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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended January 29, 2000 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ___________ to ___________
Commission File No. 0-23671
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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 (IRS Employer
incorporation or organization) Identification No.)
6005 Westview Drive, Houston, TX 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 registered pursuant to Securities registered pursuant to Section
Section 12(b) of the Act: None 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the voting and non-voting common equity
of the registrant held by non-affiliates of the registrant as of March 31, 2000
was $5,182,719.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No __
As of April 16, 2000, there were 18,509,710 shares of Weiner's
Stores, Inc. common stock, par value $.01 per share, outstanding.
Documents incorporated by reference:
1. Portions of the Annual Report to Stockholders for the fiscal year
ended January 29, 2000 are incorporated by reference into Part II - Items 6, 7
and 8.
2. Portions of the Company's definitive proxy statement relating to
the Annual Meeting of Stockholders to be held on May 25, 2000 as filed with the
Commission are incorporated by reference into Part III - Items 10, 11, 12 and
13.
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PART I
ITEM 1. BUSINESS
GENERAL
Weiner's Stores, Inc., a Delaware corporation (the "Company"),
incorporated in December 1991, is a neighborhood family retailer of primarily
branded apparel, shoes, related accessories and domestic products for
value-conscious customers. The Company operates 136 stores located in Texas,
Louisiana, Mississippi and Arkansas and employs approximately 3,000 full-time
equivalent 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 freestanding structures. The current store prototype is approximately 25,000
square feet, with approximately 20,000 square feet for selling space and with
the remaining space for office, receiving and layaway storage. The current
stores range in total size from approximately 17,000 square feet to 53,000
square feet.
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, the
effective date of the Company's Amended Plan of Reorganization under Chapter 11
of the Bankruptcy Code, dated June 24, 1997, as amended (the "Plan"), which was
confirmed by order of the Bankruptcy Court on August 13, 1997.
RETAILING STRATEGY
The Company's retailing strategy is to focus closely on its unique
markets and on the buying habits of its largely ethnic customer base. The
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.
MERCHANDISING
The Company's merchandising strategy is to focus closely 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. The
Company recognizes that one of its competitive strengths relative to many
discounters is the availability of several key brands such as Nike(R),
Reebok(R), K-Swiss(R), Adidas(R), Levi's(R), Lee(R), Bugle Boy(R), Wrangler(R),
Westpoint Stevens(R), Fieldcrest Cannon(R), and Sag Harbor(R). Much of the
in-store and overall marketing strategies focus on such brands. Management
expects to continue to invest appropriate resources and priority to strengthen
these relationships and add incremental products from these vendors.
Additionally, the Company continues to identify other brands that would enhance
the merchandise assortment and is developing action plans to address appropriate
vendors. The Company continues to identify several merchandise departments and
classifications that have previously been nonexistent at the Company's stores or
insufficiently funded or spaced. The Company is continually reviewing
classifications and/or items, identifying vendors, creating space allocations
and developing pricing strategies to enhance these businesses.
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.
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PURCHASING AND DISTRIBUTION
The Company purchases merchandise from many top brand name companies,
primarily through domestic sources. The Company has 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.
At January 29, 2000, the Company employed one senior vice
president/general merchandising manager, three divisional merchandising
managers, 13 buyers, five merchandise planners, ten merchandise allocators, and
two basic stock/ replenishment managers.
During fiscal 1999, the Company purchased merchandise from
approximately 780 vendors, of which two major vendors accounted for
approximately 5.8% and 8.4% of total Company purchases of goods sold. The
Company's 20 largest vendors accounted for approximately 46.2% of total Company
purchases during fiscal 1999. 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 the
Company's business.
The majority of the Company's purchases are shipped to the Company's
centralized distribution center in Houston, Texas. At the distribution center,
which is designed to handle up to approximately 175 stores, merchandise is
received, counted and sorted for distribution to the Company's stores. A
planning and allocation staff determines the quantities to be shipped to each
store based on the store's needs and merchandise profile. After the merchandise
is picked and packed, it is shipped to the stores at regular intervals via a
commercial transportation service.
STORE OPERATIONS
As of January 29, 2000, the Company operated 132 stores in Texas,
Louisiana and Mississippi. In March 2000, the Company opened four additional
stores in Little Rock, Arkansas. The Company's stores range in total size from
approximately 17,000 square feet to 53,000 square feet and average approximately
25,000 square feet. The majority of the Company's stores are located in strip
shopping centers or are free standing. As all of the Company's stores have been
and are currently located in Texas, Louisiana, Mississippi and Arkansas during
the last three fiscal years the Company has received no revenues from external
customers attributable to foreign countries except for certain revenues received
from customers visiting the Company's stores from foreign countries, the amount
of which revenues it is impracticable for the Company to determine and which is
immaterial to the Company's total sales. All of the Company's long-lived assets
are currently located in the United States.
Each store is staffed by a store manager and/or one to two
co-managers, one to two assistant managers and/or one to two floor managers, and
several sales associates. Store managers report to district supervisors, who in
turn report to the Company's senior vice president of stores and operations.
The Company periodically reviews its store base and determines
whether particular stores need to be improved or closed. The Company generally
closes a store at the end of its lease term when the operating profit generated
by the store is insufficient to make a contribution to fixed corporate overhead.
Stores are closed prior to their lease expiration when they are unprofitable
and/or have, in the Company's opinion, limited potential for improvement and the
Company has reached a satisfactory agreement with the landlord for closing the
location. The Company closed six stores in fiscal year 1999, three stores in
fiscal year 1998, and seven stores in fiscal year 1997.
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During fiscal 1999, the Company opened six new stores. The average
capital cost to construct a new store is approximately $350,000 plus inventory
requirements of approximately $450,000 per store (of which approximately 30% is
currently financed by vendor accounts payable).
The Company expects to open approximately ten new stores and remodel
two stores in fiscal 2000. The Company believes that there are adequate real
estate opportunities to open additional stores in the markets it currently
serves and to enter new markets in its overall trade areas. These capital
expenditures are expected to be funded with cash generated by operations and
borrowings under the Company's revolving credit agreement.
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 Improving the quality of media with more thematic and ethnic
presentations, illustration of products with greater impact and
color assortment, and specialized merchandise classifications:
o Improving and further refining the use of ethnic television and
radio:
o Coordinating with buyers to maximize return, ensure an in-stock
position on advertised items, and evaluate pricing programs;
o Moving the mix of media to more focused print programs;
o Targeting print mailings in a more efficient manner and focusing
on the ethnicity of different markets;
o Upgrading in-store signage; and
o Establishing promotional programs that highlight the branded
merchandise available and the value pricing being offered to the
consumers while also generating an exciting shopping experience
for the consumer.
The Company has laid out marketing strategies that target its
strengths relative to certain demographic features of its customer base. These
demographic features include: 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 Company uses an integrated merchandising package which includes
modules for accounts payable, general ledger, loss prevention, planning,
allocation, merchandise analysis, stores and the distribution center. The
accounts payable and the general ledger modules were installed in fall 1996. In
spring 1997, the allocations module was installed and in early fall 1997, the
planning module was installed. The merchandise analysis and store sales modules
and the distribution center module were installed in early 1998. The loss
prevention module was installed in 1999. In fall 1999, the company completed
installation of a payroll/benefit system. The Company operates its own in-house
computer facility.
The integrated merchandise package has generated 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; and improved price line reporting, vendor analysis reporting,
open-to-ship reporting for improved allocation, loss prevention analysis and
exception reporting. auto-allocation capabilities and marketing profitability
analysis. To further enhance the capabilities of these systems, the Company is
scheduled to begin the installation of a state of the art point of sale (POS)
system in May 2000. The company expects to complete such installation in the
first 30 stores in fiscal year 2000 and in another 30 stores in early fiscal
2001.
The Company scans merchandise price tickets at the point-of-sale and
point-of-sale registers automatically determine the correct price through a
price look-up capability. The registers also capture financial, credit and
statistical information and provide reports on sales by department and class for
financial reporting purposes and weekly reports on sales by style, color and
size for use by the Company's buyers and management. The merchandise planners
and allocators use this information on a regular basis to evaluate and adjust
each store's merchandise mix.
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The Company continues to review its information systems needs.
Currently, the Company is upgrading and updating some of its merchandising
systems to client server based technology. As a result of these changes, when
they are completed the Company should be able to access information more
quickly, retain statistical information for longer periods of time and enhance
its reporting capabilities.
EMPLOYEES
As of January 29, 2000, the Company had approximately 3,000 full time
equivalent employees. The Company has a significant number of part-time store
employees and, as is typical in the retail industry, experiences high turnover
in its retail sales personnel. However, the Company has not experienced
significant difficulty in hiring qualified personnel. Of such total work force,
approximately 375 employees are employed in the Company's corporate offices and
distribution center.
METHOD OF PAYMENT
Approximately 79.1% of the Company's net sales are made by cash or
check, and 11.5% by national credit cards. Under the related credit card
agreements, the Company receives daily payments on amounts charged on those
credit cards. Such a payment is not subject to recovery by the payor under such
agreements unless the charge in question involved an invalid use of such credit
card. The Company has not had its own credit card program, but does offer a
layaway program that accounts for approximately 9.4% of the Company's revenues.
In fiscal 1999, layaways are recognized as revenue at the point-of-sale and as a
receivable on the balance sheet. The Company generally requires a refundable
deposit on layaway sales. As customers pay on their layaways, the payment
reduces the receivable. See " - New Accounting Developments."
SEASONALITY
The Company's business is seasonal with approximately 40.3% 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. In
addition, the Company's performance, like that of many other retailers, is
sensitive to the overall U.S. economy and economic cycles and related economic
conditions that influence consumer trends and spending patterns.
COMPETITION
The retail industry is intensely competitive. The Company is in
competition with numerous retail outlets in the geographic areas in which it
operates, 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 and may have
various other financial or other competitive advantages over the Company.
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 also has registrations for certain
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.
NEW ACCOUNTING DEVELOPMENTS
The Company offers a layaway program pursuant to which its customers
are permitted to purchase merchandise currently available for sale and pay for
the goods over a 30 to 60 day period. At the time of the sale, the goods are
segregated from the Company's inventory and held for the benefit of the customer
pending payment in full for the goods. In 1999, the Company's layaway program
accounted for approximately 9.4% of the Company's revenues. Layaways are
recognized as revenue at the point of sale and as a receivable on the balance
sheet (net layaway receivables at January 29, 2000 were $510,000 as compared to
$847,000 at January 30, 1999). The Company provided an allowance for layaway
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sales receivables based on management's estimate of the amount by which
uncollected receivables would exceed the cost of the items reverting back to
inventory. This estimate was based on the Company's historical calculation of
layaway sales that will never be completed. The Company generally required a
refundable deposit on layaway sales. As customers paid off the balance on their
layaway purchases, the payment reduced the corresponding receivable.
The Staff (the "Staff") of the U.S. Securities and Exchange
Commission (the "SEC") has requested that the Company change its treatment
regarding revenue recognition of layaway sales, commencing with the Company's
fiscal year beginning January 30, 2000, to reflect layaway sales as deposits
until the merchandise is paid in full and delivered to the customer. The Staff
subsequently issued Staff Accounting Bulletin No. 101 - Revenue Recognition in
Financial Statements ("SAB 101") on December 3, 1999. SAB 101 requires that
layaway sales be treated in a manner consistent with such request. As a result
of the Staff's request and the subsequent issuance of SAB 101, the Company
changed its treatment regarding revenue recognition of layaway sales commencing
on the first day of the Company's fiscal year beginning January 30, 2000 to be
consistent with the Staff's recommendation.
The impact of this change in revenue recognition of layaway sales was
very difficult to quantify because of information system constraints regarding
the historical information of payments relating to specific transactions. The
Company estimates that, in the year of adoption, approximately $1.0 to $2.0
million of revenue would be deferred into the following fiscal year. Once
adopted, the Company believes there will be a minimal impact on an annual basis,
however the impact on the results of operations on a quarter to quarter basis is
expected to be much more pronounced. The impact is expected to be especially
pronounced in the second and third quarters and first six and nine month periods
because these periods include a portion of the Company's important
back-to-school sales period.
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standards No. 133 - "Accounting for Derivative
Instruments and Hedging Activities", effective for years beginning after June
15, 1999. The Company believes that this statement will have no impact on its
financial presentation.
ITEM 2. PROPERTIES
The Company leases all of its 132 stores in operation as of January
29, 2000, of which 106 stores are located in Texas, 23 stores are located in
Louisiana, and three stores are located in Mississippi. Most leases are
long-term net leases (i.e., lease contracts without a purchase option) which
expire on varying dates through 2009. 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 January 29, 2000, the number of
store leases that will expire in each of the indicated fiscal years (excluding
renewal options):
Number of Number of Leases
Year Leases Expiring with Renewal Options
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2000 23 21
2001 16 14
2002 18 17
2003 25 23
2004 21 18
Thereafter 29 23
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Total 132 116
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Most of the Company's stores are either freestanding structures or
anchors in strip shopping centers. The Company opened 13 new stores and closed
nine stores in the last two fiscal years. 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. See "Business - General" and " - Store
Operations."
The Company owns its distribution center/headquarters facility in
Houston, Texas, which 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 in connection with
its revolving credit agreement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- - Revolving Credit Agreement."
The Company considers its stores and its distribution
center/headquarters facility to be suitable and adequate for its operations for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to ordinary routine litigation, arbitrations and
proceedings incidental to its business, the dispositions of which are not
expected to have a material adverse effect on the Company's business or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
As of August 17, 1998, the Company's common stock, par value $.01 per
share ("Common Stock"), began trading on the Over-the-Counter Bulletin Board
Service ("OTC") under the symbol "WEIR." There was previously no established
public trading market for the Common Stock. The following table sets forth, for
each full quarterly period in fiscal year 1999 and 1998 since trading on the OTC
began, the high and low sales price per share of the Company's Common Stock as
reported on the OTC.
1999 1998
High Low High Low
---- --- ---- ---
First Quarter $0.66 $0.19 N/A N/A
Second Quarter $1.19 $0.28 N/A N/A
Third Quarter $1.16 $0.47 $1.50 $0.25
Fourth Quarter $0.81 $0.38 $0.28 $0.13
The last reported sale price per share of Common Stock as reported on
the OTC on March 31, 2000 was $0.28. As of March 31, 2000, there were 482
holders of record of the Common Stock. This number does not include stockholders
for whom shares are held in a "nominee" or "street" name.
DIVIDENDS
The Company did not declare or pay any cash dividends with respect to
the Common Stock during fiscal years 1997, 1998 or 1999. The Company presently
does not intend to pay cash dividends in the foreseeable future. In addition,
the terms of the Company's revolving credit agreement 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
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capital requirements, restrictions under then existing debt instruments and
other factors deemed relevant by the Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the information contained in the
Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit
13.1 to this Annual Report on Form 10-K, under the caption "Selected Financial
Data" (included on page 5).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference to the information contained in the
Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit
13.1 to this Annual Report on Form 10-K, under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
(included on pages 6-11).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the information contained in the
Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit
13.1 to this Annual Report on Form 10-K, under the captions "Weiner's Stores,
Inc. Consolidated Balance Sheets" (included on page 12), "Weiner's Stores, Inc.
Consolidated Statements of Operations" (included on page 13), "Weiner's Stores,
Inc. Consolidated Statements of Changes in Stockholders' Equity (Deficiency)"
(included on page 13), "Weiner's Stores, Inc. Consolidated Statements of Cash
Flows" (included on page 14), "Weiner's Stores, Inc. Notes to Consolidated
Financial Statements" (included on pages 15-22) and "Independent Auditors'
Reports" (included on page 23).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information responsive to the Items
comprising this Part III that is contained in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders, which is incorporated
herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) The following financial statements filed as a part of this Annual
Report on Form 10-K are incorporated by reference to the applicable
portions of the Company's Annual Report to Stockholders for fiscal
year 1999, filed as Exhibit 13.1 to this Annual Report on Form 10-K.
