<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1999
REGISTRATION NO. 333-72693
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DAVID'S BRIDAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 5632 65-0214563
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
44 WEST LANCASTER AVENUE, SUITE 250
ARDMORE, PA 19003
(610) 896-2111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN ERLBAUM
CHAIRMAN OF THE BOARD
44 WEST LANCASTER AVENUE, SUITE 250
ARDMORE, PA 19003
(610) 896-2111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
ALAN SINGER SARAH BESHAR
MORGAN, LEWIS & BOCKIUS LLP DAVIS POLK & WARDWELL
1701 MARKET STREET 450 LEXINGTON AVENUE
PHILADELPHIA, PA 19103-2921 NEW YORK, NY 10017
(215) 963-5000 (212) 450-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
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SUBJECT TO COMPLETION -- APRIL 28, 1999
PROSPECTUS
, 1999
[DAVID'S BRIDAL, INC. LOGO]
8,000,000 SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
DAVID'S BRIDAL, INC.:
- We are the largest retailer of bridal gowns and bridal-related
apparel in the United States.
- David's Bridal, Inc.
44 West Lancaster Avenue, Suite 250
Ardmore, PA 19003
(610) 896-2111
PROPOSED SYMBOL AND MARKET:
- DABR/NASDAQ NATIONAL MARKET
THE OFFERING:
- - We are offering 1,613,000 of the shares and existing shareholders are
offering 6,387,000 of the shares.
- - The underwriters have an option to purchase an additional 322,581
shares from us and 877,419 shares from the selling shareholders to
cover over-allotments.
- - This is our initial public offering, and no public market currently
exists for our shares.
- - We plan to use the proceeds from this offering to repay bank debt, to
fund new store growth, for capital expenditures and for general
corporate purposes. We will not receive any proceeds from the shares
sold by the selling shareholders.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Per Share Total
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<S> <C> <C>
Public offering price (Estimated): $14.50 - $16.50 $
Underwriting fees:
Proceeds to David's Bridal:
Proceeds to selling shareholders:
- ------------------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE LEGG MASON WOOD WALKER
INCORPORATED
The undersigned is facilitating Internet distribution.
DLJdirect INC.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.............. 3
Risk Factors.................... 8
Forward-Looking Statements...... 15
Use of Proceeds................. 16
Dividend Policy................. 16
Capitalization.................. 17
Dilution........................ 18
Selected Consolidated Historical
Financial and Operating
Data.......................... 19
Management's Discussion and
Analysis of Financial
Conditions and Results of
Operations.................... 21
Business........................ 29
Management...................... 39
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Certain Relationships and
Related Transactions.......... 45
Principal and Selling
Shareholders.................. 46
Description of Capital Stock.... 49
Shares Eligible for Future
Sale.......................... 51
Underwriting.................... 53
Legal Matters................... 55
Experts......................... 55
Available Information........... 55
Reports to Security Holders..... 55
Index to Consolidated Financial
Statements.................... F-1
</TABLE>
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully.
DAVID'S BRIDAL
OVERVIEW
We are a leading retailer of bridal gowns and bridal-related apparel and
accessories in the United States. We believe that we are the largest bridal
retailer in terms of sales, operating 81 stores in 30 states as of April 3,
1999. We have created a distinctive shopping experience designed to attract a
majority of potential bridal customers. We provide our customers with excellent
value by offering a broad, in-stock assortment of bridal gowns and
bridal-related apparel at popular prices, together with service designed to
exceed customers' expectations.
Our broad in-stock assortments enable us to offer the convenience of
one-stop shopping for the bridal party, including brides, bridesmaids,
mothers-of-the-bride and -groom and flower girls. We also offer a variety of
special occasion dresses and accessories for events such as proms, pageants,
homecomings and other formal affairs. We believe that the breadth and depth of
our in-stock assortments in our primary bridal and bridal-related products far
exceeds those of other bridal retailers. This belief is based upon our knowledge
of the bridal business derived from discussions with manufacturers, our
principal suppliers and customers. Our in-house staff coordinates the design
and, through a Hong Kong-based joint venture, procures virtually all of our
bridal gowns. This results in lower product costs and a shorter time period
between order and delivery than we have experienced in the past and allows us to
frequently update our product assortment. Our merchandising strategy is to
target customers across a wide range of income levels and offer apparel of
excellent value at everyday prices typically ranging from $99 to $899. We
recognize that the bridal customer expects a higher level of customer service
than the typical retail customer. We seek to exceed our customers' expectations
for service by providing attentive and knowledgeable sales assistance,
convenient store design and extended hours of operation relative to other bridal
retailers.
In mid-1995, we commenced key initiatives which we continue to build upon
to increase profitability and support controlled growth. While the immediate
effect was decreased profitability in fiscal 1996, we believe that these
measures have facilitated controlled growth and enhanced profitability in fiscal
1997 and fiscal 1998. We have achieved comparable store sales growth of 13.2% in
fiscal 1997, 18.8% in fiscal 1998 and 26.5% in the first quarter of fiscal 1999.
In addition, our total revenues increased by 36.7% in fiscal 1997, 44.7% in
fiscal 1998 and 51.1% in the first quarter of fiscal 1999, and our operating
margin increased from 5.5% in fiscal 1997 to 7.9% in fiscal 1998 and from 13.1%
in the first quarter of fiscal 1998 to 13.5% in the first quarter of fiscal
1999.
INDUSTRY OVERVIEW
We believe the bridal market is highly fragmented, with approximately 7,500
stores nationwide and estimate that less than five percent of bridal retailers
operate more than one store. We estimate the domestic market for the various
apparel and accessories purchased by brides, bridesmaids and other members of
the bridal party to be in excess of $4 billion per year. Historically, no
retailer has been dominant in the bridal retailing industry.
Most bridal retailers are small and do not have significant bargaining
power with the manufacturers of bridal apparel. As a result, the manufacturers
dictate the styles that will be available to the retailers and require retailers
to make a significant investment in samples of those styles during each selling
season. Typically, bridal apparel retailers offer a limited selection of bridal
gowns and bridesmaid dresses and provide samples in only the most common sizes,
8 and 10. In
3
<PAGE> 5
general, customers are not able to purchase bridal gowns or bridesmaid dresses
off-the-rack. The majority of bridal gown purchases are made by placing a
substantial deposit to order the gown, waiting up to 20 weeks for delivery, and
tailoring the fit of the gown through multiple fittings and alterations. These
factors can make the bridal shopping experience time consuming, inconvenient and
stressful.
KEY COMPETITIVE STRENGTHS
Largest Bridal Apparel Retailer. Our size enables us to spread fixed
operating and marketing expenses over a larger revenue base, advertise
nationally, and offer one-stop shopping to the bridal party.
Unique Merchandising Strategy. Our merchandising strategy is to offer the
broadest in-stock selection of bridal-related apparel in sizes 2 through 26, and
special occasion dresses, headpieces, shoes, handbags and accessories to outfit
the entire bridal party. This enables our customers to try on, purchase and take
their gowns home on the same day.
Control of Product Design, Procurement and Distribution. We control the
production process for a majority of our products from design through
distribution. Our in-house design staff and direct relationships with
manufacturers result in lower product costs, shorter time periods between order
and delivery and a continuous flow of updated merchandise to our stores
throughout the year.
Superior Customer Service. Our objective is to exceed our customers'
expectations for service. Purchasing a wedding gown is an emotional experience,
and we devote significant effort to developing an attentive and knowledgeable
sales staff.
GROWTH STRATEGY
We believe we are well positioned to capitalize on growth opportunities and
can achieve profitable and controlled growth through opening new stores and
increasing sales productivity of existing stores. We plan to continue to
diversify geographically throughout the United States by opening 22 stores in
new and existing markets in fiscal 1999 and 22-25 stores in fiscal 2000. We also
seek to increase the sales productivity of existing stores by using our
multi-media marketing strategy to promote David's Bridal as the dominant
national brand name in bridal retailing. In addition, we strive to create a
favorable experience for the bride to encourage referrals to additional members
of the bridal party and other brides-to-be and, as a result, increase sales.
RISK FACTORS
Our business will be adversely affected if, among other things, we do not
effectively manage our growth, offer products that are accepted by our
customers, and obtain sufficient quantities of merchandise on a cost-effective
basis. There is strong competition in our industry. We compete with local bridal
stores, regional chains and bridal warehouses on the basis of reputation,
service and price. We also compete with department stores that may have greater
financial and other resources than we do. These and other risks are addressed
under the caption "Risk Factors" beginning on page 8 of this prospectus.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by:
David's Bridal....................... 1,613,000 shares
The selling shareholders............. 6,387,000 shares
-----------------
Total........................... 8,000,000 shares
Common stock to be outstanding after this
offering................................ 19,041,827 shares
Proposed Nasdaq National Market Symbol.... DABR
</TABLE>
- ------------------------
The table above includes 145,162 shares to be sold in the offering, which
are to be issued immediately prior to completion of the offering in connection
with the exercise of stock options. The table above excludes an aggregate of
1,256,388 shares issuable upon exercise of stock options outstanding at April 3,
1999, plus an additional 1,048,450 shares reserved for issuance in connection
with future stock options and other awards under our stock option plan. See
"Management--Stock Option Plan".
------------------------
We are a successor to a bridal retailing business that began in Ft.
Lauderdale, Florida in 1950 and were incorporated in Florida in 1990. Our
principal executive offices are located at 44 West Lancaster Avenue, Suite 250,
Ardmore, Pennsylvania 19003. Our telephone number is (610) 896-2111. Our world
wide web address is http:/www.davidsbridal.com. OUR WEB SITE IS NOT PART OF THIS
PROSPECTUS.
------------------------
Generally, the information in this prospectus:
- assumes that the over-allotment option is not exercised
- gives effect to a 1.473 for 1 common stock split that occurred on April
23, 1999 for all periods
- unless otherwise noted, reflects the conversion of all outstanding shares
of class A, B, C and D preferred stock into an aggregate of 7,543,817
shares of common stock at the closing of this offering
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS EXCEPT PER SHARE, NET SALES PER SQUARE FOOT AND
NUMBER OF STORES DATA)
Our fiscal year consists of 52 or 53 weeks, ends on a Saturday near
December 31 and is named for the calendar year ending on that December 31. All
fiscal years presented include 52 weeks of operations except for fiscal 1996,
which includes 53 weeks of operations.
You should read the following summary consolidated financial and operating
data together with Management's Discussion and Analysis of Financial Condition
and Results of Operations and our consolidated financial statements and related
notes included elsewhere in this prospectus.
In addition, when reading this summary, you should be aware that:
- diluted earnings per share assumes that preferred stock has been
converted at historical conversion rates
- comparable store sales include net sales plus alterations income
- stores that have been relocated within the same market are considered
comparable stores and stores become comparable in the first month
following 12 full months of operation
- average net sales per square foot includes net sales plus alterations
income for stores open for the entire period indicated
- net sales per square foot is calculated by dividing net sales plus
alterations income by the total square footage of stores open for the
entire period indicated
- pro forma, as adjusted, balance sheet data gives effect to the exercise
of stock options to purchase 145,162 shares of common stock and the sale
of the shares offered by us at an assumed initial public offering price
of $15.50 less applicable discounts, commissions and expenses, and the
repayment of bank debt with a portion of these proceeds
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
FISCAL YEAR -------------------
------------------------------------------------ APRIL 4, APRIL 3,
1994 1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $27,523 $45,453 $62,836 $85,381 $123,540 $35,628 $54,087
Other income, primarily
alterations and third party
promotional fees........... 1,331 2,634 4,188 6,228 9,062 1,969 2,717
Total revenues............. 28,854 48,087 67,024 91,609 132,602 37,597 56,804
Gross profit, net of buying,
distribution and occupancy
costs...................... 14,258 21,569 26,287 38,727 57,991 17,461 27,835
Selling, general and
administrative expenses.... 11,930 19,114 26,424 33,702 47,571 12,532 20,191
Income (loss) from
operations................. 2,328 2,455 (137) 5,025 10,420 4,929 7,644
Interest expense, net......... 491 467 586 1,249 1,087 309 272
Net income (loss)(a).......... 1,107 700 (515) 2,480 5,755 2,823 4,570
Net income (loss) per common
share (a):
Basic...................... $ 0.08 $ 0.06 $ (0.05) $ 0.25 $ 0.59 $ 0.29 $ 0.47
Diluted.................... $ 0.08 $ 0.04 $ (0.05) $ 0.14 $ 0.31 $ 0.15 $ 0.25
Weighted average shares
outstanding:
Basic...................... 13,743 12,153 10,207 9,849 9,751 9,784 9,740
Diluted.................... 14,702 16,791 10,207 17,472 18,375 18,359 18,614
Pro forma basic earnings per
common share(b)............ $ 0.33 $ 0.26
Pro forma basic weighted
average shares
outstanding(b)............. 17,295 17,284
</TABLE>
6
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<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
FISCAL YEAR -------------------
------------------------------------------------ APRIL 4, APRIL 3,
1994 1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
STORE DATA:
Number of stores, end of
period..................... 23 36 48 59 77 63 81
Total square feet, end of
period..................... 200 328 455 569 766 619 812
Comparable store sales
increase................... 20.9% 11.3% 0.5% 13.2% 18.8% 25.3% 26.5%
Average net sales per store... $ 1,816 $ 1,769 $ 1,672 $ 1,803 $ 2,023 $ 613 $ 723
Net sales per square foot..... $ 193 $ 204 $ 184 $ 190 $ 207 $ 63 $ 73
OPERATING DATA:
Gross profit margin, net of
buying, distribution and
occupancy costs............ 49.4% 44.9% 39.2% 42.3% 43.7% 46.4% 49.0%
Selling, general and
administrative expense
percentage................. 41.3% 39.8% 39.4% 36.8% 35.8% 33.3% 35.5%
Operating income (loss)
margin..................... 8.1% 5.1% (0.2)% 5.5% 7.9% 13.1% 13.5%
Capital expenditures.......... $ 1,109 $ 5,029 $ 4,931 $ 7,470 $ 8,105 $2,121 $ 3,361
Depreciation and amortization,
excluding amortization of
debt discount and debt
issuance costs............. $ 284 $ 632 $ 1,393 $ 2,022 $ 2,896 $ 645 $ 887
</TABLE>
<TABLE>
<CAPTION>
APRIL 3, 1999
----------------------
PRO FORMA
AS
ACTUAL ADJUSTED
<S> <C> <C>
BALANCE SHEET DATA:
Inventories............................................... $35,339 $35,339
Working capital........................................... 18,545 35,210
Total assets.............................................. 68,242 83,340
Long-term debt and capital lease obligations, excluding
current portion........................................ 9,974 2,974
Shareholders' equity...................................... 31,808 54,536
</TABLE>
- -----------------------------
(a) Fiscal 1995 reflects a net loss of $550 from early extinguishment of debt,
net of income tax benefit of $323. Net income before extraordinary item for
fiscal year 1995 was $0.10 per common share (basic) and $0.07 per common
share (diluted).
(b) Reflects the conversion of all outstanding shares of class A, B, C and D
preferred stock into an aggregate of 7,543,817 shares of common stock upon
the consummation of this offering.
7
<PAGE> 9
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in shares of our common stock.
RISKS RELATING TO OUR BUSINESS:
IF WE ARE NOT ABLE TO EFFECTIVELY MANAGE OUR GROWTH, OUR PROFITABILITY WILL BE
MATERIALLY ADVERSELY AFFECTED
Our strategy is designed to enhance profitability by increasing sales in
existing stores and generating sales in new stores. However, we must
successfully manage our growth to realize this strategy. Our growth will be
adversely affected if we are unable to:
- identify suitable markets and sites for new stores
- negotiate leases on acceptable terms
- maintain levels of service that are expected by customers
- provide a diverse inventory of bridal gowns and flower girl, bridesmaid,
mothers-of-the-bride and -groom and other special occasion dresses,
accessories and other product offerings in attractive styles
- avoid reducing sales and profitability at existing stores when opening
new stores in the same region or market area
- offer prices that appeal to a broad range of consumers
- manage inventory on an effective basis
- deliver products on a timely basis
- test new product offerings on an effective basis
- hire, train and retain competent managers and personnel capable of
providing high levels of customer service
- improve, upgrade and expand our infrastructure to accommodate our growth
- expand our distribution facility or add additional distribution
facilities, as necessary
Our profitability will be materially adversely affected if we are unable to
successfully manage our growth.
IF OUR MANAGEMENT INFORMATION SYSTEMS ARE DISRUPTED OR WE ARE NOT ABLE TO
EFFECTIVELY UPGRADE AND EXPAND OUR MANAGEMENT INFORMATION SYSTEMS, OUR
PROFITABILITY, BUSINESS OPERATIONS AND EXPANSION WILL BE ADVERSELY AFFECTED
We depend on management information systems for all major aspects of our
business. We will be materially adversely affected if our management information
systems are disrupted or we are unable to improve, upgrade and expand our
systems on an effective basis. Our expansion strategy may be adversely affected
if we are not able to successfully expand our current hardware and network
infrastructure, including the development of a communications infrastructure and
the creation of data warehouses for store, marketing and customer information to
improve controls and enhance sales and operational capabilities. We cannot
assure you that our planned expansion or upgrades will be completed on a timely
basis and successfully. See "Business--Management Information Systems."
IF WE ARE NOT ABLE TO ANTICIPATE AND RESPOND TO CONSUMER DEMAND, WE WILL BE
COMPELLED TO REDUCE PRICES AND MAY BE LEFT WITH EXCESS INVENTORY, AND THIS WILL
MATERIALLY ADVERSELY AFFECT OUR SALES AND PROFITABILITY
Our success will depend on our ability to anticipate and respond to
consumer demand. We must identify and respond to changing consumer preferences
with respect to bridal gowns and related bridal wear, accessories and our other
product offerings. Fashion trends can be volatile. This is particularly true for
bridesmaid and special occasion dresses. Our success depends on our ability to
anticipate and effectively respond to these trends. If we do not provide
merchandise that is desired by a sufficient number
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of customers, we will be compelled to reduce prices and we may be left with
excess inventory. Our sales and profitability will be materially adversely
affected if we do not anticipate and effectively respond to customer demands.
IF OUR ASIAN MANUFACTURERS ARE NOT ABLE TO PROVIDE US WITH SUFFICIENT
MERCHANDISE TO MEET CUSTOMER DEMAND OR IF OUR IMPORTS ARE DISRUPTED, OUR SALES
AND PROFITABILITY WILL BE MATERIALLY ADVERSELY AFFECTED
Substantially all of our bridal gowns and flower girl dresses are
manufactured in Asia. Substantially all of our other product offerings are
currently manufactured domestically. We may in the future seek to manufacture a
portion of this apparel internationally. Our sales and profitability could be
materially adversely affected by our reliance on international manufacturing.
Some of the risks in manufacturing overseas include:
- changes in laws and regulations
- compliance with labor laws and ethical standards
- tariffs, quotas and other trade barriers
- work stoppages
- political and financial instability
- fluctuations in currency exchange rates
- increases in freight costs
Virtually all of our bridal gowns are manufactured in China. There have
been a number of recent trade disputes between China and the United States
during which the Unites States has threatened to impose punitive tariffs and
duties on products imported from China and to withdraw China's "most favored
nation" trade status. Since a substantial portion of our total revenues is
derived from the sale of bridal gowns, we are particularly vulnerable to the
risk of loss of the most favored nation status for China, changes in the current
tariff or duty structures or the adoption by the United States of other trade
policies or sanctions adverse to China.
In addition, the violation of labor laws by an independent manufacturer, or
the divergence of a manufacturer's labor practices from those generally accepted
as ethical in the United States, could have a material adverse effect on our
image and reputation and as a result, adversely effect our sales and
profitability. We cannot control the actions of our manufacturers and we cannot
assure you that they will conduct their business using ethical labor practices.
Furthermore, our import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries. These agreements and other applicable treaties impose quotas on the
amounts and types of merchandise which may be imported into the United States
from these countries. These agreements and other applicable treaties also allow
the United States to impose restraints at any time on the importation of
categories of merchandise that, under the terms of the agreements, are not
currently subject to specified limits. Our sales and profitability may be
materially adversely affected if the United States or the countries in which our
products are produced impose new quotas, duties, tariffs or other restrictions,
or adversely adjust the prevailing quota, duty or tariff levels.
