) shall be deemed to have agreed to
the provisions of this Section 13.5, and shall be bound
thereby, by reason of, among other things, its acceptance of
this Plan and its receipt of any distributions hereunder.
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
WEINER'S STORES, INC.
WEINER'S STORES, INC., a corporation duly incorporated by the
filing of its original Certificate of Incorporation (the "Original Certificate
of Incorporation") with the Secretary of State of the State of Delaware on
December 23, 1991 (the "Company"), desiring to amend and restate said Original
Certificate of Incorporation, such restated Certificate of Incorporation having
been duly adopted in accordance with Section 245 of the General Corporation Law
of the State of Delaware, hereby certifies as follows:
1. This Restated Certificate of Incorporation amends and
restates the Original Certificate of Incorporation of the Company and has been
duly adopted in accordance with Sections 242, 245 and 303 of the General
Corporation Law of the State of Delaware, as amended (the "DGCL"), pursuant to
the authority granted to the Company under Section 303 of the DGCL to put into
effect and carry out the Plan of Reorganization under Chapter 11 of title 11 of
the United States Code (the "Bankruptcy Code") for the Company (the "Plan"), as
confirmed on August 13, 1997 by order of the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). Provision for the making of
this Restated Certificate of Incorporation is contained in the order of the
Bankruptcy Court having jurisdiction under the Bankruptcy Code for the
reorganization of the Company.
2. The Original Certificate of Incorporation is hereby amended
and restated to read in its entirety as follows:
FIRST: The name of the corporation is "WEINER'S STORES, INC.
" (the "Company").
SECOND: The address of the registered office of the Company in
the State of Delaware is The Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle, Delaware 19801. The registered
agent for the Company at such address is The Corporation Trust Company.
THIRD: The nature of business and purpose of the Company is
to engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law, as amended (the "DGCL").
FOURTH: The total number of shares of all classes of capital
stock which the Company shall have authority to issue is 60,000,000 shares,
consisting of
(i) 10,000,000 shares of Preferred Stock, without par
value (the "Preferred Stock"), and
(ii) 50,000,000 shares of Common Stock, par value $0.01
per share (the "Common Stock").
Except as otherwise provided by law, the shares of capital
stock of the Company, regardless of class, may be issued by the Company from
time to time in such amounts, for such lawful consideration and for such
corporate purpose(s) as the Board of Directors may from time to time determine.
<PAGE>
Shares of Preferred Stock may be issued from time to time in
one or more series of any number of shares as may be determined from time to
time by the Board of Directors; provided that the aggregate number of shares
issued and not cancelled of any and all such series shall not exceed the total
number of shares of Preferred Stock authorized by this paragraph FOURTH. Each
series of Preferred Stock shall be distinctly designated. The Board of Directors
is hereby expressly granted authority to fix, in the resolution or resolutions
providing for the issuance of a particular series of Preferred Stock, the voting
powers, if any, of each such series (subject to paragraph NINTH hereof), and the
designations, preferences and relative, participating, optional and other
special rights of each such series, and the qualifications, limitations and
restrictions thereof to the fullest extent now or hereafter permitted by this
Restated Certificate of Incorporation and the laws of the State of Delaware.
Subject to the provisions of applicable law or of the
Company's By-Laws with respect to the closing of the transfer books or the
fixing of a record date for the determination of stockholders entitled to vote,
and except as otherwise provided by law, the holders of outstanding shares of
capital stock of the Company shall exclusively possess the voting power for the
election of directors of the Company and for all other purposes as prescribed by
applicable law, with each holder of record of shares of Common Stock or
Preferred Stock having voting power being entitled to one vote for each share of
Common Stock or Preferred Stock registered in his or its name on the books,
registers and/or accounts of the Company.
FIFTH: A director of the Company shall not be personally
liable either to the Company or to any stockholder for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, or (ii) for acts
or omissions which are not taken or omitted to be taken in good faith or which
involve intentional misconduct or knowing violation of the law, or (iii) for any
matter in respect of which such director would be liable under Section 174 of
the DGCL or any amendment or successor provision thereto, or (iv) for any
transaction from which the director shall have derived an improper personal
benefit. Neither the amendment nor the repeal of this paragraph FIFTH nor the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this paragraph FIFTH shall eliminate or reduce the effect of
this paragraph FIFTH in respect of any matter occurring, or any cause of action,
suit or claim that, but for this paragraph FIFTH, would accrue or arise prior to
such amendment, repeal or adoption of an inconsistent provision.
The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or an officer
of the Company at any time after the Effective Time against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding to
the fullest extent and in the manner set forth in and permitted by the DGCL, and
any other applicable law, as from time to time in effect. Such right of
indemnification shall not be deemed exclusive of any other rights to which such
director or officer may be entitled apart from the foregoing provisions. The
foregoing provisions shall be deemed to be a contract between the Company and
each director and officer who serves in such capacity at any time while this
paragraph FIFTH and the relevant provisions of the DGCL and other applicable
law, if any, are in effect, and any repeal or modification thereof shall not
affect any rights or obligations then existing with respect to any state of
facts then or theretofore brought or threatened based in whole or in part upon
any such state of facts.
The Company may indemnify any person who was or is threatened
to be made a party to any threatened pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was an employee or agent of the Company after the
Effective Time, or is or was serving at the request of the Company, as a
director, officer, employee or agent after the
Exhibit 3.1 - Page 2
<PAGE>
Effective Time of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding to the extent and in the manner
set forth in and permitted by the DGCL, and any other applicable law, as from
time to time in effect. Such right of indemnification shall not be deemed
exclusive of any other rights to which any such person may be entitled apart
from the foregoing provisions.
SIXTH: Notwithstanding Section 228(a) of the DGCL, the
stockholders of the Company shall be prohibited from taking any action by means
of a written consent in lieu of a meeting.
SEVENTH: The number of directors constituting the entire Board
of Directors shall be no fewer than five (5) and no more than nine (9), as may
be fixed from time to time, subject to paragraph EIGHTH hereof, by action of a
majority of the entire Board of Directors. Election of directors need not be by
written ballot.
EIGHTH: Notwithstanding any other provision of this Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, the affirmative vote of the holders of at least
two-thirds (2/3) of the outstanding shares of Common Stock shall be required to
(i) remove any director(s) from the Board of Directors or increase the number of
directors constituting the entire Board of Directors, or (ii) amend this
Restated Certificate of Incorporation (except as set forth in the paragraph
NINTH hereof) or the Company's By-Laws, or (iii) approve any merger or other
business combination, share exchange, or the sale, lease or exchange of all or
substantially all of the Company's assets and property (other than in the usual
and regular course of business) or a reclassification of securities or
recapitalization of the Company, or (iv) change the state of incorporation of
the Company.
NINTH: Notwithstanding any other provision contained herein,
the Company, as a Debtor (as defined in the Plan referred to below) under the
Plan of Reorganization Under Chapter 11 of the Bankruptcy Code for the Company
(the "Plan") shall not issue nonvoting equity securities in connection with the
Plan and shall comply, to the extent applicable, with Section 1123(a)(6) of the
Bankruptcy Code of 1978, as amended. This paragraph NINTH shall not be amended
or repealed prior to 180 days after the Effective Time; provided that after the
expiration of such 180-day period, this paragraph NINTH may be amended or
repealed by the affirmative vote of a majority of the outstanding stock entitled
to vote thereon in accordance with Section 242 of the DGCL.
* * * *
3. At the Effective Time, as contemplated by the Plan, each
share of the Company's old Class A Voting Common Stock, par value $100.00 per
share, and old Class A Non-Voting Common Stock, par value $100.00 per share,
outstanding immediately prior to the Effective Time, shall, without any further
action on the part of the Company or of any holder of stock of the Company, be
cancelled and cease to represent any ownership interest in the Company, and new
fully paid and nonassessable shares of the Common Stock will be issued pursuant
to the Plan.
4. This Restated Certificate of Incorporation shall become
effective at 12:00 noon, Delaware time, on August 26, 1997 (the "Effective
Time"), and shall not become effective until such time.
Exhibit 3.1 - Page 3
<PAGE>
IN WITNESS WHEREOF, Weiner's Stores, Inc., has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Herbert R. Douglas, its President and Chief Executive Officer, and attested to
by Raymond J. Miller, its Vice President, Chief Financial Officer, Treasurer and
Secretary, on this 26th day of August, 1997.
WEINER'S STORES, INC.
By: /s/ Herbert R. Douglas
-------------------------------
Herbert R. Douglas
President and Chief
Executive Officer
Attest:
/s/ Raymond J. Miller
- --------------------------------
Raymond J. Miller
Vice President, Chief Financial
Officer, Treasurer and Secretary
[Corporate Seal]
Exhibit 3.1 - Page 4
EXHIBIT 3.2
RESTATED BY-LAWS
OF
WEINER'S STORES, INC.
--------------------
(a Delaware corporation)
ARTICLE I
Stockholders
------------
SECTION 1. Annual Meetings. The annual meeting (the "Annual
Meeting of Stockholders") of the holders of such classes or series of capital
stock as are entitled to notice thereof and to vote thereat pursuant to the
provisions of the Restated Certificate of Incorporation (the "Certificate of
Incorporation") of Weiner's Stores, Inc. (the "Company") for the election of
directors and for the transaction of such other business as may properly come
before the meeting shall be held on such date as may be designated by resolution
of the Board of Directors or, in the event that no such date is so designated,
on the fourth Thursday in May of each year, at such hour (within ordinary
business hours) as shall be stated in the notice of the meeting. If the day so
designated shall be a legal holiday, then such meeting shall be held on the next
succeeding business day. Each Annual Meeting of Stockholders shall be held at
such place, within or without the State of Delaware, as shall be determined by
the Board of Directors.
The Annual Meeting of Stockholders may be adjourned by the
presiding officer of the meeting for any reason (including, if the presiding
officer determines that it would be in the best interests of the Company, to
extend the period of time for the solicitation of proxies) from time to time and
place to place until such presiding officer shall determine that the business to
be conducted at the meeting is completed, which determination shall be
conclusive.
At the Annual Meeting of Stockholders, the only business which
shall be conducted thereat shall be that which shall have been properly brought
before the meeting. To be properly brought before an annual meeting, business
must be (a) specified in the notice of meeting (or any supplement or addendum
thereto) given by or at the direction of the Board of Directors, (b) brought
before the meeting by or at the direction of the Board of Directors or (c)
otherwise brought before the meeting by a stockholder in the manner prescribed
immediately below. For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have delivered timely notice thereof in
writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered to or mailed and received by the Secretary at the principal
executive offices of the Company, not less than 60 calendar days in advance of
the anniversary date of the previous year's annual meeting of stockholders (or
if there was no such prior annual meeting, not less than 60 calendar days prior
to the date which represents the fourth Thursday in May of the current year);
provided, however, that in the event that the date of the annual meeting is
advanced by more than 20 days, or delayed by more than 60 days, from such
anniversary date, then, to be considered timely, notice by the stockholder must
be received not later than the close of business on the later of (x) the 60th
day prior to such annual meeting or (y) the seventh day following the date on
which notice of the date of the annual meeting was mailed to stockholders or
public disclosure thereof was otherwise made.
A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be transacted, (b) the name and
address, as they appear on the Company's most recent stockholder lists, of the
stockholder proposing such proposal, (c) the class and number of shares of
capital stock of the Company that are beneficially owned by the stockholder, and
(d) any material interest of the stockholder in such business. Any stockholder
who desires to
<PAGE>
propose any matter at an annual meeting shall, in addition to the aforementioned
requirements described in clauses (a) through (d), comply in all material
respects with the content and procedural requirements of Rule 14a-8 of
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), irrespective of whether the Company is then subject to such
Rule or said Exchange Act. In addition, if the stockholder's ownership of shares
of the Company, as set forth in the notice, is solely beneficial (and not of
record) documentary evidence satisfactory to the Company of such ownership must
accompany the notice in order for such notice to be considered validly and
timely received.
Notwithstanding anything in these By-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 1. The presiding officer at an annual
meeting shall, if the facts warrant, determine and declare to the meeting that
any business which was not properly brought before the meeting is out of order
and shall not be transacted at the meeting.
SECTION 2. Special Meetings. Special meetings of stockholders
for the transaction of such business as may properly come before the meeting
shall only be called by order of a majority of the entire Board of Directors or
by the Chairman of the Board of Directors or by the Chief Executive Officer of
the Company or by stockholders holding of record at least forty percent (40%) of
the issued and outstanding shares of Common Stock of the Company, and shall be
held at such date and time, within or without the State of Delaware, as may be
specified by such order.
SECTION 3. Notice of Meetings. Written notice of all meetings
of the stockholders, stating the place, date and hour of the meeting and the
place within the city or other municipality or community at which the list of
stockholders may be examined, shall be mailed or delivered to each stockholder
not less than 10 nor more than 60 days prior to the meeting. Notice of any
special meeting shall state with reasonable specificity the purpose or purposes
for which the meeting is to be held and the business proposed to be transacted
thereat.
SECTION 4. Stockholder Lists. The Secretary shall prepare and
make, or cause to be prepared and made, at least 10 calendar days before every
meeting of stockholders, a true and complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 calendar days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present in person thereat.
SECTION 5. Quorum. Except as otherwise provided by law or the
Certificate of Incorporation, a quorum for the transaction of business at any
meeting of stockholders shall consist of the holders of record of a majority in
voting power of the then issued and outstanding shares of all classes and series
of stock of the Company entitled to vote at the meeting, present in person or by
proxy. At all meetings of the stockholders at which a quorum is present, all
matters, except as otherwise provided by law, the Certificate of Incorporation
or these By-laws, shall be decided by the vote of the holders of a majority in
voting power of the shares entitled to vote thereat present in person or by
proxy. If there be no such quorum, the holders of a majority in voting power of
such shares so present or represented may adjourn the meeting from time to time,
without further notice, until a quorum shall have been obtained. When a quorum
is once present it is not broken by the subsequent withdrawal from the meeting
by any stockholder.
SECTION 6. Organization. Meetings of stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's absence
the Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence any Vice President,
or, if none of the foregoing is present, by a chairman to be chosen by the
holders of a majority in voting power of the shares entitled to vote thereat
present in person or by proxy at the meeting. The Secretary of the Company, or
in the Secretary's absence an Assistant Secretary, shall act as secretary of
every meeting, but if neither the Secretary nor
Exhibit 3.2 - Page 2
<PAGE>
an Assistant Secretary is present, the presiding officer of the meeting shall
appoint an appropriate person present at the meeting to act as secretary.
SECTION 7. Voting; Proxies; Required Vote. Except as otherwise
provided in the Certificate of Incorporation, at each meeting of stockholders,
every stockholder shall be entitled to vote in person or by proxy (but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period), and shall have one vote for each share of
stock entitled to vote registered in the name of such stockholder on the books
of the Company on the applicable record date fixed by applicable law or pursuant
to these By-laws in respect of each matter properly presented to the meeting. At
all elections of directors the voting may (but need not) be by ballot and a
plurality of the votes cast there shall be sufficient to elect directors. Except
as otherwise required by law or the Certificate of Incorporation, any other
action shall be authorized by the vote of the holders of a majority in voting
power of the shares entitled to vote thereat present in person or by proxy.
SECTION 8. Inspectors. The Board of Directors shall, in
advance of any meeting of stockholders, appoint one or more inspectors of
election to act at the meeting and make a written report thereof. If an
inspector or inspectors are not so appointed, the person presiding at the
meeting shall appoint one or more inspectors. In case any person who may be
appointed as an inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
ARTICLE II
Board of Directors
------------------
SECTION 1. General Powers. The business, property and
affairs of the Company shall be managed by, or under the direction of, the Board
of Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each
director shall be at least 18 years of age. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the entire Board shall be no
fewer than five (5) nor more than nine (9), as may be fixed from time to time,
except as otherwise provided by the Certificate of Incorporation, by action of a
majority of the entire Board of Directors. The use of the phrase "entire Board"
herein refers to the total number of directors which the Company would have if
there were no vacancies.
(b) Directors who are elected at an annual meeting of
stockholders, and directors who are elected to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) Directors who are not officers or other employees of the
Company may be paid their expenses, if any, of attendance at each meeting of the
Board of Directors and may be paid a fixed sum for attendance at each meeting of
the Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Company in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Exhibit 3.2 - Page 3
<PAGE>
SECTION 3. Nomination of Directors. Nominations for the
election of directors may be made by the Board of Directors or a committee
appointed by the Board of Directors or, to the extent permitted by this Section
3, by any holder of record of capital stock of the Company entitled to vote
generally in the election of directors. Any stockholder entitled to vote
generally in the election of directors may nominate one or more persons for
election as directors only in accordance with the procedures specified in the
next sentence, and only if written notice of such stockholder's intent to make
such nomination or nominations has been received, either by hand delivery or by
United States mail, postage prepaid, by the Secretary of the Company not later
than (i) with respect to an election to be held at the Annual Meeting of
Stockholders, not less than 60 calendar days prior to the anniversary date of
the date of the immediately preceding annual meeting (or if there was no such
prior annual meeting, not less than 60 calendar days prior to the date which
represents the fourth Thursday in May of the current year), and (ii) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the fifth calendar day following
the date on which notice of such meeting is first delivered to stockholders.
Each such notice from a stockholder shall set forth: (a) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated; (b) a representation that the stockholder is a holder of record
of capital stock of the Company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all contracts, arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy or information statement filed pursuant to the Exchange Act
and the rules and regulations promulgated thereunder (or any subsequent
provisions replacing such Act, rules or regulations); and (e) the consent of
each nominee to serve as a director of the Company if so elected. The presiding
officer of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
SECTION 4. Quorum and Manner of Voting. Except as otherwise
provided by law or the Certificate of Incorporation, a majority of the entire
Board of Directors shall constitute a quorum. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting from time to
time to another time and place without notice. The vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 5. Places of Meetings. Meetings of the Board of
Directors may be held at any place within or without the State of Delaware, as
may from time to time be fixed by resolution of the Board of Directors, or as
may be specified in the notice of meeting.
SECTION 6. Annual Meeting. Following the Annual Meeting of
Stockholders, the newly elected Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the Annual Meeting of Stockholders at the same place at which
such stockholders' meeting is held.
SECTION 7. Regular Meetings. Regular meetings of the Board of
Directors shall be held following the Annual Meeting of Stockholders and in each
April, August and November on such date and at such place and time as the Board
of Directors shall from time to time by resolution determine. Notice need not be
given of regular meetings of the Board of Directors held at times and places
fixed by resolution of the Board of Directors.
SECTION 8. Special Meetings. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board or by a
majority of the directors then in office.
SECTION 9. Notice of Meetings. A notice of the place, date and
time and the purpose or purposes of each meeting of the Board of Directors shall
be given to each director by mailing the same at least five days before the
meeting, or by telefaxing or telephoning the same or by delivering the same
personally not later than the day before the day of the meeting.
Exhibit 3.2 - Page 4
<PAGE>
SECTION 10. Organization. At all meetings of the Board of
Directors, the Chairman, if any, or if none or in the Chairman's absence or
inability to act the President, or in the President's absence or inability to
act any Vice President who is a member of the Board of Directors, or in such
Vice-President's absence or inability to act a chairman chosen by the directors,
shall preside. The Secretary of the Company shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as secretary.
SECTION 11. Resignation and Removal. Any director may
voluntarily resign at any time upon written notice to the Company and such
resignation shall take effect upon receipt thereof by the President or
Secretary, unless otherwise specified in the resignation. Subject to the rights
of the holders of any series of Preferred Stock or any other class of capital
stock of the Company (other than the Common Stock) then outstanding, any
director may be removed from office at any time, with or without cause, by the
affirmative vote of the holders of not less than 66 2/3% of the votes entitled
to be cast by the holders of all then outstanding Common Stock of the Company
entitled to vote at an election of directors.
SECTION 12. Vacancies. Vacancies on the Board of Directors,
whether caused by resignation, death, disqualification, removal, an increase in
the authorized number of directors or otherwise, may be filled only by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and any directors so chosen
shall hold office until their successors are elected and qualified.
SECTION 13. Board Action by Written Consent. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if all the directors consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors.
ARTICLE III
Indemnification
----------------
SECTION 1. Indemnification. (a) The Company shall indemnify,
to the fullest extent permitted by Section 145 of the General Corporation Law of
Delaware, as amended from time to time, all persons whom it may indemnify
pursuant thereto and in the manner prescribed thereby.
(b) The Company shall pay the expenses (including attorneys'
fees) incurred by an indemnitee in defending any proceeding in advance of its
final disposition, provided, however, that the payment of expenses incurred by a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the director or
officer is not entitled to be indemnified under this Article or otherwise.
ARTICLE IV
Committees
----------
SECTION 1. Appointment. From time to time the Board of
Directors by a resolution adopted by a majority of the entire Board may appoint
any committee or committees which, to the extent lawful, shall have powers as
shall be determined and specified by the Board of Directors in the resolution of
appointment.
SECTION 2. Procedures, Quorum and Manner of Acting. Each
committee shall fix its own rules of procedure, and shall meet where and as
provided by such rules or by resolution of the Board of Directors. Except as
otherwise provided by law, the presence of a majority of the then appointed
members of a committee shall constitute a quorum for the transaction of business
by that committee, and in every case where a quorum is present the affirmative
vote of a majority of the members of the committee present shall be the act of
the
Exhibit 3.2 - Page 5
<PAGE>
committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
SECTION 3. Committee Action by Written Consent. Any action
required or permitted to be taken at any meeting of any committee of the Board
of Directors may be taken without a meeting if all the members of the committee
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the committee.
SECTION 4. Executive Committee. (a) The Board of Directors, by
resolution, may appoint from its members an Executive Committee consisting of
the Chairman of the Board and such other directors as it may choose to appoint.
Each member of the Executive Committee shall continue to be a member thereof
only so long as he remains a director and at the pleasure of the Board of
Directors. Any vacancies on the Executive Committee may be filled by the Board
of Directors.
(b) The Executive Committee, between meetings of the Board of
Directors, shall have and may exercise, except as otherwise provided by law, all
the powers of the Board of Directors in the management of the property, business
and affairs of the Company and may authorize the seal of the Company to be
affixed to all papers which may require it. Without limiting the foregoing, the
Executive Committee shall have the express power and authority to declare a
dividend, to authorize the issuance of stock and to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law of
the State of Delaware, as amended.
(c) At each meeting of the Executive Committee, one of the
following shall act as chairman of the meeting and preside thereat in the
following order of precedence:
(i) the Chairman of the Executive Committee,
who shall be appointed from the members of the Executive
Committee by the Board of Directors; or
(ii) the Chairman of the Board.
The Secretary of the Company shall act as secretary at all
meetings of the Executive Committee when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as secretary.
(d) Regular meetings of the Executive Committee, of which no
notice shall be necessary, shall be held on such days and at such places, within
or without the State of Delaware, as shall be fixed by resolution adopted by a
majority of the Executive Committee. Special meetings of the Executive Committee
shall be held whenever called by the Chairman of the Board or the Chairman of
the Executive Committee and shall be called by the Secretary of the Corporation
on the request of a majority of the Executive Committee. Notice of each special
meeting of the Executive Committee shall be given to each member thereof by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his residence or usual place of business at least two days
before the day on which such meeting is to be held or shall be sent addressed to
him at such place by telecopy, telegraph, cable, wireless or other form of
recorded communication or be delivered personally or by telephone a reasonable
time in advance of the time at which such meeting is to be held. Notice of any
such meeting need not, however, be given to any member of the Executive
Committee if he shall be present at such meeting. Any meeting of the Executive
Committee shall be a legal meeting without any notice thereof having been given
if all the members of the Executive Committee shall be present thereat. Such
notice shall specify the time and place of the meeting, but, except as otherwise
expressly provided by law, the purposes thereof need not be stated in such
notice. Subject to the provisions of these By-laws, the Executive Committee may
fix its own rules of procedure, and it shall keep a record of its proceedings
and report them to the Board at the next regular or special meeting thereof
after such proceedings shall have been taken. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by any such revision or alteration.
Exhibit 3.2 - Page 6
<PAGE>
(e) Except as otherwise provided by law, a majority of the
Executive Committee then in office shall constitute a quorum for the transaction
of business, and the act of a majority of those present at a meeting thereof
shall be the act of the Executive Committee. In the absence of a quorum, a
majority of the members of the Executive Committee present thereat may adjourn
such meeting from time to time until a quorum shall be present thereat. Notice
of any adjourned meeting need not be given. The Executive Committee shall act
only as a committee and the individual members shall have no power as such.
(f) Any member of the Executive Committee may resign therefrom
at any time by giving written notice of his resignation to the Chairman of the
Board, the President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, it shall take effect immediately upon its receipt;
and, except as specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
(g) In addition to the foregoing, in the absence or
disqualification of a member of the Executive Committee, the member or members
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
SECTION 5. Audit Committee. The Board of Directors, by
resolution, shall appoint from its members an Audit Committee consisting of at
least two directors, each of which shall be independent of management and free
from any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment as a committee member. The
Audit Committee shall:
(a) Prior to each Annual Meeting of Stockholders, submit a
recommendation in writing to the Board of Directors for the selection of
independent public accountants to be appointed by the Board of Directors in
advance of the Annual Meeting of Stockholders, subject to ratification or
rejection by the stockholders at such meeting;
(b) Consult, at least annually, with the independent public
accountants with regard to the proposed plan of audit and from time to time
consult privately with them and also with the internal auditor and the
Controller with regard to the adequacy of internal controls;
(c) Upon completion of the report of audit by the independent
public accountants and before the date of the Annual Meeting of Stockholders,
(i) review the financial statements of the Company, and (ii) meet with the
independent public accountants and review with them the results of their audit
and any recommendations made to the management; and
(d) Periodically, but at least annually, review the terms of
all material transactions and arrangements entered into between the Company and
its affiliates and subsidiaries.
SECTION 6. Term; Termination. In the event any person shall
cease to be a director of the Company, such person shall simultaneously
therewith cease to be a member of any committee appointed by the Board of
Directors.
ARTICLE V
Officers
--------
SECTION 1. Election and Qualifications. The Board of Directors
shall elect the officers of the Company, which shall include a Chief Executive
Officer, a Chief Financial Officer, a President and a Secretary, and may
include, by election or appointment, one or more Vice-Presidents (any one or
more of whom may be given an additional designation of rank or function), a
Controller, a Treasurer and such Assistant Treasurers,
Exhibit 3.2 - Page 7
<PAGE>
Assistant Controllers, Assistant Secretaries, and such other officers as the
Board may from time to time deem proper. Each officer shall have such powers and
duties as may be prescribed by these By-laws and as may be assigned by the Board
of Directors or the President. Any two or more offices may be held by the same
person except the offices of President and Secretary.
SECTION 2. Term of Office and Remuneration. The term of office
of all officers shall be one year and until their respective successors have
been elected and qualified or until their earlier resignation or removal. Any
vacancy in any office arising from any cause may be filled for the unexpired
portion of the term by the Board of Directors. The remuneration of all officers
of the Company may be fixed by the Board of Directors or in such manner as the
Board of Directors shall otherwise provide.
SECTION 3. Resignation; Removal. Any officer may resign at any
time upon written notice to the Company and such resignation shall take effect
upon receipt thereof by the President or Secretary, unless otherwise specified
in the resignation. Any officer shall be subject to removal, with or without
cause, at any time by an affirmative vote of a majority of the Board of
Directors.
SECTION 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors shall preside at all meetings of the stockholders and at
all meetings of the directors and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The Chairman of the Board of
Directors, as such, shall not be an officer of the Company.
SECTION 5. President and Chief Executive Officer. The
President shall be the Chief Executive Officer of the Company and the duties of
the President shall include the general management and supervision of the
property, business and affairs of the Company and its other officers. The
President may appoint and remove assistant officers and other agents and
employees, other than officers referred to in Section 1 of this Article V; and
may execute and deliver in the name of the Company powers of attorney,
contracts, bonds and other obligations and instruments.
SECTION 6. Chief Financial Officer. The Chief Financial
Officer shall in general have all duties incident to such position, including,
without limitation, the organization and review of all accounting, tax and
related financial matters involving the Company, the implementation of
appropriate Company financial controls and procedures, and the supervision and
assignment of the duties of all other financial officers and personnel employed
by the Company, and shall have such other duties as may be assigned by the Board
of Directors or the President.
SECTION 7. Vice-President. A Vice-President may execute and
deliver in the name of the Company contracts and other obligations and
instruments pertaining to the regular course of the duties of said office, and
shall have such other authority as from time to time may be assigned by the
Board of Directors or the President.
SECTION 8. Treasurer. The Treasurer shall in general have
all duties incident to the position of Treasurer and such other duties as may be
assigned by the Board of Directors or the Chief Financial Officer.
SECTION 9. Secretary. The Secretary shall in general have
all the duties incident to the office of Secretary and such other duties as may
be assigned by the Board of Directors, the President or any Vice President.
SECTION 10. Controller. The Controller shall in general have
all the duties incident to the office of Controller and such other duties as may
be assigned by the Board of Directors or the Chief Financial Officer.
SECTION 11. Assistant Officers. Any assistant officer shall
have such powers and duties of the officer such assistant officer assists as
such officer or the Board of Directors shall from time to time prescribe.
Exhibit 3.2 - Page 8
<PAGE>
ARTICLE VI
Books and Records
-----------------
SECTION 1. Location. The books and records of the Company may
be kept at such place or places within or outside the State of Delaware as the
Board of Directors or the respective officers in charge thereof may from time to
time determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the dates
when they respectively became the owners of record thereof shall be kept by the
Secretary or by the transfer agent or registrar as shall be designated by the
Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and
all other corporate notices may be delivered personally or mailed to each
stockholder at the stockholder's address as it appears on the records of the
Company.
SECTION 3. Fixing Date for Determination of Stockholders of
Record. In order that the Company may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date: (1) in the case of
determination of stockholders entitled to notice of or to vote at any meeting of
stockholders or adjournment thereof, shall, unless otherwise required by law,
not be more than sixty nor less than ten days before the date of such meeting;
and (2) in the case of any other action, shall not be more than sixty days prior
to such other action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (2) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE VII
Certificates Representing Stock
-------------------------------
SECTION 1. Certificates; Signatures. The shares of the Company
shall be represented by certificates, and every holder of stock shall be
entitled to have a certificate, signed by or in the name of the Company by the
Chairman or Vice-Chairman of the Board of Directors, or the President or
Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Company, representing the number of shares
registered in certificate form. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Company with the same effect as
if he were such officer, transfer agent or registrar at the date of issue. The
name of the holder of record of the shares represented thereby, with the number
of such shares and the date of issue, shall be entered on the books of the
Company.
SECTION 2. Transfers of Stock. Upon compliance with any
provisions restricting the transfer or registration of transfer of shares of
stock, including, without limitation, the restrictions set forth in the
Certificate of Incorporation, shares of capital stock shall be transferable on
the books of the Company only by the
Exhibit 3.2 - Page 9
<PAGE>
holder of record thereof in person, or by duly authorized attorney or legal
representative, upon surrender and cancellation of certificates for a like
number of shares (or upon compliance with the provisions of Section 5 of this
Article VII, if applicable), properly endorsed, and the payment of all taxes due
thereon. Upon such surrender to the Company or a transfer agent of the Company
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer (or upon compliance with the
provisions of Section 5 of this Article VII, if applicable) and of compliance
with any transfer restrictions applicable thereto contained in an agreement to
which the Company is a party or of which the Company has knowledge by reason of
legend with respect thereto placed on any such surrendered stock certificate, it
shall be the duty of the Company to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
SECTION 3. Ownership of Shares. The Company shall be entitled
to treat the holder of record of any shares or shares of capital stock of the
Company as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
SECTION 4. Fractional Shares. The Company may, but shall not
be required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Company may pay in cash the fair value of
fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Company or of its
agent, exchangeable as therein provided for full shares, but such scrip shall
not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of capital stock
of the Company.
SECTION 5. Lost, Stolen or Destroyed Certificates. The Company
may issue a new certificate of stock in place of any certificate, theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Board of
Directors may require the owner of any lost, stolen or destroyed certificate, or
his legal representative, to furnish an affidavit as to such loss, theft, or
destruction and to give the Company a bond sufficient to indemnify the Company
and each transfer agent and registrar against any and all claims that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
ARTICLE VIII
Dividends
---------
Subject always to provisions of applicable law and the
Certificate of Incorporation, the Board of Directors shall have full power to
determine whether any, and, if any, what part of any, funds or other property
legally available for the payment of dividends shall be declared as dividends
and paid to holders of the capital stock of the Company; the division of the
whole or any part of such funds or other property of the Company shall rest
wholly within the lawful discretion of the Board of Directors, and it shall not
be required at any time, against such discretion, to divide or pay any part of
such funds or other property among or to the stockholders as dividends or
otherwise; and before payment of any dividend, there may be set aside out of any
funds of the Company available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Company, or for such other purpose
as the Board of Directors shall think conducive to the interest of the Company,
and the Board of Directors may modify or abolish any such reserve in the manner
in which it was created.
Exhibit 3.2 - Page 10
<PAGE>
ARTICLE IX
Corporate Seal
--------------
The corporate seal shall have inscribed thereon the name of
the Company and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed, upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
Fiscal Year
-----------
The fiscal year of the Company shall be fixed, and shall be
subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Company shall end on the Saturday
nearest to January 31st of each and every calendar year.
ARTICLE XI
Waiver of Notice
----------------
Whenever notice is required to be given by the Certificate of
Incorporation or by these By-laws, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
-------------------------------------
SECTION 1. Bank Accounts and Drafts. In addition to
such bank accounts as may be authorized by the Board of Directors, the Chief
Financial Officer, the Treasurer or any other person designated by said Chief
Financial Officer, whether or not an employee of the Company, may authorize such
bank accounts to be opened or maintained in the name and on behalf of the
Company as he may deem necessary or appropriate, payments from such bank
accounts to be made upon and according to the check of the Company in accordance
with the written instructions of said Chief Financial Officer, Treasurer, or
other person so designated by said Chief Financial Officer.
SECTION 2. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Company, to enter into or
execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The
Chairman, the President or any other person designated by either of them shall
have the power and authority to execute and deliver proxies, powers of attorney
and other instruments in the name and on behalf of the Company in connection
with the rights and powers incident to the ownership of stock by the Company.
The Chairman, the President or any other person authorized by proxy or power of
attorney executed and delivered by either of them on behalf of the Company may
attend and vote at any meeting of stockholders of any company in which the
Company may hold stock, and may exercise on behalf of the Company any and all of
the rights and powers incident to the ownership of such stock at
Exhibit 3.2 - Page 11
<PAGE>
any such meeting, or otherwise as specified in the proxy or power of attorney so
authorizing any such person. The Board of Directors, from time to time, may
confer like powers upon any other person.
SECTION 4. Financial Reports. The Board of Directors may
appoint the primary financial officer or other fiscal officer and/or the
Secretary or any other officer to cause to be prepared and furnished to
stockholders entitled thereto any special financial notice and/or financial
statement, as the case may be, which may be required by any provision of law.
ARTICLE XIII
Amendments
----------
SECTION 1. Except as otherwise set forth in Section 2 of this
Article XIII, these By-laws may be altered or repealed at the Annual Meeting of
Stockholders or at any special meeting of the stockholders, in each case, at
which a quorum is present or represented, provided in the case of a special
meeting that notice of the proposed alteration or repeal is contained in the
notice of such special meeting, by the affirmative vote of the holders of not
less than 66 2/3% of the votes entitled to be cast by the holders of all then
outstanding Common Stock entitled to vote at such meeting and present or
represented thereat (in person or by proxy).
SECTION 2. Notwithstanding any other provisions of these
By-laws (including Section 1 of this Article XIII), the adoption by stockholders
of any alteration, amendment, change, addition to or repeal of all or any part
of these By-laws, or the adoption by stockholders of any other provision of
these By-laws which is inconsistent with or in addition to these By-laws, shall
require the affirmative vote of the holders of not less than 66 2/3% of the
votes entitled to be cast by the holders of all then outstanding capital stock
of the Company entitled to vote thereon.
Exhibit 3.2 - Page 12
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of August 26, 1997 between Weiner's Stores, Inc., a Delaware
corporation (the "Company"), and Texas Commerce Bank N.A., a national banking
association ("TCB").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has authorized 50,000,000 shares of
Common Stock, par value $0.01 per share (the "Common Stock");
WHEREAS, the Plan of Reorganization under Chapter 11 of title
11 of the United States Code for the Company (the "Plan") was confirmed on
August 13, 1997 (the "Effective Date") by order of the United States Bankruptcy
Court for the District of Delaware in Case No. 95-417 (PJW);
WHEREAS, TCB is receiving shares of Common Stock pursuant to
the Plan;
WHEREAS, this Agreement is entered into pursuant to and in
accordance with Section 5.8 of the Plan; and
WHEREAS, in connection with the consummation of the
transactions contemplated by the Plan, the parties hereto are entering into this
Agreement in order to define certain rights and obligations of such parties.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Terms. In addition to the terms defined elsewhere
herein, when used herein the following terms shall have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person
controlling, controlled by, or under common control with such Person. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
With respect to any shares of Common Stock, "beneficial"
ownership or "beneficially" owned shall have the same meaning as in Rule 13d-3
under the Exchange Act.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized by law to
close.
"Capital Stock" means any and all shares, interests,
participations, or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation), and any and all warrants, options, or other rights to purchase
or acquire any of the foregoing.
<PAGE>
"Demand Registration" has the meaning set forth in Section 2.1
(a) below.
"Demand Request" has the meaning set forth in Section 2.1(a)
below.
"Effective Date" has the meaning set forth in the recitals to
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Holder" means a Person who holds Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 7.3
below.
"Indemnifying Party" has the meaning set forth in Section 7.3
below.
"Inspectors" has the meaning set forth in Section 5.10 below.
"Member of Management" means (i) the President, Chief
Executive Officer, Chief Financial Officer and Vice-President -- Marketing and
Sales Promotion of the Company or (ii) any Person holding an office equivalent
or senior to any of the foregoing (but not the Chairman of the Board unless such
Person is otherwise a Member of Management) or (iii) any other Person designated
a Member of Management by the Board of Directors.
"Person" means any natural person, corporation, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust, or
other organization, whether or not a legal entity, and any government or agency
or political subdivision thereof.
"Records" has the meaning set forth in Section 5.10 below.
"Registrable Securities" means the Common Stock received by
TCB pursuant to the Plan and any other securities issued or issuable with
respect to such Common Stock by way of a share dividend or share split or in
connection with a combination of shares, recapitalization, merger, consolidation
or reorganization; provided, that any Registrable Security will cease to be a
Registrable Security when (a) a registration statement covering such Registrable
Security has been declared effective by the SEC and it has been disposed of
pursuant to such effective registration statement, (b) it is sold under
circumstances in which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are met, (c) (i) it
has been otherwise transferred and (ii) the Company has delivered a new
certificate or other evidence of ownership for it not bearing the legend
required pursuant to Section VIII of the Plan and (iii) it may be resold without
subsequent registration under the Securities Act or (d) when all of such
securities may be freely sold publicly without registration pursuant to Rule 144
under the Securities Act or otherwise.
"Registration Expenses" has the meaning set forth in Article
VI below.
"Requesting Holder" means TCB and any other Person who has the
contractual right (whether exercisable alone or in conjunction with other
rights) to require the Company to file a registration statement in respect of
such Person's Registrable Securities.
"SEC" means the Securities and Exchange Commission or any
successor governmental agency.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
Exhibit 4.1 - Page 2
<PAGE>
"Subsidiary" means (i) any corporation or other entity a
majority of the Capital Stock of which having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
is at the time owned, directly or indirectly, with power to vote, by the Company
or any direct or indirect Subsidiary of the Company or (ii) a partnership in
which the Company or any direct or indirect Subsidiary is a general partner.
"Suspension Period" means a period of time commencing on the
date on which the Company provides written notice to TCB that there is a
material event pending with respect to the Company and the Company has elected
to require the suspension of the sale by TCB of Registrable Securities pursuant
to any Demand Registration, and ending on the date when TCB is advised in
writing by the Company that such Suspension Period has been terminated.
"Termination Date" has the meaning set forth in Section 9.13
below.
"Underwriter" means a securities dealer which purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
ARTICLE II
DEMAND REGISTRATION
-------------------
2.1 Request for Registration. (a) At any time after the date
that is (i) 24 months after the Effective Date and prior to the Termination
Date, TCB may make a written request of the Company (a "Demand Request") for
registration under the Securities Act (a "Demand Registration") of all or part
of TCB's Registrable Securities and (ii) 60 months after the Effective Date and
prior to the Termination Date, TCB may make an additional Demand Request for a
Demand Registration of all or part of TCB's Registrable Securities; provided
that in each case the number of Registrable Securities proposed to be sold by
TCB must be equal to no less than 20% of the number of Registrable Securities
received by TCB pursuant to the Plan.
(b) Each Demand Request shall specify the number of
shares of Registrable Securities proposed to be sold. Subject to Section 4.3,
the Company shall file the Demand Registration within 90 days after receiving a
Demand Request (the "Required Filing Date") and shall use reasonable efforts to
cause the same to be declared effective by the SEC as promptly as practicable
after such filing.
(c) Notwithstanding anything to the contrary
contained in this Agreement, (i) the Company shall not be required to register
TCB's Registrable Securities pursuant to a Demand Registration unless TCB
accepts the terms of the underwriting agreement between the Company and the
managing Underwriter or Underwriters and otherwise complies with the provisions
of Article VIII below and (ii) the Company shall not be required to register any
Registrable Securities pursuant to a Demand Registration more than once in any
one-year period.
2.2 Effective Registration and Expenses. A registration will
not count as a Demand Registration until it has become effective pursuant to the
Securities Act (unless TCB withdraws all its Registrable Securities, in which
case such demand will count as a Demand Registration unless TCB pays all
Registration Expenses in connection with such withdrawn registration), provided
that if, after it has become effective, an offering of Registrable Securities
pursuant to a registration is materially interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court, such registration will be deemed not to have been effected.
2.3 Selection of Underwriters. The offering of Registrable
Securities pursuant to a Demand Registration shall be in the form of a "firm
commitment" underwritten offering. The Company, in its sole discretion, shall
select the book-running managing Underwriter and such additional Underwriters to
be used in
Exhibit 4.1 - Page 3
<PAGE>
connection with the offering. In the event of any such offering, such
Underwriters and managers and the Company will enter into an agreement
appropriate to the circumstances, containing provisions for, among other things,
compensation, indemnification, contribution, and representations and warranties,
which are usual and customary for similar agreements entered into by investment
bankers of international standing acting in similar transactions.
2.4 Priority on Demand Registrations. No securities to be sold
for the account of any Person (including the Company) other than a Requesting
Holder shall be included in a Demand Registration unless the managing
Underwriter or Underwriters shall advise the Company in writing that the
inclusion of such securities will not potentially impede or interfere with the
offering. Furthermore, in the event the managing Underwriter or Underwriters
shall advise the Requesting Holders that even after exclusion of all securities
of other Persons pursuant to the immediately preceding sentence, the amount of
Registrable Securities proposed to be included in such Demand Registration by
Requesting Holders is sufficiently large to potentially impede or interfere with
the offering, the Registrable Securities of Requesting Holders to be included in
such Demand Registration shall be allocated pro rata among the Requesting
Holders on the basis of the number of shares of Common Stock requested to be
included in such registration by each such Requesting Holder.
2.5 Multiple Demands. If the Company shall receive, within a
period of 30 days, a request to file a registration statement from more than one
Person who has the contractual right (whether exercisable alone or in
conjunction with other rights) to require the Company to file a registration
statement, all such requesting Persons shall be considered "Requesting Holders"
for purposes of this Article II. In the event the Company shall receive a
request to file a Demand Registration statement from any Persons who have the
contractual right to cause the Company to do so other than TCB, the Company
shall promptly (and in any event within five (5) days after its receipt of such
request) notify TCB thereof.
ARTICLE III
PIGGY-BACK REGISTRATION
-----------------------
3.1 Piggyback Registration Rights. Subject to the provisions
of this Agreement, if the Company proposes to file a registration statement
under the Securities Act with respect to an offering of any equity securities by
the Company for its own account or for the account of any of its equity holders
(other than a registration statement on Form S-4 or Form S-8 or any substitute
form(s) that may be adopted by the SEC or any registration statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing security holders), then the Company shall give written notice
of such proposed filing to TCB as soon as practicable (but in no event less than
30 days before the anticipated effective date of such registration statement),
and such notice shall offer TCB the opportunity to register such number of
Registrable Securities as TCB may request (a "Piggyback Registration"). Subject
to Section 3.2 hereof, the Company shall include in each such Piggyback
Registration all Registrable Securities requested to be included in the
registration for such offering; provided, that TCB must notify the Company in
writing no later that 15 days after TCB's receipt of such notice from the
Company that TCB is exercising its right under this Section 3.1 to include
Registrable Securities in the Piggyback Registration (which notice shall specify
the number of Registrable Securities so to be included), or else such right
shall be deemed to have been waived by TCB. TCB shall be permitted to withdraw
all or part of TCB's Registrable Securities from a Piggyback Registration at any
time prior to the effective date thereof.
3.2 Selection of Underwriters; Cut-Backs. The Company shall,
in its sole and absolute discretion, select the book-running managing
Underwriter and such additional Underwriters to be used in connection with the
offering. In the event of any such offering, the Company will enter into an
agreement appropriate to the circumstances, containing provisions for, among
other things, compensation, indemnification, contribution, and representations
and warranties, which are usual and customary for similar agreements entered
into by investment bankers of international standing acting in similar
transactions. The Company shall use reasonable efforts to cause the managing
Underwriter of a proposed underwritten offering to permit the
Exhibit 4.1 - Page 4
<PAGE>
Registrable Securities requested to be included in the registration statement
for such offering under Section 3.1 or pursuant to other piggyback registration
rights granted by the Company ("Piggyback Securities") to be included on the
same terms and conditions as any similar securities included therein.
Notwithstanding the foregoing, the Company shall not be required to include any
Holder's Piggyback Securities in such offering unless such Holder accepts the
terms of the underwriting agreement between the Company and the managing
Underwriter or Underwriters, and otherwise complies with the provisions of
Article VIII below. If the managing Underwriter or Underwriters of a proposed
underwritten offering advise the Company in writing that in their opinion the
total amount of securities, including Piggyback Securities, to be included in
such offering is sufficiently large to potentially impede or interfere with the
offering, then in such event the securities to be included in such offering
shall be allocated first to the Company and then, to the extent that any
additional securities can, in the opinion of such managing Underwriter or
Underwriters, be sold without any such potential to impede or interfere with the
offering, pro rata among the Holders of Piggyback Securities on the basis of the
number of shares of Common Stock requested to be included in such registration
by each such Holder.
ARTICLE IV
HOLDBACK AGREEMENTS
-------------------
4.1 Restrictions on Public Sale by Holder of Registrable
Securities. TCB agrees not to effect any public sale or distribution of the
issue being registered or of any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, during the 14 days prior to, and during the 90-day period
beginning on the effective date of a registration statement filed pursuant
hereto except as part of such registration if and to the extent requested by the
Company in the case of a non-underwritten public offering or if and to the
extent requested by the managing Underwriter or Underwriters in the case of an
underwritten public offering.
4.2 Restrictions on Public Sale by the Company and Others. The
Company agrees (a) not to effect any public sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for such securities, during the 14 days prior to,
and during the 90- day period beginning on, the effective date of any
registration statement which includes Registrable Securities (unless such sale
or distribution is pursuant to such registration statement and either (i) TCB
consents thereto or (ii) Holders are participating pursuant to Article III
hereof or pursuant to other piggyback registration rights granted by the Company
in such registration statement, such registration statement was filed by the
Company with respect to the sale of securities by the Company and TCB is not
simultaneously participating in a registration statement pursuant to Article II
hereof); and (b) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed securities shall contain a provision under which holders of such
securities agree not to effect any public sale or distribution of any such
securities during the period described in (a) above, including a sale pursuant
to Rule 144 under the Securities Act (except as part of any such registration,
if permitted); provided, however, that the provisions of this Section 4.2 shall
not prevent the conversion or exchange of any securities pursuant to their terms
into or for other securities.
4.3 Deferral of Filing. The Company may, in its sole and
absolute discretion, defer the filing (and the preparation) of a registration
statement required by Article II if (a) at the time the Company receives the
Demand Request, the Company or any of its Subsidiaries are engaged in
confidential negotiations or other confidential business activities, disclosure
of which would be required in such registration statement (but would not be
required if such registration statement were not filed), and the Board of
Directors of the Company determines that such disclosure would be detrimental to
the Company and its stockholders or (b) prior to receiving the Demand Request,
the Board of Directors had determined to effect a registered underwritten public
offering of the Company's equity securities for the Company's account and the
Company had taken steps and is proceeding with reasonable diligence to effect
such offering. A deferral of the filing of a registration statement pursuant to
this Section 4.3 shall be lifted, and the requested registration statement shall
be filed forthwith, if, in the case of a deferral pursuant to clause (a) of the
preceding sentence, the negotiations or other activities are disclosed or
Exhibit 4.1 - Page 5
<PAGE>
terminated, or, in the case of a deferral pursuant to clause (b) of the
preceding sentence, the proposed registration for the Company's account is
abandoned. In order to defer the filing of a registration statement pursuant to
this Section 4.3, the Company shall promptly, upon determining to seek such
deferral, deliver to TCB a certificate signed by the President and CEO of the
Company stating that the Company is deferring such filing pursuant to this
Section 4.3 and the basis therefor in reasonable detail. Within twenty (20) days
after receiving such certificate, TCB, with respect to the Registrable
Securities held by TCB for which registration was previously requested, may
withdraw such request by giving notice to the Company; if withdrawn, such Demand
Request shall be deemed not to have been made for all purposes of this
Agreement. The Company may defer the filing of a particular registration
statement pursuant to this Section 4.3 without limitation as to the number or
length of any such deferrals.
ARTICLE V
REGISTRATION PROCEDURES
-----------------------
Whenever TCB has requested that any Registrable Securities be
registered pursuant to Article II hereof, the Company will, at its expense, use
reasonable efforts to effect the registration and the sale of such Registrable
Securities under the Securities Act in accordance with the intended method of
disposition thereof as quickly as reasonably practicable, and in connection with
any such request, the Company will:
5.1 prepare and file with the SEC a registration statement on
any form for which the Company then qualifies or which counsel for the Company
shall deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and use reasonable efforts to cause
such filed registration statement to become effective under the Securities Act;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to TCB and to its
counsel copies of all such documents proposed to be filed, which documents will
be subject to the review of such counsel; provided, that in connection with a
Demand Registration, the Company shall not file any registration statement or
prospectus, or any amendments or supplements thereto, if TCB, its counsel, or
the managing Underwriters shall reasonably object thereto, in writing, on a
timely basis;
5.2 prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
pursuant to Article II, subject to any Suspension Periods, for a period (except
as provided in the last paragraph of this Article V) of not less than 365
consecutive days or, if shorter, the period terminating when all Registrable
Securities covered by such registration statement have been sold (but not before
the expiration of the applicable period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable) (the "Effective Period")
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by TCB set forth
in such registration statement; provided, that in connection with a Demand
Registration, (i) TCB agrees that it will not sell any Registrable Securities
pursuant to a Demand Registration during any Suspension Period and (ii) the
Company agrees that no Suspension Period shall exceed 30 consecutive days and
that there shall be no more than three (3) Suspension Periods during any one
Demand Registration; provided further, that if one or more Suspension Periods
occur, the Effective Period of the applicable Demand Registration shall be
extended by the number of days equal to the aggregate number of days included in
all Suspension Periods effected with respect to such Demand Registration;
5.3 furnish to TCB such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as TCB may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by TCB;
Exhibit 4.1 - Page 6
<PAGE>
5.4 notify TCB promptly, and (if requested by TCB) confirm
such notice in writing, (a) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to a registration
statement or any post-effective amendment, when the same has become effective
under the Securities Act and each applicable state law, (b) of any request by
the SEC or any other Federal or state governmental authority for amendments or
supplements to a registration statement or related prospectus or for additional
information, (c) of the issuance by the SEC of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (d) if at any time the representations or warranties of the
Company or any Subsidiary contained in any agreement (including any underwriting
agreement) contemplated by Section 5.9 below cease to be true and correct in any
material respect, (e) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (f) of the
happening of any event which makes any statement made in such registration
statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such registration statement, prospectus or
documents so that, in the case of the registration statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and (g) of the
Company's reasonable determination that a post-effective amendment to a
registration statement would be appropriate;
5.5 use reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification (or exemption from qualification) of any
of the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment;
5.6 cooperate with TCB and the managing Underwriter or
Underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for deposit with
The Depository Trust Company; and enable such Registrable Securities to be
registered in such names as the managing Underwriter or Underwriters may request
at least two (2) business days prior to any sale of Registrable Securities;
5.7 use reasonable efforts to register or qualify such
Registrable Securities as promptly as reasonably practicable under such other
securities or blue sky laws of such jurisdictions as TCB or the managing
Underwriter reasonably (in light of the intended plan of distribution) requests
and do any and all other acts and things which may be reasonably necessary or
advisable to enable TCB or such managing Underwriter to consummate the
disposition in such jurisdictions of the Registrable Securities owned by TCB;
provided that the Company will not be required to (a) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 5.7, (b) subject itself to taxation in any such
jurisdiction or (c) consent to general service of process in any such
jurisdiction;
5.8 use reasonable efforts to cause such Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
the Company to enable TCB to consummate the disposition of such Registrable
Securities;
5.9 enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
5.10 make available for inspection by TCB, any Underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other professional retained, and paid, by TCB or any
such Underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to
Exhibit 4.1 - Page 7
<PAGE>
supply all information reasonably requested by any such Inspectors in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. TCB agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such is made generally available to the public. TCB
further agrees that it will, as soon as practicable upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company at its expense to undertake
appropriate action to prevent disclosure of the Records deemed confidential;
5.11 use reasonable efforts to obtain a comfort letter or
comfort letters from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as TCB or the managing Underwriter or Underwriters reasonably requests;
5.12 otherwise use reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of twelve (12) months, beginning within three (3) months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
5.13 use reasonable efforts to cause all such Registrable
Securities to be quoted on any inter-dealer quotation system on which similar
securities issued by the Company are then quoted;
5.14 if any event contemplated by Section 5.4(f) above shall
occur, as promptly as practicable prepare a supplement or amendment or
post-effective amendment to such registration statement or the related
prospectus or any document incorporated therein by reference or promptly file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
5.15 cooperate and assist in any filing required to be made
with the National Association of Securities Dealers, Inc. and in the performance
of any due diligence investigation by any underwriter, including any "qualified
independent underwriter," or TCB; and
5.16 cooperate fully with the marketing and sale of securities
in accordance with this Agreement including, without limitation, providing
marketing support and causing the appropriate Member(s) of Management to
participate in "road show" presentations and attend meetings with Underwriters
as requested by TCB or the Underwriters.