See "Financial Statements and Supplementary Data."
o Consolidated Balance Sheets as of January 29, 2000 and January
30, 1999
o Consolidated Statements of Operations for the Years Ended January
29, 2000 and January 30, 1999, for the twenty-three weeks ended
January 31, 1998 (Successor Company) and the thirty weeks ended
August 25, 1997 (Predecessor Company)
o Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) for the Years Ended January 29, 2000 and January 30,
1999, for the twenty-three weeks ended January 31, 1998
(Successor Company) and the thirty weeks ended August 25, 1997
(Predecessor Company)
o Consolidated Statements of Cash Flows for the Years Ended January
29, 2000 and January 30, 1999, for the twenty-three weeks ended
January 31, 1998 (Successor Company) and the thirty weeks ended
August 25, 1997 (Predecessor Company)
o Notes to Consolidated Financial Statements
o Independent Auditors' Reports
(2) Financial Statement Schedules
No schedules have been included herein because the
information required to be submitted has been included in the
Consolidated Financial Statements or the notes thereto, or the
required information is inapplicable.
(3) Exhibits
See the Exhibit Index for a list of those exhibits filed
herewith, which includes and identifies management contracts and
compensatory plans or arrangements required to be filed as exhibits
to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K.
(b) The Company did not file any reports on Form 8-K during the fourth
quarter of fiscal year 1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
WEINER'S STORES, INC.
April 17, 2000 By: /s/ Raymond J. Miller
-------------- ---------------------
(Date) Raymond J. Miller
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on April 17, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Herbert R. Douglas* President and Chief Executive Officer
- --------------------------------------------------------- (Principal Executive Officer) and Chairman of the Board of
Herbert R. Douglas Directors
/s/ Raymond J. Miller Executive Vice President, Chief Operating Officer, Chief
- --------------------------------------------------------- Financial Officer and Secretary (Principal Financial Officer)
Raymond J. Miller and Director
/s/ Michael S. Marcus* Vice President, Controller and Treasurer (Principal Accounting
- --------------------------------------------------------- Officer)
Michael S. Marcus
/s/ Randall L. Lambert* Director
- ---------------------------------------------------------
Randall L. Lambert
/s/ Gasper Mir* Director
- ---------------------------------------------------------
Gasper Mir
/s/ F. Hall Webb* Director
- ---------------------------------------------------------
F. Hall Webb
/s/ Melvyn L. Wolff* Director
- ---------------------------------------------------------
Melvyn L. Wolff
*By: /s/ Raymond J. Miller
-----------------------------------------------------
Raymond J. Miller
Attorney-in-Fact
</TABLE>
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's registration statement on
Form 10 filed April 14, 1998)
3.2 Restated Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the Company's registration statement on Form 10 filed April
14, 1998)
10.1+ Employment Agreement, dated as of February 1, 1999, between the
Company and Herbert R. Douglas (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated December 31,
1998)
10.2*+ Weiner's Stores, Inc. 1999 Stock Incentive Plan ("1999 Stock Plan")
10.3*+ Form of Incentive Stock Option Agreement between the Company and
participants under the 1999 Stock Plan
10.4*+ Form of Nonqualified Stock Option Agreement between the Company and
participants under the 1999 Stock Plan
10.5* Third Amendment, dated October 4, 1999, to the Revolving Credit
Agreement, dated August 26, 1997, among the Company, the lenders
party thereto and The CIT Group/Business Credit, Inc., as Agent, as
amended
10.6*+ Agreement, dated December 10, 1999, between the Company and Michael
S. Marcus
10.7*+ Employment Agreement, dated as of February 1, 2000, between the
Company and Raymond J. Miller
10.8*+ Employment Agreement, dated as of February 1, 2000, between the
Company and Joseph J. Kassa
10.9*+ Employment Agreement, dated as of February 1, 2000, between the
Company and James L. Berens
13.1* Annual Report to Stockholders of the Company for fiscal year 1999
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit
21.1 to the Company's registration statement on Form 10 filed April
14, 1998)
23.1* Consent of Independent Auditors
24.1* Powers of Attorney
27.1* Financial Data Schedule
- ----------
* Filed herewith
+ Management contracts or compensatory plans or arrangements
EXHIBIT 10.2
------------
WEINER'S STORES, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE.
The Weiner's Stores, Inc. 1999 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 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 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 the form of Stock Options (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
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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, i.e., Stock Options, granted under this Plan shall be 1,000,000 shares
of Common Stock, which may be authorized and unissued or treasury shares,
subject to any adjustments made in accordance with Section 8 hereof. 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 400,000 shares (subject to adjustments made in accordance with
Section 8 hereof). Any shares of Common Stock subject to an Award which for any
reason is canceled, 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 11 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 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.
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(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 7 below) or
(ii) be exempt from the deduction limitation imposed by Section 162(m) of the
Code.
7. 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.
8. 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. In addition, other than with respect to Stock Options 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.
9. 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 the
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agreement granting 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. UNFUNDED PLAN.
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
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<PAGE>
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.
15. 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.
16. 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 16 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 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.
17. 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).
18. 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 date the stockholders approve the
Plan.
(b) This Plan shall terminate on the tenth anniversary of the
Effective Date (unless sooner terminated by the Board).
5
EXHIBIT 10.3
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FORM OF
INCENTIVE STOCK OPTION AGREEMENT
GRANTED TO: [name of employee]
DATE OF GRANT: [date]
GRANTED PURSUANT TO: Weiner's Stores, Inc. 1999
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. 1999 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:
[percentage of shares] shall become exercisable on [date]
and shall remain exercisable until [date]; and
[percentage of shares] shall become exercisable on [date]
and shall remain exercisable until [date].
[Optional provisions:]
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
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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] [or] [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].
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 3-month 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 3-month 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.
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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 stockholder
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 and any rules or regulations
thereunder and any applicable state securities laws and regulations, 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.
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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 IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date written below.
WEINER'S STORES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ACCEPTED:
- -------------------------------
Signature of Employee
- -------------------------------
Name of Employee (please print)
Date:
--------------------------
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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
------------
FORM OF
NONQUALIFIED STOCK OPTION AGREEMENT
GRANTED TO: [name of employee]
DATE OF GRANT: [date]
GRANTED PURSUANT TO: Weiner's Stores, Inc. 1999 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. 1999 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 ]; and
[ number ] shares shall become exercisable on [ date ] and
shall remain exercisable until [ date ].
[Optional provisions:]
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
1
<PAGE>
determined by applying the corresponding provision in the Employee's employment
agreement that determines whether a change in control of the Company has
occurred] [or] [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].
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 3-month 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 3-month 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.
2
<PAGE>
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 stockholder
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 and any rules or regulations
thereunder and any applicable state securities laws and regulations, 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.
3
<PAGE>
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 IS INTENTIONALLY LEFT BLANK.]
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date written below.
WEINER'S STORES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ACCEPTED:
- -------------------------------
Signature of Employee
- -------------------------------
Name of Employee (please print)
Date:
--------------------------
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 10.5
------------
[Letterhead of The CIT Group/Business Credit, Inc.]
Date: October 4, 1999
Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attn: Mr. Raymond J. Miller
Executive Vice President and Chief Operating Officer
Reference is made to that certain Revolving Credit Agreement dated as
of August 26, 1997 (as amended, modified or supplemented from time to time, 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"). Capitalized terms used but not otherwise defined herein
shall have the same meanings ascribed to such terms in the Credit Agreement.
The Borrower, the Lenders, and the Agent desire to amend certain
provisions of the Credit Agreement. Accordingly, in accordance with Section
10.03 of the Credit Agreement, the Borrower, the Lenders, and the Agent hereby
agree as follows:
1. Capital Expenditures. Section 8.08 of the Credit Agreement
is hereby amended to read in its entirety as follows:
"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 29, 2000, (ii) $8,500,000 for each of the
fiscal years ending February 3, 2001, February 2, 2002,
and February 1, 2003, respectively, or (iii) $5,000,000
for the period beginning on February 2, 2003 and ending on
August 30, 2003 and each fiscal year thereafter."
2. Cumulative FIFO EBITDA. Section 8.12 of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"Permit Cumulative FIFO EBITDA for any fiscal quarter
(calculated on a rolling twelve (12) month basis) of the
Borrower ending on the dates set forth below to be less
than the amount specified opposite each such fiscal
quarter.
<PAGE>
Fiscal Quarter Amount
-------------- ------
October 30, 1999 $875,000
January 29, 2000 875,000
April 29, 2000 875,000
July 29, 2000 1,375,000
October 28, 2000 1,875,000
February 3, 2001 2,375,000
May 5, 2001 2,875,000
August 4, 2001 2,875,000
November 3, 2001 2,875,000
February 2, 2002 3,375,000
May 4, 2002 3,875,000
August 3, 2002 3,875,000
November 2, 2002 3,875,000
February 1, 2003 4,375,000
May 3, 2003 4,875,000
August 2, 2003 4,875,000"
3. Amendment to Definition of Cumulative FIFO EBITDA. The
definition of the term "Cumulative FIFO EBITDA" in Section
1.01 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Cumulative FIFO EBITDA" shall mean with respect to the
fiscal quarter ending on October 30, 1999 and each fiscal
quarter thereafter, the aggregate FIFO EBITDA for such
fiscal quarter and the preceding three fiscal quarters
(i.e., a rolling twelve (12) month basis)."
4. Maintenance of Inventory. Section 8.16 of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"The Borrower shall not permit the aggregate amount of its
Inventory (valued at Book Value) at the end of each fiscal
quarter ending on the dates set forth below to be more
than the amounts specified opposite each such fiscal
quarter set forth below:
Fiscal Quarter Maximum Amount
-------------- --------------
October 30, 1999 90,000,000
January 29, 2000 90,000,000
April 29, 2000 90,000,000
July 29, 2000 90,000,000
October 28, 2000 90,000,000
February 3, 2001 90,000,000
May 5, 2001 96,000,000
August 4, 2001 96,000,000
November 3, 2001 96,000,000
2
<PAGE>
February 2, 2002 96,000,000
May 4, 2002 102,000,000
August 3, 2002 102,000,000
November 2, 2002 102,000,000
February 1, 2003 102,000,000
May 3, 2003 108,000,000
August 2, 2003 and each
fiscal year thereafter. 108,000,000"
5. The last sentence in paragraph 2.01(a) is deleted in its
entirety and replaced with the following text:
"The Termination Date means the earlier of (i) the date on
which the Revolving Credit Commitment of each Lender
expires, which shall be August 30, 2003 and (ii) the date
on which the Revolving Credit Commitment is terminated by
the Borrower pursuant to Section 2.04 hereof."
6. Subject to receipt and satisfaction with an inventory
appraisal, by the Agent, as of the effective date of this
Amendment, and as may be required from time to time
hereafter, subsection (i) (A) of the definition of
"Borrowing Base" is hereby deleted and the following is
substituted in lieu thereof:
"(A) The aggregate of 65% of the Book Value of Eligible
Inventory for the months of June, July and November of
each calendar year, and 60% of the Book Value of Eligible
Inventory for each other month of each calendar year, and
..."
7. Early Termination Fee. Section 2.08(h) of the Credit
Agreement is hereby amended to read in its entirety as
follows:
"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:
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<PAGE>
Amount Period
------ ------
(i) 2% of the Revolving Credit any date on or prior to
Commitment August 26, 2000
(ii) 1.50% of the Revolving Credit any date from August 26, 2000
Commitment through August 26, 2001
(iii) 1% of the Revolving Credit any date from August 26, 2001
Commitment through August 26, 2002
(iv) 0.50% of the Revolving Credit any date from August 26, 2002
Commitment through August 30, 2003"
8. Pursuant to mutual agreement, we shall charge you a
one-time Facility Fee in the amount of $30,000.00 for this
accommodation, which fee shall be in addition to other
fees we are entitled to charge you under the Credit
Agreement and shall be due and charged to your loan
account upon execution of this agreement. You hereby
confirm that we may charge your loan account with any such
amount.
[Remainder of this page intentionally left blank]
4
<PAGE>
Except as specifically set forth herein, no other change in the terms or
conditions of the Credit Agreement is intended or implied. If the foregoing is
in accordance with your understanding, please so indicate by signing and
returning to us the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC., as Agent and Lender
By: /s/ Grant Weiss
-------------------------------
Name: Grant Weiss
Title: Assistant Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, a Lender
By: /s/ Martin Greenberg
--------------------------------
Name: Martin Greenberg
Title: Duly Authorized Signatory
Read and Agreed to:
WEINER'S STORES, INC., Borrower
By: /s/ Raymond J. Miller
------------------------
Name: Raymond J. Miller
Title: Executive Vice President and Chief Operating Officer
5
EXHIBIT 10.6
------------
[LETTERHEAD OF WEINER'S STORES, INC.]
December 10, 1999
Mr. Michael S. Marcus
6303 Gabrielle Canyon Court
Katy, Texas 77450
Dear Mr. Marcus:
This letter (this "Agreement") sets forth the terms of
your offer of employment with Weiner's Stores, Inc. (the "Company"):
1. Your current base salary is at the rate of $110,000 annually, less
payroll tax deductions required by law, payable at such times and in
accordance with the Company's standard payroll practices for
employees of the Company.
2. 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. In addition, effective as of February 1, 2000, the
Company shall pay or cause to be paid, or waive or reimburse you for,
any costs or contributions otherwise payable by you as a condition to
participation in the Company's medical plan or hospitalization plan,
other than such deductible, co-payment or similar amounts as may be
provided in any such plan, as any such plan or program may be
adopted, modified or terminated from time to time in the Company's
sole discretion.
3. You shall be entitled to an annualized vacation allotment of 3
weeks per year, without reduction in your salary, to be taken at such
times as may be consistent with the needs of the Company.
4. 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.
5. If (a) the Company does not offer to renew your employment with
the Company by December 2, 2002 and you remain continually employed
by the Company, in accordance with this Agreement until January 31,
2003 (the "Termination Date") or (b) the Company terminates your
employment for any reason other than cause prior to the Termination
Date, then, within twenty (20) days after (i) the Termination Date,
in the case of clause (a), or (ii) the date of such termination, in
the case of clause (b), 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
1
<PAGE>
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. For
purposes of this Agreement, "cause" shall mean conduct by you
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 your ability to carry out the business of the
Company; (iii) willful and material breach of any of the provisions
or covenants of this Agreement; (iv) willful gross neglect or willful
gross misconduct in carrying out your duties as an employee
resulting, in either case, in material economic harm to the Company;
(v) embezzlement; (vi) chronic alcoholism or chronic drug dependency
that in either case precludes your performing your duties
contemplated herein; or (vii) 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.
6. During your employment and for one (1) year following the
termination of your employment, you 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. During your
employment and for all time following the termination of your
employment, you shall not, directly or indirectly, furnish or make
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 you during your 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 you in breach of this provision, or
which is demonstrated by you to the Company's reasonable satisfaction
to be known by you prior to the disclosure to you 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. The provisions of this paragraph 6 shall be in
full force and effect in each state in the United States where the
Company carries on business at any time during your employment and
for one (1) year following the termination of your employment. You
hereby acknowledge that your services are of a special, unique and
extraordinary character and your position with the Company places you
in a position of confidence and trust with the clients and employees
of the Company, and that in connection with your services to the
Company, you will have access to confidential information vital to
the Company's businesses. You further acknowledge that in view of the
nature of the business in which the Company is engaged, the foregoing
restrictive covenants in this paragraph 6 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, you hereby consent and agree that if you
violate or threaten to violate any of the provisions of this
paragraph 6, the Company would sustain irreparable harm and,
therefore, the Company shall be entitled to obtain from any court of
2
<PAGE>
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 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.
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 Agreement sets forth all of the terms of your employment, and
supersedes all prior agreements, oral or written, relating to your
employment by the Company or the termination thereof, 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. Subject in all respects to
the provisions set forth in paragraph 7, this Agreement shall
terminate on the Termination Date; provided that paragraph 6 and this
paragraph 8 shall survive any termination of this Agreement.
If you agree that the above sets forth your understanding
of our offer regarding the terms and conditions of your employment,
please sign this Agreement in the space provided below and return it
to me.