WE RELY ON OUR JOINT VENTURE PARTNER TO INSURE THE QUALITY OF IMPORTED GOODS,
AND OUR QUALITY CONTROL COULD BE NEGATIVELY AFFECTED IF OUR JOINT VENTURE
PARTNER DOES NOT PERFORM ACCEPTABLY
We depend on our Hong Kong based joint venture to handle our relationships
with international manufacturers of our bridal wear. The quality of our product
may be materially adversely affected if our joint venture partner does not
perform its responsibilities on an acceptable basis or terminates our
relationship and we are unable to replace our joint venture partner on a prompt
basis. See note 5 to our consolidated financial statements. This joint venture
is equally owned by us and one of our shareholders, Addwood Limited. We handle
negotiations with the manufacturers with respect to basic economic terms
9
<PAGE> 11
and product design. We depend on our joint venture partner to identify suitable
manufacturers and insure that our manufacturers are meeting design
specifications, adhering to shipping requirements and complying with our
business standards.
IF OUR MANUFACTURERS, MANY OF WHOM HAVE LIMITED RESOURCES, ARE UNABLE TO
SUPPORT THE CONTINUED EXPANSION OF OUR BUSINESS, OUR SALES AND PROFITABILITY
WILL BE MATERIALLY ADVERSELY AFFECTED
Many of the third parties we use to manufacture our apparel have limited
resources, production capabilities and operating histories. These manufacturers
may be unable to support the continued expansion of our business. Our
relationships with our manufacturers are not on a contractual basis and do not
assure adequate supply or quality or acceptable pricing on a long-term basis. A
manufacturer could discontinue selling to us at any time. Our sales and
profitability may be materially adversely affected if we are unable to promptly
replace a manufacturer who is unwilling or unable to satisfy our requirements.
IF WE ARE NOT ABLE TO MAINTAIN OUR COMPARABLE STORE SALES GROWTH OR PREVENT
FLUCTUATIONS IN COMPARABLE STORE SALES, OUR PROFITABILITY MAY BE MATERIALLY
ADVERSELY AFFECTED
Our comparable store sales have fluctuated significantly in the past.
Comparable store sales will continue to fluctuate. Comparable store sales may be
affected by many factors, including:
- competition and economic conditions
- fashion trends
- weather conditions
- new store openings in existing markets
- procurement and management of merchandise inventory
- customer response to new and existing styles
- store relocations
We are not likely to maintain comparable store sales growth at our current
levels. Our profitability may be materially adversely affected by declines and
fluctuations in our comparable store sales.
IF OUR FINANCIAL RESULTS DO NOT MEET EXPECTATIONS AS A RESULT OF FLUCTUATIONS
IN OUR QUARTERLY FINANCIAL RESULTS, THE MARKET PRICE OF OUR COMMON STOCK IS
LIKELY TO DECLINE
Our financial results may substantially fluctuate during any reporting
period due to a number of factors. Historical trends indicate that our sales are
typically highest from January through April and lowest from October through
December. Our financial results may also fluctuate as a result of:
- performance of new and existing stores
- pre-opening expenditures for new stores
- the timing of new store openings
- the timing of holidays
- competition and economic conditions
- fashion trends
- weather conditions
- procurement and management of merchandise inventory
- customer response to new and existing styles
10
<PAGE> 12
Our expenditures for inventory, personnel and other pre-opening items for
new stores may adversely affect period-to-period financial results. New stores
may fail to generate sales as promptly as planned. New stores may also depress
sales in our other stores that are located in the same regions or market areas.
Our financial results may not meet the expectations of analysts and
investors. The market price of our common stock is likely to decline when we do
not meet these expectations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Quarterly Results and
Seasonality."
IF ADDITIONAL FINANCING IS NOT AVAILABLE, WE MAY BE UNABLE TO RESPOND TO
COMPETITIVE PRESSURES OR UNANTICIPATED REQUIREMENTS
Our business may be adversely affected if the unavailability of additional
financing prevents us from responding to competitive pressures or unanticipated
requirements. We may need additional financing if we accelerate our expansion
program or our operating results decline. Additional funds may also be necessary
to respond to competitive pressures or unanticipated requirements. Additional
financing may not be available on satisfactory terms or at all. Any additional
equity financing may cause investors to experience dilution. Any debt financing
may result in restrictions on our spending or payment of dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
IF WE ARE NOT ABLE TO RETAIN OR REPLACE OUR KEY PERSONNEL, OUR BUSINESS MAY BE
MATERIALLY ADVERSELY AFFECTED
Our success will depend on the continued employment of our executive
management team after this offering. If one or more members of our management
team do not continue in their present positions, our business could be
materially adversely affected.
Steven H. Erlbaum, our Chairman and Chief Executive Officer, will resign
from his position as Chief Executive Officer upon the closing of this offering.
Robert D. Huth, our President and Chief Operating Officer, will also become our
Chief Executive Officer upon the closing of this offering. Although Mr. Huth has
been primarily responsible for running our day-to-day operations since joining
us in 1995, we will be materially adversely affected if Mr. Huth is unable to
assume these added responsibilities on a timely and effective basis. See
"Management -- Executive Officers and Directors."
We have employment agreements with Robert D. Huth and with Philip Youtie
that will become effective upon completion of this offering. Mr. Huth's
employment agreement will provide for a three year term. Mr. Youtie's employment
agreement will provide for a two year term. In addition, effective following
completion of this offering, Steven H. Erlbaum will become a consultant to us.
We will have a three year consulting agreement with Steven H. Erlbaum. We have
no employment or consulting agreement with any of our other employees or
consultants. See "Management -- Employment and Consulting Agreements."
Our expansion strategy will depend on our ability to hire capable managers
and other store level personnel. The need for such personnel is particularly
important because purchasers of bridal wear typically expect a high level of
service and attentiveness. We will be materially adversely affected if we do not
hire capable store managers and other store level personnel.
IF OUR SYSTEMS ARE NOT YEAR 2000 COMPLIANT, WE MAY NOT BE ABLE TO CONDUCT
NORMAL BUSINESS ACTIVITIES
Historically, many computerized systems have used two digits rather than
four to define the applicable year. Computer equipment and software and devices
with imbedded technology that are time-sensitive may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in system failure
or miscalculations. This problem is generally referred to as the "Year 2000
issue."
As a result of the Year 2000 issue, possible adverse consequences to our
business include the inability to engage in normal business activities resulting
from one or more of the following:
- loss of communications links with one or more of our store locations
11
<PAGE> 13
- disruptions in the movement of inventory to and from our distribution
center and between store locations
- failure of our inventory management systems
- the inability to process transactions with customers
- the inability to send purchase orders
- the inability to fulfill customer orders in a timely fashion
- failure of our vendors to provide us with suitable products
- failure of our credit card processors to correctly process customer
transactions
- failure of our telecommunications service
Not all of our information systems are Year 2000 compliant and not all of
the third parties with whom we conduct our business have indicated that their
information systems are Year 2000 compliant. If we and these third parties do
not effectively change, or replace, our management information systems to make
them Year 2000 compliant, our business will be materially adversely affected. We
discuss the impact that the Year 2000 issue may have on our business, our
expected costs to address our Year 2000 issues and our contingency plans in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus.
RISKS RELATING TO OUR INDUSTRY:
A DETERIORATION OF ECONOMIC CONDITIONS COULD HAVE A NEGATIVE IMPACT ON OUR
BUSINESS, SALES AND PROFITABILITY
Our business, sales and profitability could be materially adversely
affected by unfavorable economic conditions. Purchases of bridal wear and
accessories may decline during recessionary periods. Prices that consumers may
be willing to pay for bridal wear and accessories may be lower during times of
economic duress. Our business, sales and profitability will likely be materially
adversely affected by a deterioration in general economic conditions.
IF WE ARE UNABLE TO RESPOND TO COMPETITION IN THE BRIDAL WEAR BUSINESS, OUR
SALES AND PROFITABILITY MAY BE ADVERSELY AFFECTED
The retail bridal wear business is highly competitive. We compete with
local stores, regional chains and bridal warehouses that may have an established
following in a community. We also compete with department stores that may also
sell through catalogs and that have substantially greater financial and other
resources. Specialty stores and a larger number of department stores provide
additional competition in the sale of bridesmaid and special occasion dresses.
Many retailers of other products that follow a growth strategy similar to
ours rely on large selections and comparatively low prices to compete. However,
the purchase of bridal wear is a very personal and emotional decision. We must
provide a high level of service to compete effectively. Our business, sales and
profitability will be materially adversely affected if we do not compete
successfully. See "Business--Competition in the Bridal Industry."
RISKS RELATING TO THIS OFFERING:
BECAUSE A SMALL NUMBER OF SHAREHOLDERS MAY CONTROL ALL MAJOR CORPORATE
DECISIONS DUE TO SIGNIFICANT OWNERSHIP CONCENTRATION OF OUR COMMON STOCK, OUR
OTHER SHAREHOLDERS MAY NOT BE ABLE TO INFLUENCE ANY OF THESE CORPORATE DECISIONS
Our major shareholders will have the power to elect our board of directors
and approve actions requiring the approval of the majority of our shareholders
if they decide to act together. Upon the consummation of this offering, Steven
H. Erlbaum, Michael C. Erlbaum, Gary E. Erlbaum, Philip Youtie,
12
<PAGE> 14
and Steven J. Sidewater, together with members of their immediate family, trusts
for the benefit of members of their immediate family, and family partnerships in
which members of their immediate family are partners, will own 8.8%, 2.3%, 6.6%,
6.2% and 3.3%, respectively, of our outstanding common stock. The Clipper Group
partnership will own 24.9% of our outstanding common stock. These shareholders
will own 52.1% in the aggregate. Steven, Michael and Gary Erlbaum are brothers
and directors. The interests of these significant shareholders could conflict
with the interests of our other shareholders.
SINCE OUR COMMON STOCK HAS NEVER BEEN PUBLICLY TRADED, WE CANNOT PREDICT THE
EXTENT TO WHICH A TRADING MARKET WILL DEVELOP FOR OUR COMMON STOCK, OR WHETHER
YOU WILL BE ABLE TO SELL YOUR STOCK
There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how liquid that market
might become. The initial public offering price will be determined by
negotiations between representatives of the underwriters, the selling
shareholders and us and may not be indicative of prices that will prevail in the
trading market.
ANTI-TAKEOVER PROVISIONS COULD DELAY OR PREVENT A SALE OF DAVID'S BRIDAL,
WHICH MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK
We are a Florida corporation. There are anti-takeover provisions of Florida
law that could make it more difficult for a third party to acquire control of
our company, even if such a change in control would be beneficial to our
shareholders. Our articles of incorporation divide our board into three classes
and provide that our board of directors may issue preferred stock without
shareholder approval. The existence of a classified board or issuance of
preferred stock could make it more difficult for a third party to acquire our
company.
IF OUR SHAREHOLDERS SELL SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK, INCLUDING
SHARES ISSUED UPON THE EXERCISE OF OUTSTANDING OPTIONS, IN THE PUBLIC MARKET
FOLLOWING THIS OFFERING, THEN THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE
Restrictions under the securities laws and lock-up agreements signed by
several of our significant shareholders limit the number of shares of common
stock available for sale in the public market. Effective upon completion of this
offering, the holders of 11,041,827 shares of common stock and options
exercisable into an aggregate of 729,800 shares of common stock have agreed,
subject to some exceptions, not to sell any such securities for 180 days after
this offering without the prior written consent of Donaldson, Lufkin and
Jenrette Securities Corporation.
Following completion of the offering, holders of 11,041,827 shares of
common stock will have demand and piggy-back registration rights. The demand
registration rights may only be exercised by The Clipper Group, but all holders
of registration rights are permitted to include shares in the demand offering on
the same basis as The Clipper Group. The exercise of such rights could adversely
affect the market price of our common stock. We plan to file a registration
statement to register all shares of common stock under our stock option plan.
After such registration statement is effective, shares issued upon exercise of
stock options will be eligible for resale in the public market without
restriction.
THIS OFFERING WILL BENEFIT OUR CURRENT SHAREHOLDERS
Our current shareholders, including members of management, will recognize
significant benefits from this offering. These benefits include the creation of
a public market for our common stock which will allow some of our existing
shareholders to sell shares in this offering and enable our shareholders to
liquidate their investments in the future. The selling shareholders, including
our Chairman and President and several members of our board of directors, will
sell a significant number of shares in this offering. The excess of the initial
public offering price over amounts paid for common stock being sold by the
selling shareholders that are our executive officers and directors, together
with members of their immediate family, trusts for the benefit of members of
their immediate family, and family partnerships in which members of their
immediate family are partners, including the amounts payable upon the exercise
of stock options, is
13
<PAGE> 15
approximately $47.6 million, or $15.19 per share based on an assumed offering
price of $15.50 per share. The excess of the initial public offering price over
amounts paid for common stock held by our executive officers and directors,
together with members of their immediate family, trusts for the benefit of
members of their immediate family, and family partnerships in which members of
their immediate family are partners, following completion of this offering is
approximately $80.8 million, or $14.88 per share based on an assumed offering
price of $15.50 per share.
14
<PAGE> 16
FORWARD-LOOKING STATEMENTS
This prospectus contains forward looking statements under the captions
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and elsewhere in this
prospectus. These forward-looking statements include statements about the
following:
- the competitiveness of the bridal industry
- the future availability and prices of materials used in our business
- our business and growth strategies and other statements contained herein
that are not historical facts
When used in this prospectus, the words "anticipate," "believe," "estimate"
and similar expressions are generally intended to identify forward-looking
statements. There are important factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements, including:
- changes in general economic and business conditions and those in the
bridal industry in particular
- actions of competitors
- our ability to recover our costs in the pricing of our products
- the extent to which we are able to develop new products and expand our
business into new markets
- our inability to effectively manage our growth
- the level of demand for our products
- changes in our business strategies
- developments in international markets
- our inability to obtain financing when required
- other factors discussed under "Risk Factors"
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds we will receive from the sale of 1,613,000 shares in this
offering will be approximately $22.0 million. This is based upon an assumed
initial public offering price of $15.50 per share, after deducting underwriting
discounts and commissions and estimated offering expenses payable by us. We will
not receive any proceeds from the sale of shares of common stock by the selling
shareholders.
We intend to use approximately $6.0 million of the net proceeds to fund new
store growth, $3.5 million for improvements to existing stores, $1.2 million for
various capital investment activities, $825,000 for the introduction of a new
warehouse management system and the balance of the net proceeds to repay the
outstanding balance under our revolving credit agreement and for general
corporate purposes. Pending such uses, we will invest the net proceeds of this
offering in short-term, investment grade securities. The outstanding balance
under our revolving credit agreement was $7.0 million on April 3, 1999.
Borrowings under the revolving credit agreement bear interest at variable rates
which averaged 6.2% at April 3, 1999. We may reborrow amounts under our
revolving credit agreement, which will be available for future borrowings
through July 31, 2001.
DIVIDEND POLICY
We have not paid cash dividends on our common stock since converting from a
subchapter S-corporation in 1993. We currently intend to retain all future
earnings to fund the development and growth of our business. We do not currently
anticipate paying any cash dividends. Future decisions regarding cash dividends
on our common stock will be made by our board of directors. These decisions will
depend on our results of operations, financial position, capital requirements,
general business conditions and restrictions imposed by any financing
arrangements. Our revolving credit agreement currently prohibits the payment of
dividends. We may also face legal and regulatory restrictions on the payment of
dividends.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth our actual, pro forma and pro forma, as
adjusted, capitalization. Our pro forma capitalization gives effect to:
- the conversion of all outstanding shares of preferred stock into an
aggregate of 7,543,817 shares of common stock upon the consummation of
this offering;
- the issuance of 145,162 shares to be sold in the offering, which are to
be issued immediately prior to completion of the offering in connection
with the exercise of stock options for an aggregate purchase price of
$714,197.
Our pro forma, as adjusted, capitalization gives effect to the pro forma
adjustments and:
- the sale of the 1,613,000 shares of common stock offered by us; and
- the application of the estimated net proceeds based on an assumed initial
public offering price of $15.50 per share.
<TABLE>
<CAPTION>
AS OF APRIL 3, 1999
-----------------------------------
PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents.................................. $ 1,946 $ 2,660 $17,981
Short-term debt, including current portion of capitalized
lease obligations........................................ $ 401 $ 401 $ 401
======= ======= =======
Capitalized lease obligations, less current portion........ 752 752 752
Long-term debt............................................. 9,222 9,222 2,222
------- ------- -------
Total long-term debt............................. 9,974 9,974 2,974
------- ------- -------
Shareholders' equity:
Preferred stock, par value $0.01 per share; 1,850,000
shares authorized actual; 5,000,000 shares authorized
pro forma and pro forma, as adjusted; 171,792 shares
of class A preferred stock; 114,104 shares of class B
preferred stock; 114,104 shares of class C preferred
stock; and 686,402 shares of class D preferred stock
issued and outstanding actual; no shares issued and
outstanding pro forma and pro forma, as adjusted...... 11 -- --
Common stock, par value $0.01 per share; 100,000,000
shares authorized; 9,739,848 shares issued and
outstanding actual; 17,428,827 shares issued and
outstanding pro forma and 19,041,827 shares issued and
outstanding pro forma, as adjusted.................... 97 174 190
Additional paid-in capital............................... 18,282 18,930 40,928
Retained earnings........................................ 13,418 13,418 13,418
------- ------- -------
Total shareholders' equity............................ 31,808 32,522 54,536
------- ------- -------
Total capitalization............................. $41,782 $42,496 $57,510
======= ======= =======
</TABLE>
The table above excludes an aggregate of 1,256,388 shares issuable upon
exercise of stock options outstanding at April 3, 1999, plus an additional
1,048,450 shares reserved for issuance in connection with future stock options
and other awards under our stock option plan. See note 10 to our consolidated
financial statements.
17
<PAGE> 19
DILUTION
The dilution table sets forth our net tangible book value after giving
effect to the conversion of preferred stock into 7,543,817 shares of common
stock and the issuance of 145,162 shares of common stock to be sold in the
offering, which are to be issued immediately prior to completion of the offering
in connection with the exercise of stock options with an aggregate exercise
price of $714,197. Our net tangible book value as of April 3, 1999 was $32.4
million or $1.86 per share. Our net tangible book value per share is determined
by subtracting the total amount of our liabilities from the total amount of our
tangible assets and dividing the remainder by the number of shares of our common
stock outstanding after giving effect to the conversion of preferred stock and
exercise of stock options noted above. The price per share to the public of the
shares of common stock offered by this prospectus exceeds the net tangible book
value per share prior to this offering. Therefore, purchasers of shares of
common stock in this offering will realize immediate and substantial dilution in
the net tangible book value of their shares. The following table, based upon our
net tangible book value as of April 3, 1999, illustrates the dilution to
purchasers of our common stock in this offering, based on an assumed initial
public offering price of $15.50 per share.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 15.50
Net tangible book value per share as of April 3, 1999,
after giving effect to the conversion of the preferred
stock and the exercise of stock options as described
above.................................................. $ 1.86
Increase in net tangible book value per share attributable
to new investors....................................... 1.00
-------
Pro forma net tangible book value per share after this
offering.................................................. 2.86
-------
Dilution per share purchased in this offering............... $ 12.64
=======
</TABLE>
The following table presents, as of April 3, 1999 and assuming an initial
public offering price of $15.50 per share:
- the number of shares of our common stock purchased from us
- the total cash consideration paid
- the issuance of 145,162 shares of common stock to be sold in the
offering, which are to be issued immediately prior to completion of the
offering in connection with the exercise of stock options with an
aggregate exercise price of $714,197
- the average price per share paid by the existing holders of common stock
including the holders of common stock after giving effect to the
conversion of preferred stock
- the average price per share paid by new investors before deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by us
<TABLE>
<CAPTION>
SHARES
PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders................ 17,428,827 91.5% $36,102,275 59.1% $ 2.07
New investors........................ 1,613,000 8.5 25,001,500 40.9 15.50
---------- ----- ----------- -----
Total...................... 19,041,827 100.0% $61,103,775 100.0%
========== ===== =========== =====
</TABLE>
The tables on this page exclude all outstanding stock options, other than
stock options to purchase 145,162 shares that will be sold in the offering. See
"Management--Stock Option Plan" and note 10 to our consolidated financial
statements. The exercise of outstanding options having an exercise price less
than the initial public offering price would increase the dilution effect to new
investors that is shown on the tables.