The Company may require TCB to promptly furnish in writing to
the Company such information regarding the distribution of the Registrable
Securities as it may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
Notwithstanding anything herein to the contrary, the Company shall have the
right to exclude from any offering the Registrable Securities of TCB if TCB does
not comply with the provisions of the immediately preceding sentence.
TCB agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5.4(f) hereof,
TCB will forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until TCB's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 5.4(f) hereof, and, if so directed by the Company, TCB will deliver to
the Company all copies, other than permanent file copies, then in TCB's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event the Company shall give such
notice, the Company shall extend the period during which such registration
statement shall be maintained effective (including the period referred to in
Section 5.2 hereof) by the number of days during
Exhibit 4.1 - Page 8
<PAGE>
the period from and including the date of the giving of notice pursuant to
Section 5.4(f) hereof to the date when the Company shall make available to TCB a
prospectus supplemented or amended to conform with the requirements of Section
5.4(f) hereof.
ARTICLE VI
REGISTRATION EXPENSES
---------------------
Subject to the provisions in Section 2.2 above with respect to
a Demand Registration, in connection with any registration statement required to
be filed hereunder, the Company shall pay the following registration expenses
(the "Registration Expenses"): (a) all registration and filing fees (including,
without limitation, with respect to filings to be made with the National
Association of Securities Dealers, Inc.), (b) fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (c) printing expenses, (d) internal expenses of the Company
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (e) the fees and expenses
incurred in connection with the listing on an exchange of the Registrable
Securities if the Company shall choose, or be required pursuant to Section 5.13
to list such Registrable Securities, (f) fees and disbursements of counsel for
the Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters requested pursuant to Section 5.11 hereof), (g) the fees and expenses of
any special experts retained by the Company in connection with such registration
and (h) fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Rule 2720(c) of
the National Association of Securities Dealers, Inc. The Company shall not have
any obligation to pay any underwriting fees, discounts, or commissions
attributable to the sale of Registrable Securities or, except as provided by
clause (b) or (h) above, any out-of-pocket expenses of TCB (or the agents who
manage TCB's accounts) or the fees and disbursements of counsel for any
Underwriter.
ARTICLE VII
INDEMNIFICATION; CONTRIBUTION
-----------------------------
7.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless TCB, each Person, if any, who controls TCB within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the officers, directors, agents, general and limited partners, and
employees of TCB and each such controlling person from and against any and all
losses, claims, damages, liabilities, and expenses (including reasonable costs
of investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of, or are based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to the Company by TCB or on
TCB's behalf expressly for use therein; provided, however, that with respect to
any untrue statement or omission or alleged untrue statement or omission made in
any preliminary prospectus, the indemnity agreement contained in this Section
7.1 shall not apply to the extent that any such loss, claim, damage, liability
or expense results from the fact that a current copy of the prospectus was not
sent or given to the Persons asserting any such loss, claim, damage, liability
or expense at or prior to the written confirmation of the sale of the
Registrable Securities concerned to such Person if it is determined that (a) it
was the responsibility of TCB or any Underwriter or dealer for TCB to provide
such Person with a current copy of the prospectus, (b) TCB was provided with a
current copy of the prospectus prior to the written confirmation of sale and (c)
such current copy of the prospectus would have cured the defect giving rise to
such loss, claim, damage, liability or expense. The Company also agrees to
indemnify any Underwriters of the Registrable
Exhibit 4.1 - Page 9
<PAGE>
Securities, their officers and directors and each Person who controls such
Underwriters on substantially the same basis as that of the indemnification of
TCB provided in this Section 7.1.
7.2 Indemnification by TCB. TCB agrees to indemnify and hold
harmless the Company, and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act and the officers, directors, agents and employees of the Company
and each such controlling Person to the same extent as the foregoing indemnity
from the Company to TCB, but only with respect to information furnished in
writing by TCB or on TCB's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Securities. The liability of
TCB under this Section 7.2 shall be limited to the aggregate cash and property
received by TCB pursuant to the sale of Registrable Securities covered by such
registration statement or prospectus.
7.3 Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Person entitled to indemnification under Section 7.1 or 7.2
above (an "Indemnified Party") in respect of which indemnity may be sought from
any party who has agreed to provide such indemnification under Section 7.1 or
7.2 above (an "Indemnifying Party"), the Indemnified Party shall give prompt
notice to the Indemnifying Party and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all reasonable expenses
of such defense. Such Indemnified Party shall have the right to employ separate
counsel in any such action or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (a) the Indemnifying Party has agreed to pay such
fees and expenses or (b) the Indemnifying Party fails promptly to assume the
defense of such action or proceeding or fails to employ counsel reasonably
satisfactory to such Indemnified Party or (c) the named parties to any such
action or proceeding (including any impleaded parties) include both such
Indemnified Party and Indemnifying Party (or an Affiliate of the Indemnifying
Party), and such Indemnified Party shall have been advised by counsel that there
is a conflict of interest on the part of counsel employed by the Indemnifying
Party to represent such Indemnified Party and such counsel reasonably determines
that it is inappropriate for such counsel to represent both the Indemnifying
Party (or such Affiliate of the Indemnifying Party) and the Indemnified Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party).
Notwithstanding the foregoing, the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable at any time for the fees and
expenses of more than one separate firm of attorneys (together in each case with
appropriate local counsel). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its written consent
(which consent will not be unreasonably withheld), but if settled with its
written consent, or if there be a final judgment for the plaintiff in any such
action or proceeding, the Indemnifying Party shall indemnify and hold harmless
such Indemnified Party from and against any loss or liability (to the extent
stated above) by reason of such settlement or judgment. The Indemnifying Party
shall not consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release, in form and substance
satisfactory to the Indemnified Party, from all liability in respect of such
action or proceeding for which such Indemnified Party would be entitled to
indemnification hereunder.
7.4 Contribution. If the indemnification provided for in this
Article VII is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities or judgments referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and judgments as between the
Company on the one hand and TCB on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of TCB in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of TCB on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged
Exhibit 4.1 - Page 10
<PAGE>
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and TCB agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7.4, TCB shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of TCB were offered to the public exceeds the amount
of any damages which TCB has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
ARTICLE VIII
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
-------------------------------------------
TCB may not participate in any underwritten registration
hereunder unless TCB (a) agrees to sell TCB's Registrable Securities on the
basis provided in any underwriting arrangements approved by the Person entitled
hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement, and (c) if requested by another Person
participating in such underwritten registration, provides that all securities
convertible or exchangeable into Common Stock that are included in such
underwritten registration shall be so converted or exchanged on or prior to the
consummation thereof.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Amendment. Any provision of this Agreement may be altered,
supplemented, amended, or waived only by the written consent of each of (i) the
Company and (ii) TCB.
9.2 Specific Performance. TCB and the Company recognize that
the obligations imposed on them in this Agreement are special, unique, and of
extraordinary character, and that in the event of breach by any party, damages
will be an insufficient remedy; consequently, it is agreed that TCB and the
Company may have specific performance and injunctive relief (in addition to
damages) as a remedy for the enforcement hereof, without proving damages.
9.3 Assignment. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the Company. This Agreement may not be assigned by TCB. Any purported
assignment made in violation of this Section 9.3 shall be void and of no force
and effect.
9.4 Notices. Any and all notices, designations, consents,
offers, acceptances, or other communications provided for herein (each a
"Notice") shall be given in writing by overnight courier, telegram, or telecopy
which shall be addressed, or sent, to the respective addresses as follows (or
such other address as the Company or TCB may specify to the other by Notice):
Exhibit 4.1 - Page 11
<PAGE>
The Company: Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attention: Chief Executive Officer
Telecopy No.: (713) 957-0080
with a copy to:
Steven D. Rubin, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telecopy No.: (713) 224-9511
TCB: Texas Commerce Bank N.A.
601 Travis
Houston, Texas 77002
Attention: Manager, Special Loans Group
Telecopy No.: (713) 216-4566
with a copy to:
General Counsel
Texas Commerce Bank N.A.
712 Main Street, 26 TCB-E45
Houston, Texas 77002
Telecopy No.: (713) 216-7970
All Notices shall be deemed effective and received (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified above and
receipt thereof is confirmed; (b) if given by overnight courier, on the business
day immediately following the day on which such Notice is delivered to a
reputable overnight courier service; or (c) if given by telegram, when such
Notice is delivered at the address specified above.
9.5 Counterparts. This Agreement may be executed in two or
more counterparts and each counterpart shall be deemed to be an original and
which counterparts together shall constitute one and the same agreement of the
parties hereto.
9.6 Section Headings. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, or extend
the scope or intent of this Agreement or any provisions hereof.
9.7 Choice of Law. This Agreement, including, without
limitation, the interpretation, construction, validity and enforceability
thereof, shall be governed by the internal laws of the State of Texas without
regard to the principles of conflict of laws thereof.
9.8 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, discussions and understandings with respect
thereto.
9.9 Cumulative Rights. The rights of TCB and the Company under
this Agreement are cumulative and in addition to all similar and other rights of
the parties under other agreements.
Exhibit 4.1 - Page 12
<PAGE>
9.10 Severability. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants, and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated.
9.11 Submission to Jurisdiction (a) Any legal action or
proceeding with respect to this Agreement, the Common Stock or any document
related thereto may be brought in the courts of the State of Texas or of the
United States of America for the Southern District of Texas, and, by execution
and delivery of this Agreement, each of the Company and TCB hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which any of them may
now or hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
(b) The Company and TCB irrevocably consent to the service of
process of any of the aforesaid courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Company or TCB, respectively, at its address provided herein.
(c) Nothing contained in this Section 9.11 shall affect the
right of any party hereto to serve process in any other manner permitted by law.
9.12 Waiver of Jury Trial. Each of the parties hereto waives
any right it may have to trial by jury in respect of any litigation based on, or
arising out of, under or in connection with this Agreement, any Common Stock or
any course of conduct, course of dealing, verbal or written statement or action
of any party hereto.
9.13 Termination. This Agreement shall terminate on (the
"Termination Date") the earlier of (a) the date on which TCB ceases to own any
Registrable Securities and (b) the date that is seven (7) years after the
Effective Date. Notwithstanding the foregoing and anything herein to the
contrary, the provisions of Article I, Article VII and Article IX of this
Agreement shall survive any termination of this Agreement.
Exhibit 4.1 - Page 13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first above written.
WEINER'S STORES, INC.
By: /s/ Herbert R. Douglas
--------------------------------------
Herbert R. Douglas
President & Chief Executive Officer
TEXAS COMMERCE BANK, N.A.
By: /s/ James W. Shreve
---------------------------------------
Name: James W. Shreve
Title: Vice President
Exhibit 4.1 - Page 14
EXHIBIT 4.2
FORM OF SPECIMEN COMMON STOCK CERTIFICATE
[FACE OF CERTIFICATE]
COMMON STOCK COMMON STOCK
NUMBER SHARES
WEINER'S
STORES, INC.
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 948704 10 1
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE REGISTERED HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01 OF
WEINER'S STORES, INC.
(the "Corporation"), transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares evidenced hereby
are issued under and shall be subject to the provisions of the laws of the State
of Delaware and to the provisions of the Restated Certificate of Incorporation
and the Restated Bylaws of the Corporation and any amendments thereto, to all of
which the holder by acceptance hereof, assents. This Certificate is not valid
until countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
President [CORPORATE SEAL] Secretary
Countersigned and registered:
American Stock Transfer & Trust Company
Transfer Agent and Registrar
By
Authorized Signature
<PAGE>
[REVERSE OF CERTIFICATE]
WEINER'S STORES, INC.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
UNIF GIFT MIN ACT - _____________________ Custodian _______________
(Cust) (Minor)
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties Under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act ____________________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For Value Received, _________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE
Shares of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within-named
Corporation, with full power of substitution in the premises.
Dated ____________________
(SIGNATURE)
NOTICE:
THE SIGNATURE(S) TO
THIS ASSIGNMENT MUST
CORRESPOND WITH THE
NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR WITHOUT
ALTERATION OR EN-
LARGEMENT OR ANY
CHANGE WHATEVER.
(SIGNATURE)
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C.
RULE 17AD-15.
SIGNATURE(S) GUARANTEED BY:
Exhibit 4.2 - Page 2
EXHIBIT 10.1
WEINER'S STORES, INC.
1997 STOCK INCENTIVE PLAN
1. PURPOSE.
The Weiner's Stores, Inc. 1997 Stock Incentive Plan (the "Plan")
is intended to provide incentives which will attract, retain and motivate highly
competent persons as key employees and non-employee directors of Weiner's
Stores, Inc. (the "Company") and of any subsidiary corporation now existing or
hereafter formed or acquired, by providing them opportunities to acquire shares
of the common stock, par value $.01 per share, of the Company ("Common Stock").
Furthermore, the Plan is intended to assist in aligning the interests of the
Company's key employees and non-employee directors to those of its stockholders.
2. ADMINISTRATION.
(a) The Plan shall be administered by a committee or subcommittee
(the "Committee") appointed by the Board of Directors of the Company (the
"Board") from among its members. Unless the Board determines otherwise, the
Committee shall be comprised solely of not less than two members who each shall
qualify as (i) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
(or any successor rule) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and (ii) an "outside director" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Awards (as defined
in Section 4 below) granted hereunder as it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all participants and their legal representatives. No member of the
Board, no member of the Committee and no employee of the Company shall be liable
for any act or failure to act hereunder, except in circumstances involving his
or her bad faith, gross negligence or willful misconduct, or for any act or
failure to act hereunder by any other member or employee or by any agent to whom
duties in connection with the administration of this Plan have been delegated.
The Company shall indemnify members of the Committee and any agent of the
Committee who is an employee of the Company, against any and all liabilities or
expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan, except in circumstances
involving such person's bad faith, gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or
to one or more agents, such administrative duties as it may deem advisable, and
the Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees have benefitted
from the Plan, as determined by the Committee.
3. PARTICIPANTS.
Participants shall consist of such key employees and non-employee
directors of the Company and any of its subsidiaries as the Committee in its
sole discretion determines to be significantly responsible for the success and
future growth and profitability of the Company and whom the Committee may
designate from time to time to receive Awards under the Plan. Designation of a
participant in any year shall not require the Committee to designate such person
to receive an Award in any other year or, once designated, to receive the same
type or
<PAGE>
amount of Award as granted to the participant in any other year. The Committee
shall consider such factors as it deems pertinent in selecting participants and
in determining the type and amount of their respective Awards.
4. TYPES OF AWARDS.
Awards under the Plan may be granted in any one or a combination
of (i) Stock Options or (ii) Stock Awards, (each as described below, and
collectively, the "Awards"). Awards shall be evidenced by agreements (which need
not be identical) in such forms as the Committee may from time to time approve;
provided, however, that in the event of any conflict between the provisions of
the Plan and any such agreements, the provisions of the Plan shall prevail.
5. COMMON STOCK AVAILABLE UNDER THE PLAN.
The aggregate number of shares of Common Stock that may be subject
to Awards, including Stock Options, granted under this Plan shall be 1,400,000
shares of Common Stock, which may be authorized and unissued or treasury shares,
subject to any adjustments made in accordance with Section 9 hereof. The maximum
number of shares of Common Stock with respect to which Stock Awards may be
granted under the Plan during the term of the Plan shall not exceed 400,000
shares. The maximum number of shares of Common Stock with respect to which
Awards may be granted or measured to any individual participant under the Plan
during the term of the Plan shall not exceed 750,000 shares, provided, however,
that the maximum number of shares of Common Stock with respect to which Stock
Options may be granted to an individual participant under the Plan during the
term of the Plan shall not exceed 500,000 shares (in each case, subject to
adjustments made in accordance with Section 9 hereof). Any shares of Common
Stock subject to an Award which for any reason is cancelled, terminated without
having been exercised, forfeited, or delivered to the Company as part of full
payment for the exercise of a Stock Option shall again be available for Awards
under the Plan. The preceding sentence shall apply only for purposes of
determining the aggregate number of shares of Common Stock subject to Awards and
shall not apply for purposes of determining the maximum number of shares of
Common Stock subject to Awards (including the maximum number of shares of Common
Stock subject to Stock Options) that any individual participant may receive.
6. STOCK OPTIONS.
(a) IN GENERAL. Stock Options shall consist of awards from the
Company that will enable the holder to purchase a specific number of shares of
Common Stock, at set terms and at a fixed purchase price. Stock Options may be
(i) "incentive stock options" ("Incentive Stock Options"), within the meaning of
Section 422 of the Code, or (ii) Stock Options which do not constitute Incentive
Stock Options ("Nonqualified Stock Options"). The Committee shall have the
authority to grant to any participant one or more Incentive Stock Options,
Nonqualified Stock Options, or both types of Stock Options. Each Stock Option
shall be subject to such terms and conditions consistent with the Plan as the
Committee may impose from time to time. In addition, each Stock Option shall be
subject to the following limitations set forth in this Section 6.
(b) EXERCISE PRICE. Each Stock Option granted hereunder shall have
such per-share exercise price as the Committee may determine on the date of
grant; provided, however, that the per-share exercise price shall not be less
than 100 percent of the Fair Market Value (as defined in Section 12 below) of
the Common Stock on the date the Stock Option is granted.
(c) PAYMENT OF EXERCISE PRICE. The Stock Option exercise price may
be paid in cash or, in the discretion of the Committee, by the delivery of
shares of Common Stock then owned by the participant, by the withholding of
shares of Common Stock for which a Stock Option is exercisable, or by a
combination of these methods. In the discretion of the Committee, payment may
also be made by delivering a properly executed exercise notice to the Company
together with a copy of irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the exercise price. To
facilitate the foregoing, the
Exhibit 10.1 - Page 2
<PAGE>
Company may enter into agreements for coordinated procedures with one or more
brokerage firms. The Committee may prescribe any other method of paying the
exercise price that it determines to be consistent with applicable law and the
purpose of the Plan, including, without limitation, in lieu of the exercise of a
Stock Option by delivery of shares of Common Stock then owned by a participant,
providing the Company with a notarized statement attesting to the number of
shares owned, where upon verification by the Company, the Company would issue to
the participant only the number of incremental shares to which the participant
is entitled upon exercise of the Stock Option. In determining which methods a
participant may utilize to pay the exercise price, the Committee may consider
such factors as it determines are appropriate; provided, however, that with
respect to Incentive Stock Options, all such discretionary determinations by the
Committee shall be made at the time of grant and specified in the Stock Option
agreement.
(d) EXERCISE PERIOD. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock Option
shall be exercisable later than 10 years after the date it is granted. All Stock
Options shall terminate at such earlier times and upon such conditions or
circumstances as the Committee shall in its discretion set forth in such Stock
Option agreement on the date of grant.
(e) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock
Options may be granted only to participants who are key employees of the Company
or any of its subsidiaries on the date of grant. The aggregate market value
(determined as of the time the Stock Option is granted) of the Common Stock with
respect to which Incentive Stock Options (under all option plans of the Company)
are exercisable for the first time by a participant during any calendar year
shall not exceed $100,000. For purposes of the preceding sentence, (i) Incentive
Stock Options shall be taken into account in the order in which they are granted
and (ii) Incentive Stock Options granted before 1987 shall not be taken into
account. Incentive Stock Options may not be granted to any participant who, at
the time of grant, owns stock possessing (after the application of the
attribution rules of Section 424(d) of the Code) more than 10 percent of the
total combined voting power of all outstanding classes of stock of the Company
or any of its subsidiaries, unless the option price is fixed at not less than
110 percent of the Fair Market Value of the Common Stock on the date of grant
and the exercise of such option is prohibited by its terms after the expiration
of 5 years from the date of grant of such option. In addition, no Incentive
Stock Option shall be issued to a participant in tandem with a Nonqualified
Stock Option.
(f) SECTION 162(M) OF THE CODE. All Stock Options granted under
this Section 6, and the compensation attributable to such Stock Options, are
intended to (i) qualify as Performance-Based Awards (as described in Section 8
below) or (ii) be exempt from the deduction limitation imposed by Section 162(m)
of the Code.
(g) INITIAL GRANTS OF STOCK OPTIONS. During the 90-day period
following the effective date of the plan of reorganization ("POR") with respect
to the Company's reorganization (the "Reorganization Emergence Date"), and
provided that such POR has been confirmed by the applicable United States
Bankruptcy Court ("Bankruptcy Court") pursuant to Section 1129 of Title 11 of
the United States Code and that the clerk of the Bankruptcy Court has entered an
order confirming such POR, the Committee shall grant a Stock Option to each
individual who, on the date of grant, holds the position listed on Schedule A.
Each Stock Option granted under this Section 6(g) shall be subject to the
following terms and conditions:
(1) the total number of shares underlying each Stock
Option shall be the number of shares set forth on
Schedule A;
(2) the exercise price of each Stock Option shall be the
Fair Market Value of the Common Stock on the date of
grant of such Stock Option;
(3) each Stock Option shall terminate on the 10th
anniversary of the date of grant of such Stock
Option;
Exhibit 10.1 - Page 3
<PAGE>
(4) 33-1/3 percent of each Stock Option shall become
exercisable on each of the first three anniversaries
of the date of grant of such Stock Option; provided,
however, that the portion of the Stock Option granted
to the Company's Chief Executive Officer that is not
exercisable as of January 15, 1999 shall immediately
become exercisable on January 15, 1999; and
(5) in the event of a change in control of the Company
(as defined on Schedule C), all Stock Options granted
under this Section 6(g) to those individuals listed
on Schedule C shall become fully exercisable as of
the date of the change in control of the Company.
In addition, each Stock Option granted under this Section 6(g) shall be subject
to such other terms and conditions consistent with the Plan, including Section
11 below, as the Committee, in its sole discretion, may impose.
7. STOCK AWARDS.
(a) IN GENERAL. The Committee may, in its discretion, grant Stock
Awards (which may include discretionary or mandatory payment of bonus incentive
compensation in stock) consisting of Common Stock issued or transferred to
participants with or without other payments therefor as additional compensation
for services to the Company. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, and
the right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such Stock Award
and/or that the stock certificates evidencing such shares be held in custody or
bear restrictive legends until the restrictions thereon shall have lapsed. The
Stock Award agreement shall specify whether the participant shall have, with
respect to the shares of Common Stock subject to a Stock Award, all of the
rights of a holder of shares of Common Stock, including the right to receive
dividends and to vote the shares.
(b) SECTION 162(M) OF THE CODE. Certain Stock Awards granted under
this Section 7, and the compensation attributable to such Stock Awards, are
intended to (i) qualify as Performance-Based Awards (as described in Section 8
below) or (ii) be exempt from the deduction limitation imposed by Section 162(m)
of the Code.
(c) INITIAL STOCK AWARDS. On or about the Reorganization Emergence
Date, the Committee shall grant a Stock Award to each individual who, on the
date of grant, holds the position listed on Schedule B. The number of shares
underlying each Stock Award granted under this Section 7(c) is set forth on
Schedule B. Each Stock Award granted under this Section 7(c) shall be subject to
the following terms and conditions:
(1) the total number of shares underlying each Stock
Award shall be the number of shares set forth on
Schedule B;
(2) 100 percent of each Stock Award shall become
transferable on January 15, 2000; provided, however,
that 100 percent of the Stock Award granted to the
Company's Chief Executive Officer shall become
transferable on January 15, 1999; and
(3) in the event of a change in control of the Company
(as defined on Schedule C), all Stock Awards granted
under this Section 7(c) to those individuals listed
on Schedule C shall become fully transferable as of
the date of the change in control of the Company.
In addition, each Stock Award granted under this Section 7(c) shall be subject
to such other terms and conditions consistent with the Plan, including Section
11 below, as the Committee, in its sole discretion, may impose.
Exhibit 10.1 - Page 4
<PAGE>
8. PERFORMANCE-BASED AWARDS.
Certain Awards granted under the Plan may be granted in a manner
such that the Awards qualify for the performance-based compensation exemption of
Section 162(m) of the Code ("Performance-Based Awards"). Unless otherwise exempt
from the deduction limitation imposed by Section 162(m) of the Code, all Stock
Options granted under the Plan are intended to qualify as Performance-Based
Awards. With respect to Stock Awards that are intended to qualify as
Performance-Based Awards, the Committee, in its sole discretion, shall determine
that the granting or vesting (or both) of such Performance-Based Awards will be
based on one or more of the following factors: net sales; pre-tax income before
allocation of corporate overhead and bonus; budget; earnings per share; net
income; division, group or corporate financial goals; return on stockholders'
equity; return on assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Common Stock or any other
publicly traded securities of the Company; market share; gross profits; earnings
before interest and taxes; earnings before interest, taxes, depreciation and
amortization; economic value-added models; comparisons with various stock market
indices; and/or reductions in costs. In addition, with respect to Stock Awards
that are intended to qualify as Performance-Based Awards, (i) the Committee
shall establish in writing (x) the objective performance-based goals applicable
to a given period and (y) the individual employees or class of employees to
which such performance-based goals apply no later than 90 days after the
commencement of such period (but in no event after 25 percent of such period has
elapsed) and (ii) no Performance-Based Awards shall be payable to or vest with
respect to, as the case may be, any participant for a given period until the
Committee certifies in writing that the objective performance goals (and any
other material terms) applicable to such period have been satisfied. In
addition, with respect to Stock Awards intended to qualify as Performance- Based
Awards, after establishment of a performance goal, the Committee shall not
revise such performance goal or increase the amount of compensation payable
thereunder (as determined in accordance with Section 162(m) of the Code) upon
the attainment of such performance goal. Notwithstanding the preceding sentence,
the Committee may reduce or eliminate the number of shares of Common Stock or
cash granted or the number of shares of Common Stock vested upon the attainment
of such performance goal.
9. ADJUSTMENT PROVISIONS.
If there shall be any change in the Common Stock, through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse stock split, split up, spinoff, combination of shares, exchange of
shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to stockholders of the Company,
an adjustment shall be made to each outstanding Stock Option such that each such
Stock Option shall thereafter be exercisable for such securities, cash and/or
other property as would have been received in respect of the Common Stock
subject to such Stock Option had such Stock Option been exercised in full
immediately prior to such change or distribution, and such an adjustment shall
be made successively each time any such change shall occur. In addition, in the
event of any such change or distribution, in order to prevent dilution or
enlargement of participants' rights under the Plan, the Committee shall have the
authority to adjust, in an equitable manner, the number and kind of shares that
may be issued under the Plan, the number and kind of shares subject to
outstanding Awards, the exercise price applicable to outstanding Awards, and the
Fair Market Value of the Common Stock and other value determinations applicable
to outstanding Awards. Appropriate adjustments may also be made by the Committee
in the terms of any Awards under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards on an
equitable basis, including modifications of performance targets and changes in
the length of performance periods. In addition, other than with respect to Stock
Options and other awards intended to constitute Performance-Based Awards, the
Committee is authorized to make adjustments to the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) any adjustment with respect to an Incentive
Stock Option shall comply with the rules of Section 424(a) of the Code, and (ii)
in no event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an incentive stock option for purposes of
Section 422 of the Code.
Exhibit 10.1 - Page 5
<PAGE>
10. TRANSFERABILITY.
Each Award granted under the Plan to a participant shall not be
transferable otherwise than by will or the laws of descent and distribution, and
shall be exercisable, during the participant's lifetime, only by the
participant. In the event of the death of a participant, each Stock Option
theretofore granted to him or her shall be exercisable during such period after
his or her death as the Committee shall in its discretion set forth in such
option or right on the date of grant and then only by the executor or
administrator of the estate of the deceased participant or the person or persons
to whom the deceased participant's rights under the Stock Option shall pass by
will or the laws of descent and distribution.
11. OTHER PROVISIONS.
Awards granted under the Plan may also be subject to such other
provisions (whether or not applicable to the Award granted to any other
participant) as the Committee determines on the date of grant to be appropriate,
including, without limitation, for the installment purchase of Common Stock
under Stock Options (to be authorized, in the case of Incentive Stock Options,
at the time of grant), to assist the participant in financing the acquisition of
Common Stock (to be authorized, in the case of Incentive Stock Options, at the
time of grant), for the forfeiture of, or restrictions on resale or other
disposition of, Common Stock acquired under any form of Award, for the
acceleration of exercisability or vesting of Awards in the event of a change in
control of the Company, for the payment of the value of Awards to participants
in the event of a change in control of the Company, or to comply with federal
and state securities laws, or understandings or conditions as to the
participant's employment in addition to those specifically provided for under
the Plan.
12. FAIR MARKET VALUE.
For purposes of this Plan and any Awards granted hereunder, Fair
Market Value shall be (i) the closing price of the Common Stock on the date of
calculation (or on the last preceding trading date if Common Stock was not
traded on such date) if the Common Stock is readily tradeable on a national
securities exchange or other market system or (ii) if the Common Stock is not
readily tradeable, the amount determined in good faith by the Board as the fair
market value of the Common Stock.
13. WITHHOLDING.
All payments or distributions of Awards made pursuant to the Plan
shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local tax withholding requirements. If the Company proposes
or is required to distribute Common Stock pursuant to the Plan, it may require
the recipient to remit to it or to the corporation that employs such recipient
an amount sufficient to satisfy such tax withholding requirements prior to the
delivery of any certificates for such Common Stock. In lieu thereof, the Company
or the employing corporation shall have the right to withhold the amount of such
taxes from any other sums due or to become due from such corporation to the
recipient as the Committee shall prescribe. The Committee may, in its discretion
and subject to such rules as it may adopt (including any as may be required to
satisfy applicable tax and/or non-tax regulatory requirements), permit an
optionee or award or right holder to pay all or a portion of the federal, state
and local withholding taxes arising in connection with any Award consisting of
shares of Common Stock by electing to have the Company withhold shares of Common
Stock having a Fair Market Value equal to the amount of tax to be withheld, such
tax calculated at rates required by statute or regulation.
14. TENURE.
A participant's right, if any, to continue to serve the Company as
a director, officer, employee, or otherwise, shall not be enlarged or otherwise
affected by his or her designation as a participant under the Plan.
15. UNFUNDED PLAN.
Exhibit 10.1 - Page 6
<PAGE>
Participants shall have no right, title, or interest whatsoever in
or to any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and any participant,
beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth in the Plan. The Plan is not intended to be subject to the
Employee Retirement Income Security Act of 1974, as amended.
16. NO FRACTIONAL SHARES.
No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
or Awards, or other property shall be issued or paid in lieu of fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
17. DURATION, AMENDMENT AND TERMINATION.
No Award shall be granted more than 10 years after the Effective
Date (as defined below); provided, however, that the terms and conditions
applicable to any Award granted prior to such date may thereafter be amended or
modified by mutual agreement between the Company and the participant or such
other persons as may then have an interest therein. Also, by mutual agreement
between the Company and a participant hereunder, under this Plan or under any
other present or future plan of the Company, Awards may be granted to such
participant in substitution and exchange for, and in cancellation of, any Awards
previously granted such participant under this Plan, or any other present or
future plan of the Company. The Board may amend the Plan from time to time or
suspend or terminate the Plan at any time; provided, however, that no action
authorized by this Section 17 shall reduce the amount of any existing Award or
change the terms and conditions thereof without the participant's consent. No
amendment of the Plan shall, without approval of the stockholders of the
Company, (i) increase the total number of shares which may be issued under the
Plan, (ii) increase the maximum number of shares with respect to Stock Options
and Stock Awards that may be granted to any individual under the Plan, (iii)
modify the requirements as to eligibility for Awards under the Plan, or (iv)
disqualify any Incentive Stock Options granted hereunder.
18. GOVERNING LAW.
This Plan, Awards granted hereunder and actions taken in
connection herewith shall be governed and construed in accordance with the laws
of the State of Delaware (regardless of the law that might otherwise govern
under applicable Delaware principles of conflict of laws).
19. EFFECTIVE DATE.
(a) The Plan shall be effective as of the date on which the Plan
is adopted by the Board (the "Effective Date"); provided, however, that the Plan
is approved by the stockholders of the Company at an annual meeting or any
special meeting of stockholders of the Company within 12 months before or after
the Effective Date, and such approval of stockholders shall be a condition to
the right of each participant to receive Awards hereunder. The Committee shall
not grant any Awards under the Plan until the later of (i) the Reorganization
Emergence Date or (ii) the date the shareholders approve the Plan.
(b) This Plan shall terminate on the tenth anniversary of the
Effective Date (unless sooner terminated by the Board).
Exhibit 10.1 - Page 7
<PAGE>
SCHEDULE A
Number of Shares
Underlying Initial Stock Options
(Incentive Stock Options + Nonqualified Stock Options)
------------------------------------------------------
Chief Executive Officer 250,000
Chief Financial Officer 125,000
Vice President, General Merchandising Manager 125,000
Vice President, Marketing & Sales Promotion 75,000
Vice President, Stores 75,000
[others] 250,000
Exhibit 10.1 - Page 8
<PAGE>
SCHEDULE B
Number of Shares
Underlying Initial Stock Awards
-------------------------------
Chief Executive Officer 160,000
Chief Financial Officer 80,000
Vice President, General Merchandising Manager 80,000
Vice President, Marketing & Sales Promotion 40,000
Vice President, Stores 40,000
Exhibit 10.1 - Page 9
<PAGE>
SCHEDULE C
Herbert R. Douglas -- whether a "change in control" of the Company has occurred
shall be determined by applying the corresponding provision in Mr. Douglas's
employment agreement that determines whether a change in control of the Company
has occurred.
Raymond J. Miller, Jerome L. Feller, James Berens, and Joseph Kassa -- a
"change in control" of the Company shall occur when any "person" (as such term
is used in Sections 3(a)(9) and 13(d) of the Exchange Act) becomes a "beneficial
owner" (as such term is used in Rule 13d-3 under the Exchange Act) of more than
50 percent of the Voting Stock of the Company, except as may otherwise be
provided for in a confirmed plan of reorganization; "Voting Stock" shall mean
capital stock of any class or classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the directors of a
corporation.
Exhibit 10.1 - Page 10
EXHIBIT 10.2
FORM OF
INCENTIVE STOCK OPTION AGREEMENT
GRANTED TO: [name of employee]
DATE OF GRANT: [date]
GRANTED PURSUANT TO: Weiner's Stores, Inc. 1997 Stock Incentive Plan
NUMBER OF UNDERLYING SHARES: [number of shares]
EXERCISE PRICE: [exercise price]
VESTING SCHEDULE: [brief description of vesting schedule]
1. This Incentive Stock Option Agreement (the "Agreement") is made and
entered into as of [ date ] (the "Date of Grant") between Weiner's Stores, Inc.,
a Delaware corporation (the "Company") and [ name of employee ] (the
"Employee"). It is the intent of the Company and the Employee that the Option
(as defined in Paragraph 2 below) shall qualify as an "incentive stock option"
("ISO") under Section 422 of the Internal Revenue Code of 1986, as amended from
time to time, but the Company makes no warranty as to the qualification of the
Option as an ISO. Moreover, to the extent that the aggregate fair market value
of the shares with respect to which the Option and all other ISOs granted to the
Employee by the Company are exercisable for the first time during any calendar
year exceeds $100,000, such options shall not qualify as ISOs.
2. The Employee is granted an option to purchase [ number of shares ]
shares of Weiner's Stores, Inc. Common Stock (the "Option"). The Option is
granted under the Weiner's Stores, Inc. 1997 Stock Incentive Plan (the "Plan"),
a copy of which is enclosed herewith, and is subject to the terms of the Plan
and of this Agreement. Capitalized terms not defined herein shall have the
meanings ascribed thereto in the Plan [or, if not defined therein, in the
employment agreement between the Company and the Employee]. The Option granted
hereunder is a matter of separate inducement and is not in lieu of salary or
other compensation for the Employee's services.
3. The Option's Exercise Price is $__________ per share.
4. Subject to Paragraphs 5 and 6 below, the Option shall become
exercisable according to the vesting schedule set forth below:
[1/3 of shares] shall become exercisable on the
1st anniversary of the Date of Grant and
shall remain exercisable until the 10th
anniversary of the Date of Grant;
[1/3 of shares] shall become exercisable on the
2nd anniversary of the Date of Grant and
shall remain exercisable until the 10th
anniversary of the Date of Grant; and
<PAGE>
[1/3 of shares] shall become exercisable on the
3rd anniversary of the Date of Grant and
shall remain exercisable until the 10th
anniversary of the Date of Grant.
[The following applies only to Herbert R. Douglas, Raymond J. Miller, Jerome L.
Feller, James L. Berens and Joseph J. Kassa:]
Notwithstanding anything contained in this Agreement to the contrary, the entire
Option shall immediately become exercisable on the date of a change in control
of the Company and shall remain exercisable until the 10th anniversary of the
Date of Grant. For purposes of this Agreement, [whether a change in control of
the Company has occurred shall be determined by applying the corresponding
provision in the Employee's employment agreement that determines whether a
change in control of the Company has occurred]1 [a change in control of the
Company shall occur when any "person" (as such term is used in Sections 3(a)(9)
and 13(d) of the Exchange Act) becomes a "beneficial owner" (as such term is
used in Rule 13d-3 under the Exchange Act) of more than 50 percent of the Voting
Stock of the Company, except as may otherwise be provided for in a confirmed
plan of reorganization. For purposes of this Paragraph 4, "Voting Stock" shall
mean capital stock of any class or classes having general voting power under
ordinary circumstances, in the absence of contingencies, to elect the directors
of a corporation]2.
5. The Option, unless sooner terminated or exercised in full, shall
expire on the 10th anniversary of the Date of Grant and, notwithstanding
anything herein to the contrary, no portion of the Option may be exercised after
such date.
6. (a) Death Of Employee. In the event of the death of the Employee,
the unexercisable portion of the Option held by the Employee on the date of the
Employee's death shall immediately become exercisable as of such date and the
entire Option held by the Employee on such date shall remain exercisable until
the earlier of (i) the end of the 12-month period following the date of the
Employee's death, or (ii) the date the Option would otherwise expire.
(b) Retirement Of Employee. If the Employee's employment is
terminated due to retirement, the unexercisable portion of the Option held by
the Employee on the date of the Employee's retirement shall immediately be
forfeited by the Employee as of such date, and the exercisable portion of the
Option held by the Employee on such date shall remain exercisable until the
earlier of (i) the end of the 90-day period following the date of the Employee's
retirement, or (ii) the date the Option would otherwise expire.
(c) Termination Of Employee's Employment For Cause or Voluntary
Termination of Employment. If the Employee's employment is terminated (i) by the
Company or any of its subsidiaries for Cause, or (ii) by the Employee without
Good Reason (other than due to death, Disability or retirement), the entire
Option (both the exercisable and unexercisable portions of the Option) held by
the Employee on the date of the termination of his or her employment shall
immediately be forfeited by the Employee as of such date.
(d) Termination of Employee's Employment Due To Disability, Or
Without Cause, Or For Good Reason. If the Employee's employment is terminated
(i) due to Disability, (ii) by the Company or any of its subsidiaries without
Cause, or (iii) by the Employee for Good Reason, the unexercisable portion of
the Option held by the Employee on the date of the termination of his or her
employment shall immediately become exercisable as of such date and the entire
Option held by the Employee on such date
- --------------------------------------
1 This language applies only to Herbert R. Douglas.
2 This language applies only to Raymond J. Miller, Jerome L. Feller, James L.
Berens and Joseph J. Kassa.
Exhibit 10.2 - Page 2
<PAGE>
shall remain exercisable until the earlier of (x) the end of the 90-day period
following the date of the termination of the Employee's employment, or (y) the
date the Option would otherwise expire.
(e) Definitions. For purposes of this Agreement, the definitions
of the terms "Cause," "Good Reason," and "Disability" shall be the same
definitions of such terms as defined in the Employee's employment agreement with
the Company as in effect; if there is no employment agreement between the
Company and the Employee in effect, the definitions of the terms "Cause," "Good
Reason," and "Disability" are set forth on Exhibit A attached hereto.
7. During the Employee's lifetime, the Option shall not be subject in
any manner to alienation, anticipation, sale, assignment, pledge, encumbrance or
other transfer and shall be exercisable only by the Employee. Upon the death of
the Employee, (i) the Option shall be exercisable only by the executor or
administrator of the estate of the deceased Employee or the person or persons to
whom the deceased Employee's rights with respect to the Option shall pass by
will or the laws of descent and distribution and (ii) the Option shall be
exercisable (x) during the period specified in Paragraph 6(a) above, if the
Employee's employment terminated as a result of his or her death or (y) during
the same period that the Option would have been exercisable by the Employee if
he or she had survived, if the Employee's death occurred after the Employee's
employment terminated.
8. The Employee may exercise the Option regardless of whether any other
option that the Employee has been granted by the Company remains unexercised. In
no event may the Employee exercise the Option for a fraction of a share or for
less than 100 shares.
9. Any exercise of the Option shall be in writing addressed to the
Corporate Secretary of the Company at the principal place of business of the
Company, specifying the Option being exercised and the number of shares to be
purchased. The Option's Exercise Price shall be paid by the Employee on the date
the Option is exercised in cash or, if permitted by the Committee in its sole
discretion, in shares of Common Stock owned by the Employee or by a combination
of cash and previously owned shares. Any shares of Common Stock delivered in
payment of the Exercise Price shall be valued at their then Fair Market Value.
10. By his or her acceptance of this Agreement, the Employee agrees to
reimburse the Company for any taxes required by any government to be withheld or
otherwise deducted and paid by the Company with respect to the issuance or
disposition of the shares subject to the Option. In lieu thereof, the Company
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Company to the Employee. The Company may, in its
discretion, hold the stock certificate or certificates to which the Employee is
entitled upon the exercise of the Option as security for the payment of such
withholding tax liability, until cash sufficient to pay that liability has been
accumulated. In addition, at any time that the Company becomes subject to a
withholding obligation under applicable law with respect to the exercise of a
Nonqualified Stock Option (the "Tax Date"), except as set forth below, a holder
of a Nonqualified Stock Option may elect to satisfy, in whole or in part, the
holder's related personal tax liabilities (an "Election") by (a) directing the
Company to withhold from shares issuable in the related exercise either a
specified number of shares or shares having a specified value (in each case not
in excess of the related personal tax liabilities), (b) tendering shares
previously issued pursuant to the exercise of an Award or other shares of the
Company's Common Stock owned by the holder or (c) combining any or all of the
foregoing Elections in any fashion. An Election shall be irrevocable. The
withheld shares and other shares of Common Stock tendered in payment shall be
valued at their Fair Market Value on the Tax Date. The Committee may disapprove
of any Election, suspend or terminate the right to make Elections or provide
that the right to make Elections shall not apply to particular shares or
exercises. The Committee may impose any additional conditions or restrictions on
the right to make an Election as it shall deem appropriate, including any
limitations necessary to comply with Section 16 of the Exchange Act.
Exhibit 10.2 - Page 3
<PAGE>
11. The Employee shall not have any of the rights of a shareholder with
respect to the shares of Common Stock underlying the Option until the Option is
exercised and the Employee receives such shares.
12. If the Company, in its sole discretion, shall determine that it is
necessary, to comply with applicable securities laws, the certificate or
certificates representing the shares purchased pursuant to the exercise of the
Option shall bear an appropriate legend in form and substance, as determined by
the Company, giving notice of applicable restrictions on transfer under or with
respect to such laws.
13. The Employee covenants and agrees with the Company that if, at the
time of exercise of the Option, there does not exist a Registration Statement on
an appropriate form under the Securities Act of 1933, as amended (the "Act"),
which Registration Statement shall have become effective and shall include a
prospectus that is current with respect to the shares subject to the Option, (i)
that he or she is purchasing the shares for his or her own account and not with
a view to the resale or distribution thereof, (ii) that any subsequent offer for
sale or sale of any such shares shall be made either pursuant to (x) a
Registration Statement on an appropriate form under the Act, which Registration
Statement shall have become effective and shall be current with respect to the
shares being offered and sold, or (y) a specific exemption from the registration
requirements of the Act, but in claiming such exemption, the Employee shall,
prior to any offer for sale or sale of such shares, obtain a favorable written
opinion from counsel for or approved by the Company as to the applicability of
such exemption and (iii) that the Employee agrees that the certificate or
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
14. This Agreement is subject to all terms, conditions, limitations and
restrictions contained in the Plan, which shall be controlling in the event of
any conflicting or inconsistent provisions.
15. This Agreement is not a contract of employment and the terms of the
Employee's employment shall not be affected hereby or by any agreement referred
to herein except to the extent specifically so provided herein or therein.
Nothing herein shall be construed to impose any obligation on the Company to
continue the Employee's employment, and it shall not impose any obligation on
the Employee's part to remain in the employ of the Company.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Exhibit 10.2 - Page 4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date written below.
WEINER'S STORES, INC.
By____________________________
[ title of officer ]
ACCEPTED:
- -------------------------------
Signature of Employee
- -------------------------------
Name of Employee (please print)
Date: _________________________
Exhibit 10.2 - Page 5
<PAGE>
EXHIBIT A
---------
The terms "Cause," "Good Reason," and "Disability" shall have the
meanings set forth below:
I. "Cause" shall mean:
(1) fraud;
(2) material dishonesty relating to the conduct of the business of
the Company or dishonesty which does not relate to the conduct
of the business of the Company which adversely affects the
Company or the Employee's ability to manage the business of
the Company;
(3) the Employee engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out the
Employee's duties as an employee, resulting, in either case,
in material economic harm to the Company, other than:
(A) conduct which is the result of the Employee's
exercise of reasonable business judgment which merely
differs from the business judgment of the Company's
chief executive officer; or
(B) any act or omission which in the Employee's
reasonable and good faith belief was in or not
opposed to the best interests of the Company;
(4) embezzlement;
(5) chronic alcoholism or chronic drug dependency that in either
case precludes the Employee from performing his or her duties
as an employee of the Company; or
(6) the conviction of, or plea of guilty or nolo contendere to, a
felony or any crime involving (i) securities or commodities
laws violations or (ii) moral turpitude.
II. "Good Reason" shall mean the occurrence of any of the following
events within the 30-day period preceding the termination of employment by the
Employee:
(1) a reduction of the Employee's base salary (other than any
reduction applicable to management employees generally);
(2) a material reduction in the Employee's position, duties or
responsibilities with respect to his or her employment by the
Company without the Employee's prior consent;
(3) a change in the Employee's principal work location by more
than 50 miles and more than 50 miles from the Employee's
principal place of abode as of the date of such change in job
location without the Employee's prior consent; or
(4) the failure of the Company to obtain the assumption in writing
of its obligations to pay any earned compensation under the
Plan by any purchaser or other transferee of all or
substantially all of the assets of the Company within 15 days
after a merger, consolidation, sale or similar transaction.
III. "Disability" shall mean a disability as determined under the
Company's then existing long- term disability plan or program.
Exhibit 10.2 - Page 6
EXHIBIT 10.3
FORM OF
NONQUALIFIED STOCK OPTION AGREEMENT
GRANTED TO: [name of employee]
DATE OF GRANT: [date]
GRANTED PURSUANT TO: Weiner's Stores, Inc. 1997 Stock Incentive Plan
NUMBER OF UNDERLYING SHARES: [number of shares]
EXERCISE PRICE: [exercise price]
VESTING SCHEDULE: [brief description of vesting schedule]
1. This Nonqualified Stock Option Agreement (the "Agreement") is made
and entered into as of [ date ] (the "Date of Grant") between Weiner's Stores,
Inc., a Delaware corporation (the "Company") and [ name of employee ] (the
"Employee"). It is the intent of the Company and the Employee that the Option
(as defined in Paragraph 2 below) will not qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986, as amended from
time to time.
2. The Employee is granted an option to purchase [ number of shares ]
shares of Weiner's Stores, Inc. Common Stock (the "Option"). The Option is
granted under the Weiner's Stores, Inc. 1997 Stock Incentive Plan (the "Plan"),
a copy of which is enclosed herewith, and is subject to the terms of the Plan
and of this Agreement. Capitalized terms not defined herein shall have the
meanings ascribed thereto in the Plan [or, if not defined therein, in the
employment agreement between the Company and the Employee]. The Option granted
hereunder is a matter of separate inducement and is not in lieu of salary or
other compensation for the Employee's services.
3. The Option's Exercise Price is $__________ per share.
4. Subject to Paragraphs 5 and 6 below, the Option shall become
exercisable according to the vesting schedule set forth below:
[ number ] shares shall become exercisable on [ date ] and shall
remain exercisable until [ date ]
[ number ] shares shall become exercisable on [ date ] and shall
remain exercisable until [ date ]
[ number ] shares shall become exercisable on [ date ] and shall
remain exercisable until [ date ].
[The following applies only to Herbert R. Douglas, Raymond J. Miller, Jerome L.
Feller, James L. Berens and Joseph J. Kassa:]
<PAGE>
Notwithstanding anything contained in this Agreement to the contrary, the entire
Option shall immediately become exercisable on the date of a change in control
of the Company and shall remain exercisable until [ date ]. For purposes of this
Agreement, [whether a change in control of the Company has occurred shall be
determined by applying the corresponding provision in the Employee's employment
agreement that determines whether a change in control of the Company has
occurred]1 [a change in control of the Company shall occur when any "person" (as
such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) becomes a
"beneficial owner" (as such term is used in Rule 13d-3 under the Exchange Act)
of more than 50 percent of the Voting Stock of the Company, except as may
otherwise be provided for in a confirmed plan of reorganization. For purposes of
this Paragraph 4, "Voting Stock" shall mean capital stock of any class or
classes having general voting power under ordinary circumstances, in the absence
of contingencies, to elect the directors of a corporation]2.
5. The Option, unless sooner terminated or exercised in full, shall
expire on [ expiration date ] and, notwithstanding anything herein to the
contrary, no portion of the Option may be exercised after such date.
6. (a) Death Of Employee. In the event of the death of the Employee,
the unexercisable portion of the Option held by the Employee on the date of the
Employee's death shall immediately become exercisable as of such date and the
entire Option held by the Employee on such date shall remain exercisable until
the earlier of (i) the end of the 12-month period following the date of the
Employee's death, or (ii) the date the Option would otherwise expire.
(b) Retirement Of Employee. If the Employee's employment is
terminated due to retirement, the unexercisable portion of the Option held by
the Employee on the date of the Employee's retirement shall immediately be
forfeited by the Employee as of such date, and the exercisable portion of the
Option held by the Employee on such date shall remain exercisable until the
earlier of (i) the end of the 90-day period following the date of the Employee's
retirement, or (ii) the date the Option would otherwise expire.
(c) Termination Of Employee's Employment For Cause or Voluntary
Termination of Employment. If the Employee's employment is terminated (i) by the
Company or any of its subsidiaries for Cause, or (ii) by the Employee without
Good Reason (other than due to death, Disability or retirement), the entire
Option (both the exercisable and unexercisable portions of the Option) held by
the Employee on the date of the termination of his or her employment shall
immediately be forfeited by the Employee as of such date.
(d) Termination of Employee's Employment Due To Disability, Or
Without Cause, Or For Good Reason. If the Employee's employment is terminated
(i) due to Disability, (ii) by the Company or any of its subsidiaries without
Cause, or (iii) by the Employee for Good Reason, the unexercisable portion of
the Option held by the Employee on the date of the termination of his or her
employment shall immediately become exercisable as of such date and the entire
Option held by the Employee on such date shall remain exercisable until the
earlier of (x) the end of the 90-day period following the date of the
termination of the Employee's employment, or (y) the date the Option would
otherwise expire.
(e) Definitions. For purposes of this Agreement, the definitions
of the terms "Cause," "Good Reason," and "Disability" shall be the same
definitions of such terms as defined in the Employee's employment agreement with
the Company as in effect; if there is no employment agreement between the
- -----------------------
1. This language applies only to Herbert R. Douglas.
2. This language applies only to Raymond J. Miller, Jerome L. Feller, James L.
Berens and Joseph J. Kassa.
Exhibit 10.3 - Page 2
<PAGE>
Company and the Employee in effect, the definitions of the terms "Cause," "Good
Reason," and "Disability" are set forth on Exhibit A attached hereto.