Very truly yours,
/s/ Raymond J. Miller
--------------------------
Raymond J. Miller
Executive Vice President,
Chief Operating Officer &
Chief Financial Officer
Accepted and Agreed:
/s/ Michael S. Marcus
---------------------
Michael S. Marcus
Date: 12/16/99
3
EXHIBIT 10.7
------------
EMPLOYMENT AGREEMENT
--------------------
Agreement, dated as of February 1, 2000, between Weiner's Stores,
Inc., a Delaware corporation (the "Company"), and Raymond J. Miller (the
"Executive").
W I T N E S S E T H :
-------------------
WHEREAS, the Company desires to continue the employment of the
Executive, 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;
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 continues the employment
of the Executive, and the Executive hereby accepts such 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 February 1, 2000 and ending on January 31, 2003, unless earlier
terminated as herein provided (the "Term of Employment").
2. Duties. During the Term of Employment the Executive shall continue
to serve as the Company's Executive Vice President, Chief Operating Officer and
Chief Financial Officer and as a member of the Company's Board of Directors (the
"Board"). As such, 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 Executive Vice President, Chief Operating Officer and Chief
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Financial Officer, and as the Company may, from time to time, require of him,
subject to the direction of the Company's Chief Executive Officer. 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
manage his own private financial investments; or 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 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:
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<PAGE>
a. Base Salary: The Company shall pay the Executive a base salary at
an annual rate of $250,000 payable at such times and in accordance with the
Company's standard payroll practices for senior executives of the Company.
b. Medical, Dental and Disability Insurance: The Company shall afford
the Executive the opportunity to participate during the Term of Employment in
any medical, dental and disability insurance plans or programs which the Company
maintains for its senior executive officers. In addition, the Company shall pay
or cause 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 than such
deductible, co-payment or similar amounts as may be provided in any such plan.
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 this Agreement shall restrict the
right of the Company to amend, modify or terminate any such benefit program.
c. 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.
d. 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 temporary disability in accordance
3
<PAGE>
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.
e. Management Incentive Compensation Plan: The Executive shall be
entitled to participate in the Company's Management Incentive Compensation Plan
(the "Incentive Plan") to the extent provided in, and subject to the conditions
and any terms and limitations of, the Incentive Plan, and, subject to the
discretion of the Board, any stock option plan ("Stock Plan") currently in
effect or hereafter adopted by the Company which is applicable to employees or
executive employees generally to the extent provided in, and subject to the
conditions and any terms and limitations of, such Stock Plan; provided, however,
that nothing in this Agreement shall require the Company to maintain or continue
the Incentive Plan or any Stock Plan and nothing in this Agreement shall
restrict the right of the Company to amend, modify or terminate the Incentive
Plan or any Stock Plan.
f. No Other Compensation or Benefits: The Executive agrees that he
will not be entitled to and he shall not request or receive any compensation or
benefits with respect to his services during the Term of Employment, that is in
addition to or different from the compensation and benefits set forth in this
paragraph 3 and in paragraph 6 of this Agreement.
4. Non-Competition and Protection of Confidential Information:
a. Restrictive Covenants:
(1) During the 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, 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
4
<PAGE>
any entity which competes with any business conducted by the Company.
(2) During the Term of Employment and for all time following the Date
of Termination, the Executive shall not, directly or indirectly, furnish or make
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 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
5
<PAGE>
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 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.
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 completion of the Executive's Term of Employment on January
31, 2003;
(2) the death of the Executive during the Term of Employment;
(3) the Disability (as defined below) of Executive during the
Term of Employment;
(4) during the 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");
6
<PAGE>
(5) during the 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, 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,
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, 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.
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) willful gross neglect or willful gross misconduct in carrying out the
7
<PAGE>
Executive's duties as an employee of the Company resulting, in either case, in
material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism
or chronic drug dependency that in either case precludes his performing his
duties contemplated herein; or (vii) 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.
d. For purposes of this Agreement, "Without Cause" shall mean any
reason other than that 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; or (iii) any Change in
Control (as defined below). 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 Operating Officer, of the Company or its successor; or
(2) 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
8
<PAGE>
disposition the Executive waives this provision in writing; (b) any person,
entity or group (as the term "group" is defined in the rules and regulations
relating to Section 13D of the Securities Exchange Act of 1934, as amended),
other than Chase Bank of Texas, acquires 50% or more of the voting common stock
of the Company; 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 for any reason,
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.
9
<PAGE>
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 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: Death or Disability:
a. 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 management
incentive compensation earned in accordance with the Incentive Plan pursuant to
Section 3e hereof, and any vacation pay pursuant to Section 3d 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 (ii) any benefits to which the
Executive may be entitled under any medical, dental or disability plan or
program pursuant to Section 3b 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. 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
10
<PAGE>
Chief Executive 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.
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 management incentive compensation earned in accordance
with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay
pursuant to Section 3d 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
(ii) any benefits to which the Executive may be entitled under any medical,
dental or disability plan or program pursuant to Section 3b 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 management incentive compensation earned in accordance
with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay
pursuant to Section 3d 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
11
<PAGE>
times as will be in accordance with the Company's normal payroll practices; (ii)
any benefits to which the Executive may be entitled under any medical, dental or
disability plan or program pursuant to Section 3b 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) if the Company terminates the
Executive's employment Without Cause pursuant to Section 5a(5) or due to the
Executive's resignation for Good Reason pursuant to Section 5a(6) at any time
during the Term of Employment, then the Company shall make a single lump sum
payment within twenty (20) days of after the Date of Termination in an amount
equal to twelve (12) months of the Executive's then current base salary. The
Company's obligation to make the payment pursuant to Section 6c(iii) shall be
conditioned upon the Company's prior receipt and the effective date 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 on January 31, 2003 pursuant to Section 1 of
this Agreement, the Company shall pay or provide to the Executive (i) all base
salary pursuant to Section 3a hereof, any management incentive compensation
earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and
any vacation pay pursuant to Section 3d 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; (ii) any benefits to which the Executive
may be entitled under any medical, dental or disability plan or program pursuant
to Section 3b 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) a
single lump sum payment within twenty (20) days of after the Date of Termination
in an amount equal to twelve (12) months of the Executive's then current base
salary. Notwithstanding the foregoing, in the event that prior to the
12
<PAGE>
termination of this Agreement on January 31, 2003 pursuant to Section 1 of this
Agreement (i) on or before December 2, 2002 the Company offers to renew this
Agreement upon the completion of the Executive's Term of Employment on January
31, 2003, or offers the Executive employment with the Company on substantially
similar terms and conditions as those contained in this Agreement, or on terms
and conditions more favorable to the Executive than the terms and conditions
contained in this Agreement, in each case for a term of employment of no less
than 24 months, and (ii) the Executive does not accept such offer of renewal or
such employment on or before December 16, 2002, then the Company shall not be
obligated to make the payment pursuant to Section 6d(iii). The Company's
obligation to make the payment pursuant to Section 6d(iii) shall be conditioned
upon the Company's prior receipt and the effective date 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 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.
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 continue to work for the Company during the Term of
Employment or would otherwise limit his ability to perform all responsibilities
13
<PAGE>
in accordance with the terms and subject to the conditions of this Agreement.
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 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 with
respect to the Executive's employment including, but not limited to, the
Employment Agreement between the Company and the Executive dated February 24,
1995 and all amendments thereto. 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.
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<PAGE>
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
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:
Raymond J. Miller
1323 Winrock Blvd.
Houston, Texas 77057
15
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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: Chief Executive Officer
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, as of the date
first above set forth, following execution of four originals of this Agreement
by both parties.
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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
/s/ Raymond J. Miller Weiner's Stores, Inc.
- ---------------------
Raymond J. Miller
By: /s/ Herbert R. Douglas
-------------------------------------
Herbert R. Douglas
President and Chief Executive Officer
12/1/99
- ---------------------
Date
17
EXHIBIT 10.8
------------
EMPLOYMENT AGREEMENT
Agreement, dated as of February 1, 2000, between Weiner's Stores,
Inc., a Delaware corporation (the "Company"), and Joseph J. Kassa (the
"Executive").
W I T N E S S E T H :
-------------------
WHEREAS, the Company desires to continue the employment of the
Executive, 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;
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 continues the employment
of the Executive, and the Executive hereby accepts such 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 February 1, 2000 and ending on January 31, 2003, unless earlier
terminated as herein provided (the "Term of Employment").
2. Duties. During the Term of Employment the Executive shall continue
to serve as the Company's Senior Vice President, General Merchandise Manager. As
such, 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 Senior Vice
President, General Merchandise Manager, and as the Company may, from time to
time, require of him, subject to the direction of the Company's Chief Executive
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Officer. 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 manage his own private financial investments; or 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 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 $200,000 payable at such times and in accordance with the
Company's standard payroll practices for senior executives of the Company.
2
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b. Medical, Dental and Disability Insurance: The Company shall afford
the Executive the opportunity to participate during the Term of Employment in
any medical, dental and disability insurance plans or programs which the Company
maintains for its executive officers. In addition, the Company shall pay or
cause 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 than such
deductible, co-payment or similar amounts as may be provided in any such plan.
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 this Agreement shall restrict the
right of the Company to amend, modify or terminate any such benefit program.
c. 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.
d. 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 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.
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e. Management Incentive Compensation Plan: The Executive shall be
entitled to participate in the Company's Management Incentive Compensation Plan
(the "Incentive Plan") to the extent provided in, and subject to the conditions
and any terms and limitations of, the Incentive Plan, and, subject to the
discretion of the Board, any stock option plan ("Stock Plan") currently in
effect or hereafter adopted by the Company which is applicable to employees or
executive employees generally to the extent provided in, and subject to the
conditions and any terms and limitations of, such Stock Plan; provided, however,
that nothing in this Agreement shall require the Company to maintain or continue
the Incentive Plan or any Stock Plan and nothing in this Agreement shall
restrict the right of the Company to amend, modify or terminate the Incentive
Plan or any Stock Plan.
f. No Other Compensation or Benefits: The Executive agrees that he
will not be entitled to and he shall not request or receive any compensation or
benefits with respect to his services during the Term of Employment, that is in
addition to or different from the compensation and benefits set forth in this
paragraph 3 and in paragraph 6 of this Agreement.
4. Non-Competition and Protection of Confidential Information:
a. Restrictive Covenants:
(1) During the 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, 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.
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(2) During the Term of Employment and for all time following the Date
of Termination, the Executive shall not, directly or indirectly, furnish or make
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 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
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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 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.
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 completion of the Executive's Term of Employment on January
31, 2003;
(2) the death of the Executive during the Term of Employment;
(3) the Disability (as defined below) of Executive during the Term of
Employment;
(4) during the 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, 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, 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,
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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, 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.
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) willful gross neglect or willful gross misconduct in carrying out the
Executive's duties as an employee of the Company resulting, in either case, in
material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism
or chronic drug dependency that in either case precludes his performing his
duties contemplated herein; or (vii) 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.
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d. For purposes of this Agreement, "Without Cause" shall mean any
reason other than that 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; or (iii) any Change in
Control (as defined below). Good Reason as defined in subdivision (ii) of this
Section 5e includes:
(1) The removal from the position of Senior Vice President, General
Merchandise Manager, of the Company or its successor; or
(2) 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) any person,
entity or group (as the term "group" is defined in the rules and regulations
relating to Section 13D of the Securities Exchange Act of 1934, as amended),
other than Chase Bank of Texas, acquires 50% or more of the voting common stock
of the Company; or (c) a contested proxy solicitation of Company shareholders
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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 for any reason,
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
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<PAGE>
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 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: Death or Disability:
a. 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 management
incentive compensation earned in accordance with the Incentive Plan pursuant to
Section 3e hereof, and any vacation pay pursuant to Section 3d 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 (ii) any benefits to which the
Executive may be entitled under any medical, dental or disability plan or
program pursuant to Section 3b 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. 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 Executive 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.
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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 management incentive compensation earned in accordance
with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay
pursuant to Section 3d 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
(ii) any benefits to which the Executive may be entitled under any medical,
dental or disability plan or program pursuant to Section 3b 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 management incentive compensation earned in accordance
with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay
pursuant to Section 3d 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; (ii)
any benefits to which the Executive may be entitled under any medical, dental or
disability plan or program pursuant to Section 3b 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) if the Company terminates the
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Executive's employment Without Cause pursuant to Section 5a(5) or due to the
Executive's resignation for Good Reason pursuant to Section 5a(6) at any time
during the Term of Employment, then the Company shall make a single lump sum
payment within twenty (20) days of after the Date of Termination in an amount
equal to twelve (12) months of the Executive's then current base salary. The
Company's obligation to make the payment pursuant to Section 6c(iii) shall be
conditioned upon the Company's prior receipt and the effective date 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 on January 31, 2003 pursuant to Section 1 of
this Agreement, the Company shall pay or provide to the Executive (i) all base
salary pursuant to Section 3a hereof, any management incentive compensation
earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and
any vacation pay pursuant to Section 3d 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; (ii) any benefits to which the Executive
may be entitled under any medical, dental or disability plan or program pursuant
to Section 3b 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) a
single lump sum payment within twenty (20) days of after the Date of Termination
in an amount equal to twelve (12) months of the Executive's then current base
salary. Notwithstanding the foregoing, in the event that prior to the
termination of this Agreement on January 31, 2003 pursuant to Section 1 of this
Agreement (i) on or before December 2, 2002 the Company offers to renew this
Agreement upon the completion of the Executive's Term of Employment on January
31, 2003, or offers the Executive employment with the Company on substantially
similar terms and conditions as those contained in this Agreement, or on terms
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<PAGE>
and conditions more favorable to the Executive than the terms and conditions
contained in this Agreement, in each case for a term of employment of no less
than 24 months, and (ii) the Executive does not accept such offer of renewal or
such employment on or before December 16, 2002, then the Company shall not be
obligated to make the payment pursuant to Section 6d(iii). The Company's
obligation to make the payment pursuant to Section 6d(iii) shall be conditioned
upon the Company's prior receipt and the effective date 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 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.
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 continue to work for the Company during 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.
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 federal, state, local and/or other
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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 with
respect to the Executive's employment including, but not limited to, the Letter
Agreement between the Company and the Executive dated February 5, 1996 and all
amendments thereto. 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.
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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
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:
Joseph J. Kassa
2345 Bering Drive #805
Houston, Texas 77057
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:
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Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attn: Chief Operating Officer
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, as of the date
first above set forth, following execution of four originals of this Agreement
by both parties.
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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
/s/ Joseph J. Kassa Weiner's Stores, Inc.
- -------------------
Joseph J. Kassa
By: /s/ Raymond J. Miller
-------------------------------------
Raymond J. Miller
Executive Vice President, Chief
Operating Officer and Chief Financial
Officer
12/1/99
- -------------------
Date
17
EXHIBIT 10.9
------------
EMPLOYMENT AGREEMENT
--------------------
Agreement, dated as of February 1, 2000, between Weiner's Stores,
Inc., a Delaware corporation (the "Company"), and James L. Berens (the
"Executive").
W I T N E S S E T H :
-------------------
WHEREAS, the Company desires to continue the employment of the
Executive, 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;
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 continues the employment
of the Executive, and the Executive hereby accepts such 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 February 1, 2000 and ending on January 31, 2003, unless earlier
terminated as herein provided (the "Term of Employment").
2. Duties. During the Term of Employment the Executive shall continue
to serve as the Company's Senior Vice President, Stores and Operations. As such,
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 Senior Vice
President, Stores and Operations, and as the Company may, from time to time,
require of him, subject to the direction of the Company's Chief Executive
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Officer. 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 manage his own private financial investments; or 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 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 $200,000 payable at such times and in accordance with the
Company's standard payroll practices for senior executives of the Company.
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b. Medical, Dental and Disability Insurance: The Company shall afford
the Executive the opportunity to participate during the Term of Employment in
any medical, dental and disability insurance plans or programs which the Company
maintains for its executive officers. In addition, the Company shall pay or
cause 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 than such
deductible, co-payment or similar amounts as may be provided in any such plan.