Also, the second table on this page does not give effect to sales of shares
by the selling shareholders. Sales by the selling shareholders in this offering
will reduce the number of shares held by existing shareholders to 11,041,827
shares, or 58.0% of the shares outstanding, and will increase the number of
shares held by new investors to 8,000,000 shares, or 42.0% of the shares
outstanding.
18
<PAGE> 20
SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth our selected consolidated statement of
operations and store, operating and balance sheet data. Our statement of
operations data for fiscal 1996, 1997 and 1998 and our balance sheet data as of
the end of fiscal 1997 and 1998 have been derived from our consolidated
financial statements, which have been audited by Arthur Andersen LLP,
independent public accountants, and are included elsewhere in this prospectus.
Our statement of operations data for fiscal 1994 and 1995 and the selected
balance sheet data as of the end of fiscal 1994, 1995 and 1996 have been derived
from consolidated financial statements which have been audited by Arthur
Andersen LLP, independent public accountants, and are not included in this
prospectus. The selected financial data as of April 3, 1999 and the 13 weeks
ended April 4, 1998 and April 3, 1999 have been derived from our unaudited
interim financial statements and, in management's opinion, include all
adjustments necessary for a fair presentation of the results of operations for
those periods. Our fiscal year consists of 52 or 53 weeks, ends on a Saturday
near December 31 and is named for the calendar year ending on that December 31.
All fiscal years presented include 52 weeks of operations except for fiscal
1996, which includes 53 weeks of operations. You should read the data set forth
below together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and notes
thereto appearing elsewhere in this prospectus.
In addition, when reading the following financial data, you should be aware
that:
- diluted earnings per share assumes that preferred stock has been
converted at historical conversion rates
- comparable store sales include net sales plus alterations income
- stores that have been relocated within the same market are considered
comparable stores and stores become comparable in the first month
following 12 full months of operation
- average net sales per square foot includes net sales plus alterations
income for stores open for the entire period indicated
- net sales per square foot is calculated by dividing net sales plus
alterations income by the total square footage of stores open for the
entire period indicated
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
FISCAL YEAR ---------------------
-------------------------------------------------------- APRIL 4, APRIL 3,
1994 1995 1996 1997 1998 1998 1999
(IN THOUSANDS EXCEPT PER SHARE, NET SALES PER SQUARE FOOT AND NUMBER OF
STORES DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $27,523 $45,453 $62,836 $85,381 $123,540 $35,628 $54,087
Other income, primarily alterations and
third party promotional fees........... 1,331 2,634 4,188 6,228 9,062 1,969 2,717
------- ------- ------- ------- -------- ------- -------
Total revenues......................... 28,854 48,087 67,024 91,609 132,602 37,597 56,804
Cost of sales, including buying,
distribution and occupancy costs....... 14,596 26,518 40,737 52,882 74,611 20,136 28,969
------- ------- ------- ------- -------- ------- -------
Gross profit........................... 14,258 21,569 26,287 38,727 57,991 17,461 27,835
Selling, general and administrative
expenses............................... 11,930 19,114 26,424 33,702 47,571 12,532 20,191
------- ------- ------- ------- -------- ------- -------
Income (loss) from operations.......... 2,328 2,455 (137) 5,025 10,420 4,929 7,644
Interest expense, net.................... 491 467 586 1,249 1,087 309 272
------- ------- ------- ------- -------- ------- -------
Income (loss) before income taxes...... 1,837 1,988 (723) 3,776 9,333 4,620 7,372
Income tax provision (benefit)........... 730 738 (208) 1,296 3,578 1,797 2,802
------- ------- ------- ------- -------- ------- -------
Income (loss) before extraordinary
item................................... 1,107 1,250 (515) 2,480 5,755 2,823 4,570
Extraordinary item, net of tax(a)........ -- (550) -- -- -- -- --
------- ------- ------- ------- -------- ------- -------
Net income (loss)...................... $ 1,107 $ 700 $ (515) $ 2,480 $ 5,755 $ 2,823 $ 4,570
======= ======= ======= ======= ======== ======= =======
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
THIRTEEN WEEKS
ENDED
FISCAL YEAR ---------------------
-------------------------------------------------------- APRIL 4, APRIL 3,
1994 1995 1996 1997 1998 1998 1999
(IN THOUSANDS EXCEPT PER SHARE, NET SALES PER SQUARE FOOT AND NUMBER OF
STORES DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) per common share(a):
Basic.................................. $ 0.08 $ 0.06 $ (0.05) $ 0.25 $ 0.59 $ 0.29 $ 0.47
Diluted................................ $ 0.08 $ 0.04 $ (0.05) $ 0.14 $ 0.31 $ 0.15 $ 0.25
Weighted average shares outstanding:
Basic.................................. 13,743 12,153 10,207 9,849 9,751 9,784 9,740
Diluted................................ 14,702 16,791 10,207 17,472 18,375 18,359 18,614
Pro forma basic earnings per common
share(b)............................... $ 0.33 $ 0.26
Pro forma basic weighted average share
outstanding(b)......................... 17,295 17,284
STORE DATA:
Number of stores, end of period.......... 23 36 48 59 77 63 81
Total square feet, end of period......... 200 328 455 569 766 619 812
Comparable store sales increase.......... 20.9% 11.3% 0.5% 13.2% 18.8% 25.3% 26.5%
Average net sales per store.............. $ 1,816 $ 1,769 $ 1,672 $ 1,803 $ 2,023 $ 613 $ 723
Net sales per square foot................ $ 193 $ 204 $ 184 $ 190 $ 207 $ 63 $ 73
OPERATING DATA:
Gross profit margin, net of buying,
distribution and occupancy costs....... 49.4% 44.9% 39.2% 42.3% 43.7% 46.4% 49.0%
Selling, general and administrative
expense percentage..................... 41.3% 39.8% 39.4% 36.8% 35.8% 33.3% 35.5%
Operating income (loss) margin........... 8.1% 5.1% (0.2)% 5.5% 7.9% 13.1% 13.5%
Capital expenditures..................... $ 1,109 $ 5,029 $ 4,931 $ 7,470 $ 8,105 $ 2,121 $ 3,361
Depreciation and amortization, excluding
amortization of debt discount and debt
issuance costs......................... $ 284 $ 632 $ 1,393 $ 2,022 $ 2,896 $ 645 $ 887
BALANCE SHEET DATA:
Inventories.............................. $ 9,916 $20,415 $20,247 $32,452 $ 37,799 $31,070 $35,339
Working capital.......................... 4,824 14,149 18,192 23,805 27,053 22,318 18,545
Total assets............................. 13,492 31,171 35,347 53,699 65,558 55,034 68,242
Long-term debt and capitalized lease
obligations, excluding current
portion................................ 2,894 134 12,654 16,331 19,647 13,839 9,974
Redeemable common stock.................. -- 7,744 3,607 628 -- -- --
Shareholders' equity..................... 3,707 11,949 11,071 21,506 27,238 24,306 31,808
</TABLE>
- ----------------------------
(a) Fiscal 1995 reflects net loss of $550 from early extinguishment of debt, net
of income tax benefit of $323. Net income before extraordinary item for
fiscal year 1995 was $0.10 per common share (basic) and $0.07 per common
share (diluted).
(b) Reflects the conversion of all outstanding shares of class A, B, C, and D
preferred stock into an aggregate of 7,543,817 shares of common stock upon
the consummation of this offering.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
David's Bridal is a successor to a bridal retailing business that began in
Ft. Lauderdale, Florida in 1950. We were incorporated and commenced operations
by opening a store in Hallandale, Florida in 1990. We experienced rapid growth
in fiscal 1994 and fiscal 1995, when the number of stores increased from 14 to
36 over these two fiscal years. This growth placed considerable strain on our
inventory controls, information systems, personnel and capital resources. During
fiscal 1995, we determined that we had accumulated excessive inventories of a
large number of wedding gowns and other apparel. In mid-1995 we commenced key
initiatives which we continue to build upon to increase profitability and
support controlled growth. These initiatives have included:
- enhancing our management team
- focusing our merchandising strategy on building and expanding an
assortment of best selling styles
- upgrading our management information systems
- opening a distribution facility to improve inventory management
- improving our recruiting and training programs for store personnel
While the immediate effect of these initiatives was to decrease
profitability in fiscal 1996, we believe that these measures have facilitated
controlled growth and enhanced profitability in fiscal 1997 and fiscal 1998. We
have achieved comparable store sales growth of 13.2% in fiscal 1997, 18.8% in
fiscal 1998 and 26.5% in the first quarter of fiscal 1999 compared to the same
prior year period. In addition, our total revenues increased by 36.7% in fiscal
1997, 44.7% in fiscal 1998 and 51.1% in the first quarter of fiscal 1999
compared to the same quarter in the prior year, and our operating margin
increased from 5.5% in fiscal 1997 to 7.9% in fiscal 1998 and from 13.1% in the
first quarter of fiscal 1998 to 13.5% in the first quarter of fiscal 1999. See
"Risk Factors -- If we are not able to maintain our comparable store sales
growth or prevent fluctuations in comparable store sales, our profitability may
be materially adversely affected."
We opened our distribution center in 1996 in Conshohocken, Pennsylvania.
This facility is 54,000 square feet. More than half of our unit merchandise is
shipped from suppliers to our distribution center, where we inspect and monitor
shipments to our stores. In early 1998, we completed the initial development of
an inventory replenishment system that is designed to improve service levels and
inventory turnover among various merchandise categories. This system, which is
linked to our distribution center and merchandise systems, was used during
fiscal 1998 to replenish accessory items. We have recently expanded the use of
this system to replenish bridal gowns and expect to further expand this system
to replenish other products that are back-stocked by the distribution center.
Our replenishment system creates computer generated forecasts of future sales in
each store. This system then establishes stock levels based upon the sales
forecasts. Orders are then generated to replenish merchandise from our warehouse
to our stores. We believe the use of our distribution center to rapidly fulfill
our merchandise needs has facilitated the expansion of our assortment of bridal
and other dress categories.
We operate on a 52/53-week fiscal year. Our fiscal year ends on a Saturday
near December 31 and is named for the calendar year ending on that December 31.
Fiscal 1996, 1997 and 1998 include 53, 52 and 52 weeks, respectively.
Total revenues principally include merchandise sales, alterations income
and third party promotional fees. Selling, general and administrative expenses
include store expenses, general and administrative expenses and media expense.
Comparable store sales are based on net sales and alterations revenue but
exclude third party promotional fee income. A store becomes comparable in the
first month following 12 full months of operation. Stores that have been
relocated within the same market are considered comparable stores.
21
<PAGE> 23
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, selected items in
the consolidated statements of operations as a percentage of total revenues.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
PERCENTAGE OF TOTAL REVENUES ENDED
FISCAL YEAR --------------------
---------------------------- APRIL 4, APRIL 3,
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
Total revenues.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales, including buying, distribution
and store occupancy costs..................... 60.8 57.7 56.3 53.6 51.0
----- ----- ----- ----- -----
Gross profit.................................. 39.2 42.3 43.7 46.4 49.0
Selling, general and administrative expenses.... 39.4 36.8 35.8 33.3 35.5
----- ----- ----- ----- -----
Income (loss) from operations................. (0.2) 5.5 7.9 13.1 13.5
Interest expense net............................ 0.9 1.4 0.9 0.8 0.5
----- ----- ----- ----- -----
Income (loss) before income taxes............. (1.1) 4.1 7.0 12.3 13.0
Income tax provision (benefit).................. (0.3) 1.4 2.7 4.8 5.0
----- ----- ----- ----- -----
Net income (loss)............................. (0.8)% 2.7% 4.3% 7.5% 8.0%
===== ===== ===== ===== =====
</TABLE>
THIRTEEN WEEKS ENDED APRIL 3, 1999 VERSUS THIRTEEN WEEKS ENDED APRIL 4, 1998
Total revenues. Total revenues for the thirteen weeks ended April 3, 1999
(first quarter of fiscal 1999) were $56.8 million, an increase of $19.2 million,
or 51.1%, from the thirteen weeks ended April 4, 1998 (first quarter of fiscal
1998). We attribute the $19.2 million increase to a $9.8 million, or 26.5%,
increase in comparable store sales, $0.7 million from stores opened in fiscal
1999, $8.6 million from stores opened in fiscal 1998 but not qualifying as
comparable stores and the balance to an increase in third party promotional
fees.
Gross profit. Gross profit for the first quarter of fiscal 1999 was $27.8
million (49.0% of total revenues) as compared with $17.5 million (46.4% of total
revenues) in the first quarter of fiscal 1998. We were able to achieve higher
gross profit as a percentage of total revenues due to an improvement in
merchandise margins coupled with decreases in buying and store occupancy costs
as a percentage of total revenues. Buying costs decreased to 1.2% of total
revenues for the first quarter of fiscal 1999 from 2.1% of total revenues for
the first quarter of fiscal 1998 due to the application of fixed costs over a
larger total revenue base. Store occupancy costs decreased to 7.9% of total
revenues for the first quarter of fiscal 1999 from 8.5% of total revenues for
the first quarter of fiscal 1998, primarily due to the 26.5% increase in
comparable store sales, the timing of new store openings and the volume of new
store sales. We were able to achieve higher merchandise margins through our
international and domestic direct sourcing efforts, which have resulted in lower
product costs.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $20.2 million (35.5% of total revenues) for the
first quarter of fiscal 1999 as compared with $12.5 million (33.3% of total
revenues) for the first quarter of fiscal 1998. The significant components of
selling, general and administrative expenses include store personnel costs,
store selling expenses, back office support costs and advertising expenses. The
$7.7 million increase in selling, general and administrative expenses reflects
our continued investment in personnel and infrastructure to support the 18 new
stores opened in the last four quarters and our continued future growth plans.
The increase in selling, general and administrative expenses as a percentage of
total revenues was primarily due to increases in advertising, store personnel
and back office expenses, partially offset by a decrease in store selling
expenses as a percentage of total revenues. Advertising expense increased as a
percentage of total revenues due to heightened levels of national and local
advertising. Store personnel costs increased as a percentage of total revenues
due to higher employee benefit costs coupled with an increase in store payroll
expense. Back office support costs increased as a percentage of total revenues
primarily due to higher personnel costs. Store selling expenses decreased as a
percentage of total revenues due to decreases in our variable costs as a
percentage of total revenues.
22
<PAGE> 24
Interest Expense. Interest expense for the first quarter of fiscal 1999
was $272,000, as compared to $309,000 for the first quarter of fiscal 1998. The
decrease was due to lower interest rates coupled with lower debt levels as a
result of financing more of our growth with cash provided by operations.
Taxes. Our effective tax rate was 38.0% for the first quarter of fiscal
1999, compared to 38.9% for the first quarter of fiscal 1998. The decrease was
due primarily to a decrease in other non-deductible expenses.
Net Income. As a result of the factors described above, our net income for
the first quarter of fiscal 1999 was $4.6 million, an increase of 61.9%, or $1.8
million, over our first quarter of fiscal 1998 net income of $2.8 million.
FISCAL 1998 VERSUS FISCAL 1997
Total revenues. Total revenues for fiscal 1998 were $132.6 million, an
increase of $41.0 million, or 44.7%, from fiscal 1997. We attribute the increase
to a $17.0 million, or 18.8%, increase in comparable store sales, $11.9 million
from stores opened in fiscal 1998, $11.7 million from stores opened in fiscal
1997 but not qualifying as comparable stores and the balance to an increase in
third party promotional fees.
Gross profit. Gross profit for fiscal 1998 was $58.0 million (43.7% of
total revenues) as compared with $38.7 million (42.3% of total revenues) for
fiscal 1997. We were able to achieve higher gross profit as a percentage of
total revenues due to an improvement in merchandise margins coupled with a
decrease in store occupancy costs from 11.8% of total revenues for fiscal 1997
to 11.0% of total revenues for fiscal 1998. We were able to achieve higher
merchandise margins through our international and domestic direct procurement
efforts, which have resulted in lower product costs. In addition, we took fewer
markdowns as a result of increased sales of our best selling styles which
generally maintain a higher margin. Our store occupancy costs were lower as a
percentage of total revenues primarily due to the 18.8% increase in comparable
store sales, the timing of new store openings and the volume of new store sales.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $47.6 million (35.8% of total revenues) for fiscal
1998 as compared with $33.7 million (36.8% of total revenues) for fiscal 1997.
The significant components of selling, general and administrative expenses
include store personnel costs, store selling expenses, back office support costs
and advertising expenses. The decrease in selling, general and administrative
expenses as a percentage of total revenues was primarily achieved through
spreading advertising costs over a greater total revenue base. Store personnel
costs, store selling expenses and back office costs remained relatively flat as
a percentage of total revenues for fiscal 1998 as compared with fiscal 1997.
Store personnel expenses generally increase proportionally with increases in
revenues. The $13.9 million increase in selling, general and administrative
expenses reflects our investment in personnel and infrastructure as well as an
increase in variable store selling expenses to support the addition of 18 new
stores and our continued future growth plans.
Interest expense. Interest expense for fiscal 1998 was $1.1 million, as
compared to $1.2 million for fiscal 1997. The decrease in interest expense was
due to lower interest rates, partially offset by higher debt levels used to fund
our expansion.
Taxes. Our effective tax rate was 38.3% for fiscal 1998 as compared to
34.3% for fiscal 1997. The increase was primarily due to a higher effective
state tax rate.
Net income. As a result of the factors described above, our net income for
fiscal 1998 was $5.8 million, a $3.3 million increase over our fiscal 1997 net
income of $2.5 million.
FISCAL 1997 VERSUS FISCAL 1996
Total revenues. Total revenues for fiscal 1997, which included 52 weeks,
were $91.6 million, an increase of $24.6 million, or 36.7%, from fiscal 1996,
which included 53 weeks. We attribute the increase to a $8.6 million, or 13.2%,
increase in comparable store sales, $4.2 million from stores opened in fiscal
1997, $11.4 million from stores opened for fiscal 1996 but not qualifying as
comparable stores and the balance to an increase in third party promotional
fees.
Gross profit. Gross profit for fiscal 1997 was $38.7 million (42.3% of
total revenues) as compared with $26.3 million (39.2% of total revenues) for
fiscal 1996. We were able to achieve higher gross profit as a percentage of
total revenues due to an improvement in merchandise margins coupled with a
decrease in
23
<PAGE> 25
buying costs from 2.2% of total revenues for fiscal 1996 to 1.6% of total
revenues for fiscal 1997. These improvements were partially offset by an
increase in distribution costs from 0.6% of total revenues for fiscal 1996 to
1.4% for fiscal 1997 and an increase in store occupancy costs from 11.4% of
total revenues for fiscal 1996 to 11.8% for fiscal 1997. We were able to achieve
higher merchandise margins through our international and domestic direct
procurement efforts, which have resulted in lower product costs. Our buying
costs were lower as a percentage of total revenues primarily through the
application of fixed costs over a larger total revenue base. Our distribution
center expenses increased as a percentage of total revenues because fiscal 1997
was the first full year of operation for our distribution center. Our store
occupancy costs increased as a percentage of total revenues as a result of the
impact of rent and real estate tax expenses associated with new stores opened in
fiscal 1997.
Selling, general and administrative expenses. Selling, general
administrative expenses were $33.7 million (36.8% of total revenues) in fiscal
1997 as compared with $26.4 million (39.4% of total revenues) in fiscal 1996.
The significant components of selling, general and administrative expenses
include store personnel costs, store selling expenses, back office support costs
and advertising expenses. The decrease in selling, general and administrative
expenses as a percentage of total revenues was primarily achieved through
spreading store selling and advertising costs over a greater total revenue base.
Store personnel costs and back office costs remained relatively flat as a
percentage of total revenues in fiscal 1997 as compared with fiscal 1996. Store
personnel expenses generally increase proportionally with increases in revenues.
The $7.3 million increase in selling, general and administrative expenses
reflects our investment in personnel and infrastructure as well as an increase
in variable store selling expenses to support the addition of 11 new stores and
our continued future growth plans.
Interest expense. Interest expense was $1.2 million in fiscal 1997 as
compared to $586,000 in fiscal 1996. The increase in interest expense was due to
higher debt levels used to fund our store expansion. Interest rates remained
relatively constant in fiscal 1997 as compared to fiscal 1996.