7. During the Employee's lifetime, the Option shall not be subject in
any manner to alienation, anticipation, sale, assignment, pledge, encumbrance or
other transfer and shall be exercisable only by the Employee. Upon the death of
the Employee, (i) the Option shall be exercisable only by the executor or
administrator of the estate of the deceased Employee or the person or persons to
whom the deceased Employee's rights with respect to the Option shall pass by
will or the laws of descent and distribution and (ii) the Option shall be
exercisable (x) during the period specified in Paragraph 6(a) above, if the
Employee's employment terminated as a result of his or her death or (y) during
the same period that the Option would have been exercisable by the Employee if
he or she had survived, if the Employee's death occurred after the Employee's
employment terminated.
8. The Employee may exercise the Option regardless of whether any other
option that the Employee has been granted by the Company remains unexercised. In
no event may the Employee exercise the Option for a fraction of a share or for
less than 100 shares.
9. Any exercise of the Option shall be in writing addressed to the
Corporate Secretary of the Company at the principal place of business of the
Company, specifying the Option being exercised and the number of shares to be
purchased. The Option's Exercise Price shall be paid by the Employee on the date
the Option is exercised in cash or, if permitted by the Committee in its sole
discretion, in shares of Common Stock owned by the Employee or by a combination
of cash and previously owned shares. Any shares of Common Stock delivered in
payment of the Exercise Price shall be valued at their then Fair Market Value.
10. By his or her acceptance of this Agreement, the Employee agrees to
reimburse the Company for any taxes required by any government to be withheld or
otherwise deducted and paid by the Company with respect to the issuance or
disposition of the shares subject to the Option. In lieu thereof, the Company
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Company to the Employee. The Company may, in its
discretion, hold the stock certificate or certificates to which the Employee is
entitled upon the exercise of the Option as security for the payment of such
withholding tax liability, until cash sufficient to pay that liability has been
accumulated. In addition, at any time that the Company becomes subject to a
withholding obligation under applicable law with respect to the exercise of a
Nonqualified Stock Option (the "Tax Date"), except as set forth below, a holder
of a Nonqualified Stock Option may elect to satisfy, in whole or in part, the
holder's related personal tax liabilities (an "Election") by (a) directing the
Company to withhold from shares issuable in the related exercise either a
specified number of shares or shares having a specified value (in each case not
in excess of the related personal tax liabilities), (b) tendering shares
previously issued pursuant to the exercise of an Award or other shares of the
Company's Common Stock owned by the holder or (c) combining any or all of the
foregoing Elections in any fashion. An Election shall be irrevocable. The
withheld shares and other shares of Common Stock tendered in payment shall be
valued at their Fair Market Value on the Tax Date. The Committee may disapprove
of any Election, suspend or terminate the right to make Elections or provide
that the right to make Elections shall not apply to particular shares or
exercises. The Committee may impose any additional conditions or restrictions on
the right to make an Election as it shall deem appropriate, including any
limitations necessary to comply with Section 16 of the Exchange Act.
11. The Employee shall not have any of the rights of a shareholder with
respect to the shares of Common Stock underlying the Option until the Option is
exercised and the Employee receives such shares.
12. If the Company, in its sole discretion, shall determine that it is
necessary, to comply with applicable securities laws, the certificate or
certificates representing the shares purchased pursuant to the
Exhibit 10.3 - Page 3
<PAGE>
exercise of the Option shall bear an appropriate legend in form and substance,
as determined by the Company, giving notice of applicable restrictions on
transfer under or with respect to such laws.
13. The Employee covenants and agrees with the Company that if, at the
time of exercise of the Option, there does not exist a Registration Statement on
an appropriate form under the Securities Act of 1933, as amended (the "Act"),
which Registration Statement shall have become effective and shall include a
prospectus that is current with respect to the shares subject to the Option, (i)
that he or she is purchasing the shares for his or her own account and not with
a view to the resale or distribution thereof, (ii) that any subsequent offer for
sale or sale of any such shares shall be made either pursuant to (x) a
Registration Statement on an appropriate form under the Act, which Registration
Statement shall have become effective and shall be current with respect to the
shares being offered and sold, or (y) a specific exemption from the registration
requirements of the Act, but in claiming such exemption, the Employee shall,
prior to any offer for sale or sale of such shares, obtain a favorable written
opinion from counsel for or approved by the Company as to the applicability of
such exemption and (iii) that the Employee agrees that the certificate or
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
14. This Agreement is subject to all terms, conditions, limitations and
restrictions contained in the Plan, which shall be controlling in the event of
any conflicting or inconsistent provisions.
15. This Agreement is not a contract of employment and the terms of the
Employee's employment shall not be affected hereby or by any agreement referred
to herein except to the extent specifically so provided herein or therein.
Nothing herein shall be construed to impose any obligation on the Company to
continue the Employee's employment, and it shall not impose any obligation on
the Employee's part to remain in the employ of the Company.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Exhibit 10.3 - Page 4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date written below.
WEINER'S STORES, INC.
By____________________________
[ title of officer ]
ACCEPTED:
- -------------------------------
Signature of Employee
- -------------------------------
Name of Employee (please print)
Date: _________________________
Exhibit 10.3 - Page 5
<PAGE>
EXHIBIT A
---------
The terms "Cause," "Good Reason," and "Disability" shall have the
meanings set forth below:
I. "Cause" shall mean:
(1) fraud;
(2) material dishonesty relating to the conduct of the business of
the Company or dishonesty which does not relate to the conduct
of the business of the Company which adversely affects the
Company or the Employee's ability to manage the business of
the Company;
(3) the Employee engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out the
Employee's duties as an employee, resulting, in either case,
in material economic harm to the Company, other than:
(A) conduct which is the result of the Employee's
exercise of reasonable business judgment which merely
differs from the business judgment of the Company's
chief executive officer; or
(B) any act or omission which in the Employee's
reasonable and good faith belief was in or not
opposed to the best interests of the Company;
(4) embezzlement;
(5) chronic alcoholism or chronic drug dependency that in either
case precludes the Employee from performing his or her duties
as an employee of the Company; or
(6) the conviction of, or plea of guilty or nolo contendere to, a
felony or any crime involving (i) securities or commodities
laws violations or (ii) moral turpitude.
II. "Good Reason" shall mean the occurrence of any of the following
events within the 30-day period preceding the termination of employment by the
Employee:
(1) a reduction of the Employee's base salary (other than any
reduction applicable to management employees generally);
(2) a material reduction in the Employee's position, duties or
responsibilities with respect to his or her employment by the
Company without the Employee's prior consent;
(3) a change in the Employee's principal work location by more
than 50 miles and more than 50 miles from the Employee's
principal place of abode as of the date of such change in job
location without the Employee's prior consent; or
(4) the failure of the Company to obtain the assumption in writing
of its obligations to pay any earned compensation under the
Plan by any purchaser or other transferee of all or
substantially all of the assets of the Company within 15 days
after a merger, consolidation, sale or similar transaction.
III. "Disability" shall mean a disability as determined under the
Company's then existing long- term disability plan or program.
Exhibit 10.3 - Page 6
EXHBIT 10.4
FORM OF
RESTRICTED STOCK AGREEMENT
GRANTED TO: [name of employee]
DATE OF GRANT: [date]
GRANTED PURSUANT TO: Weiner's Stores, Inc. 1997 Stock Incentive Plan
NUMBER OF SHARES: [number of shares]
VESTING SCHEDULE: [brief description of vesting schedule]
1. This Restricted Stock Agreement (the "Agreement") is made and
entered into as of [ date ] between Weiner's Stores, Inc., a Delaware
corporation (the "Company") and [ name of employee ] (the "Employee").
2. The Employee is granted [ number of shares ] shares of Weiner's
Stores, Inc. Common Stock (the "Restricted Stock"). The Restricted Stock is
granted under the Weiner's Stores, Inc. 1997 Stock Incentive Plan (the "Plan"),
a copy of which is enclosed herewith, and is subject to the terms of the Plan
and of this Agreement. Capitalized terms not defined herein shall have the
meanings ascribed thereto in the Plan [or, if not defined therein, in the
employment contract between the Company and the Employee]. The Restricted Stock
granted hereunder is a matter of separate inducement and is not in lieu of
salary or other compensation for the Employee's services.
3. The Restricted Stock granted hereunder shall be promptly issued and
a certificate or certificates for such shares shall be issued in the Employee's
name. The Employee shall thereupon be a shareholder of all the shares
represented by the certificate or certificates. As such, the Employee shall have
all the rights of a shareholder with respect to such shares, including, but not
limited to, the right to vote such shares and to receive all dividends and other
distributions paid with respect to them; provided, however, that the shares
shall be subject to the restrictions on transferability in Paragraphs 5 and 6
below. Unless as otherwise provided in this Paragraph 3, the Company shall hold
the certificate or certificates for such shares until the date the restrictions
on transferability are removed in accordance with Paragraphs 5 and 7 below. The
Committee may, in its sole discretion and at any time prior to the date the
restrictions on transferability are removed in accordance with Paragraphs 5 and
7 below, require (i) that the stock certificate or certificates representing
such shares shall be imprinted with a legend stating that the shares represented
thereby are restricted shares subject to the terms and conditions of this
Agreement and, as such, may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except in accordance with the terms of
this Agreement, and if the Committee makes such requirement, then each transfer
agent for the Common Stock shall be instructed to like effect with respect to
such shares and/or (ii) that the Employee shall, upon receipt of the certificate
or certificates therefor, deposit such certificate or certificates together with
a stock power or other like instrument of transfer, appropriately endorsed in
blank, with an escrow agent designated by the Committee, which may be the
Company, under a deposit agreement containing such terms and conditions as the
Committee shall approve, with the expenses of such escrow to be borne by the
Company.
4. If under Section 9 of the Plan, entitled "Adjustment Provisions,"
the Employee, as the owner of the shares of the Restricted Stock, shall be
entitled to new, additional or different shares of
<PAGE>
stock or securities, (i) the Committee may require that the certificate or
certificates for, or other evidences of, such new, additional or different
shares or securities, together with a stock power or other instrument of
transfer appropriately endorsed, shall be (x) imprinted with a legend as
provided in Paragraph 3 above and/or (y) deposited by the Employee under the
deposit agreement provided for therein, and (ii) such certificate or
certificates for, or other evidences of, such new, additional or different
shares or securities, shall be subject to the restrictions on transferability as
provided in Paragraphs 5 and 6 below.
5. Subject to Paragraph 7 below, the shares of the Restricted Stock
shall be subject to restrictions on transferability. Such restrictions shall be
removed from such shares on January 15, 2000 [on January 15, 1999 for Herbert R.
Douglas] (the "Vesting Date").
[The following applies only to Herbert R. Douglas, Raymond J. Miller, Jerome L.
Feller, James L. Berens and Joseph J. Kassa:]
Notwithstanding anything contained in this Agreement to the contrary, all shares
of the Restricted Stock shall immediately become and remain transferable on the
date of a change in control of the Company. For purposes of this Agreement,
[whether a change in control of the Company has occurred shall be determined by
applying the corresponding provision in the Employee's employment agreement that
determines whether a change in control of the Company has occurred]1 [a change
in control of the Company shall occur when any "person" (as such term is used in
Sections 3(a)(9) and 13(d) of the Exchange Act) becomes a "beneficial owner" (as
such term is used in Rule 13d-3 under the Exchange Act) of more than 50 percent
of the Voting Stock of the Company, except as may otherwise be provided for in a
confirmed plan of reorganization. For purposes of this Paragraph 4, "Voting
Stock" shall mean capital stock of any class or classes having general voting
power under ordinary circumstances, in the absence of contingencies, to elect
the directors of a corporation]2.
6. During the period when the Restricted Stock is subject to the
restrictions on transferability, none of the shares of the Restricted Stock
subject to such restrictions shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of except by will or the laws of descent and
distribution. Any attempt by the Employee to dispose of any shares of the
Restricted Stock in any such manner shall result in the immediate forfeiture of
such shares and any other shares then held by the Company or the designated
escrow agent on the Employee's behalf.
7. In the event of the death of the Employee prior to the Vesting
Date, or if prior to the Vesting Date, the Employee's employment is terminated
(i) due to Disability, (ii) by the Company or any of its subsidiaries without
Cause, or (iii) by the Employee for Good Reason, the shares of the Restricted
Stock held by the Employee on the date of his or her death or the date of the
termination of his or her employment, as the case may be, shall immediately
become transferable as of such date. If prior to the Vesting Date, the
Employee's employment is terminated (x) due to the Employee's retirement, (y) by
the Company or any of its subsidiaries for Cause, or (z) by the Employee without
Good Reason (other than due to death or Disability), the shares of the
Restricted Stock held by the Employee on the date of the termination of his or
her employment shall immediately be forfeited by the Employee as of such date.
For purposes of this Agreement, the definitions of the terms "Cause," "Good
Reason," and "Disability" shall be the same definitions of such terms as defined
in the Employee's employment agreement with the Company as in effect; if there
is no employment agreement between the Company and the Employee in effect, the
definitions of the terms "Cause," "Good Reason," and "Disability" are set forth
on Exhibit A attached hereto.
- --------------------
1. This language applies only to Herbert R. Douglas.
2. This language applies only to Raymond J. Miller, Jerome L. Feller, James L.
Berens and Joseph J. Kassa.
Exhibit 10.4 - Page 2
<PAGE>
8. The Company shall pay to the Employee an amount [in cash] equal to
the total federal, state and local income taxes which the Employee would be
obligated to pay at his or her marginal tax rate resulting from (i) the vesting
of the Restricted Stock and (ii) the reimbursement by the Company of all such
taxes which the Employee is obligated to pay in accordance with this Paragraph 8
(such payment to be referred to as the "Gross-Up Payment"). The Employee agrees
that the Company may offset the Gross-Up Payment by any amount the Company is
required by any government to be withheld or otherwise deducted and paid by the
Company with respect to the Restricted Stock and the Gross-Up Payment. By his or
her acceptance of this Agreement, the Employee agrees to irrevocably waive his
or her right to make an election (as permitted under Section 83(b) of the
Internal Revenue Code of 1986, as amended from time to time) to include in gross
income for the taxable year in which the Restricted Stock is granted an amount
equal to the fair market value of the Restricted Stock.
9. If the Company, in its sole discretion, shall determine that it is
necessary, to comply with applicable securities laws, the certificate or
certificates representing any shares delivered to the Employee under this
Agreement shall bear an appropriate legend in form and substance, as determined
by the Company, giving notice of applicable restrictions on transfer under or
with respect to such laws.
10. The Employee covenants and agrees with the Company that if, with
respect to any shares of Common Stock delivered to the Employee pursuant to this
Agreement, there does not exist a Registration Statement on an appropriate form
under the Securities Act of 1933, as amended (the "Act"), which Registration
Statement shall have become effective and shall include a prospectus that is
current with respect to the shares subject to this Agreement, (i) that he or she
takes the shares for his or her own account and not with a view to the resale or
distribution thereof, (ii) that any subsequent offer for sale or sale of any
such shares shall be made either pursuant to (x) a Registration Statement on an
appropriate form under the Act, which Registration Statement shall have become
effective and shall be current with respect to the shares being offered and
sold, or (y) a specific exemption from the registration requirements of the Act,
but in claiming such exemption, the Employee shall, prior to any offer for sale
or sale of such shares, obtain a favorable written opinion from counsel for or
approved by the Company as to the applicability of such exemption and (iii) that
the Employee agrees that the certificate or certificates evidencing such shares
shall bear a legend to the effect of the foregoing.
11. This Agreement is subject to all terms, conditions, limitations and
restrictions contained in the Plan, which shall be controlling in the event of
any conflicting or inconsistent provisions.
12. This Agreement is not a contract of employment and the terms of the
Employee's employment shall not be affected hereby or by any agreement referred
to herein except to the extent specifically so provided herein or therein.
Nothing herein shall be construed to impose any obligation on the Company to
continue the Employee's employment, and it shall not impose any obligation on
the Employee's part to remain in the employ of the Company.
Exhibit 10.4 - Page 3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date written below.
WEINER'S STORES, INC.
By____________________________
[ title of officer ]
ACCEPTED:
- -------------------------------
Signature of Employee
- -------------------------------
Name of Employee (please print)
Date: _________________________
Exhibit 10.4 - Page 4
<PAGE>
EXHIBIT A
---------
The terms "Cause," "Good Reason," and "Disability" shall have the
meanings set forth below:
I. "Cause" shall mean:
(1) fraud;
(2) material dishonesty relating to the conduct of the business of
the Company or dishonesty which does not relate to the conduct
of the business of the Company which adversely affects the
Company or the Employee's ability to manage the business of
the Company;
(3) the Employee engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out the
Employee's duties as an employee, resulting, in either case,
in material economic harm to the Company, other than:
(A) conduct which is the result of the Employee's
exercise of reasonable business judgment which merely
differs from the business judgment of the Company's
chief executive officer; or
(B) any act or omission which in the Employee's
reasonable and good faith belief was in or not
opposed to the best interests of the Company;
(4) embezzlement;
(5) chronic alcoholism or chronic drug dependency that in either
case precludes the Employee from performing his or her duties
as an employee of the Company; or
(6) the conviction of, or plea of guilty or nolo contendere to, a
felony or any crime involving (i) securities or commodities
laws violations or (ii) moral turpitude.
II. "Good Reason" shall mean the occurrence of any of the following
events within the 30-day period preceding the termination of employment by the
Employee:
(1) a reduction of the Employee's base salary (other than any
reduction applicable to management employees generally);
(2) a material reduction in the Employee's position, duties or
responsibilities with respect to his or her employment by the
Company without the Employee's prior consent;
(3) a change in the Employee's principal work location by more
than 50 miles and more than 50 miles from the Employee's
principal place of abode as of the date of such change in job
location without the Employee's prior consent; or
(4) the failure of the Company to obtain the assumption in writing
of its obligations to pay any earned compensation under the
Plan by any purchaser or other transferee of all or
substantially all of the assets of the Company within 15 days
after a merger, consolidation, sale or similar transaction.
III. "Disability" shall mean a disability as determined under the
Company's then existing long- term disability plan or program.
Exhibit 10.4 - Page 5
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
Agreement, dated as of December 1, 1995, between Weiner's Stores,
Inc., a Delaware corporation (the "Company"), and Herbert Douglas (the
"Executive").
W I T N E S S E T H :
-------------------
WHEREAS, the Company desires to employ the Executive as its
President and Chief Executive Officer and the Executive desires to accept such
employment, on all the terms and conditions specified herein; and
WHEREAS, the Executive and the Company desire to set forth in
writing all of their respective duties, rights and obligations with respect to
the Executive's employment by the Company; and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and obligations hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Employment and Term. The Company hereby employs the Executive,
and the Executive hereby accepts employment by the Company, in the capacity and
upon the terms and conditions hereinafter set forth. The term of employment
under this Agreement shall be for the period commencing as of December 11, 1995
and ending on January 31, 1999, unless earlier terminated as herein provided
(the "Term of Employment"). Not later than thirty (30) days prior to the
expiration of the Term of Employment, the Company may make a written offer to
extend the Executive's employment for not less than two (2) years at an annual
compensation equal to not less than the total compensation actually paid by the
Company to the Executive during the Term of Employment (including Performance
Bonuses, plus the Performance Bonuses earned as of October 31, 1998 as the same
may be finally calculated) divided by three (3), and upon such other terms and
conditions of employment which are substantially equivalent to those terms and
conditions of employment set forth in this Agreement. Upon the Executive's
acceptance of such offer, the Executive's term of employment with the Company
shall be deemed
<PAGE>
extended for an additional two (2) years, unless earlier terminated as provided
in Section 5 hereof, upon the compensation terms set forth in the offer and upon
such other terms and conditions of employment set forth herein (the "Extended
Term of Employment"), provided however, that Section 6d) hereof shall be of no
force and effect during any Extended Term of Employment.
2. Duties. During the Term of Employment (or, if applicable, any
Extended Term of Employment), the Executive shall serve as the Company's
President and Chief Executive Officer, and upon election by the Company's Board
of Directors (the "Board"), shall serve as a member of the Board. The Board
shall elect the Executive as a member of the Board prior to the execution of
this Agreement, subject however to execution of this Agreement by the parties
and further subject to the approval of the Bankruptcy Court for the District of
Delaware. As the Company's President and Chief Executive Officer, the Executive
shall direct and manage the affairs of the Company with such duties, functions
and responsibilities (including the right to hire and dismiss employees (subject
to approval of the Board in the case of corporate officers)) as are customarily
associated with and incident to the position of President and Chief Executive
Officer and as the Company may, from time to time, require of him, subject to
the direction of the Company's Board. The Executive shall serve the Company
faithfully, conscientiously and to the best of the Executive's ability and shall
promote the interests and reputation of the Company. Unless prevented by
sickness or disability, the Executive shall devote all of the Executive's time,
attention, knowledge, energy and skills, during normal working hours, and at
such other times as the Executive's duties may reasonably require, to the duties
of the Executive's employment, provided, however, that it shall not be a breach
of this Agreement for the Executive to (1) manage his own private financial
investments; or (2) with the consent of the Board (which consent shall not be
unreasonably withheld) to be a member of the board of directors of other
companies which do not compete with the Company, so long as, in either case,
such activities do not require the Executive to spend a material amount of time
away from his performance of his duties hereunder, do not otherwise interfere
with the Executive's performance of his duties hereunder, or otherwise violate
this Agreement (including, but not limited to, Section 4 hereof) or the
Company's other policies. The principal place of employment of the Executive
shall be the principal executive offices of the Company. The Executive
acknowledges that in
Exhibit 10.5 - Page 2
<PAGE>
the course of his employment he may be required, from time to time, to travel on
behalf of the Company.
3. Compensation, Benefits and Business Expenses. As full and
complete compensation for the Executive's execution and delivery of this
Agreement and performance of any services hereunder, and as the Company's policy
with respect to the reimbursement or payment of the Executive's business
expenses, the Company shall pay, grant or provide the Executive, and the
Executive agrees to accept, the following:
a. Base Salary: The Company shall pay the Executive a base salary
at an annual rate of $450,000 payable at such times and in accordance with the
Company's standard payroll practices for senior executives of the Company.
b. Signing Bonus: The Company shall, on January 2, 1996, pay a
signing bonus to the Executive in the amount of $200,000.
c. Performance Bonus: The Company shall additionally pay the
Executive a Performance Bonus with respect to the Company's 1996, 1997 and 1998
fiscal years in the following amounts and in accordance with the payment
schedule set forth below:
(1) Three percent (3%) of first $2 million of "EBIT" (as defined
below) during each such fiscal year plus (2) four percent (4%) of
next $3.5 million of EBIT during the fiscal year in excess of $2
million (i.e. total potential Performance Bonus of $200,000 each
fiscal year); plus (3) an amount equal to the amount calculated
pursuant to (2), provided that the aggregate amount of Performance
Bonuses under (3) shall not exceed $300,000 during the Term of
Employment.
The Company shall pay the Executive the Performance Bonus payment in the amount
calculated by the Board or its designee under subdivisions (1) and (2) of this
Section 3c within thirty (30) days after completion of its audited financial
statements for each of its 1996, 1997 and 1998 fiscal years, provided, however,
that the Performance Bonus for the Company's 1996 fiscal year (i.e. the year
ending January 31, 1997) shall be a minimum of $200,000 and the Performance
Bonus for the Company's 1997 fiscal
Exhibit 10.5 - Page 3
<PAGE>
year shall be a minimum of $100,000, regardless of the amount calculated under
subdivisions (1) and (2) of this Section 3c. The Company shall pay the Executive
the Performance Bonus payment under subdivision (3) of this Section 3c in the
amount calculated by the Board (after consultation with its regularly employed
accountants) or by the Board's designee, within thirty (30) days after
completion of audited financial statements for its 1998 fiscal year. All annual
Performance Bonuses payable hereunder shall be paid by the Company at the times
provided for above, and shall be deemed earned on October 31 of each fiscal year
during the Term of Employment (or, if applicable, any Extended Term of
Employment), provided that the Executive is employed by the Company as of
October 31 of the applicable fiscal year, even if the Executive is not employed
by the Company on the date that payment is due hereunder, and provided further
that the minimum portion of the Performance Bonuses for the fiscal years 1996
and 1997 shall be paid on the first business day of January 1997 and 1998,
respectively.
For purposes of this Agreement, "EBIT" shall mean: earnings before
income taxes and shall include Net Income (or Net Loss) as determined in
accordance with GAAP (as defined below) consistently applied and reflected in
the Audited Financial Statements for the applicable fiscal year, PLUS (a) the
sum of (i) the excess of gross interest expense over gross interest income, (ii)
total income tax expense, (iii) professional fees incurred related to the
administration of the chapter 11 case, (iv) extraordinary losses, including
losses resulting from store and warehouse closings during the Company's chapter
11 case and losses resulting from inventory and fixture liquidations directly
related to such closings, and (v) negative adjustments related to the cumulative
effect of changes in accounting principles, LESS (b) the sum of (i) the excess
of gross interest income over gross interest expense, (ii) total income tax
benefits, (iii) extraordinary gains, and (iv) positive adjustments related to
the cumulative effect of changes in accounting principles.
For purposes of this Agreement, "GAAP" means generally accepted
accounting principles in the United States in effect from time to time and as
set forth in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such
Exhibit 10.5 - Page 4
<PAGE>
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of the
determination.
d. Medical, Dental and Disability Insurance: The Company shall
afford the Executive the opportunity to participate during the Term of
Employment (and, if applicable, any Extended Term of Employment) in any medical,
dental and disability insurance plans or programs which the Company maintains
for its senior executives. Nothing in this Agreement shall require the Company
to establish, maintain or continue any of the benefit programs already in
existence or hereafter adopted for employees of the Company and nothing in the
Agreement shall restrict the right of the Company to amend, modify or terminate
any such benefit program.
e. Expenses: The Executive shall be entitled to reimbursement or
payment of reasonable business expenses (in accordance with the Company's
policies as amended from time to time in the Company's sole discretion),
following the Executive's submission of appropriate receipts and/or vouchers to
the Company. In accordance with such policies, the Company agrees:
(1) to reimburse the Executive for his attorney's fees up to
$12,000 which the Executive may incur in connection with the negotiations
leading up to the execution of this Agreement following the Executive's
presentation to the Company of an invoice from his attorney reflecting a
description of the attorney's services; and
(2) to reimburse the Executive for all lease payments for the
Executive's existing BMW 740 (or a replacement thereof by an automobile in an
equivalent class and price range at the Executive's option) during the Term of
Employment (and, if applicable, any Extended Term of Employment) and all
maintenance, fuel and insurance expenses associated with the use of such
automobile.
f. Vacations, Holidays or Temporary Leave: The Executive shall be
entitled to take annual vacation without loss or diminution of compensation, not
exceeding four (4) weeks, such vacation to be taken at such time or times, and
as a whole or in increments, as the Executive shall elect, consistent with the
reasonable needs of the Company's business and such vacation policies as may be
established by the Board. The Executive shall further be entitled to the number
of paid holidays, and leaves for illness or
Exhibit 10.5 - Page 5
<PAGE>
temporary disability in accordance with the policies of the Company for its
senior executives, as the Company may amend or terminate such policies from time
to time in its sole discretion.
g. Moving Expenses:
(1) The Company shall reimburse the Executive for his
reasonable moving expenses in connection with the Executive's relocation from
New Jersey to Houston, upon presentation by the Executive of statements or other
supporting evidence of such expenses. Such expenses shall be limited solely to
(i) the mortgage loan origination fee and/or "points" incurred in connection
with the Executive's procurement of a reasonable mortgage for the purchase of a
home in Houston, (ii) other closing costs incurred in connection with the
purchase of the aforementioned home in Houston; (iii) the fee of one
professional mover; and (iv) two (2) round trip plane tickets (coach) for Mrs.
Douglas to inspect and scout out potential residences in the Houston area and
one one-way ticket (coach) from New Jersey to Houston at such time as she
actually moves to Houston. In the event that any of such moving expenses shall
be reflected on a W-2 issued to the Executive by the Company, then the Company
shall further reimburse the Executive for 65% of such reflected amount on or
before April 10 of the year following the year of reimbursement.
(2) The Company shall further reimburse the Executive for his
reasonable living expenses for Executive and his spouse in the Houston area for
up to four (4) months, upon presentation by the Executive of statements or other
supporting evidence of such expenses.
(3) The Company shall arrange for a reputable third party
relocation specialist (the "Purchaser") to purchase the Executive's current home
in Saddle River, New Jersey promptly after the parties execute this Agreement.
The Company's selection of such Purchaser shall be subject to the consent of the
Executive prior to retention of such Purchaser, which consent shall not be
unreasonably be withheld. The Purchaser shall purchase the Executive's home at
fair market value as determined based upon the Purchaser's appraisal of the home
following the Company's retention of the Purchaser, whereupon the Executive's
mortgage obligation shall first be satisfied and then any remaining proceeds of
the purchase shall be paid to the Executive. The Executive agrees to execute all
documents reasonably required to effectuate such purchase.
Exhibit 10.5 - Page 6
<PAGE>
h. Tax Bonus: The Company shall pay the Executive a one-time bonus
in the amount of $125,000 no later than April 10, 1996 (the "Tax Bonus") as full
payment by the Company in respect of income taxes payable by the Executive with
respect to the Signing Bonus payment provided for in Section 3b hereof.
4. Non-Competition and Protection of Confidential Information:
a. Restrictive Covenants:
(1) During the Term of Employment, any Extended Term of Employment
and for one (1) year following the termination of the Executive's employment
with the Company ("Date of Termination"), the Executive shall not directly or
indirectly engage, participate, own or make any financial investments in, or
become employed by or render (whether or not for compensation) any consulting,
advisory or other services to or for the benefit of, any person, firm or
corporation, or otherwise engage in any business activity which directly or
indirectly competes with any of the business operations or activities in which
the Company has engaged within one (1) year prior to the Date of Termination;
provided, however, that it shall not be a violation of this Agreement for the
Executive to have beneficial ownership of less than 3% of the outstanding amount
of any class of securities listed on a national securities exchange or quoted on
an inter-dealer quotation system.
(2) During the Term of Employment, any Extended Term of
Employment and for one (1) year following the Date of Termination, the Executive
shall not, directly or indirectly, solicit, in competition with the Company, any
person who is a customer of any business conducted by the Company.
(3) During the Term of Employment, any Extended Term of
Employment and for one (1) year following the Date of Termination, the Executive
shall not, directly or indirectly, solicit or induce any employee of the Company
to terminate his or her employment for any purpose, including without
limitation, in order to enter into employment with any entity which competes
with any business conducted by the Company.
(4) During the Term of Employment, any Extended Term of
Employment and for all time following the Date of Termination, the Executive
shall not, directly or indirectly, furnish or make
Exhibit 10.5 - Page 7
<PAGE>
accessible to any person, firm, or corporation or other business entity, whether
or not he, she, or it competes with the business of the Company, any trade
secret, technical data, or know-how acquired by the Executive during his
employment by the Company which relates to the business practices, methods,
processes, equipment, or other confidential or secret aspects of the business of
the Company without the prior written consent from the Company, unless such
information is or hereafter may become in the public domain other than by being
divulged or made accessible by the Executive in breach of this provision, or
which is demonstrated by the Executive to the Company's reasonable satisfaction
to be known by him prior to the disclosure to him by the Company, or which is or
may hereafter be disclosed by the Company to third parties without similar
restrictions on disclosure or use, or which is required to be disclosed pursuant
to governmental or judicial process or procedure.
b. Geographic Scope: The provisions of this Section 4 shall be in
full force and effect in each state in the United States where the Company
carries on business at any time during the Term of Employment, any Extended Term
of Employment and for one (1) year following the Date of Termination.
c. Remedies: The Executive acknowledges that his services are of a
special, unique and extraordinary character and, his position with the Company
places him in a position of confidence and trust with the clients and employees
of the Company, and that in connection with his services to the Company, the
Executive will have access to confidential information vital to the Company's
businesses. The Executive further acknowledges that in view of the nature of the
business in which the Company is engaged, the foregoing restrictive covenants in
this Section 4 hereof are reasonable and necessary in order to protect the
legitimate interests of the Company and that violation thereof would result in
irreparable injury to the Company. Accordingly, the Executive consents and
agrees that if the Executive violates or threatens to violate any of the
provisions of this Section 4 hereof the Company would sustain irreparable harm
and, therefore, the Company shall be entitled to obtain from any court of
competent jurisdiction, without the posting any bond or other security,
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits and other benefits arising from
Exhibit 10.5 - Page 8
<PAGE>
such violation, which rights shall be cumulative and in addition to any other
rights or remedies in law or equity to which the Company may be entitled.
d. Termination Without Cause or Resignation For Good Reason: The
Executive's covenants under Section 4a)(1) and 4a)(2) shall be of no force or
effect in the event that the Company terminates the Executive's employment
Without Cause pursuant to Section 5a)(5) hereof or the Executive resigns for
Good Reason as defined in Section 5a)(6) hereof. All other covenants hereunder
shall remain in full force and effect in the event of a termination of the
Executive's employment pursuant to either Section 5a)(5) or Section 5a)(6)
hereof.
5. Termination of Employment:
a. The Executive's employment with the Company shall terminate
upon the occurrence of any of the following events:
(1) the termination of the Executive's employment
for any reason effective upon or following the expiration of the Term of
Employment (or, if applicable, any Extended Term of Employment);
(2) the death of the Executive during the Term
of Employment (or, if applicable, any Extended Term of Employment);
(3) the Disability (as defined below) of Executive
during the Term of Employment (or, if applicable, any Extended Term of
Employment);
(4) during the Term of Employment (or, if
applicable, any Extended Term of Employment) upon not less than fourteen (14)
days' written notice to the Executive from the Company of the termination of his
employment for Cause (as defined below) ("Notice of Termination");
(5) during the Term of Employment (or, if
applicable, any Extended Term of Employment) upon not less than fourteen (14)
days' written notice to the Executive from the Company of termination of his
employment Without Cause (as defined below);
(6) during the Term of Employment (or, if
applicable, any Extended Term of Employment) upon not less than fourteen (14)
days' written notice to the Company of the resignation by the Executive for Good
Reason (as defined below) ("Notice of Resignation"), provided however,
Exhibit 10.5 - Page 9
<PAGE>
notwithstanding Section 10 hereof relating to waivers, in the case of a
resignation by the Executive due to a Change of Control, the Executive's
resignation shall be deemed to have been for Good Reason hereunder only if such
resignation occurs more than three (3) months following such Change of Control,
but less than six (6) months following such Change of Control; or
(7) during the Term of Employment (or, if
applicable, any Extended Term of Employment) upon not less than fourteen (14)
days' written notice to the Company of the resignation by the Executive Without
Good Reason (as defined below) during the Term of Employment (or, if applicable,
any Extended Term of Employment).
b. For purposes of this Agreement, the "Disability" of the
Executive shall mean his inability, because of mental or physical illness or
incapacity, whether total or partial, to perform his duties under this Agreement
for a continuous period of 120 days or for shorter periods aggregating 120 days
out of any 180-day period.
c. For purposes of this Agreement "Cause" shall mean conduct by
the Executive constituting (i) fraud; (ii) material dishonesty relating to the
conduct of the business of the Company or dishonesty which does not relate to
the conduct of the business of the Company which adversely affects the Company
or the Executive's ability to manage the business of the Company; (iii) willful
and material breach of any of the provisions or covenants of this Agreement;
(iv) embezzlement; (v) chronic alcoholism or chronic drug dependency that in
either case precludes his performing his duties contemplated herein; or (vi) the
conviction of or plea or guilty or nolo contendere to a felony, or any crime
involving securities or commodities laws violations or moral turpitude, except
that Cause as defined in clause (iii) shall not mean
(1) conduct which is the result of the Executive's exercise of
reasonable business judgment which merely differs from the business judgment of
the Board; nor
(2) any act or omission which in the Executive's reasonable
and good faith belief was in or not opposed to the best interests of the
Company.
d. For purposes of this Agreement, "Without Cause" shall mean any
reason other than that
Exhibit 10.5 - Page 10
<PAGE>
defined in this Agreement as constituting Cause. The parties expressly agree
that a termination of employment Without Cause pursuant to Section 5a)(5) hereof
may be for any reason whatsoever, or for no reason, in the sole discretion of
the Company.
e. For purposes of this Agreement, "Good Reason" shall mean (i)
willful and material breach of the Agreement by the Company; (ii) assignment of
duties or responsibilities materially inconsistent with those described in
Section 2 hereof without the consent of the Executive; (iii) any Change in
Control (as defined below), or (iv) the Company's failure to maintain during the
Term of Employment and through the last date on which any Performance Bonus
earned during the Term of Employment becomes payable either (a) a letter of
credit as provided for in Section 6f) hereof, or (b) within thirty (30) days
prior to expiration of any letter of credit, to obtain a replacement letter of
credit or, in the alternative, to provide cash collateral that gives the
Executive equivalent protection. Good Reason as defined in subdivision (ii) of
this Section 5e includes:
(1) The cessation of the Executive's membership on the Company's,
or its successor's, Board and/or his removal from the position of Chief
Executive Officer of the Company or its successor;
(2) any change in the Executive's reporting responsibility being
solely to the Board;
(3) the election of any other officer having the right to report
directly to the Board, provided however, that it shall not constitute Good
Reason if (a) another officer is elected to the Board, (b) another officer
reports to the Board with the consent of the Executive, or (c) any officer
reports to the Board as may be required by law; or
(4) the Company's requiring, without the written consent of the
Executive, the Executive to be based at any office or location more than 50
miles from the current offices of the Company in Houston, Texas.
f. For purposes of this Agreement, "Without Good Reason" shall
mean any reason other than that defined in this Agreement as constituting Good
Reason.
g. For purposes of this Agreement, "Change of Control" shall mean
(a) the disposition, whether by sale, merger, consolidation, etc. of all or
substantially all of the Company's assets, unless in advance of any such
disposition the Executive waives this provision in writing; (b) a change of more
than
Exhibit 10.5 - Page 11
<PAGE>
50% in holders of voting common stock of the Company, except as may otherwise be
provided for in a confirmed plan of reorganization; or (c) a contested proxy
solicitation of Company shareholders that results in the contesting party
obtaining the ability to cast 25% or more of the votes entitled to be cast in
electing directors of the Company.
h. Upon the termination of the Executive's employment, the
Executive shall, upon the request of the Company, promptly resign from all
officerships and directorships held by the Executive in the Company or any other
business enterprise in which the Executive is serving at the Company's request.
If the Executive refuses to resign in accordance herewith within seven (7) days
of such request, the Executive agrees that the Executive shall be deemed to have
resigned all of such officerships and directorships as of the date requested by
the Company.
i. A Notice of Termination described in Section 5a)(4) shall state
the Date of Termination and the basis for the Company's determination that the
Executive's actions establish Cause hereunder. Upon the Executive's receipt of a
Notice of Termination, the Executive may, prior to the Date of Termination, seek
to cure any conduct identified in the Notice of Termination as establishing
Cause (to the extent susceptible to cure) and shall, upon his written request,
be accorded the right to address the Board, with or without counsel to the
Executive present at the Executive's option, for the purpose of responding to
the Notice of Termination. Following such meeting between the Executive and the
Board, if the Board does not withdraw or modify the Notice of Termination, the
Executive's employment shall terminate on the Date of Termination stated in the
Notice of Termination.
j. A Notice of Resignation described in Section 5a)(6) shall state
the Date of Termination and the basis for the Executive's determination that the
Company's actions establish Good Reason hereunder. Upon the Company's receipt of
a Notice of Resignation, the Company may, prior to the Date of Termination, seek
to cure any conduct identified in the Notice of Resignation as establishing Good
Reason (to the extent susceptible to cure) and shall, upon the Company's
request, be accorded the right to address the Executive, with or without counsel
to the Executive present at the Executive's option, for the purpose of
responding to the Notice of Resignation. Following such meeting between the
Executive and
Exhibit 10.5 - Page 12
<PAGE>
the Board, if the Executive does not withdraw or modify the Notice of
Resignation, the Executive's employment shall terminate on the Date of
Termination stated in the Notice of Resignation.
6. Payments Upon Termination of Employment:
a. Death or Disability: If the Executive's employment hereunder is
terminated due to the Executive's death or Disability pursuant to Sections
5a)(2) or (3) hereof, the Company shall pay or provide to the Executive, his
designated beneficiary or to his estate (i) all base salary pursuant to Section
3a hereof, any Performance Bonuses pursuant to Section 3c hereof and any
vacation pay pursuant to Section 3f hereof, in each case which has been earned
but which remains unpaid as of the Date of Termination, such payments to be made
at such times as will be in accordance with the Company's normal payroll
practices, and with respect to the Performance Bonuses, at such times as
provided in Section 3c hereof; (ii) any benefits to which the Executive may be
entitled under any medical, dental or disability plan or program pursuant to
Section 3d hereof in which he is a participant in accordance with the terms of
such plan or program up to and including the Date of Termination; and (iii)
within 20 days after the Date of Termination the greater of (a) $900,000 or (b)
the present value of the remaining Base Salary payments which the Executive
would have earned hereunder had he worked during the balance of the Term of
Employment (or, if applicable, the balance of any Extended Term of Employment).
Any payments due and owing pursuant to Section 6a)(iii) immediately above shall
be reduced to the extent that the Executive, his estate or designated
beneficiary receives any payments pursuant to any disability insurance plan or
arrangement or any life insurance policy maintained by the Company. Should the
Company wish to purchase insurance to cover the costs associated with the
Executive's termination of employment pursuant to Sections 5a)(2) or (3), the
Executive agrees to execute any and all necessary documents necessary to
effectuate said insurance. Upon termination of the Executive's employment due to
the Executive's Disability, the Executive shall continue to have the obligations
provided for in Section 4 hereof. The Executive may designate in writing to the
Chief Financial Officer of the Company from time to time a beneficiary to whom
payments shall be made hereunder in the event of the Executive's death. In the
absence of such a designation payments shall be made to the Executive's estate
in the event of the Executive's death. The Company's obligation to make any
payment pursuant to Section 6a) (iii)
Exhibit 10.5 - Page 13
<PAGE>
shall be conditioned upon the Company's prior receipt of an executed general
release of claims and covenant not to sue. The interest rate which shall be used
in making any present value calculations pursuant to this Section 6 shall be the
30-year treasury rate prevailing on the close of business on the Date of
Termination.
b. Termination for Cause or Resignation Without Good Reason: If
the Executive's employment hereunder is terminated due to the termination of the
Executive's employment by the Company for Cause pursuant to Section 5a)(4) or
due to the Executive's resignation Without Good Reason pursuant to Section
5a)(7), the Company shall pay or provide to the Executive (i) all base salary
pursuant to Section 3a hereof, any Performance Bonus pursuant to Section 3c
hereof and any vacation pay pursuant to Section 3f hereof, in each case which
has been earned but which remains unpaid as of the Date of Termination, such
payments to be made at such times as will be in accordance with the Company's
normal payroll practices, and with respect to the Performance Bonuses, at such
times as provided in Section 3c hereof; and (ii) any benefits to which the
Executive may be entitled under any medical, dental or disability plan or
program pursuant to Section 3d hereof in which he is a participant in accordance
with the terms of such plan or program up to and including the Date of
Termination.
c. Termination Without Cause or Resignation For Good Reason: If
the Executive's employment hereunder is terminated due to the termination of the
Executive's employment by the Company Without Cause pursuant to Section 5a)(5)
or due to the Executive's resignation for Good Reason pursuant to Section
5a)(6), the Company shall pay or provide to the Executive (i) all base salary
pursuant to Section 3a hereof, any Performance Bonus pursuant to Section 3c
hereof and any vacation pay pursuant to Section 3f hereof, in each case which
has been earned but which remains unpaid as of the Date of Termination, such
payments to be made at such times as will be in accordance with the Company's
normal payroll practices, and with respect to the Performance Bonuses, at such
times as provided in Section 3c hereof; (ii) any benefits to which the Executive
may be entitled under any medical, dental or disability plan or program pursuant
to Section 3d hereof in which he is a participant in accordance with the terms
of such plan or program up to and including the Date of Termination; and (iii)
within 20 days after the Date of Termination a payment in an amount equal to the
greater of (a) $900,000
Exhibit 10.5 - Page 14
<PAGE>
or (b) the present value of the remaining Base Salary payments which the
Executive would have earned hereunder had he worked during the balance of the
Term of Employment (or, if applicable, during the balance of any Extended Term
of Employment). The Company's obligation to make the payment pursuant to Section
6c)(iii) shall be conditioned upon the Company's prior receipt of an executed
general release of claims and covenant not to sue.
d. Expiration of Term of Employment Without Renewal: If the
Executive's employment terminates for any reason effective upon or following the
expiration of the Term of Employment pursuant to Section 5a)(1), the Company
shall pay or provide to the Executive (i) all base salary pursuant to Section 3a
hereof, any Performance Bonus pursuant to Section 3c hereof and any vacation pay
pursuant to Section 3f hereof, in each case which has been earned but which
remains unpaid as of the date of termination of the Executive's employment, such
payments to be made at such times as will be in accordance with the Company's
normal payroll practices, and with respect to the Performance Bonuses, at such
times as provided in Section 3c hereof; (ii) any benefits to which the Executive
may be entitled under any medical, dental or disability plan or program pursuant
to Section 3d hereof in which he is a participant in accordance with the terms
of such plan or program up to and including the Date of Termination; and (iii)
within 20 days after the Date of Termination, a payment in an amount equal to,
at the Executive's option, either (a) a lump sum equal to the present value of
the Executive's then current base salary for two (2) years following the Date of
Termination, or (b) continuation of the Executive's then current base salary for
two (2) years following the Date of Termination, provided, however, that the
Company shall have no obligation to make the payment(s) described in subdivision
(iii)(a) or (iii)(b) hereof if, prior to the expiration of the Term of
Employment, the Company has made an offer to extend the Executive's employment
pursuant to Section 1 hereof. Sections 6d)(iii) (a) and (b) shall be null and
void during any Extended Term of Employment. The Company's obligation to make
the payment pursuant to Section 6d)(iii) shall be conditioned upon the Company's
prior receipt of an executed general release of claims and covenant not to sue.
e. No Other Payments: Except as provided in this Section 6, the
Executive shall not be entitled to receive any other payments or benefits from
the Company due to the termination of his
Exhibit 10.5 - Page 15
<PAGE>
employment by the Company, including but not limited to, any employee benefits
under any of the Company's employee benefits plans or programs (other than at
the Executive's expense under the Consolidated Omnibus Budget Reconciliation Act
of 1985 or pursuant to the terms of any pension plan which the Company may have
in effect from time to time) or any right to be paid severance pay.
f. Letter of Credit: The payments provided in Sections 6a(iii),
6c(iii) or 6d(iii) and any other compensation which the Executive has earned and
which is due to the Executive and unpaid as of the Date of Termination shall be
secured during the Term of Employment and through the last date on which any
Performance Bonus earned during the Term of Employment is payable by: (a) a
clean, irrevocable letter of credit in the amount of $900,000 which the Company
shall procure by the later of (1) ten (10) days after the execution of this
Agreement or (2) two (2) days after approval of this Agreement by the Bankruptcy
Court for the District of Delaware; or (b) within thirty (30) days prior to
expiration of any letter of credit during the Term of Employment and through the
last date on which any Performance Bonus earned during the Term of Employment is
payable, a replacement letter of credit or, in the alternative, cash collateral
that gives the Executive protection equivalent to the letter of credit described
in subdivision 6f)(a) hereof.
7. No Conflicting Agreements. The Executive hereby represents and
warrants that he is not a party to any agreement, or non-competition or other
covenant or restriction contained in any agreement, commitment, arrangement or
understanding (whether oral or written), which would in any way conflict with or
limit his ability to commence work on the first day of the Term of Employment or
would otherwise limit his ability to perform all responsibilities in accordance
with the terms and subject to the conditions of this Agreement. In addition, the
Executive represents and warrants that he has Good Reason to terminate his
employment with Jamesway Corporation pursuant to Section 6(c) or (d) of the
employment agreement dated September 1, 1994 with Jamesway Corporation. The
Executive acknowledges that the Company did not in any way induce or otherwise
solicit the termination of his employment with Jamesway Corporation.
8. Deductions and Withholding. The Executive agrees that the
Company shall withhold from any and all compensation required to be paid to the
Executive pursuant to this Agreement all
Exhibit 10.5 - Page 16
<PAGE>
federal, state, local and/or other taxes which the Company determines are
required to be withheld in accordance with applicable statutes and/or
regulations from time to time in effect and all amounts required to be deducted
in respect of the Executive's coverage under applicable employee benefit plans.
9. Entire Agreement. This Agreement embodies the entire agreement
of the parties with respect to the Executive's employment and supersedes any
other prior oral or written agreements between the Executive and the Company.
This Agreement may not be changed or terminated orally but only by an agreement
in writing signed by the parties hereto.
10. Waiver. The waiver by the Company of a breach of any provision
of this Agreement by the Executive shall not operate or be construed as a waiver
of any subsequent breach by the Executive. The waiver by the Executive of a
breach of any provision of this Agreement by the Company shall not operate or be
construed as a waiver of any subsequent breach by the Company.
11. Governing Law. This Agreement shall be subject to, and
governed by, the laws of the State of Delaware applicable to contracts made and
to be performed in the State of Delaware, regardless of where the Executive is
in fact required to work.
12. Assignability. The obligations of the Executive may not be
delegated and, except as expressly provided in Section 6a relating to the
designation of beneficiaries, the Executive may not, without the Company's
written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate
or otherwise dispose of this Agreement or any interest therein. Any such
attempted delegation or disposition shall be null and void and without effect.
The Company and the Executive agree that this Agreement and all of the Company's
rights and obligations hereunder may be assigned or transferred by the Company
to and shall be assumed by and binding upon and shall inure to the benefit of
any successor to the Company. The term "successor" shall mean, with respect to
the Company or any of its subsidiaries, any corporation or other business entity
which, by merger, consolidation, purchase of the assets, or otherwise, acquires
all or a material part of the assets of the Company.
13. Severability. If any provision of this Agreement as applied to
either party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Exhibit 10.5 - Page 17
<PAGE>
Agreement. If any court construes any of the provisions of Section 4 hereof, or
any part thereof, to be unreasonable because of the duration of such provision
or the geographic or other scope thereof, such court may reduce the duration or
restrict the geographic or other scope of such provision and enforce such
provision as so reduced or restricted.
14. Notices. All notices to the Executive hereunder shall be in
writing and shall be delivered personally or sent by registered or certified
mail, return receipt requested, to:
Herbert Douglas
3 Pell Farm Road
Saddle River, New Jersey 07458
All notices to the Company hereunder shall be in writing and shall be delivered
personally or sent by registered or certified mail, return receipt requested,
to:
Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attn: Chairman of the Board
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party.
15. Effective Date. This Agreement shall be effective following
(i) execution of four originals of this Agreement by both parties; (ii) approval
by the Board; and (iii) approval by the Bankruptcy Court for the District of
Delaware.
16. Paragraph Headings. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
18. Construction. All of the parties to this Agreement were
represented by counsel and this document was negotiated by counsel, and no party
may rely on any drafts of this Agreement in any interpretation of this
Agreement. Each party and counsel for each party to this Agreement has reviewed
this Agreement and has participated in its drafting and, accordingly, no party
shall attempt to invoke the
Exhibit 10.5 - Page 18
<PAGE>
normal rule of construction to the effect that ambiguities are to be resolved
against the drafting party in any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
/s/ Herbert R. Douglas Weiner's Stores, Inc.
----------------------------
Herbert Douglas
By: /s/ Leon Weiner
----------------------------
Leon Weiner
Weiner's Stores, Inc.
By: /s/ Sol Weiner
----------------------------
Sol Weiner
Exhibit 10.5 - Page 19
EXHIBIT 10.6
[Letterhead of Weiner's Stores, Inc.]
May 1, 1997
Mr. Herbert R. Douglas
1531 Nantucket Drive
Houston, Texas 77057
Dear Herb:
This letter sets forth the terms and conditions of the amendment to the
Employment Agreement (the "Agreement") dated as of December 1, 1995 between
Weiner's Stores, Inc., and you.
Paragraph 5(g) of the Agreement shall be amended to add the following at the end
of that paragraph:
In addition to the foregoing, a Change of Control also shall occur when
any "person" (as such term is used in Sections 3(a)(9) and 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
becomes a "beneficial owner" (as such term is used in Rule 13d-3 under
the Exchange Act) of more than 50 percent of the Voting Stock of the
Company, except as may otherwise be provided for in a confirmed plan of
reorganization. "Voting Stock" shall mean capital stock of any class or
classes having general voting power under ordinary circumstances, in
the absence of contingencies, to elect the directors of a corporation.
This agreement shall become effective upon execution by both parties and
delivery of a fully executed document to the Company.
If you agree that the above sets forth our agreement regarding the terms and
conditions of the amendment to your Agreement, please sign and date this
agreement in the spaces provided below and return it to Ray Miller.
Very truly yours,
/s/ Sol B. Weiner /s/ Leon Weiner
Sol B. Weiner Leon Weiner
Co-Chairman of the Board Co-Chairman of the Board
Accepted and Agreed:
/s/ Herbert R. Douglas
Herbert R. Douglas
Date: May 1, 1997
EXHIBIT 10.7
WEINER'S STORES, INC.