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 this Agreement shall restrict the
right of the Company to amend, modify or terminate any such benefit program.
c. 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.
d. 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 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.
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e. Management Incentive Compensation Plan: The Executive shall be
entitled to participate in the Company's Management Incentive Compensation Plan
(the "Incentive Plan") to the extent provided in, and subject to the conditions
and any terms and limitations of, the Incentive Plan, and, subject to the
discretion of the Board, any stock option plan ("Stock Plan") currently in
effect or hereafter adopted by the Company which is applicable to employees or
executive employees generally to the extent provided in, and subject to the
conditions and any terms and limitations of, such Stock Plan; provided, however,
that nothing in this Agreement shall require the Company to maintain or continue
the Incentive Plan or any Stock Plan and nothing in this Agreement shall
restrict the right of the Company to amend, modify or terminate the Incentive
Plan or any Stock Plan.
f. No Other Compensation or Benefits: The Executive agrees that he
will not be entitled to and he shall not request or receive any compensation or
benefits with respect to his services during the Term of Employment, that is in
addition to or different from the compensation and benefits set forth in this
paragraph 3 and in paragraph 6 of this Agreement.
4. Non-Competition and Protection of Confidential Information:
a. Restrictive Covenants:
(1) During the 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, 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.
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(2) During the Term of Employment and for all time following the Date
of Termination, the Executive shall not, directly or indirectly, furnish or make
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 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
6
<PAGE>
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 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.
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 completion of the Executive's Term of Employment on January
31, 2003;
(2) the death of the Executive during the Term of Employment;
(3) the Disability (as defined below) of Executive during the Term of
Employment;
(4) during the 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, 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, 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,
7
<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, 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.
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) willful gross neglect or willful gross misconduct in carrying out the
Executive's duties as an employee of the Company resulting, in either case, in
material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism
or chronic drug dependency that in either case precludes his performing his
duties contemplated herein; or (vii) 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.
8
<PAGE>
d. For purposes of this Agreement, "Without Cause" shall mean any
reason other than that 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; or (iii) any Change in
Control (as defined below). Good Reason as defined in subdivision (ii) of this
Section 5e includes:
(1) The removal from the position of Senior Vice President, Stores
and Operations, of the Company or its successor; or
(2) 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) any person,
entity or group (as the term "group" is defined in the rules and regulations
relating to Section 13D of the Securities Exchange Act of 1934, as amended),
other than Chase Bank of Texas, acquires 50% or more of the voting common stock
of the Company; or (c) a contested proxy solicitation of Company shareholders
that results in the contesting party obtaining the ability to cast 25% or more
9
<PAGE>
of the votes entitled to be cast in electing directors of the Company.
h. Upon the termination of the Executive's employment for any reason,
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
10
<PAGE>
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 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: Death or Disability:
a. 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 management
incentive compensation earned in accordance with the Incentive Plan pursuant to
Section 3e hereof, and any vacation pay pursuant to Section 3d 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 (ii) any benefits to which the
Executive may be entitled under any medical, dental or disability plan or
program pursuant to Section 3b 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. 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 Executive 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.
11
<PAGE>
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 management incentive compensation earned in accordance
with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay
pursuant to Section 3d 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
(ii) any benefits to which the Executive may be entitled under any medical,
dental or disability plan or program pursuant to Section 3b 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 management incentive compensation earned in accordance
with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay
pursuant to Section 3d 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; (ii)
any benefits to which the Executive may be entitled under any medical, dental or
disability plan or program pursuant to Section 3b 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) if the Company terminates the
12
<PAGE>
Executive's employment Without Cause pursuant to Section 5a(5) or due to the
Executive's resignation for Good Reason pursuant to Section 5a(6) at any time
during the Term of Employment, then the Company shall make a single lump sum
payment within twenty (20) days of after the Date of Termination in an amount
equal to twelve (12) months of the Executive's then current base salary. The
Company's obligation to make the payment pursuant to Section 6c(iii) shall be
conditioned upon the Company's prior receipt and the effective date 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 on January 31, 2003 pursuant to Section 1 of
this Agreement, the Company shall pay or provide to the Executive (i) all base
salary pursuant to Section 3a hereof, any management incentive compensation
earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and
any vacation pay pursuant to Section 3d 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; (ii) any benefits to which the Executive
may be entitled under any medical, dental or disability plan or program pursuant
to Section 3b 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) a
single lump sum payment within twenty (20) days of after the Date of Termination
in an amount equal to twelve (12) months of the Executive's then current base
salary. Notwithstanding the foregoing, in the event that prior to the
termination of this Agreement on January 31, 2003 pursuant to Section 1 of this
Agreement (i) on or before December 2, 2002 the Company offers to renew this
Agreement upon the completion of the Executive's Term of Employment on January
31, 2003, or offers the Executive employment with the Company on substantially
similar terms and conditions as those contained in this Agreement, or on terms
13
<PAGE>
and conditions more favorable to the Executive than the terms and conditions
contained in this Agreement, in each case for a term of employment of no less
than 24 months, and (ii) the Executive does not accept such offer of renewal or
such employment on or before December 16, 2002, then the Company shall not be
obligated to make the payment pursuant to Section 6d(iii). The Company's
obligation to make the payment pursuant to Section 6d(iii) shall be conditioned
upon the Company's prior receipt and the effective date 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 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.
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 continue to work for the Company during 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.
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 federal, state, local and/or other
14
<PAGE>
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 with
respect to the Executive's employment including, but not limited to, the Letter
Agreement between the Company and the Executive dated January 29, 1996 and all
amendments thereto. 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.
15
<PAGE>
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
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:
James L. Berens
6322 Shoreview Court
Kingwood, Texas 77346
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:
16
<PAGE>
Weiner's Stores, Inc.
6005 Westview Drive
Houston, Texas 77055
Attn: Chief Operating Officer
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, as of the date
first above set forth, following execution of four originals of this Agreement
by both parties.
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.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
/s/ James L. Berens Weiner's Stores, Inc.
- -------------------
James L. Berens
By: /s/ Raymond J. Miller
--------------------------------------
Raymond J. Miller
Executive Vice President, Chief
Operating Officer and Chief Financial
Officer
1/3/00
- -------------------
Date
18
EXHIBIT 13.1
WEINER'S(R) STORES, INC.
-----------------------------------------
Picture of merchandise that Weiner's
sells - blue jeans, jackets, shirts
and tennis shoes.
-----------------------------------------
Annual
Report
1999
<PAGE>
CONTENTS
Letter to Stockholders 1
Selected Financial Data 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Financial Statements 12
Market and Dividend Information
and Related Stockholder Matters 24
Directors and Officers
and Stockholder Information 25
<PAGE>
Fellow Stockholders:
Fiscal 1999 was a mixture of bright and dark times. We began the year
with a focused and exciting merchandise and marketing strategy that was
immediately accepted by our core customer. We expanded our borders to Jackson,
Mississippi and were welcomed with open arms. Our average transaction increased
10.5% and our average items per transaction increased 8.6%. We saw our new Bed
Bath Etc department, which opened in the fourth quarter of fiscal 1998, capture
4.4% of our business with continuing growth. We featured new media advertising
in Spanish in our San Antonio, Corpus Christi and Texas border markets, which
dramatically increased sales in these stores.
Yet with all of these bright spots, we were not able to overcome the
3.1% decline in our fiscal 1999 holiday sales and the continued downturn in the
Levi's(R) jeans, branded athletic shoes and branded activewear businesses. The
result of these downturns was unacceptable results for the second half of fiscal
1999. Some of the risks of being an inner city retail provider also adversely
impacted our fiscal 1999 profitability. We saw our inventory shrink grow 0.9%
beyond last year's results. This exacerbated our poor results for the second
half of the year. While highly disappointing, we recognize the difficulty we
face in securing our inventory in high-risk neighborhoods. Our Loss Prevention
department and stores organization have begun implementing new programs to
reduce our shrink to manageable levels, while maintaining an open, friendly
shopping environment.
The bright spots did solidify our belief that we have chosen the
correct course for the Company's future. The success we have experienced in the
Jackson, Mississippi market bolstered our efforts to secure further urban inner
city locations. We are starting fiscal 2000 with an expansion into Little Rock,
Arkansas and will go west in the second quarter of fiscal 2000 with the addition
of the El Paso, Texas market. We believe there are many exciting growth
opportunities throughout the Southeast and Southwest. During fiscal 1999, the
Company opened six new stores and closed six stores. Current plans are to open
approximately ten new stores in fiscal 2000 and close five stores. In addition,
we will begin installing a new state of the art point of sale system in our
stores in fiscal 2000.
We have reinvented our merchandise, planning and allocations groups to
enhance our ability to utilize our information technology to better merchandise
our individual store locations and the Company as a whole. These changes
included the promotion of Joe Kassa to the position of Senior Vice President,
General Merchandise Manager. With these changes, we have begun to strategize
merchandise content and levels with a view toward improving the third and fourth
quarter of fiscal 2000.
When we introduced "Because Everybody Loves a Bargain" at the beginning
of fiscal 1999, we felt strongly that our concepts of "The Big Deal," "Bargain
Alley" and "Dare to Compare" would enhance our competitive position. We were
able to significantly increase our transaction count for fiscal 1999. We
continue to refine these merchandise programs with emphasis on value priced and
name brand products at everyday low prices. For fiscal 2000, we will continue to
expand our Bed Bath Etc department and establish a year-round toy and
electronics department. Our buyers have been challenged to create excitement
throughout our stores. We have tested and are now in the process of rolling out
a young men's fashion department. Each successful refinement further enhances
our competitive posture.
While fiscal 1999 performance did not meet our expectations, it gave
insight on what our future can be. We see in the acceptance of our "Everybody
Loves a Bargain" programs a customer that prefers to shop in their neighborhood
Weiner's store. Fiscal 2000 could be a defining moment for the Company. With the
continued support of our associates, stockholders and vendors, we look forward
to further growth and improvement in the coming years.
- ---------------------------------
Picture of Herbert R.
Douglas - Chairman of the Board,
President and Chief Executive
Officer
- ---------------------------------
/s/ Herbert R. Douglas
Herbert R. Douglas
Chairman of the Board, President
and Chief Executive Officer
March 16, 2000
1
<PAGE>
-------------
Weiner's Logo
-------------
Because Everybody Loves a Bargain
Weiner's Stores serves a growing ethnic and urban market with quality,
well-established brand name clothing, shoes, accessories and home furnishings.
In fiscal 1999, Weiner's continued to strengthen its presence in the urban
neighborhood shopping experience with the addition of six new stores.
- -------------------------
Two Pictures of marketing
meetings
- -------------------------
WEINER'S-A New Millennium
Many changes, which began in 1999, will more fully develop in
fiscal 2000. The merchandise team will work much more closely with merchandise
planners and allocators in order to purchase the correct amount of merchandise
and then to allocate the merchandise properly to each of our district regions
and ethnic markets. Our buyers search out a wide variety of products and brand
names that our customers recognize. The buyers will continue to negotiate
off-price closeout merchandise in order to provide the customer with more value
and thus encourage more frequent visits to our stores. Our home furnishings
department, which was rolled out to the chain in April 1999, will be expanded to
double in size in the majority of our stores. Based on the successes of the
Juniors' and Women's areas in both buying and store presentation, we are
creating a Young Men's fashion department in fiscal 2000. The buying team is
committed to bringing new and exciting products to our customers.
Our store district managers work closely with all divisions of the organization
to better manage changes which occur in the retail environment. Monthly meetings
at the corporate headquarters allow these district managers to interface with
inventory control, human resources, merchandise information systems, the
distribution center and, of utmost importance, the buyers. The growth and
2
<PAGE>
development of the district managers, store managers, assistant store managers
and key associates in the stores are critical to the success of any retailer. In
fiscal 1999, we began to improve some of these programs and expect to expand our
training and growth programs in fiscal 2000. In a marketplace with great
competition for people assets, we believe training programs, retentive plans and
advancement programs are key to our success. In order to reduce inventory
shrinkage, control employee turnover and improve morale, we must seek out
extraordinary people in our organization, aid in their development, expand their
knowledge and increase their levels of responsibility.
- ------------------------------
Picture of distribution center
- ------------------------------
In fiscal 2000, our Distribution Center will undergo an approximate $300,000
renovation project that will facilitate ease of handling for the increase in
volume of home furnishings and off-price closeout merchandise. The renovation is
necessary to continue efficiency in the Distribution Center and aid in timely
delivery of merchandise to our stores at an acceptable per-unit cost. We expect
the Distribution Center project to be completed in fall 2000. Throughout fiscal
2000, we will cultivate the interface of communications among the Distribution
Center associates, the planners and allocators and the buyers. This maintained
dialogue and project management are destined to be the catalysts for further
expense savings, quicker response times to the selling floor and stronger
relations with our vendors.
In fiscal 2000, the Company will begin the process of installing
state-of-the-art point-of-sale ("POS") equipment in approximately 30 stores. The
estimated cost of this first phase of new POS equipment is $1,200,000. For
training and maximization purposes, we have chosen the Houston and San Antonio
markets for our implementation. We expect to positively impact customer
satisfaction with the efficiencies of the new POS terminals
The Company currently plans to open ten new stores in fiscal 2000. Based on the
strength of our Jackson, Mississippi openings in spring 1999, we entered the
Little Rock, Arkansas market in March 2000 and opened four stores. We expect to
open six additional stores in spring 2000, with one location in the Dallas,
Texas market. Additionally, we will be entering the El Paso, Texas market with
three new locations in May 2000. All of the new stores are designed to
consistently drive home our approach of being the best neighborhood family
retailer.
- ----------------------------------
Picture of "Bargain Alley
(Good Stuff...Cheap Prices)" signs
in a Weiner's store
- ----------------------------------
- ----------------------
Picture of Shoe
Department at Weiner's
- ----------------------
3
<PAGE>
LOCATIONS
Weiner's Stores, Inc. is a Houston, Texas based neighborhood family retailer of
primarily branded apparel, shoes, domestics, housewares and decorative home
products for value conscious customers, operating 132 stores located primarily
in strip shopping centers in Texas, Louisiana and Mississippi, and employs
approximately 3,700 full- and part-time employees.
- -----------------------------------------------
Map of states we do business in -
Texas, Louisiana and Mississippi
Also included is a map of Arkansas
where we plan to do business in the future.