Taxes. Our effective tax rate was 34.3% in fiscal 1997, compared to a
28.8% benefit in fiscal 1996. The fiscal 1997 provision reflects the federal
statutory rate plus relevant state taxes. The 1996 federal tax benefit was due
to our operating loss, which was offset by a state tax provision and other
non-deductible items.
Net income. As a result of the factors described above, our net income in
fiscal 1997 was $2.5 million as compared to a net loss of $515,000 in fiscal
1996.
LIQUIDITY AND CAPITAL RESOURCES
We require cash principally to finance capital investment in new stores,
new store inventory and seasonal working capital. We opened 12 stores in fiscal
1996, 11 stores in fiscal 1997, 18 stores in fiscal 1998 and 4 stores in the
first quarter of fiscal 1999. In recent years, we have financed our operations
and new store openings primarily with cash from operations, borrowings under
bank financing agreements and equity financing.
We currently estimate that our capital expenditures will be approximately
$11.0-$12.0 million in fiscal 1999, including the $3.4 million incurred during
the first quarter of fiscal 1999. Our capital expenditures will be incurred to
open new stores, remodel or expand existing stores and fund capital investment
activities. We anticipate spending approximately:
- $6.0 million for new stores,
- $3.5 million for improvements to existing stores,
- $825,000 for the introduction of a new warehouse management system and
- $1.2 million for various capital investment activities.
In future years, our lease payments are expected to increase substantially
as we open new stores. In addition, we expect to relocate our offices to larger
offices within the next 18 months. If we purchase our new offices, we anticipate
funding the purchase through mortgage financing and cash from operations.
We believe that our cash flow from operations, the net proceeds from this
offering and amounts available under our revolving credit agreement will be
sufficient to fund anticipated capital expenditures and working capital
requirements, including increased lease payments, for at least the next 12
months.
24
<PAGE> 26
Our cash flows provided by operating activities were $15.2 million for the
first quarter of fiscal 1999 as compared to $6.4 million in the first quarter of
fiscal 1998. The increase was primarily due to higher net income coupled with
increases in accrued expenses and income taxes payable and a higher reduction in
inventory levels. Our cash flows provided by our operating activities were $4.2
million in fiscal 1998 as compared to cash used of $3.8 million in fiscal 1997.
This increase was primarily due to higher net income and a lower increase in
inventory levels in fiscal 1998 as compared to fiscal 1997. Our cash used in
operating activities in fiscal 1997 primarily reflected the increase in
inventory levels related to new store openings and support of sales growth,
partially offset by net income. Cash flows provided by operating activities were
$2.1 million in fiscal 1996.
Our net cash used in investing activities in the first quarter of fiscal
1999 was $3.2 million as compared to $2.1 million in the first quarter of fiscal
1998. Our cash used in investing activities primarily represents our capital
expenditures in opening new stores. Our net cash used in investing activities in
fiscal 1998 was $7.6 million, as compared to $7.9 million in fiscal 1997 and
$4.9 million in fiscal 1996. Our cash used in investing activities primarily
represents our capital expenditures in opening new stores. While we opened seven
more stores in fiscal 1998 than in fiscal 1997, we purchased land and one
building in fiscal 1997.
Our net cash used in financing activities in the first quarter of fiscal
1999 was $10.4 million as compared to $3.2 million in the first quarter of
fiscal 1998. The increase was primarily due to repayments on our revolving
credit agreement. Our primary financing activity involved continual borrowings
and repayments under our revolving credit agreement. Our net cash provided by
financing activities in fiscal 1998 was $3.3 million, as compared to $11.7
million in fiscal 1997 and $2.8 million in fiscal 1996. Over the last three
years our primary financing activities have involved continual borrowings and
repayments under our revolving credit agreement, increases in bank overdrafts,
periodic issuances of long-term debt and sales of equity securities.
Our cash provided by financing activities in fiscal 1998 was primarily
derived from:
- $2.2 million of net borrowings under our revolving credit agreement,
- $1.4 million from the issuance of long-term debt, and
- an increase of $1.0 million in bank overdrafts.
Bank overdrafts represent checks that have been written by us that have not been
presented to our bank for payment. These sources of cash in fiscal 1998 were
partially offset by repayments of long-term debt and capital leases of $680,000
and the repurchase of common stock for $651,000. Our cash provided by financing
activities in fiscal 1997 was primarily provided by $5.0 million from the sale
of class D preferred stock, $3.9 million of net borrowings under our revolving
credit agreement and an increase of $2.7 million of bank overdrafts.
Our revolving credit agreement provides for borrowings of up to $30.0
million, of which up to $25.0 million may be used for letters of credit. Cash
borrowings and letters of credit under our revolving credit agreement are
secured by all of our assets. Our borrowings under this agreement are restricted
to a specified percentage of our accounts receivable and inventory.
Specifically, we are not permitted to borrow amounts that are greater than the
sum of 80% of our eligible accounts receivable and 60% of our eligible
inventory. The revolving credit agreement provides some exceptions to these
limitations. These exceptions allow us to exceed these limitations by $3.0
million from December 31, 1998 to March 31, 1999, $3.0 million from October 31,
1999 to March 31, 2000 and $2.0 million from October 1, 2000 to March 31, 2001.
The interest rates that we are charged under our revolving credit agreement are
variable.
We can choose to have our interest rate based on:
- the higher of the U.S. federal funds rate plus 0.50% and our bank's prime
rate, or
- adjusted LIBOR plus an applicable margin of between 1.25% and 1.75%
depending on our financial performance.
As of April 3, 1999, we had cash borrowings of $7.0 million and $3.4 million of
letters of credit issued, with $14.7 million available to borrow under our
revolving credit agreement. We intend to use a portion of the net proceeds of
this offering to repay the outstanding balance under our revolving credit
agreement,
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<PAGE> 27
although we may reborrow amounts under the revolving credit agreement, which
will remain available for future borrowings. The revolving credit agreement is
available through July 31, 2001.
We currently intend to retain all future earnings to fund the development
and growth of our business. We do not currently anticipate paying any cash
dividends. Our board of directors will make future decisions regarding cash
dividends on our common stock. These decisions will depend on our results of
operations, financial position, capital requirements, general business
conditions and restrictions imposed by any financing arrangements. Our revolving
credit agreement currently prohibits the payment of dividends.
QUARTERLY RESULTS AND SEASONALITY
Our business is subject to seasonal variations and our revenues and income
historically have been higher from January through April and lower from October
through December. Our working capital requirements tend to fluctuate throughout
the year and increase during the months of November and December. This is
because we increase our inventory in these months to support sales, which tend
to be higher from January through April.
The following table presents our unaudited quarterly operating results for
our nine most recent quarterly periods and the number of stores open at the end
of each period.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------------------------------------------
APRIL 5, JULY 5, OCTOBER 4, JANUARY 3, APRIL 4, JULY 4,
1997 1997 1997 1998 1998 1998
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Revenues................... $25,117 $24,028 $24,322 $18,142 $37,597 $35,189
Gross Profit(a).................. $11,068 $10,325 $10,217 $ 7,117 $17,461 $15,573
Income (loss) from operations.... $ 2,408 $ 1,657 $ 1,553 $ (593) $ 4,929 $ 3,517
Net income (loss)................ $ 1,360 $ 877 $ 806 $ (563) $ 2,823 $ 2,061
Quarterly total revenues as a
percentage of annual
total revenues................. 27.4% 26.2% 26.5% 19.9% 28.4% 26.5%
Quarterly operating income (loss)
as a percentage of annual
operating income............... 47.9% 33.0% 30.9% (11.8)% 47.3% 33.8%
Quarterly operating income (loss)
as a percentage of quarterly
total revenues................. 9.6% 6.9% 6.4% (3.3)% 13.1% 10.0%
Stores open at end of period..... 50 52 54 59 63 69
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------
OCTOBER 3, JANUARY 2, APRIL 3,
1998 1999 1999
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total Revenues................... $34,456 $25,360 $56,804
Gross Profit(a).................. $14,714 $10,243 $27,835
Income (loss) from operations.... $ 2,166 $ (192) $ 7,644
Net income (loss)................ $ 1,181 $ (310) $ 4,570
Quarterly total revenues as a
percentage of annual
total revenues................. 26.0% 19.1% N/A
Quarterly operating income (loss)
as a percentage of annual
operating income............... 20.8% (1.9)% N/A
Quarterly operating income (loss)
as a percentage of quarterly
total revenues................. 6.3% (0.8)% 13.5%
Stores open at end of period..... 71 77 81
</TABLE>
- -----------------------------
(a) Net of buying, distribution and store occupancy costs.
YEAR 2000 COMPLIANCE
The Year 2000 issue results from the writing of computer programs using two
digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations. In this section we will describe our current
state of readiness for the Year 2000 issue and other information relating to the
Year 2000 issue.
WILL DAVID'S BRIDAL BE READY?
Information Technology Systems--Our core information technology system is
the STS integrated retail system. The system supports our major business
functions, including merchandise planning, finance and accounting, and point of
sale systems. With STS we have completed an analysis of all modules included in
this retail system to insure that they are Year 2000 compliant. Year 2000
remediation has been completed for all STS modules except for point of sale and
decision support. The decision support remediation solution has been issued for
implementation and is scheduled to be completed in the second quarter of 1999.
The point of sale remediation is being tested and is scheduled to be completed
in the third quarter of fiscal 1999.
Our other information technology systems are either internally developed
legacy systems or "off the shelf" applications. The most significant legacy
system is our distribution system, which supports
26
<PAGE> 28
distribution center operations and inventory transfers among stores. Our new
warehouse system, which will replace our distribution system will be Year 2000
compliant. We have scheduled this new system to be implemented in the third
quarter of fiscal 1999. Other legacy systems support special order warehouse
processing allocation and replenishment systems. Our assessment of the Year 2000
readiness of these systems is underway, and remediation is expected to be
completed in the third quarter of fiscal 1999. Our "off the shelf" applications
have been inventoried and assessed for compliance. In all instances the
applications are compliant, scheduled for remediation or not critical to the
daily operations or decision support processes. We do not believe that
non-compliance of "off the shelf" applications would materially adversely affect
our operations.
Non-Information Technology Systems--Non-information technology systems are
systems that contain embedded technology such as microcontrollers. Our
non-technology systems include security systems, fax machines, elevators and
HVAC systems. Our preliminary assessment of non-information technology indicates
that the non-information technologies do not have embedded date functions for
the models utilized in our corporate and field facilities and, therefore, are
not subject to Year 2000 issues.
Material Third Party Relationships--We have made inquiries of our principal
suppliers and service providers to determine the effect on our business if these
third parties fail to remediate their own Year 2000 issues. These parties
include our joint venture partner that manages the procurement of merchandise
from Asia and our merchandise and business service vendors, such as
telecommunications and credit and processing companies. All principal suppliers
and service providers have been contacted by us to assess compliance efforts and
the risk to us related to Year 2000 issues. These communications were completed
either by direct mail, electronic mail, or researching Year 2000 Internet sites.
We have received replies from approximately 75% of our merchandise vendors, and
each has either provided a statement regarding the status of their compliance or
signed a statement provided by us regarding the status of their compliance.
These communications are retained in our Year 2000 archives in order for us to
monitor the progress these third parties are making to remediate their Year 2000
issues. The assessment of the remaining 25% is in-progress with an expected
completion date of May 1999. We have considered the responses from all of our
service vendors and are in the process of remediating non-compliant systems.
HOW MUCH WILL IT COST TO ADDRESS YEAR 2000 ISSUES?
We have entered into a contract with an external contractor to provide
business solutions for a portion of our efforts to address year 2000 issues. The
scope of the contract includes network, server and desktop remediation at all
corporate facilities and the installation of a point-of-sale upgrade, provided
by STS, our point-of-sale software vendor, at store level. In addition, the
contractor will complete an independent certification of important vendors who
have provided us with Year 2000 letters of compliance to validate risk and cost
estimates. We have assigned one full time employee to manage the Year 2000
project team. The project team is comprised of seven of our employees, each of
whom represents one of our principal business units. The team meets on a weekly
basis to assess our progress and reports on a biweekly basis to our Year 2000
committee which is comprised of several members of executive management.
Through April 3, 1999, we have incurred approximately $5,000 in remediation
costs, exclusive of employee time and effort, associated with Year 2000 issues.
All of these costs relate to upgrades to the STS retail system. We estimate that
an additional $600,000 will be incurred during the remainder of fiscal 1999 to
complete our Year 2000 remediation. The significant components of this cost
includes $100,000 to upgrade our point-of-sale system, $115,000 to remediate our
network hardware, $75,000 for application software remediation, $50,000 for Year
2000 testing of systems and software and $40,000 on vendor supply chain
compliance.
WHAT ARE THE POSSIBLE CONSEQUENCES OF YEAR 2000 ISSUES CONFRONTING DAVID'S
BRIDAL?
If STS is unable to remedy non-compliant modules, we will have to process
key business functions with less efficient systems. These key business functions
include the following functions:
- Merchandising
- Finance and Accounting
- Point-of-Sale
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<PAGE> 29
- Distribution
- Replenishment
The current point-of-sale system supports the sales and returns of
merchandise, inventory receipts, transfer of merchandise between locations and
price change functions. This information is collected through a nightly polling
process initiated from our corporate data center. The system also supports
credit authorization and settlement processing with our financial settlement
vendors. In the case where the point-of-sale system is not available, we
anticipate that manual processing would be necessary at the store level. In
addition, manual processing and recording of information would be required for
accurate financial reporting. If credit services were not available the store
would initiate manual telephone authorizations and batch settlements. These
efforts would be manually intensive and would result in a delay in daily
financial reporting. The utilization of these manual processes on a broad scale
would substantially disrupt our operations and would involve substantial cost.
The failure to have the new warehouse management system implemented on a
timely basis could disrupt the movement of inventory into and out of our
distribution center and our ability to transfer gowns from store to store. This
could have an adverse effect on our ability to supply merchandise on a timely
basis, and therefore on our revenues. The remediation of our current
distribution system is part of the new warehouse management system project plan
and we would rely on this remediation if the new warehouse management system is
not completed on schedule. We do not believe that difficulties with regard to
our other legacy systems would materially adversely affect our operations.
If our joint venture partner or a large number of our merchandise or
business service vendors are not Year 2000 compliant, our business may be
materially adversely affected. If our telecommunications and credit card
processing service providers are not Year 2000 compliant on a timely basis, our
operations could be materially adversely affected. If our telecommunication
providers are not compliant, we would be required to migrate our service to a
compliant vendor. If our credit card processor is not compliant, we would be
required to approve and settle credit requests manually. This may require the
imposition of credit limits in the absence of direct approval by the credit card
processor, a highly cumbersome process when applied to individual sales.
WHAT ARE DAVID'S BRIDAL'S CONTINGENCY PLANS?
Our new distribution system, scheduled for implementation in September
1999, is designed to remediate Year 2000 distribution and allocation system
issues. As a contingency, the project schedule includes a plan to remediate the
current systems.
Remediation of our point-of-sale systems is scheduled for June 1999. Our
contingency plan is to apply additional store staff to process transactions
manually and to use additional staff at our headquarters to ensure accurate
financial reporting. The contingency procedure will be paper based, manually
intensive, slower and more costly.
We have not yet established a contingency plan with respect to
non-compliant STS modules or telecommunications service providers. If, by the
end of the third quarter of fiscal 1999, we determine that a contingency plan is
required with regard to non-compliant STS modules or telecommunications service
providers, we will formulate a contingency plan, which we anticipate will be
completed by the end of the fourth quarter of 1999.
INFLATION
We do not believe that inflation has had a material effect on our financial
position or results of operations during the past three years. We cannot predict
what effect inflation will have in the future. Our operating results may be
materially adversely affected by future inflation.
28
<PAGE> 30
BUSINESS
OVERVIEW
We are a leading retailer of bridal gowns and bridal-related apparel and
accessories in the United States. We believe that we are the largest bridal
retailer in terms of sales, operating 81 stores in 30 states as of April 3,
1999. We have created a distinctive shopping experience designed to attract a
majority of potential bridal customers. We provide our customers with excellent
value by offering a broad, in-stock assortment of bridal gowns and
bridal-related apparel at popular prices, together with service that is designed
to exceed customers' expectations.
Our broad in-stock assortments enable us to offer the convenience of
one-stop shopping for the bridal party, including brides, bridesmaids,
mothers-of-the-bride and-groom and flower girls. We also offer a variety of
special occasion dresses and accessories for events such as proms, pageants,
homecomings and other formal affairs. We believe that the breadth and depth of
our in-stock assortments in our primary bridal and bridal-related products far
exceeds those of other bridal retailers. This belief is based upon our knowledge
of the bridal business derived from discussions with manufactures, our principal
suppliers and customers. Our in-house staff coordinates the design and, through
a Hong Kong-based joint venture, procures virtually all of our bridal gowns.
This results in lower product costs and a shorter time period between order and
delivery than we have experienced in the past and allows us to more frequently
update our product assortment. Our merchandising strategy is to target customers
across a wide range of income levels and offer apparel of excellent value at
everyday prices, typically ranging from $99 to $899. We recognize that the
bridal customer expects a higher level of customer service than the typical
retail customer. We seek to exceed our customers' expectations for service by
providing attentive and knowledgeable sales assistance, convenient store design
and extended hours of operation relative to other bridal retailers.
DESCRIPTION OF BRIDAL INDUSTRY
According to the U.S. Department of Health and Human Services, since 1990
there have been an average of approximately 2.3 million marriages per year in
the United States. This number is expected to increase during the next decade,
as the children of the "Baby Boomer" generation reach adulthood. We believe that
a substantial majority of marriages in the United States involve a formal
wedding ceremony.
Demographic surveys indicate that the age of brides is increasing.
According to the U.S. Bureau of the Census, the median age of a bride in the
United States has increased from 21 in 1970 to 27 in 1998. We believe that the
trend towards older brides is continuing and has resulted in an increasing
number of brides paying for some or all of their wedding expenses. As a result,
brides place greater emphasis on value and service.
Based on our research and surveys conducted by Modern Bride and Bridal
Guide, each of which is a national bridal magazine, a bride typically will spend
approximately $700-800 for her wedding gown. Brides also usually purchase a
headpiece, a slip and other foundation items, as well as accessories such as
shoes and a handbag. The wedding party normally includes four or five
bridesmaids, each of whom usually purchases a dress, shoes, handbag, jewelry and
other accessory items.
We believe the bridal market is highly fragmented, with approximately 7,500
stores nationwide, and estimate that less than five percent of bridal retailers
operate more than one store. We estimate the domestic market for the various
apparel and accessories purchased by brides, bridesmaids and other members of
the bridal party to be in excess of $4 billion per year. Historically, no
retailer has been dominant in the bridal retailing industry.
The manufacture of a bridal gown requires a significant amount of skill and
typically involves more than 100 hours of labor per gown. Due to this high labor
component, most manufacturers contract with independent, locally owned and
operated factories in Asia, predominantly in China, for production of the gown.
The manufacturers sell to bridal retailers which have generally become highly
reliant upon the
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manufacturers. In order to gain efficiency and reduce costs, some manufacturers
often will not forward orders to the factories until they have received a
minimum number of orders from bridal retailers. This delay in order placement
and the labor intensive nature of bridal gown production contributes to the
lengthy time period often experienced between order and receipt of a bridal
gown.
We believe that most bridal retailers are considerably smaller than most
bridal manufacturers and do not have significant bargaining power with the
manufacturers. Therefore, manufacturers can often exert a considerable amount of
influence on bridal retailers. Typically, the manufacturers dictate the styles
that will be available to the bridal retailers and require retailers to make a
significant investment in samples of those styles during each selling season.
Typically, bridal wear retailers offer a limited selection of bridal gowns
and bridesmaid dresses and provide samples in only the most common sizes,
typically size 8 or 10. In addition, they carry limited inventory, therefore
customers generally cannot purchase bridal gowns and bridesmaid dresses
"off-the-rack." The customer generally places a substantial deposit for her gown
and waits for an extended period of time, often up to 20 weeks, before the gown
arrives from the manufacturer. As a result, the traditional purchasing process
involves a number of drawbacks for the customer, including the inability of most
bridal customers to try on gowns in their sizes, the wait involved in the
delivery process, and uncertainty relating to the appearance and fit of the
final product. These factors can make the bridal shopping experience time
consuming, inconvenient and stressful.