EMPLOYMENT AGREEMENT
Draft: 2/23/95
AGREEMENT made as of this 24th day of February, 1995 between Weiner's
Stores, Inc., a Texas corporation (the "Company"), and Raymond J. Miller (the
"Executive").
RECITALS:
The Company desires to assure itself of the services of the Executive
on a full time basis for an extended period.
The Executive desires to join and continue in the employ of the Company
and is willing to enter into this Agreement to provide his services to the
Company for such period and upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
Section 1. Employment.
1.1 Position. Subject to the terms and conditions hereof, the Company
agrees to employ the Executive, and the Executive agrees to accept employment by
the Company, for the term of employment hereinafter agreed. The Executive shall
serve as Chief Financial Officer of the Company. The Executive shall report to
the new Chief Executive Officer at the time the new Chief Executive Officer
joins Weiner's and shall perform such duties and services as are customarily
performed by executives holding the aforesaid position. The Executive agrees to
devote such efforts, skills and time during reasonable business hours to the
performance of his duties hereunder as is customary with executive employees
holding a position comparable to that of the Executive.
1.2 Outside Services.
(a) During the term of this Agreement, the Executive shall not,
directly or indirectly, without the written consent of the Vice President -
Operations, render any services to any person, firm or entity, or own manage,
operate, control or participate in the management of any other person, firm or
<PAGE>
entity which is in competition with the business of the Company or its
subsidiaries as such businesses are being conducted on the date the activities
prohibited by this subparagraph are alleged to have occurred. The foregoing
provision shall not, however, prohibit or prevent the Executive from acquiring
or holding investments in securities on a national or regional securities
exchange or sold in the over-the-counter public market, provided that the
Executive is not part of any control group of such corporation or entity. So
long as it does not interfere with his duties under this Agreement, the
Executive shall have the right to serve as a director of any other corporation
upon the written approval of a majority of the Board of Directors of the
Company, which approval will not be unreasonably withheld.
(b) Notwithstanding the provisions of subsection (a) of this
Section 1.2, from February 7, 1995 to and including March 20, 1995 (the
"Consulting Period"), the Executive shall be permitted to provide financial,
operational and other consulting services to Carlisle Retailers, Inc.
("Carlisle"), including reasonable travel to Carlisle's corporate offices in
Ashtabula, Ohio upon not less than 24 hours prior notice to the Company. The
Executive shall exert his best efforts to avoid material disruption to or in the
rendering of his services to the Company by virtue of his rendering of
consulting services to Carlisle during the Consulting Period.
1.3 Location. The Executive's services during the term of this
Agreement shall be performed primarily in Houston, Texas, and, without his prior
consent, the Executive shall not be required to move his place of permanent
employment out of Houston, Texas. The Executive may be required to travel from
time to time within the continental United States in the course of his duties,
but the Executive shall not be required to devote more than a reasonable amount
of his working time during the term of this Agreement to performing his duties
and responsibilities at locations outside of Houston, Texas.
Section 2. Term.
The initial term of this Agreement shall be for the period beginning as
of February 7, 1995 and ending on January 31, 1998 (the "Initial Term"). The
parties hereto anticipate that, commencing six calendar months prior to the
expiration of the Initial Term, such parties will attempt to negotiate an
extension or renewal of this Agreement. Pending execution and delivery of such
agreement, this Agreement shall continue in effect subsequent to expiration of
the Initial Term but may be terminated by
Exhibit 10.7 - Page 2
<PAGE>
either party hereto as of the end of any calendar month after the end of the
Initial Term upon the giving of thirty (30) days' advance notice by such party
to the other. If this Agreement is terminated after the expiration of the
Initial Term without extension or renewal hereof, the Company agrees to pay to
the Executive a lump-sum severance payment in cash of $43,750.
Section 3. Compensation.
3.1 Base Salary. In consideration of the services and duties to be
rendered and performed by the Executive, the Company will pay the Executive a
fixed salary (the "Base Salary"), payable in accordance with the policies of the
Company of general application to executive personnel. As of the date hereof,
those policies provide for payment of salaries to executive personnel in arrears
in equal biweekly installments at the end of each two week period. The amount of
the Base Salary shall, unless otherwise increased by act of the Board of
Directors, be determined as follows:
(a) For the period from February 7, 1995 through January 31, 1996,
the amount of the Base Salary shall be $162,500;
(b) for the period from February 1, 1996 through January 31, 1997,
the Base Salary shall be $175,000; and
(c) for the period from February 1, 1997 through January 31, 1998,
the Base Salary Shall be $175,000.
3.2 Additional Benefits.
(a) In addition to the compensation provided elsewhere in this
Agreement, during the term hereof the Executive shall be enticed to participate
in any pension plan, bonus plan, profit sharing plan, stock option, group
insurance plan, medical plan, hospitalization plan or other employee benefit
plan currently in effect or hereafter adopted by the Company (or any subsidiary
of the Company, if applicable) which is applicable to employees or executive
employees generally. The Company agrees that it will, to the extent reasonably
practicable, cause the underwriter of risks under the Company's hospitalization
and medical plan (including the Company to the extent applicable) to waive any
limitations contained in such plan relating to participation therein by the
Executive based on any waiting period or the absence of any preexisting health
condition.
Exhibit 10.7 - Page 3
<PAGE>
(b) During the term of this Agreement, the Executive shall be
entitled to annual vacations of three weeks duration.
(c) During the term of this Agreement, the Executive shall be
entitled to reimbursement for all reasonable travel and other business expenses
incurred in connection with his services to the Company. In addition, during the
period from the date hereof through July 31, 1995, the Executive shall be
entitled to reimbursement of actual costs of housing and car rental in Houston,
Texas and for travel to his residence in Ashtabula, Ohio; provided, however,
that such reimbursement shall not exceed $2,500 per calendar month. The Company
shall reimburse the Executive for all reasonable moving, relocation and directly
related expenses incurred by the Executive in establishing a residence in the
Houston, Texas area.
Section 4. Termination.
4.1 Rights of Termination. This Agreement may, on thirty (30) days'
advance notice given by the terminating party, be terminated as of the end of
such thirty (30) day period (the "Termination Date"):
(a) During the period from the date hereof to June 30, 1995, by
the Executive (an "Executive Rightful Termination");
(b) During the period from the date hereof to June 30, 1995, by
the Company without cause (as such term is hereinafter defined) (a "Company
Rightful Termination"); or
(c) At any time by the Company for cause.
4.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 4.1 herein and
(a) such termination is an Executive Rightful Termination, then
the Executive's compensation for which provision is made in Section 3 herein
shall be continued until the Termination Date, the Executive shall, in addition,
be paid the sum of $25,000 and, except for the provisions of Sections 4, 5, 10
and 11 (the "Surviving Sections") which shall remain in full force and effect,
this Agreement shall terminate as of the Termination Date;
(b) such termination is a Company Rightful Termination, then the
Executive's compensation for which provision is made in Section 3 herein shall
be continued until the Termination Date, the
Exhibit 10.7 - Page 4
<PAGE>
Executive shall, in addition, be paid the sum of $50,000 and, except for the
Surviving Sections which shall remain in full force and effect, this Agreement
shall terminate as of the Termination Date; or
(c) such termination is by the Company for cause, then the
Executive's compensation for which provision is made in Section 3 herein shall
be continued until the Termination Date and, except for the Surviving Sections
which shall remain in full force and effect, this Agreement shall terminate as
of the Termination Date.
In the event of an Executive Rightful Termination or a Company Rightful
Termination, except with respect to the Surviving Sections, neither the Company
nor the Executive shall have any claim of whatever nature against the other
based on the termination of this Agreement.
If the Termination Date shall not coincide with the end of a calendar
month, the Executive's compensation for that calendar month shall be prorated to
the Termination Date.
4.3 Procedure for Termination for Cause. Termination by the Company for
"cause" shall only mean termination by action of the Board of Directors of the
Company because of (i) serious willful misconduct or gross negligence by the
Executive in respect to his obligations under this Agreement, including without
limitation the Executive's willful refusal to perform his obligations under this
Agreement (unless such refusal is based on the Executive's reasonable good faith
belief that the requested service or act is unlawful), the commission by the
Executive of a felony, the perpetration by the Executive of a civil or criminal
fraud and the commission by the Executive of an act of commercial bribery, or
(ii) the inability of the Executive to perform his duties by reason of chronic
alcoholism, drug abuse or other directly related conditions. Termination for
"cause" shall be effected by written notice thereof delivered by the Company to
the Executive, stating in detail the grounds therefor, and shall be effective
thirty (30) days following the date of such notice; provided, however, that, if
(i) such termination is because of the Executive's willful refusal to perform
any one or more of his obligations under this Agreement, (ii) such notice is the
first notice of termination delivered by the Company to the Executive hereunder
and (iii) within thirty (30) days following the date of such notice the
Executive has used his best efforts to discharge such obligations, the
termination shall not be effective. The Executive may, by written notice given
to the Board of Directors of the Company within ten (10) days following
Exhibit 10.7 - Page 5
<PAGE>
receipt of the notice of termination, cause the manner of the termination of
this Agreement by the Company to be reviewed by the Board of Directors of the
Company prior to the Termination Date at a regular or special meeting of the
Board of Directors. The Executive shall be entitled to be represented by counsel
at such meeting, which shall be conducted according to a procedure deemed
equitable by a majority of the directors. If at such meeting it shall be
determined that there does not exist proper cause to terminate this Agreement,
the Executive shall be reinstated or shall continue his employment, as the case
may be, and all of the provisions of this Agreement shall continue in effect as
if the notice of termination had not been given; the Executive shall be entitled
to receive the compensation and all other benefits provided herein from the date
the notice of termination became effective through the date of the Executive's
reinstatement if the notice of termination became effective prior to the
Executive's reinstatement by the Board of Directors.
4.4 Other Termination Provisions.
(a) If the Executive's employment is terminated by the Company
prior to the expiration of the Initial Term other than pursuant to subsection
(b) or (c) of Section 4.1 and
(i) such termination occurs during the period from
July 1, 1995 through January 31, 1996, then, in lieu of any further payment of
Base Salary or any other compensation for which provision is made in Section 3
herein, the Company shall pay the Executive the sum of $162,500 as liquidated
damages; or
(ii) such termination occurs subsequent to January 31,
1996 and prior to the expiration of the Initial Term, then, in lieu of any
further payment of Base Salary or any other compensation for which provision is
made in Section 3 herein, the Company shall pay the Executive the sum of
$175,000 as liquidated damages.
(b) If the Executive's employment is terminated by the Executive
prior to the expiration of the Initial Term other than pursuant to Section 4.1,
then the Executive shall forfeit all rights to compensation under paragraph 3
hereof which arise after the Termination Date. Except for actions constituting
cause (as defined in Section 4.3 herein) and the Surviving Sections, the Company
shall have no claim of whatever nature against the Executive based upon such
termination of this Agreement.
Exhibit 10.7 - Page 6
<PAGE>
(c) If the Executive's employment is terminated by either the
Company or the Executive pursuant to the provisions of this Section 4.4, the
date of notice of such termination given by the Company or the Executive shall
be deemed the Termination Date hereunder and this Agreement shall terminate as
of the Termination Date except for the Surviving Sections which shall remain in
full force and effect.
Section 5. Confidentiality.
The Executive agrees that he will not disclose or use, either during or
subsequent to his employment hereunder, except in pursuance of the business of
the Company and its subsidiaries and affiliates, any knowledge, information or
data about or concerning the Company and its subsidiaries and affiliates which
he may receive or develop during the course of his employment relating to
improvements, inventions, discoveries, formulae, processes, trademarks, trade
secrets, copyrights, literal ideas, creations and properties, accounting
methods, information systems, business or financial plans or reports, customer
lists or any other matters which are of a secret or confidential nature. Any and
all materials in the possession or under the control of the Executive containing
any such secret or confidential information shall be and remain the exclusive
property of the Company and shall promptly be delivered to the Company by the
Executive upon any termination or expiration of his employment hereunder. The
Executive acknowledges that a remedy at law for any breach by him of any of the
provisions of this paragraph 5 will be inadequate and the Executive hereby
agrees that the Company shall be entitled to injunctive relief in that case.
Section 6. Notices.
All notices and other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or 72 hours after being mailed by registered
or certified mail as follows (or to such other or additional addresses as either
party shall designate by notice in writing to the other in accordance herewith):
If to the Company: Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 71055
Attn: Mr. Andy I. Weiner
Executive Vice President
Exhibit 10.7 - Page 7
<PAGE>
If to the Executive: Raymond J. Miller
3919 Essex Lane, #244
Houston, Texas 77027
Section 7. Amendments and Waivers.
This Agreement may be amended, modified, superseded, cancelled, renewed
or extended only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving a provision hereof. Failure of
either party at any time or times to require performance of any provision hereof
shall in no manner effect the right of such party at a later time to enforce the
same. No waiver by either party of the breach of any term or covenant contained
in this Agreement, whether by conduct or otherwise, shall be deemed to be a
further or continuing waiver of any such breach or a waiver of any other term or
covenant herein.
Section 8. Complete Agreement.
This Agreement is the entire agreement of the parties with respect to
the subject matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties.
Section 9. Assignability.
This Agreement shall not be assignable, in whole or in part, by either
party, except that this Agreement shall be binding upon, and the Company may
assign this Agreement to, any subsidiary or affiliate of the Company or any
person, firm or corporation with which the Company may be merged or consolidated
or which may acquire all or substantially all of the assets of the Company.
Section 10. Legal Expenses.
In the event of a dispute resulting in litigation in connection with
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and expenses from the losing party.
Section 11. Arbitration.
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof shall be settled by arbitration in the City of Houston,
Texas in accordance with the rules then obtaining of the American Arbitration
Association and judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
Exhibit 10.7 - Page 8
<PAGE>
Section 12. Reformation.
If any court shall hold any provision of this Agreement unenforceable,
it is the intent of the parties that this Agreement be reformed in order to
comply with the requirements of law and be thereafter enforced to its fullest
legal extent.
Section 13. Authority.
The Company and the Executive represent and warrant each to the other
that the execution, delivery and performance of this Agreement by such party
have been authorized by any and all requisite action by or on behalf of such
party and will not violate or cause a default under any contract, agreement or
other instrument to which such party is a part or by which such party is bound.
Section 14. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, without regard to the
application of conflicts of laws principles, and, subject to the provisions of
Section 11 herein, the parties hereto agree to submit to the jurisdiction of the
courts of Texas in connection with any dispute arising out of this Agreement.
Exhibit 10.7 - Page 9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
WEINER'S STORES, INC. WEINER'S STORES, INC.
By: /s/ Leon Weiner By: /s/ Andy I. Weiner
Leon Weiner Andy I. Weiner
Chairman of The Board Vice President - Operations
Executive Vice President
By: /s/ Sol B. Weiner /s/ Raymond J. Miller
Sol B. Weiner RAYMOND J. MILLER
President
Exhibit 10.7 - Page 10
EXHIBIT 10.8
WEINER'S STORES, INC.
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Amendment No. 1 made as of this 7th day of April, 1995
("this Amendment") to the Employment Agreement made as of the 24th day of
February, 1995 (the "Agreement") between Weiner's Stores, Inc., a Texas
corporation (the "Company"), and Raymond J. Miller (the "Executive").
RECITALS:
The Company and the Executive are parties to the Employment
Agreement.
The Company and the Executive desire to amend the Agreement as
set forth below.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained herein, the parties hereto agree as follows:
Section 1. Amendments.
(a) Section 2 of the Agreement is amended by substituting
"$200,000" for "$43,750" in the last line thereof.
(b) Section 3.1 of the Agreement is amended and restated in
its entirety to read as follows:
"3.1 Base Salary. In consideration of the services
and duties to be rendered and performed by the Executive, the
Company will pay the Executive a fixed salary (the "Base
Salary"), payable in accordance with the policies of the
Company of general application to executive personnel. As of
the date hereof, those policies provide for payment of
salaries to executive personnel in arrears in equal weekly
installments at the end of each week. The amount of the Base
Salary shall, unless otherwise increased by act of the Board
of Directors, be $200,000."
(c) Section 3.2(a) of the Agreement is amended by adding
thereto the following as the third sentence thereof:
"The Company agrees that it will pay or caused to be paid, or
waive or reimburse the Executive for, any costs or
contributions otherwise payable by the Executive as a
condition to participation in the Company's medical plan or
hospitalization plan, other such than deductible, co-payment
or similar amounts as may be provided in any such plan."
(d) Section 4.1 of the Agreement is amended and restated in
its entirety to read as follows:
"4.1 Right of Termination for Cause. This Agreement
may, on thirty (30) days' advance notice given by the Company,
be terminated as of the end of such thirty (30) day period
(the "Termination Date") at any time by the Company for
cause."
<PAGE>
(e) Section 4.2 of the Agreement is amended and restated in
its entirety to read as follows:
"4.2 Effect of Termination for Cause. If this
Agreement is terminated pursuant to Section 4.1 herein, then
the Executive's compensation for which provision is made in
Section 3 herein shall be continued until the Termination Date
and, except for the provisions of Sections 4, 5, 10 and 11
(the "Surviving Sections") which shall remain in full force
and effect, this Agreement shall terminate as of the
Termination Date.
If the Termination Date shall not coincide with the
end of a calendar month, the Executive's compensation for that
calendar month shall be prorated to the Termination Date."
(f) Section 4.4(a) of the Agreement is amended and restated in
its entirety to read as follows:
"(a) if the Executive's employment is terminated by
the Company prior to the expiration of the Initial Term other
than pursuant to Section 4.1, the Company shall pay the
Executive the sum of $200,000 as liquidated damages, which
shall constitute the Executive's sole and exclusive remedy in
connection with any such termination, all other remedies being
expressly waived."
(g) Section 4.4(b) of the Agreement is amended and by deleting
therefrom "other than pursuant to Section 4.1" after "Initial Term" in the
second line thereof.
Section 2. General.
(a) The Company and the Executive represent and warrant each
to the other that the execution, delivery and performance of this Agreement by
such party have been authorized by any and all requisite action by or on behalf
of such party and will not violate or cause a default under any contract,
agreement or other instrument to which such party is a party or by which such
party is bound.
(b) All references to "this Agreement" in the Agreement shall
be deemed references to the Agreement, as amended by this Amendment.
Exhibit 10.8 - Page 2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
WEINER'S STORES, INC. WEINER'S STORES, INC.
By: /s/ Leon Weiner By: /s/ Andy I. Weiner
------------------------- ---------------------------
Leon Weiner Andy I. Weiner
Chairman of the Board Title: V.P. Operations
Executive Vice President
By: /s/ Sol B. Weiner /s/ Raymond J. Miller
--------------------------- ------------------------------------
Sol B. Weiner RAYMOND J. MILLER
President
/s/ Richard B. Stark With my approval
---------------------------- /s/ Michael Klaiman
Richard B. Stark ------------------------------------
V.P. Merchandising V.P. Merchandise
Exhibit 10.8 - Page 3
EXHIBIT 10.9
[Letterhead of Weiner's Stores, Inc.]
May 1, 1997
Mr. Raymond J. Miller
1323 Winrock Boulevard
Houston, Texas 77057
Dear Ray:
This letter sets forth the terms and conditions of the amendment to the February
24, 1995 agreement, as amended as of April 7, 1995 (collectively the "1995
Agreement") between Weiner's Stores, Inc., (the "Company") and you (the
"Executive") concerning your employment as Chief Financial Officer and Vice
President. Except as otherwise expressly set forth below, the terms and
conditions set forth in the 1995 Agreement shall remain in full force and
effect:
Section 2 of the 1995 Agreement shall be deleted and replaced with the
following:
2. The term of this agreement shall be for a period ending on
January 31, 2000 (the "Term"), unless otherwise terminated by
either party.
Section 3.1 of the 1995 Agreement shall be amended to add the following
sentences at the end of that paragraph:
For the period from February 1, 1998 through January 31, 2000,
the Base Salary shall be $220,000, unless otherwise increased
by act of the Board of Directors.
Section 4.4 of the 1995 Agreement shall be amended to add the following at the
end of that paragraph:
(d) If during the four month period following the date of a
Change in Control, the Company: (i) assigns to the Executive
duties inconsistent with his position in the Company as
described in Section 1.1 above; or (ii) otherwise materially
alters the nature of the Executive's responsibilities as
described in Section 1.1, such actions shall constitute a
termination of the Executive's employment by the Company
other than for cause (as defined in Section 4.3) 30 days
following the Company's receipt of written notice from the
Executive of any allegation of (i) or (ii) above, and in the
absence of the Company remedying the situation within 30
days from the date on which it receives such written notice
from the Executive. In the event of a termination pursuant
to the circumstances set forth in this Section 4.4(d), then,
in lieu of any further payment of Base Salary or any other
compensation for which provision is made in Section 3
herein, the Company shall pay the executive the greater of
$200,000 or an amount equal to his then Base Salary. For
purposes of this Section 4.4(d), (x) a "Change in Control"
shall occur when any "person" (as such term is used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) becomes a beneficial
owners (as such term is used in Rule 13d-3 under the
Exchange Act) of more than 50 percent of the Voting Stock of
the Company, except as may otherwise be provided for in a
confirmed plan of reorganization, and (y) "Voting Stock"
shall mean capital stock of any class or
<PAGE>
classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the
directors of a corporation.
Section 4.4(a) and 4.4(b) of the 1995 Agreement shall be amended to substitute
the word "Term" for "Initial Term".
This agreement shall become effective upon execution by both parties and
delivery of a fully executed document to the Company.
If you agree that the above sets forth our agreement regarding the terms and
conditions of the amendment to your 1995 Agreement, please sign and date this
agreement in the spaces provided below and return it to me.
Very truly yours,
/s/ Herbert R. Douglas
Herbert R. Douglas
Chief Executive Officer
Accepted and Agreed:
/s/ Raymond J. Miller
- --------------------------
Raymond J. Miller
Dated:5/1/95
---------------------
Exhibit 10.9 - Page 2
EXHIBIT 10.10
WEINER'S STORES, INC.
6005 WESTVIEW DRIVE
HOUSTON, TEXAS 77055
December 14, 1995
BY HAND
- -------
Jerome L. Feller
17 Gatehouse Court
Morris Township, New Jersey 07960
Dear Jerry:
This letter sets forth the terms and conditions of your
employment as General Merchandise Manager and Vice President of Weiner's Stores,
Inc. (the "Company").
1. As we discussed, your employment as General Merchandise
Manager and Vice President of the Company commenced as of Wednesday, December
13, 1995. However, we have agreed that this agreement is not effective until it
is approved by the Bankruptcy Court for the District of Delaware. Pending such
approval, the parties agree to abide by all of the terms of this agreement with
the exception of paragraphs 2 and 8, and that your relationship to the Company
during that time shall be that of an employee at-will.
2. The term of this agreement shall commence if and when the
Bankruptcy Court approves of the agreement and shall continue through and
including January 31, 1998, unless otherwise terminated by either party.
3. As General Merchandise Manager and Vice President of the
Company you shall perform such duties as are customarily associated with that
position and title in the retail industry, subject to the supervision and
direction of the Chief Executive Officer of the Company. You shall devote your
best efforts and all of your time during regular business hours in faithfully
and conscientiously performing such duties.
4. In full consideration for your performance of such duties,
you shall receive a salary at the rate of $200,000 per annum, less applicable
payroll withholdings required by law, to be paid periodically in accordance with
the Company's customary payroll practices.
5. You shall also be entitled to participate in such employee
benefit plans, policies or programs as the Company may maintain for its
employees generally, as such plans, policies or programs may be adopted,
modified or terminated from time to time in the Company's sole discretion. You
shall further be entitled to four weeks of vacation annually, without reduction
in your salary, to be taken at such times as may be consistent with the needs of
the Company. With respect to medical benefits, you shall be entitled to
participate in any plan, policy or program which is made available to other
senior executives of the Company.
6. In accordance with the Company's policies as they may be
amended from time to time, you shall be reimbursed for any necessary business
expenses upon submission of appropriate documentation. In accordance with these
policies, the Company agrees to reimburse you for the fee of one professional
mover to move your and your family's belongings from New Jersey to Houston, and
the
<PAGE>
cost of two one-way coach class airplane tickets from New Jersey to Houston for
you and your wife. The Company shall also reimburse you and your family for
temporary living expenses for you and your family following your arrival in
Houston for the shorter of (i) four months, or (ii) until such time as you and
your family move to a permanent residence.
7. You agree to abide by the Company's policies and procedures
which may be implemented from time to time, and to abide by any confidentiality
restrictions that the Company may require of you and, if requested, to sign a
confidentiality agreement in a form provided by the Company. You further agree
not to obligate the Company to any contract or undertaking without the express
prior approval of the Chief Executive Officer.
8. If the Company terminates your employment for any reason
other than Cause (as defined herein) prior to the expiration of the term of your
employment provided in paragraph 2 hereof, then, within twenty (20) days of such
termination of employment, you shall be entitled to a payment in the gross
amount of $200,000, less applicable payroll withholdings required by law,
following and contingent upon your execution of a general release of claims in a
form provided to you by the Company. For purposes of this agreement, Cause shall
mean (a) your gross negligence or willful misconduct in failing or refusing to
perform your material duties to the Company; (b) your being formally charged or
entering into a plea of guilty or "nolo contendere" to any crime; or (c) your
committing any act of dishonesty, fraud, embezzlement or moral turpitude. You
shall not be entitled to any other payments or benefits from the Company upon
the termination of your employment, other than such payments or benefits
expressly provided in any written agreement or employee benefit plan. If the
Company terminates your employment for Cause, if you should resign for any
reason or if your employment terminates following the term of employment
provided in paragraph 2 hereof, you shall not be entitled to any payments or
benefits under this agreement as severance pay or otherwise.
9. This agreement sets forth the entire understanding of the
parties and supersedes any and all prior agreements, oral or written, relating
to your employment by the Company or the termination thereof. This agreement may
not be modified except by a writing, signed by you and by the Chief Executive
Officer of the Company, and following approval by the Company's Board of
Directors and, to the extent required, the Bankruptcy Court. This agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, without regard to its choice of law rules.
If you agree that the above sets forth our agreement regarding
the terms and conditions of your employment, please sign and date this agreement
in the spaces provided below and return it to me.
Very truly yours,
/s/ Raymond Miller
Raymond Miller
Chief Financial Officer
Accepted and Agreed:
/s/ Jerome L. Feller
- --------------------------
Jerome L. Feller
Dated: 12/13/95
- ---------------------------
Exhibit 10.10 - Page 2
EXHIBIT 10.11
[Letterhead of Weiner's Stores, Inc.]
May 1, 1997
Mr. Jerome L. Feller
2137 Bering Drive
Houston, Texas 77057
Dear Jerry:
This letter sets forth the terms and conditions of the amendment to the December
13, 1995 Agreement (the "1995 Agreement") between Weiner's Stores, Inc. (the
"Company") and you, concerning your employment as General Merchandise Manager
and Vice President. Except as otherwise expressly set forth below, the terms and
conditions set forth in the 1995 Agreement shall remain in full force and
effect.
Paragraph 2 of the 1995 Agreement shall be deleted and replaced with the
following:
2. The term of the 1995 Agreement shall be for a period ending
January 31, 2000, unless otherwise terminated by either party.
Paragraph 4 of the 1995 Agreement shall be amended to add the following sentence
at the end of that paragraph:
For the period from February 1, 1998 through January 31, 2000,
The Base Salary shall be $220,000 unless otherwise increased
by act of the Board of Directors.
Paragraph 8 of the 1995 Agreement shall be deleted and replaced with the
following:
If the Company terminates your employment for any reason other
than Cause (as defined herein) prior to the expiration of the
term of your employment provided in paragraph 2 hereof, then
within twenty (20) days of such termination of employment, you
shall be entitled to a payment in the gross amount of the
greater of $200,000, or your then base salary, less applicable
payroll withholdings required by law, following and contingent
upon your execution of a general release of claims in a form
provided to you by the Company. For purposes of this
agreement, Cause shall mean (a) your gross negligence or
willful misconduct in failing or refusing to perform your
material duties to the Company; (b) your being formally
charged or entering into a plea of guilty or "nolo contendere"
to any crime; or (c) your committing any act of dishonesty,
fraud, embezzlement or moral turpitude. You shall not be
entitled to any other payments or benefits from the Company
upon the termination of your employment, other than such
payments or benefits expressly provided in any written
agreement or employee benefit plan. If the Company terminates
your employment for Cause, if you should resign for any reason
or if your employment terminates following the term of
employment provided in paragraph 2 hereof, you shall not be
entitled to any payments or benefits under this agreement as
severance pay or otherwise.
If during the four month period following the date of a Change
in Control, the Company: (i) assigns to you duties
inconsistent with your position in the Company as described in
paragraph 1 above; or (ii) otherwise materially alters the
nature of your responsibilities as described in paragraph 1
above, such actions shall constitute a
<PAGE>
termination of your employment by the Company for a reason
other than Cause (as defined in paragraph 8) 30 days following
the Company's receipt of written notice from you of any
allegation of either (i) or (ii) above, and in the absence of
the Company remedying the situation within 30 days from the
date on which it receives such written notice from you. For
purposes of this Paragraph 8, (x) a "Change in Control" shall
occur when any "person" (as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) become a "beneficial owner" (as
such term is used in Rule 13d-3 under the Exchange Act) of
more than 50 percent of the Voting Stock of the Company,
except as may otherwise be provided for in a confirmed plan of
reorganization, and (y) "Voting Stock" shall mean capital
stock of any class or classes having general voting power
under ordinary circumstances, in the absence of contingencies,
to elect the directors of a corporation.
This amendment to the 1995 Agreement shall become effective upon execution by
both parties and delivery of a fully executed amendment to the Company.
If you agree that the above sets forth all of the terms and conditions of the
amendment to the 1995 Agreement, please sign and date this letter in the spaces
provided below and return it to me.
Very truly yours,
/s/ Raymond J. Miller
Raymond J. Miller
Vice President & Chief
Financial Officer
Accepted and Agreed:
/s/ Jerome L. Feller
- ----------------------------
Jerome L. Feller
Dated: May 14, 1997
----------------------
Exhibit 10.11 - Page 2
EXHIBIT 10.12
[Letterhead of Weiner's Stores, Inc.]
January 29, 1996
Mr. James Berens
91 Ridgewood
Burlington, New Jersey 08016
Dear Jim:
This letter sets forth the terms of your offer of employment with
Weiner's Stores, Inc. (the "Company"):
1. Your base salary shall be at the rate of $150,000 annually, less
payroll tax deductions required by law, payable on a weekly basis.
2. Your signing bonus shall be a one-time payment in the net amount of
$20,000, having deducted payroll tax required by law. In the event that you
resign within twelve months of today's date, you will be required to repay a
pro-rata amount of this signing bonus.
3. You shall also be entitled to participate in such employee benefit
plans, policies or programs as the Company may maintain for its employees
generally, as such plans, policies or programs may be adopted, modified or
terminated from time to time in the Company's sole discretion.
4. You shall be entitled to an annualized vacation allotment of two
weeks in your first year and three weeks in the second year, without reduction
in your salary, to be taken at such times as may be consistent with the needs of
the Company.
5. In accordance with the Company's policies as they may be amended
from time to time, you shall be reimbursed for any necessary business expenses
upon submission of appropriate documentation. In accordance with these policies,
the Company agrees to reimburse you for the following expenses:
o the fee of one professional mover to move you and your
family's belongings from New Jersey to Houston;
o temporary living expenses not to exceed $3,000 per
month for you and your family following your arrival
in Houston for the shorter of (i) four months, or
(ii) until such time as you and your family move to a
permanent residence;
o the brokerage commission incurred in connection with the sale
of your home in New Jersey,
o up to an amount equal to two "points" which you may have
incurred in connection with the procurement of a reasonable
mortgage for the purchase of a home in Houston;
o closing costs incurred in connection with the procurement of
a home in Houston;
<PAGE>
o one round trip plane ticket (coach) for Mrs. Berens
to inspect and scout our potential residences in the
Houston area, and one one-way ticket (coach) from New
Jersey to Houston at such time as she actually moves
to Houston;
o four round trip plane tickets (coach) for you from New Jersey
to Houston; and
o the cost of one cellular telephone for your automobile to the
extent used for business purposes.
6. If the Company terminates your employment for any reason other than
cause prior to January 31, 2000, then, within twenty (20) days of such
termination of employment, you shall be entitled to a payment equal to six
months of your then current base salary. You shall not be entitled to any other
payments or benefits from the Company upon the termination of your employment,
other than such payments or benefits expressly provided in any written agreement
or employee benefit plan. If the Company terminates your employment for cause or
if you should resign for any reason, you shall not be entitled to any payments
or benefits under this agreement as severance pay or otherwise.
7. Your relationship to the Company during your employment shall be
that of an employee at-will. Thus, both you and the Company each may terminate
the employment relationship at any time with or without notice.
8. This letter sets forth all of the terms of your offer of employment,
and supersedes the letter of January 16, 1996, and may not be modified except by
a writing, signed by you and by the Chief Executive Officer of the Company. This
agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to its choice of law rules.
If you agree that the above sets forth your understanding of our offer
regarding the terms and conditions of your employment, please sign and date this
agreement in the spaces provided below and return to me.
Very truly yours,
/s/ Raymond J. Miller
Raymond J. Miller
Chief Financial Officer
Accepted and Agreed:
/s/ James Berens
- --------------------------
James Berens
Dated:1/31/96
- --------------------------
Exhibit 10.12 - Page 2
EXHIBIT 10.13
[Letterhead of Weiner's Stores, Inc.]
February 5, 1996
Mr. Joe Kassa
631 Woodmill Drive
Cranbury, New Jersey 08512
Dear Joe:
This letter sets forth the terms of your offer of employment with
Weiner's Stores, Inc. (the "Company"):
1. Your base salary shall be at the rate of $125,000 annually, less
payroll tax deductions required by law, payable on a weekly basis.
2. Your signing bonus shall be a one-time payment in the net amount of
$15,000, having deducted payroll tax required by law. In the event that you
resign within twelve months of today's date, you will be required to repay a
pro-rata amount of this signing bonus.
3. You shall also be entitled to participate in such employee benefit
plans, policies or programs as the Company may maintain for its employees
generally, as such plans, policies or programs may be adopted, modified or
terminated from time to time in the Company's sole discretion.
4. You shall be entitled to an annualized vacation allotment of two
weeks in your first year and three weeks in the second year, without reduction
in your salary, to be taken at such times as may be consistent with the needs of
the Company.
5. In accordance with the Company's policies as they may be amended
from time to time, you shall be reimbursed for any necessary business expenses
upon submission of appropriate documentation. In accordance with these policies,
the Company agrees to reimburse you for the following expenses:
o the fee of one professional mover to move your belongings from
New Jersey to Houston;
o an apartment for twelve (12) months;
o six round trip plane tickets (coach) for you from Houston to
Philadelphia.
6. If the Company terminates your employment for any reason other than
cause prior to January 31, 2000, then, within twenty (20) days of such
termination of employment, you shall be entitled to a payment equal to six
months of your then current base salary. You shall not be entitled to any other
payments or benefits from the Company upon the termination of your employment,
other than such payments or benefits expressly provided in any written agreement
or employee benefit plan. If the Company terminates your employment for cause or
if you should resign for any reason, you shall not be entitled to any payments
or benefits under this agreement as severance pay or otherwise.
7. Your relationship to the Company during your employment shall be
that of an employee at-will. Thus, both you and the Company each may terminate
the employment relationship at any time with or without notice.
<PAGE>
8. This letter sets forth all of the terms of your offer of employment
and may not be modified except by a writing, signed by you and by the Chief
Executive Officer of the Company. This agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its choice of law rules.
9. Your start date is February 9, 1996.
If you agree that the above sets forth your understanding of our offer
regarding the terms and conditions of your employment, please sign and date this
agreement in the spaces provided below and return to me.
Very truly yours,
/s/ Raymond J. Miller
--------------------------------
Raymond J. Miller
Chief Financial Officer
Accepted and Agreed:
/s/ Joseph J. Kassa
----------------------
Joseph J. Kassa
Dated: 2/9/96
-------------------
Exhibit 10.13 - Page 2
EXHIBIT 10.14
REVOLVING CREDIT AGREEMENT
dated as of August 26, 1997
among
WEINER'S STORES, INC.
AS BORROWER,
-----------
THE FINANCIAL INSTITUTIONS PARTY HERETO,
AS LENDERS,
----------
and
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT
--------
-----------------------
$40,000,000
-----------------------
<PAGE>
Table of Contents
-----------------
Section Title Page
- ------- ----- ----
ARTICLE I DEFINITIONS; CONSTRUCTION...........................................1
1.01. Certain Definitions........................................1
1.02. Construction..............................................14
1.03. Accounting Principles.....................................14
ARTICLE II THE CREDITS.......................................................15
2.01. Revolving Credit Loans....................................15
2.02. Notes.....................................................15
2.03. Notice of Borrowing; Making of Loans......................15
2.04. Termination or Reduction of Commitment; Mandatory
Prepayment Optional Prepayment............................17
2.05. Interest Rate.............................................19
2.06. Interest Payment Dates....................................19
2.07. Amortization..............................................19
2.08. Payments..................................................19
2.09. Use of Proceeds...........................................22
2.10. Eurodollar Rate Not Determinable; Illegality or
Impropriety...............................................22
2.11. Reserve Requirements; Capital Adequacy Circumstances......22
2.12. Indemnity.................................................24
2.13. Sharing of Setoffs........................................24
2.14. Continuation and Conversion of Loans......................25
2.15. Taxes.....................................................25
ARTICLE III LETTERS OF CREDIT................................................27
3.01. Letters of Credit.........................................27
3.02. Participations............................................30
ARTICLE IV BORROWING BASE....................................................31
4.01. Condition of Lending and Assisting in Establishing or
Opening Letters of Credit.................................31
4.02. Mandatory Prepayment......................................31
4.03. Rights and Obligations Unconditional......................31
4.04. Borrowing Base Certificate................................31
4.05. General Provisions........................................32
ARTICLE V CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT ISSUANCE AND
LENDING..................................................32
5.01. Conditions Precedent to Effectiveness.....................32
5.02. Conditions Precedent to Loans and Letters of Credit.......36
ARTICLE VI REPRESENTATIONS AND WARRANTIES....................................38
6.01. Organization, Good Standing, Etc..........................38
6.02. Authorization, Etc........................................38
6.03. Governmental Approvals....................................38
6.04. Enforceability of Loan Documents..........................38
6.05. Subsidiaries..............................................38
Exhibit 10.14 - Page i
<PAGE>
6.06. Litigation................................................39
6.07. Financial Condition.......................................39
6.08. Compliance with Law, Etc..................................39
6.09. ERISA.....................................................39
6.10. Taxes, Etc................................................40
6.11. Regulation U..............................................40
6.12. Adverse Agreements, Etc...................................40
6.13. Holding Company and Investment Company Acts...............40
6.14. Permits, Etc..............................................40
6.15. Priority Title............................................40
6.16. Full Disclosure...........................................40
6.17. Operating Lease Obligations...............................41
6.18. Environmental Matters.....................................41
6.19. Schedules.................................................43
6.20. Insurance.................................................43
6.21. Use of Proceeds...........................................43
6.22. Security Document.........................................43
6.23. Financial Accounting Practices, Etc.......................43
6.24. No Material Adverse Effect................................43
6.25. Real Property; Leases.....................................44
6.26. Location of Bank Accounts.................................44
6.27. No Event of Default.......................................44
6.28. Capitalized Leases........................................44
6.29. Tradenames................................................45
6.30. Compliance with Bankruptcy Code...........................45
6.31. Solvency..................................................45
6.32. Inventory.................................................45
6.33. Intellectual Property.....................................45
6.34. Confirmation Order........................................45
6.35. Nature of Business........................................45
ARTICLE VII AFFIRMATIVE COVENANTS............................................46
7.01. Reporting Requirements....................................46
7.02. Compliance with Laws, Etc.................................49
7.03. Preservation of Existence, Etc............................50
7.04. Keeping of Records and Books of Account...................50
7.05. Inspection Rights.........................................50
7.06. Maintenance of Properties, Etc............................50
7.07. Maintenance of Insurance..................................50
7.08. Environmental Indemnity...................................51
7.09. Further Assurances........................................51
7.10. Borrowing Base............................................52
7.11. Change in Collateral; Collateral Records..................52
7.12. Financial Accounting Practices, Etc.......................52
7.13. Cash Management System....................................52
7.14. Compliance with Bankruptcy Documents......................53
7.15. Leases....................................................53
7.16. New Real Estate...........................................54
7.17. Landlord Waivers..........................................54
7.18. Subsidiaries..............................................54
Exhibit 10.14 - Page ii
<PAGE>
ARTICLE VIII NEGATIVE COVENANTS..............................................54
8.01. Liens, Etc................................................54
8.02. Indebtedness..............................................55
8.03. Guarantees, Etc...........................................56
8.04 Merger, Consolidation, Sale of Assets, Etc................56
8.05. Change in Nature of Business..............................56
8.06. Loans, Advances and Investments, Etc......................56
8.07 Lease Obligations.........................................57
8.08. Capital Expenditures......................................57
8.09. Dividends, Prepayments, Etc...............................57
8.10. Federal Reserve Regulations...............................57
8.11. Transactions with Affiliates..............................57
8.12. Cumulative FIFO EBITDA....................................58
8.13. Markup and Markdown Policies..............................58
8.14. Environmental.............................................58
8.15. ERISA.....................................................59
8.16. Maintenance of Inventory..................................59
8.17. Plan Documents............................................60
ARTICLE IX DEFAULTS..................................................60
9.01. Events of Default.........................................60
9.02 Consequences of an Event of Default.......................62
9.03. Deposit for Letters of Credit.............................63
9.04 Certain Remedies..........................................63
ARTICLE X MISCELLANEOUS.............................................63
10.01. Holidays..................................................63
10.02. Records...................................................63
10.03. Amendments and Waivers....................................63
10.04. No Implied Waiver; Cumulative Remedies....................64
10.05. Notices...................................................64
10.06 Expenses; Taxes; Attorneys' Fees; Indemnification.........65
10.07. Application...............................................66
10.08. Severability..............................................66
10.09. Governing Law.............................................66
10.10. Prior Understandings......................................66
10.11. Duration; Survival........................................66
10.12. Counterparts..............................................66
10.13. Assignment; Participations................................67
10.14. Successors and Assigns....................................68
10.15. Confidentiality...........................................68
10.16. Waiver of Jury Trial......................................69
10.17. Right of Setoff...........................................69
10.18. Counterparts..............................................69
10.19. Headings..................................................70
10.20. Forum Selection and Consent to Jurisdiction...............70
Exhibit 10.14 - Page iii
<PAGE>
ARTICLE XI THE AGENT.................................................70
11.01. Appointment...............................................70
11.02. Nature of Duties..........................................70
11.03. Rights, Exculpation, Etc..................................71
11.04. Reliance..................................................71
11.05. Indemnification...........................................71
11.06. CIT Individually..........................................72
11.07. Successor Agent...........................................72
11.08. Collateral Matters........................................72
Exhibit 10.14 - Page iv
<PAGE>
Exhibit A Form of Note
Exhibit B Form of Security Agreement
Exhibit C Form of Letter of Credit Application
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Credit Card Bank Depository Account Agreement
Exhibit G Form of Depository Account Agreement
Exhibit H Restricted Account Agreement
Exhibit I Form of Pledge and Security Agreement
Exhibit J Form of Subsidiary Guaranty
Schedule 1.01(A) Location of Eligible Inventory
Schedule 1.01(B) Revolving Credit Commitments
Schedule 3.01(C) Existing Letters of Credit
Schedule 5.01(d)(v) Initial Mortgaged Properties
Schedule 6.05 Subsidiaries
Schedule 6.06 Litigation
Schedule 6.09 Employee Plans
Schedule 6.17 Operating Lease Obligations
Schedule 6.18 Environmental Matters
Schedule 6.20 Insurance
Schedule 6.25 Real Property
Schedule 6.26 Bank Accounts
Schedule 6.29 Tradenames
Schedule 8.01 Existing Liens
Schedule 8.02 Indebtedness and Guarantees
Exhibit 10.14 - Page v
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of August 26, 1997,
among WEINER'S STORES, INC., a Delaware corporation (the "Borrower"), the
financial institutions from time to time party hereto (collectively, the
"Lenders" and individually, a "Lender"), and THE CIT GROUP/BUSINESS CREDIT, INC.
("CIT"), as agent for the Lenders (in such capacity, the "Agent").
BACKGROUND
----------
WHEREAS, on April 12, 1995, the Debtor (as hereinafter
defined) filed a petition for relief under Chapter 11 of the Bankruptcy Code (as
hereinafter defined) in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court");
WHEREAS, in connection with the Plan of Reorganization (as
hereinafter defined), the Debtor has requested the Agent and the Lenders to
provide the Borrower with a $40 million revolving credit facility, including a
$15 million subfacility for the issuance of letters of credit and, subject to
the terms and conditions set forth herein, the Lenders have agreed to provide
such facility.
In consideration of the mutual covenants herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
-------------------------
1.01. Certain Definitions. In addition to other words and
terms defined elsewhere in this Agreement, as used herein the following words
and terms shall have the following meanings, respectively, unless the context
hereof otherwise clearly requires:
"Affiliate" of a Person shall mean any other Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting power
for the election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise; provided, however, that Texas Commerce Bank National Association
shall not be deemed to be an "Affiliate" of the Borrower under clause (a)
hereof.
"Agent Account" shall mean an account in the name of the Agent
designated to the Borrower from time to time into which the Borrower shall make
all payments to the Agent under this Agreement.
"Agent Advances" shall have the meaning given that term in
Section 11.08 hereof.
"Agreement" shall mean this Revolving Credit Agreement as
amended modified, supplemented or restated from time to time.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by CIT and an assignee, and accepted by the Agent,
substantially in the form of Exhibit E hereto.
"Availability" shall mean, at any time, the difference between
(i) the lesser of (A) the Borrowing Base and (B) the Current Commitment and (ii)
the sum of (A) the aggregate outstanding principal amount of all Loans and (B)
the Letter of Credit Exposure.
<PAGE>
"Bank" shall mean The Chase Manhattan Bank, its successors or
any other bank designated by Borrower to the Agent from time to time that is
reasonably acceptable to the Agent.
"Bankruptcy Code" shall mean Title 11 of the United States
Code, 11 U.S.C. ss.ss. 101 et seq., or any similar United States federal or
state law for the relief of debtors, as amended from time to time.
"Bankruptcy Court" shall have the meaning given to that term
in the introductory paragraph to this Agreement.
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA and subject to Title IV of ERISA (other than a
Multiemployer Plan) in respect of which the Borrower or any ERISA Affiliate is
or within the immediately preceding six (6) years was an "employer" as defined
in Section 3(5) of ERISA.
"Board" means the Board of Governors of the Federal Reserve
System of the United States.
"Book Value" shall mean, as to any Inventory in respect of
which such amount is to be determined, the lower of (i) cost (as reflected in
the general ledgers of the Borrower) or (ii) market value (both cost and market
value being determined in accordance with GAAP calculated on the first in first
out basis) excluding adjustments relating to the uniform capitalization of
inventory.
"Borrower" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Borrower's Account" shall have the meaning given that term
in Section 2.08(a) hereof.
"Borrowing Base" shall mean an amount equal to the difference
between (i) the sum of (A) 60% of the Book Value of Eligible Inventory and (B)
$3,000,000 less (ii) the sum of (A) $1,170,000, provided that the dollar amount
of the $1,170,000 reduction set forth in this subsection (A) shall be decreased
by $10,000 for each landlord waiver delivered to the Agent pursuant to section
7.17 hereof with respect to a retail store location of the Borrower and (B) an
additional $1,000,000, provided that the dollar amount of the $1,000,000
reduction set forth in this subsection (B) shall be decreased by $200,000 for
each credit card depository agreement delivered to the Agent pursuant to Section
7.13 hereof. All such landlord waivers and credit card bank depository
agreements shall be in form and substance satisfactory to the Agent.
"Borrowing Base Certificate" shall have the meaning given that
term in Section 4.04(a) hereof.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which banking institutions are authorized or obligated to
close in New York, New York, provided, that with respect to the borrowing,
payment, conversion to or continuation of Eurodollar Loans, Business Day shall
also mean a day on which dealings in Dollars are carried on in an Interbank
Market.
"Capital Expenditures" shall mean, for any period, the sum,
without duplication, of (i) the aggregate amount of all expenditures during such
period which, in accordance with GAAP, is required to be included in property,
plant or equipment or similar fixed asset accounts plus (ii) the entire
principal amount of any debt obligations (including, without limitation,
Capitalized Lease Obligations) assumed in connection with any such expenditures.
Exhibit 10.14 - Page 2
<PAGE>
"Capitalized Lease" shall mean any lease which is required
under GAAP to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean the aggregate
amount which is required under GAAP to be reported as a liability on the balance
sheet of a Person as lessee under a Capitalized Lease.
"Cash Concentration Account" shall mean the deposit account
maintained by the Borrower at the Cash Concentration Account Bank, which deposit
account shall be under the sole dominion and control of the Agent.
"Cash Concentration Account Bank" shall mean the Texas
Commerce Bank National Association or such other bank as the Borrower may select
with the written approval of the Agent.
"Cash Concentration Account Blockage Date" shall mean the date
on which the Agent, after the occurrence and during the continuance of an Event
of Default, instructs the Cash Concentration Account Bank, pursuant to the
Restricted Account Agreement, to remit all amounts deposited in the Cash
Concentration Account to the Agent Account or as the Agent shall direct.
"CIT" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Closing Date" shall mean the date on which the conditions set
forth in Section 5.01 hereof shall be satisfied, which shall be no later than
October 31, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed also to refer to any successor sections.
"Collateral" shall mean all of the property (tangible and
intangible) of any Person purported to be subject to the lien or security
interest purported to be created by any Security Document heretofore or
hereafter executed by such Person as security for all or any part of the
Obligations.
"Collateral Property" shall mean any land and/or buildings
owned or leased in their entirety (i.e., under a so-called ground lease or net
lease) by the Borrower or any of its Subsidiaries.
"Confirmation Order" shall mean that certain order of the
Bankruptcy Court, dated August 13, 1997, confirming the Plan of Reorganization,
as the same may be amended from time to time to the extent permitted by Section
8.17 hereof.
"Consolidated Subsidiary" of a Person at any time shall mean
those Subsidiaries or other Affiliates of such Person whose accounts are or
should in accordance with GAAP be consolidated with those of such Person.
"Credit Extension" shall mean (a) the making of any Loan by a
Lender or the Agent on behalf of the Lenders or (b) the issuance, or extension
of the expiration date, of any Letter of Credit which CIT or any Lender assists
the Borrower in opening or establishing.
"Cumulative FIFO EBITDA" shall mean, for each fiscal month in
any fiscal year of the Borrower, the aggregate FIFO EBITDA for the period
beginning on July 26, 1997 and ending at the end of such fiscal month.
Exhibit 10.14 - Page 3
<PAGE>
"Current Commitment" shall have the meaning assigned to that
term in Section 2.01 hereof.
"Debtor" shall mean the Borrower prior to its reorganization
at the Effective Time.
"Depository Accounts" shall mean the lock-box or blocked
depository accounts maintained by the Borrower for the collection of the cash of
the Borrower and the proceeds from the sale of the Inventory of the Borrower.
"Depository Accounts Agreements" shall mean each agreement,
substantially in the form of Exhibit G hereto, among a Depository Bank, the
Borrower and the Agent delivered to the Agent pursuant to Section 7.13 hereof,
as each such Agreement may be modified and supplemented and in effect from time
to time.
"Depository Bank" shall mean each financial institution at
which a Depository Account is maintained.
"Designated Borrowing Officer" shall mean Raymond J. Miller or
such other officer as shall be designated from time to time in writing by the
Borrower to the Agent.
"Designated Financial Officer" of a Person shall mean the
individual designated from time to time by the Board of Directors or governing
body performing like functions of such Person to be the chief financial officer
or treasurer of such Person (and individuals designated from time to time by the
Board of Directors or governing body performing like functions of such Person to
act in lieu of the chief financial officer or the treasurer).
"Disbursement Account" shall mean the deposit account in the
name of the Borrower maintained at a bank in the United States designated by the
Borrower to the Agent into which there shall be deposited proceeds of Loans and
funds disbursed to the Borrower by the Agent.
"DIP Financing" shall have the meaning assigned to that term
in Section 2.08(g) hereof.
"Disclosure Statement" shall mean the Disclosure Statement
pursuant to Section 1125 of the United States Bankruptcy Code, dated June 26,
1997, with respect to the Plan of Reorganization.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
"Effective Date" shall mean the Effective Date defined in
Section 1.36 of the Plan of Reorganization.
"Effective Time" shall mean the time on the Effective Date at
which the Plan of Reorganization becomes effective in accordance with its terms.