- -----------------------------------------------
TEXAS Border Market Victoria
Houston Market Brownsville Wharton
Alvin Del Rio
Baytown Eagle Pass Dallas Market
Channelview Edinburg Dallas-5
Conroe Harlingen Ft. Worth-2
Deer Park Laredo
Dickinson McAllen-2 LOUISIANA
Galveston Mission Louisiana-Other
Houston-28 Weslaco Market
Humble Alexandria
Missouri City Austin Market Baton Rouge-3
Pasadena-2 Austin-5 Bossier City
Pearland Round Rock Covington
Rosenberg San Marcos Gonzales
Stafford Hammond
Texas City San Antonio Houma
Tomball Market Lafayette North
San Antonio-7 Lake Charles
Northeast Market Seguin La Place
Bellmead Universal City Monroe
Brenham New Iberia
Bryan Corpus Christi Opelousas
Cleveland Market Shreveport-2
Crockett Alice
Jasper Corpus Christi-3 New Orleans Market
Killeen Portland Chalmette
Longview Gretna
Lufkin Golden Triangle Marrero
Marshall Market New Orleans-3
Temple Beaumont-2
Texarkana Pinehurst MISSISSIPPI
Waco Port Arthur Clinton
Jackson-2
Southwest Market
Bay City * FUTURE LOCATIONS
Beeville ARKANSAS
Clute Little Rock-4
El Campo
TEXAS
Dallas
El Paso-3
4
<PAGE>
Selected FINANCIAL DATA
<TABLE>
<CAPTION>
Successor Company(a) Predecessor Company
--------------------------------------------- -------------------------------------------------
Fiscal Year Fiscal Year Twenty-Three Thirty Fiscal Year Ended (a)
Ended Ended Weeks Ended Weeks Ended ----------------------------
January 29, January 30, January 31, August 25, January 25, January 27,
2000 1999 1998 1997(b) 1997 1996
---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share and per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 276,843 $ 260,908 $ 103,322 $ 160,315 $ 263,666 $ 260,712
Operating (loss) income (2,026) (3,979) (5,734) 1,250 (17,864) (25,847)
Net (loss) income (3,133) (4,992) (5,885) 18,541 (17,220) (25,605)
Net (loss) income per share
of common stock (c) $ (0.17) $ (0.26) $ (0.31) $ 185.41 $ (172.20) $ (256.05)
Balance Sheet Data:
Working capital $ 35,583 $ 34,781 $ 41,249 $ 43,434 $ 54,728 $ 64,926
Total assets 89,674 87,644 80,739 99,241 91,285 103,242
Long-term debt 10,000 4,000 5,000 -- -- --
Selected Operating Data:
Comparable store net sales
increase (decrease) 3.4% (1.9)% (0.1)% (d) 6.7% (11.9)%
Number of stores
Beginning of period 132 128 134 131 139 158
Opened 6 7 1 3 -- --
Closed 6 3 7 -- 8 19
End of period 132 132 128 134 131 139
Total sales square feet at
end of period (000's) 2,634 2,644 2,602 (d) 2,652 2,810
Average net sales per store $ 2,097 $ 2,007 $ 2,036 (d) $ 1,953 $ 1,756
Average net sales per square
foot $ 105 $ 99 $ 100 (d) $ 97 $ 86
</TABLE>
(a) Fiscal years 1999 and 1998, each of which contained 52 weeks, and fiscal
year 1997, which contained 53 weeks, all ended on the Saturday closest to
January 31st (i.e., January 29, 2000, January 30, 1999 and January 31, 1998,
respectively). Fiscal years 1996 and 1995 each contained 52 weeks and ended
January 25, 1997 and January 27, 1996, respectively.
(b) Net income for the thirty weeks ended August 25, 1997 includes $1,519,000 in
"fresh start" expense and $18,683,000 in extraordinary gain related to debt
discharge.
(c) Net loss per share of common stock for fiscal years 1999 and 1998 is based
on a weighted average number of shares of common stock outstanding of 18,483,729
and 18,869,208, respectively. Net loss per share of common stock for the
twenty-three weeks ended January 31, 1998 (Successor Company) is based on a
weighted average number of shares of common stock outstanding of 19,000,000. Net
income (loss) per share of common stock for the thirty weeks ended August 25,
1997 (Predecessor Company) and for fiscal years ended January 25, 1997 and
January 27, 1996 is based on a weighted average number of shares of common stock
outstanding of 100,000. Earnings per share for the Predecessor Company is not
comparable due to the Company's reorganization.
(d) Amount presented is for the fiscal year ended January 31, 1998.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The financial results of Weiner's Stores, Inc. (the "Company") have changed
significantly over the past five years, principally as a result of its filing
for reorganization under Chapter 11 ("Chapter 11") of Title 11 of the United
States Code (the "Bankruptcy Code") on April 12, 1995, and the Company's
subsequent emergence from Chapter 11 reorganization on August 26, 1997 (the
"Effective Date").
The Company's net loss for the 52-week fiscal year ended January 29, 2000
("1999") was $3,133,000 compared to a net loss of $4,992,000 for the 52-week
fiscal year ended January 30, 1999 ("1998") and a net income of $12,656,000 for
the 53-week fiscal year ended January 31, 1998 ("1997"). An extraordinary gain
for debt discharge of $18,683,000 favorably impacted the results in 1997.
Comparable 52-week store sales increased 3.4% for 1999 compared to a comparable
store decrease of 1.9% for 1998. In 1997, comparable 53-week store sales were
virtually flat. The Company had an operating loss as a percentage of sales of
0.7% in 1999, 1.5% in 1998 and 1.7% in 1997.
The Company emerged from Chapter 11 reorganization on the Effective Date. The
Company incurred reorganization expenses of $2,406,000 in 1997. These charges
included $1,894,000 in professional fees, reduced by a $1,040,000 adjustment in
respect to liabilities subject to settlement, $818,000 of administrative
reorganization costs, $468,000 of system and store reorganization costs and
approximately $266,000 in relation to closing of unprofitable stores and a
warehouse facility.
On the Effective Date, the Company restructured its capitalization in accordance
with the Company's Amended Plan of Reorganization under Chapter 11 of the
Bankruptcy Code, dated June 24, 1997, as amended (the "Plan"), which was
confirmed by order of the United States Bankruptcy Court for the District of
Delaware on August 13, 1997. The application of "fresh start" reporting
provisions of Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), as of the Effective Date
included adjustments to certain assets, which resulted in a $1,519,000 one-time
charge to expense. Further, the Company recognized reorganization value in
excess of amounts allocable to identifiable assets ("Excess Reorganization
Value") of $4,411,000. This Excess Reorganization Value is being amortized by
the straight-line method over 15 years. Also on the Effective Date, the value of
the cash and securities distributed by the Company in settlement of the claims
resulted in an extraordinary gain of $18,683,000.
Recent Developments
In February 2000, the Company entered into the fourth amendment (the "Fourth
Amendment") to its revolving credit agreement, dated as of the Effective Date
(as amended, the "Revolving Credit Agreement"), which provides a $40,000,000,
working capital facility including a sub-facility of $15,000,000 for letters of
credit. The Fourth Amendment, among other things, provided for an adjustment to
the financial covenant relating to earnings before interest, taxes, depreciation
and amortization ("EBITDA"), as defined in the Revolving Credit Agreement. This
adjustment was necessary because of the Company's change in its method regarding
revenue recognition of layaway sales commencing with the fiscal year which
begins January 30, 2000.
In October 1999, the Company entered into the third amendment (the "Third
Amendment") to its Revolving Credit Agreement. The Third Amendment, among other
things, provided for the extension of the term of the Agreement for an
additional three years to August 30, 2003, changing the Company's monthly
financial covenant tests to quarterly tests, and an increase in the amount of
capital expenditures in each of the respective years. Borrowings under the
Revolving Credit Agreement are restricted for the sole use of funding working
capital requirements in the ordinary course of business and for other general
corporate purposes. Under the terms of the Revolving Credit Agreement, capital
expenditures are limited to $8,500,000 in each of the years ended February 3,
2001, February 2, 2002, and February 1, 2003 and to $5,000,000 in the period
commencing February 2, 2003 and ending August 30, 2003, the expiration date of
the Revolving Credit Agreement.
"Fresh Start" Reporting
As a result of "fresh start" reporting under SOP 90-7, the financial information
for the fiscal years ended January 29, 2000 and January 30, 1999 is not
comparable to the information for the twenty-three weeks ended January 31, 1998,
and the thirty weeks ended August 25, 1997. However, except as described below,
the Company believes that the impact of the "fresh start" reporting adjustments,
while material, is identifiable, and that combining the twenty-three weeks ended
January 31, 1998 with the thirty weeks ended August 25, 1997 provides a useful
basis for comparison to the current and prior periods. Therefore, the following
discussion assumes that such periods in fiscal 1997 are combined.
6
<PAGE>
Results of Operations
The following table sets forth income statement data for 1999, 1998 and 1997
expressed as a percentage of sales:
<TABLE>
<CAPTION>
1999 1998 1997*
---- ---- -----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 67.7% 67.0% 67.8%
---- ---- -----
Gross margin 32.3% 33.0% 32.2%
Selling, administrative and other operating costs 33.0% 34.5% 33.0%
Reorganization expense 0.0% 0.0% 0.9%
---- ---- -----
Operating loss -0.7% -1.5% -1.7%
Interest (expense) income, net -0.4% -0.4% 0.0%
"Fresh start" adjustments 0.0% 0.0% -0.6%
---- ---- -----
Loss before extraordinary gain -1.1% -1.9% -2.3%
Extraordinary gain 0.0% 0.0% 7.1%
---- ---- -----
Net (loss) income -1.1% -1.9% 4.8%
==== ==== =====
</TABLE>
* Reflects the combining of the twenty-three weeks ended January 31, 1998
(Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor
Company).
1999 Compared to 1998
Net sales increased to $276,843,000 in 1999 from $260,908,000 in 1998. The sales
increase was primarily due to a 3.4% comparable store sales increase and the
opening of six new stores, offset by the closing of six stores. The comparable
store sales increase is primarily attributable to the growth of the Bed Bath Etc
department, offset by continued declines in the Levi's(R) jeans sales, branded
athletic shoes and branded activewear.
Cost of goods sold increased $12,673,000 to $187,423,000 in 1999 from
$174,750,000 in 1998. As a percentage of sales, cost of goods sold increased to
67.7% in 1999 from 67.0% in 1998. Gross margin increased $3,262,000 to
$89,420,000 in 1999 from $86,158,000 in 1998. This increase in gross margin is
primarily due to the sales increases discussed above. Gross margin as a
percentage of sales decreased to 32.3% in 1999 from 33.0% in 1998. The decline
in the gross margin as a percentage of sales is primarily due to a decline in
the initial markup on those products changed to an everyday low price concept
and an increase in the merchandise shrinkage, offset by a decrease in markdowns
as a percentage of sales.
Selling, general and administrative expenses increased $1,309,000 to $91,446,000
in 1999 from $90,137,000 in 1998. This increase is primarily due to increased
rent expense, outbound freight and new store opening expenses, offset by
reductions in payroll costs and promotional advertising. Selling, general and
administrative expenses, as a percentage of sales, decreased to 33.0% in 1999
compared to 34.5% in 1998 due primarily to the increase in sales.
Operating loss decreased to $2,026,000 in 1999 from $3,979,000 in 1998.
The Company recorded interest expense of $1,107,000 in 1999 compared to
$1,013,000 in 1998. This increase is primarily attributable to an increase in
the average borrowings under the Revolving Credit Agreement in 1999.
The Company provides United States federal income taxes based on its estimated
annual effective tax rate for the fiscal year. No income tax provision was
recorded in either 1999 or 1998. The recognition of income tax benefits is
affected by limitations on the Company's ability to utilize net operating loss
("NOL") carryforwards.
The Company's net loss for 1999 was $3,133,000 compared to a net loss of
$4,992,000 in 1998. Loss per share of common stock was $0.17 in 1999 compared to
$0.26 in 1998.
1998 Compared to 1997
Net sales decreased to $260,908,000 in 1998 from $263,637,000 in 1997. The sales
decrease was primarily attributable to the number of weeks in 1998 (52 weeks)
compared to 1997 (53 weeks), offset by the opening of seven new stores in 1998.
Comparable store sales on a 52-week comparable basis decreased 1.9%. The
decrease is primarily attributable to the decline in Levi's(R) jeans sales,
offset by the introduction of domestics in the fourth quarter of 1998.
Cost of goods sold decreased $3,908,000 to $174,750,000 in 1998 from
$178,658,000 in 1997. As a percentage of sales, cost of goods sold decreased to
67.0% in 1998 from 67.8% in 1997. Gross margin increased $1,179,000 to
$86,158,000 in 1998 from $84,979,000 in 1997. Gross margin as a percentage of
sales increased to 33.0% in 1998 compared to 32.2% in 1997. This increase in
gross margin is
7
<PAGE>
primarily due to an increase in initial markup and a decrease in merchandise
shrinkage, offset by an increase in markdowns as a percentage of sales.
Selling, general and administrative expenses increased $3,080,000 to $90,137,000
in 1998 from $87,057,000 in 1997. This increase is primarily due to increased
payroll costs due to federally mandated minimum wage increases, promotional
advertising and rent expense. Selling, general and administrative expenses, as a
percentage of sales, increased to 34.5% in 1998 from 33.0% in 1997 due primarily
to the decline in sales.
Fiscal 1997 included $2,406,000 of reorganization expense. There has been no
reorganization expense since August 26, 1997 when the Company emerged from
Chapter 11 reorganization.
Operating loss decreased to $3,979,000 in 1998 from $4,484,000 in 1997. Had the
Company not incurred the reorganization expense referred to above, operating
loss would have been $2,078,000 in 1997.
The Company recorded interest expense of $1,013,000 in 1998 compared to $201,000
in 1997. During its bankruptcy proceedings, the Company discontinued accruing
interest on substantially all of its prepetition debt. Interest expense has
increased due to the increase in borrowings under the Revolving Credit Agreement
since the Company's emergence from Chapter 11 reorganization on August 26, 1997.
Interest income during 1998 was approximately zero compared to $177,000 during
1997. This decline in interest income is primarily due to the reduction in cash
available for investment in 1998 as compared to 1997.
The Company recorded $1,519,000 in "fresh start" expense in relation to its
emergence from Chapter 11 reorganization in August 1997.
The Company provides United States federal income taxes based on its estimated
annual effective tax rate for the fiscal year. No income tax provision was
recorded in either 1998 or 1997. The recognition of income tax benefits is
affected by limitations on the Company's ability to utilize NOL carryforwards.
Extraordinary gain of $18,683,000 related to debt discharged in the Company's
emergence from Chapter 11 reorganization was recognized in August 1997.
The Company's net loss for 1998 was $4,992,000 compared to a net income of
$12,656,000 for 1997. The Company adopted "fresh start" accounting upon its
emergence from Chapter 11 reorganization. Earnings per share for prior periods
is based on the Predecessor Company shares then outstanding; such information is
not comparable due to the Company's reorganization.
Liquidity and Capital Resources
Cash from Operations and Working Capital
The Company's primary sources of liquidity have been cash flow from operations
and borrowings under the Revolving Credit Agreement.
For the three fiscal years ended January 29, 2000, net cash flow from operations
was as follows ($ in thousands):
<TABLE>
<CAPTION>
1999 1998 1997*
---- ---- -----
<S> <C> <C> <C>
Net (loss) income $(3,133) $(4,992) $ 12,656
Depreciation and amortization 3,977 4,079 4,083
Other non-cash charges 29 125 (14,771)
Changes in current assets and liabilities (4,636) 9,699 (15,377)
------- ----- --------
Net cash (used in) provided by operating activities $(3,763) $ 8,911 $(13,409)
======= ======= ========
</TABLE>
* Reflects the combining of the twenty-three weeks ended January 31, 1998
(Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor
Company).
The decrease in cash provided by operating activities in 1999 reflects an
increase in inventory, primarily attributable to the new store openings planned
to be opened in March 2000, an increase in prepaid expenses, with a slight
decrease in accounts payable. The increase in cash provided by operating
activities in 1998 reflects an increase in vendor credit since the Company's
emergence from Chapter 11 reorganization, offset by increased inventory.
8
<PAGE>
The Company's working capital, current ratio and ratio of sales to average
working capital at the end of the three fiscal years ended January 29, 2000 were
as follows ($ in thousands):
1999 1998 1997
---- ---- ----
Working capital $35,583 $34,781 $41,249
Current ratio 2.2 2.1 3.4
Ratio of sales to average working capital 7.9 6.9 5.5
The Company funds inventory purchases through cash flows from operations, from
borrowings under the Revolving Credit Agreement and through favorable payment
terms the Company has established with its vendors.
Revolving Credit Agreement
The Company's Revolving Credit Agreement provides a $40,000,000 working capital
facility, including a $15,000,000 sub-facility for the issuance of letters of
credit. The Revolving Credit Agreement is secured by substantially all of the
Company's assets. The Revolving Credit Agreement provides that proceeds may be
used solely to fund working capital in the ordinary course of business and for
other general corporate purposes. Borrowings under the Revolving Credit
Agreement bear interest at the reference rate thereunder plus 0.5% or, at the
option of the Company, the Eurodollar Rate thereunder plus 2.5%. Under the terms
of the Revolving Credit Agreement, capital expenditures are limited to
$8,500,000 in fiscal year 2000. The Revolving Credit Agreement further
stipulates certain borrowing limitations based on the Company's inventory levels
and requires that the Company comply with certain financial covenants. The
Revolving Credit Agreement expires on August 30, 2003. As of January 29, 2000,
the Company was in compliance with all of its covenants under the Revolving
Credit Agreement.