COMPETITION IN THE BRIDAL INDUSTRY
The high level of service required by bridal customers and the difficulties
of dealing with manufacturers make bridal retailing a challenging business.
Currently, the bridal market can be categorized into four segments:
Bridal Salons--This group includes the largest number of bridal retailers.
Typically, these are single store operations managed by the owner. They offer a
limited number of lines and sizes and generally operate a sample only, special
order business. They may offer a limited selection of off-the-rack dresses. We
believe that many of these operators have limited resources and little influence
with manufacturers over style availability or order delivery times. These stores
often have only limited hours of operation and require appointments. However, we
face competition from bridal salons and other bridal retailers that compete on
the basis of customer service and personalized attention, or that have
established strong reputations within a given community.
Bridal Warehouses--This relatively small group of stores sell limited
assortments including old samples, discontinued styles and manufacturer
overruns. They generally do not offer a full line of in-stock bridal apparel,
although they may special order bridal wear. Store hours are typically more
flexible than bridal salons, although service levels are low and these stores
generally do not accept appointments. We can face competition from bridal
warehouses in terms of prices.
Department Stores--Several department stores offer bridal gowns and
bridesmaid dresses in their own or leased departments and through their
catalogs. These locations generally operate a sample-only, special-order
business and tend to offer higher priced couture merchandise. Bridal department
hours of operation are usually based on typical retail department store hours.
Customer appointments are generally required. We also compete with department
stores that sell through catalogs and that have substantially greater financial
and other resources.
Multi-Store Chains--There are a small number of bridal retail chains
operating two or more stores in a region. These retailers may offer a selection
of off-the-rack merchandise as well as the traditional sample model retailing
offered by bridal salons and department stores. Store hours are generally
flexible and customers may, in most cases, either walk-in or make an
appointment.
Bridesmaid and other special occasion dresses are available at a large
number of retailers, including department stores and specialty dress retailers.
In addition, because the complexity and customization involved in special
occasion garments are usually far less than in bridal wear, customer service
expectations
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are somewhat lower. However, retailers must devote care to insure that
bridesmaid dresses are uniform in style and color for the entire bridal party.
Because bridesmaid dresses are often selected by the bride, her overall
satisfaction with the bridal retailer is a large factor in deciding whether to
also purchase the bridesmaid dresses from the same bridal retailer.
BUSINESS STRATEGY
Our principal strategies are as follows:
Offer a Wide Selection of In-Stock Bridal Apparel
Our customer research reveals that bridal customers value selection more
than any other single attribute in deciding where to shop for their wedding
gowns. As a result, our merchandising strategy is to offer the broadest in-stock
selection of bridal-related apparel. Of our total product assortment,
approximately 225 of our best-selling styles, which we call our core assortment,
are typically featured in our advertising and are maintained in stock, either in
stores or in the distribution center. We believe these styles typically endure
over time and result in less fashion risk and markdown exposure. We also provide
special occasion dresses, headpieces and accessories, including shoes, handbags,
jewelry and gloves to offer one-stop shopping to the entire bridal party. To
meet the needs of additional customers, we are continuing to expand and refine
our assortment in terms of number of styles, silhouettes, fabrics, prices and
sizes.
We produce our gowns under our own private labels, as well as under
exclusive licenses with Gloria Vanderbilt and Oleg Cassini. We maintain a broad
in-stock selection of bridal gowns in many sizes so that customers can often try
on, purchase and take their gowns home on the same day. We believe that this
provides us with a competitive advantage over typical bridal retailers whose
bridal customers often wait up to 20 weeks for delivery of their gowns.
Offer Excellent Everyday Value
Our pricing strategy is to offer our bridal gowns, flower girl, bridesmaid,
mothers-of-the-bride and -groom and other special occasion dresses at everyday
prices equal to or below comparable product offerings of our competitors. We
target customers across a wide range of income levels and offer apparel at
prices typically ranging from $99 to $899. The excellent value of our apparel,
coupled with a wide in-stock selection and high level of customer service, are
key elements of our strategy. We are able to support our pricing strategy while
maintaining attractive margins because we deal directly with the factories that
manufacture the majority of our merchandise.
Control Product Design, Procurement and Distribution
We design and obtain the majority of our merchandise directly from
factories. Based on our in-house design expertise and our direct relationship
with the factories that manufacture our merchandise, we are able to offer our
customers a broad assortment of fashionable styles at popular prices, while
maintaining high quality and fit standards. We have eliminated the middleman and
established relationships with important manufacturers through our Hong Kong
joint venture. This has significantly reduced the cost of our bridal gowns and
related apparel and has shortened the time period between order and delivery
that we have experienced in the past. Currently, the time between order and
delivery is 8-12 weeks. This reduced order lead time enables us to replenish our
merchandise quickly and react swiftly to fashion trends. By controlling the
distribution of our product, we are able to:
- reinforce our brand name, David's Bridal, in the eyes of our customers
- provide a broad in-stock assortment of our products
- control our pricing and flow of goods
- test new products on an ongoing basis
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Emphasize High Levels of Service
We are committed to providing a high level of customer service. We believe
this often leads to establishing an ongoing relationship with our customers and
results in repeat and/or referral purchases. Key elements of our customer
service include the following:
- Attentive and knowledgeable personnel. We recognize that purchasing a
wedding gown is an emotional experience, and that bridal customers expect
a higher level of attentiveness and product knowledge than is typically
provided by other apparel retailers. We understand that it is critical to
have experienced, highly trained employees in this role. Our recruiting
focus is to attract candidates with experience in the retailing of
products requiring significant interaction with the customer, such as
furniture, jewelry and cosmetics. We also provide initial training for
our personnel as well as training on an ongoing basis. Finally, we
regularly monitor service performance and customer satisfaction, and we
have a compensation structure that rewards store management for sales
performance and customer service.
- Convenient store design and hours. Our store design encourages purchases
in a customer friendly environment. Our current prototype, which exists
in over half of our stores, averages approximately 10,000 square feet and
has approximately 30 conveniently located fitting rooms and a central,
well-lit mirrored platform. This prototype presents merchandise in a
highly accessible format and enables us to provide personalized service
and to cross-merchandise related accessories. Our stores are open during
convenient hours, typically seven days a week, including evening hours on
all weekdays. Unlike many bridal retailers who require appointments, we
welcome customers to shop with or without an appointment.
- In-store alterations service. As an added convenience for our customers,
all of our stores, except for two outlet stores, provide an in-store full
service alterations department. This enables us to ensure that gowns and
dresses are well-tailored. The alterations department can also be a
crucial element in the sales process to enhance our relationship with the
customer. We believe that on-site alterations is a significant
competitive advantage because most retailers do not provide this service
on-site.
Open Stores in New and Existing Markets
Our store expansion strategy is to continue our geographic diversification
throughout the United States and to open additional stores in existing markets.
We believe this should create greater access and convenience for our customers
and increase the efficiency of our marketing, distribution and management
expenses. We opened 12 stores in fiscal 1996, 11 stores in fiscal 1997 and 18
stores in fiscal 1998. No stores were closed during this period, other than
relocations within the same market. We plan to open approximately 22 stores in
fiscal 1999 and 22-25 stores in fiscal 2000. As of April 3, 1999, we have
already opened four of the stores we plan to open in fiscal 1999.
Increase Sales Productivity of Existing Stores
We employ two complementary strategies to increase the productivity of our
existing stores. First, we seek to increase the flow of traffic into our stores
by increasing consumer awareness of our brand. Through our multi-media marketing
strategy and our continuing geographic expansion, we strive to establish David's
Bridal as the dominant national brand name in bridal retailing. In addition, the
bride typically determines where the bridesmaid dresses are purchased. As a
result, we strive to create a favorable experience for the bride. This enhances
our ability to outfit her bridesmaids as well as other members of the bridal
party, and encourages referrals, a significant factor in generating additional
business.
OUR MERCHANDISE ASSORTMENT
We carry an extensive assortment of bridal gowns and other special occasion
dresses, including mother-of-the-bride and -groom, bridesmaid, flower girl and
other dresses. Our average store carries
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approximately 2,600 gowns and dresses including our core assortment plus
numerous other styles. Our non-bridal dresses are often suitable for a variety
of occasions. We also carry a broad assortment of headpieces and other
accessories to satisfy the needs of the bride and the entire bridal party. Our
merchandise is classified in the following merchandise categories:
<TABLE>
<CAPTION>
CATEGORY DESCRIPTION TYPICAL PRICE RANGES
<S> <C> <C>
Bridal Gowns............ Hundreds of styles are available in all stores in $199-$899
sizes 2-26. Gowns represent current fashion trends
as well as traditional looks. Styles range from
simple and elegant to highly embellished. Fabrics
include silk, satin, chiffon, tulle and organza.
Bridesmaid Dresses...... Through both in-store inventory and rapid $99-$250
fulfillment through our distribution center,
customers can select from over 100 styles that
include a variety of colors and fabrics available in
sizes 2-24. An additional special order program is
available for sizes up to 48.
Other Dresses........... A broad assortment of mothers-of-the-bride and $99-$298
-groom and special occasion dresses is available in
sizes 2-24. Fashion trends are represented in both
traditional and seasonal color palates.
Flower Girl Dresses..... A broad assortment of styles is available in sizes $99-$119
2-12. Fabrics include satin, tulle and organza.
Bridal Headpieces....... A broad selection of headpieces, from informal $69-$185
wreaths to long veils, that compliment bridal gown
styles.
Accessories and Gifts... Undergarments (such as slips and bras), bridal and $7-$79
fashion shoes, costume jewelry, gloves, handbags and
wedding gift items (such as candles, wedding books
and disposable cameras).
</TABLE>
To reduce risk, we test our apparel prior to rolling out new products to
gauge customer appeal. We produce gowns under our own private labels, including
Michelangelo, Lady Eleanor, St. Tropez and Santa Monica, as well as under
exclusive licenses from popular fashion designers, Gloria Vanderbilt and Oleg
Cassini. We believe these brands reinforce the exclusivity of our product
offerings and enhance our store brand recognition.
We believe that a crucial component of our success is our ability to
satisfy the needs and preferences of bridesmaids in a timely fashion. Because a
number of bridesmaid dresses of the same style and color are typically sold to a
wedding party, stores may not carry sufficient quantities of bridesmaid dresses
to permit off-the-rack purchases by the entire wedding party. We utilize rapid
fulfillment from our distribution center to ensure that appropriate quantities
and sizes of bridesmaid dresses in matching styles and dye lots can be made
available within a short period of time. If necessary, we can special order
dresses directly from factories with whom we have an established relationship.
This enables members of the bridal party to purchase their bridesmaid dresses at
different stores throughout the country while still ensuring that the dresses
are consistent in style and color. This flexibility helps to improve merchandise
turnover and reduce markdowns.
DEVELOPMENT AND PROCUREMENT OF BRIDAL AND BRIDAL RELATED APPAREL
We control the production process for the majority of our products from
design through distribution. We obtain virtually all of our bridal gowns and
flower girl dresses from overseas manufacturers located principally in Asia.
Our product development staff, together with our merchandising group,
selects the fabrics, silhouettes, colors and price ranges for our designs. Our
in-house design staff interprets industry trends and develops
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exclusive designs for our stores. Unlike most manufacturers which update their
lines only two to three times per year, we design and develop styles for our
customers continually throughout the year.
We do not operate any manufacturing plants. We have established
relationships with important manufacturers through our Hong Kong joint venture.
Our joint venture partner is responsible for identifying the providers of and
for the purchasing of our bridal gowns and for ensuring that manufacturers
adhere to design and other business standards. We select manufacturers based on
their ability to support our growth, meet defined quality and fit standards and
make timely deliveries. These strategic relationships reduce our product costs
and shorten the time between order and receipt. They also enable us to avoid
depending on traditional bridal manufacturers which can dictate the styles,
quantities and order lead times.
For bridesmaids dresses, we either procure the products directly from
factories or purchase them from domestic dress manufacturers. We have
implemented a system for our bridesmaid dresses that monitors and controls the
production process from the acquisition of piece goods through final delivery.
Bridesmaids dresses that are not sourced through this system are purchased from
traditional domestic dress manufacturers.
We purchase other special occasion merchandise and accessories from a
variety of domestic vendors.
STORE DESIGN AND STAFFING
Our store design encourages purchases in a friendly environment. Most of
our stores range in size from 8,000 to 12,000 square feet. Our current
prototype, which exists in over half of our stores, averages approximately
10,000 square feet and has approximately 30 conveniently located fitting rooms
and a central, well-lit mirrored platform. This prototype presents merchandise
in a highly accessible format and enables us to provide personalized service and
to cross merchandise related accessories.
A typical store has 16-18 employees, including:
- a store manager
- an assistant manager
- a lead customer service representative
- an alterations manager
- bridal consultants
- seamstresses
- other support personnel.
We believe that appropriate personnel training is critical to ensure high
levels of customer service expected by purchasers of bridal wear. Accordingly,
we have developed a comprehensive training program for our personnel that is
supported by a training staff located at designated regional training stores.
This training staff focuses on the areas of product knowledge, sales techniques
and key elements of excellent service that we require. Management candidates for
a new store are typically hired approximately three to six months in advance.
During this period, a management candidate is expected to complete our formal
training program. In addition, the candidate is required to spend a considerable
amount of time in a store to gain experience in all facets of operations and
learn selling and management techniques appropriate for our stores. Management
candidates for existing stores must successfully complete a six week training
program before they assume store manager or assistant manager responsibilities.
Supplemental training is provided periodically to managers and assistant
managers.
OUR APPROACH TO CUSTOMER SERVICE
We strive to provide a level of service that exceeds our customers'
expectations. We believe that referrals are a principal source of new customers.
We have found that customers who are pleased with
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their experience are more likely to refer others to our stores. They are also
more likely to consider our stores to satisfy their future special occasion
needs.
Our principal customer service focus is the relationship between the
customer and her bridal consultant. Our bridal consultants typically have
experience in selling items requiring a high degree of interaction with the
customer and have completed our training program. They are expected to be highly
attentive to each customer's needs and to assist them throughout each stage of
the purchase process, from selecting a style to altering their gown. Since the
purchase decision may involve several visits to the store, bridal consultants
place follow-up telephone calls to customers to maintain contact with them and
thereby increase the likelihood of a return visit. After a purchase, bridal
consultants are expected to continue to contact customers to build an ongoing
relationship and enhance our ability to extend sales to the entire bridal party.
Other aspects of our operations underscore our commitment to customer
service. We also facilitate the availability of credit to our customers by
offering qualified customers a credit card from an independent financial
services company. This independent financial services company makes all credit
decisions, assumes all credit risk, processes all charge and credit slips, mails
statements and maintains account information.
LOCATIONS AND EXPANSION
As of April 3, 1999, we operated 81 stores in 30 states. Presently, we
lease 79 of these sites and own the other sites. In addition, we have entered
into lease agreements for the opening of 10 new stores. Two of our stores in
Texas are outlet stores.
<TABLE>
<S> <C> <C>
Alabama--1 Kentucky--1 North
Carolina--3
Arizona--1 Louisiana--1 Ohio--5
California--2 Maryland--2 Oklahoma--2
Colorado--2 Massachusetts--2 Pennsylvania--7
Connecticut--2 Michigan--3 South
Carolina--1
Delaware--1 Minnesota--2 Tennessee--3
Florida--7 Missouri--1 Texas--6
Georgia--3 Nevada--1 Utah--1
Illinois--5 New Jersey--5 Virginia--3
Kansas--1 New York--6 Wisconsin--1
</TABLE>
In determining store locations, we consider, among other things, the
population in a metropolitan market, marriage rates, household income levels and
the availability of suitable sites. We currently seek locations in high traffic
areas with convenient access to major commercial roads. We typically open stores
in larger strip centers with one or more larger and well-recognized tenants, in
stand-alone locations with high visibility and near regional shopping malls. We
believe that our strategy of selecting highly visible sites enables us to build
additional brand awareness.
The cost of opening a store in fiscal 1998, was approximately $720,000.
This amount includes approximately $260,000 of inventory, approximately $430,000
for leasehold improvements and fixtures, prior to tenant improvement allowances,
if any, and approximately $30,000 for pre-opening expenses. We expense our
pre-opening expenses as they are incurred. Our cost to open new stores will vary
in the future. Our costs will depend on factors such as local construction
expenses, changes in store format and tenant improvement allowances.
We continually evaluate our existing real estate positioning. Based on
demographic trends and shifts in traffic patterns, we may occasionally relocate
stores. In addition, as our store design evolves, some of our
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older, smaller stores may be relocated and conformed to our new prototype. Three
stores were relocated in fiscal 1998 and we plan to relocate three stores in
1999.
Our headquarters are located in Ardmore, Pennsylvania and consist of
approximately 16,000 square feet. We have leased these offices through June
2000. We may move our headquarters to a larger facility within the next 12
months.
We expect to relocate our offices to larger offices within the next 18
months. If we purchase our new offices, we anticipate funding the purchase
through mortgage financing and cash from operations.
OUR MARKETING STRATEGY
We employ a multi-media marketing strategy that uses magazines, television,
radio, newspaper and our internet website. We also actively use our product
catalog, which we make available to walk-in shoppers, mail directly to potential
customers and distribute at bridal fashion shows to reinforce the breadth of our
assortment and to facilitate sales.
Our industry research indicates that many brides-to-be purchase one or more
bridal magazines shortly after becoming engaged. We believe that we are among
the largest advertisers in two of the largest national bridal magazines. Our
extensive advertising in these magazines, which can consist of up to 30 pages
per magazine, enables us to showcase style, variety and value of our
merchandise. We believe that we are the only bridal retailer that advertises on
a national basis in these magazines. We also advertise in regional bridal
magazines in many of our markets. Because of the availability of customer
information and the ease of access to our target market through multi-media, we
are able to deploy our marketing dollars efficiently.
Television and radio advertising supplement our regional efforts. We
generally direct our television advertising to regional markets. In addition,
selected national television advertising is purchased to target audiences of
18-35 year old women. Radio advertising is utilized selectively, particularly in
areas where the cost of television advertising can be very expensive. Our radio
and television advertising further emphasizes our brand and enables us to
advertise special events, grand openings and sales. We believe that this
advertising provides a competitive advantage over most bridal retailers who do
not advertise on radio or television.
We also utilize direct mail to enhance brand awareness and promote select
events. A significant direct mail tool is our product catalog, which is mailed
to targeted lists of recently engaged brides-to-be. We obtain lists of potential
bridal and special occasion customers from our own bridal registry and from
lists that we purchase from regional bridal magazines and other third parties.
We distributed over 500,000 copies of our catalogs in fiscal 1998.
In December 1998, we launched our website, www.davidsbridal.com, which
allows customers to register with us online and subsequently receive information
on upcoming store events. On the website, customers can browse our catalog and
identify our store nearest to them using a state-by-state store locator.
Our public relations efforts are designed to emphasize our leadership role
in the bridal industry. Because we are the only national bridal chain, we are
often called on as an authority on bridal fashion and retailing trends. Our
spokespersons have made many television appearances during which they have
discussed current fashion trends for bridal and special occasion attire.
Additionally, we focus our marketing efforts on community, social,
educational, religious and cultural organizations. We cooperate with these
organizations by participating in local bridal and fashion shows, speaking
engagements on fashion trends and other special events.
DISTRIBUTION AND INVENTORY MANAGEMENT
Our distribution center is located in Conshohocken, Pennsylvania. We leased
a 30,000 square foot distribution center in 1996, which was expanded to 54,000
square feet in 1998. Currently, this facility ships
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<PAGE> 38
over half of our merchandise items to our stores, five days a week via third
party delivery services. The remaining merchandise is shipped directly from
suppliers to our retail stores.
Our distribution center utilizes a management information system to inspect
and monitor shipments to our stores. The system facilitates the timely delivery
of store shipments and the accurate accounting and balancing of inventory among
stores. We are typically able to make gowns, dresses and other products that are
not in stock in a particular store available to customers within 3-5 weeks of
purchase, a much shorter time period than the 12-20 weeks that we estimate is
usual in our industry. Once a delivery arrives at a store, inventory items are
inspected, sorted and placed on the selling floor by in-store personnel. We have
been able to reduce the amount of inventory that we must carry at our stores by
using the distribution center to support merchandise replenishment and our rapid
fulfillment program for bridesmaid dresses.