"Eligible Inventory" shall mean finished goods Inventory of
the Borrower which at the time of determination meets all the following
qualifications:
(i) it is lawfully owned by the Borrower and not subject
to any Lien, security interest or prior assignment,
other than the Lien, security interest and assignment
in favor of the Agent that secures the payment of the
Obligations, and it is not held on consignment and
may be lawfully sold;
Exhibit 10.14 - Page 4
<PAGE>
(ii) it is (A) located in the Borrower's distribution
center, warehouses or retail locations listed on
Schedule 1.01(A) hereto or (B) located in other
locations in the continental United States as the
Agent shall have approved in writing from time to
time, which approval shall be given upon the Borrower
providing the Agent with evidence, reasonably
satisfactory to the Agent, of (1) the Agent's
perfected, first priority Lien on all Inventory of
the Borrower located in such locations and (2) the
absence of any other Liens on any Inventory of the
Borrower located in such locations;
(iii) it is determined in the reasonable judgment of the
Agent to be, when taken as a whole, substantially
similar in quality and mix to the Inventory
maintained by the Debtor in recent historical
operations prior to the Effective Date; and
(iv) it is Inventory that has been valued after deducting
reserves for (1) markdowns, (2) shrinkage, (3)
lay-a-ways, (4) pack-a-ways, (5) displays and open
stock to the extent such stock is the type of stock
that is customarily sold in the package, (6)
rejected, damaged, aged or otherwise unusable
Inventory and (7) other reserves required by the
Agent in the exercise of its reasonable business
judgment;
provided, that any Inventory in respect of which a Letter of
Credit has been issued at the Borrower's request, payment and
performance of which is guaranteed by a Letter of Credit
Guarantee, shall be deemed "Eligible Inventory" for all
purposes hereof subject to the qualifications set forth in
clauses (iii) and (iv) above.
"Environmental Actions" shall mean any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, hearing,
proceeding, judgment, letter or other communication from any Governmental
Authority or any third party relating to any Environmental Matter, including,
without limitation, a Release (i) from or onto any of the properties presently
or formerly owned, leased, operated or controlled by the Borrower or its
Subsidiaries or (ii) from or onto any facilities which received Hazardous
Materials from the Borrower or its Subsidiaries, or any violation of any
Environmental Law.
"Environmental Laws" shall mean, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss.ss. 9601 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. ss.ss. 11001 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. ss.ss. 6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
ss.ss. 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. ss.ss. 136 et seq., the Clean Air Act, 42 U.S.C. ss.ss. 7401 et. seq.,
the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. ss.ss. 1251
et seq., the Safe Drinking Water Act, 42 U.S.C. ss.ss. 300f et seq., the
Occupational Safety and Health Act, 29 U.S.C. ss.ss. 641, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. ss.ss. 1801, et seq., as any of the
above statutes have been or may be amended from time to time, all rules and
regulations promulgated pursuant to any of the above statutes, and any other
foreign, federal, state or local law, statute, ordinance, rule or regulation
governing Environmental Matters, as the same have been or may be amended from
time to time, including any common law cause of action providing any right or
remedy relating to Environmental Matters, and all applicable judicial and
administrative decisions, orders, and decrees relating to Environmental Matters.
"Environmental Liabilities and Costs" shall mean, without
limitation, any actual or potential investigation, cleanup, remediation,
removal, or other response costs (which without limitation shall include costs
to cause the Borrower and its Subsidiaries to come into compliance with
Environmental Laws), expenses (including without limitation fees and
disbursements of consultants, counsel, and other experts in connection with any
environmental investigation, testing, audits or studies, response actions, or
litigation), losses, liabilities or obligations (including without limitation,
liabilities
Exhibit 10.14 - Page 5
<PAGE>
or obligations under any lease or other contract), payments, damages (including
without limitation any actual, punitive or consequential damages under any
statutory laws, common law cause of action or contractual obligations or
otherwise, including without limitation damages (a) of third parties for
personal injury or property damage, or (b) to natural resources), civil or
criminal fines or penalties, judgments, and amounts paid in settlement arising
out of or relating to or resulting from any Environmental Matter.
"Environmental Matter" shall mean any matter arising out of,
relating to, or resulting from pollution, contamination, protection of the
environment, human health or safety, health or safety of employees, sanitation,
and any matters relating to Releases or threatened Releases of Hazardous
Materials into the air (indoor and outdoor), surface water, groundwater, soil,
land surface or subsurface, buildings, facilities, real or personal property or
fixtures or otherwise arising out of, relating to, or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials.
"Environmental Lien" shall mean any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, and
regulations thereunder, in each case as in effect from, time to time. References
to sections of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Eurodollar Base Rate" shall mean, with respect to a
Eurodollar Loan for the relevant Interest Period, the rate determined by the
Agent to be the rate at which deposits in Dollars are offered by The Chase
Manhattan Bank to first-class banks in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
eurodollar loans are then being conducted at approximately 11:00 a.m., New York
City time, two Business Days prior to the first day of such Interest Period, in
the approximate amount of the relevant Eurodollar Loan and having a maturity
equal to such Interest Period.
"Eurodollar Loan" shall mean a Loan bearing interest at the
Eurodollar Rate.
"Eurodollar Rate" means with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100 of 1%):
Eurodollar Base Rate
----------------------------
1.00 - Reserve Requirements
"Event of Default" shall mean any of the Events of Default
described in Section 9.01 hereof.
"Fee Letter" shall mean the commitment letter, dated July 9,
1997, between the Borrower and the Agent obligating the Borrower to pay certain
fees to the Agent in connection with
Exhibit 10.14 - Page 6
<PAGE>
this Agreement, as such commitment letter may be modified, supplemented or
amended from time to time.
"FIFO EBITDA" shall mean, for any period, the consolidated net
income (or net loss) of the Borrower and its Consolidated Subsidiaries for such
period as determined in accordance with GAAP, plus (i) the sum of, without
duplication the following for the Borrower and its Consolidated Subsidiaries,
(A) depreciation expense, (B) amortization expense net of negative goodwill
amortization, (C) the excess, if any, of gross interest expense for such period
over gross interest income for such period, in each case determined in
accordance with GAAP, (D) total income tax expense, (E) extraordinary or unusual
non-cash losses (provided that such extraordinary or unusual losses, (a) do not
at any time result in a cash outlay by the Borrower or any Consolidated
Subsidiary and (b) do not result from the write down of the Inventory of the
Borrower), which include the cumulative effect on earnings from the adoption of
GAAP pronouncements, and (G) expenses relating to the uniform capitalization of
inventory, less (ii) extraordinary non-cash gains and the income effect of the
uniform capitalization of inventory for the Borrower and its Consolidated
Subsidiaries.
"Final Order" shall mean an order or judgment of the
Bankruptcy Court as entered on the docket that has not been reversed, stayed,
modified or amended, and as to which the time to appeal, petition for
certiorari, or seek reargument or rehearing has expired and as to which no
appeal, reargument, petition for certiorari, or rehearing is pending or as to
which any right to appeal, reargue, petition for certiorari or seek rehearing
has been waived in writing in a manner satisfactory to the Agent or, if an
appeal, reargument, petition for certiorari, or rehearing thereof has been
sought, the order or judgment of the Bankruptcy Court has been affirmed by the
highest court to which the order was appealed or from which the reargument or
rehearing was sought, or certiorari has been denied, the time to take any
further appeal or to seek certiorari or further reargument has expired.
"GAAP" shall mean generally accepted accounting principles as
such principles shall be in effect in the United States at the relevant date.
"Governmental Authority" shall mean any nation or government,
any federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" of or by any Person shall mean any obligation of
such Person guaranteeing any indebtedness of any other Person (the "primary
obligor"), directly or indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such indebtedness or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Hazardous Materials" shall mean any pollutants, contaminants,
toxic or hazardous or extremely hazardous substances, materials, wastes,
constituents, compounds, chemicals, natural or man-made elements or forces
(including, without limitation, petroleum or any by-products or fractions
thereof, any form of natural gas, lead, asbestos and asbestos-containing
materials ("ACM"), building construction materials and debris, polychlorinated
biphenyls ("PCBs") and PCB-containing equipment, radon and other radioactive
elements, ionizing radiation, electromagnetic field radiation and other non-
ionizing radiation, infectious, carcinogenic, mutagenic, or etiologic agents,
pesticides, defoliants, explosives, flammables, corrosives and urea formaldehyde
foam insulation) that are regulated by, or may now or in the future form the
basis of liability under, any Environmental Laws.
Exhibit 10.14 - Page 7
<PAGE>
"Indebtedness" shall mean as to any Person (i) indebtedness
for borrowed money; (ii) indebtedness for the deferred purchase price of
property or services (other than current trade payables incurred in the ordinary
course of business and payable in accordance with customary practices); (iii)
indebtedness evidenced by bonds, debentures, notes or other similar instruments
(other than performance, surety and appeal or other similar bonds arising in the
ordinary course of business); (iv) obligations and liabilities secured by a Lien
upon property owned by such Person, whether or not owing by such Person and even
though such Person has not assumed or become liable for the payment thereof; (v)
obligations and liabilities directly or indirectly Guaranteed by such Person;
(vi) obligations or liabilities created or arising under any conditional sales
contract or other title retention agreement with respect to property used and/or
acquired by such Person, even though the rights and remedies of the lessor,
seller and/or lender thereunder are limited to repossession of such property;
(vii) Capitalized Lease Obligations; and (viii) all liabilities in respect of
letters of credit, acceptances and similar obligations created for the account
of such Person.
"Indemnified Parties" shall have the meaning given that term
in Section 10.06 hereof.
"Initial Mortgaged Properties" shall have the meaning set
forth in Section 5.01(d)(v) hereto.
"Interest Period" shall mean, with respect to any Eurodollar
Loan, the period commencing on the borrowing date or the date of any
continuation or conversion for such Eurodollar Loan, as the case may be, and
ending one, two or three months thereafter as the Borrower may elect in the
applicable notice given to the Agent pursuant to Section 2.03; provided that (i)
any Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day, unless such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next preceding Business Day; (ii) any Interest Period that begins on the
last Business day of a calendar month or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period shall end on the last Business Day of the applicable calendar month; and
(iii) no Interest Period for any Loan shall end after the Termination Date.
Interest shall accrue from and include the first date of an Interest Period, but
exclude the last day of such Interest Period.
"Inventory" shall mean all goods and merchandise of the
Borrower including, but not limited to, all raw materials, work in process,
finished goods, materials and supplies of every nature used or usable in
connection with the shipping, storing, advertising or sale of such goods and
merchandise, whether now owned or hereafter acquired and all such property, the
sale or disposition of which would give rise to accounts receivable or cash;
provided that Inventory shall not include inventory held by the Borrower on
consignment.
"L/C Notice" shall have the meaning given to that term in
Section 3.01(b).
"Lease" shall mean any lease of real property to which the
Borrower is a party as lessee or lessor.
"Lenders" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Letter of Credit" shall have the meaning given to that term
in Section 3.01(a).
"Letter of Credit Application" shall have the meaning given to
that term in Section 3.01(a) hereof.
"Letter of Credit Cash Collateral Account" shall mean the
deposit account maintained at The Chase Manhattan Bank in New York, Now York or
such other bank as CIT may select, which deposit account shall be under the sole
dominion and control of CIT.
Exhibit 10.14 - Page 8
<PAGE>
"Letter of Credit Exposure" shall mean, at any time, the sum
at such time of (a) the aggregate amount of all Unreimbursed Draws under Letters
of Credit (whether or not such Letters of credit are then outstanding) and (b)
the aggregate Undrawn Letter of Credit Availability under all outstanding
Letters of Credit.
"Letter of Credit Fee" shall have the meaning given to that
term in Section 2.08(f) hereof.
"Letter of Credit Guaranty" shall mean the guaranty delivered
by CIT to the Letter of Credit Issuer, guaranteeing the Borrower's reimbursement
obligations under a reimbursement agreement, Letter of Credit Application or
other like document.
"Letter of Credit Issuer" shall mean the issuer of a Letter of
Credit, which issuer shall be either The Chase Manhattan Bank or Dai-Ichi Kangyo
Bank.
"Lien" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loan or loans
(including Unreimbursed Draws) made by the Lenders or by the Agent on behalf of
the Lenders to the Borrower under this Agreement.
"Loan Documents" shall have the meaning given to that term in
the definition of "Related Documents" set forth in this Section 1.01.
"Majority Lenders" shall mean, at any time, the Agent and
Lenders whose Pro Rata Shares aggregate at least sixty-six and two-thirds
percent (66-2/3%).
"Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations, condition (financial or otherwise), or
properties of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower or any Subsidiary to perform its obligations hereunder,
under the Fee Letter or under any other Related Document, (iii) the Lien arising
under the Related Documents on any Collateral, (iv) the legality, validity or
enforceability of this Agreement or any Related Document or the Lien arising
under any Related Document, or (v) the aggregate value of the property included
in the calculations of the Borrowing Base.
"Minority Lenders" shall have the meaning given to that term
in Section 10.03(b).
"Mortgaged Property" means each Collateral Property or Lease
subject to a Mortgage, including the Initial Mortgaged Properties.
"Mortgages" shall mean, collectively, each mortgage, deed of
trust, assignment of rents, security agreement and fixture filing and similar
instrument executed by the Borrower or any Subsidiary in favor of the Agent from
time to time, acting for the benefit of the Lenders, as each mortgage, deed of
trust, assignment of rents, security agreement and fixture filing shall be
modified and supplemented and in effect from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which
is, or within the immediately preceding six (6) years was, contributed to by the
Borrower or any ERISA Affiliate.
Exhibit 10.14 - Page 9
<PAGE>
"Net Proceeds" shall mean, for any asset sale or disposition,
the amount of cash and other payments received (directly or indirectly) by the
Borrower and/or its Subsidiaries net of reasonable expenses incurred by the
Borrower and/or its Subsidiaries in connection therewith and transfer taxes paid
by the Borrower and/or its Subsidiaries in connection therewith.
"Notes" shall mean the promissory notes of the Borrower
executed and delivered to the Lenders under this Agreement and substantially in
the form of Exhibit A hereto, as modified or restated from time to time and any
promissory note or notes issued in exchange or replacement thereof, including
all extensions, renewals, refinancings or refundings thereof in whole or part.
"Notice of Borrowing" shall have the meaning given to that
term in Section 2.03(a) hereof.
"Obligations" shall mean all indebtedness, obligations and
liabilities of the Borrower and its Subsidiaries to any Lender or the Agent
incurred under or related to this Agreement, the Notes, the Fee Letter or any
other Related Document, whether such indebtedness, obligations or liabilities
are direct or indirect, secured or unsecured, joint or severe, absolute or
contingent, due or to become due, which are described in either of the following
clauses (i) of (ii):
(i) All indebtedness, obligations (including
Reimbursement Obligations) and liabilities of any
nature whatsoever including amounts due under Section
10.06 hereof and similar agreements contained in the
other Related Documents, from time to time arising
under or in connection with or evidenced or secured
by this Agreement, the Notes, the Letters of Credit
or any other Related Document, including but not
limited to the principal amount of Loans outstanding,
together with interest thereon, the amount of the
Letter of Credit Exposure, together with interest
thereon and all expenses, fees and indemnities
hereunder or under any other Related Document.
Without limitation, such amounts include all Loans
and interest thereon and the amount of all Letter of
Credit Exposure whether or not such Loans were made
or any Letters of Credit to which such Letter of
Credit Exposure relates were issued in compliance
with the terms and conditions hereof or in excess of
any Lender's obligation to lend and arrange for the
issuance of Letters of Credit hereunder or any
Lender's obligation to participate therein. If and to
the extent any amounts in any account (including the
Agent Account, the Letter of Credit Cash Collateral
Account, the Depository Accounts, the Cash
Concentration Account or otherwise) constituting
collateral are applied to Obligations hereunder, and
any Lender or the Agent is subsequently obligated to
return or repay any such amounts to any Person for
any reason, the amount so returned or repaid shall be
deemed a Loan hereunder and shall constitute an
Obligation.
(ii) All indebtedness, obligations and liabilities from
time to time arising under or in connection with any
account from time to time maintained by the Borrower
with any Lender or the Agent, including but not
limited to all Reimbursement Obligations, service
charges and interest in connection with any
overdrafts or returned items from time to time
arising in connection with any such account, or
arising under or in connection with any investment
services, cash management services or other services
from time to time performed by any Lender or the
Agent pursuant to or in connection with this
Agreement or any other Related Document.
Exhibit 10.14 - Page 10
<PAGE>
"Office", when used in connection with the Agent shall mean
its office located at 1211 Avenue of the Americas, New York, New York 10036 or
at such other office or offices of the Agent as may be designated in writing
from time to time by the Agent to the Borrower and when used in connection with
the Bank or the Letter of Credit Issuer shall mean the office of such entity
designated in writing from time to time by the Agent to the Borrower. In the
event The Chase Manhattan Bank shall be the Bank or the Letter of Credit Issuer,
the Office for such entity shall until further written notice from the Agent to
the Borrower be its office located at 55 Water Street, New York, New York 10004.
"Operating Lease Obligations" shall mean all obligations and
indebtedness of the Borrower and its Subsidiaries in respect of leases of
property (whether real, personal or mixed) other than Capitalized Lease
Obligations.
"Other Taxes" shall have the meaning given to that term in
Section 2.15.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Permitted Investments" shall mean (a) direct obligations of
the United States of America or of any agency thereof or obligations guaranteed
as to principal and interest by the United States of America or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof by such Person; (b) deposit accounts with or certificates of
deposit and bankers' acceptances issued by any bank or trust company organized
under the laws of the United States of America or any state thereof and having
capital, surplus and undivided profits of at least $500,000,000, maturing not
more than 90 days from the date of acquisition thereof by such Person; (c)
commercial paper rated A-1 or better or P-1 by Standard & Poor's Corporation
("S&P") or Moody's Investors Services, Inc. ("Moody's"), respectively, maturing
not more than 90 days from the date of acquisition thereof by such Person; and
(d) Investments in money market funds rated AAAm or AAAm-G by S&P and P-1 by
Moody's.
"Permitted Liens" shall have the meaning given that term in
Section 8.01.
"Person" shall mean an individual, corporation, partnership,
limited liability company, limited liability partnership, trust, unincorporated
association, joint venture, joint-stock company, government (including political
subdivisions), Governmental Authority or agency, or any other entity.
"Pledge Agreement" shall mean the Pledge and Security
Agreement substantially in the form of Exhibit I hereto made by the Borrower in
favor of the Agent, for the benefit of the Lenders, as modified and supplemented
and in effect from time to time.
"Plan" shall mean an employee benefit plan defined in Section
3(3) of ERISA in respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Plan of Reorganization" shall mean that certain Amended Plan
of Reorganization under chapter 11 of the United States Bankruptcy Code for
Weiner's Stores, Inc. dated June 24, 1997, as confirmed by the Confirmation
Order, as amended, restated, supplemented or otherwise modified to the extent
permitted by Section 8.17 hereof.
"Potential Default" shall mean any event or condition which,
with notice or passage of time, or any combination of the foregoing, would
constitute an Event of Default.
Exhibit 10.14 - Page 11
<PAGE>
"Pledge Agreement" shall mean a Pledge Agreement, in form and
substance satisfactory to the Agent in all respects, executed and delivered to
the Agent pursuant to Section 7.18 hereof by the Borrower upon the creation of
the first Subsidiary created after the date hereof, in favor of the Agent, as
modified and supplemented and in effect from time to time.
"Pro Rata Share" shall mean, with respect to any Lender, a
fraction (expressed as a percentage), the numerator of which shall be the amount
of such Lender's Revolving Credit Commitment and the denominator of which shall
be the aggregate amount of all of the Lenders' Revolving Credit Commitments, as
adjusted from time to time in accordance with the provisions of Section 10.13
hereof, provided that, if the Revolving Credit Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and Letter of
Credit Exposure and the denominator shall be the aggregate amount of all of the
Lenders' unpaid Loans and Letter of Credit Exposure.
"Reference Loan" shall mean a Loan bearing interest at the
Regular Rate.
"Reference Rate" shall mean the interest rate per annum
publicly announced from time to time by The Chase Manhattan Bank in New York,
New York as its Reference Rate, such interest rate to change automatically from
time to time effective as of the announced effective date of each change in the
Reference Rate. The Reference Rate is not intended to be the lowest rate of
interest charged by The Chase Manhattan Bank to its borrowers.
"Register" shall have the meaning given that term in Section
10.13(c) hereof.
"Regular Rate" shall mean, for any day, the Reference Rate for
such day plus .375%.
"Reimbursement Obligation" shall mean the obligation of the
Borrower to reimburse CIT or the Lenders for amounts payable by CIT or the
Lenders under a Letter of Credit Guaranty in respect of any drawings made under
any Letter of Credit issued by the Letter of Credit Issuer, together with
interest thereon and all fees and expenses related thereto.
"Related Documents" or "Loan Documents" shall mean this
Agreement, the Notes, the Letters of Credit, each Letter of Credit Application,
the Letter of Credit Guaranty, the Confirmation Order, Fee Letter, the
Depository Account Agreements, the Security Documents, the Restricted Account
Agreement, each notice letter delivered to a Depository Bank or other financial
institution pursuant to Section 5.01(o) hereof and Section 7.13 hereof and the
other documents, instruments and agreements referred to in Section 5.01 hereof,
and all other instruments, agreements and documents from time to time delivered
in connection with or otherwise relating to any Related Document.
"Release" shall mean any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
depositing, dumping, escaping, leaching or migrating of Hazardous Materials.
"Remedial Action" shall mean all actions necessary to (i)
monitor, assess, evaluate, investigate, clean up, remove or treat any Release or
threatened Release of Hazardous Materials; (ii) prevent, mitigate or minimize
any Release or threatened Release so that the Release or threatened Release does
not migrate or endanger or threaten to endanger public health or welfare or the
environment; (iii) perform any pre-remedial studies and investigations and
post-remedial monitoring and care, or (iv) come into compliance with
Environmental Law.
"Reorganization" shall mean the reorganization of the Debtor
pursuant to the Plan of Reorganization and the Confirmation Order.
Exhibit 10.14 - Page 12
<PAGE>
"Reportable Event" shall mean any of the events described in
Section 4043(c) of ERISA (other than events for which the notice requirements
have been waived).
"Reserve Requirements" shall mean, for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of or credit for
proration, exceptions or offsets which may be available from time to time to any
Lender or the Affiliate of any Lender under Regulation D.
"Restricted Account Agreement" shall have the meaning given
to that term in Section 7.13.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the amount set forth on Schedule 1.01(B) to this Agreement or assigned
to such Lender in accordance with Section 10.13, as such amounts may be reduced
from time to time pursuant to the terms of this Agreement, and "Revolving Credit
Commitments" shall, collectively, mean the aggregate amount of the Revolving
Credit Commitments of all the Lenders, the maximum amount of which shall not
exceed $40,000,000.
"Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit B hereto, made by the Borrower in favor of
the Agent, for the benefit of the Lenders, as modified and supplemented and in
effect from time to time.
"Security Documents" shall mean, collectively, the Security
Agreement, the Pledge Agreement, each Subsidiary Guaranty, the Mortgages, each
Assignment for Security (Trademarks) and each Assignment for Security (Patents),
substantially in the forms of Exhibits A and B to the Security Agreement,
executed and delivered by the Borrower, each collateral assignment of leases and
rents executed and delivered by the Borrower and/or its Subsidiaries, and all
Uniform Commercial Code financing statements required by this Agreement, the
Security Agreement and the Mortgages to be filed with respect to the security
interests in personal property and fixtures created pursuant to such agreements,
and all other documents and agreements executed and delivered by the Borrower
and/or its Subsidiaries in connection with any of the foregoing documents.
"Settlement Period" shall have the meaning set forth in
Section 2.03 hereof.
"Stated Amount" shall mean, with respect to a Letter of
Credit, the face amount thereof, drawn or undrawn, regardless of the existence
or satisfaction of any conditions or limitations on drawing.
"Subsidiary" shall mean, with respect to any Person, any
corporation, limited or general partnership, limited liability company, limited
liability partnership, trust, association or other business entity of which an
aggregate of 50% or more of the outstanding stock or other interests entitled to
vote in the election of the board of directors of such corporation (irrespective
of whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more Subsidiaries
of such Person.
Exhibit 10.14 - Page 13
<PAGE>
"Subsidiary Guaranty" shall mean each Subsidiary Guaranty,
substantially in the form of Exhibit J hereto, made by the Subsidiaries of the
Borrower existing on the date hereof in favor of the Agent and the Subsidiary
Guaranty, substantially in the form of Exhibit J hereto, executed and delivered
to the Agent pursuant to Section 7.18 hereof by each Subsidiary of the Borrower
created after the date hereof, in each case in favor of the Agent, as modified
and supplemented and in effect from time to time.
"Taxes" shall have the meaning given to that term in Section
2.15.
"Termination Date" shall have the meaning given that term in
Section 2.01(a) hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which the Borrower or any
ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (iii) the imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written notice
of intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; or (v) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Undrawn Letter of Credit Availability" shall mean with
respect to a Letter of Credit, at any time, the maximum amount available to be
drawn under such Letter of Credit at such time, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
"Unreimbursed Draws" shall mean with respect to a Letter of
Credit, at any time, the aggregate amount at such time of all payments made by
the Letter of Credit Issuer or payments made by CIT or the Lenders under a
Letter of Credit Guaranty in respect of such payments under such Letter of
Credit, to the extent not repaid by the Borrower.
"Unused Line Fee" shall have the meaning given to that term in
Section 2.08(e).
"Westview Advertising" shall mean Westview Advertising, Inc.,
a Texas corporation, a wholly-owned Subsidiary of the Borrower, engaged solely
in the business of placing advertisements for the Borrower.
"Westview Facility" shall mean the warehouse, corporate
offices and distribution center of the Borrower located on Westview Drive in
Houston, Texas.
1.02. Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Agent include good faith estimates by the Agent (in the
case of quantitative determinations) and good faith beliefs by the Agent (in the
case of qualitative determinations). The words "hereof," "herein," "hereunder"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement. The section and other headings
contained in this Agreement and the Table of Contents preceding this Agreement
are for reference purposes only and shall not control or affect the construction
of this Agreement or the interpretation thereof in any respect. Section,
subsection and exhibit references are to this Agreement unless otherwise
specified.
1.03. Accounting Principles. Except as otherwise provided in
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
Exhibit 10.14 - Page 14
<PAGE>
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP. Notwithstanding
the definition of GAAP contained in this Agreement, no change in GAAP that would
affect the method or calculation of any of the financial covenants, restrictions
or standards or definitions of terms used herein shall be given effect in such
calculations until such financial covenants, restrictions or standards or
definitions are amended in a manner satisfactory to the Borrower and the
Majority Lenders so as to reflect such change in GAAP.
ARTICLE II
THE CREDITS
-----------
2.01. Revolving Credit Loans. (a) The Revolving Credit
Commitment. Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender severally agrees to
make Loans to the Borrower at any time and from time to time on or after the
date hereof and to, but not including, the Termination Date, in an aggregate
principal amount not exceeding at any one time its Pro Rata share of the Current
Commitment at such time. The Current Commitment at any time shall be equal to
the lesser of (A) $40,000,000, as such amount may have been reduced under
Section 2.04(a) hereof at such time, and (B) the Borrowing Base. No Lender shall
have an obligation to make Loans hereunder or arrange for the issuance of the
date on which the Revolving Credit Commitment is terminated by Borrower pursuant
to Section 2.04 hereof.
(b) Revolving Credit. Within the limits of time
and amount set forth in this Section 2.01, and subject to the provisions of this
Agreement, the Borrower may borrow, repay and reborrow hereunder.
2.02. Notes. The obligation of the Borrower to repay the
unpaid principal amount of the Loans made to it by each Lender and to pay
interest thereon shall be evidenced in part by a Note dated the date of this
Agreement in the principal amount of such Lender's Revolving Credit Commitment
with the blanks appropriately filled in. An executed Note for each Lender shall
be delivered by the Borrower to the Agent on the date of the execution and
delivery of this Agreement.
2.03. Notice of Borrowing; Making of Loans. (a) Whenever the
Borrower desires to borrow, it shall provide notice to the Agent of such
proposed borrowing (a "Notice of Borrowing"), each such notice, to be given (i)
not later than 12:00 noon (New York City time) on the date of such proposed
borrowing, in the case of a borrowing consisting of Reference Loans, or (ii) not
later than 12:00 noon (New York City time) on the third Business Day before the
date of such borrowing, in the case of a borrowing consisting of Eurodollar
Loans, setting forth: (a) the date, which shall be a Business Day, on which such
borrowing is to occur, (b) whether such Loan is requested to be a Reference Loan
or a Eurodollar Loan and, if a Eurodollar Loan, the Interest Period requested
with respect thereto, (c) the principal amount of the Loan being borrowed, and
(d) the account information where such Loan is to be received. Such notice shall
be given by telephone or in writing by a Designated Borrowing Officer, provided
that, if requested by the Agent, any such telephonic notice shall be confirmed
in writing by delivery to the Agent promptly on or before the date on which such
Loan is to be made a notice containing the original or facsimile signature of a
Designated Borrowing Officer. Except for a Notice of Borrowing when the Agent
will fund the related Loan pursuant to Section 2.03(e) hereof, the Agent shall
provide each Lender with prompt notice of each Notice of Borrowing. Except as
otherwise provided in Section 2.03(e), on the date specified in such notice,
each Lender shall, subject to the terms and conditions of this Agreement, make
its Pro Rata Share of such Loan in immediately available funds by wire transfer
to the Agent at its Office not later than 12:30 p.m. (New York City time).
Unless the Agent determines that any applicable conditions in Section 5.02 have
not been satisfied, the Agent shall make the funds so received from the Lenders
available to the Borrower not later than 2:30 p.m. (New York City time), on the
date specified in such notice in immediately available funds by (i) depositing
such proceeds in the Disbursement Account if
Exhibit 10.14 - Page 15
<PAGE>
the Disbursement Account is located at the Bank and (ii) initiating a wire
transfer if the Disbursement Account is not located at the Bank.
(b) The Agent and each Lender shall be entitled
to rely conclusively on each Designated Borrowing Officer's authority to request
a Loan on behalf of the Borrower until the Agent receives written notice to the
contrary. The Agent and the Lenders shall have no duty to verify the
authenticity of the signature appearing on any written Notice of Borrowing and,
with respect to an oral request for a Loan, the Agent and the Lenders shall have
no duty to verify the identity of any Person representing himself as a
Designated Borrowing Officer.
(c) The Agent and the Lenders shall not incur
any liability to the Borrower in acting upon any telephonic notice referred to
above which the Agent and the Lenders believe in good faith to have been given
by a Designated Borrowing Officer or for otherwise acting in good faith under
this Section 2.03 and, upon the funding of a Loan by the Lenders (or by the
Agent on behalf of the Lenders) in accordance with this Agreement pursuant to
any such telephonic notice, the Borrower shall have effected a Loan hereunder.
(d) Each Notice of Borrowing pursuant to this
Section 2.03 shall be irrevocable and the Borrower shall be bound to make a
borrowing in accordance therewith. Each Reference Loan shall be in a minimum
amount of $100,000 and in multiples of $100,000 if in excess thereof, and each
Eurodollar Loan shall be in a minimum amount of $1,000,000 and in multiples of
$1,000,000 if in excess thereof. Notwithstanding any other provision of this
Agreement, no more than five separate Interest Periods in respect of Eurodollar
Loans may be outstanding at any one time.
(e) (i) Except as otherwise provided in this
subsection 2.03(e), all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares, it being understood
that no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder nor shall the
Revolving Credit Commitment of any Lender be increased or decreased as a result
of the default by any other Lender in that other Lender's obligation to make a
Loan requested hereunder.
(ii) Notwithstanding any other provision
of this Agreement, and in order to reduce the number of fund transfers among the
Borrower, the Lenders and the Agent, the Borrower, the Lenders and the Agent
agree that the Agent may (but shall not be obligated to), and the Borrower and
the Lenders hereby irrevocably authorize the Agent to, fund, on behalf of the
Lenders, Loans pursuant to subsection 2.01(a), subject to the procedures for
settlement set forth in subsection 2.03(f); provided, however, that (a) the
Agent shall in no event fund such Loans if the Agent shall have received written
notice from the Majority Lenders on the Business Day prior to the day of the
proposed Loan that one or more of the conditions precedent contained in Section
5.02 will not be satisfied on the day of the proposed Loan, and (b) the Agent
shall not otherwise be required to determine that, or take notice whether, the
conditions precedent in Section 5.02 have been satisfied.
(iii) Unless (A) the Agent has notified the
Lenders that the Agent, on behalf of the Lenders, will fund a particular Loan
pursuant to subsection 2.03(e)(ii), or (B) the Agent shall have been notified by
any Lender on the Business Day prior to the day of a proposed Loan that such
Lender does not intend to make available to the Agent such Lender's Pro Rata
Share of the Loan requested on such day, the Agent may assume that such Lender
has made such amount available to the Agent on such day and the Agent, in its
sole discretion, may, but shall not be obligated to, cause a corresponding
amount to be made available to the Borrower on such day. If the Agent makes such
corresponding amount available to the Borrower and such corresponding amount is
not in fact made available to the Agent by such Lender, the Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon, for each day from the date such payment was due
until the date such amount is paid to the Agent, at the customary rate
Exhibit 10.14 - Page 16
<PAGE>
set by the Agent for the correction of errors among banks for three Business
Days and thereafter at the Regular Rate. During the period in which such Lender
has not paid such corresponding amount to the Agent, notwithstanding anything to
the contrary contained in this Agreement or any other Related Document, the
amount so advanced by the Agent to the Borrower shall, for all purposes hereof,
be a Loan made by the Agent for its own account. Upon any such failure by a
Lender to pay the Agent, the Agent shall promptly thereafter notify the Borrower
of such failure and the Borrower shall immediately pay such corresponding amount
to the Agent for its own account.
(iv) Nothing in this subsection 2.03(e)
shall be deemed to relieve any Lender from its obligation to fulfill its
Revolving Credit Commitment hereunder or to prejudice any rights that the Agent
or the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
(f) (i) With respect to all periods for
which the Agent has funded Loans pursuant to Subsection 2.03(e), within 15 days
after the last day of each calendar month, or such shorter period as it may from
time to time select (any such month or shorter period being herein called a
"Settlement Period"), the Agent shall notify each Lender of the average daily
unpaid principal amount of the Loans outstanding during such Settlement Period.
In the event that such amount is greater than the average daily unpaid principal
amount of the Loans outstanding during the Settlement Period immediately
preceding such Settlement Period (or, if there has been no preceding Settlement
Period, the amount of the Loans made on the date of such Lender's initial
funding), each Lender shall promptly make available to the Agent its Pro Rata
Share of the difference in immediately available funds. In the event that such
amount is less than such average daily unpaid principal amount, the Agent shall
promptly pay over to each other Lender its Pro Rata Share of the difference in
immediately available funds. In addition, if the Agent shall so request at any
time when a Potential Default or an Event of Default shall have occurred and be
continuing, or any other event shall have occurred as a result of which the
Agent shall determine that it is desirable to present claims against the
Borrower for repayment, each Lender shall promptly remit to the Agent or, as the
case may the be, the Agent shall promptly remit to each Lender, sufficient funds
to adjust the interests of the Lenders in the then outstanding Loans to such an
extent that, after giving effect to such adjustment, each Lender's interest in
the then outstanding Loans will be equal to its Pro Rata Share thereof. The
obligations of each Lender under this subsection 2.03(f) shall be absolute and
unconditional. Each Lender shall only be entitled to receive interest on its Pro
Rata Share of the Loans which have been funded by such Lender.
(ii) In the event that any Lender fails
to make any payment required to be made by it pursuant to subsection 2.03(f)(i),
the Agent shall be entitled to recover such corresponding amount on demand from
such Lender together with interest thereon, for each day from the date such
payment was due until the date such amount is paid to the Agent, at the
customary rate set by the Agent for the correction of errors among banks for
three Business Days and thereafter at the Regular Rate. During the period in
which such Lender has not paid such corresponding amount to the Agent,
notwithstanding anything to the contrary contained in this Agreement or any
other Related Document, the amount so advanced by the Agent to the Borrower
shall, for all purposes hereof, be a Loan made by the Agent for its own account.
Upon any such failure by a Lender to pay the Agent, the Agent shall promptly
thereafter notify the Borrower of such failure and the Borrower shall
immediately pay such corresponding amount to the Agent for its own account.
Nothing in this subsection 2.03(f)(ii) shall be deemed to relieve any Lender
from its obligation to fulfill its Revolving Credit Commitment hereunder or to
prejudice any rights that the Borrower or the Agent may have against any Lender
as a result of any default by such Lender hereunder.
2.04. Termination or Reduction of Commitment; Mandatory
Prepayment; Optional Prepayment. (a) Termination or Reduction of the Commitment.
The Borrower may (i) upon not less than five Business Days' notice to the Agent,
terminate the Revolving Credit Commitments, subject to the early termination
fees provided for in Section 2.08(h) hereof, or (ii) at any time or from time to
Exhibit 10.14 - Page 17
<PAGE>
time and without penalty or premium reduce the amount of the Revolving Credit
Commitments of the Lenders, provided that no such termination or reduction shall
be permitted if, after giving effect thereto, the sum of the unpaid principal
amount of all Loans then outstanding plus the principal amount of all Loans not
yet made as to which notice has been given by the Borrower under Section 2.03
hereof plus the Letter of Credit Exposure at such time plus the Stated Amount of
all Letters of Credit not yet issued as to which a request has been made unless
the request is withdrawn and the Letter of Credit is not issued by the Letter of
Credit Issuer under Section 3.01 hereof, would exceed the amount of the
Revolving Credit Commitments then in effect. Any reduction shall be in an amount
which is an integral multiple of $1,000,000. Reduction of the Revolving Credit
Commitments of the Lenders shall be made by providing not less than two Business
Days' written notice (which notice shall be irrevocable) to such effect to the
Agent (which notice the Agent shall promptly transmit to each Lender).
Termination or reductions of the Revolving Credit Commitments of the Lenders are
irrevocable and may not be reinstated. Each such reduction shall reduce the
Revolving Credit Commitment of each Lender proportionately in accordance with
its Pro Rata Share. No termination of the Revolving Credit Commitment shall
relieve or discharge the Borrower of its respective duties, obligations and
covenants under this Agreement and the Related Documents until all Obligations
have been fully and finally discharged and paid, and the Agent's continuing
security interest in the Collateral and the rights and remedies of the Agent and
each Lender hereunder, under the Related Documents and any applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid.
(b) Mandatory Prepayment. (i) Exceeding
Current Commitment. If at any time the Current Commitment is less than the
aggregate unpaid principal amount of the Loans then outstanding plus the Letter
of Credit Exposure at such time, the Borrower shall prepay an amount of the
Loans not less than the amount of such difference or, if the Loans then
outstanding are less than the amount of such difference, provide cash collateral
to the Agent in an amount equal to 105% of such excess, which cash collateral
shall be deposited and held in the Letter of Credit Cash Collateral Account
until such time as such excess no longer exists. Any such prepayment will not
otherwise reduce the Revolving Credit Commitments of the Lenders. Concurrently
with any notice of reduction of the Revolving Credit Commitments of the Lenders,
the Borrower shall give notice to the Agent of any mandatory prepayment which
notice shall specify a prepayment date no later than the effective date of such
reduction of the Revolving Credit Commitments of the Lenders.
(ii) Asset Sales. Simultaneously with
the consummation of any sale or disposition of assets permitted under Section
8.04(b) hereof, whether by the Borrower or its Subsidiaries, the Borrower shall
prepay the Loans in an aggregate principal amount equal to 100% of the Net
Proceeds of such sale or disposition, other than such sales or dispositions the
Net Proceeds from which do not exceed $50,000 individually or $200,000 in the
aggregate.
(iii) Loss Event. If there shall occur
any Destruction or Taking (as defined in the Mortgages) with respect to any
Mortgaged Property, the Borrower shall promptly repay the Loans in an amount
equal to the net proceeds received by the Borrower or any Subsidiary in respect
of such Destruction or Taking required to be applied to the Loans pursuant to
the terms of the Mortgages.
(iv) Other Mandatory Prepayments. The
Agent may, on the Cash Concentration Account Blockage Date and on each Business
Day thereafter, apply all funds in the Cash Concentration Account to the
payment, in whole or in part, of the Obligations outstanding.
(c) Optional Prepayment. The Borrower may at
any time or from time to time prepay, in whole or in part, any or all Loans then
outstanding. Any such prepayment (i) shall be in an aggregate principal amount
equal to $100,000 or an integral multiple of $100,000, provided that no
Eurodollar Loan shall be prepaid in part.
Exhibit 10.14 - Page 18
<PAGE>
(d) Prepayment Penalty. Subject to Section
2.08(h) hereof, all prepayments of Loans under this Section 2.04 shall be
without premium or penalty, except that any prepayment of Eurodollar Loans shall
be subject to the provisions of Section 2.12 hereof.
2.05. Interest Rate. (a) Each Reference Loan shall bear
interest for each day until paid at a rate per annum for each day equal to the
Regular Rate for such day.
(b) Each Eurodollar Loan shall bear interest at
a rate per annum equal to the Eurodollar Rate plus 2.250% for the Interest
Period in effect for such Eurodollar Loan, together with any additional interest
owing pursuant to Section 2.14 hereof.
2.06. Interest Payment Dates. The Borrower shall pay interest
on the unpaid principal amount of each Loan from the date of such Loan until
such principal amount shall be paid in full, which interest shall be payable (i)
if such Loan is a Reference Loan, monthly in arrears on the first Business Day
of each month, commencing September 1, 1997, and (ii) if such Loan is a
Eurodollar Loan on the last day of the Interest Period of such Eurodollar Loan.
After maturity of any principal amount of any Loan (by acceleration, at
scheduled maturity or otherwise), interest on such amount shall be due and
payable on demand.
2.07. Amortization. To the extent not due and payable earlier
pursuant to the terms of this Agreement, the entire unpaid principal amount of
each of the Loans shall be due and payable on the Termination Date.
2.08. Payments. (a) Time, Place and Manner. Except as
otherwise provided in Section 2.04(b) hereof, all payments and prepayments to be
made in respect of principal, interest, commitment fee, facility fee or other
amounts due from the Borrower hereunder, under the Fee Letter, the Notes or any
other Related Document shall be payable at or before 1:00 p.m., New York City
time, on the day when due without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived. Such payments shall be made to
the Agent for the account of the Agent, CIT or the Lenders, as the case may be,
at the Agent Account in Dollars in funds immediately available at the Bank's
Office without setoff, counterclaim or other deduction of any nature. The Agent
shall maintain a separate loan account (the "Borrower's Account") on its books
in the name of the Borrower in which the Borrower will be charged with Loans
made by the Agent or the Lenders to the Borrower hereunder and with any other
Obligations. The Borrower and the Lenders hereby authorize the Agent to, and the
Agent may, from time to time charge the Borrower's Account with any interest,
fees, expenses and other Obligations that are due and payable under this
Agreement or any Related document. The Borrower and the Lenders confirm that any
charges which the Agent may so make to the Borrower's Account as herein provided
will be made as an accommodation to the Borrower and solely at the Agent's
discretion and shall constitute a Loan to the Borrower funded by the Agent on
behalf of the Lenders and subject to subsections 2.03(e) and 2.03(f) of the
Agreement. Each of the Lenders and the Borrower agrees that the Agent shall have
the right to make such charges regardless of whether any Event of Default or
Potential Default shall have occurred and be continuing or whether any of the
conditions precedent in Section 5.02 have been satisfied. The Borrower's Account
will be credited upon receipt of "good funds" in the Agent Account with all
amounts actually received by the Agent from the Borrower or others for the
account of the Borrower. The Agent shall use reasonable efforts to provide the
Borrower with copies or other evidence of all charges to the Borrower's Account
promptly after such charges are made, provided that the failure to provide such
copies or other evidence to the Borrower shall not relieve the Borrower of any
of its obligations under this Agreement. Interest on all Loans and all fees that
accrue on a per annum basis shall be computed on the basis of the actual number
of days elapsed in the period during which interest or such fee accrues and a
year of 360 days. In computing interest on any Loan, the date of the making of
such Loan shall be included and the date of payment shall be excluded; provided,
however, that if a Loan is repaid on the same day in which it is made, one day's
interest shall be paid on such Loan.
Exhibit 10.14 - Page 19
<PAGE>
(b) Periodic Statements. The Agent shall
provide the Lenders and the Borrower promptly after the end of each calendar
month a summary statement (in the form from time to time used by the Agent) of
(A) the opening and closing daily balances in the Borrower's Account during such
month, (B) the amounts and dates of all Loans made during such month, (C) the
amounts and dates of all payments on account of the Loans made during such month
and each Lender's interest in the Loans, (D) the amount of interest accrued on
the Loans during such month, (E) any Letters of Credit issued by the Letter of
Credit Issuer during such month, specifying the Stated Amount thereof, (F) the
amount of charges to the Borrower's Account or Loans to be made during such
month to reimburse CIT, the Lenders or the Letter of Credit Issuer for drawings
made under Letters of Credit or payments made by CIT or the Lenders under the
Letter of Credit Guaranty, and (G) the amount and nature of any charges to the
borrower's Account made during such month on account of interest, fees and
expenses and other Obligations. All entries on any such statement shall, 30 days
after the same is sent, be presumed to be correct and shall constitute prima
facie evidence of the information contained in such statement, subject to the
Borrower's and each Lender's express right to rebut such presumption by
conclusively demonstrating the existence of any error on the part of the Agent.
(c) Apportionment of Payments. Except as
otherwise provided in this subsection, aggregate principal and interest payments
shall be apportioned among all outstanding Loans to which such payments relate
and payments of the fees required to be paid by the borrower under subsections
2.08(e), (f) and (h) shall, as applicable, be apportioned ratably among the
Lenders, in each case according to their Pro Rata Shares. All payments shall be
remitted to the Agent and all such payments and any other amounts, including,
without limitation, proceeds of Collateral received by the Agent from or as to
the Borrower shall be applied subject to the provisions of this Agreement first,
to pay principal of and interest on any Loans funded by the Agent on behalf of
the Lenders and any fees, expense reimbursements or indemnities then due to the
Agent from the Borrower; second, to pay any fees, expense reimbursements or
indemnities then due to the Lenders or the Letter of Credit Issuer hereunder;
third, to pay interest due in respect of Loans and Unreimbursed Draws under
Letters of Credit; and fourth, to pay, prepay or provide case collateral in
respect of principal of Loans and Letter of Credit Exposure. The Agent shall
promptly distribute to each Lender at its primary address or at such other
address as such Lender may designate in writing, such funds as it may be
entitled to receive. The foregoing apportionment of payments is solely for the
purpose of determining the obligations of the Borrower hereunder and,
notwithstanding such apportionment, any Lender may on its books and records
allocate payments received by it in a manner different from that contemplated
hereby. No such different allocation shall alter the rights and obligations of
the Borrower under this Agreement determined in accordance with the
apportionments contemplated by this Section 2.08(c). To the extent that the
Borrower makes a payment or payments to the Agent or the Agent receives any
payment or other amount, which payment(s) or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause then, to the
extent of such payment or proceeds received ,the Obligations or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by the Agent.
(d) Interest Upon Events of Default. To the
extent permitted by law, after there shall have occurred and so long as there is
continuing an Event of Default pursuant to Section 9.01, all principal,
interest, commitment fees, facility fees, indemnities or any other Obligations
of the Borrower hereunder, under the Fee Letter or under any Note or any other
Related Document (and including interest accrued under this subsection 2.08(d))
shall compound on a daily basis as provided in this subsection 2.08(d) and shall
bear interest for each day until paid (before and after judgment), payable on
demand, at a rate per annum of 4.250% above the Eurodollar Rate for such day in
the case of Eurodollar Loans and 2.375% above the Reference Rate for such day in
the case of Reference Loans, such interest rate relating to Reference Loans to
change automatically from time to time effective as of the announced effective
date of each change in the Reference Rate.
Exhibit 10.14 - Page 20
<PAGE>
(e) Unused Line Fee. From and after the Closing
Date until the Termination Date, the Borrower shall pay to the Agent, for the
account of each Lender in accordance with such Lender's Pro Rate Share, an
unused line fee (the "Unused Line Fee") accruing at the rate of one-quarter of
one percent (0.25%) per annum, on the excess, if any, of the aggregate Revolving
Credit Commitments over the sum of the Loans and letter of Credit Exposure
outstanding from time to time. All Unused Line Fees shall be payable monthly in
arrears on the first day of each month commencing September 1, 1997.
(f) Letter of Credit Fees. From and after the
Closing Date until the Termination Date, the Borrower shall pay to the Agent,
for the account of each Lender in accordance with such Lender's Pro Rata Share,
a letter of credit fee (the "Letter of Credit Fee") accruing at the rate of one
and one-quarter percent (1.25%) per annum on the average daily Undrawn Letter of
Credit Availability of all Letters of Credit. All Letter of Credit Fees shall be
payable monthly in arrears on the first day of each month commencing September
1, 1997. The Borrower shall also pay the customary letter of credit fees and
charges of he Letter of Credit Issuer for the administration, issuance and
processing of any Letters of Credit issued by the Letter of Credit Issuer.
Promptly following the Agent's receipt of any Letter of Credit Fees described
above, the Agent shall pay to each Lender its Pro Rata Share of an amount equal
to the difference between (A) the amount of the Letter of Credit Fees received
by the Agent and (B) the Letter of Credit Fees payable to the Letter of Credit
Issuer in connection with the issuance of the Letters of Credit.
(g) Administration Fee. The Borrower shall pay
to CIT an annual administration fee of $36,000 payable in advance on the Closing
Date and on each subsequent anniversary of the Closing Date; provided, however,
that a ratable portion of the most recently paid administration fee under that
certain Revolving Credit Agreement, dated as of April 12, 1995, as amended (the
"DIP Financing"), between the Debtor and CIT, shall be credited against the
first Administration Fee due hereunder.
(h) Early Termination Fee. If the Borrower
elects to terminate the Revolving Credit Commitment pursuant to Section 2.04(a)
hereof, or if an Event of Default described in subsections (g) or (h) of Section
9.01 hereof has occurred, or if the Agent elects to declare the Revolving Credit
Commitment terminated pursuant to Section 9.02(a) hereof, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of the Lenders'
lost profits as a result thereof, the Borrower shall pay to the Agent, for the
account of each Lender in accordance with such Lender's Pro Rata Share, an early
termination fee in an amount set forth below if such termination is effective in
the period indicated:
Amount Period
- ------ ------
(i) 1.50% of the Revolving Credit any date prior to, and including,
Commitment the date of the first anniversary of
the Effective Date
(ii) 1.00% of the Revolving Credit any date from the date of the first
Commitment anniversary of the Effective Date
to, and including, the date of the
second anniversary of the Effective Date
Exhibit 10.14 - Page 21
<PAGE>
(iii) 0.50% of the Revolving Credit any date from the date of the
Commitment second anniversary of the
Effective Date, to, and including,
the date of the third anniversary
of the Effective Date
(i) Fees. The Borrower shall pay to the Agent
the fees set forth in the Fee Letter at the times set forth in the Fee Letter.
All fees required to be paid to the Agent pursuant to the Fee Letter, this
Agreement and any other Related Document shall be paid to the Agent for its own
account as required therein. All fees under this Agreement, the Fee Letter and
the other Related Documents are non-refundable under all circumstances.
2.09. Use of Proceeds. The Borrower hereby covenants,
represents and warrants that the proceeds of the Loans made to it will be used
solely to fund working capital in the ordinary course of the Borrower's business
and for other general corporate purposes.
2.10. Eurodollar Rate Not Determinable; Illegality or
Impropriety. (a) In the event, and on each occasion, that on or before the day
on which the Eurodollar Rate is to be determined for a borrowing that is to
include Eurodollar Loans, the Agent has determined in good faith that, or has
been advised by the Bank that, the Eurodollar Rate cannot be determined for any
reason or the Eurodollar Rate will not adequately and fairly reflect the cost of
maintaining Eurodollar Loans or Dollar deposits in the principal amount of the
applicable Eurodollar Loans are not available in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in respect of
the Bank's eurodollar loans are then being conducted, the Agent shall, as soon
as practicable thereafter, give written notice of such determination to the
Borrower and the other Lenders. In the event of any such determination, any
request by the Borrower for a Eurodollar Loan pursuant to Section 2.03 shall,
until the Agent shall have advised the Borrower and the other Lenders that the
circumstances giving rise to such notice no longer exist, be deemed to be a
request for a Reference Loan. Each determination by the Agent hereunder shall be
conclusive and binding absent manifest error.
(b) In the event that it shall be unlawful or
improper for any Lender to make, maintain or fund any Eurodollar Loan as
contemplated by this Agreement, then such Lender shall forthwith give notice
thereof to the Agent and the Borrower describing such illegality or impropriety
in reasonable detail. Effective immediately upon the giving of such notice, the
obligation of such Lender to make Eurodollar Loans shall be suspended for the
duration of such illegality or impropriety and, if and when such illegality or
impropriety ceases to exist, such suspension shall cease, and such Lender shall
notify the Agent and the Borrower. If any such change shall make it unlawful or
improper for any Lender to maintain any outstanding Eurodollar Loan as a
Eurodollar Loan, such Lender shall, upon the happening of such event, notify the
Agent and the Borrower, and the Borrower shall immediately, or if permitted by
applicable law, rule, regulation, order, decree, interpretation, request or
directive, no later than the date permitted thereby, convert each such
Eurodollar Loan into a Reference Loan.