At January 29, 2000, the Company had approximately $15,749,000 of availability
under the working capital facility, after considering borrowings and outstanding
letters of credit. At January 29, 2000, the outstanding letters of credit
thereunder were approximately $3,616,000.
The Company believes that the financial covenants established in the Fourth
Amendment will be achieved based upon the Company's current and anticipated
performance. Based upon management's 2000 operating plan and availability under
the Revolving Credit Agreement, the Company believes that there is adequate
liquidity to fund the Company's operations during fiscal year 2000. However,
material shortfalls or variances from anticipated performance could require the
Company to seek a further amendment to the Revolving Credit Agreement or
alternative sources of financing or to limit capital expenditures to an amount
less than that currently anticipated by the Company or permitted under the
Revolving Credit Agreement. See "- Capital Expenditures."
Capital Expenditures
The Company's capital expenditures were approximately $6,077,000 in 1999,
$4,380,000 in 1998, and $6,823,000 in 1997. The majority of capital expenditures
were for fixtures, equipment and leasehold improvements for new, relocated and
remodeled stores and the upgrade of the management information systems. The
Company opened six new stores in 1999, seven new stores in 1998, and four new
stores in 1997. Underperforming stores are closed upon lease termination, or
earlier, if possible. The Company closed six underperforming stores in 1999,
three underperforming stores in 1998 and seven underperforming stores in 1997.
See "- Revolving Credit Agreement."
The Company's capital expenditures are expected to be approximately $7,000,000
in fiscal 2000 for the opening of new stores, remodeling of existing stores,
installation of a new point-of-sale system in approximately 30 stores and
management information system enhancements. The Company expects to fund these
capital expenditures from cash generated by operations and borrowings under the
Revolving Credit Agreement.
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.
9
<PAGE>
Seasonality
The Company's business is seasonal with approximately 40% 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. In
addition, the Company's performance, like that of many other retailers, is
sensitive to the overall U.S. economy and economic cycles and related economic
conditions that influence consumer trends and spending patterns.
New Accounting Developments
The Company offers a layaway program pursuant to which its customers are
permitted to purchase merchandise currently available for sale and pay for the
goods over a 30 to 60 day period. At the time of the sale, the goods are
segregated from the Company's inventory and held for the benefit of the customer
pending payment in full for the goods. In 1999, the Company's layaway program
accounted for approximately 9.4% of the Company's revenues. Layaways are
recognized as revenue at the point of sale and as a receivable on the balance
sheet (net layaway receivables at January 29, 2000 were $510,000 as compared to
$847,000 at January 30, 1999). The Company provided an allowance for layaway
sales receivables based on management's estimate of the amount by which
uncollected receivables would exceed the cost of the items reverting back to
inventory. This estimate is based on the Company's historical calculation of
layaway sales that will never be completed. The Company generally required a
refundable deposit on layaway sales. As customers paid off the balance on their
layaway purchases, the payment reduced the corresponding receivable.
The Staff (the "Staff") of the U.S. Securities and Exchange Commission (the
"SEC") has requested that the Company change its treatment regarding revenue
recognition of layaway sales, commencing with the Company's fiscal year
beginning January 30, 2000, to reflect layaway sales as deposits until the
merchandise is paid in full and delivered to the customer. The Staff
subsequently issued Staff Accounting Bulletin No. 101 - Revenue Recognition in
Financial Statements ("SAB 101") on December 3, 1999. SAB 101 requires that
layaway sales be treated in a manner consistent with such request. As a result
of the Staff's request and the subsequent issuance of SAB 101, the Company
changed its treatment regarding revenue recognition of layaway sales commencing
on the first day of the Company's fiscal year beginning January 30, 2000 to be
consistent with the Staff's recommendation.
The impact of this change in revenue recognition of layaway sales is very
difficult to quantify because of information system constraints regarding the
historical information of payments relating to specific transactions. The
Company estimates that, in the year of adoption, approximately $1.0 to $2.0
million of revenue would be deferred into the following fiscal year. Once
adopted, the Company believes there will be a minimal impact on an annual basis;
however, the impact on the results of operations on a quarter to quarter basis
is expected to be much more pronounced. The impact will be especially pronounced
in the second and third quarters and first six and nine month periods because
these periods include a portion of the Company's important back-to-school sales
period.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments
and Hedging Activities," effective for years beginning after June 15, 2000. The
Company believes that this statement will have no impact on its financial
presentation.
Year 2000 Readiness Disclosure
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either the
Company's products or internal systems, or the products and services of outside
parties. The Company expensed $50,000 during fiscal 1999 in connection with
remediating its systems. During fiscal 2000, the Company does not expect to
incur any material expenses in regard to the remediation of non-critical
systems. The Company will continue to monitor its mission critical applications
and those of its suppliers and vendors throughout 2000 that any latent Year 2000
matters that may arise addressed promptly.
10
<PAGE>
Foreign Operations
As all of the Company's stores have been and are currently located in Texas,
Louisiana, Mississippi and, as of March 2000, Arkansas, during the last three
fiscal years the Company has received no revenues from external customers
attributable to foreign countries except for certain revenues received from
customers visiting the Company's stores from foreign countries, the amount of
which revenues it is impracticable for the Company to determine and which the
Company believes is immaterial to the Company's sales. All of the Company's
long-lived assets are currently located in the United States.
Forward-Looking Statements
This Annual Report 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 of the Company and its competitors to
predict fashion trends and customer preferences and achieve further market
penetration and additional customers, consumer apparel buying patterns, adverse
weather conditions, inventory risks due to shifts in market demand, Year 2000
issues, and various other matters, many of which are beyond the Company's
control. 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
Annual Report 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 effect on the Company or its business or operations.
The Company does not undertake and expressly disclaims any obligation to
publicly update or revise any such forward-looking statements even if experience
or future changes make it clear that the projected results expressed or implied
therein will not be realized.
11
<PAGE>
WEINER'S STORES, INC. CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 3,336,000 $ 7,176,000
Receivables, net 1,100,000 1,252,000
Merchandise inventories, net 57,293,000 54,243,000
Prepaid expenses and other assets 3,287,000 2,380,000
----------- -----------
Total current assets 65,016,000 65,051,000
----------- -----------
Property and Equipment:
Land 258,000 258,000
Building - distribution center and office facility 1,996,000 1,996,000
Furniture, fixtures and leasehold improvements 26,759,000 20,728,00
----------- -----------
Total 29,013,000 22,982,000
Less accumulated depreciation and amortization (7,967,000) (4,296,000)
----------- -----------
Total property and equipment, net 21,046,000 18,686,000
----------- -----------
Excess Reorganization Value, less accumulated amortization of
$799,000 and $504,000, respectively 3,612,000 3,907,000
----------- -----------
$89,674,000 $87,644,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 21,592,000 $21,000,000
Accrued expenses and other current liabilities 7,841,000 9,270,000
----------- -----------
Total current liabilities 29,433,000 30,270,000
----------- -----------
Deferred Taxes 397,000 397,000
Long-Term Debt 10,000,000 4,000,000
----------- -----------
Commitments and Contingencies -- --
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
19,000,000 shares issued 190,000 190,000
Additional paid-in capital 63,664,000 63,664,000
Accumulated deficit (14,010,000) (10,877,000)
Treasury stock, at cost, 523,170 in both years -- --
----------- -----------
Total stockholders' equity 49,844,000 52,977,000
----------- -----------
$89,674,000 $87,644,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
<TABLE>
<CAPTION>
WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Successor Company Predecessor Company
----------------------------------------------------- ----------------
Year Year Twenty-Three Weeks Thirty Weeks
Ended Ended Ended Ended
January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 276,843,000 $ 260,908,000 $ 103,322,000 $ 160,315,000
Cost of goods sold 187,423,000 174,750,000 72,308,000 106,350,000
---------------- ---------------- ---------------- ---------------
Gross margin 89,420,000 86,158,000 31,014,000 53,965,000
Selling, administrative and other operating costs 91,446,000 90,137,000 36,748,000 50,309,000
Reorganization expense -- -- -- 2,406,000
---------------- ---------------- ---------------- ---------------
Operating (loss) income (2,026,000) (3,979,000) (5,734,000) 1,250,000
Interest expense (1,107,000) (1,013,000) (161,000) (40,000)
Interest income -- -- 10,000 167,000
"Fresh start" adjustments -- -- -- (1,519,000)
---------------- ---------------- ---------------- ---------------
Loss before income taxes and extraordinary gain (3,133,000) (4,992,000) (5,885,000)
(142,000)
Income tax -- -- -- --
---------------- ---------------- ---------------- ---------------
Loss before extraordinary gain (3,133,000) (4,992,000) (5,885,000) (142,000)
Extraordinary gain -- -- -- 18,683,000
---------------- ---------------- ---------------- ---------------
Net (loss) income $ (3,133,000) $ (4,992,000) $ (5,885,000) $ 18,541,000
================ ================ ================ ===============
Earnings per share of common stock:
Loss before extraordinary gain $ (0.17) $ (0.26) $ (0.31) $ (1.42)
Extraordinary gain -- -- -- 186.83
---------------- ---------------- ---------------- ---------------
Net (loss) income per share of common stock $ (0.17) $ (0.26) $ (0.31) $ 185.41
================ ================ ================ ===============
Weighted average number of shares of
common stock outstanding 18,483,729 18,869,208 19,000,000 100,000
================ ================ ================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY)
<TABLE>
<CAPTION>
Common Additional Accumulated Treasury
Stock Paid-In Capital Deficit Stock Total
---------------- ------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Predecessor Company:
Balances at January 26, 1997 $ 10,000,000 $ -- $(34,446,000) $ -- $(24,446,000)
Net income for the thirty weeks ended
August 25, 1997 -- -- 18,541,000 -- 18,541,000
Cancellation of stock of Predecessor Company (10,000,000) -- 15,905,000 -- 5,905,000
Issuance of Successor Company common stock 190,000 63,664,000 -- -- 63,854,000
---------------- ------------- ---------------- ------------- -------------
Successor Company:
Balances at August 26, 1997 190,000 63,664,000 -- -- 63,854,000
Net loss for the twenty-three weeks ended
January 31, 1998 -- -- (5,885,000) -- (5,885,000)
---------------- ------------- ---------------- ------------- -------------
Balances at January 31, 1998 190,000 63,664,000 (5,885,000) -- 57,969,000
Treasury stock of 523,170 shares revested on
November 1, 1998 -- -- -- -- --
Net loss -- -- (4,992,000) -- (4,992,000)
---------------- ------------- ---------------- ------------- -------------
Balances at January 30, 1999 $ 190,000 $ 63,664,000 $ (10,877,000) $ -- $ 52,977,000
Net loss -- -- (3,133,000) -- (3,133,000)
---------------- ------------- ---------------- ------------- -------------
Balances at January 29, 2000 $ 190,000 $ 63,664,000 $ (14,010,000) $ -- $ 49,844,000
================ ============= ================ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
13
<PAGE>
WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Predecessor
Successor Company Company
--------------------------------------------------------- ----------------
Year Year Twenty-Three Weeks Thirty Weeks
Ended Ended Ended Ended
January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $ (3,133,000) $ (4,992,000) $ (5,885,000) $ 18,541,000
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Depreciation and amortization 3,977,000 4,079,000 1,842,000 2,241,000
Reorganization expense - - - 2,406,000
"Fresh start" adjustments - - - 1,519,000
Extraordinary gain - - - (18,683,000)
Impairment of assets - - - -
Loss on disposition of assets 36,000 4,000 35,000 -
Change in deferred taxes - (53,000) - -
Change in other (7,000) 174,000 (48,000) -
Net change in current assets and liabilities (4,636,000) 9,699,000 (10,059,000) (5,318,000)
---------------- ---------------- ---------------- ---------------
Total adjustments (630,000) 13,903,000 (8,230,000) (17,835,000)
---------------- ---------------- ---------------- ---------------
Net cash (used in) provided by operating activities (3,763,000) 8,911,000 (14,115,000) 706,000
---------------- ---------------- ---------------- ---------------
Cash Flows From Investing Activities:
Capital expenditures (6,077,000) (4,380,000) (3,010,000) (3,813,000)
Proceeds on disposition of assets - 71,000 26,000 61,000
---------------- ---------------- ---------------- ---------------
Net cash used in investing activities (6,077,000) (4,309,000) (2,984,000) (3,752,000)
---------------- ---------------- ---------------- ---------------
Cash Flows From Financing Activities:
Net borrowings (payments) under revolving credit facility 6,000,000 (1,000,000) 5,000,000 -
---------------- ---------------- ---------------- ---------------
Net cash provided by (used in) financing activities 6,000,000 (1,000,000) 5,000,000 -
---------------- ---------------- ---------------- ---------------
Net (decrease) increase in cash (3,840,000) 3,602,000 (12,099,000) (3,046,000)
Cash, beginning of period 7,176,000 3,574,000 15,673,000 18,719,000
---------------- ---------------- ---------------- ---------------
Cash, end of period $ 3,336,000 $ 7,176,000 $ 3,574,000 $ 15,673,000
================ ================ ================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
14
<PAGE>
WEINER'S STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Organization and Summary of Significant Accounting Policies
Weiner's Stores, Inc. (the "Company") operates, as of January 29, 2000, 132
retail stores in Texas, Louisiana and Mississippi. As more fully described in
Notes 7 and 8, the Company emerged from Chapter 11 bankruptcy on August 26, 1997
and adopted "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"). The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary. All significant intercompany balances and transactions
have been eliminated.
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 disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Fiscal Year
The Company's fiscal year ends on the Saturday nearest January 31 of the
following calendar year. Fiscal year 1999 contains 52 weeks, fiscal year 1998
contains 52 weeks and fiscal year 1997 contains 53 weeks.
Cash
Cash includes temporary investments in short-term securities with original
maturities of three months or less.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost (applied on a first-in,
first-out basis using the retail inventory method) or market. Trade and purchase
discounts are recorded as a reduction in inventory cost in the period in which
the merchandise is received. Certain general and administrative costs associated
with both the buying and the distribution of merchandise from the distribution
center to the stores are included in inventory. These costs were approximately
$2,400,000 at January 29, 2000 and at January 30, 1999.
Property and Equipment
Property and equipment were restated at approximate fair market value at August
26, 1997. Additions subsequent to August 26, 1997 are recorded at cost.
Depreciation is provided using the 150% declining-balance method on the
distribution center and office facility based on an average life of 28 years.
Equipment is depreciated using the straight-line method based on an average
useful 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. Expenditures for maintenance
and repairs are charged to operations as incurred, while renewals and
betterments are capitalized. Long-lived assets are reviewed for impairment upon
occurrence of events or changes in circumstances that indicate that the carrying
value of these long-lived assets may not be recoverable, as measured by
comparing the net book value of the assets to the estimated future cash flows
generated by their use. Impaired assets which are held for use are recorded at
the lesser of their carrying value or fair value. Software is capitalized with a
useful life of five years.
Excess Reorganization Value
Excess reorganization value represents the adjustment of the Company's balance
sheet for reorganization value in excess of amounts allocable to identifiable
assets. Excess reorganization value is being amortized over 15 years. The
Company reviews, at least annually, whether events or circumstances have
occurred that may impact the recoverability of excess reorganization value.
If this review indicates that this intangible asset will not be recoverable, as
determined based on the undiscounted cash flow over the remaining amortization
periods, the carrying value is reduced by the estimated shortfall of the
discounted cash flows.
Income Taxes
Deferred income taxes reflect the future tax consequences attributable to
temporary differences between the Company's assets and liabilities for financial
reporting and income tax purposes, using income tax rates in effect during the
periods presented. The effect of a change in existing income tax rates is
recognized in the income tax provision in the period that includes the enactment
date.
Earnings per Share of Common Stock
Earnings per share of common stock is computed as net (loss) income divided by
the weighted average number of shares of common stock outstanding during the
period. There is no difference between basic and dilutive earnings per share, as
the inclusion of options to purchase 1,615,000 shares of common stock in fiscal
1999 and 945,500 shares of common stock in fiscal 1998 would have had an
anti-dilutive effect. Earnings per share for prior periods is based on the
Predecessor Company shares then outstanding; such information is not comparable
due to the Company's reorganization.