We believe that we will need to continue to increase the use of our rapid
fulfillment program as we expand the breadth of our assortments. Accordingly,
our distribution center will increase in importance as a greater portion of our
sales are fulfilled from inventory in our distribution center. In early 1998, we
completed the development of an inventory replenishment system that is designed
to further improve service levels and turnover in various accessory categories.
This system, which is linked to our distribution center and our merchandise
systems, facilitates the replenishment of merchandise upon sale. During fiscal
1998, this system was used to replenish accessory items. We have recently
expanded the use of this system to replenish our bridal gowns and expect to
further expand the use of this system to replenish other products that are
back-stocked by our distribution center.
We lease our distribution facility under a lease that expires in December
2002. We have the option to renew this lease through December 2005. We believe
that our distribution center, which was expanded in March 1998, will be
sufficient to meet our expected needs for the next two years based on our
current expansion plans. However, we may add an additional distribution center
in another geographic region or require additional space in our current
facility.
MANAGEMENT INFORMATION SYSTEMS
We seek to maintain management information systems that provide high
quality information and that enable us to manage and control our business.
Our operational systems are based on an STS fully integrated retail system.
This system operates in a UNIX environment on an IBM RISC 6000 and supports all
major business functions including sales, purchase order management,
distribution, store transfer, inventory control, merchandise planning and
financial systems. At the store level, we utilize a point-of-sale system that
includes bar code scanning capability, price look-up and dial-up credit
authorization, check authorization and financing authorization. This system also
supports a number of non-sales functions including inventory receipt, store
transfer, markdown notification, return to vendor, UPC look up and style locator
function. Our management information system is integrated among all major
aspects of our business, including sales, warehousing, distribution, purchasing,
inventory control, merchandise planning and replenishment and financial systems.
Stores are polled nightly, which supports the analysis of detailed sales and
merchandise information. Our management information systems have also been
supplemented with systems tailored for us such as our special order and an STS
EnVue systems. EnVue provides a merchandise data warehouse that enables us to
better analyze and improve our merchandise performance.
We are expanding our current hardware and network infrastructure, including
the development of an improved inventory management communications
infrastructure and the creation of data warehouses for store, marketing and
customer information to improve controls and enhance sales and operational
capabilities. We also intend to upgrade our systems to accommodate our planned
marketing strategy and inventory management, including the implementation of a
new warehouse management system. We will also seek to expand our store bridal
registry information to enhance communications with customers and target our
promotions. See "Risk Factors -- If our management information systems are
disrupted or we are not able to effectively upgrade and expand our management
information systems, our profitability, business operations and expansion could
be adversely affected."
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EMPLOYEES
We had a total of approximately 2,200 employees as of April 3, 1999.
Approximately 820 were part-time employees. None of our employees are covered by
collective bargaining agreements. We consider our relations with our employees
to be satisfactory.
LEGAL PROCEEDINGS
We are involved in litigation that we believe ordinarily accompanies a
retail business. A competitor has advised us that it believes that three of our
wedding gown styles infringe the trade dress of, and unfairly compete with,
three of the competitor's gown styles. We emphatically deny these allegations
and will vigorously defend any legal claims that are asserted by this
competitor. These three styles are not material to our overall product line or
our profitability.
We do not believe that any of our pending or threatened litigation will
result in an outcome that would materially adversely affect our business.
38
<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table provides information regarding our directors and
executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Steven H. Erlbaum......................... 50 Chairman of the Board
Robert D. Huth............................ 53 Chief Executive Officer, President and
Director
Philip Youtie............................. 51 Executive Vice President, Bridal Product
Development/Sourcing
Edward S. Wozniak......................... 53 Senior Vice President and Chief Financial
Officer
Marlene Karp.............................. 49 Senior Vice President, General Merchandise
Manager
Susan Zeitz............................... 42 Senior Vice President, Marketing
Kathy L. Kennedy.......................... 43 Senior Vice President, Sales
Fred A. Postelle.......................... 53 Senior Vice President, Human Resources
Gary E. Erlbaum........................... 54 Secretary, Treasurer and Director
Michael C. Erlbaum........................ 53 Director
Robert B. Calhoun, Jr. ................... 56 Director
Steven J. Sidewater....................... 55 Director
Eugene P. Lynch........................... 37 Director
</TABLE>
Prior to this offering, Steven H. Erlbaum served as our Chairman and Chief
Executive Officer. Upon consummation of this offering, Robert D. Huth, who has
been primarily responsible for running our day-to-day operations and has served
as our President and Chief Operating Officer since joining us in 1995, will
become our Chief Executive Officer and President. Steven H. Erlbaum will
continue as our Chairman of the Board and become a consultant to our business.
This will complete a transition that has occurred gradually over the past three
years.
Steven, Gary and Michael Erlbaum are brothers. There are no other family
relationships among the directors and executive officers.
Our articles of incorporation divide our board of directors into three
classes, with each director serving for a three-year term. Eugene P. Lynch and
Steven J. Sidewater are in a class of directors with a term ending at the annual
meeting of shareholders held in 2000. Robert B. Calhoun, Jr., Gary E. Erlbaum
and Michael C. Erlbaum are in a class of directors with a term ending at the
annual meeting of shareholders held in 2001. Robert D. Huth and Steven H.
Erlbaum are in a class of directors with a term ending at the annual meeting of
shareholders held in 2002. To the extent there is an increase in the number of
directors, we will distribute the additional directorships so that, as nearly as
possible, each class will consist of an equal number of directors. We intend to
appoint or elect one additional independent director within 90 days after the
completion of this offering.
Under a stockholders agreement among all of the current shareholders that
terminates upon the completion of this offering, The Clipper Group has
designated three directors, and the remaining shareholders have designated the
other four directors. Messrs. Huth, Calhoun and Lynch have been designated by
The Clipper Group. Steven H. Erlbaum, Michael C. Erlbaum, Gary E. Erlbaum and
Steven J. Sidewater have been designated by the other shareholders.
Our current directors and executive officers, along with their backgrounds,
are as follows:
Steven H. Erlbaum has been our Chairman of the Board and Chief Executive
Officer since 1990 and is a co-founder of David's Bridal. Mr. Erlbaum is also a
private investor in real estate and other private business ventures and was a
founder of Mr. Goodbuys, a chain of home improvement retail stores.
39
<PAGE> 41
Robert D. Huth has been our President, Chief Operating Officer and one of
our directors since July 1995. Mr. Huth has been primarily responsible for
running our day-to-day operations since joining us in 1995. Prior to joining us,
from 1987 to 1995, Mr. Huth was the Executive Vice President and Chief Financial
Officer of Melville Corporation, a specialty retailer operating diversified
businesses. Mr. Huth also served on the Melville Board of Directors. From 1971
to 1987, Mr. Huth practiced accounting at KPMG Peat Marwick where he became a
partner in 1981. Mr. Huth also serves on the board of directors of Stage Stores,
Inc.
Philip Youtie has been our Executive Vice President of Bridal Product
Development/Sourcing since 1990. Mr. Youtie was our co-founder in 1990. Prior to
our founding, Mr. Youtie was President of David's by Minerva, a chain of bridal
shops based in Florida. Mr. Youtie was First Vice President and co-founder of
the Bridal Marketing Association of America and has served on the advisory panel
of Modern Bride magazine.
Edward S. Wozniak has been our Senior Vice President and Chief Financial
Officer since April 1998. Mr. Wozniak was Senior Vice President, Chief
Administrative Officer of Things Remembered, Inc., a subsidiary of Cole National
Corporation, from November 1996 through April 1998. Mr. Wozniak served as Vice
President, Chief Financial Officer and Secretary of Egghead, Inc., a computer
software and hardware provider, from May 1996 to November 1996. From 1990
through April 1996, Mr. Wozniak was employed by Thom McAn Shoe Company, a
division of Melville Corporation, most recently as Senior Vice President and
Chief Financial Officer.
Marlene Karp has been our Senior Vice President, General Merchandise
Manager since July 1996. Previously, Ms. Karp served as General Merchandise
Manager for the retail outlet division of Spiegel, Inc. from June 1995 until
July 1996. Ms. Karp was the Divisional Merchandise Manager for Spiegel's retail
outlet division from September 1993 through June 1995. From March 1989 through
April 1992, Ms. Karp was Divisional Merchandise Manager at Mervyn's.
Susan Zeitz has been Senior Vice President of Marketing at David's Bridal
since February 1998. From June 1996 to February 1998, Ms. Zeitz managed her own
brand marketing consulting company. From 1990-June 1996, Ms. Zeitz was Vice
President of Marketing and New Business Development at The Franklin Mint. From
1988 to 1990, Ms. Zeitz was Director of Marketing at Revlon, Inc. From 1982 to
1988, Ms. Zeitz held several brand marketing and product development positions
at Elizabeth Arden, Inc.
Kathy L. Kennedy has been our Senior Vice President, Sales since January
1996. From 1986 through January 1996, Ms. Kennedy held various positions with
Casual Corner and Group, including Regional Director from 1994 to 1996, Regional
Manager from 1990 to 1994, and District Manager from 1986 to 1990.
Fred A. Postelle has been our Senior Vice President, Human Resources since
July 1998. From September 1995 through July 1998, Mr. Postelle served as a human
resources consultant to us. Prior to joining us, Mr. Postelle served as Senior
Vice President, Human Resources of Woodward & Lothrop/ John Wanamaker in
Washington, D.C. from January 1995 through September 1995. From 1993 to 1995,
Mr. Postelle served as Senior Vice President, Human Resources at Goody's Family
Clothing and from 1990 through 1993, he was Vice President, Corporate Human
Resources at Melville Corporation.
Gary E. Erlbaum has been our Secretary and one of our directors since
August 1992. Since 1983, Mr. Erlbaum has been involved in real estate and other
business ventures. Mr. Erlbaum is also a director and a member of the executive
committee of DBT Online, Inc., an on-line provider of database services. Mr.
Erlbaum also serves as a director of several privately owned companies.
Michael C. Erlbaum has been one of our directors since January 1994. Mr.
Erlbaum has been the President of Floors, USA, a retail floor covering chain,
since 1976. Mr. Erlbaum is also the President of MCE Associates, a real estate
firm.
Robert B. Calhoun, Jr. has been one of our directors since July 1995. Mr.
Calhoun is a founder and has been a Managing Director of Monitor Clipper
Partners, Inc. since its formation in June 1997.
40
<PAGE> 42
Mr. Calhoun also founded The Clipper Group, L.P. in 1990 and has served as its
President since such date. Prior to forming The Clipper Group, Mr. Calhoun was a
Managing Director of Credit Suisse First Boston Corporation, which he had joined
in 1965. Mr. Calhoun also serves on the boards of directors of Avondale
Incorporated, Hvide Marine, Inc., Interstate Bakeries, Inc. and TravelCenters of
America, Inc., as well as several privately-held companies.
Steven J. Sidewater has been one of our directors since August 1992. Mr.
Sidewater is currently President of RP Management, a real estate holding and
management company, a position he has held since June 1991. Mr. Sidewater served
in various capacities at Charming Shoppes, Inc. for approximately 25 years,
including President, Chief Operating Officer and Vice Chairman of the board of
directors from 1988 through 1990.
Eugene P. Lynch was one of the founders of The Clipper Group where he has
been a Managing Director since 1993. Prior to joining The Clipper Group, Mr.
Lynch was a Vice President of Credit Suisse First Boston, which he joined in
1983. Mr. Lynch also serves as a director of AVTEAM, Inc., Owosso Corp.,
TravelCenters of America, Inc. as well as several privately-held companies.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has a compensation committee comprised of Steven H.
Erlbaum, Steven J. Sidewater and Robert B. Calhoun, Jr. The compensation
committee is responsible for the administration of all salary and incentive
compensation plans for all of our officers, including bonuses and options
granted under our stock option plan. Within 90 days following the consummation
of this offering, we plan to elect an audit committee consisting of at least two
independent directors. It is anticipated that the audit committee will be
responsible for reviewing with our management our financial controls and
accounting and reporting activities. In addition, the audit committee will
review the qualifications of our independent auditors, make recommendations to
our board of directors regarding the selection of independent auditors, review
the scope, fees and results of any audit and review any non-audit services and
related fees.
DIRECTOR COMPENSATION
We will reimburse our directors for out-of-pocket expenses incurred in
connection with their rendering of services as directors. We also intend to pay
cash fees or grant stock options to non-management directors for attendance at
meetings, in such amounts as may be determined by our board of directors from
time to time. In addition, effective upon the consummation of this offering,
Steven H. Erlbaum will continue as Chairman of the Board and become a consultant
to us for a three year term. He will be paid a consulting fee in each of the
first two years of $425,000. In addition, he will receive a fee of $200,000 for
the third year. Gary E. Erlbaum has assisted us, and will continue to assist us,
in bank financing, real estate matters and as a liaison with legal counsel. He
has received aggregate cash compensation of $60,600 in fiscal 1997 and $68,748
in fiscal 1998. We intend to continue compensating Gary E. Erlbaum for his
services.
41
<PAGE> 43
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid by
us to our chief executive officer and our four other most highly compensated
executive officers (the "named executive officers") for services rendered to us
during fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL COMPENSATION COMPENSATION(A)
------------------------------------------------ ---------------
OTHER ANNUAL
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
<S> <C> <C> <C> <C> <C>
Steven H. Erlbaum.............. 1998 $425,000 $ -- $ -- $ 924
Chairman of the Board and
Chief Executive Officer
Robert D. Huth................. 1998 400,000 -- -- 985
President and Chief Operating
Officer
Philip Youtie.................. 1998 183,000 38,659 -- 518
Executive V.P. Bridal Product
Development/Sourcing
Marlene Karp................... 1998 177,300 45,630 40,470 1,000
Senior V.P., General
Merchandise Manager
Kathy L. Kennedy............... 1998 153,650 39,293 -- 1,000
Senior V.P., Sales
</TABLE>
- ---------------
(a) Represents our contributions for the account of the named executive officers
under the David's Bridal 401(k) Plan and Trust.
Effective on the date of this prospectus, we expect to grant a stock option
to purchase 106,056 shares of our common stock to Steven H. Erlbaum, and a stock
option to purchase 106,056 shares of common stock to Robert Huth, at an exercise
price equal to the price at which shares of our common stock are sold in this
offering. These options will be immediately exercisable. In addition, effective
upon completion of this offering, we expect to grant a stock option to purchase
190,418 shares of our common stock to Robert Huth, at an exercise price equal to
the price at which shares of our common stock are sold in this offering. These
options will vest on the third anniversary of the date of grant.
The following table contains information regarding stock options held at
the end of the last fiscal year end by our Chief Executive Officer and our other
named executive officers, none of whom were granted any stock options in fiscal
1998. The value of unexercised in-the-money options is based upon an assumed
public offering price of $15.50.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT JANUARY 2, 1999 OPTIONS AT JANUARY 2, 1999
-------------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Steven H. Erlbaum................... -- -- -- --
Robert D. Huth...................... 441,900 -- $4,675,302 --
Philip Youtie....................... -- -- -- --
Marlene Karp........................ 33,879 17,676 $ 318,125 $165,978
Kathy L. Kennedy.................... 51,555 -- $ 484,103 --
</TABLE>
42
<PAGE> 44
STOCK OPTION PLAN
Under our stock option plan, our designated employees or consultants and
non-employee members of our board of directors may receive grants of incentive
stock options and nonqualified stock options. The aggregate number of shares of
our common stock that may be issued under the stock option plan is 2,450,000
shares. As of April 3, 1999, options to purchase 1,401,550 shares were
outstanding under the stock option plan. In addition, effective on the date of
this prospectus, we expect to grant stock options to purchase an aggregate of
762,530 shares of common stock. The maximum number of shares that may be subject
to grants to any individual in 1999 is 330,000 shares, and for future years is
150,000 shares. Employees may receive incentive stock options or nonqualified
stock options and restricted stock under the stock option plan. Non-employee
directors and consultants may receive nonqualified stock options and restricted
stock. If options terminate or expire, or if restricted stock is forfeited the
shares attributable to such grants may again be subject to grants under the
stock option plan. The stock option plan will terminate on September 30, 2005,
unless sooner terminated pursuant to its terms.
The stock option plan is currently administered by the compensation
committee of our board. Grants and other actions by the committee are subject to
ratification by the board of directors.
The option price of an option may be equal to, greater than or less than
the fair market value of a share of common stock on the date of grant, provided
that:
- the option price of an incentive stock option may not be less than the
fair market value of a share of common stock on the date of grant and
- an incentive stock option that is granted to a person who owns more than
10% of our stock or a subsidiary must have an option price of not less than 110%
of the fair market of the common stock on the date of grant.
The committee determines the term of each option, which cannot exceed ten
years from the date of grant. However, an incentive stock option granted to a
10% shareholder may not have a term longer than five years from the date of
grant.
Unless the committee determines otherwise, upon a change of control where
we are not the surviving corporation, outstanding options will be assumed by the
surviving corporation and will continue to vest following the change of control.
In other cases, unless the committee determines otherwise, outstanding grants
will automatically vest in full in the event of a change of control.
Alternatively, in the event of a change of control, the committee may require
that grantees surrender their outstanding options in exchange for payment by us,
in cash or common stock, of an amount equal to the amount by which the fair
market value of the common stock exceeds the option price.
The committee may grant restricted stock with such vesting or other terms
as the committee deems appropriate.
A change of control will be deemed to occur if
- any person acquires securities representing more than 25% of the voting
power of our then outstanding securities or
- shareholders approve an agreement providing for
- a merger or consolidation where our shareholders immediately before
the transaction will not hold, immediately after the transaction, more
than 50% of the stock of the surviving corporation and where,
immediately after the transaction, persons who were our directors
immediately before the transaction do not constitute a majority of the
board of the surviving corporation,
- a sale of substantially all of our assets,
- a liquidation or dissolution of our company,
43
<PAGE> 45
- any person begins a tender offer for 25% or more of our stock or
- directors are elected such that a majority of the directors have been
members of the board for less than two years, unless the election or
nomination of the directors was approved by at least two-thirds of the
directors then in office who were directors at the beginning of the
period.
EMPLOYMENT AND CONSULTING AGREEMENTS
We have entered into an employment agreement with Philip Youtie, effective
on the date of this prospectus. The principal terms of the employment agreement
are as follows:
- Term: two years.
- Base Salary: $200,000 in the first year, $210,000 in the second year.
- Bonus: eligible for an annual bonus in accordance with our bonus plan.
- Severance: in the event of termination of Mr. Youtie by us without cause,
we will continue to pay Mr. Youtie's salary for the lesser of 12 months
or the remaining term of the employment agreement.
Mr. Youtie has also agreed to non-competition and non-solicitation
covenants as set forth in his employment agreement.
We have entered into an employment agreement with Robert D. Huth, effective
upon completion of this offering. The principal terms of the employment
agreement are as follows:
- Term: three years.
- Base Salary: $500,000 per year, subject to annual review by the
Compensation Committee of the board of directors.
- Bonus: eligible to participate in a bonus plan to be adopted by the
Compensation Committee of our board of directors.
- Severance: in the event of termination of Mr. Huth by us without cause,
we will continue to pay Mr. Huth's salary over the 12 months following
termination.
- Options: Mr. Huth will receive options to purchase 190,418 shares of our
common stock, at an exercise price equal to the price at which shares of
our common stock are sold in this offering. These options will vest on
the third anniversary of the date of grant.
Mr. Huth has also agreed to non-competition and non-solicitation covenants
as set forth in his employment agreement.
We have entered into a consulting agreement with Steven H. Erlbaum,
effective upon completion of this offering. The principal terms of the
consulting agreement are as follows:
- Term: three years.
- Base Compensation: $425,000 in the first two years, $200,000 in the third
year.
- Bonus: eligible for a bonus based upon a comparison of actual to budgeted
earnings for 1999.
Steven H. Erlbaum has also agreed to non-competition and non-solicitation
covenants as set forth in his consulting agreement.
44
<PAGE> 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALES OF CLASS D PREFERRED STOCK
On August 15, 1997, pursuant to the terms of a series of subscription
agreements, we sold an aggregate of 686,402 shares of class D preferred stock
for an aggregate purchase price of $5.0 million or $7.25 per share. These shares
were sold to our existing shareholders, including 448,651 shares to The Clipper
Group, an aggregate of 69,842 shares that are beneficially owned by Steven J.