2.11. Reserve Requirements; Capital Adequacy Circumstances.
(a) Notwithstanding any other provision herein, if any change in applicable law
or regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration thereof
(whether or not having the force of law) shall impose any tax on or change the
basis of taxation of payments to the Letter of Credit Issuer or any Lender or
any Affiliate of a Lender of the principal of or interest on any Eurodollar Loan
made by such Lender or of any amounts payable hereunder (other than taxes
imposed on the overall net income of the Letter of Credit Issuer or such Lender
or such Affiliate by the jurisdiction in which the Letter of Credit Issuer or
such Lender or such Affiliate has its principal office or by any political
subdivision or taxing authority therein), or shall
Exhibit 10.14 - Page 22
<PAGE>
impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of or credit
extended by the Letter of Credit Issuer or such Lender or Affiliate of such
Lender (except any such reserve requirement that is reflected in Reserve
Requirements) or shall impose on the Letter of Credit Issuer or such Lender or
such Affiliate any other condition affecting this Agreement or any Eurodollar
Loans made by such Lender or any Letter of Credit, and the result of any of the
foregoing shall be to increase the cost to the Letter of Credit Issuer or such
Lender of making or maintaining any Eurodollar Loan or issuing any Letter of
Credit or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such Lender hereunder (whether of principal, interest or
otherwise) in respect thereof by an amount deemed by the Letter of Credit Issuer
or such Lender to be material, then the Borrower shall pay to the Letter of
Credit Issuer or such Lender such additional amount or amounts as will
compensate the Letter of Credit Issuer or such Lender for such additional costs
incurred or reduction suffered. Any amount or amounts payable by the Borrower to
the Letter of Credit Issuer or any Lender in accordance with the provisions of
this Section 2.11(a) shall be paid by the Borrower to the Letter of Credit
Issuer or such Lender within ten (10) days after receipt by the Borrower from
the Letter of Credit Issuer or such Lender of a statement setting forth in
reasonable detail the amount or amounts due and the basis for the determination
from time to time of such amount or amounts, which statement shall be conclusive
and binding absent manifest error.
(b) If the Letter of Credit Issuer or any Lender
shall have reasonably determined that the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Letter of Credit Issuer or by such
Lender (or any lending office of such Lender) or by any Affiliate of such
Lender, as the case may be, with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has the effect of reducing the rate of return on the
Letter of Credit Issuer's or such Lender's capital or on the capital of such
Lender's Affiliate, as the case may be, as a consequence of the Letter of Credit
Issuer's obligations or such Lender's obligations under this Agreement and the
Related Documents to a level below that which the Letter of Credit Issuer or
such Lender or such Lender's Affiliate, as the case may be, could have achieved
but for such adoption, change or compliance (taking into consideration the
Letter of Credit Issuer's or such Lender's policies or such Lender's Affiliate's
policies, as the case may be, with respect to capital adequacy) by an amount
deemed by the Letter of Credit Issuer or such Lender to be material, then, from
time to time, the Borrower shall reimburse the Letter of Credit Issuer or such
Lender for such reduction. Any amount or amounts payable by the Borrower to the
Letter of Credit Issuer or any Lender in accordance with the provisions of this
Section 2.11(b) shall be paid by the Borrower to the Letter of Credit Issuer or
such Lender within ten (10) days after receipt by the Borrower from the Letter
of Credit Issuer or such Lender of a statement setting forth (i) in reasonable
detail the amount or amounts due, (ii) the basis for the determination from time
to time of such amount or amounts, (iii) that such amount(s) have been
determined in good faith, and (iv) that the Letter of Credit Issuer or such
Lender is using reasonable efforts to collect comparable amounts from similarly
situated account parties or borrowers having similar relationships with the
Letter of Credit Issuer or such Lender under documentation which gives the
Letter of Credit Issuer or such Lender substantially the same rights with
respect to such increased costs or reductions or payments made with respect to
capital adequacy requirements or guidelines, as relevant, as set forth in this
Section 2.11, which statement shall be conclusive and binding absent manifest
error.
(c) The Letter of Credit Issuer or any Lender
may demand compensation for any increased costs or reduction in amounts received
or receivable or reduction in return on capital with respect to any period;
provided that the Letter of Credit Issuer or such Lender shall provide to the
Borrower a certificate setting forth the basis on which such demand is made. The
protection of this Section 2.11 shall be available to the Letter of Credit
Issuer or any Lender regardless
Exhibit 10.14 - Page 23
<PAGE>
of any possible contention of the invalidity or inapplicability of the law,
rule, regulation, guideline or other change or condition which shall have
occurred or been imposed.
2.12. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender actually sustains or incurs
(including, but not limited to, reasonable fees and expenses of counsel) as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
borrowing hereunder the applicable conditions set forth in Article V, (b) any
failure by the Borrower to borrow any Eurodollar Loan hereunder or to convert
any Reference Loan into a Eurodollar Loan after notice of such borrowing or
conversion has been given pursuant to Section 2.03 or Section 2.14, as the case
may be, (c) any payment, prepayment (mandatory or optional) or conversion of a
Eurodollar Loan required by any provision of this Agreement or otherwise made on
a date other than the last day of the Interest Period applicable thereto, (d)
any default in payment or prepayment of the principal amount of any Eurodollar
Loan or any part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, by notice of prepayment or otherwise), or (e)
the occurrence of any Event of Default, including, in each such case, any loss
(including, without limitation, loss of margin) or reasonable expense sustained
or incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such loss
or reasonable expense shall include but not be limited to an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i) its costs of
obtaining the funds for the Loan being paid, prepaid or converted or not
borrowed or converted (based on the Eurodollar Rate applicable thereto) for the
period from the date of such payment, prepayment, conversion or failure to
borrow or convert the last day of the Interest Period for such Loan (or, in the
case of a failure to borrow or convert, the last day of the Interest Period for
such Loan that would have commenced on the date of such failure to borrow or
convert) over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in re-employing the funds so paid,
prepaid or converted or not borrowed or converted for such Interest Period.
Notwithstanding the foregoing, the Agent will use reasonable efforts to minimize
or reduce any such loss or expense resulting from the mandatory prepayments
required by clause (iii) of Section 2.04(b) of this Agreement by calculating
such loss or expense based upon the net decrease in Eurodollar Loans on a day
after giving effect to all prepayments and all Loans made on such day. A
certificate of any Lender setting forth in reasonable detail any amount or
amounts that such Lender is entitled to receive pursuant to this Section 2.12
and the basis for the determination of such amount or amounts shall be delivered
to the Borrower and shall be conclusive and binding absent manifest error.
2.13. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or other security or interest arising from, or in lieu of, such
secured claim, received by such lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Obligation as a result of
which the aggregate unpaid amount of the Obligations owing to it shall be
proportionately less than the aggregate unpaid amount of the Obligations owing
to any other Lender, it shall simultaneously purchase from such other Lender at
face value a participation in the Obligations owing to such other Lender, so
that the aggregate unpaid amount of the Obligations and participations in
Obligations held by each Lender shall be in the same proportion to the aggregate
unpaid amount of all Obligations owing to such Lender prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the aggregate unpaid
amount of all Obligations outstanding prior to such exercise of banker's lien,
setoff or counterclaim or other event; provided that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.13 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustments restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in an Obligation deemed to have been so purchased
may exercise any and all rights of banker's lien, setoff or counterclaim with
respect to
Exhibit 10.14 - Page 24
<PAGE>
any and all moneys owing by the Borrower to such Lender by reason thereof as
fully as if such Lender had made a loan directly to the Borrower in the amount
of such participation.
2.14. Continuation and Conversion of Loans. Subject to Section
2.03 and Section 2.10 hereof, the Borrower shall have the right, at any time,
(i) on three (3) Business Days' prior irrevocable written or telecopy notice to
the Agent, to continue any Eurodollar Loan or any portion thereof into a
subsequent Interest Period or to convert any Reference Loan or portion thereof
into a Eurodollar Loan, or (ii) on one (1) Business Day's prior irrevocable
written or telecopy notice to the Agent, to convert any Eurodollar Loan or
portion thereof into a Reference Loan, subject to the following:
(A) in the case of a conversion of a Reference Loan
or portion thereof into a Eurodollar Loan, no Event of Default
or Potential Default shall have occurred and be continuing at
the time of such continuation or conversion;
(B) in the case of a continuation or conversion of
less than all Loans, the aggregate principal amount of any
Eurodollar Loan continued or converted shall not be less than
$1,000,000 and in multiples of $500,000 if in excess thereof;
(C) each conversion shall be effected by the Lenders
by applying the proceeds of the new Loan to the Loan (or
portion thereof) being converted; and accrued interest on the
Loan (or portion thereof) being converted shall be paid by the
Borrower at the time of the conversion;
(D) if the new Loan made in respect of a conversion
shall be a Eurodollar Loan, the first Interest Period with
respect thereto shall commence on the date of conversion;
(E) no portion of any Loan shall be continued or
converted to a Eurodollar Loan with an interest period ending
later than the Termination Date; and
(F) if any conversion of a Eurodollar Loan shall be
effected on a day other than the last day of an Interest
Period, the Borrower shall reimburse each Lender on demand for
any loss incurred or to be incurred by it (including, but not
limited to, reasonable fees and expenses of counsel) in the
reemployment of the funds released by such conversion as
provided in Section 2.12 hereof.
In the event that the Borrower shall not give notice to continue any Eurodollar
Loan into a subsequent Interest Period, such Loan (unless repaid) shall
automatically become a Reference Loan at the expiration of the then current
Interest Period.
2.15. Taxes. (a) All payments made by the Borrower hereunder,
under the Notes or under any Loan Document will be made without setoff,
counterclaim, deduction or other defense. All such payments shall be made free
and clear of and without deduction for any present or future income, franchise,
sales, use, excise, stamp or other taxes, levies, imposts, deductions, charges,
fees, withholdings, restrictions or conditions of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any jurisdiction (whether
pursuant to United States Federal, state, local or foreign law) or by any
political subdivision or taxing authority thereof or therein, and all interest,
penalties or similar liabilities, excluding taxes on or measured by the overall
net income of the Lenders or the Letter of Credit Issuer (such nonexcluded taxes
are hereinafter collectively referred to as the "Taxes"). If the Borrower shall
be required by law to deduct or to withhold any Taxes from or in respect of any
amount payable hereunder, (i) the amount so payable shall be increased to the
extent necessary so that after making all required deductions and withholdings
(including Taxes on amounts
Exhibit 10.14 - Page 25
<PAGE>
payable to the Lenders or the Letter of Credit Issuer pursuant to this sentence)
the Lenders or the Letter of Credit Issuer receive an amount equal to the sum
they would have received had no such deductions or withholdings been made, (ii)
the Borrower shall make such deductions or withholdings, and (iii) the Borrower
shall pay the full amount deducted or withheld to the relevant taxation
authority in accordance with applicable law. Whenever any Taxes are payable by
the Borrower, as promptly as possible thereafter, the Borrower shall send the
Lenders, the Letter of Credit Issuer and the Agent an official receipt showing
payment. In addition, the Borrower agrees to pay any present or future taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution, delivery, performance, recordation or filing of, or otherwise
with respect to, this Agreement, the Notes, the Letters of Credit or any other
Loan Document (hereinafter referred to as "Other Taxes").
(b) The Borrower will indemnify the Lenders and
the Letter of Credit Issuer for the amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.15) paid by any lender or the Letter of
Credit Issuer and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be paid within 30 days from the date on
which such Lender or such Letter of Credit Issuer makes written demand.
(c) Each Lender which is a foreign person (i.e.,
a Person other than a United States Person for United States Federal income tax
purposes) hereby agrees that:
(i) it shall, no later than the Closing
Date (or, in the case of a Lender which becomes a party hereto pursuant to
Section 10.13 hereof after the Closing Date, the date upon which such Lender
becomes a party hereto) deliver to the Borrower through the Agent:
(A) two accurate and complete
signed originals of Form 4224, or
(B) two accurate and complete
signed originals of Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the account of
its lending installation under this Agreement free from withholding of United
States Federal income tax;
(ii) if at any time such Lender changes its
lending installation or installations or selects an additional lending
installation it shall, at the same time or reasonably promptly thereafter,
deliver to the Borrower through the Agent in replacement for, or in addition to,
the forms previously delivered by it hereunder;
(A) if such changed or
additional lending installation is located in the United States, two accurate
and complete signed originals of Form 4224, or
(B) otherwise, two accurate and
complete signed originals of Form 1001, in each case indicating that such lender
is on the date of delivery thereof entitled to receive payments of principal,
interest and fees for the account of such changed or additional lending
installation under this Agreement free from withholding of United States Federal
income tax; and
(iii) it shall, promptly upon the Borrower's
reasonable request to that effect, deliver to the Borrower such other forms or
similar documentation as may be required from
Exhibit 10.14 - Page 26
<PAGE>
time to time by any applicable law, treaty, rule or regulation in order to
establish such Lender's tax status for withholding purposes.
(d) If the Borrower fails to perform its
obligations under this Section 2.15, the Borrower shall indemnify the Lenders
and the Letter of Credit Issuer for any incremental taxes, interest or penalties
that may become payable as a result of any such failure.
ARTICLE III
LETTERS OF CREDIT
-----------------
3.01. Letters of Credit. (a) General. In order to assist the
Borrower in establishing or opening documentary and standby letters of credit,
which shall not have expiration dates that exceed one year from the date of
issuance (the "Letters of Credit") with the Letter of Credit Issuer, the
Borrower has requested CIT to join in the applications for such Letters of
Credit, and/or guarantee payment or performance of such Letters of Credit and
any drafts or acceptances thereunder through the issuance of a Letter of Credit
Guaranty, thereby lending CIT's credit to the Borrower, and CIT has agreed to do
so. These arrangements shall be handled by CIT subject to the terms and
conditions set forth below. CIT shall have no obligation to arrange for the
issuance of Letters of Credit on or after the Termination Date or which, when
added to the aggregate amount of all outstanding and contemporaneous Loans and
the Letter of Credit Exposure at such time, would cause the amount of all Loans
and the Letter of Credit Exposure at any time to exceed the Current Commitment
at such time. In addition, CIT shall not be required to be the issuer of any
Letter of Credit. The Letter of Credit Issuer shall be a bank mutually
acceptable to CIT and the Borrower. The Borrower will be the account party for
any application for a Letter of Credit, which shall be substantially in the form
of Exhibit C hereto or such other form as may from time to time be approved by
the Letter of Credit Issuer and CIT, and shall be duly completed in a manner
acceptable to CIT, together with such other certificates, documents and other
papers and information as the Letter of Credit Issuer or CIT may request (the
"Letter of Credit Application").
(i) The aggregate Letter of Credit
Exposure shall not exceed $15 million. In addition, the amount, purpose and
extent of the letters of credit and changes or modifications thereof by the
Borrower and/or the Letter of Credit Issuer of the terms and conditions thereof
shall in all respects be subject to the prior approval of CIT in the exercise of
its reasonable discretion; provided, however, that (x) the expiry date of all
Letters of Credit shall be no later than 15 days prior to the Termination Date
unless on or prior to 15 days prior to the Termination Date such Letters of
Credit shall be cash collateralized in an amount equal to at least 105% of the
Stated Amount of such Letters of Credit, (y) the Letters of Credit and all
documentation in connection therewith shall be in form and substance reasonably
satisfactory to CIT and the Letter of Credit Issuer and (z) aggregate Letter of
Credit Exposure in excess of $6,500,000 resulting from the issuance of Letters
of Credit for the benefit of domestic trade creditors in connection with the
purchase of Inventory by the Borrower shall not be permitted.
(ii) The Agent shall have the right,
without notice to the Borrower, to charge the Borrower's Account with the amount
of any and all indebtedness, liability or obligation of any kind (including
indemnification for breakage costs, capital adequacy and reserve requirement
charges) incurred by the Agent, CIT or the Lenders under the Letter of Credit
Guaranty at the earlier of (x) payment by CIT or the Lenders under the Letter of
Credit Guaranty, or (y) with respect to any Letter of Credit which is not cash
collateralized as provided in this Agreement, the occurrence of an Event of
Default. Any amount charged to the Borrower's Account shall be deemed a Loan
hereunder made by the Lenders to the Borrower, funded by the Agent on behalf of
the lenders and subject to subsections 2.03(e) and (f). Any charges, fees,
commissions, costs and expenses charged to CIT for the account of the Borrower
by the Letter of Credit Issuer in connection with or
Exhibit 10.14 - Page 27
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arising out of Letters of Credit issued pursuant to this Agreement or out of
transactions relating thereto will be charged to the Borrower's Account in full
when charged to or paid by CIT and any such charges by CIT to the Borrower's
Account shall be conclusive and binding on the Borrower and the Lenders absent
manifest error. Each of the Lenders and the Borrower agree that the Agent shall
have the right to make such charges regardless of whether any Event of Default
or Potential Default shall have occurred and be continuing or whether any of the
conditions precedent in Section 5.02 have been satisfied.
(iii) The Borrower agrees to unconditionally
indemnify the Agent, CIT and each Lender and to hold the Agent, CIT and each
Lender harmless from any and all loss, claim or liability (including, but not
limited to, reasonable fees and expenses of counsel) incurred by the Agent, CIT
or any such Lender arising from any transactions or occurrences relating to
Letters of Credit established or opened for the Borrower's account and any
drafts or acceptance thereunder, and all Obligations thereunder, including any
such loss or claim due to any action taken by the Letter of Credit Issuer, other
than for any such loss, claim or liability arising out of the gross negligence
or willful misconduct of the Agent, CIT or any Lender as determined by a final
judgment of a court of competent jurisdiction. The Borrower further agrees to
hold the Agent, CIT and each Lender harmless from any errors or omissions,
negligence or misconduct by the Letter of Credit Issuer. The Borrower's
unconditional obligation to the Agent, CIT and each Lender hereunder shall not
be modified or diminished for any reason or in any manner whatsoever, other than
as a result of the Agent's, CIT's or such Lender's gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. The Borrower agrees that any charges incurred by CIT for the
Borrower's account by the Letter of Credit Issuer shall be conclusive and
binding on the Borrower absent manifest error and may be charged to the
Borrower's Account.
(iv) None of the Agent, CIT, the Letter of
Credit Issuer or any of the Lenders shall be responsible for the existence,
character, quality, quantity, condition, packing, value or delivery of the goods
purporting to be represented by any documents; any difference or variation in
the character, quality, quantity, condition, packing, value or delivery of the
goods from that expressed in the documents; the validity, sufficiency or
genuineness of any documents or of any endorsements thereof even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place, manner or order in which
shipment is made; partial or incomplete shipments, or failure or omission to
ship any or all of the goods referred to in the Letters of Credit or documents;
and deviation from instructions; delay, default, or fraud by the shipper and/or
anyone else in connection with any such goods or the shipping thereof; or any
breach of contract between the shipper or vendors and the Borrower. Furthermore,
without being limited by the foregoing, none of the Agent, CIT, the Letter of
Credit Issuer or any of the Lenders shall be responsible for any act or omission
with respect to or in connection with any goods covered by Letters of Credit.
(v) The Borrower agrees that any action
taken by the Agent, CIT or any Lender, if taken in good faith, and any action
taken by the Letter of Credit Issuer, under or in connection with the Letters of
Credit, the guarantees, the drafts or acceptances, or the goods purported to be
represented by any documents, shall be binding on the Borrower (with respect to
the Letter of Credit Issuer, the Agent, CIT and the Lenders) and shall not put
the Agent, CIT or the Lenders in any resulting liability to the Borrower. In
furtherance thereof, CIT shall have the full right and authority to clear and
resolve any questions of non-compliance of documents; to give any instructions
as to acceptance or rejection of any documents or goods; to execute any and all
steamship or airways guaranties (and applications therefore), indemnities or
delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in CIT's sole name, and the Letter
of Credit Issuer shall be entitled to comply with and
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honor any and all such documents or instruments executed by or received solely
from CIT, all without any notice to or any consent from the Borrower.
(vi) Without CIT's express consent and
endorsement in writing, the Borrower agrees: (x) not to execute any applications
for steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances or documents; or to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
and (y) after the occurrence of an Event of Default which is not cured within
any applicable grace period, if any, or waived by the Agent, not to (A) clear
and resolve any questions of non-compliance of documents, or (B) give any
instructions as to acceptances or rejection of any documents or goods.
(vii) The Borrower agrees that any necessary
and material import, export or other license or certificates for the import or
handling of Inventory will have been promptly procured; all foreign and domestic
governmental laws and regulations in regard to the shipment and importation of
Inventory or the financing thereof will have been promptly and fully complied
with, and any certificates in that regard that CIT may at any time reasonably
request will be promptly furnished. In this connection, the Borrower represents
and warrants that all shipments made under any such Letters of Credit are in
accordance with the laws and regulations of the countries in which the shipments
originate and terminate, and are not prohibited by any such laws and
regulations. As between the Borrower, on the one hand, and the Agent, CIT, the
Lenders and the Letter of Credit Issuer, on the other hand, the Borrower assumes
all risk, liability and responsibility for, and agrees to pay and discharge, all
present and future local, state, federal or foreign taxes, duties, or levies. As
between the Borrower, on the one hand, and the Agent, CIT, the Lenders and the
Letter of Credit Issuer, on the other hand, any embargo, restriction, laws,
customs or regulations of any country, state, city, or other political
subdivision, where such Inventory is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall
be solely the Borrower's risk, liability and responsibility.
(viii) Upon any payments made to the Letter
of Credit Issuer under the Letter of Credit Guaranty, CIT or the Lenders, as the
case may be, shall, without prejudice to its rights under this Agreement
(including that such unreimbursed amounts shall constitute Loans hereunder),
acquire by subrogation, any rights, remedies, duties or obligations granted or
undertaken by the Borrower to the Letter of Credit Issuer in any application for
Letters of Credit, any standing agreement relating to Letters of Credit or
otherwise, all of which shall be deemed to have been granted to the Agent and
apply in all respects to the Agent and shall be in addition to any rights,
remedies, duties or obligations contained herein.
(ix) In the event that the Borrower is
required to provide cash collateral for any Letter of Credit, the Borrower shall
deposit such cash collateral in the Letter of Credit Cash Collateral Account,
which cash collateral shall be held in the Letter of Credit Cash Collateral
Account until all Obligations have been paid in full in cash; provided, that,
when the Borrower elects, and is not required to provide cash collateral for a
Letter of Credit, the cash collateral for such Letter of Credit shall be
returned to the Borrower if at such time (A) an Event of Default or Potential
Default has not occurred and is not continuing and (B) no amounts are available
to be drawn on such Letter of Credit and all Unreimbursed Draws have been paid
in full.
(b) Request for Issuance. The Borrower may from
time to time, upon notice (an "L/C Notice") not later than 12:00 noon, New York
City time, at least three Business Days in advance, request CIT to assist the
Borrower in establishing or opening a Letter of Credit by delivering to the
Agent, with a copy to the Letter of Credit Issuer, a Letter of Credit
Application, together with any necessary related documents. CIT shall not
provide support, pursuant to the Letter
Exhibit 10.14 - Page 29
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of Credit Guaranty, if the Agent shall have received written notice from the
Majority Lenders on the Business Day immediately preceding the proposed issuance
day for such Letter of Credit that one or more of the conditions precedent in
Section 5.02 will not have been satisfied on such date, and neither CIT nor the
Agent shall otherwise be required to determine that, or take notice whether, the
conditions precedent set forth in Section 5.02 have been satisfied.
(c) Existing Letters of Credit. Schedule 3.01(
c) hereto contains a description of all letters of credit issued pursuant to the
DIP Financing and outstanding on the Closing Date. Each such letter of credit,
including any extension or renewal thereof (each, as amended from time to time
in accordance with the terms thereof and hereof, an "Existing Letter of Credit")
shall constitute a "Letter of Credit" for all purposes of this Agreement, issued
on the Closing Date.
3.02. Participations. (a) Purchase of Participations.
Immediately upon the issuance by the Letter of Credit Issuer of any Letter of
Credit in accordance with the procedures set forth in Section 3.01, each Lender
(other than CIT) shall be deemed to have irrevocably and unconditionally
purchased and received from CIT, without recourse or warranty, an undivided
interest and participation, to the extent of such Lender's Pro Rata Share, in
all obligations of CIT with respect to such Letter of Credit (including, without
limitation, all Undrawn Letter of Credit Availability and Reimbursement
Obligations of the Borrower with respect thereto pursuant to the Letter of
Credit Guaranty or otherwise).
(b) Sharing of Letter of Credit Payments.
In the event that CIT makes any payment in respect of the Letter of Credit
Guaranty and the Borrower shall not have repaid such amount to the Agent for the
account of CIT, the Agent shall charge the Borrower's Account in the amount of
the Reimbursement Obligation, in accordance with Section 3.01(a)(ii).
(c) Obligations Irrevocable. The obligations of
a Lender to make payments to the Agent for the account of the Agent or CIT with
respect to a Letter of Credit shall be irrevocable, not subject to any
qualification or exception whatsoever and shall be made in accordance with, but
not subject to, the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability
of this Agreement or any of the other Related Documents;
(ii) the existence of any claim, setoff,
defense or other right which the Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the Agent,
Letter of Credit Issuer, any Lender, or any other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions between the
Borrower or any other party and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Related Documents;
(v) any failure by the Agent to provide
any notices required pursuant to this Agreement relating to the Letters of
Credit; or
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(vi) the occurrence of any Event of Default
or Potential Default.
ARTICLE IV
BORROWING BASE
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4.01. Condition of Lending and Assisting in Establishing or
Opening Letters of Credit. CIT and the other Lenders shall have no obligation to
make a Loan or assist in establishing or opening a Letter of Credit to the
extent that the aggregate unpaid principal amount of the Loans plus the Letter
of Credit Exposure exceeds, or after giving effect to a requested Credit
Extension would exceed, the Current Commitment at such time.
4.02. Mandatory Prepayment. Concurrently with the delivery of
any Borrowing Base Certificate, the Borrower shall give notice to the Agent of
any mandatory prepayment pursuant to Section 2.04(b)(i), which notice shall
specify a prepayment date no later than the earlier of the date on which such
Borrowing Base Certificate is given and the date on which such Borrowing Base
Certificate is required to be provided to the Lenders.
4.03. Rights and Obligations Unconditional. Without limitation
of any other provision of this Agreement, the rights of the Agent, CIT and the
Lenders and the obligations of the Borrower under this Article IV are absolute
and unconditional, and the Agent, CIT and the Lenders shall not be deemed to
have waived the condition set forth in Section 4.01 hereof or their right to
payment in accordance with Section 4.02 hereof in any circumstance whatever,
including but not limited to circumstances wherein the Agent or the Lenders
(knowingly or otherwise) make an advance hereunder in excess of the Borrowing
Base.
4.04. Borrowing Base Certificate. (a) By 12:00 noon, New York
City time (i) seven (7) Business Days after the Friday of each week and (ii)
thirty (30) days after the end of each fiscal month (and on any other date on
which the Agent reasonably requests), the Borrower shall furnish to the Agent a
certificate ("Borrowing Base Certificate") substantially in the form attached
hereto as Exhibit D, certified as true and correct by a Designated Financial
Officer, setting forth the Borrowing Base and the other information required
therein as of the Borrower's close of business on the Saturday of the preceding
week (in the case of the weekly Borrowing Base Certificates), or as of
Borrower's close of business on the last day of each fiscal month (in the case
of subsequent monthly Borrowing Base Certificates), in each case together with
such other information with respect to the Inventory of the Borrower as the
Agent may reasonably request. The weekly Borrowing Base Certificate may be
prepared based upon a good faith estimate by the Borrower of its Inventory.
(b) In the event of any dispute about the
eligibility of any asset for inclusion in the Borrowing Base or the valuation
thereof, the Agent's good faith judgment shall control.
(c) The Borrowing Base set forth in a Borrowing
Base Certificate shall be effective from and including the date such Borrowing
Base Certificate is duly received by the Agent to but not including the date on
which a subsequent Borrowing Base Certificate is duly received by the Agent,
unless the Agent disputes the eligibility of any asset for inclusion in the
Borrowing Base or the valuation thereof by notice of such dispute to the
Borrower, in which case the value of such asset shall, at the discretion of the
Borrower, either not be included in the Borrowing Base or be included in the
Borrowing Base with a value reasonably acceptable to the Agent.
(d) Each Borrowing Base Certificate shall be
accompanied by backup schedules showing the derivation thereof and containing
such detail and such other and further information as the Agent may reasonably
request from time to time.
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4.05. General Provisions. Notwithstanding anything to the
contrary in this Article IV, in no event shall any single element of value or
asset be counted twice in determining the Borrowing Base.
ARTICLE V
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
---------------------------------------------
5.01. Conditions Precedent to Effectiveness. This Agreement
shall become effective as of the Business Day when each of the following
conditions precedent shall have been satisfied and the obligation of any Lender
to make the initial Loan hereunder or the obligation of CIT or any Lender to
assist the Borrower in obtaining the issuance of the initial Letter of Credit
hereunder shall be subject to the satisfaction of the following conditions
precedent:
(a) Payment of Fees, Etc. The Borrower shall
have paid all fees, costs, expenses and taxes then payable by the Borrower
including, without limitation, those due and payable pursuant to Sections 2.08
and 10.06 hereof. The Borrower shall have paid to counsel to the Agent all fees
and other client charges due to such counsel on the Closing Date.
(b) Representations and Warranties; No Event of
Default. The representations and warranties contained in Article VI of this
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lenders or the Letter of Credit Issuer pursuant hereto or
thereto or prior to the Closing Date shall be correct on and as of the Closing
Date as though made on and as of such date; and no Potential Default or Event of
Default shall have occurred and be continuing on the Closing Date or would
result from this Agreement becoming effective in accordance with its terms.
(c) Legality. The making of the initial Loans
and the issuance of the initial Letter of Credit shall not contravene any law,
rule or regulation applicable to CIT, the Lenders or the Letter of Credit
Issuer.
(d) Delivery of Documents. The Agent shall have
received on or before the Closing Date the following, each in form and substance
satisfactory to the Agent in all respects and, unless indicated otherwise, dated
the Closing Date:
(i) a Note payable to the order of each
Lender, duly executed by the Borrower;
(ii) the Security Agreement, duly executed
by the Borrower together with an Assignment for Security (Trademarks) duly
executed by the Borrower;
(iii) acknowledgment copies of appropriate
financing statements on Form UCC-1, duly executed by the Borrower and duly filed
in such office or offices as may be necessary or, in the opinion of the Agent,
desirable to perfect the security interests purported to be created by the
Security Documents and evidence that all necessary filing fees and taxes or
other expenses related to such filings have been paid in full;
(iv) certified copies of requests for copies
or information on Form UCC-11, listing all effective financing statements which
name as debtor the Borrower, tax liens and judgment liens and which are filed in
the offices referred to in paragraph (iii) above, together with copies of such
financing statements, none of which, except as otherwise agreed to in writing by
the Agent, shall cover any of the Collateral;
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(v) the Mortgages encumbering each
Collateral Property and Lease identified on Schedule 5.01(d)(v) hereto (the
"Initial Mortgaged Properties"), duly executed and delivered by the Borrower in
recordable form (in such number of copies as the Agent shall have requested),
together with a current survey of the Initial Mortgaged Properties and all
improvements thereon and reflecting all easements and encumbrances of record, a
report of title, a policy of title insurance on forms of and issued by a title
company satisfactory to the Agent (the "Title Companies"), subject only to such
exceptions as are satisfactory to the Agent and, to the extent necessary under
applicable law, Uniform Commercial Code financing statements covering fixtures,
in each case appropriately completed and duly executed, for filing in the
appropriate county land office and evidence that the Borrower shall have paid to
the Title Companies all expenses in connection with the issuance of such survey,
title reports and policy of title insurance in addition shall have paid to the
Title Companies an amount equal to the recording and stamp taxes (including
mortgage recording taxes) payable in connection with recording the Mortgages and
other Security Documents in the appropriate county land offices;
(vi) a copy of the resolutions adopted by
the Board of Directors of the Borrower and its Subsidiaries, certified as of the
Closing Date by authorized officers thereof, authorizing (A) in the case of the
Borrower, the borrowings hereunder and the transactions contemplated by the Loan
Documents to which the Borrower is or will be a party, and (B) the execution,
delivery and performance by such Person of each Loan Document and the execution
and delivery of the other documents to be delivered by such Person in connection
therewith;
(vii) a certificate of an authorized
officer of the Borrower and its Subsidiaries, certifying the names and true
signatures of the officers of such Person authorized to sign each Loan Document
to which such Person is or will be a party and the other documents to be
executed and delivered by such Person in connection therewith, together with
evidence of the incumbency of such authorized officers;
(viii) a certificate, dated as of a date not
more than 10 Business Days prior to the Closing Date, of the appropriate
official(s) of the states of incorporation and each state of foreign
qualification of the Borrower and its Subsidiaries, certifying as to the
subsistence in good standing of, and the payment of taxes by, such Person in
such states and listing all charter documents of such Person on file with such
official(s), together with confirmation by telephone or telegram (where
available) on the Closing Date from such official(s) as to such matters;
(ix) a copy of the certificates of
incorporation of the Borrower and its Subsidiaries certified as of a date not
more than 10 days prior to the Closing Date by the appropriate official(s) of
the state of incorporation of each such Person and as of the Closing Date by an
authorized officer of each such Person;
(x) a copy of the by-laws of the
Borrower and its Subsidiaries, certified as of the Closing Date by an authorized
officer of each such Person;
(xi) a favorable opinion of Weil, Gotshal
& Manges, LLP, counsel to the Borrower and its Subsidiaries, and opinions from
special Louisiana counsel to the Borrower, each in form and substance
satisfactory to the Agent and as to such other matters as the Agent may
reasonably request;
(xii) a certificate of the Designated
Financial Officer of the Borrower, certifying as to the matters set forth in
subsection (b) of this Section 5.01;
(xiii) a copy of the financial statements
of the Borrower referred to in Section 6.07 hereof together with a certificate
of the Designated Financial Officer of the Borrower
Exhibit 10.14 - Page 33
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setting forth all existing Indebtedness, guarantees, pending or threatened
litigation or claims and other contingent liabilities of the Borrower and its
Subsidiaries;
(xiv) a Borrowing Base Certificate, current
as of the close of business on the Friday immediately preceding the Closing
Date, certified by the Designated Financial Officer of the Borrower;
(xv) a certificate of insurance evidencing
insurance on the property of the Borrower as is required by Section 7.07 of this
Agreement, naming the Agent as additional insured and loss payee, using a long
form loss payee endorsement, for all insurance maintained by the Borrower and
its Subsidiaries;
(xvi) a certificate of the Designated
Financial Officer of the Borrower setting forth in reasonable detail the
calculations required to establish whether the Borrower is in compliance with
the requirements of each of the financial covenants set forth in Sections 8.12
and 8.16 hereof;
(xvii) a certificate of an authorized
officer of the Borrower certifying the names and true signatures of those
officers of the Borrower that are authorized to provide Notices of Borrowing and
all other notices under this Agreement and the Loan Documents;
(xviii) a certificate of the Designated
Financial Officer of the Borrower certifying that as of the Closing Date, after
giving effect to all payments required to be made by the Plan of Reorganization
on the Effective Date, (A) the Borrower shall have available a positive cash
balance, (B) all other liabilities of the Borrower are current together with
such evidence as the Agent may reasonably request, and (C) no Loans are
outstanding, provided that Letters of Credit may be outstanding;
(xix) a certificate of the Designated
Financial Officer of the Borrower certifying that as of the date which is one
month prior to the Effective Date the Cumulative FIFO EBITDA for the twelve
month period ending on such date was not less than ($6,200,000) together with
calculations demonstrating compliance with this provision;
(xx) a satisfactory legal description of the
Initial Mortgaged Properties;
(xxi)a certificate of the Designated
Financial Officer of the Borrower certifying (A) that attached thereto is a true
and correct copy of each Lease constituting an Initial Mortgaged Property, (B)
whether each Lease has been assumed in accordance with the Plan of
Reorganization, and (C) a rent roll in respect of each space lease or sublease
under which the Borrower or any of its Subsidiaries is the lessor, if any;
(xxii) a Subsidiary Guaranty, duly executed
by each Subsidiary of the Borrower;
(xxiii) a Pledge Agreement, duly executed by
the Borrower, together with the original stock certificates representing all of
the capital stock of the Subsidiaries of the Borrower, accompanied by undated
stock powers executed in blank, all in form and substance satisfactory to the
Agent in all respects; and
(xxiv) such other agreements, instruments,
approvals, opinions and other documents as the Agent may reasonably request.
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(e) Proceedings; Receipt of Documents. All
proceedings in connection with the transactions contemplated by this Agreement
and the Related Documents and all documents incidental thereto, shall be
satisfactory to the Agent and its special counsel, and the Agent and such
special counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents, in form and substance
reasonably satisfactory to the Agent, as the Agent or such special counsel may
reasonably request.
(f) Plan of Reorganization. Subject only to
the initial extension of credit hereunder, all conditions precedent to the
Effective Date and consummation of the Plan of Reorganization shall have been
satisfied. The Reorganization shall have concurrently become effective in
accordance with the Confirmation Order, the Plan of Reorganization and this
Agreement. All parties to the Reorganization shall be ready, willing and able to
consummate the Reorganization to the extent of the transactions required to
occur after the Effective Time.
(g) Reorganization. Subject only to the initial
extension of credit hereunder, the Borrower shall have consummated all
transactions contemplated by the Reorganization to occur on or prior to the
Effective Time.
(h) Adequate Protection Payments. The Borrower
shall have paid or caused to be paid all amounts accrued and unpaid through and
including the Effective Time with respect to any adequate protection provided
under the Bankruptcy Code in accordance with the terms of, and the extent
required by, the Plan of Reorganization.
(i) Performance of Agreements. The Borrower and
its Subsidiaries shall have performed in all material respects all agreements
that the Plan of Reorganization, this Agreement and the other Loan Documents
provide shall be performed by them on or before the Effective Time.
(j) Confirmation Order. The Confirmation Order
shall have become a Final Order and the Agent shall have received a copy thereof
certified by a clerk of the Bankruptcy Court as true, complete and correct and
such order shall be in full force and effect.
(k) Default under Related Documents. The
consummation of the Reorganization has not and will not result in an Event of
Default or a Potential Default.
(l) Governmental Approval. All necessary
governmental and third party approvals required to be obtained by the Borrower
or any of its Subsidiaries, in connection with the Reorganization, have been
obtained and remain in effect, and all applicable waiting periods have expired
without any action being taken by any competent authority which restrains,
prevents, impedes, delays or imposes adverse conditions upon, the consummation
of the Reorganization.
(m) Consummation of the Reorganization.
There exists no judgment, order, injunction or other restraint prohibiting or in
the judgment of the Agent imposing materially adverse condition upon the
consummation of the Reorganization.
(n) Aspects of the Reorganization. The Agent
shall be satisfied, in its sole judgment, with all tax aspects of the
Reorganization, the corporate, capital, legal and management structure of the
Borrower and its Subsidiaries immediately after the Reorganization, all
shareholder agreements and all financing relating to the Reorganization, and
shall be satisfied, in its sole judgment, with the nature and status of all
contractual obligations, securities, labor, tax, ERISA, employee benefit,
environmental, health and safety matters, in each case, involving or affecting
the Borrower or any of its Subsidiaries.
Exhibit 10.14 - Page 35
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(o) Cash Management System. The cash management
system of the Borrower shall be satisfactory to the Agent.
(p) Audit. The Agent shall be satisfied (in its
sole discretion) with the results of an audit of the Inventory that has been
conducted by an appraisal firm which is satisfactory to the Agent, in its sole
and absolute discretion, and the Borrower shall have paid all fees and expenses
payable in connection with such audit.
(q) Lien Priority. The Lien in favor of the
Agent pursuant to the Related Documents shall be a valid and perfected first
priority Lien prior to all other Liens on the Collateral, except for Permitted
Liens on any Collateral.
(r) Compliance. The Agent shall have received
evidence reasonably satisfactory to the Agent of the Borrower's compliance with
all environmental Laws, ERISA, tax and labor matters.
(s) Legal Restraints/Litigation. On the Closing
Date, there shall be no (1) litigation, investigation or proceeding (judicial or
administrative) pending or to the best of the Borrower's knowledge after
reasonable inquiry, threatened against the Borrower, or its Subsidiaries, or
their assets, by any agency, division or department of any county, city, state
or federal government challenging the Reorganization, (2) injunction, writ or
restraining order restraining or prohibiting the transactions contemplated
pursuant to the Reorganization or the consummation of the financing arrangements
contemplated by this Agreement, (3) suit, action, investigation or proceeding
(judicial or administrative) pending or, to the knowledge of the Borrower,
threatened against the Borrower, or its Subsidiaries or their assets, which, in
the opinion of the Agent, if adversely determined could have a Material Adverse
Effect, or (4) litigation, investigation or proceeding (judicial or
administrative) pending or, to the best of the Borrower's knowledge after
reasonable inquiry, threatened with respect to the Fee Letter or this Agreement.
(t) Phase I Environmental Site Assessment. The
Agent shall be satisfied (in its sole and absolute discretion) with the results
and scope of a Phase I Environmental Site Assessment of the Westview Facility
conducted by a nationally recognized firm of licensed engineers which is
acceptable to the Agent it its sole and absolute discretion, based upon and in
accordance with ASTM Standard Practice for Environmental Site Assessments E
1527, which assessment shall include, without limitation, a physical onsite
inspection by such firm, as well as a historical review of the use of the
Westview Facility and of the business and operations of the Borrower (including
any former subsidiaries or divisions of the Borrower or any of its Subsidiaries
which have been disposed of prior to the close of such assessment), and the
Borrower shall have paid all fees and expenses payable in connection with such
assessment.
(u) Westview Appraisal. The Agent shall be
satisfied (in its sole and absolute discretion) with the results of an appraisal
of the Westview Facility by an appraisal firm which is satisfactory to the Agent
in its sole and absolute discretion, and the Borrower shall have paid all fees
and expenses payable in connection with such audit.
(v) Field Examination. The Agent shall be
satisfied with the results of a field examination of the Borrower's assets,
business and operations.
5.02. Conditions Precedent to Loans and Letters of Credit. In
addition to the requirements of Section 5.01, the obligation of each Lender to
make any Loan and the obligation of CIT or any Lender to assist the Borrower in
obtaining the issuance of any Letter of Credit is subject to the fulfillment, in
a manner satisfactory to the Agent, of each of the following conditions
precedent:
Exhibit 10.14 - Page 36
<PAGE>
(a) Payment of Fees, Etc. The Borrower shall
have paid all fees, costs, expenses and taxes then payable by the Borrower
pursuant to Sections 2.08 and 10.06 hereof.
(b) Representations and Warranties; No Event of
Default. The following statements shall be true, and the submission by the
Borrower to the Agent of a Notice of Borrowing with respect to a Loan and the
Borrower's acceptance of the proceeds of such Loan, or the submission by the
Borrower to the Agent of an L/C Notice with respect to a Letter of Credit and
the issuance of such Letter of Credit shall be deemed to be a representation and
warranty by the Borrower on the date of such Loan and the date of the issuance
of such Letter of Credit that, (i) the representations and warranties contained
in Article VI of this Agreement and in each other Loan Document and certificate
or other writing delivered to the Lenders pursuant hereto on or prior to the
date of such Loan or Letter of Credit are correct on and as of such date as
though made on and as of such date (except for representations and warranties
which relate to a specific date); and (ii) no Potential Default or Event of
Default has occurred and is continuing or would result from the making of the
Loan to be made on such date or the issuance of the Letter of Credit to be
issued on such date.
(c) Legality. The making of such Loan or the
issuance of such Letter of Credit shall not contravene any law, rule or
regulation applicable to CIT, the Agent, the Lenders or the Letter of Credit
Issuer.
(d) Borrowing Notice. The Agent shall have
received a Notice of Borrowing pursuant to Section 2.03 hereof no later than
12:00 noon (New York City time) three Business Days prior to the date of the
proposed borrowing with respect to a Eurodollar Loan or on the date of a
proposed borrowing of a Reference Loan or an L/C Notice and a Letter of Credit
Application pursuant to Section 3.01 hereof not later than 12:00 noon (New York
City time) three Business Days prior to the proposed date of issuance of a
Letter of Credit.
(e) Delivery of Documents. The Agent shall have
received such other agreements, instruments, approvals and other documents ,
each in form and substance satisfactory to the Agent, as the Agent may
reasonably request.
(f) Proceedings; Receipt of Documents. All
proceedings in connection with the making of such Loan or the issuance of such
Letter of Credit and the other transactions contemplated by this Agreement, and
all documents incidental thereto, shall be satisfactory to the Agent and its
special counsel, and the Agent and such special counsel shall have received all
such information and such counterpart originals or certified or other copies of
such document, in form and substance satisfactory to the Agent, as the Agent or
such special counsel may reasonably request.
(g) Commitment. The aggregate unpaid principal
amount of the Loans and the Letter of Credit Exposure shall not exceed, and
giving effect to the requested Credit Extension will not exceed, the Current
Commitment.
(h) Additional Availability. On the earlier of
(i) the date on which the Lenders make the initial Loan under this Agreement or
(ii) the date on which the Borrower obtains the issuance of the initial Letter
of Credit under this Agreement (excluding any Existing Letters of Credit), after
giving effect to all Loans made on such date, the Letters of Credit issued on
such date and all Existing Letters of Credit, the Availability shall not be less
than $15,000,000 and the Borrower shall deliver to the Agent a certificate of
the Designated Financial Officer of the Borrower certifying that the
Availability is not less than $15,000,000 and containing the calculation
thereof.
Any oral or written request by the Borrower for any Credit Extension hereunder
shall constitute a representation and warranty by the Borrower that the
conditions set forth in this Section 5.02 have been satisfied as of the date of
such request. Failure of the Agent to receive notice from the Borrower to the
Exhibit 10.14 - Page 37
<PAGE>
contrary before such Credit Extension is made shall constitute a further
representation and warranty by the Borrower that the conditions set forth in
this Section 5.02 have been satisfied as of the date of such Credit Extension.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to the Agent and
the Lenders as follows:
6.01. Organization, Good Standing, Etc. Each of the Borrower
and its Subsidiaries (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its organization, (ii) has all
requisite power and authority to conduct its business as now conducted and as
presently contemplated and (in the case of the Borrower) to make the borrowings
hereunder and to consummate the transactions contemplated hereby, and (iii) is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary.
6.02. Authorization, Etc. The execution, delivery and
performance by the Borrower and its Subsidiaries of each Loan Document to which
it is a party, (i) have been duly authorized by all necessary corporate action,
(ii) do not and will not contravene its charter or by-laws, any other applicable
law or any contractual restriction binding on or otherwise affecting it or any
of its properties or result in a default under any agreement or instrument to
which the Borrower or any of its Subsidiaries is a party or by which they or
their respective properties may be subject, (iii) do not and will not result in
or require the creation of any Lien (other than pursuant to any such Loan
Document) upon or with respect to any of its properties, and (iv) do not and
will not result in any suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to its
operations or any of its properties.
6.03. Governmental Approvals. No authorization, consent,
approval license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority is or will be necessary in connection with the execution and delivery
by the Borrower and its Subsidiaries of each Loan Document to which it is a
party, consummation of the transactions therein contemplated, performance of or
compliance with the terms and conditions thereof or to ensure the legality,
validity, enforceability and admissibility in evidence thereof, except for the
filings and recordings in respect of the Liens created pursuant to the Security
Documents.
6.04. Enforceability of Loan Documents. This Agreement is, and
each other Loan Document to the which the Borrower is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms. Each
Loan Document to which a Subsidiary of the Borrower is or will be a party, when
delivered hereunder, will be a legal, valid and binding obligation of such
Subsidiary, enforceable against such Subsidiary in accordance with its terms.
6.05. Subsidiaries. Schedule 6.05 hereto is a complete and
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding capital stock of each Subsidiary of the Borrower in existence on
the Closing Date. All shares of such stock owned by the Borrower or one or more
of its Subsidiaries, as indicated in such Schedule, are owned free and clear of
all Liens, except for the Liens in favor of the Agent that secure payment of the
Obligations. There are no options, warrants or other rights to acquire shares of
capital stock of any Subsidiary of the Borrower. The aggregate fair market value
of all assets owned by all Subsidiaries of the Borrower existing on the Closing
Date is not in excess of $500,000.
Exhibit 10.14 - Page 38
<PAGE>
6.06. Litigation. Except as set forth on Schedule 6.06 hereto,
there is no pending or, to the knowledge of the Borrower, threatened action,
suit or proceeding affecting the Borrower or any of its Subsidiaries before any
court or other Governmental Authority or any arbitrator in existence on the
Closing Date. There is no pending or threatened action, suit or proceeding
affecting the Borrower or any of its Subsidiaries before any court or other
Governmental Authority or any arbitrator which may have a Material Adverse
Effect.
6.07. Financial Condition. (a) Historical Statements. The
Borrower has heretofore furnished to the Lenders a balance sheet of the Borrower
for the six months ended July 26, 1997 and the related statements of operations
and cash flows for the fiscal year then ended, as examined and reported on by
Deloitte & Touche, independent certified public accountants, and a balance sheet
and related statements of operations and cash flows of the Borrower and it
Consolidated Subsidiaries for and as of the end of the five-month period ending
June 21, 1997, as certified by a Designated Financial Officer. Such financial
statements (in the case of the statements as of January 25, 1997, including the
notes thereto) present fairly, in all material respects, the financial condition
of the Borrower as of the end of such fiscal year and as of the end of such
period and the results of its operations and the cash flows for the fiscal year
then ended, all in conformity with GAAP applied on a basis consistent with that
of the preceding fiscal year, subject (in the case of interim financial
statements) to year-end adjustments. Except as disclosed therein, the Borrower
and its Subsidiaries do not have any material contingent liabilities (including
liabilities for taxes), unusual forward or long term commitments or unrealized
or anticipate losses from unfavorable commitments.
(b) The Borrower has heretofore furnished to the
Lenders pro forma consolidated statements of financial condition and pro forma
consolidated statements of operations of the Borrower and its Consolidated
Subsidiaries as of the dates and for the periods specified therein and such
statements have been prepared in accordance with the standard set forth in
Section 6.16(c) hereof.
(c) The Borrower has heretofore furnished to the
Lenders projections for the period from January 26, 1997, through February 3,
2003 and such projections have been prepared in accordance with the standard set
forth in the second sentence of Section 6.16(a) hereof.
6.08. Compliance with Law, Etc. Each of the Borrower and its
Subsidiaries is not in violation of its charter or by-laws, any law (including
but not limited to violations pertaining to the conduct of its business or the
use, maintenance or operation of the real and personal properties owned or
possessed by it) or any material term of any agreement or instrument binding on
or otherwise affecting it or any of its properties, except for the noncompliance
with any law which could not, in the aggregate for all such noncompliance, have
a Material Adverse Effect.
6.09. ERISA. (i) Each Plan is in substantial compliance with
ERISA and the Code, (ii) no Termination Event has occurred nor is reasonably
expected to occur with respect to any Benefit Plan, (iii) the most recent annual
report (Form 5500 Series) with respect to each Benefit Plan, including Schedule
B (Actuarial Information) thereto, copies of which have been filed with the
Internal Revenue Service and delivered to the Agent, is complete and correct and
fairly presents the funding status of such Benefit Plan, and since the date of
such report there has been no material adverse change in such funding status,
(iv) no Benefit Plan had an accumulated or waived funding deficiency or
permitted decreases which would create a deficiency in its funding standard
account within the meaning of Section 412 of the Code at any time during the
previous 60 months, and (v) no Lien, security interest or other charge or
encumbrance imposed under the Code or ERISA exists or is likely to arise on
account of any Benefit Plan within the meaning of Section 412 of the Code.
Neither the Borrower nor any of its ERISA Affiliates has incurred any withdrawal
liability under ERISA with respect to any Multiemployer Plan, and the Borrower
is not aware of any facts indicating that the Borrower or any of its ERISA
Affiliates may in the future incur any such withdrawal liability. Except as
required by Section 4980B of the Code, neither the Borrower nor any of its ERISA
Affiliates maintains a welfare
Exhibit 10.14 - Page 39
<PAGE>
plan (as defined in Section 3(1) of ERISA) which provides benefits or coverage
after a participant's termination of employment. All Plans in existence on the
Closing Date are set forth on Schedule 6.09.
6.10. Taxes, Etc. All tax returns required to be filed by the
Borrower and any of its Subsidiaries have been properly prepared, executed and
filed. All taxes, assessments, fees and other governmental charges upon the
Borrower and its Subsidiaries or upon any of their respective properties,
income, sales or franchises which are shown thereon as due and payable have been
paid, except as otherwise permitted by the Plan of Reorganization and the
Confirmation Order. The reserves and provisions for taxes, if any, on the books
of the Borrower are adequate for all open years and for its current fiscal
period. The Borrower does not know of any proposed additional assessment or
basis for any material assessment for additional taxes (whether or not reserved
against). The federal income tax liabilities of the Borrower and its
Subsidiaries have been finally determined by the Internal Revenue Service, or
the time for audit has expired, for all fiscal periods ending on or prior to
January 28, 1995 all such liabilities (including all deficiencies assessed
following audit) have been satisfied, except as otherwise permitted by the Plan
of Reorganization and the Confirmation Order.
6.11. Regulation U. The Borrower is not and will not be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board),
and no proceeds of any Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purposes of purchasing or carrying any
margin stock.
6.12. Adverse Agreements, Etc. Neither the Borrower nor any of
its Subsidiaries is a party to any agreement or instrument, or subject to any
charter or other corporate restriction or any judgment, order, regulation,
ruling or other requirement of a court or other Governmental Authority or
regulatory body, which has a Material Adverse Effect, or to the best knowledge
of the Borrower, is reasonably likely to have a Material Adverse Effect.