15
<PAGE>
Fair Value of Financial Instruments
The Company's financial instruments include cash, receivables, trade accounts
payable and long-term debt. The fair values of cash, receivables and trade
accounts payable approximate recorded amounts as a result of their short-term
nature. The fair value of long-term debt approximates its recorded amount due to
the floating interest rate.
Advertising
The Company expenses advertising costs when the event advertised occurs.
Advertising expense, included in selling, administrative and other operating
costs in the accompanying consolidated statements of operations, was $13,081,000
for fiscal 1999 and $13,415,000 for fiscal 1998, $5,436,000 for the twenty-three
weeks ended January 31, 1998 (Successor Company) and $7,166,000 for the thirty
weeks ended August 25, 1997 (Predecessor Company).
Revenue Recognition Policy
The Company recognizes revenue at the point of sale. The Company has a layaway
program that in fiscal year 1999 accounted for approximately 9.4% of the
Company's revenues. Layaways are recognized as revenue at the point of sale and
as a receivable on the balance sheet (net layaway receivables at January 29,
2000 was $510,000 as compared to $847,000 at January 30, 1999). The Company
provided an allowance for layaway sales receivables based on management's
estimates of the amount by which uncollected receivables would exceed the cost
of the items reverting back to inventory. The estimate was based on the
Company's historic calculation of layaway sales that will never be completed.
The Company generally required a refundable deposit on layaway sales. As
customers paid on their layaways, the payment reduced the receivable.
The Staff (the "Staff") of the U.S. Securities and Exchange Commission (the
"SEC") has requested that the Company change its treatment regarding revenue
recognition of layaway sales, commencing with the Company's fiscal year which
begins January 30, 2000, to reflect layaway sales as deposits until the
merchandise is paid in full and delivered to the customer. The Staff
subsequently issued Staff Accounting Bulletin No. 101 - "Revenue Recognition in
Financial Statements" ("SAB 101") on December 3, 1999. As a result of the
Staff's request and subsequent issuance of SAB 101, the Company changed its
treatment regarding revenue recognition to recognize layaway sales upon delivery
of the merchandise to the customer commencing the first day of the Company's
fiscal year which began on January 30, 2000.
Recent Accounting Pronouncements
The Staff of the SEC has issued Staff Accounting Bulletin No. 101 - "Revenue
Recognition in Financial Statements," effective for fiscal years beginning after
December 15, 1999. The Company is in compliance with SAB 101, except with regard
to leased department sales and layaway sales, as discussed above. The Company
has implemented all provisions of SAB 101, including treatment of leased
department and layaway sales, effective for fiscal year 2000, beginning January
30, 2000.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments
and Hedging Activities," effective for years beginning after June 15, 2000. The
Company believes that this statement will have no impact on its financial
presentation.
Reclassifications
Certain prior year balances have been reclassified to conform to current year
presentation.
2 Long-Term Debt
The Company believes that the financial covenants established in the Fourth
Amendment to the Company's Revolving Credit Agreement will be achieved based
upon the Company's current and anticipated performance. Based upon management's
2000 operating plan and availability under the Revolving Credit Agreement, the
Company believes that there is adequate liquidity to fund the Company's
operations during fiscal year 2000. However, material shortfalls or variances
from anticipated performance could require the Company to seek a further
amendment to the Revolving Credit Agreement or alternative sources of financing
or to limit capital expenditures to an amount less than that currently
anticipated by the Company or permitted under the Revolving Credit Agreement.
The Company's Revolving Credit Agreement provides a $40,000,000 working capital
facility, including a $15,000,000 sub-facility for the issuance of letters of
credit. The Revolving Credit Agreement is secured by substantially all of the
Company's assets. The Revolving Credit Agreement provides that proceeds may be
used solely to fund working capital in the ordinary course of business and for
other general corporate purposes. Borrowings under the Revolving Credit
Agreement bear interest at the reference rate thereunder plus 0.5% or, at the
option of the Company, the Eurodollar Rate thereunder plus 2.5% and are due
August 30, 2003. The Company's blended interest rate was 9.0% at January 29,
2000. The working capital facility may also be used to fund letters of credit.
16
<PAGE>
At January 29, 2000, the Company had approximately $15,749,000 available under
its working capital facility, after considering outstanding letters of credit of
approximately $3,616,000 and borrowings of $10,000,000. The Company's peak
borrowings under the working capital facility during fiscal year 1999, including
outstanding letters of credit, were approximately $26,830,000 in July 1999. The
Company may prepay amounts outstanding under the working capital facility
without penalty.
The Revolving Credit Agreement requires that the Company maintain certain
financial covenants and stipulates certain borrowing limitations based on the
Company's inventory levels. The Revolving Credit Agreement also restricts future
liens and indebtedness, sales of assets and dividend payments. Capital
expenditures are restricted to $8,500,000 in each of fiscal years 2000, 2001 and
2002 and to $5,000,000 for the period commencing February 2, 2003 and ending
August 30, 2003. As of January 29, 2000, the Company was in compliance with all
of its covenants under the Revolving Credit Agreement.
Cash interest paid was approximately $951,000 during the fiscal year 1999,
$925,000 during fiscal year 1998, $153,000 during the twenty-three weeks ended
January 31, 1998 (Successor Company) and $33,000 during the thirty weeks ended
August 25, 1997 (Predecessor Company).
3 Accrued Expenses
Accrued expenses consisted of the following:
January 29, January 30,
2000 1999
----------- -----------
Payroll and related benefits $1,706,000 $2,210,000
Taxes other than income taxes 1,308,000 1,563,000
Rent and other related costs 1,943,000 2,264,000
Other 2,884,000 3,233,000
----------- -----------
Total $7,841,000 $9,270,000
=========== ===========
4 Statements of Cash Flows
The net change in current assets and liabilities reflected in the consolidated
statements of cash flows was as follows:
<TABLE>
<CAPTION>
Successor Company Predecessor Company
---------------------------------------------------- ---------------
Year Year Twenty-Three Weeks Thirty Weeks
Ended Ended Ended Ended
January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in cash:
Receivables $ (111,000) $ 95,000 $ 2,799,000 $ (1,960,000)
Merchandise inventories (2,765,000) (4,297,000) 5,489,000 (2,453,000)
Prepaid expenses and other assets (907,000) 757,000 (792,000) (241,000)
Accounts payable 577,000 11,703,000 (10,625,000) 10,256,000
Accrued expenses (1,430,000) 1,441,000 (6,930,000) (10,920,000)
---------------- ---------------- ---------------- ----------------
$ (4,636,000) $ 9,699,000 $ (10,059,000) $ (5,318,000)
=============== ================ ================ ================
</TABLE>
5 Leases
The Company leases store locations under operating lease agreements, which
expire at varying dates through 2009. 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 rents. Most of the store leases also require the payment of contingent
rent based upon specified percentages of sales in excess of a base amount. Total
rent expense for all operating leases was as follows:
<TABLE>
<CAPTION>
Successor Company Predecessor Company
------------------------------------------------- ----------------
Year Year Twenty-Three Weeks Thirty Weeks
Ended Ended Ended Ended
January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Minimum rentals $ 11,003,000 $ 10,186,000 $ 3,950,000 $ 5,426,000
Contingent rentals 422,000 427,000 67,000 419,000
---------------- ---------------- --------------- ----------------
Total $ 11,425,000 $ 10,613,000 $ 4,017,000 $ 5,845,000
================ ================ ============== ================
</TABLE>
17
<PAGE>
At January 29, 2000, future minimum rental payments under all noncancelable
operating leases with initial or remaining lease terms of one year or more were
as follows:
Fiscal Year
-----------
2000 $ 11,121,000
2001 9,223,000
2002 7,824,000
2003 6,256,000
2004 4,299,000
Thereafter 7,903,000
---------
Total $ 46,626,000
==========
6 Income Taxes
A reconciliation of the Company's effective tax rate with the statutory federal
income tax rate is as follows:
<TABLE>
<CAPTION>
Successor Company Predecessor Company
------------------------------------------------- -------------------
Year Year Twenty-Three Weeks Thirty Weeks
Ended Ended Ended Ended
January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Expense (benefit) at statutory rate (34.0) % (34.0) % (34.0) % 34.0 %
Operating losses not providing
current benefit 34.0 34.0 34.0 -
Operating loss carryforwards - - - (34.0)
---------------- ---------------- --------------- ----------------
Effective rate - - - -
================ ================ =============== ================
</TABLE>
Deferred tax assets and liabilities and the related valuation allowance were as
follows:
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
----------- -----------
<S> <C> <C>
Deferred tax liabilities - depreciation and other $ 1,143,000 $ 958,000
----------- -----------
Deferred tax assets:
Operating loss carryforwards 15,442,000 13,961,000
Targeted jobs credit carryforward 779,000 779,000
Accrued expenses and other 830,000 1,158,000
----------- -----------
17,051,000 15,898,000
Valuation allowance (16,305,000) (15,337,000)
----------- -----------
Deferred income taxes, net $ 397,000 $ 397,000
=========== ===========
</TABLE>
The valuation allowance reduces deferred tax assets to the amount that the
Company believes is most likely to be realized. The Company has determined that
a $16,305,000 valuation allowance at January 29, 2000 is necessary to reduce the
deferred tax assets to the amount that will more likely than not be realized.
The $968,000 increase in the valuation allowance in the current year is the
result of current year net operating losses, which may not be realized. At
January 29, 2000, the Company had federal income tax net operating loss ("NOL")
carryforwards of approximately $45,418,000. The NOL and targeted jobs credit
carryforwards expire in various years through 2020.
The amount of the NOL carryforwards and certain other tax attributes available
to the Company as of the Effective Date (see Note 7) were reduced substantially,
to approximately $31,000,000 as a result of the discharge and cancellation of
various prepetition liabilities under the Plan (see Note 7). Tax attributes
remaining after the application of cancellation of indebtedness rules are
subject to limitation-on-utilization rules. The federal tax code imposes
limitations on the utilization of tax attributes, such as NOL carryforwards,
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 existing as of the Effective Date will be credited to
Excess Reorganization Value (see Note 8) and then to additional paid-in-capital.
18
<PAGE>
7 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"). Subsequent to the Petition Date, the Company operated
as a debtor-in-possession under the supervision of the United States Bankruptcy
Court for the District of Delaware (the "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 the rejections could file claims with the Court in
accordance with the reorganization process. Substantially all liabilities as of
the Petition Date were subject to settlement under a plan of reorganization that
was to be voted on by the creditors and approved by the 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 Amended Plan of Reorganization under
Chapter 11 of the Bankruptcy Code dated June 24, 1997, as amended (the "Plan").
On August 13, 1997, the Court commenced a hearing that resulted in the entering
of a court order confirming the Plan, which became effective August 26, 1997
(the "Effective Date").
Pursuant to the Plan, all outstanding shares of common stock and any options,
warrants or other agreements requiring the issuance of any such stock were
extinguished. The Plan was designed to repay all priority creditors in full on
the Effective Date or thereafter as provided in the Plan and to repay secured
creditors in full over time with interest. Allowed unsecured claims totaling
approximately $85,200,000 were cancelled in exchange for $5,000,000 of cash and
18,600,000 shares of newly issued common stock, par value $.01 per share, of the
reorganized company. An additional 400,000 shares of the newly issued common
stock were issued to senior management. Consequently, a total of 19,000,000
shares of newly issued common stock of the Successor Company were issued under
the Plan. In addition, the Plan authorized the issuance of options to purchase
up to 1,000,000 shares of newly issued common stock of the Successor Company for
purposes of providing incentives intended to retain and motivate highly
competent persons as key employees of the Company.
In connection with the Chapter 11 proceedings, the Company incurred
reorganization expenses as follows ($ in thousands):
Predecessor Company
-------------------
Thirty Weeks
Ended
August 25, 1997
---------------
Professional fees $ 1,894
Store/warehouse closings 266
System and store reorganization costs 468
Administrative reorganization costs 818
Adjustment of liabilities subject to settlement (1,040)
---------------
Total $ 2,406
===============
8 "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
twenty-three weeks from inception (August 26, 1997) to January 31, 1998. SOP
90-7 was applicable because the pre-reorganization stockholders received less
than 50% of the Successor Company's newly issued common stock and the enterprise
value of the assets of the Successor Company was less than the total of all
prepetition liabilities.
In adopting "fresh start" reporting, the Company was required to determine its
enterprise value, which represented the fair value of the entity before
considering its liabilities. The Company's enterprise value was determined with
the assistance of its financial advisor to be within a range that centered
around a point of estimate of $75,000,000. 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.
The adjustments that reflected the adoption of "fresh start" reporting,
including the adjustments to record assets and liabilities at their fair market
values, were reflected in the financial statements as of August 25, 1997 as
"fresh start" adjustments. In addition, the Successor Company's opening balance
sheet was further adjusted to eliminate existing equity and to reflect the
aforementioned $75,000,000 enterprise value, which included the establishment of
$4,411,000 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 which is based on the average remaining life of the Company's operating
leases.
19
<PAGE>
9 Employee Benefit Plans
The Company sponsors the Weiner's Stores, Inc. 401(k) Plan, a defined
contribution plan. This plan allows participants to defer up to 15% of their
income. Company contributions are at the discretion of the Board of Directors.
No contributions were made by the Company in the fiscal years currently being
reported.
The Company also sponsors the Weiner's Stores, Inc. Employees' Profit Sharing
Plan. The Board of Directors of the Company resolved that it was in the best
interest of the Company to terminate the profit sharing plan, effective December
31, 1998. The Company is in the process of complying with this resolution. The
Company made no contribution in fiscal year 1999 and $5,000 in each of the
fiscal years 1998 and 1997.
On August 5, 1999, at a special meeting of the stockholders, the stockholders
approved the 1999 Stock Incentive Plan (the "1999 Stock Plan"). The Company's
1997 Stock Incentive Plan (the "1997 Stock Plan") and the 1999 Stock Plan are
accounted for using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations, under which no compensation cost has been recognized.
Had compensation cost for this plan been determined consistent with the
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation," there would have been no changes to the Company's
reported net loss per share of common stock of $0.17 as of January 29, 2000 and
$0.26 as of January 30, 1999 and $0.31 as of the twenty-three weeks ended
January 31, 1998 (Successor Company). The weighted average fair value of options
granted was estimated to be zero on the date of grant using the Black-Scholes
option pricing model with the assumptions that the risk-free interest rate was
4.5%, price volatility was 0.001% and the expected term of the options was 2.5
years and no dividends were expected.
The effect on fiscal 1999, 1998 and fiscal 1997 pro forma net income and net
income per share of common stock of expensing the estimated fair value of stock
options is not necessarily representative of the effect on reported earnings in
future years due to the vesting period of stock options and the potential for
issuance of additional stock options in future years.
Under the 1997 Stock Plan and the 1999 Stock Plan (collectively, the "Stock
Plans"), a committee of the Board of Directors may grant options to key
employees to purchase common stock at not less than the fair market value at the
date of the grant. These options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Board of
Directors, provided that no stock option shall be exercisable later than 10
years after the date it is granted. Further, the 1997 Stock Plan allows that the
Board of Directors may grant stock awards consisting of common stock issued or
transferred to participants as additional compensation with or without other
payments to the Company. On the Effective Date of the Plan, stock awards of
400,000 shares were granted. The 1997 Stock Plan allows the Board of Directors
to grant options and awards up to the plan limit of 1,400,000 shares and the
1999 Stock Plan allows the Board of Directors to grant options up to the plan
limit of 1,000,000 shares. If not exercised, these options revert back to the
respective Stock Plans and can be reissued as new options. The number of options
available to be granted under the 1997 Stock Plan and the 1999 Stock Plan as of
January 29, 2000 was 54,500 and 330,500, respectively.