Sidewater, 36,371 shares to Michael C. Erlbaum, 24,317 shares that are
beneficially owned by Gary E. Erlbaum. Each outstanding share of class D
preferred stock will convert upon the consummation of this offering into 1.473
shares of common stock, or an aggregate of 1,011,070 shares of common stock.
MDR ASSOCIATES
In December 1997, we purchased a one-third interest in MDR Associates LLC
("MDR") for $460,000. We borrowed this amount from Gary E. Erlbaum which loan
was evidenced by a demand note that bore interest at 7.75%, and was repaid in
full in January 1998. MDR owns a one-eighth interest in an aircraft. We made
this investment to facilitate travel between our locations. On November 23,
1998, Steven H. Erlbaum and Gary E. Erlbaum repurchased our interest in MDR and
reimbursed us for all expenses relating to MDR paid by us since December 1997.
After such purchase, each of Steven H. Erlbaum, our Chief Executive Officer and
Chairman of the Board, and Gary E. Erlbaum, a director, individually own a
one-half interest in MDR and each is also responsible for one-half of such
expenses allocated to MDR.
STOCK REDEMPTIONS
On March 30, 1996, we redeemed 526,173 shares of our Class A Common Stock
from Steven Erlbaum, for consideration equal to $3.76 per share. On March 30,
1996, we redeemed 271,055 shares of our Class A Common Stock from Gary Erlbaum,
for consideration equal to $3.76 per share, and on October 24, 1996, we redeemed
77,252 shares of our Class A Common Stock from Gary Erlbaum, for consideration
equal to $3.88 per share. On June 11, 1996, we redeemed 225,173 shares of our
Class A Common Stock from Philip Youtie, for consideration equal to $5.33 per
share, and on February 2, 1998 we redeemed 109,555 shares of our Class A Common
Stock from Philip Youtie, for consideration equal to $5.94 per share.
FLOORS USA
During fiscal 1997 and fiscal 1998 we purchased an aggregate of $159,056
and $297,217 in leasehold improvements from Floors USA. Michael C. Erlbaum, is
the controlling shareholder of Floors USA. The terms upon which we purchased
such leasehold improvements from Mr. Erlbaum are no more favorable to Mr.
Erlbaum than those that are available from non-affiliated third-parties.
RELATED PARTY TRANSACTIONS
Our board of directors has adopted a policy that we will not enter into any
related-party transactions unless they are approved by the disinterested members
of our board of directors and are on terms that are representative of the terms
that are available from non-affiliated third-parties.
45
<PAGE> 47
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock by:
- Our chief executive officer, our four other most highly compensated
executive officers and our directors
- Each selling shareholder
- All directors and executive officers as a group
- Each person known to us to own beneficially more than 5% of our
outstanding shares
A person has beneficial ownership of shares if he has the power to vote or
dispose of the shares. This power can be exclusive or shared, direct or
indirect. In addition, a person beneficially owns shares underlying options that
are presently exercisable or will become exercisable within 60 days of the date
of this prospectus.
As of April 23, 1999, there were 9,739,848 shares of our common stock,
outstanding and 7,543,817 shares of common stock issuable upon conversion of all
outstanding preferred stock.
To calculate a shareholder's percentage of beneficial ownership, we must
include in the numerator and denominator those shares underlying options
beneficially owned by that shareholder. Options held by other shareholders,
however, are disregarded in this calculation. Therefore, the denominator used in
calculating beneficial ownership among our shareholders may differ.
The table below assumes that the underwriters' have not exercised their
over-allotment option. In addition, the symbol "*" means that the percentage is
less than 1.0%.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP NUMBER OF BENEFICIAL OWNERSHIP
PRIOR TO OFFERING SHARES AFTER OFFERING
-------------------- TO BE SOLD --------------------
NAME SHARES PERCENT* IN THIS OFFERING SHARES PERCENT*
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Steven H. Erlbaum(a).................... 2,894,372 16.6% 1,205,427 1,688,945 8.8%
Philip Youtie(b)........................ 1,533,057 8.9% 343,124 1,189,933 6.2%
Gary E. Erlbaum(c)...................... 2,112,649 12.2% 778,443 1,250,514 6.6%
Michael C. Erlbaum(d)................... 733,404 4.2% 214,551 435,161 2.3%
Robert D. Huth(e)....................... 547,956 3.1% 96,775 451,181 2.3%
Steven J. Sidewater(f).................. 1,036,072 6.0% 411,989 624,083 3.3%
Marlene Karp(g)......................... 33,879 * -- 33,879 *
Kathy L. Kennedy(h)..................... 51,555 * -- 51,555 *
Eugene P. Lynch......................... -- -- -- -- --
Robert B. Calhoun, Jr.(i)............... -- * -- -- --
All executive officers and directors as
a group (10 persons)(j)............... 8,942,944 49.6% 3,050,309 5,725,251 29.1%
FIVE PERCENT HOLDERS
The Clipper Group(k).................... 7,193,615 41.6% 2,457,621 4,735,994 24.9%
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP NUMBER OF BENEFICIAL OWNERSHIP
PRIOR TO OFFERING SHARES AFTER OFFERING
-------------------- TO BE SOLD --------------------
NAME SHARES PERCENT* IN THIS OFFERING SHARES PERCENT*
<S> <C> <C> <C> <C> <C>
OTHER SELLING SHAREHOLDERS
The Vederman Family Partnership......... 518,305 3.0% 206,004 312,301 1.6%
Jon Erlbaum............................. 45,810 * 18,207 27,603 *
Marc Erlbaum............................ 45,810 * 18,207 27,603 *
Daniel Erlbaum(l)....................... 45,810 * 18,207 27,603 *
Michael Moore........................... 97,969 * 38,938 59,031 *
Shelly Shapiro(m)....................... 217,264 1.3% 48,627 168,637 *
Mordechai Kafry(n)...................... 152,388 * 60,567 91,821 *
First Union Corporation................. 489,997 2.8% 194,753 295,244 1.6%
Michael Erlbaum and Gary Erlbaum as
Trustees under the Agreement of Trust
of S.H. Erlbaum(o).................... 193,593 1.1% 83,692 109,901 *
Addwood Limited(p)...................... 225,284 1.3% 89,540 135,744 *
Eileen Rae Winkler Youtie, Custodian for
Haleigh R. Youtie..................... 108,720 * 24,333 84,387 *
Eileen Rae Winkler Youtie, Custodian for
Maxwell Evan Youtie................... 132,288 * 29,608 102,680 *
Andrew Taussig(q)....................... 220,950 1.3% 48,387 172,563 *
</TABLE>
- ------------------------------
(a) Mr. Steven Erlbaum is our Chairman and Chief Executive Officer. His address
is 44 West Lancaster Avenue, Suite 250, Ardmore, Pennsylvania 19003.
Includes currently exercisable options to purchase 106,056 shares of common
stock granted on the date of this prospectus.
(b) Mr. Youtie is our Executive Vice President, Bridal Product Development
Servicing. His address is 44 West Lancaster Avenue, Suite 250, Ardmore,
Pennsylvania 19003. Includes 14,273 shares of common stock held by Philip
Youtie as custodian for Haleigh Youtie, 2,031 shares of common stock held by
Philip Youtie as custodian for Maxwell Youtie. Excludes 108,720 shares of
common stock held by Eileen Youtie as custodian for Haleigh Youtie and
132,288 shares of common stock held by Eileen Youtie as custodian for
Maxwell Youtie. Mr. Youtie disclaims beneficial ownership of the shares held
by Eileen Youtie as custodian for each of Haleigh Youtie and Maxwell Youtie.
Number of shares to be sold in this offering includes 3,194 shares to be
sold by Philip Youtie as custodian for Haleigh Youtie, and 454 shares to be
sold by Philip Youtie as custodian for Maxwell Youtie.
(c) Includes 152,112 shares of common stock, and 35,818 shares of Class D
Preferred Stock held by the Erlbaum Family LP and excludes 137,430 shares
held by Mr. Gary Erlbaum's three children. Mr. Gary Erlbaum is the President
of the general partner of the Erlbaum Family LP. Mr. Gary Erlbaum disclaims
beneficial ownership of the shares held by his children. Includes 193,593
shares of common stock held by Michael Erlbaum and Gary Erlbaum as Trustees
under the Agreement of Trust of S.H. Erlbaum. Includes 450,441 shares of
common stock held by Gary Erlbaum as Trustee for Adam Erlbaum. Mr. Gary
Erlbaum's address is 44 West Lancaster Avenue, Suite 250, Ardmore,
Pennsylvania 19003. Mr. Gary Erlbaum is our Secretary and Treasurer and is a
member of our board of directors. Number of shares to be sold in this
offering includes 74,694 shares to be sold by the Erlbaum Family LP and
194,731 shares to be sold by Gary Erlbaum as Trustee for Adam Erlbaum.
Number of shares sold in this offering does not include 83,692 shares to be
sold by Michael Erlbaum and Gary Erlbaum as Trustees under the Agreement of
Trust of S.H. Erlbaum. Beneficial ownership after the offering includes
109,901 shares of common stock held by Michael Erlbaum and Gary Erlbaum as
Trustees under the Agreement of Trust of S.H. Erlbaum.
(d) Includes 167,922 shares of common stock held by the MCE Family Limited
Partnership. Mr. Michael Erlbaum is the general partner of the MCE Family
Limited Partnership. Includes 193,593 shares of common stock held by Michael
Erlbaum and Gary Erlbaum as Trustees under the Agreement of Trust of S.H.
Erlbaum. Mr. Michael Erlbaum is a member of our board of directors. Number
of shares to be sold in this offering include 66,742 shares to be sold by
MCE Family Limited Partnership. Number of shares to be sold in this offering
does not include 83,692 shares to be sold by Michael Erlbaum and Gary
Erlbaum as Trustees under the Agreement of Trust of S.H. Erlbaum. Beneficial
ownership after the offering includes 109,901 shares of common stock held by
Michael Erlbaum and Gary Erlbaum as Trustees under the Agreement of Trust of
S.H. Erlbaum.
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<PAGE> 49
(e) Represents 441,900 shares of common stock underlying presently exercisable
options. Also includes currently exercisable options to purchase 106,056
shares of common stock granted on the date of this prospectus. Mr. Huth has
a .155% interest in the shares of our stock owned by The Clipper Group, and
disclaims beneficial interest in the shares owned by The Clipper Group other
than .155% of these shares. Mr. Huth is our President and Chief Operating
Officer, and is a member of our board of directors.
(f) Includes (i) 200,099 shares of common stock held by Steven J. Sidewater,
Wendy Sidewater and Peter Sidewater as Trustees of the Grantor Retained
Annuity Trust of Steven J. Sidewater and (ii) 200,099 shares of common stock
held by SPWJ Associates, L.P. Mr. Sidewater is the general partner of SPWJ
Associates, L.P. Includes 36,713 shares of common stock held by the 1998
Irrevocable Deed of Trust of Steven Sidewater for Wendy Sidewater, 36,713
shares of common stock held by the 1998 Irrevocable Deed of Trust of Steven
Sidewater for Peter Sidewater and 516,802 shares of common stock held by the
Nancy Sidewater Agreement of Trust. Includes 1,000 shares of common stock
owned by Janet Sidewater, 1,000 shares of common stock owned by Maurice
Sidewater and 1,000 shares of common stock owned by Catherine Sidewater. Mr.
Sidewater is a member of our board of directors. Number of shares to be sold
in this offering includes 79,530 shares to be sold by Steven J. Sidewater,
Wendy Sidewater and Peter Sidewater as Trustees of the Grantor Retained
Annuity Trust of Steven J. Sidewater, 79,530 shares to be sold by SPWJ
Associates, L.P., 14,591 shares to be sold by the 1998 Irrevocable Deed of
Trust of Steven Sidewater for Wendy Sidewater, 14,591 shares to be sold by
the 1998 Irrevocable Deed of Trust of Steven Sidewater for Peter Sidewater
and 206,004 shares to be sold by the Nancy Sidewater Agreement of Trust.
(g) Represents 33,879 shares of common stock underlying presently exercisable
options. Ms. Karp is our Senior Vice President, General Merchandise Manager.
(h) Represents 51,555 shares of common stock underlying presently exercisable
options. Ms. Kennedy is our Senior Vice President, Sales.
(i) Excludes 7,193,615 shares of common stock held by The Clipper Group. Mr.
Calhoun is the sole shareholder and a director of the ultimate general
partner of The Clipper Group and is deemed to beneficially own all shares of
common stock beneficially owned by The Clipper Group. Mr. Calhoun is a
member of our board of directors.
(j) Includes 739,446 shares of common stock underlying presently exercisable
options.
(k) Includes shares beneficially owned by Clipper/Merchant Partners, L.P.,
Clipper Equity Partners I, L.P., Clipper/ Merban, L.P., and Clipper Capital
Associates, L.P. and Clipper/European Re, L.P. The address for each of these
entities is 650 Madison Avenue, New York, New York 10022. Clipper Capital
Associates, L.P. is the general partner of all of The Clipper Group
partnerships. The general partner of Clipper Capital Associates, L.P. is
Clipper Capital Associates, Inc. Robert B. Calhoun is the sole shareholder
and a director of Clipper Capital Associates, Inc. As a result, each of Mr.
Calhoun, Clipper Capital Associates, L.P. and Clipper Capital Associates,
Inc. is deemed to beneficially own all shares of common stock beneficially
owned by The Clipper Group.
(l) Mr. Daniel Erlbaum is employed by us.
(m) Mr. Shapiro is employed by us.
(n) Mr. Kafry is a principal owner of Addwood Limited, our Hong Kong joint
venture partner.
(o) 193,593 shares owned prior to this offering by Gary Erlbaum and Michael
Erlbaum as Trustees under the Agreement of Trust of S.H. Erlbaum are also
included in the beneficial ownership table for each of Gary Erlbaum and
Michael Erlbaum.
(p) Addwood Limited is our Hong Kong joint venture partner.
(q) Includes 220,950 shares of common stock underlying presently exercisable
options.
48
<PAGE> 50
DESCRIPTION OF CAPITAL STOCK
The following summarizes the terms of our common stock you will receive in
this offering. Please read our Articles of Incorporation, which are included as
an exhibit to the Registration Statement of which this prospectus is a part.
OUR AUTHORIZED CAPITAL STOCK
- 100 million shares of common stock, par value $0.01 per share;
- 5 million shares of preferred stock, par value $0.01 per share;
- Immediately after the sale of the shares of common stock in this
offering, we will have 19,041,827 shares of common stock outstanding and
no shares of preferred stock outstanding.
COMMON STOCK
Voting:
- One vote for each share held of record on all matters submitted to a vote
of shareholders;
- No cumulative voting rights;
- Election of directors by plurality of votes cast; and
- All other matters by majority of the votes cast.
Dividends:
- Subject to preferential dividend rights of outstanding shares of
preferred stock, common shareholders are entitled to receive ratably
declared dividends; and
- The Board may only declare dividends out of legally available funds.
Additional Rights:
- Subject to the preferential liquidation rights of outstanding shares of
preferred stock, common shareholders are entitled to receive ratably net
assets (available after payment of debts and other liabilities) upon our
liquidation, dissolution or winding up;
- No preemptive rights;
- No subscription rights;
- No redemption rights;
- No sinking fund rights; and
- No conversion rights.
The rights and preferences of common shareholders are subject to the rights of
any class of preferred stock we may issue in the future.
PREFERRED STOCK
By resolution of our board of directors, we may, without any further vote
or action by our shareholders, authorize and issue, subject to limitations
prescribed by law, an aggregate of 5 million shares of preferred stock. The
preferred stock may be issued in one or more classes or class. With respect to
any classes or class, the Board may determine the designation and the number of
shares, preferences, limitations and special rights, including dividend rights,
conversion rights, voting rights, redemption rights and liquidation preferences.
Because of the rights that may be granted, the issuance of preferred stock may
delay, defer or prevent a change of control.
49
<PAGE> 51
Prior to this offering, we had 171,792 shares of Class A preferred stock,
114,104 shares of Class B preferred stock, 114,104 shares of Class C preferred
stock and 686,402 shares of Class D preferred stock issued and outstanding. Upon
the consummation of this offering, all of our outstanding shares of preferred
stock will be subject to mandatory conversion, into an aggregate of 7,543,817
shares of common stock.
FLORIDA ANTI-TAKEOVER LAWS AND PROVISIONS OF OUR ARTICLES OF INCORPORATION
The provisions of the Florida Business Corporation Act and our Articles of
Incorporation, which are described below, could make it more difficult for a
third party to acquire control of us, even if such change of control would be
beneficial to the shareholders.
Section 607.0901 of the Florida Business Corporation Act generally requires
that, in merger, consolidation, specified asset sales or other specified
transactions between an "interested shareholder" (or an affiliate of the
interested shareholder) and a Florida public corporation, all of the
shareholders receive an amount equal to the greater of:
1) the highest price per share, including brokerage commissions and
other specified fees, paid by the interested shareholder for any shares
acquired by it (the "Highest Per Share Price") within the two-year period
immediately preceding the date on which it became an interested shareholder
or the announcement date of the transaction, whichever is higher;
2) the fair market value per share on the date on which it became an
interested shareholder or the announcement date of the transaction,
whichever is higher, or
3) the fair market value per share determined under (2) above,
multiplied by the ratio of the Highest Per Share Price within the two year
period immediately preceding the announcement date of the transaction to
the fair market value per share on the date of the interested shareholder's
first share acquisition during such two year period.
An "interested shareholder" is generally defined as a person that owns more than
10 percent of the voting shares of a corporation. The "fair market value" per
share generally means the highest closing sale price during the immediately
preceding 30-day period. The fair price provisions do not apply:
1) to a transaction approved by two-thirds of the shareholders other
than the interested shareholder;
2) to a transaction approved by a majority of the directors who are
not affiliated with the interested shareholder;
3) to a corporation which has not had more than 300 shareholders of
record at any time during the preceding three years;
4) if the interested shareholder has owned at least 80 percent of the
outstanding shares for at least five years; or
5) if the interested shareholder owns at least 90 percent of the
outstanding shares other than shares acquired from the corporation.
Section 607.0902 of the Florida Business Corporation Act generally provides
that, in the event any person acquires a control share, which is defined as 20
percent or more of the outstanding voting shares of a Florida public
corporation, all of the shares acquired by the acquiror within 90 days before
and after the date on which the acquiror reached the 20 percent threshold will
not have voting rights, unless the remaining disinterested shareholders approve
voting rights for such shares by a majority vote at a special meeting called for
that purpose. In addition to the 20 percent threshold, a control share
acquisition also
50
<PAGE> 52
takes place when an acquiror acquires 33 1/3 percent and 50 percent of the
voting shares of a corporation. Among other things, the voting disqualification
provisions do not apply to:
1) the acquisition of shares of a corporation which has been approved
in advance by the board of directors of the corporation;
2) a merger or share exchange effected in compliance with the Florida
corporate laws; or
3) a corporation with neither 10 percent of its shareholders resident
in Florida, 10 percent of its shares owned by Florida residents nor 1,000
shareholders resident in Florida.
If the control shares are a majority of the outstanding shares and are accorded
full voting rights by the disinterested shareholders, all of the disinterested
shareholders will have dissenters' rights to receive in cash from the
corporation the fair value of their shares. Fair value of the shares cannot be
less than the highest price paid per share by the acquiror in the control share
acquisition.
Our Articles of Incorporation provide that shareholders may call special
meetings of the shareholders only if the holders of at least 20 percent of all
votes entitled to be cast on any issue proposed to be considered at the meeting
make a demand. In addition, the Articles of Incorporation provide that
shareholders must act at a meeting and not by written consent. The Articles of
Incorporation also provide for a classified board. See "Management--Executive
Officers and Directors".
REGISTRATION RIGHTS
Holders of 9,739,848 shares of common stock, and holders of 7,543,817
shares of common stock issuable upon conversion of preferred stock, including
The Clipper Group, Steven H. Erlbaum, Gary E. Erlbaum, Philip Youtie, Michael C.