6.13. Holding Company and Investment Company Acts. Neither the
Borrower nor any of its Subsidiaries is (i) a "holding company" or a "subsidiary
company" of a "holding company" or any "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) an "investment company" or an "affiliated person" or "promoter"
of, or "principal underwriter" of or for, an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
6.14. Permits, Etc. The Borrower and its Subsidiaries have all
material permits, licenses, authorizations and approvals required for them
lawfully to own and operate their business.
6.15. Priority Title. Except for (a) Permitted Liens and (b)
any failure arising from any act or omission of the Agent after the Closing Date
with respect to the perfection of the Liens granted under the Security
Documents, the Liens granted under the Security Documents constitute and shall
at all times constitute perfected, first priority Liens on the Collateral and
the Borrower is the sole and absolute owner of the Collateral with full right to
pledge, sell, consign, transfer and create a security interest therein, free and
clear of any and all claims or Liens in favor of others and no Person has any
right of first refusal, option or other preferential right to purchase any
Collateral and the Borrower will at its expense forever warrant and, at the
Agent's request, defend the same from any and all claims and demands of any
other Person other than the Permitted Liens; and the Borrower will not grant,
create or permit to exist, any Lien upon the Collateral, or any proceeds
thereof, in favor or any other Person other than Permitted Liens. The Borrower
and its Subsidiaries have good and marketable title to all of their owned
properties and assets, free and clear of all Liens except Permitted Liens, the
Liens arising under the Related Documents and Liens with respect to Capitalized
Leases.
6.16. Full Disclosure. (a) No representation or warranty
made by the Borrower or its Subsidiaries under this Agreement or any other Loan
Document is false or misleading in any
Exhibit 10.14 - Page 40
<PAGE>
material respect and no Loan Document or schedule or exhibit thereto and no
certificate, report, statement or other document or information furnished to the
Agent or the Lenders in connection herewith or therewith or with the
consummation of the transactions contemplated hereby and thereby, contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained herein or therein not misleading. To
the extent the Borrower furnishes any projections of the financial position and
results of operations of the Borrower and its Subsidiaries for, or as at the end
of, certain future periods, such projections were believed at the time furnished
to be reasonable, have been or will have been prepared on a reasonable basis and
in good faith by the Borrower, and have been or will be based on assumptions
believed by the Borrower to be reasonable at the time made and upon the best
information then reasonably available to the Borrower. There is no fact
materially adversely affecting the condition or operations, financial or
otherwise, or the business or prospects of the Borrower or any of its
Subsidiaries which has not been set forth in a footnote included in the
financial statements referred to in Section 6.07(a) hereof or a Schedule hereto.
(b) The Borrower has delivered to each Lender a
true, complete and correct copy of the Disclosure Statement. The Disclosure
Statement, as of the date it was distributed to the creditors, and at the time
of the creditor vote pursuant thereto and at the Effective Time, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(c) The pro forma consolidated statements of
financial condition and pro forma consolidated statements of operations of the
Borrower and its Consolidated Subsidiaries delivered to the Lenders are the
unaudited consolidated financial statements of the Borrower and its Consolidated
Subsidiaries, as of the dates and for the periods specified therein, adjusted to
give effect to the Reorganization, any financing thereof and certain other
events and assumptions as set forth therein. Such pro forma financial statements
(including any related schedules and notes) have been prepared on the basis of
the statements and assumptions set forth in the respective notes thereto
contained in the Disclosure Statement and the projections and assumptions
expressed therein were reasonably based on the information available to the
Borrower at the time so furnished.
(d) The Disclosure Statement complies in all
material respects with all applicable requirements of the Bankruptcy Code and
related rules.
6.17. Operating Lease Obligations. On the Closing Date, the
Borrower and its Subsidiaries do not have any obligations as lessee for the
payment of rent for any real or personal property other than the Operating Lease
Obligations set forth in Schedule 6.17 hereto.
6.18. Environmental Matters. (A) Except as disclosed on
Schedule 6.18:
(i) The Borrower and its Subsidiaries at all
times have been operated, and are, in full compliance with all applicable
Environmental Laws, including all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable Environmental Laws, except to the extent such
failure to comply would not result in a Material Adverse Effect.
(ii) The Borrower and its Subsidiaries have
obtained, and are in compliance with, all permits, licenses, authorizations,
registrations and other governmental consents required by applicable
Environmental Laws ("Environmental Permits"), except to the extent the failure
to so obtain or comply with any such Environmental Permits would not result in a
Material Adverse Effect. All Environmental Permits are in full force and effect,
and the Borrower and its Subsidiaries have made all appropriate filings for
issuance or renewal of such Environmental Permits, except such as would not
result in a Material Adverse Effect.
Exhibit 10.14 - Page 41
<PAGE>
(iii) All of the property owned, leased, operated
or controlled by the Borrower or its Subsidiaries are free of any Hazardous
Materials (except those authorized pursuant to and in accordance with
Environmental Permits held by the Borrower or its Subsidiaries) and free of all
contamination arising from, relating to, or resulting from any such Hazardous
Materials, except such as would not result in a Material Adverse Effect.
(iv) There are no pending or, to the knowledge of
the Borrower, threatened Environmental Actions.
(v) There are no past or present conditions,
events, circumstances, facts, activities, practices, incidents, actions,
omissions or plans: (1) that may interfere with or prevent continued compliance
by the Borrower or its Subsidiaries with Environmental Laws and the requirements
of material Environmental Permits, or (2) that may require the Borrower or any
Subsidiary to incur any Environmental Liabilities and Costs, or (3) that may
form the basis of any Environmental Action against or involving the Borrower or
its Subsidiaries, except such as would not result in a Material Adverse Effect.
(vi) There are no underground or aboveground
storage tanks, or related piping, incinerators or surface impoundments at, on,
or about, under or within any property owned, operated, leased or controlled by
Borrower or its Subsidiaries, and any former underground or aboveground storage
tanks, or related piping, incinerators or surface impoundments at, on, or about,
under or within any such property have been removed or closed in accordance with
applicable Environmental Law.
(vii) The Borrower and its Subsidiaries have not
received any notice or other communication that any of them is or may be a
potentially responsible person or otherwise liable in connection with any waste
disposal site allegedly containing any Hazardous Materials, or other location
used for the disposal of any Hazardous Materials, or notice of any failure of
the Borrower or its Subsidiaries to comply with any Environmental Law or the
requirements of any Environmental Permit.
(viii) The Borrower and its Subsidiaries have not
used any waste disposal site, or otherwise disposed of, transported, or arranged
for the transportation of, any Hazardous Materials to any place or location, or
in violation of any Environmental Laws, except such as would not result in a
Material Adverse Effect.
(ix) No Environmental Lien exists, and no
condition exists which could result in the filing of a Environmental Lien,
against any assets, facility, inventory or property owned, leased, operated or
controlled by the Borrower or its Subsidiaries.
(x) There has been no Release or threatened
material Release at any time of any Hazardous Materials at, on, or about, under
or within any real property currently or formerly owned, leased, operated or
controlled by the Borrower or its Subsidiaries or any predecessor of the
Borrower or its Subsidiaries (other than pursuant to and in accordance with
permits held by the Borrower or its Subsidiaries or any such predecessor),
except such as shall not result in a Material Adverse Effect. To the knowledge
of the Borrower and its Subsidiaries, there have been no such Releases of
Hazardous Materials at, on, or about, under, within, or from any property
adjacent to any Mortgaged Property that, through soil, air, surface water or
groundwater migration or contamination, may reasonably have been expected to
have migrated to or under any Mortgaged Property.
(xi) Neither the Borrower nor any Subsidiary has
entered into or agreed to any currently pending or effective judgment, decree or
order by any judicial or administrative tribunal relating to compliance with any
Environmental Law or to Remedial Action, nor has Borrower
Exhibit 10.14 - Page 42
<PAGE>
or any Subsidiary been requested or required by any Governmental Authority to
perform any Remedial Action.
(B) To the knowledge of the Borrower and its Subsidiaries, all
environmental investigations, studies, audits or assessments in the possession
or control of the Borrower or any Subsidiary concerning any violation or
potential violation of, or liability or potential liability under, any
Environmental Law relating to any current or prior business, facilities or
properties owned, operated, leased or controlled by the Borrower or any
Subsidiary (or any of their respective predecessors in interest) have been made
available to the Lenders and the Agent.
6.19. Schedules. All of the information which is required to
be scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate and does not omit to state any information material
thereto.
6.20. Insurance. The Borrower and its Subsidiaries keep their
properties adequately insured and maintain (i) insurance to such extent and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workmen's compensation insurance in the amount
required by applicable law, (iii) public liability insurance in the amount
customary with companies in the same or similar business against claims for
personal injury or death on properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or by the Loan Documents.
Schedule 6.20 hereto sets forth a list of all insurance maintained by the
Borrower and its Subsidiaries on the Closing Date. All such insurance complies
with the requirements of the Mortgages in respect of the Mortgaged Properties.
6.21. Use Proceeds. The proceeds of the Loans shall be used
for general working capital purposes and for other general corporate purposes.
The Letters of Credit will be used to support insurance policies and customs
bonds, to purchase Inventory in the ordinary course of the Borrower's business
and to secure Herbert R. Douglas's employment agreement.
6.22. Security Document. Except for failure arising from any
act or omission by the Agent after the Closing Date with respect to the
perfection of the Liens created under the Security Documents, the Security
Documents create and grant to the Agent, for the benefit of the Lenders, a
legal, valid and perfected first priority Lien on the Collateral purported to be
covered thereby.
6.23. Financial Accounting Practices, Etc.. (a) The Borrower
and its Subsidiaries make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect their respective transactions
and dispositions of their respective assets and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with GAAP except as previously
disclosed to the Agent and (B) to maintain accountability for assets, and (iii)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(b) The Borrower and its Subsidiaries maintain
a system of internal procedures and controls sufficient to provide reasonable
assurance that the information required to be set forth in each Borrowing Base
Certificate (including, without limitation, information relating to the
identification of assets which are Inventory and the valuation thereof) is
accurate.
6.24. No Material Adverse Effect. Since July 26, 1997 there
has not occurred any Material Adverse Effect or any event which could have a
Material Adverse Effect.
Exhibit 10.14 - Page 43
<PAGE>
6.25. Real Property; Leases. (a) Schedule 6.25 hereto sets
forth a complete and accurate description and list as of the Closing Date of the
location, by state and street address, of all real property owned and leased by
the Borrower and its Subsidiaries.
(b) As of the Closing Date, the Borrower and its
Subsidiaries have valid leasehold interests in the Leases described in Schedule
6.25 hereto. None of the Leases is subject to any Lien except Liens granted to
the Agent pursuant to the Security Documents and Permitted Liens. Each of the
Borrower and its Subsidiaries have duly effected all recordings, filings and
other actions necessary to perfect the Borrower's and its Subsidiaries' right,
title and interest in and to all Mortgaged Property. Schedule 6.25 sets forth
with respect to each Lease, the commencement date, termination date, renewal
options (if any) and annual base rents. To the best of the Borrower's knowledge
each such Lease is valid and enforceable in accordance with its terms in all
material respects and is in full force and effect. No consent or approval of any
landlord or other third party in connection with the Leases is necessary for the
Borrower or any of its Subsidiaries to enter into and execute the Loan
Documents, except as set forth on Schedule 6.25. Neither the Borrower nor any of
its Subsidiaries or, to the knowledge of the Borrower or any of its
Subsidiaries, any other party to any Lease is in default of its obligations
thereunder and neither the Borrower nor any of its Subsidiaries nor any other
party to any such Lease has at any time delivered or received any notice of
default which remains uncured under any such Lease and, as of the Closing Date,
no event has occurred which, with the giving of notice or the passage of time,
or both, would constitute a default under any such Lease, except for defaults
the consequence of which in the aggregate would have no Material Adverse Effect.
(c) All permits required to have been issued to
the Borrower with respect to the real property owned or leased by the Borrower
or any of its Subsidiaries to enable such property to be lawfully occupied and
used for all of the purposes for which it is currently occupied and used
(separate and apart from any other properties), have been lawfully issued and
are in full force and effect, other than such permits which, if not obtained,
would not have a Material Adverse Effect, and all such real property complies
with all applicable legal and insurance requirements.
(d) Neither the Borrower nor any of its
Subsidiaries has received any notice, nor has any knowledge, of any pending,
threatened or contemplated condemnation proceeding affecting any real property
owned or leased by the Borrower or any Subsidiary.
(e) No portion of any real property owned or
leased by the Borrower or any of its Subsidiaries has suffered any damage by
fire or other casualty loss which has not heretofore been completely repaired
and restored to its condition existing prior to such casualty or which if not
repaired or restored is not reasonably likely to result in a Material Adverse
Effect. Except as disclosed to the Agent in writing, no portion of any of the
real property owned or leased by the Borrower or any its Subsidiaries is located
in a special flood hazard area as designated by any Governmental Authority.
6.26. Location Bank Accounts. Schedule 6.26 hereto sets forth
a complete and accurate list as of the Closing Date of all deposits and other
accounts, including all Depository Accounts, maintained by the Borrower and its
Subsidiaries together with a description thereof (i.e. the bank at which such
deposit or other account is maintained and the account number and the purpose
thereof).
6.27. No Event of Default. No event has occurred and is
continuing and no condition exists which constitutes an Event of Default or
Potential Default. The Borrower is not in violation of any term of its charter
or by-laws.
6.28. Capitalized Leases. As of the Closing Date, Capitalized
Lease Obligations of the Borrower and its Subsidiaries do not exceed $100,000 in
the aggregate.
Exhibit 10.14 - Page 44
<PAGE>
6.29. Tradenames. Schedule 6.29 hereto sets forth a complete
and accurate list as of the Closing Date of all tradenames used by the Borrower
and its Subsidiaries.
6.30. Compliance with Bankruptcy Code. The Debtor has complied
in all material respects with the Bankruptcy Code, and all other laws, rules,
regulations, decrees and orders applicable to or arising out of the
Reorganization. All lists of creditors and shareholders, schedules, statements
of affairs and financial reports filed by the Debtor with the Bankruptcy Court
and all representations, warranties or disclosures of the Debtor made in
connection with the Reorganization are complete and accurate in all material
respects. Notice has been given to all holders of Claims and Equity Interests
(as such terms are defined respectively in Sections 1.17 and 1.37 of the Plan of
Reorganization) as required by the Bankruptcy Code and as was directed by the
Bankruptcy Court pursuant to the Order of the Bankruptcy Court, dated June 30,
1997, approving the Disclosure Statement.
6.31. Solvency. After giving effect to the agreements and
transactions that the Plan of Reorganization provides for on the Effective Date:
(i) the fair value of the Borrower's assets exceeds the book value of the
Borrower's liabilities; (ii) the Borrower is generally able to pay its debts as
they become due and payable; and (iii) the Borrower does not have unreasonably
small capital to carry on its business as it is currently conducted.
6.32. Inventory. There is no location at which the Borrower
has any Inventory (except for Inventory in transit) other than (i) those
locations listed on Schedule 1.01A hereto and (ii) any other locations approved
in writing by the Agent pursuant to the definition of "Eligible Inventory".
Schedule 1.01A hereto contains a true, correct and complete list, as of the
Closing Date, of the legal names and addresses of each warehouse at which
Inventory of the Borrower is stored. None of the receipts received by the
Borrower from any warehouse states that the goods covered thereby are to be
delivered to bearer or to the order of a named Person or to a named Person and
such named Person's assigns.
6.33. Intellectual Property. Each of the Borrower and its
Subsidiaries owns or licenses or otherwise has the right to use all material
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operations of their businesses and, to the knowledge of the
Borrower or such Subsidiary, without infringement upon or conflict with the
rights of any other Person with respect thereto, except for such infringements
and conflicts which, individually or in the aggregate, could not have a Material
Adverse Effect. To the best knowledge of the Borrower and its Subsidiaries, no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by the Borrower
or any of its Subsidiaries infringes upon or conflicts with any rights owned by
any other Person, and no claim or litigation regarding any of the foregoing is
pending or threatened, except for such infringements and conflicts which could
not have, individually or in the aggregate, a Material Adverse Effect. To the
knowledge of the Borrower and its Subsidiaries, no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or proposed, which, individually or in the aggregate, could have a
Material Adverse Effect.
6.34. Confirmation Order. The Confirmation Order has not been
reversed, stayed, modified or amended absent the joinder and consent of the
Agent and the Borrower. The Confirmation Order has been entered by the
Bankruptcy Court and is binding and effective on all creditors of the Borrower
existing as of the Effective Date. The Plan of Reorganization has been confirmed
pursuant to the Confirmation Order.
6.35. Nature Business. Neither the Borrower nor any of its
Subsidiaries is engaged in any business other than the operation of stores
selling family apparel, shoes, related accessories and
Exhibit 10.14 - Page 45
<PAGE>
other retail items and the support of the Borrower's and such Subsidiaries'
business and operations as presently conducted.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any other Obligations (whether or not due) shall
remain unpaid or the Lenders shall have any Revolving Credit Commitment
hereunder, the Borrower will, unless the Majority Lenders shall otherwise
consent in writing:
7.01. Reporting Requirements. Furnish to the Lenders:
(a) Annual Reports. As soon as practicable and in any
event within 90 days after the close of each fiscal year of the
Borrower, a consolidated statement of operations and cash flows of the
Borrower and its Consolidated Subsidiaries for such fiscal year and a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the close of such fiscal year, and notes to each,
all in reasonable detail, setting forth in comparative form the
corresponding figures for the preceding fiscal year, which statements
and balance sheet shall be certified by Deloitte and Touche or other
independent certified public accountants of recognized national
standing selected by the Borrower and reasonably satisfactory to the
Agent. The certificate or report of such accountants shall be without a
"going concern" qualification or like qualification or exception or
qualification arising out of the scope of the audit with respect to
such statements and balance sheet being prepared in compliance with
GAAP and shall in any event contain a written statement of such
accountants substantially to the effect that (i) such accountants
examined such statements and balance sheet in accordance with generally
accepted auditing standards and accordingly made such tests of
accounting records and such other auditing procedures as such
accountants considered necessary in the circumstances and (ii) in the
opinion of such accountants such statements and balance sheet present
fairly, in all material respects, the financial position of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal
year and the results of its operations and the changes in its financial
position for such fiscal year, in conformity with GAAP applied on a
basis consistent with that of the preceding fiscal year (except for
changes in application in which such accountants concur). A copy of
such certificate or report shall be delivered to the Agent and each
Lender and signed by such independent public accountants. Each set of
statements and balance sheets delivered pursuant to this Section
7.01(a) shall be accompanied by a certificate dated the date of such
statements and balance sheet by the Designated Financial Officer
stating in substance that he has reviewed this Agreement and that in
making the examination necessary for this certification, he did not
become aware of any Event of Default or Potential Default, or if he did
become so aware, such certificate shall state the nature and period of
existence thereof if determinable and (B) a certificate certified by
the Designated Financial Officer of the Borrower stating that the
Borrower has complied with the Cumulative FIFO EBITDA, Capital
Expenditures and Minimum/Maximum Inventory covenants set forth in
Sections 8.12, 8.08 and 8.16, respectively, and a reconciliation
between EBITDA calculated using the last in first out method of
inventory valuation and FIFO EBITDA, in form and substance satisfactory
to the Agent.
(b) Quarterly Reports. As soon as practicable and in
any event within 45 days after the close of each of the first three
fiscal quarters of each of the Borrower's fiscal years, unaudited
consolidated statements of operations and cash flows of the Borrower
and its Consolidated Subsidiaries and a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the close of such
fiscal quarter, all in reasonable detail setting
Exhibit 10.14 - Page 46
<PAGE>
forth in comparative form for the corresponding fiscal quarter for the
preceding fiscal year, and certified by a Designated Financial Officer
of the Borrower as presenting fairly, in all material respects, the
financial position of the Borrower and the Consolidated Subsidiaries as
of the end of such quarter and the results of its operations and the
changes in its financial position for such quarter, in conformity with
GAAP applied in a manner consistent except as otherwise disclosed
therein with that of the most recent audited financial statements
furnished to the Lenders, subject to year-end adjustments. Each set of
statements and balance sheets delivered pursuant to Section 7.01(b)
shall be accompanied by a certificate of a Designated Financial Officer
dated the date of such statements and balance sheet stating that he has
reviewed this Agreement and that to the best of his knowledge he did
not become aware of any Event of Default or Potential Default, or if he
did become so aware, such certificate shall state the nature and period
of existence thereof, if determinable and that the Borrower has
complied with the Cumulative FIFO EBITDA, Capital Expenditures and
Minimum/Maximum Inventory covenants set forth in Sections 8.12, 8.08
and 8.16, respectively, and a reconciliation between EBITDA calculated
using the last in first out method of inventory valuation and FIFO
EBITDA, in form and substance satisfactory to the Agent.
(c) Monthly Reports. As soon as practicable and in
any event within twenty-five days after the end of each month
(including the fiscal month in which this Agreement is executed),
unaudited consolidated statements of operations and cash flows for the
Borrower and its Consolidated Subsidiaries for such fiscal month and
for the period from the beginning of such fiscal year to the end of
such fiscal month, and an unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal
month, all in reasonable detail, setting forth in comparative form the
corresponding figures for the same periods during the preceding fiscal
year (except for the balance sheet, which shall set forth in
comparative form the corresponding balance sheet as of the prior fiscal
year end), and accompanied by a certificate of a Designated Financial
Officer of the Borrower stating that (1) such statements present
fairly, in all material respects, the financial position of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal
month and the results of its operations and cash flows for such fiscal
month, in conformity with GAAP applied in a manner consistent except as
otherwise disclosed therein with that of the most recent adjusted
financial statements furnished to the Lenders, subject to year-end
adjustments, (2) he has reviewed this Agreement and that to the best of
his knowledge he did not become aware of any Event of Default or
Potential Default, or if he did become so aware, such certificate shall
state the nature and period of existence thereof, if determinable and
(3) the Borrower has complied with the Cumulative FIFO EBITDA, Capital
Expenditures, and Minimum/Maximum Inventory covenants set forth in
Sections 8.12, 8.08 and 8.16, respectively.
(d) Other Monthly Reports. As soon as practicable and
in any event within twenty-five days after the end of each fiscal month
(including the fiscal month in which this Agreement is executed), the
Borrower shall furnish to the Lenders a monthly inventory report and a
Borrowing Base Certificate in form and substance reasonably
satisfactory to the Agent and certified by a Designated Financial
Officer of the Borrower, which shall be accompanied by a reconciliation
from the Borrowing Base Certificate delivered by the Borrower to the
Lenders pursuant to paragraph (e) of this Section 7.01.
(e) Weekly Reports. As soon as practicable and in any
event within seven Business Days after the end of each week (including
the week in which this Agreement is executed), weekly sales reports,
weekly inventory report and a Borrowing Base Certificate, each in form
and substance reasonably satisfactory to the Agent and certified by a
Designated Financial Officer of the Borrower.
Exhibit 10.14 - Page 47
<PAGE>
(f) Notice of Event of Default or Material Adverse
Change. As soon as possible, and in any event within five Business Days
after the occurrence of a Potential Default or an Event of Default or a
Material Adverse Effect, the written statement of the Designated
Financial Officer of the Borrower, setting forth the details of such
Potential Default or Event of Default, Material Adverse Effect and the
action which the Borrower proposes to take with respect thereto.
(g) Certain Reports. Upon the request of the Agent,
copies of all consultants' reports, investment bankers' reports,
accountants' management letters, business plans and similar documents.
(h) Other Reports and Information. Promptly upon
their becoming available, a copy of (1) all reports, financial
statements or other information delivered by the Borrower to its
shareholders, (2) all reports, proxy statements, financial statements
and other information generally distributed by the Borrower to its
creditors or the financial community in general, and (3) any audit or
other reports submitted to the Borrower any independent accountants in
connection with any annual, interim or special audit of the Borrower.
(i) ERISA Statements. (1) As soon as possible and in
any event (A) no later than the latest date specified in Section 4043
of ERISA and the regulations thereunder for the Borrower or any of its
ERISA Affiliates to notify the PBGC that any Termination Event
described in clause (i) of the definition of Termination Event with
respect to any Benefit Plan has occurred or is about to occur, and (B)
within 10 days after the Borrower or any of its ERISA Affiliates knows
or has reason to know that any other Termination Event with respect to
any Benefit Plan has occurred, or that the Borrower or any of its ERISA
Affiliates has failed to make a required installment to a Benefit Plan
within the meaning of Section 412(m) of the Code, a statement of the
Designated Financial Officer of the Borrower describing such
Termination Event and the action, if any, which the Borrower or such
ERISA Affiliate proposes to take with respect thereto, (2) promptly and
in any event within five Business Days after receipt thereof by the
Borrower or any of its ERISA Affiliates from the PBGC, copies of each
notice received by the Borrower or any of its ERISA Affiliates of the
PBGC's intention to terminate any Benefit Plan or to have a trustee
appointed to administer any Benefit Plan, (3) promptly and in any event
within 30 days after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) with respect to each Benefit Plan and
Multiemployer Plan, (4) promptly and in any event within five Business
Days after receipt thereof by the Borrower or any of its ERISA
Affiliates from a sponsor of a Multiemployer Plan or from the PBGC, a
copy of each notice received by the Borrower or any of its ERISA
Affiliates concerning the imposition or amount of withdrawal liability
under Section 4202 of ERISA or indicating that such Multiemployer Plan
may enter reorganization status under Section 4241 of ERISA, and (5)
promptly and in any event within 10 days after the Borrower or any
ERISA Affiliate takes action to establish a Plan, a statement of the
Designated Financial Officer of the Borrower describing such employee
benefit plan and a copy of such employee benefit plan.
(j) Within 90 days after the Effective Date, an
"opening" balance sheet of the Borrower and its Consolidated
Subsidiaries certified by the Borrower's Designated Financial Officer.
(k) As soon as possible and in any event no later
than January 15, 1998, a financial plan of the Borrower containing
financial projections for the fiscal year of the Borrower ending
January 30, 1999 prepared by management of the Borrower, in form and
substance satisfactory to the Agent.
Exhibit 10.14 - Page 48
<PAGE>
(l) As soon as possible and in any event no later
than January 15, 1999, a financial plan of the Borrower containing
financial projections for the fiscal year of the Borrower ending
January 29, 2000 prepared by management of the Borrower, in form and
substance satisfactory to the Agent.
(m) Promptly after, and in any event within 10 days
after, an officer of the Borrower learns of any of the following,
notice thereof:
(i) the receipt by the Borrower or any
of its Subsidiaries of notification that any real or personal property
of the Borrower or such Subsidiary is subject to any Environmental
Lien;
(ii) notice of violation of any
Environmental Law and notice of the commencement of any judicial or
administrative proceeding or investigation alleging a violation by the
Borrower or any of its Subsidiaries of any Environmental Law;
(iii) notice that Borrower or any
Subsidiary is or may be a potentially responsible person or otherwise
liable in connection with any waste disposal site allegedly containing
any Hazardous Materials, or other location used for the disposal of any
Hazardous Materials; or
(iv) notice from any Governmental
Authority or any third party that the Borrower or any Subsidiary may
be required to undertake Remedial Action.
(n) Promptly after the commencement thereof but in
any event not later than five Business Days after service of process
with respect thereto on, or the obtaining of knowledge thereof by, the
Borrower or any of its Subsidiaries, notice of each action, suit or
proceeding involving the Borrower or any of its Subsidiaries before any
court or other Governmental Authority or other regulatory body or any
arbitrator which could have a Material Adverse Effect.
(o) Promptly after submission to any Governmental
Authority all documents and information furnished to such Governmental
Authority in connection with any investigation of the Borrower or any
of its Subsidiaries other than routine inquiries by such Governmental
Authority.
(p) Promptly upon request, such other information
concerning the condition or operations, financial or otherwise, of the
Borrower or any of its Subsidiaries as the Agent or any Lender from
time to time may reasonably request.
7.02. Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders (including, without limitation, compliance in
respect of their businesses, or use, maintenance or operation of real and
personal properties owned or leased by them), such compliance to include,
without limitation, (i) paying before the same become delinquent all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any of its properties, and (ii) paying all lawful
claims which if unpaid might become a Lien or charge upon any of its properties,
except to the extent contested in good faith by proper proceedings which stay
the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves in accordance with GAAP have
been set aside for the payment thereof. The provisions of this Section 7.02 are
subject to any provisions in the Mortgages which may impose additional or
greater obligations on the Borrower and its Subsidiaries.
Exhibit 10.14 - Page 49
<PAGE>
7.03. Preservation Existence, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, its existence, rights
and privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by them or
in which the transaction of their business makes such qualification necessary,
provided that the Borrower may dissolve certain of its Subsidiaries as
contemplated by, and in accordance with, the Plan of Reorganization.
7.04. Keeping of Records and Books of Account. Keep, and cause
each of its Subsidiaries to keep, adequate records and books of account, with
complete entries made in accordance with generally accepted accounting
principles consistently applied.
7.05. Inspection Rights. Permit, and cause each of its
Subsidiaries to permit, the Agent or any Lender, or any agents or
representatives thereof or such professionals or other Persons as the Agent may
designate (i) to examine and inspect the books and records of the Borrower and
its Subsidiaries and take copies and extracts therefrom at reasonable times and
during normal business hours upon the reasonable request of the Agent or any
Lender, (ii) to verify materials, leases, notes, receivables, deposit accounts
and other assets of the Borrower and its Subsidiaries from time to time, and
(iii) to conduct physical Inventory counts and/or valuations at the distribution
center and retail stores of the Borrower.
7.06. Maintenance of Properties, Etc. Maintain and preserve,
and cause each of its Subsidiaries to maintain and preserve, all of their
properties (including all real properties leased or owned by them) which are
necessary or useful in the proper conduct of their business in good working
order and condition, ordinary wear and tear excepted, and comply, and cause each
of its Subsidiaries to comply, at all times with the provisions of all Leases to
which each of them is a party as lessee or under which each of them occupies
property, so as to prevent any loss or forfeiture thereof or thereunder. The
provisions of this Section 7.06 are subject to any provisions in the Mortgages
which may impose additional or greater obligations on the Borrower.
7.07. Maintenance of Insurance. Maintain, and cause each of
its Subsidiaries to maintain, with responsible and reputable insurance companies
or associations insurance (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to
their properties (including all real properties leased or owned by them) and
business, in such amounts and covering such risks, as is required by any
Governmental Authority or other regulatory body having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event in amount,
adequacy and scope reasonably satisfactory to the Agent. All policies covering
the Collateral not subject to any Mortgage are to be made payable to the Agent,
in case of loss, under a standard non-contributory "lender" or "secured party"
clause and are to contain such other provisions as the Agent may require to
fully protect the Agent's interest in the Collateral and to any payments to be
made under such policies. All original policies or true copies thereof are to be
delivered to the Agent, premium prepaid, with the loss payable and additional
insured endorsement in the Agent's favor, and shall provide for not less than
thirty (30) days prior written notice to the Agent of the exercise of any right
of cancellation. At the Borrower's request, or if the Borrower fails to maintain
such insurance, the Agent may arrange for such insurance, but at the Borrower's
expense and without any responsibility on the Agent's part for: obtaining the
insurance, the solvency of the insurance companies, the adequacy of the
coverage, or the collection of claims. Upon the occurrence of an Event of
Default, the Agent shall have the sole right, in the name of the Agent and the
Borrower, to file claims under any insurance policies, to receive, receipt and
give acquittance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments, reassignments or
other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. The provisions of
this Section 7.07 are subject to any provisions in the Mortgages which may
impose additional or greater obligations on the Borrower.
Exhibit 10.14 - Page 50
<PAGE>
7.08. Environmental Indemnity. (a) Comply, and cause each of
its Subsidiaries to comply, with all Environmental Laws and provide to the Agent
all documentation in connection with such compliance that the Agent may
reasonably request; and not cause or permit the Collateral or any property or
facility owned, leased, operated or controlled by the Borrower or any of its
Subsidiaries to be used for any activities involving, directly or indirectly,
the use, generation, treatment, storage, release or disposal of any Hazardous
Materials in violation of Environmental Law or in a manner that could result in
Environmental Liabilities and Costs; and take all necessary steps to initiate
and expeditiously complete all Remedial Action to eliminate any such
Environmental Liabilities and Costs. In the event the Borrower fails to comply
with the covenants in the preceding sentence, the Agent may, in addition to any
other applicable remedies set forth herein, at Borrower's sole cost and expense,
cause any Remedial Action to be taken, and the Borrower shall provide to the
Agent access to the Mortgaged Property for such purpose. Any costs or expenses
incurred by the Agent for such purpose shall be immediately due and payable by
the Borrower and shall bear interest at the rate determined pursuant to Section
2.08(d) herein.
(b) The Agent shall have the right at any time
that any Obligations are outstanding, at the sole cost and expense of the
Borrower, to conduct an environmental audit of the Mortgaged Property by such
persons or firms appointed by the Agent, and the Borrower shall cooperate in all
respects in the conduct of such environmental audit, including, without
limitation, by providing access to the Mortgaged Property and to all records
relating thereto. To the extent that any such environmental audit identifies
conditions which violate, or could be expected to give rise to liabilities or
obligations under, Environmental Laws, the Borrower agrees to expeditiously
conduct all Remedial Action necessary to eliminate such conditions.
(c) On behalf of the Borrower and its
Subsidiaries, the Borrower hereby agrees to defend, indemnify, and hold harmless
the Agent, the Lenders and the Letter of Credit Issuer, their employees, agents,
officers, and directors, from and against any Environmental Liabilities and
Costs, including, without limitation, those arising out of (i) any Release or
threatened Release on any property presently or formerly owned, leased, operated
or controlled by the Borrower or any of its Subsidiaries (or their predecessors
in interest or title) or at any disposal facility which received Hazardous
Materials generated by Borrower or any of its Subsidiaries (or their
predecessors in interest or title); (ii) any violation of Environmental Laws;
(iii) any Environmental Actions; (iv) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to
exposure to Hazardous Materials used, handled, generated, transported or
disposed of by the Borrower or any of its Subsidiaries (or any predecessor in
interest or title); and/or (v) the breach of any representation or warranty made
by the Borrower in Section 6.18 hereof or the breach of any covenant made by the
Borrower in this Section 7.08, provided that the Borrower shall not have any
liability under this Section 7.08 with respect to any Environmental Liabilities
and Costs finally determined by a court of competent jurisdiction to have been
directly caused by the gross negligence or willful misconduct of the Agent, the
Lenders, the Letter of Credit Issuer or their employees, agents, officers or
directors. This Environmental Indemnity shall survive the repayment of the
Obligations and discharge or release of any security interest granted under the
Loan Documents.
7.09. Further Assurances. Do, execute, acknowledge and
deliver, and cause each of its Subsidiaries to do, execute, acknowledge and
deliver, at the sole cost and expense of the Borrower all such further acts,
deeds, conveyances, mortgages, assignments, estoppel certificates, financing
statements, notices of assignment, transfers and assurances as the Agent may
require from time to time in order (a) to carry out more effectively the
purposes of this Agreement or any other Related Document, (b) to subject to
valid and perfected first priority Liens all the Collateral, (c) to perfect and
maintain the validity, effectiveness and priority of any of the Related
Documents and the Lien intended to be created thereby, and (d) to better assure,
convey, grant, assign, transfer and confirm unto the Agent, the Lenders and the
Letter of Credit Issuer the rights now or hereafter
Exhibit 10.14 - Page 51
<PAGE>
intended to be granted to the Agent, the Lenders and the Letter of Credit Issuer
under this Agreement, any Loan Document or any other instrument under which the
Borrower or any Subsidiary may be or may hereafter become bound to convey,
mortgage or assign to the Agent, the Lenders and the Letter of Credit Issuer.
7.10. Borrowing Base. Maintain all Loans and Letters of
Credit in compliance with the then-current Borrowing Base.
7.11. Change in Collateral; Collateral Records. Give the Agent
not less than thirty days' prior written notice of any change in the location of
any Collateral, other than to locations, that as of the date hereof, are known
to the Agent and at which the Agent has filed financing statements and otherwise
fully perfected its Liens thereon. The Borrower shall also advise the Agent
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or the security interests granted
therein. The Borrower agrees to executes and deliver to the Agent for the
benefit of the Agent from time to time, solely for the Agent's convenience in
maintaining a record of the Collateral, such written statements and schedules as
the Agent may reasonably require, designating, identifying or describing the
Collateral. The Borrower's failure, however, to promptly give the Agent such
statements or schedules shall not affect, diminish, modify or otherwise limit
the Agent's security interest in the Collateral.
7.12. Financial Accounting Practices, Etc. (a) Make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of assets of the Borrower and its
Subsidiaries and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with GAAP and (B) to maintain accountability for assets, and (iii)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(b) Maintain a system of internal procedures
and controls sufficient to provide reasonable assurance that the information
required to be set forth in each Borrowing Base Certificate (including, without
limitation, information relating to the identification of assets which are
Eligible Inventory as provided herein and the valuation thereof) is accurate in
all material respects.
7.13. Cash Management System. (a) The Borrower agrees and
covenants to (i) cause all cash and all proceeds from accounts receivable and
the sale of Inventory to be deposited into the Depository Accounts in the
ordinary course of business of the Borrower consistent with past practice, (ii)
cause all remittances on credit card sales to be transferred into the Cash
Concentration Account or a Depository Account on a daily basis, (iii) cause all
funds in the Depository Accounts to be transferred into the Cash Concentration
Account at least three (3) times per week, (iv) take all such actions as the
Agent deems necessary or advisable to send all cash, all proceeds from the sale
of Inventory, all remittances or other proceeds of Collateral to the Cash
Concentration Account, (v) as soon as possible and in no event later than thirty
(30) days following the Closing Date, the Borrower shall enter into a Depository
Account Agreement substantially in the form of Exhibit G hereto with respect to
each Depository Bank listed on Schedule 6.26, and (vi) take such actions as the
Agent deems necessary or advisable to grant to the Agent dominion and control
over the funds in the Cash Concentration Account. With respect to the Cash
Concentration Account, as soon a possible and in no event later than thirty (30)
days following the Closing Date, the Borrower shall deliver to the Agent an
agreement, duly executed by the Borrower and the Cash Concentration Account Bank
substantially in the form of Exhibit H hereto (the "Restricted Account
Agreement"), authorizing and directing the Cash Concentration Account Bank to
remit all amounts deposited in the Cash Concentration Account to the Agent or as
the Agent may direct, subject to this Section 7.13. After the occurrence and
during the continuance of an Event of Default, the Agent may instruct the Cash
Concentration Account Bank to
Exhibit 10.14 - Page 52
<PAGE>
send by wire transfer all amounts deposited in the Cash Concentration Account to
the Agent Account or as the Agent shall direct. In the absence of an Event of
Default, the Agent shall direct the Cash Concentration Account Bank to make all
cash in the Cash Concentration Account available to the Borrower for general
corporate purposes in accordance with Section 2.09. The Borrower shall promptly,
and in any event not later than five (5) days after the opening of any such new
account, notify the Agent in writing of the creation of any new Depository
Account and shall at the time of such notice cause each Depository Bank
maintaining a Depository Account to promptly, and in any event within thirty
(30) days after the date of such notice, enter into a Depository Account
Agreement. If the Borrower is unable to obtain a Depository Account Agreement
from any financial institution that receives remittances or other proceeds of
sales of Inventory within such thirty (30) day period, the Borrower shall
promptly thereafter terminate such accounts and establish new accounts at a
financial institution that will enter into a Depository Account Agreement.
(b) As soon as practicable and in any event
within thirty (30) days of the Closing Date, the Borrower shall use its best
efforts (but not requiring any payment to be made by the Borrower) to deliver to
the Agent a credit card bank depository account agreement, substantially in the
form of Exhibit F hereto, duly executed by the Borrower and each of Discover
Card Services Inc. and National Bancard Corporation. The Borrower shall
promptly, and in any event not later than five (5) days after the establishment
of any new credit card relationship, notify the Agent in writing of the creation
of such new relationship and shall use its best efforts (but not requiring any
payment to be made by the Borrower) to deliver to the Agent a credit card bank
depository account agreement, substantially in the form of Exhibit F hereto,
duly executed by the Borrower and such new credit card servicer.
(c) Upon receipt by the Borrower of collections
of cash and any proceeds of the sale of the sale of Inventory, the Borrower
shall immediately deposit all such payments into the Cash Concentration Account
or any Depository Account. The Borrower shall cause all funds in the Depository
Accounts and all remittances or other proceeds of credit card sales to be
promptly transferred from the financial institution that receives such
remittances or other proceeds or from the Depository Accounts to the Cash
Concentration Account.
7.14. Compliance with Bankruptcy Documents. Comply, and will
cause each of its Subsidiaries to comply, at all times with the Plan of
Reorganization, the Confirmation Order and each Related Document.
7.15. Leases. Upon the request of the Agent, provide the Agent
with a copy of each Lease to which the Borrower or any of its Subsidiaries is a
party, whether as lessor or lessee. The Borrower shall, and shall cause each of
its Subsidiaries to, (i) comply in all material aspects with all of their
respective obligations under Leases; (ii) not modify, amend, extend or otherwise
change any of the terms, covenants or conditions of any such Leases if such
modification, amendment, extension or other change could have a Material Adverse
Effect; (iii) upon the request of the Agent, provide the Agent with a copy of
each notice of default under any Lease received by the Borrower or such
Subsidiary immediately upon receipt thereof and deliver to the Agent a copy of
each notice of default sent by the Borrower or such Subsidiary under any Lease
simultaneously with its delivery of such notice under such Lease; (iv) notify
the Agent, not later than 60 days prior to the last date on which the Borrower
or any of its Subsidiaries may exercise any renewal or extension option granted
to the Borrower or such Subsidiary under any Lease, that the Borrower or such
Subsidiary has exercised its right to renew or extend such Lease or not to renew
or extend any such Lease, and, if the Borrower or such Subsidiary intends to
renew such Lease, the terms and conditions of such renewal; and (v) notify the
Agent at least 14 days prior to the date the Borrower or such Subsidiary becomes
liable under any new Lease.
Exhibit 10.14 - Page 53
<PAGE>
7.16. New Real Estate. If at any time the Borrower or any of
its Subsidiaries acquires any fee interest in real property not covered by a
Mortgage, the Borrower or such Subsidiary shall promptly execute, deliver and
record or cause such Subsidiary to execute, deliver and record, a first priority
mortgage (subject only to such Liens as may already constitute a Lien against
such real estate prior to the time the Borrower or such Subsidiary acquires such
real estate and not in contemplation of such acquisition) in favor of the Agent
covering such real property interest, in form and substance satisfactory to the
Agent, and provide the Agent with a title insurance policy covering such real
property interest in an amount equal to the purchase price thereof, a current
ALTA survey thereof, a surveyor's certificate and the documents referred to in
clauses (iii), (vi), (xii) and (xxi) of Section 5.01(d) hereof with respect to
such real property interest, each in form and substance satisfactory to the
Agent.
7.17. Landlord Waivers. As soon as practicable and in any
event within sixty (60) days of the Closing Date, the Borrower shall use
reasonable efforts (but not requiring any payment to be made by the Borrower) to
deliver to the Agent a landlord waiver, in form and substance satisfactory to
the Agent, executed by each of the Borrower's landlords.
7.18. Subsidiaries. If a Person shall become a Subsidiary of
the Borrower, the Borrower shall (i) notify the Agent promptly after such Person
becomes a Subsidiary of the Borrower, (ii) promptly, and in any event within ten
(10) Business Days of such Person becoming a Subsidiary, execute and deliver to
the Agent Annex I to the Pledge Agreement, appropriately completed, providing
that all of the outstanding shares of capital stock of such Subsidiary shall be
pledged to the Agent as collateral security for the Obligations, and deliver to
the Agent the certificate(s) representing such capital stock, together with
instruments of assignment and transfer in such form as the Agent may request;
provided, that if such Person is the first Subsidiary of the Borrower, the
Borrower shall also execute and deliver to the Agent a Pledge Agreement in form
and substance satisfactory to the Agent, (iii) promptly, and in any event within
ten (10) Business Days of such Person becoming a Subsidiary, cause such
Subsidiary to execute and deliver a Subsidiary Guaranty in respect of the
Obligations and to deliver proof of corporate action, incumbency of officers,
opinions of counsel and other documents as the Agent may reasonably request, and
(iv) promptly, and in any event within ten (10) Business Days of such Person
becoming a Subsidiary, cause such Subsidiary to make such representations and
warranties to the Lenders and undertake such obligations as the Agent may
reasonably request. Except as permitted by the Related Documents, the Borrower
shall not sell, transfer or otherwise dispose of any shares of stock in any of
its Subsidiaries, nor permit any of its Subsidiaries to issue any shares of
stock of any class whatsoever to any Person (other than to the Borrower). In the
event that any such additional shares of stock shall be issued by any
Subsidiary, the Borrower agrees forthwith to deliver or cause to be delivered to
the Agent pursuant to the Pledge Agreement the certificates evidencing such
shares of stock, accompanied by instruments of assignment and transfer in such
form as the Agent may request and shall take such other action as the Agent
shall request to perfect the security interest created therein pursuant to the
Pledge Agreement.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any principal of or interest on the Loans or the
Reimbursement Obligations or any Obligations (whether or not due) shall remain
unpaid or any Lender shall have any Revolving Credit Commitment hereunder, the
Borrower will not, without the prior written consent of the Majority Lenders:
8.01. Liens, Etc. Create or suffer to exist, or permit any of
its Subsidiaries to create or suffer to exist, any Lien upon or with respect to
any of their properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer, or permit any of its
Exhibit 10.14 - Page 54
<PAGE>
Subsidiaries to assign or otherwise transfer, any right to receive income, other
than the following ("Permitted Liens"):
(a) Liens created pursuant to the Loan
Documents:
(b) Liens existing on the date hereof, as set
forth in Schedule 8.01 hereto, but not the extension of coverage thereof to the
other property or the extension of maturity, refinancing or other modification
of the terms thereof or of the Indebtedness secured thereby;
(c) Liens for taxes, assessments or governmental
charges or levies to the extent that the payment thereof shall not be required
by Section 7.02 hereof and/or any of the Mortgages;
(d) Liens created by operation of law other than
Environmental Liens, such as materialmen's liens, mechanics' liens and other
similar liens, arising in the ordinary course of business which secure amounts
not overdue for a period of more than 60 days or which are being contested in
good faith by appropriate proceedings;
(e) deposits, pledges or liens (other than
liens arising under ERISA) securing (1) obligations incurred in respect of
workers' compensation, unemployment insurance or other forms of governmental
insurance or benefits, (2) the performance of bids, tenders, leases, contracts
(other than for the payment of money) and statutory obligations, or (3)
obligations on surety or appeal bonds, but only to the extent such deposits,
pledges or liens are incurred or otherwise arise in the ordinary course of
business and secure obligations which are not past due;
(f) restrictions on the use of real property and
minor irregularities in the title thereto which do not (1) secure obligations
for the payment of money or (2) materially impair the value of such property or
its use by the Borrower or any of its Subsidiaries in the normal conduct of such
Person's business;
(g) Liens on property to be used by the Borrower
in the ordinary course of its business, securing payment of all or part of the
purchase price thereof, and Liens with respect to equipment leases which
equipment is used by the Borrower in the ordinary course of its business,
provided that the aggregate amount of Indebtedness at any one time outstanding
incurred after the Filing Date and secured by such Liens shall not exceed
$3,000,000, and further provided that such Liens are confined solely to the
property so purchased, leased, improvements thereto and proceeds thereof;
(h) Liens securing Capitalized Leases permitted
by Sections 8.07 and 8.08; and
(i) to the extent the same constitutes Liens,
the interest of the cosigner in Inventory held by the Borrower on consignment.
8.02. Indebtedness. Create, incur or suffer to exist, or
permit any of its Subsidiaries to create, incur or suffer to exist, any
Indebtedness, other than:
(a) Indebtedness created hereunder or under the Notes
or any Letter of Credit;
(b) Indebtedness existing on the date hereof, as set
forth in Schedule 8.02 hereto, but not the extension of maturity,
refinancing or other modification of the terms thereof;
Exhibit 10.14 - Page 55
<PAGE>
(c) Indebtedness of the Borrower which is fully
subordinated to the payment of the Obligations on terms fully approved
in writing by the Majority Lenders in their sole and absolute
discretion, provided that such Indebtedness is not secured;
(d) Indebtedness for Capitalized Leases permitted by
Sections 8.07 and 8.08 of this Agreement;
(e) Indebtedness secured by Liens or security
interests permitted by 8.01(g); and
(f) accounts payable and accrued expenses arising out
of transactions (other than borrowings) in the ordinary course of
business.
8.03. Guarantees, Etc. Become liable under any Guarantee
in connection with any Indebtedness of any other Person, other than:
(a) guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business; and
(b) guaranties existing on the date hereof, as set
forth in Schedule 8.02 hereto, but not any renewal or other
modification thereof.
8.04 Merger, Consolidation, Sale of Assets, Etc. (a) Merge or
consolidate with any Person, or permit any of its Subsidiaries to merge or
consolidate with any Person; provided, however, that any Subsidiary of the
Borrower may be merged into the Borrower or another such Subsidiary, or may
consolidate with another such Subsidiary, so long as (i) no other provision of
this Agreement would be violated thereby, and (ii) the Borrower gives the Agent
at least 30 days' prior written notice of such merger or consolidation.
(b) Sell, assign, lease or otherwise transfer or
dispose of, or permit any of its Subsidiaries to sell, assign, lease or
otherwise transfer or dispose of, whether in one transaction or in a series of
related transactions, any of its properties, rights or other assets whether now
owned or hereafter acquired to any Person, provided that (i) the Borrower may
sell Inventory in the ordinary course of business, (ii) the Borrower and its
Subsidiaries may dispose of obsolete, worn-out property or excess inventory in
the ordinary course of business, (iii) the Borrower may sell or discount without
recourse its accounts receivable only in connection with the compromise thereof
or the assignment of past due accounts receivable for collection, (iv) the
Borrower may sell Inventory and other assets for fair market value, for cash, in
connection with store closings, provided that the net decrease in retail stores
of the Borrower after giving effect to all stores opened and all stores closed
by the Borrower after the Effective Date shall not exceed ten retail stores, and
(v) the Borrower may sell or otherwise dispose of assets, other than Inventory,
for fair market value, for cash, provided that the Net Proceeds of such
dispositions do not exceed $250,000 in the aggregate.
8.05. Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any change in the nature of its business as carried on at
the date hereof.
8.06. Loans, Advances and Investments, Etc. Make, or permit
any of its Subsidiaries to make, any loan or advance to any Person or purchase
or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise
acquire, any capital stock, properties, assets or obligations of, or any
interest in, any Person, other than advances to employees not exceeding $100,000
at any time outstanding. By way of illustration, and without limitation of the
foregoing, it is understood that the Borrower will be deemed to have made an
advance to a Person: (x) to the extent that the Borrower performs any service
for such Person (including but not limited to management
Exhibit 10.14 - Page 56
<PAGE>
services), or transfers any property to such Person, and is not reimbursed for
such service or property and (y) to the extent that the Borrower pays any
obligation on behalf of such Person. The amount of such advance shall be deemed
to be the fair value of the services so performed or property so transferred (in
the case of clause (x)) or the amount so paid by the Borrower (in the case of
clause (y)).
The following are excepted from the operation of this Section
8.06.
(a) Permitted Investments; and
(b) investments, loans or advances by the Borrower to
its Subsidiaries, provided that (1) any such Subsidiary has executed
and delivered to the Agent a Subsidiary Guaranty and all of the other
conditions of Section 7.18 have otherwise been satisfied with respect
to such Subsidiary, (2) the aggregate amount of such investments,
loans, or advances to all Subsidiaries (other than Westview
Advertising) shall not exceed $100,000 and (3) the aggregate amount of
such investments, loans, or advances to Westview Advertising shall not
exceed $4,000,000 during any 12-month period.
8.07 Lease Obligations. Create, incur or suffer to exist, or
permit any of its Subsidiaries to create, incur or suffer to exist, any
obligations as lessee (i) for the payment of rent for any real or personal
property in connection with any sale and leaseback transaction, or (ii) for the
payment of rent for any real or personal property under leases or agreements to
lease other than aggregate obligations under Capitalized Leases and Operating
Lease Obligations which would not cause the aggregate amount of all obligations
under Capitalized Leases and Operating Lease Obligations entered into after the
date hereof owing by the Borrower and its Subsidiaries in any 12-month period to
exceed $4,000,000.
8.08. Capital Expenditures. Make or be committed to make, or
permit any of its Subsidiaries to make or be committed to make, any expenditure
(by purchase or capitalized lease) for fixed or capital assets other than
expenditures (including obligations under Capitalized Leases) which would not
cause the aggregate amount of all such expenditures to exceed (i) $7,000,000 for
the fiscal year of the Borrower ending January 31, 1998, January 30, 1999, or
January 29, 2000, respectively, or (ii) $5,000,000 for the period beginning on
January 30, 2000 and ending on August 31, 2000.
8.09. Dividends, Prepayments, Etc. Declare or pay any
dividends, purchase or otherwise acquire for value any of its capital stock now
or hereafter outstanding, return any capital to its stockholders as such, or
make any other payment or distribution of assets to its stockholders as such, or
permit any of its Subsidiaries to do any of the foregoing or to purchase or
otherwise acquire for value any stock of the Borrower or make any payment or
prepayment of principal of, premium, if any, or interest on, or redeem, defease
or otherwise retire, any other Indebtedness of the Borrower before its scheduled
due date.