A summary of options granted under the Stock Plans at January 29, 2000 is
presented below:
Weighted Average
Option Shares Exercise Price
------------- --------------
Outstanding, January 25, 1997 - $ -
Granted 900,000 1.15
Forfeited (1,500) 1.15
------------- --------------
Outstanding, January 31, 1998 898,500 $ 1.15
============= ==============
Exercisable, January 31, 1998 83,333 $ 1.15
============= ==============
Weighted Average
Option Shares Exercise Price
------------- --------------
Outstanding, January 31, 1998 898,500 $ 1.15
Granted 51,500 1.00
Forfeited (4,500) 1.15
------------- --------------
Outstanding, January 30, 1999 945,500 $ 1.14
============= ==============
Exercisable, January 30, 1999 534,366 $ 1.15
============= ==============
20
<PAGE>
Weighted Average
Option Shares Exercise Price
------------- --------------
Outstanding, January 30, 1999 945,500 $ 1.14
Granted 890,000 0.87
Forfeited (220,500) 1.11
------------- --------------
Outstanding, January 29, 2000 1,615,000 $ 1.00
============= ==============
Exercisable, January 29, 2000 718,174 $ 1.09
============= ==============
The Company has an employment agreement with each of its four most senior
officers, which prescribe a minimum base salary and severance payments if the
executives are terminated for any reason other than cause, including if they
resign for good reason. Further, the Company has entered into agreements with
certain key employees in an effort to retain continuity for a meaningful period
of time. In addition, the Company, with respect to certain of its officers
(other than the four most senior officers) and key employees and without
altering their employment-at-will status, has provided for a separation payment
equal to six months base salary in the event of termination for any reason other
than cause. If all officers and key employees, including the three most senior
officers, were terminated, the Company's estimated maximum aggregate severance
payment obligations would be approximately $1,493,000.
10 Stockholders' Equity
At both January 29, 2000 and January 30, 1999, 50,000,000 shares of common
stock, $0.01 par value per share, were authorized and 19,000,000 shares were
issued. The Company had 18,476,830 shares outstanding at January 29, 2000 and at
January 30, 1999. On November 1, 1998, the Company acquired 523,170 treasury
shares, at a cost of zero, as a result of unclaimed distributions as described
in the Plan, which called for unclaimed distributions to be revested in the
Company.
11 Quarterly Financial Data (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended January 29, 2000
--------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net sales $ 69,602 $ 79,532 $ 58,859 $ 68,850 $ 276,843
Gross profit 24,222 24,352 20,798 20,048 89,420
Operating income (loss) 2,243 881 (2,188) (2,962) (2,026)
Net income (loss) $ 2,033 $ 463 $ (2,437) $ (3,192) $ (3,133)
Weighted average number of shares of
common stock outstanding 18,477 18,487 18,497 18,477 18,484
Earnings (loss) per share (a) $ 0.11 $ 0.03 $ (0.13) $ (0.17) $ (0.17)
Fiscal Year Ended January 30, 1999
--------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net sales $ 61,579 $ 68,548 $ 60,585 $ 70,196 $ 260,908
Gross profit 22,791 22,485 20,601 20,281 86,158
Operating income (loss) 781 (331) (2,400) (2,029) (3,979)
Net income (loss) $ 604 $ (596) $ (2,709) $ (2,291) $ (4,992)
Weighted average number of shares of
common stock outstanding 19,000 19,000 19,000 18,476 18,869
Earnings (loss) per share (a) $ 0.03 $ (0.03) $ (0.14) $ (0.13) $ (0.26)
</TABLE>
(a) The sum of the four quarterly earnings per share amounts does not agree with
the earnings per share as calculated for the full year due to the fact that the
full year calculation uses a weighted average number of shares based on the sum
of the four quarterly weighted average numbers of shares divided by four
quarters.
The Company implemented SAB 101 commencing with the Company's fiscal
year beginning January 30, 2000. The Company believes there will be minimal
impact on an annual basis; however, the impact on the results of operations on a
quarter to quarter basis is expected to be much more pronounced. The impact will
be especially pronounced in the second and third quarters and first six and nine
month periods because these periods include a portion of the Company's important
back-to-school sales period.
21
<PAGE>
12 Commitments and Contingencies
There are various suits and claims against the Company that have arisen in the
normal course of business. The total liability on these matters cannot be
determined with certainty. However, in the opinion of management, the ultimate
liability, to the extent not otherwise provided for, will not materially impact
the financial statements of the Company.
- --------------------------------------------------------------------------------
MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL REPORTING
Weiner's Stores, Inc.'s management is responsible for the fair presentation of
the consolidated financial statements and the related financial data presented
in this Annual Report. The statements were prepared in accordance with generally
accepted accounting principles and include amounts determined by management's
estimates and judgments, based on currently available information, which it
believes are reasonable under the circumstances. Actual results could differ
from those estimates.
The Company maintains a system of internal controls that management believes
provides reasonable assurance that the financial statements are reliably
prepared, assets are properly accounted for and safeguarded and transactions are
properly recorded and authorized. The concept of reasonable assurance implies
that the cost of controls should not exceed their benefits, recognizing that
limitations exist within any system.
The Board of Directors oversees management's administration of the Company's
financial and accounting policies and practices and the preparation of the
financial statements. The Audit Committee, which consists of three
non-management directors, meets regularly with management and the independent
auditors to review their activities. The independent auditors have direct access
to the Audit Committee and meet regularly with the Audit Committee, with and
without management representatives present.
/s/ Raymond J. Miller
Raymond J. Miller
Executive Vice President, Chief Operating Officer and
Chief Financial Officer
22
<PAGE>
INDEPENDENT AUDITORS' REPORTS
Board of Directors and Stockholders of Weiner's Stores, Inc.
We have audited the accompanying consolidated balance sheets of Weiner's Stores,
Inc. (Company) as of January 29, 2000 and January 30, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Weiner's Stores,
Inc. at January 29, 2000 and January 30,1999, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
Houston, Texas /s/ Ernst & Young LLP
March 16, 2000
Board of Directors and Stockholders of Weiner's Stores, Inc.
We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity (deficiency) and of cash flows for the twenty-three
weeks ended January 31, 1998 (Successor Company operations) and the thirty weeks
ended August 25, 1997 (Predecessor Company operations) of Weiner's Stores, Inc.
and subsidiary. 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 auditing standards generally accepted
in the United States of America. 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.
As discussed in Notes 1 and 7 to the consolidated financial statements, on
August 13, 1997, the Bankruptcy Court entered an order confirming the plan of
reorganization of Weiner's Stores, Inc., which became effective after the close
of business on August 25, 1997. Accordingly, the accompanying financial
statements have 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 8.
In our opinion, the Successor Company consolidated financial statements present
fairly, in all material respects, the results of its operations and its cash
flows for the twenty-three weeks ended January 31, 1998 in conformity with
accounting principles generally accepted in the United States of America.
Further, in our opinion, the Predecessor Company financial statements referred
to above present fairly, in all material respects, the results of the
Predecessor Company's operations and its cash flows for the thirty weeks ended
August 25, 1997 in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Houston, Texas
March 19, 1998
23
<PAGE>
MARKET AND DIVIDEND INFORMATION AND
RELATED STOCKHOLDER MATTERS
Market Price Information
As of August 17, 1998, the Company's Common Stock began trading on the
Over-the-Counter Bulletin Board Service ("OTC") under the symbol "WEIR." There
was previously no established public trading market for the Common Stock. The
following table sets forth, for each full quarterly period in fiscal year 1998
since trading on the OTC began, the high and low sales price per share of the
Company's Common Stock as reported on the OTC.
2000 High Low
---- ---- ---
1st Quarter (through March 31) $0.41 $0.28
1999 High Low
---- ---- ---
1st Quarter $0.66 $0.19
2nd Quarter 1.19 0.28
3rd Quarter 1.16 $0.47
4th Quarter 0.81 0.38
1998 High Low
---- ---- ---
3rd Quarter $1.50 $0.25
(from August 17, 1998)
4th Quarter 0.28 0.13
The last reported sale price per share of Common Stock as reported on the OTC on
March 31, 2000 was $0.28. As of March 31, 2000, there were 482 holders of record
of the Common Stock. This number does not include stockholders for whom shares
are held in a "nominee" or "street" name.
The Company did not declare or pay any cash dividends with respect to the Common
Stock during fiscal 1999, fiscal 1998 or fiscal 1997. The terms of the Revolving
Credit Agreement prohibit payment of cash dividends on the Common Stock.
Form 10-K
A copy of Form 10-K filed by the Company with the Securities and Exchange
Commission for the fiscal year ended January 29, 2000 may be obtained by
stockholders without charge (except exhibits) upon written request to Raymond J.
Miller, Executive Vice President, Chief Operating Officer and Chief Financial
Officer, at the Executive Offices of the Company.
24
<PAGE>
DIRECTORS
Herbert R. Douglas
Chairman of the Board, President and Chief Executive Officer
Raymond J. Miller
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Secretary
Randall L. Lambert
Managing Director, Chanin Capital Partners
Gasper Mir
President, Mir-Fox & Rodriguez, P.C.
F. Hall Webb
Senior Vice President, Chase Bank of Texas
Melvyn L. Wolff
Chairman of the Board and Chief Executive Officer, Star Furniture
Company
OTHER CORPORATE OFFICERS
James L. Berens
Senior Vice President, Stores
Joseph J. Kassa
Senior Vice President, General Merchandise Manager
John P. Dineen
Vice President, Divisional Merchandise Manager
Michael G. Klaiman
Vice President, Divisional Merchandise Manager
Michael S. Marcus
Vice President, Controller and Treasurer
STOCKHOLDER INFORMATION
Annual Meeting
The Annual Meeting of Stockholders will be held at 8:30 a.m. local time on
Thursday, May 25, 2000 at the executive offices of the Company, 6005 Westview
Drive, Houston, Texas.
Executive Offices Legal Counsel
6005 Westview Drive Weil, Gotshal & Manges LLP
Houston, Texas 77055 700 Louisiana, Suite 1600
Houston, Texas 77002
Independent Auditors Transfer Agent and Registrar
Ernst & Young LLP American Stock Transfer & Trust Company
1221 McKinney, Suite 2400 40 Wall Street
Houston, Texas 77010 New York, New York 10005
25
<PAGE>
Weiner's (R)
Because Everybody Loves A Bargain!
6005 Westview Drive, Houston, Texas 77055
www.weiners.com
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Weiner's Stores, Inc. of our report dated March 16, 2000, included in the
1999 Annual Report to Stockholders of Weiner's Stores, Inc.
/s/ Ernst & Young LLP
April 14, 2000
Houston, Texas
EXHIBIT 24.1
------------
POWER OF ATTORNEY
Herbert R. Douglas hereby designates and appoints Raymond J. Miller
as his attorney-in-fact, with full power of substitution and resubstitution (the
"Attorney-in-Fact"), for him and in his name, place and stead, in any and all
capacities, to execute the annual report on Form 10-K (the "Annual Report") to
be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission
and any amendment(s) to the Annual Report, which amendment(s) may make such
changes in the Annual Report as the Attorney-in-Fact deems appropriate, and to
file the Annual Report and each such amendment to the Annual Report together
with all exhibits thereto and any and all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ Herbert R. Douglas President and Chief March 24, 2000
- ----------------------- Executive Officer and Chairman
Herbert R. Douglas of the Board of Directors
1
<PAGE>
POWER OF ATTORNEY
Raymond J. Miller hereby designates and appoints Herbert R. Douglas
as his attorney-in-fact, with full power of substitution and resubstitution (the
"Attorney-in-Fact"), for him and in his name, place and stead, in any and all
capacities, to execute the annual report on Form 10-K (the "Annual Report") to
be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission
and any amendment(s) to the Annual Report, which amendment(s) may make such
changes in the Annual Report as the Attorney-in-Fact deems appropriate, and to
file the Annual Report and each such amendment to the Annual Report together
with all exhibits thereto and any and all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ Raymond J. Miller Executive Vice President, Chief March 24, 2000
- --------------------- Operating Officer, Chief Financial
Raymond J. Miller Officer, Secretary and Director
2
<PAGE>
POWER OF ATTORNEY
Michael S. Marcus hereby designates and appoints Herbert R. Douglas
and Raymond J. Miller and each of them (with full power to each of them to act
alone) as his attorney-in-fact, with full power of substitution and
resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and
stead, in any and all capacities, to execute the annual report on Form 10-K (the
"Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and
Exchange Commission and any amendment(s) to the Annual Report, which
amendment(s) may make such changes in the Annual Report as either
Attorney-in-Fact deems appropriate, and to file the Annual Report and each such
amendment to the Annual Report together with all exhibits thereto and any and
all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ Michael S. Marcus Vice President, Controller and March 24, 2000
- --------------------- Treasurer
Michael S. Marcus
3
<PAGE>
POWER OF ATTORNEY
Randall L. Lambert hereby designates and appoints Herbert R. Douglas
and Raymond J. Miller and each of them (with full power to each of them to act
alone) as his attorney-in-fact, with full power of substitution and
resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and
stead, in any and all capacities, to execute the annual report on Form 10-K (the
"Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and
Exchange Commission and any amendment(s) to the Annual Report, which
amendment(s) may make such changes in the Annual Report as either
Attorney-in-Fact deems appropriate, and to file the Annual Report and each such
amendment to the Annual Report together with all exhibits thereto and any and
all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ Randall L. Lambert Director March 24, 2000
- ----------------------
Randall L. Lambert
4
<PAGE>
POWER OF ATTORNEY
Gasper Mir hereby designates and appoints Herbert R. Douglas and
Raymond J. Miller and each of them (with full power to each of them to act
alone) as his attorney-in-fact, with full power of substitution and
resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and
stead, in any and all capacities, to execute the annual report on Form 10-K (the
"Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and
Exchange Commission and any amendment(s) to the Annual Report, which
amendment(s) may make such changes in the Annual Report as either
Attorney-in-Fact deems appropriate, and to file the Annual Report and each such
amendment to the Annual Report together with all exhibits thereto and any and
all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ Gasper Mir Director March 24, 2000
- -------------
Gasper Mir
5
<PAGE>
POWER OF ATTORNEY
F. Hall Webb hereby designates and appoints Herbert R. Douglas and
Raymond J. Miller and each of them (with full power to each of them to act
alone) as his attorney-in-fact, with full power of substitution and
resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and
stead, in any and all capacities, to execute the annual report on Form 10-K (the
"Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and
Exchange Commission and any amendment(s) to the Annual Report, which
amendment(s) may make such changes in the Annual Report as either
Attorney-in-Fact deems appropriate, and to file the Annual Report and each such
amendment to the Annual Report together with all exhibits thereto and any and
all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ F. Hall Webb Director March 24, 2000
- ----------------
F. Hall Webb
6
<PAGE>
POWER OF ATTORNEY
Melvyn L. Wolff hereby designates and appoints Herbert R. Douglas and
Raymond J. Miller and each of them (with full power to each of them to act
alone) as his attorney-in-fact, with full power of substitution and
resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and
stead, in any and all capacities, to execute the annual report on Form 10-K (the
"Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and
Exchange Commission and any amendment(s) to the Annual Report, which
amendment(s) may make such changes in the Annual Report as either
Attorney-in-Fact deems appropriate, and to file the Annual Report and each such
amendment to the Annual Report together with all exhibits thereto and any and
all documents in connection therewith.
Signature Title Date
--------- ----- ----
/s/ Melvyn L. Wolff Director March 24, 2000
- -------------------
Melvyn L. Wolff
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements incorporated by reference in the accompanying
Annual Report on Form 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JAN-29-2000
<CASH> 3,336
<SECURITIES> 0
<RECEIVABLES> 1,100
<ALLOWANCES> 0
<INVENTORY> 57,293
<CURRENT-ASSETS> 65,016
<PP&E> 29,013
<DEPRECIATION> 7,967
<TOTAL-ASSETS> 89,674
<CURRENT-LIABILITIES> 29,433
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 49,844
<TOTAL-LIABILITY-AND-EQUITY> 89,674
<SALES> 276,843
<TOTAL-REVENUES> 276,843
<CGS> 187,423
<TOTAL-COSTS> 187,423
<OTHER-EXPENSES> 91,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,107
<INCOME-PRETAX> (3,133)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,133)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,133)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