8.10. Federal Reserve Regulations. Permit any Loan or the
proceeds of any Loan under this Agreement to be used for any purpose which
violates or is inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.
8.11. Transactions with Affiliates. Enter into or be a party
to, or permit any of its Subsidiaries to enter into or be a party to, any
transaction with any Affiliate of the Borrower except as otherwise provided
herein or in the ordinary course of business in a manner and to an extent
consistent with past practice and necessary or desirable for the prudent
operation of its business for fair consideration and on terms no less favorable
to the Borrower or such Subsidiary as are available from unaffiliated third
parties, provided that the amount of such normal and customary operating
expenses shall not exceed $100,000.
Exhibit 10.14 - Page 57
<PAGE>
8.12. Cumulative FIFO EBITDA. Permit Cumulative FIFO EBITDA
for any fiscal month of the Borrower set forth below to be less than the amount
specified opposite each such fiscal month.
Month Amount
September, 1997 ($10,235,000)
October, 1997 ($10,115,000)
November, 1997 ($10,729,000)
December, 1997 ($6,935,000)
January, 1998 ($8,651,000)
February, 1998 ($8,676,000)
March, 1998 ($8,235,000)
April, 1998 ($7,483,000)
May, 1998 ($7,383,000)
June, 1998 ($6,900,000)
July, 1998 ($4,100,000)
August, 1998 ($500,000)
September, 1998 ($500,000)
October, 1998 ($500,000)
November, 1998 ($500,000)
December, 1998 ($500,000)
January, 1999 ($500,000)
February, 1999 ($500,000)
March, 1999 ($250,000)
April, 1999 ($250,000)
May, 1999 ($250,000)
June, 1999 ($250,000)
July, 1999 ($250,000)
August, 1999 $0
September, 1999 $1,000,000
October, 1999 $1,250,000
November, 1999 $1,500,000
December, 1999 $1,750,000
January, 2000 $2,000,000
February, 2000 $2,250,000
March, 2000 $2,500,000
April, 2000 $3,000,000
May, 2000 $3,500,000
June, 2000 $4,000,000
July, 2000 $4,500,000
August, 2000 $5,000,000
8.13. Markup and Markdown Policies. Engage in policies or
procedures with respect to markups or markdowns of Inventory which policies and
procedures, including the timing, amount and implementation of such markups and
markdowns, are inconsistent in any material respect with the past practices of
the Borrower absent the prior written consent of the Agent.
8.14. Environmental. Dispose, and shall not permit any
Subsidiary to dispose, of any Hazardous Material by placing it in or on the
ground or waters of any property owned, leased, operated or controlled by the
Borrower or such Subsidiary.
Exhibit 10.14 - Page 58
<PAGE>
8.15. ERISA. (a) Engage in any prohibited transaction
described in Section 406 of ERISA or 4975 of the Code for which a statutory or
class exemption is not available or a private exemption has not previously been
obtained from the Department of Labor;
(b) permit, or permit any ERISA Affiliate to
permit, any enforceable Lien from arising under Section 412(n) of the Code;
(c) amend or permit any ERISA Affiliate to amend
any Benefit Plan in a manner that would require security under Section 307 of
ERISA;
(d) request or permit any ERISA Affiliate to
request a waiver of the minimum funding requirements under Section 412 of the
Code in respect of any Benefit Plan; or
(e) adopt any Plan or any amendment to a Plan
the effect of which is to materially increase the "current liability" under the
Plan as defined in section 302(d)(7) of ERISA.
8.16. Maintenance of Inventory. The Borrower shall not
permit the aggregate amount of its Inventory (valued at Book Value) at the end
of each fiscal month set forth below to be more than the amounts specified
opposite each such fiscal month set forth below: Fiscal Month Maximum Amount
August, 1997 $82,000,000
September, 1997 $82,000,000
October, 1997 $82,000,000
November, 1997 $82,000,000
December, 1997 $82,000,000
January, 1998 $82,000,000
February, 1998 $85,000,000
March, 1998 $85,000,000
April, 1998 $85,000,000
May, 1998 $85,000,000
June, 1998 $85,000,000
July, 1998 $85,000,000
August, 1998 $85,000,000
September, 1998 $85,000,000
October, 1998 $85,000,000
November, 1998 $85,000,000
December, 1998 $85,000,000
January, 1999 $85,000,000
February, 1999 $88,000,000
March, 1999 $88,000,000
April, 1999 $88,000,000
May, 1999 $88,000,000
June, 1999 $88,000,000
July, 1999 $88,000,000
August, 1999 $88,000,000
September, 1999 $88,000,000
October, 1999 $88,000,000
November, 1999 $88,000,000
December, 1999 $88,000,000
January, 2000 $88,000,000
February, 2000 $90,000,000
March, 2000 $90,000,000
Exhibit 10.14 - Page 59
<PAGE>
April, 2000 $90,000,000
May, 2000 $90,000,000
June, 2000 $90,000,000
July, 2000 $90,000,000
August, 2000 $90,000,000
8.17. Plan Documents. The Borrower shall not permit the Plan
or the Confirmation Order to be amended, restated, supplemented or otherwise
modified in any way which has an effect upon (i) the ability of the Borrower or
any Subsidiary to perform its obligations hereunder, under the Fee Letter or
under any other Related Document, (ii) the Lien arising under the Related
Documents on any Collateral, (iii) the legality, validity or enforceability of
this Agreement or any Related Document or the Lien arising under any Related
Document, or (iv) the aggregate value of the property included in the
calculations of the Borrowing Base, without the prior written consent of the
Agent.
ARTICLE IX
DEFAULTS
----------
9.01. Events of Default. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for such Event of Default and whether voluntary,
involuntary or effected by operation of law):
(a) The Borrower shall fail to make any payment of
principal under this Agreement on any Loan or any Reimbursement
Obligation when due; or the Borrower shall fail to pay when due any
other amount payable under this Agreement or any other Related Document
(including but not limited to the making of deposits in the Depository
Accounts, the Cash Concentration Account or the Letter of Credit Cash
Collateral Account), including any interest or fee due hereunder or
under the Fee Letter or any other Related Document and such failure
shall continue unremedied for more than five (5) Business Days; or
(b) Any representation or warranty made by the
Borrower under this Agreement or any other Related Document or any
statement made by the Borrower in any financial statement, certificate,
report or document furnished to the Agent or the Lenders pursuant to or
in connection with this Agreement or any other Related Document, shall
prove to have been false or misleading in any material respect as of
the time when made (including by omission of material information
necessary to make such representation, warranty or statement, in light
of the circumstances under which it was made, not misleading); or
(c) The Borrower shall default in the performance or
observance of any covenant contained in Sections 7.03, 7.07, 7.08,
7.10, 7.11, 7.13 or 7.18 hereof or Article VIII hereof or Section 5 of
the Security Agreement and such default shall have continued unremedied
for a period of five (5) Business Days; or
(d) The Borrower shall default in the performance or
observance of (i) the covenants contained in Section 7.01 (other than
paragraphs (e) and (f) thereof) and such default shall have continued
unremedied for a period of five (5) days, (ii) the covenants contained
in paragraphs (e) and (f) of Section 7.01 and such default shall have
continued unremedied for a period of five (5) Business Days, and (iii)
any other covenant, agreement or duty under this Agreement or any other
Related Document (to the extent not otherwise set forth in this Section
9.01) and such default shall have continued unremedied for a period of
twenty (20) days; or
Exhibit 10.14 - Page 60
<PAGE>
(e) There shall have been asserted against the
Borrower or any Subsidiary claims, whether accrued, absolute or
contingent, based on or arising from any Environmental Matter,
including, without limitation, the generation, storage, transport,
handling or disposal of Hazardous Materials by the Borrower or any
Subsidiary, or any predecessor in interest to the Borrower or any
Subsidiary, which claims are reasonably likely to be determined
adversely to the Borrower or any Subsidiary (or any such predecessor in
interest), in an amount in excess of $250,000; or
(f) The Borrower or any Subsidiary shall fail to pay
any principal or interest on any of its Indebtedness (excluding
Indebtedness evidenced by the Notes) in excess of $250,000, or any
interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such
failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness,
or any other default under any agreement or instrument relating to any
such Indebtedness, or any other event, shall occur and shall continue
after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such default or event is to accelerate,
or to permit the acceleration of, the maturity of such Indebtedness; or
any such Indebtedness in excess of such amount shall be declared to be
due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
or
(g) The Borrower or any Subsidiary (i) shall
institute any proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry
of any order for relief of debtors, or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian or
other similar official for the Borrower or any Subsidiary or for any
substantial part of its property, (ii) shall be generally not paying
its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, (iii) shall make a general
assignment for the benefit of creditors, or (iv) shall take any action
to authorize or effect any of the actions set forth above in this
subsection (g); or
(h) Any proceeding shall be instituted against the
Borrower or any Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for the Borrower
or any Subsidiary or for any substantial part of its property, and
either such proceeding shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its
property) shall occur; or
(i) Any material provision of any Loan Document shall
at any time for any reason be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Borrower,
or a proceeding shall be commenced by the Borrower, or by any
Governmental Authority or other regulatory body having jurisdiction
over the Borrower, seeking to establish the invalidity or
unenforceability thereof, or the Borrower shall deny in writing that
the Borrower has any liability or obligation purported to be created
under any Loan Document; or
(j) The Security Agreement or any other Security
Document, after delivery thereof pursuant hereto, shall for any reason
fail or cease to create a valid and
Exhibit 10.14 - Page 61
<PAGE>
perfected and, except to the extent permitted by the terms hereof or
thereof, first priority Lien on or security interest in any Collateral
purported to be covered thereby; or
(k) One or more judgments or orders (other than a
judgment described in subsections (g) or (h) of this Section 9.01) for
the payment of money exceeding any applicable insurance or bond
coverage by more than $500,000 in the aggregate shall be rendered
against the Borrower or any Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon any such
judgment or order, or (ii) there shall be any period of 20 consecutive
days during which a stay of enforcement of any such judgment or order,
by reason of a pending appeal or otherwise shall not be in effect; or
(l) The Borrower or any of its ERISA Affiliates shall
have made a complete or partial withdrawal from a Multiemployer Plan,
and, as a result of such complete or partial withdrawal, the Borrower
or such ERISA Affiliate incurs a withdrawal liability in an annual
amount exceeding $250,000; or a Multiemployer Plan enters
reorganization status under Section 4241 of ERISA, and, as a result
thereof, the Borrower's or such ERISA Affiliate's annual contribution
requirement with respect to such Multiemployer Plan increases in an
annual amount exceeding $250,000; or
(m) Any Termination Event with respect to any Benefit
Plan shall have occurred, and, 30 days after notice thereof shall have
been given to the Borrower by the Agent, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current
value of such Benefit Plan's vested benefits exceeds the then current
value of assets allocable to such benefits in such Benefit Plan by more
than $250,000 (or in the case of a Termination Event involving
liability under Section 515, 4062, 4063, 4064, 4069, 4201 or 4204 of
ERISA, the liability is in excess of such amount); or
(n) Raymond J. Miller shall cease to be actively
involved in the management of the Borrower (other than as a result of
the death, incapacity or disability of Mr. Miller) and such Person
shall not have been replaced within 90 days of Mr. Miller ceasing to be
actively involved in the management of the Borrower with a person
reasonably acceptable to the Agent on terms reasonably acceptable to
the Agent.
9.02 Consequences of an Event of Default. If an Event of
Default shall occur and be continuing or shall exist the Agent may, and upon the
direction of the Majority Lenders, shall by notice to the Borrower,
(a) declare the Revolving Credit Commitment of
each Lender and the Current Commitment terminated, whereupon the Revolving
Credit Commitment of each Lender and the Current Commitment will terminate
immediately and any fees hereunder shall be immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived, and an action therefor shall immediately accrue; or
(b) declare the unpaid principal amount of the
Notes, interest accrued thereon, the total amount of the Letter of Credit
Exposure that is not cash collateralized in accordance with this agreement and
all other amounts owing by the Borrower hereunder or under the Notes to be
immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue; or
(c) give notice to the Borrower of the
occurrence and continuance of an Event of Default; or
Exhibit 10.14 - Page 62
<PAGE>
(d) at any time when there are no Loans
outstanding, maintain cash collateral (to the extent the Borrower has or
receives cash) equal to 105% of all outstanding Letters of Credits; or
(e) apply all funds deposited in the Cash
Concentration Account, and in the Letter of Credit Cash Collateral Account to
the payment, in whole or in part, of the Obligations; or
(f) set-off amounts in the Cash Concentration
Account, the Letter of Credit Cash Collateral Account, or any other account
under the dominion and control of the Agent and apply such amounts to the
Obligations of the Borrower hereunder and under the Related Documents;
provided, however, that upon the occurrence of any Event of Default described in
subsections (g) or (h) of Section 9.01, the Loans and all Reimbursement
Obligations, all interest thereon and all other amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by the Borrower.
9.03. Deposit for Letters of Credit. Upon the occurrence of an
Event of Default, the Letter of Credit Issuer may make payment of all or any
part of the Stated Amount of any Letter of Credit to the beneficiary thereof, or
to an account at the Agent designated by the Agent for the purpose of future
payments to be made to such beneficiary, in which event such payment shall be
treated in all respects as a drawing under the Letter of Credit in full
compliance therewith (notwithstanding that the beneficiary shall have failed to
present all or any of the documents or satisfied all or any of the requirements
for a drawing thereunder) and shall result in an Unreimbursed Draw. In addition,
upon demand by the Letter of Credit Issuer after the occurrence of any Event of
Default, the Borrower shall deposit with the Agent for the benefit of the Letter
of Credit Issuer with respect to each Letter of Credit then outstanding cash in
an amount equal to the greatest amount for which such Letter of Credit may be
drawn. Such deposits shall be held by the Agent for the benefit of the Letter of
Credit Issuer in a non-interest bearing cash collateral account as security for,
and to provide for the payment of, the Letter of Credit Exposure.
9.04 Certain Remedies. If an Event of Default occurs, each of
the Agent and the Lenders may exercise all rights and remedies which it may have
hereunder or under any other Related Document or at law or in equity or
otherwise. All such remedies shall be cumulative and not exclusive.
ARTICLE X
MISCELLANEOUS
10.01. Holidays. Except as otherwise provided herein, whenever
any payment or action to be made or taken hereunder or under the Notes shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.
10.02. Records. The unpaid principal amount of the Notes, the
unpaid interest accrued thereon, the interest rate or rates applicable to such
unpaid principal amount, the duration of such applicability, the Current
Commitment, the Stated Amount of each Letter of Credit, the principal amount of
all Reimbursement Obligations, the Letter of Credit Exposure, and the accrued
and unpaid Agent's fee, Unused Line Fee and Letter of Credit Fees shall at all
times be ascertained from the records of the Agent, which shall be conclusive
and binding absent manifest error.
10.03. Amendments and Waivers. (a) No amendment or
modification of any provision of this Agreement or of any of the Notes or of any
other Related Document shall be effective without the written agreement of the
Majority Lenders and the Borrower and no termination or waiver
Exhibit 10.14 - Page 63
<PAGE>
of any provision of this Agreement or of any of the Notes, or consent to any
departure by the Borrower therefrom, shall in any event be effective without the
written concurrence of the Majority Lenders, which the Majority Lenders shall
have the right to grant or withhold at their sole discretion; except that any
amendment, modification, or waiver of (i) any provision of Article II or III
which amendment, modification or waiver increases the Revolving Credit
Commitment of any Lender, changes the principal amount or the final maturity of
the Loans or reduces the interest rate applicable to the Loans or the amount of
the fees payable pursuant hereto, (ii) the definitions of "Termination Date",
"Majority Lenders" and "Pro Rata Shares", (iii) any provision of this Agreement
or any Related Document that would permit Liens on the Collateral or release of
the Collateral (except as set forth in Section 11.08 thereof or except as other
permitted therein) or (iv) the provisions contained in this Section 10.03, shall
be effective only if evidenced by a writing signed by or on behalf of all
Lenders. No amendment, modification, termination, or waiver of any provision of
Article XI or any other provision referring to the Agent shall be effective
without the written concurrence of the Agent. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, waiver or consent effected in
accordance with this Section 10.03 shall be binding on each Lender, each future
Lender, and, if signed by the Borrower, on the Borrower.
(b) Notwithstanding anything to the contrary
contained in subsection 10.03(a), in the event that the Borrower requests that
this Agreement or any other Related Document be amended or otherwise modified in
a manner which would require the unanimous consent of all of the Lenders and
such amendment or other modification is agreed to by the Majority Lenders, then,
with the consent of the Borrower and the Majority Lenders, the Borrower and the
Majority Lenders may amend this Agreement without the consent of the Lender or
Lenders which did not agree to such amendment or other modification
(collectively the "Minority Lenders") to provide for (w) the termination of the
Revolving Credit Commitment of each of the Minority Lenders, (x) the addition to
this Agreement of one or more other Lenders, or an increase in the Revolving
Credit Commitment of one or more of the Majority Lenders, so that the Revolving
Credit Commitments after giving effect to such amendment shall be in the same
aggregate amount as the Revolving Credit Commitments immediately before giving
effect to such amendment, (y) if any Loans are outstanding at the time of such
amendment, the making of such additional Loans by such new Lenders or Majority
Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to
such amendment and (z) the payment of all fees and other Obligations payable or
accrued in favor of the Minority Lenders and such other modifications to this
Agreement as the Borrower and the Majority Lenders may determine to be
appropriate.
10.04. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of the Lenders or the Agent in exercising any
right, power or privilege under this Agreement, the Notes or any other Related
Document shall affect any other or future exercise thereof or exercise of any
other right, power or privilege; nor shall any single or partial exercise of any
such right, power or privilege or any abandonment or discontinuance of steps to
enforce such a right, power or privilege preclude any further exercise thereof
or of any other right, power or privilege. The rights and remedies of the
Lenders or the Agent under this Agreement, the Notes and the other Related
Documents are cumulative and not exclusive of any rights or remedies which the
Lenders or the Agent have thereunder or at law or in equity or otherwise. The
Lenders or the Agent may exercise their rights and remedies against the Borrower
and the Collateral as the Lenders and the Agent may elect, and regardless of the
existence or adequacy of any other right or remedy.
10.05. Notices. (a) All notices, requests, demands, directions
and other communications (collectively "notices") under the provisions of this
Agreement or the Notes shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied, or delivered
and shall be effective (i) if mailed, three days after being deposited in the
mails, (ii) if
Exhibit 10.14 - Page 64
<PAGE>
telecopied, when sent, confirmation received and (iii) if delivered, upon
delivery. All notices shall be sent to the applicable party at the address
stated on the signature page hereof together with, in the case of a letter of
credit request and Letter of Credit Application sent pursuant to Section
3.01(a), a copy to the Agent at the address for the Agent provided on the
signature page hereof, or in accordance with the last unrevoked written
direction from such party to the other parties hereto.
(b) The Lenders and the Agent may rely, and
shall be fully protected in relying, on any notice purportedly made by or on
behalf of the Borrower and the Lenders and the Agent shall have no duty to
verify the identity or authority of any Person giving such notice. The preceding
sentence shall apply to all notices whether or not made in a manner authorized
or required by this Agreement or any other Related Document.
10.06 Expenses; Taxes; Attorneys' Fees; Indemnification.
Without in any way limiting any provision of this Agreement or any provision of
any Related Document, the Borrower agrees to pay or cause to be paid, on demand,
and to save the Agent (and, in the case of clauses (c) through (m) below, the
Lenders) harmless against liability for the payment of, all reasonable
out-of-pocket expenses, regardless of whether the transactions contemplated
hereby are consummated, including but not limited to reasonable fees and
expenses of counsel for the Agent (and, in the case of clauses (c) through (m)
below, the Lenders), accounting, due diligence, periodic field audits,
investigation, monitoring of assets, syndication, miscellaneous disbursements,
examination, travel, lodging and meals, incurred by the Agent (and, in the case
of clauses (e) through (m) below, the Lenders) from time to time arising from or
relating to: (a) the negotiation, preparation, execution, delivery, performance
and administration of this Agreement and the other Related Documents, (b) any
requested amendments, waivers or consents to this Agreement or the other Related
Documents whether or not such documents become effective or are given, (c) the
preservation and protection of any of the Agent's and the Lenders' rights under
this Agreement or the other Related Documents, (d) the defense of any claim or
action asserted or brought against the Agent or the Lenders by any Person that
arises from or relates to this Agreement, any other Related Document, the
Agent's or the Lenders' claims against the Borrower, or any and all matters in
connection therewith, (e) the commencement or defense of, or intervention in,
any court proceeding arising from or related to this Agreement or any other
Related Document, (f) the filing of any petition, complaint, answer, motion or
other pleading by the Agent or the Lenders, or the taking of any action in
respect of the Collateral or other security, in connection with this Agreement
or any other Related Document, (g) the protection, collection, lease, sale,
taking possession of or liquidation of, any Collateral or other security in
connection with this Agreement or any other Related Document, (h) any attempt to
enforce any lien or security interest in any Collateral or other security in
connection with this Agreement or any other Related Document, (i) any attempt to
collect from the Borrower, (j) the receipt of any advice with respect to any of
the foregoing, (k) all Environmental Liabilities and Costs arising from or in
connection with the past, present or future operations of the Borrower or any of
its Subsidiaries involving any damage to real or personal property or natural
resources or harm or injury alleged to have resulted from any Release of
Hazardous Materials on, upon or into such property, (1) any costs or liabilities
incurred in connection with the investigation, removal, cleanup and/or
remediation of any Hazardous Materials present or arising out of the operations
of any facility of the Borrower or any of its Subsidiaries, or (m) any costs or
liabilities incurred in connection with any Environmental Lien. Without
limitation of the foregoing or any other provision of any Related Document: (x)
the Borrower agrees to pay all stamp, document, transfer, recording or filing
taxes or fees (including, without limitation, mortgage recording taxes) and
similar impositions now or hereafter determined by the Agent or any of the
Lenders to be payable in connection with this Agreement or any other Related
Document, and the Borrower agrees to save the Agent and the Lenders harmless
from and against any and all present or future claims, liabilities or losses
with respect to or resulting from any omission to pay or delay in paying any
such taxes, fees or impositions, and (y) if the Borrower fails to perform any
covenant or agreement contained herein or in any other Related Document, the
Agent may itself perform or cause performance of such covenant or agreement, and
the expenses of the Agent incurred in connection therewith shall be reimbursed
on
Exhibit 10.14 - Page 65
<PAGE>
demand by the Borrower. The Borrower agrees to indemnify and defend the Agent
and the Lenders and their directors, officers, agents, employees and affiliates
(collectively, the "Indemnified Parties") from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages, costs or expenses of
any nature whatsoever (including reasonable attorneys' fees and expenses and
amounts paid in settlement) incurred by, imposed upon or asserted against any of
them arising out of or by reason of any investigation, litigation or other
proceeding brought or threatened relating to, or otherwise arising out of or
relating to, the execution of this Agreement or any other Related Document, the
transactions contemplated hereby or thereby or any Loan or Proposed Loan or
Letter of Credit or proposed Letter of Credit hereunder (including, but without
limitation, any use made or proposed to be made by the Borrower or any of its
Affiliates of the proceeds of any thereof, or the delivery or use or transfer of
or the payment or failure to pay under any Loan or Letter of Credit) but
excluding any such losses, liabilities, claims, damages, costs or expenses to
the extent determined by a final judgment of a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of the
Indemnified Party.
10.07. Application. Except to the extent, if any, expressly
set forth in this Agreement or in the Related Documents, the Agent and the
Lenders shall have the right to apply any payment received or applied by it in
connection with the Obligations to such of the obligations then due and payable
as it may elect.
10.08. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
10.09. Governing Law. This Agreement and the Notes shall be
deemed to be contracts under the laws of the State of New York, without regard
to choice of law principles, and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State.
10.10. Prior Understandings. This Agreement supersedes all
prior understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein other than the Fee
Letter.
10.11. Duration; Survival. All representations and warranties
of the Borrower contained herein or made in connection herewith shall survive
the making of the Loans and the issuance of any Letter of Credit and shall not
be waived by the execution and delivery of this Agreement, the Notes or any
other Related Document, any investigation by or knowledge of the Agent or the
Lenders, the making of any Loan or the issuance of any Letter of Credit
hereunder, or any other event whatsoever. All covenants and agreements of the
Borrower contained herein shall continue in full force and effect from and after
the date hereof so long as the Borrower may borrow hereunder and until the
Obligations have been paid in full and no Letters of Credit remain outstanding.
Without limitation, it is understood that all obligations of the Borrower to
make payments to or indemnify the Agent the Lenders (including, without
limitation, obligations arising under Section 10.06 hereof) shall survive the
payment in full of the Notes and all Reimbursement Obligations and of all other
obligations of the Borrower thereunder and hereunder, termination of this
Agreement and all other events whatsoever and whether or not any Loans are made
or Letters of Credit issued hereunder.
10.12. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
Exhibit 10.14 - Page 66
<PAGE>
10.13. Assignment; Participations. (a) CIT shall have the
right at any time to assign to one or more commercial banks or other financial
institutions (then entitled to receive payments of principal, interest and fees
for the account of its lending office under this Agreement free from withholding
of Federal income tax) a portion of its rights and obligations under this
Agreement (including, without limitation, a portion of its Revolving Credit
Commitment, the Loans owing to it and its rights and obligations as a Lender
with respect to Letters of Credit) and the other Related Documents; provided,
however, that (i) the identity of each such assignee shall be subject to the
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed, unless such assignee is on the list of proposed assignees delivered by
CIT to the Borrower prior to the date hereof the Borrower shall not have
rejected in writing such assignee in which case the consent of the Borrower
shall not be required, (ii) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the Register (as
hereinafter defined), an Assignment and Acceptance, and (iii) after giving
effect to such assignment, CIT's Revolving Credit Commitment shall be at least
equal to the lesser of (1) $20,000,001 and (2) an amount equal to a majority of
the aggregate amount of the Revolving Credit Commitments. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and to the other Related Documents and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations (including, without limitation, the
obligation to participate in Letters of Credit) of a Lender hereunder and
thereunder and (B) CIT shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement.
(b) By executing and delivering an Assignment
and Acceptance, CIT and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, CIT makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other
Related Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Related
Document furnished pursuant hereto; (ii) CIT makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or observance by the
Borrower of any of its obligations under this Agreement or any other Related
Document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement and the other Related Documents, together with
such other documents and information it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Related Documents; (v) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Related Documents as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement and the other Related Documents are required to be performed
by it as a Lender.
(c) The Agent shall maintain at its address
referred to on the signature page hereto, a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Revolving Credit Commitment of,
and principal amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection
Exhibit 10.14 - Page 67
<PAGE>
by the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender, an assignee Lender, the Agent and
the Borrower, together with the Note subject to such Assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit E hereto, (i) accept such Assignment and
Acceptance, (ii) give prompt notice thereof to the Borrower and (iii) record the
information contained therein in the Register. Within five Business Days after
its receipt of such notice, the Borrower, at its own expense, shall execute and
deliver to the Agent in exchange for the surrendered Note a new Note to the
order of such assignee Lender in an aggregate principal amount equal to the
Revolving Credit Commitment assigned by it pursuant to such Assignment and
Acceptance, and if the assigning Lender has retained any Revolving Credit
Commitment hereunder, a new Note to the order of the assigning Lender in an
aggregate principal amount equal to the Revolving Credit Commitment retained by
it hereunder, in each case prepared by the Agent. Such now Note shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note, shall be dated the date of the Agent's acceptance of such
assignment and acceptance and shall otherwise be in substantially the form of
Exhibit A hereto.
(e) Each Lender may sell participations to one
or more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement and the other Related Documents (including,
without limitation, all or a portion of its Revolving Credit Commitment and the
Loans owing to it and its participation in Letters of Credit), provided that (1)
such Lender's obligations under this Agreement (including, without limitation,
its Revolving Credit Commitment hereunder) and the other Related Documents shall
remain unchanged; (2) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, and the Borrower, the
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Related Documents; and (3) a participant shall not be
entitled to require such Lender to take or omit to take any action hereunder
except (A) action directly effecting an extension of the maturity dates of the
Loans, or (B) action directly effecting an increase of any of the Revolving
Credit Commitments or principal amounts of Loans or a decrease in the rate of
interest payable on the Loans.
(f) Notwithstanding the foregoing provisions of
this Section 10.13, each Lender may at any time sell, assign, transfer, or
negotiate all or any part of its rights and obligations under this Agreement and
the Related Document to any Affiliate of such Lender.
10.14. Successors and Assigns. This Agreement and the other
Related Documents shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns except that the Borrower may
not assign or transfer any of its rights hereunder or thereunder without the
prior written consent of all of the Lenders.
10.15. Confidentiality. Upon delivering to any Lender or the
Agent, or permitting any Lender or the Agent to inspect, any written information
pursuant to this Agreement or the other Related Documents, each Lender and the
Agent shall treat such information as confidential to the extent such
information is conspicuously marked confidential. Each Lender and the Agent
agrees to hold such information in confidence from the date of disclosure
thereof. Subject to the other provisions of this Section 10.15, each Lender and
the Agent may disclose confidential information to its officers, directors,
employees, attorneys, accountants or other professionals engaged by any Lender
or the Agent only after determining that such third party has been instructed to
hold such information in confidence to the same extent as if it were a Lender.
Notwithstanding the foregoing, the provisions of this Section 10.15 shall not
apply to information within any one of the following categories or any
combination thereof: (i) information the substance of which, at the time of
disclosure by any Lender or the Agent, has been disclosed to or is known to any
creditor (other than information as to which such
Exhibit 10.14 - Page 68
<PAGE>
creditor is then under an obligation of nondisclosure), or any Person other than
(A) a director, officer, employee or agent of any of the Borrower or a
professional engaged by the Borrower or (B) a Person who is then under an
obligation of nondisclosure (otherwise than as a consequence of a wrongful act
of any Lender or the Agent), (ii) information which any Lender or the Agent had
in its possession prior to receipt thereof from the disclosing party, or (iii)
information received by any Lender or the Agent from a third party having no
obligations of nondisclosure with respect thereto. Nothing contained in this
Section 10.15 shall prevent any disclosure: (x) believed in good faith by any
Lender or the Agent to be required by any law or guideline or interpretation or
application thereof by any Governmental Authority, arbitrator or grand jury
charged with the interpretation or administration thereof or compliance with any
request or directive of any Governmental Authority, arbitrator or grand jury
(whether or not having the force of law), (y) determined by counsel for any
Lender or the Agent to be necessary or advisable in connection with enforcement
or preservation of rights under or in connection with this Agreement or any
other Related Document or (z) of any information which has been made public by a
Person other than any Lender or the Agent. The Lenders and the Agent shall have
the right to disclose any confidential information described in this Section
10.15 to the Letter of Credit Issuer and to an assignee or prospective assignee
or to a participant or prospective participant in Loans hereunder, provided that
the assigning or selling Lender shall have obtained from such assignee or
prospective assignee or participant or prospective participant an agreement to
hold such information in confidence to the same extent as if it were a Lender.
10.16. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT,
THE NOTES OR ANY OTHER RELATED DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, OR THE
BORROWER IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS MATERIAL
INDUCEMENT FOR THE AGENT AND THE LENDERS TO ENTER INTO THE AGREEMENT.
10.17. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default any Lender, the Agent and the Letter of
Credit Issuer may, and is hereby authorized to, at the time from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower) and to the fullest extent permitted by law, set off and apply any and
all deposits (general or special, time or demand, provision or final) at any
time held and other indebtedness at any time owing by such Lender, the Agent or
the Letter of Credit Issuer to or for the credit or the account of the Borrower
against any and all Obligations of the Borrower now or hereafter existing under
the Loan Documents, irrespective of whether or not any Lender, the Agent and the
Letter of Credit Issuer shall have made any demand hereunder or thereunder and
although such Obligations may be contingent or unmatured. Each Lender, the Agent
and the Letter of Credit Issuer agrees promptly to notify the Borrower after any
such setoff and application made by such Lender, the Agent or the Letter of
Credit Issuer; provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender,
the Agent and the Letter of Credit Issuer under this Section 10.17 are in
addition to the other rights and remedies (including, without limitation, other
rights of setoff under applicable law or otherwise) which such Lender, the Agent
or the Letter of Credit Issuer may have.
10.18. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
Exhibit 10.14 - Page 69
<PAGE>
10.19. Headings. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
10.20. Forum Selection and Consent to Jurisdiction. Any
litigation based hereon, or arising out of, under or in connection with, this
Agreement or any other Loan Document, or any course of conduct, course of
dealing, statement (whether verbal or written) or action of the Agent, any
Lender, the Agent, the Letter of Credit Issuer or the Borrower may be brought
and maintained exclusively in the courts of the State of Now York or the United
States District Court for the Southern District of New York; provided, however,
that any suit seeking enforcement against any Collateral or other property may
be brought, at the Agent's option, in the courts of any jurisdiction where such
Collateral or other property may be found. The Borrower hereby expressly and
irrevocably submits to the jurisdiction of the courts of the State of New York
and of the United States District Court for the Southern District of New York
for the purpose of any such litigation and irrevocably agrees to be bound by any
judgment rendered thereby in connection with such litigation. The Borrower
further irrevocably consents to the service of process (i) by registered or
certified mail, postage prepaid, to the Borrower at its address for notices
contained in Section 10.05 hereof, such service to become effective five days
after such mailing, or (ii) by personal service within or without the State of
New York. Nothing herein shall affect the right of the Agent, any Lender or the
Letter of Credit Issuer to service of process in any other manner permitted by
law. The Borrower hereby expressly and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such litigation brought in any such court referred to above and
any claim that any such litigation has been brought to an inconvenient forum. To
the extent that the Borrower has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) with respect to itself or its property, the Borrower hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement and the other Loan Documents.
ARTICLE XI
THE AGENT
----------
11.01. Appointment. Each Lender designates and appoints CIT as
its Agent under this Agreement and the Related Documents, and each Lender hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and the Related Documents and to exercise such
powers as are set forth herein or therein, together with such other powers as
are reasonably incidental thereto. The Agent agrees to act as such on the
express conditions contained in this Article XI. The provisions of this Article
XI are solely for the benefit of the Agent and the Lenders and the Borrower
shall not have any rights as a third party beneficiary of any of the provisions
hereof (other than as expressly set forth in Section 11.07). In performing its
functions and duties under this Agreement and under the Related Documents, the
Agent shall act solely as agent of the Lenders and does not assume and shall not
be deemed to have assumed any obligations toward or relationship of agency or
trust with or for the Borrower. The Agent may perform any of its duties
hereunder, or under the Related Documents, by or through its agents or
employees.
11.02. Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
Related Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement
or any Related Document a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the Related Documents, express or implied,
is intended to or shall be construed to impose upon the Agent any obligations in
respect of this Agreement or any of the Related Documents except as expressly
set forth herein or therein. Each Lender shall make its own independent
investigation of the financial condition and affairs of the Borrower in
connection with the making and the continuance of the Loans hereunder and with
the issuance of the Letters of Credit and shall make its own appraisal of
Exhibit 10.14 - Page 70
<PAGE>
the creditworthiness of the Borrower, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the initial Credit Extension hereunder or at any time or
times thereafter, provided that, upon the reasonable request of a Lender, the
Agent shall provide to such Lender any documents or reports delivered to the
Agent by the Borrower pursuant to the terms of this Agreement or any Related
Document. If the Agent seeks the consent or approval of the Majority Lenders to
the taking or refraining from taking any action hereunder, the Agent shall send
notice thereof to each Lender. The Agent shall promptly notify each Lender any
time that the Majority Lenders have instructed the Agent to act or refrain from
acting pursuant hereto.
11.03. Rights, Exculpation, Etc. Neither the Agent nor any of
its officers, directors, employees or agents shall be liable to any Lender for
any action taken or omitted by them hereunder or under any of the Related
Documents, or in connection herewith or therewith, except that the Agent shall
be obligated on the terms set forth herein for performance of its express
obligations hereunder and except that no Person shall be relieved of any
liability imposed by law for intentional tort. The Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith pursuant
to Section 2.08(c), and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of any
Lender to whom payment was due but not made, shall be to recover from other
lenders any payment in excess of the amount which they are determined to be
entitled. The Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein or in the Related Documents or
for any execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the Related Documents
or the transactions contemplated thereby, or for the financial condition of the
Borrower. The Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any of the Related Documents or the financial condition of the
Borrower, or the existence or possible existence of any Potential Default or
Event of Default. The Agent may at any time request instructions from the
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Related Documents the Agent is permitted or required
to take or to grant, and if such instructions are promptly requested, the Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval under any of the Related Documents until it shall have received
such instructions from the Majority Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting under this Agreement, the Notes or
any of the other Related Documents in accordance with the instructions of the
Majority Lenders.
11.04. Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Related Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
11.05. Indemnification. To the extent that the Agent is not
reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify the Agent for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement or any of the Related Documents or any action taken or omitted
by the Agent under this Agreement or any of the Related Documents, in proportion
to each Lender's Pro Rata Share, including, without limitation, advances and
disbursements made pursuant to Section 11.08; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements resulting from the Agent's recklessness or willful misconduct.
Exhibit 10.14 - Page 71
<PAGE>
The obligations of the Lenders under this Section 11.05 shall survive the
payment in full of the Loans and Reimbursement Obligations and the termination
of this Agreement.
11.06. CIT Individually. With respect to its Pro Rata Share of
the Revolving Credit Commitments hereunder, the Loans made by it and the Note
issued to or held by it, CIT shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender or holder of a Note. The
terms "Lenders" or "Majority Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include CIT in its individual capacity as a
Lender or one of the Majority Lenders. CIT and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with the Borrower or any of its Subsidiaries as if it were not
acting as Agent pursuant hereto without any duty to account to the Lenders. The
Lenders acknowledge and agree that Chemical Bank, as the Letter of Credit
Issuer, is an Affiliate of the Agent, and may take actions which are not in the
interests of, or may have an adverse effect on, the Lenders, or may omit to take
actions which would be in the interests of, or would have a favorable effect on,
the Lenders, and the Lenders will not assert any claim against the Agent based
on actions or omissions by the Letter of Credit Issuer and will not assert any
such actions or omissions as a defense or offset to the Lenders' obligations
hereunder.
11.07. Successor Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder and under the other
Related Documents at any time by giving at least thirty (30) Business Days'
prior written notice to the Borrower and each Lender. Such resignation shall
take effect upon the acceptance by a successor Agent of appointment pursuant to
clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the
Majority Lenders shall appoint a successor Agent who shall be reasonably
satisfactory to the Borrower.
(c) If a successor Agent shall not have been so
appointed within said thirty (30) Business Day period, the retiring Agent, with
the consent of the Borrower, shall then appoint a successor Agent who shall
serve as Agent until such time, if any, as the Majority Lenders, with the
consent of the Borrower, appoint a successor Agent as provided above.
11.08. Collateral Matters. (a) The Agent may from time to
time, during the occurrence and continuance of an Event of Default, make such
disbursements and advances ("Agent Advances") which the Agent, in its sole
discretion, deems necessary or desirable to preserve or protect the Collateral
or any portion thereof, to enhance the likelihood or maximize the amount of
repayment by the Borrower of the Loans and other Obligations or to pay any other
amount chargeable to the Borrower pursuant to the terms of this Agreement,
including, without limitation, costs, fees and expenses as described in Section
11.06. The Agent Advances shall be repayable on demand and be secured by the
Collateral. The Agent Advances shall not constitute Loans but shall otherwise
constitute Obligations hereunder. The Agent shall notify each Lender and the
Borrower in writing of each such Agent Advance, which notice shall include a
description of the purpose of such Agent Advance. Without limitation to its
obligations pursuant to Section 11.05, each Lender agrees that it shall make
available to the Agent, upon the Agents' demand, in Dollars in immediately
available funds, the amount equal to such Lender's Pro Rata Share of each such
Agent Advance. If such funds are not made available to the Agent by such Lender
the Agent shall be entitled to recover such funds, on demand from such Lender
together with interest thereon, for each day from the date such payment was due
until the date such amount is paid to the Agent, at the customary rate set by
the Agent for the correction of errors among banks for three Business Days and
thereafter at the Regular Rate.
(b) The Lenders hereby irrevocably authorize the
Agent, at its option and in its discretion, to release any Lien granted to or
held by the Agent upon any Collateral upon termination of the Revolving Credit
Commitments and payment and satisfaction of all Loans,
Exhibit 10.14 - Page 72
<PAGE>
Reimbursement Obligations, other Letter of Credit Exposure (whether or not due)
and all other Obligations which have matured and which the Agent has been
notified in writing are then due and payable; or constituting property being
sold or disposed of if the Borrower certifies to the Agent that the sale or
disposition is made in compliance with Section 8.04(b) hereof (and the Agent may
rely conclusively on any such certificate, without further inquiry); or, in the
case of the Mortgaged Properties, the Borrower grants to the Agent for the
benefit of the Lenders a perfected Lien on a substitute Lease reasonably
acceptable to the Agent; or constituting property in which the Borrower owned no
interest at the time the Lien was granted or at any time thereafter; or if
approved, authorized or ratified in writing by the Majority Lenders. Upon
request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this Section 11.08(b).
(c) Without in any manner limiting the Agent's
authority to act without any specific or further authorization or consent by the
Majority Lenders (as set forth in Section 11.08(b)), each Lender agrees to
confirm in writing, upon request by the Agent, the authority to release
Collateral conferred upon the Agent under Section 11.08(b). So long as no Event
of Default is then continuing, upon receipt by the Agent of confirmation from
the Majority Lenders of its authority to release any particular item or types of
Collateral, and upon at least five (5) Business Days' prior written request by
the Borrower, the Agent shall (and is hereby irrevocably authorized by the
Lenders to) execute such documents as may be necessary to evidence the release
of the Liens granted to the Agent for the benefit of the Lenders upon such
Collateral; provided, however, that (i) the Agent shall not be required to
execute any such document on terms which, in the Agent's opinion, would expose
the Agent to liability or create any obligations or entail any consequence other
than the release of such Liens without recourse or warranty, and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or
any Lien upon (or obligations of the Borrower in respect of) all interests in
the Collateral retained by the Borrower.
(d) The Agent shall have no obligation
whatsoever to any Lenders to assure that the Collateral exists or is owned by
the Borrower or is cared for, protected or insured or has been encumbered or
that the Lien granted to the Agent pursuant to the Security Documents has been
properly or sufficiently or lawfully created, perfected or enforced or is
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
the Agent in this Section 11.08 or in any of the Related Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem appropriate,
in its sole discretion, given the Agent's own interest in the Collateral as one
of the Lenders and that the Agent shall have no duty or liability whatsoever to
any other Lender.
Exhibit 10.14 - Page 73
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this Agreement as of the
date first above written.
BORROWER:
--------
WEINER'S STORES, INC.
By: /s/ Herbert R. Douglas
--------------------------
Name: Herbert R. Douglas
Title: President & Chief Executive
Officer
Address for Notices:
-------------------
Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attention: Raymond J. Miller
Vice President and Chief
Financial Officer
Telephone: (713) 688-1331
Fax: (713) 957-0080
with a copy to:
Weil, Gotshal & Manges LLP
700 Louisiana Street
Suite 1600
Houston, Texas 77002
Attention: Steven D. Rubin, Esq.
Telephone: (713) 546-5030
Fax: (713) 224-9511
Exhibit 10.14 - Page 74
<PAGE>
AGENT AND LENDER:
----------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Frank A. Grimaldi
-------------------------------
Name: Frank A. Grimaldi
Title: Vice President
Address for Notices:
-------------------
The CIT Group/Business
Credit, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Frank A. Grimaldi
Vice President
Telephone: (212) 536-1200
Telecopier:(212) 536-1295
with a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Brad Eric Scheler, Esq.
David Golay, Esq.
Telephone: (212) 859-8000
Telecopier: (212) 859-4000
Exhibit 10.14 - Page 75
EXHIBIT 10.15
FIRST AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
First Amendment, dated as of September 30, 1997, to the
Revolving Credit Agreement, dated as of August 26, 1997, (the "Credit
Agreement"), among WEINER'S STORES, INC., a Delaware corporation (the
"Borrower"), the financial institutions from time to time party thereto
(collectively, the "Lenders" and individually, a "Lender") and THE CIT
GROUP/BUSINESS CREDIT, INC., as a Lender and as agent for the Lenders (in such
capacity, the "Agent").
The Borrower, the Lenders, and the Agent desire to amend
certain provisions of the Credit Agreement. Accordingly, the Borrower, the
Lenders, and the Agent hereby agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein are used herein as defined in the Credit Agreement.
2. Existing Definitions. The definition of the term
"Assignment and Acceptance" in Section 1.01 of the Credit Agreement is hereby
amended in its entirety to read as follows:
"Assignment and Acceptance shall mean an assignment and
acceptance entered into by a Lender and an assignee, and
accepted by the Agent, substantially in the form of Exhibit E
hereto."
3. Notice of Borrowing; Making of Loans. The fourth sentence
of Section 2.03 (a) of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Except as otherwise provided in Section 2.03(e), on the date
specified in such notice, each Lender shall, subject to the
terms and conditions of this Agreement, make its Pro Rata
Share of such Loan in immediately available funds by wire
transfer to the Agent at its Office not later than 2:00 p.m.
(New York City time)."
4. Letters of Credit. Clause (y) of Section 3.01 (a) (vi) of
the Credit Agreement is hereby amended to read in its entirety as follows:
"(y) after the occurrence of an Event of Default which is not
cured within any applicable grace period, if any, or waived by
the Majority Lenders, not to (A) clear and resolve any
questions of non-compliance of documents, or (B) give any
instructions as to acceptances of any documents or goods."
5. Plan Documents. Section 8.17 of the Credit Agreement is
hereby amended to read in its entirety as follows:
"The Borrower shall not permit the Plan or the Confirmation
Order to be amended, restated, supplemented or otherwise
modified in any way which has an effect upon (i) the ability
of the Borrower or any Subsidiary to perform its obligations
hereunder, under the Fee Letter or under any other Related
Document, (ii) the Lien arising under the Related Documents on
any Collateral, (iii) the legality, validity or
<PAGE>
enforceability of this Agreement or any Related Document or
the Lien arising under any Related Document, or (iv) the
aggregate value of the property included in the calculations
of the Borrowing Base, without the prior written consent of
the Majority Lenders."
6. Assignment; Participations. Sections 10.13(a) and (b) of
the Credit Agreement are hereby amended to read in their entirety as follows:
"(a) Each of the Lenders shall have the right at any time to
assign to one or more commercial banks or other financial
institutions (then entitled to receive payments of principal,
interest and fees for the account of its lending office under
this Agreement free from withholding of Federal income tax) a
portion of its rights and obligations under this Agreement
(including, without limitation, a portion of its Revolving
Credit Commitment, the Loans owing to it and its rights and
obligations as a Lender with respect to Letters of Credit) and
the other Related Documents; provided, however, that (i) the
identity of each such assignee shall be subject to the consent
of the Borrower, which consent shall not be unreasonably
withheld or delayed, unless such assignee is on the list of
proposed assignees delivered by the Agent to the Borrower
prior to the date hereof the Borrower shall not have rejected
in writing such assignee in which case the consent of the
Borrower shall not be required, (ii) the parties to each such
assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as hereinafter
defined), an Assignment and Acceptance, and (iii) after giving
effect to such assignment, CIT's Revolving Credit Commitment
shall be at least equal to the lesser of (1) $20,000,001 and
(2) an amount equal to a majority of the aggregate amount of
the Revolving Credit Commitments. Upon such execution,
delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance,
(A) the assignee thereunder shall be a party hereto and to the
other Related Documents and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to
participate in Letters of Credit) of a Lender hereunder and
thereunder and (B) the assignor thereunder shall, to the
extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations
under this Agreement.
(b) By executing and delivering an Assignment and Acceptance,
the assignor and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, the
assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement
or any other Related Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement or any other Related Document furnished
pursuant hereto; (ii) the assignor makes no representation or
warranty and assumes no responsibility with respect
Exhibit 10.15 - Page 2
<PAGE>
to the financial condition of the Borrower or any of its
Subsidiaries or the performance or observance by the Borrower
of any of its obligations under this Agreement or any other
Related Document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this
Agreement and the other Related Documents, together with such
other documents and information it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent or any
Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement
and the other Related Documents; (v) such assignee appoints
and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and
the other Related Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto, and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations
which by the terms of this Agreement and the other Related
Documents are required to be performed by it as a Lender."
7. Collateral Matters. The first sentence of section 11.08(b)
of the Credit Agreement is hereby amended to read in its entirety as follows:
"The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to
or held by the Agent upon any Collateral upon termination of
the Revolving Credit Commitments and payment and satisfaction
of all Loans, Reimbursement Obligations, other Letter of
Credit Exposure (whether or not due) and all other Obligations
which have matured and which the Agent has been notified in
writing are then due and payable; or constituting property
being sold or disposed of if the Borrower certifies to the
Agent that the sale or disposition is made in compliance with
Section 8.04(b) hereof (and the Agent may rely conclusively on
any such certificate, without further inquiry); or
constituting property in which the Borrower owned no interest
at the time the Lien was granted or at any time thereafter."
8. Conditions to Effectiveness. This First Amendment shall
become effective only upon satisfaction in full of the following conditions
precedent (the first date upon which all such conditions have been satisfied
being herein called the "Effective Date"):
(a) The Agent shall have received a counterpart of this First
Amendment which bears the signature of the Borrower.
(b) All legal matters incident to this First Amendment shall
be satisfactory to the Agent and its counsel.
9. Representations and Warranties. The Borrower represents and
warrants to the Lenders as follows:
(a) The execution, delivery and performance by the Borrower
of this First Amendment and the performance by the Borrower of the Credit
Agreement as amended hereby (i)
Exhibit 10.15 - Page 3
<PAGE>
have been duly authorized by all necessary corporate action and (ii) do not and
will not contravene its organizational documents or any applicable law.
(b) This First Amendment and the Credit Agreement, as amended
hereby, constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms.
(c) The representations and warranties contained in Article VI
of the Credit Agreement are correct on and as of the Effective Date as though
made on and as of the Effective Date (except to the extent such representations
and warranties expressly relate to an earlier date), and no Event of Default or
Potential Default, has occurred and is continuing on and as of the Effective
Date.
10. Continued Effectiveness of Credit Agreement. The Borrower
hereby (i) confirms and agrees that each Related Document to which it is a party
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that on and after the Effective Date of
this First Amendment all references in any such Related Document to "the Credit
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Credit Agreement shall mean the Credit Agreement as amended by this First
Amendment; and (ii) confirms and agrees that to the extent that any such Related
Document purports to grant to the Lenders or the Agent a security interest in or
lien on, any collateral as security for the Obligations of the Borrower from
time to time existing in respect of the Credit Agreement and the Related
Documents, such security interest or lien is hereby ratified and confirmed in
all respects.
11. Miscellaneous.
(a) This First Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this First
Amendment for any other purpose.
(c) This First Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to choice
of law principles.
(d) The Borrower will pay on demand all fees, costs and
expenses, if any, of Agent in connection with the preparation, execution and
delivery of this First Amendment, including, without limitation, the reasonable
fees, disbursements and other charges of Fried, Frank, Harris, Shriver &
Jacobson, counsel to Agent.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
BORROWER:
--------
WEINER'S STORES, INC.
By: /s/ Raymond J. Miller
----------------------------
Name: Raymond J. Miller
Title: Vice President and
Exhibit 10.15 - Page 4
<PAGE>
Chief Financial Officer
AGENT AND LENDER:
----------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Frank A. Grimaldi
----------------------------
Name: Frank A. Grimaldi
Title: Vice President
Exhibit 10.15 - Page 5
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Name State of Incorporation
--------------------------------- ---------------------------------------
1. Westview Advertising, Inc. Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Weiner's Stores, Inc. contained in the accompanying
Registration Statement on Form 10 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> OTHER YEAR
<FISCAL-YEAR-END> JAN-31-1998 JAN-25-1997
<PERIOD-END> OCT-25-1997 JAN-25-1997
<CASH> 5,449 18,719
<SECURITIES> 0 0
<RECEIVABLES> 3,986 2,702
<ALLOWANCES> 0 0
<INVENTORY> 59,683 53,617
<CURRENT-ASSETS> 71,116 77,192
<PP&E> 40,087 46,835
<DEPRECIATION> 23,633 32,742
<TOTAL-ASSETS> 93,410 91,285
<CURRENT-LIABILITIES> 31,394 22,464
<BONDS> 0 0
0 0
0 0
<COMMON> 190 10,000
<OTHER-SE> 60,736 (34,446)
<TOTAL-LIABILITY-AND-EQUITY> 93,410 91,285
<SALES> 196,115 263,043
<TOTAL-REVENUES> 197,539 265,437
<CGS> 131,283 178,541
<TOTAL-COSTS> 131,283 178,541
<OTHER-EXPENSES> 67,769 104,164
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 38 0
<INCOME-PRETAX> (3,070) (17,268)
<INCOME-TAX> 0 48
<INCOME-CONTINUING> (3,070) (17,220)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 18,683 0
<CHANGES> 0 0
<NET-INCOME> 15,613 (17,220)
<EPS-PRIMARY> 0.78 (0.87)
<EPS-DILUTED> 0.78 (0.87)
</TABLE>