Erlbaum and Steven J. Sidewater, have been granted registration rights. These
rights are provided under the terms of the registrable securities and agreements
between us and the holders of such securities. Such agreements and registrable
securities provide, in specific instances, demand registration rights. In
particular, the Clipper Group may demand that we register their shares on not
more than three occasions, in which event the holders of all shares of common
stock and preferred stock would have specific rights to participate in the
registration. In addition, pursuant to these agreements, the holders are
entitled, subject to specific limitations, to require us to include their
registrable securities in future registration statements we file under the
Securities Act of 1933. The holders of all outstanding shares of common stock
have specific piggyback registration rights, subject to reduction in the
discretion of an underwriter. Registration of shares of common stock pursuant to
the exercise of demand registration rights or piggyback registration rights
would result in such shares becoming freely tradable without restriction under
the Securities Act of 1933 immediately upon the effectiveness of such
registration and may adversely affect our stock price.
TRANSFER AGENT
The transfer agent for our common stock is The Bank of New York.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market
following this offering could adversely affect the market price of our common
stock and adversely affect our ability to raise capital at a time and on terms
favorable to us.
Of the 19,041,827 shares to be outstanding after this offering (assuming
that the underwriters do not exercise their over-allotment option), the
8,000,000 shares of common stock offered hereby will be freely tradeable without
restriction in the public market unless such shares are held by "affiliates," as
that term is defined in Rule 144 under the Securities Act of 1933. The remaining
shares of common stock to be outstanding after this offering are "restricted
securities" under the Securities Act of 1933 and may be sold in the public
market under Rule 144, subject to the manner of sale and other limitations of
Rule 144.
51
<PAGE> 53
In addition, as of April 3, 1999, there were options to purchase 1,401,550
shares of common stock, of which 1,055,153 options were fully vested and
exercisable. An additional 1,048,450 shares were reserved for issuance under our
stock option plan, of which options to purchase 762,530 shares are being granted
on or prior to the completion of this offering. We intend to register the shares
of common stock issued, issuable or reserved for issuance under the plan
following the date of this prospectus.
Following completion of the offering, holders of 11,041,827 shares of
common stock are entitled to registration rights with respect to such shares for
resale under the Securities Act. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold in
the public market, will likely cause an adverse effect on the market price for
our common stock. These registration rights may not be exercised prior to the
expiration of 180 days from the date of this prospectus. See "Description of
Capital Stock--Registration Rights."
LOCK-UP ARRANGEMENTS
Along with our officers and directors and all of the holders of the
preferred stock we have agreed not to sell or otherwise dispose of any shares of
common stock for a period of 180 days after the date of this prospectus without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
After the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act to register all shares of common
stock reserved for issuance under our stock option plan.
52
<PAGE> 54
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement dated
, 1999 the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation and, Legg Mason Wood Walker,
Incorporated have severally agreed to purchase from us and the selling
shareholders the respective number of shares set forth opposite their names
below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Legg Mason Wood Walker, Incorporated........................
---------
TOTAL............................................. 8,000,000
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of legal matters by their counsel and to other
specified conditions. The underwriters are obligated to purchase and accept
delivery of all the shares (other than those shares covered by the
over-allotment option described below) if they purchase any of the shares.
The underwriters initially propose to offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to dealers at the public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share on
sales to other dealers. After the initial offering of the shares to the public,
the representatives may change the public offering price and such concessions at
any time without notice.
We and the selling shareholders have granted the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase, from time
to time, in whole or in part, up to 1,200,000 additional shares at the public
offering price less the underwriting fees. The underwriters may exercise such
option solely to cover overallotments, if any, made in connection with this
offering. To the extent that the underwriters exercise such option, each
underwriter will become obligated, subject to specified conditions, to purchase
a number of additional shares approximately proportionate to such underwriter's
initial purchase commitment.
The following table shows the underwriting fees to be paid to the
underwriters by us and the selling shareholders in connection with this
offering. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY THE COMPANY PAID BY SELLING STOCKHOLDERS
---------------------------- ----------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
<S> <C> <C> <C> <C>
Per Share.................................. $ $ $ $
Total...................................... $ $ $ $
</TABLE>
We and the selling shareholders have agreed to indemnify the underwriters
against specified civil liabilities, including liabilities under the Securities
Act of 1933, or to contribute to payments that the underwriters may be required
to make in respect of any of those liabilities.
The underwriters have reserved for sale, at the initial public offering
price, up to 400,000 shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
such shares of common stock in this offering. The number of shares of common
stock available for sale to the general public in this offering will be reduced
to the extent such persons purchase the reserved shares. Any reserved shares not
so purchased will be offered by the underwriters to the general public on the
same terms as the other shares offered hereby.
53
<PAGE> 55
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in this offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJdirect Inc. for sale to
brokerage account holders.
We estimate that expenses of the offering will total $1,300,000.
We and our executive officers and directors and several of our shareholders
who are the selling shareholders have agreed that, subject to some exceptions
for a period of 180 days from the date of this prospectus, they will not,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock;
- purchase any option or contract to sell, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common
stock;
- grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common
stock;
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock (regardless of whether any of the transactions described above is
to be settled by the delivery of common stock, or such other securities,
in cash or otherwise).
In addition, during such period, we have also agreed not to file any
registration statement with respect to, and each of our executive officers and
directors and several of our shareholders (including the selling shareholders)
have agreed not to make any demand for, or exercise any right with respect to,
the registration of any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.
We have made application to list our common stock on the Nasdaq National
Market under the symbol "DABR".
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Other than in the United States, no action has been taken by us, the
selling shareholders or the underwriters that would permit a public offering of
the shares of common stock included in this offering in any jurisdiction where
action for that purpose is required. The shares included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisement in connection with the offer and sale
of any such shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
this offering and the distribution of this prospectus. This prospectus is not an
offer to sell or a solicitation of an offer to buy any shares of common stock
included in this offering in any jurisdiction where that would not be permitted
or legal.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of common stock in the open market to cover such syndicate
short position or to stabilize the price of the common stock. These activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
54
<PAGE> 56
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock was
determined by negotiation among us, the selling shareholders and the
representatives of the underwriters. Among the factors considered in determining
the public offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stages of development of other companies
which the representatives of the underwriters believe to be comparable
to us; and
- estimates of our business potential.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania and Miami, Florida.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
Our consolidated financial statements as of January 3, 1998 and January 2,
1999 and for the fiscal years ended January 4, 1997, January 3, 1998 and January
2, 1999, included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
AVAILABLE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-1
filed by us with the Commission under the Securities Act, with respect to the
securities offered in this prospectus. This prospectus does not contain all the
information which is in the registration statement. Certain parts of the
registration statement are omitted as allowed by the rules and regulations of
the Commission. We refer to the registration statement and to the exhibits to
such registration statement for further information with respect to us and the
securities offered in this prospectus. Statements contained in this prospectus
concerning the provisions of documents are necessarily summaries of the material
provisions of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission.
Copies of the registration statement are on file at the offices of the
Securities and Exchange Commission and may be inspected without charge at the
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of the registration statement may be obtained from the Public Reference
Section of the Commission upon payment of the fee prescribed by the Commission.
Information on David's Bridal can be obtained from the Public Reference Room by
calling 1-800-SEC-0330. The Commission maintains a Web site that contains all
information filed electronically by us, including reports, proxy and information
statements. The address of the Commission's Web site is (http://www.sec.gov).
We intend to list our common stock on the Nasdaq National Market. Reports,
proxy statements and other information concerning us can be inspected at: the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
REPORTS TO SECURITY HOLDERS
We intend to distribute to our shareholders annual reports containing
audited financial statements and will make available copies of our quarterly
reports for the first three quarters of each fiscal year containing unaudited
interim financial information.
55
<PAGE> 57
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report Of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements Of Operations....................... F-4
Consolidated Statements Of Redeemable Common Stock And
Shareholders' Equity...................................... F-5
Consolidated Statements Of Cash Flows....................... F-6
Notes To Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 58
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To David's Bridal, Inc.:
We have audited the accompanying consolidated balance sheets of David's
Bridal, Inc. (a Florida corporation) and subsidiaries as of January 3, 1998 and
January 2, 1999, and the related consolidated statements of operations,
redeemable common stock and shareholders' equity and cash flows for each of the
three years in the period ended January 2, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of David's Bridal, Inc. and
subsidiaries as of January 3, 1998 and January 2, 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
January 2, 1999 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.
February 10, 1999 (except for the items
discussed in Note 2, as to
which the date is April 23, 1999)
F-2
<PAGE> 59
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA
APRIL 3,
JANUARY 3, JANUARY 2, APRIL 3, 1999
1998 1999 1999 (SEE NOTE 2)
---------- ---------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 464 $ 320 $ 1,946 $ 1,946
Accounts receivable....................................... 1,468 2,423 2,396 2,396
Inventories............................................... 32,452 37,799 35,339 35,339
Prepaid expenses and other assets......................... 1,929 2,323 2,301 2,301
Deferred tax asset........................................ 296 -- -- --
---------- ---------- ----------- ------------
Total current assets................................ 36,609 42,865 41,982 41,982
---------- ---------- ----------- ------------
PROPERTY AND EQUIPMENT, net................................. 15,581 20,650 23,776 23,776
---------- ---------- ----------- ------------
DEFERRED TAX ASSET.......................................... 616 1,066 1,066 1,066
---------- ---------- ----------- ------------
OTHER ASSETS, net of accumulated amortization of $36, $79,
$103 and $103, respectively............................... 893 977 1,418 1,418
---------- ---------- ----------- ------------
$ 53,699 $ 65,558 $ 68,242 $ 68,242
========== ========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdrafts........................................... $ 3,003 $ 4,033 $ 3,881 $ 3,881
Current portion of capitalized lease obligations.......... 126 134 251 251
Current portion of long-term debt......................... 551 147 150 150
Accounts payable.......................................... 4,394 6,070 6,658 6,658
Accrued expenses.......................................... 3,985 4,837 9,895 9,895
Income taxes payable...................................... 745 355 2,366 2,366
Deferred tax liabilities.................................. -- 236 236 236
---------- ---------- ----------- ------------
Total current liabilities........................... 12,804 15,812 23,437 23,437
---------- ---------- ----------- ------------
DEFERRED RENT............................................... 2,430 2,861 3,023 3,023
---------- ---------- ----------- ------------
CAPITALIZED LEASE OBLIGATIONS, net of current portion....... 415 281 752 752
---------- ---------- ----------- ------------
LONG-TERM DEBT.............................................. 15,916 19,366 9,222 9,222
---------- ---------- ----------- ------------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
REDEEMABLE COMMON STOCK..................................... 628 -- -- --
---------- ---------- ----------- ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value 5,000,000 shares
authorized, none issued or outstanding, proforma........ -- -- -- --
Convertible Preferred stock, liquidation value $33,977 at
January 2, 1999 and April 3, 1999....................... 11 11 11 --
Common stock--
Common Stock, $.01 par value, 100,000,000 shares
authorized, 17,283,665 issued and outstanding,
proforma.............................................. -- -- -- 173
Class A, $.01 par value, 16,250,000 shares authorized,
9,849,403, 9,739,848 and 9,739,848 shares issued and
outstanding........................................... 98 97 97 --
Class B, $.01 par value, 1,500,000 shares authorized,
none issued or outstanding............................ -- -- -- --
Class C, $.01 par value, 3,750,000 shares authorized,
none issued or outstanding............................ -- -- -- --
Additional paid-in capital................................ 18,304 18,282 18,282 18,217
Retained earnings......................................... 3,093 8,848 13,418 13,418
---------- ---------- ----------- ------------
21,506 27,238 31,808 31,808
---------- ---------- ----------- ------------
$ 53,699 $ 65,558 $ 68,242 $ 68,242
========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 60
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED ENDED
-------------------------------------- --------------------
JANUARY 4, JANUARY 3, JANUARY 2, APRIL 4, APRIL 3,
1997 1998 1999 1998 1999
---------- ---------- ---------- -------- --------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net sales...................................... $62,836 $85,381 $123,540 $35,628 $54,087
Other income................................... 4,188 6,228 9,062 1,969 2,717
------- ------- -------- ------- -------
Total revenues............................. 67,024 91,609 132,602 37,597 56,804
COST OF SALES, including buying, distribution
and occupancy costs.......................... 40,737 52,882 74,611 20,136 28,969
------- ------- -------- ------- -------
Gross profit............................... 26,287 38,727 57,991 17,461 27,835
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES... 26,424 33,702 47,571 12,532 20,191
------- ------- -------- ------- -------
INCOME (LOSS) FROM OPERATIONS.................. (137) 5,025 10,420 4,929 7,644
INTEREST EXPENSE, net.......................... 586 1,249 1,087 309 272
------- ------- -------- ------- -------
Income (loss) before income taxes.......... (723) 3,776 9,333 4,620 7,372
INCOME TAX PROVISION (BENEFIT)................. (208) 1,296 3,578 1,797 2,802
------- ------- -------- ------- -------
NET INCOME (LOSS).............................. $ (515) $ 2,480 $ 5,755 $ 2,823 $ 4,570
======= ======= ======== ======= =======
Net income (loss) per common share:
Basic........................................ $ (0.05) $ 0.25 $ 0.59 $ 0.29 $ 0.47
======= ======= ======== ======= =======
Diluted...................................... $ (0.05) $ 0.14 $ 0.31 $ 0.15 $ 0.25
======= ======= ======== ======= =======
Weighted average shares outstanding:
Basic........................................ 10,207 9,849 9,751 9,784 9,740
Diluted...................................... 10,207 17,472 18,375 18,359 18,614
Pro forma basic earnings per common share
(unaudited) (Note 2)......................... $ 0.33 $ 0.26
======== =======
Pro forma basic weighted average number of
shares outstanding (unaudited) (Note 2)...... 17,295 17,284
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 61
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
REDEEM- --------------------------------------------------------------------------
ABLE PREFERRED STOCK COMMON STOCK ADDITIONAL
COMMON ------------------ ------------------- PAID-IN RETAINED
STOCK SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------- --------- ------ ---------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 30, 1995....... $7,744 400,000 $ 4 10,949,056 $109 $10,708 $ 1,128 $11,949
Purchase of Redeemable Common
stock........................ (4,500) -- -- (1,099,653) (11) 11 -- --
Accretion of Common stock
redemption value............. 363 -- -- -- -- (363) -- (363)
Net loss....................... -- -- -- -- -- -- (515) (515)
------ --------- --- ---------- ---- ------- ------- -------
BALANCE, JANUARY 4, 1997......... 3,607 400,000 4 9,849,403 98 10,356 613 11,071
Sale of preferred stock........ -- 686,402 7 -- -- 4,969 -- 4,976
Modification of Common stock
redemption agreement......... (3,120) -- -- -- -- 3,120 -- 3,120
Accretion of Common stock
redemption value............. 141 -- -- -- -- (141) -- (141)
Net income..................... -- -- -- -- -- -- 2,480 2,480
------ --------- --- ---------- ---- ------- ------- -------
BALANCE, JANUARY 3, 1998......... 628 1,086,402 11 9,849,403 98 18,304 3,093 21,506
Purchase of Redeemable Common
stock........................ (651) -- -- (109,555) (1) 1 -- --
Accretion of Common stock
redemption value............. 23 -- -- -- -- (23) -- (23)
Net income..................... -- -- -- -- -- -- 5,755 5,755
------ --------- --- ---------- ---- ------- ------- -------
BALANCE, JANUARY 2, 1999......... -- 1,086,402 11 9,739,848 97 18,282 8,848 27,238
Net income (unaudited)......... -- -- -- -- -- -- 4,570 4,570
------ --------- --- ---------- ---- ------- ------- -------
BALANCE, APRIL 3, 1999
(UNAUDITED).................... $ -- 1,086,402 $11 9,739,848 $ 97 $18,282 $13,418 $31,808
====== ========= === ========== ==== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 62
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED ENDED
------------------------------------ -------------------
JANUARY 4, JANUARY 3, JANUARY 2, APRIL 4, APRIL 3,
1997 1998 1999 1998 1999
---------- ---------- ---------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ (515) $ 2,480 $ 5,755 $ 2,823 $ 4,570
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities--
Depreciation and amortization.......................... 1,393 2,022 2,896 645 887
Amortization of debt issuance costs.................... -- 74 42 22 15
Provision for deferred rent............................ 645 782 431 126 161
Loss on sale or disposal of property and equipment..... 70 8 144 77 --
Equity income in affiliate............................. -- -- (166) (25) (50)
Deferred income taxes.................................. (33) (479) 82 -- --
Changes in assets and liabilities--
(Increase) decrease in--
Accounts receivable.................................. (247) (116) (955) (52) 27
Prepaid expenses and other assets.................... (930) 375 (780) (172) (510)
Inventories.......................................... 168 (12,204) (5,347) 1,381 2,460
Increase (decrease) in--
Accounts payable..................................... 1,585 816 1,676 (834) 588
Accrued expenses..................................... (27) 1,668 852 2,013 5,058
Income taxes payable................................. (41) 785 (390) 366 2,011
-------- -------- -------- ------- --------
Net cash provided by (used in) operating
activities......................................... 2,068 (3,789) 4,240 6,370 15,217
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................... (4,931) (7,470) (8,105) (2,121) (3,361)
(Investment in) distribution from affiliate.............. -- (460) 460 -- 170
-------- -------- -------- ------- --------
Net cash used in investing activities................ (4,931) (7,930) (7,645) (2,121) (3,191)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt................. 1,086 -- 1,400 -- --
Repayments of long-term debt and capital leases.......... (40) (203) (680) (516) (105)
Borrowings on revolving credit agreement................. 25,804 42,356 41,500 11,000 8,900
Repayments on revolving credit agreement................. (20,256) (38,461) (39,300) (13,435) (19,000)
Borrowings on short-term debt............................ -- 460 -- -- --
(Decrease) increase in bank overdrafts................... (276) 2,732 1,030 444 (152)
Proceeds from subscription receivable.................... 1,000 -- -- -- --
Proceeds from sale of Preferred stock.................... -- 4,976 -- -- --
Repurchase of Common stock............................... (4,500) -- (651) (651) --
Payment of debt issuance costs........................... -- (185) (38) (6) (43)
-------- -------- -------- ------- --------
Net cash provided by (used in) financing
activities......................................... 2,818 11,675 3,261 (3,164) (10,400)
-------- -------- -------- ------- --------
Net increase (decrease) in cash...................... (45) (44) (144) 1,085 1,626
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............. 553 508 464 464 320
-------- -------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 508 $ 464 $ 320 $ 1,549 $ 1,946
======== ======== ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for--
Income taxes........................................... $ 76 $ 330 $ 3,744 $ 1,287 $ 791
======== ======== ======== ======= ========
Interest, net of amounts capitalized................... $ 555 $ 1,240 $ 1,018 $ 198 $ 305
======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 63
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BACKGROUND
David's Bridal, Inc. was organized on August 29, 1990 and is engaged in the
retail sale of bridal gowns and bridal related merchandise. As of January 3,
1998 and January 2, 1999, the Company operated 59 stores in 27 states and 77
stores in 29 states, respectively, throughout the United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of David's Bridal, Inc. and
subsidiaries (the Company) include the accounts of David's Bridal, Inc. (a
Florida corporation) and all of its wholly owned subsidiaries. Material
intercompany balances and transactions have been eliminated in consolidation.
FISCAL YEAR-END
The Company operates under a 52/53-week fiscal year ending on a Saturday
near December 31. The accompanying consolidated financial statements for the
years ended January 4, 1997 (fiscal 1996), January 3, 1998 (fiscal 1997) and
January 2, 1999 (fiscal 1998), include 53, 52 and 52 weeks of operations,
respectively.
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The accompanying consolidated financial statements as of April 3, 1999 and
for the 13 weeks ended April 4, 1998 and April 3, 1999 are unaudited and, in the
opinion of management include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations for those interim periods. The results of
operations for the 13 weeks ended April 4, 1998 and April 3, 1999 are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents for the purpose of
determining cash flows. Checks issued in excess of cash balances are reflected
as bank overdrafts. Cash and cash equivalents includes investments of $100,000
in overnight securities as of April 3, 1999.
INVENTORIES
Merchandise inventories are stated at the lower of cost (first-in,
first-out) or market. Costs associated with certain buying, receiving and
distribution activities are included in inventories.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Additions or improvements are
capitalized, while repairs and maintenance are charged to expense. Gains or
losses on sale or disposal are reflected in net income. Depreciation and
amortization is computed on the straight-line method over the estimated useful
life of the asset. The estimated useful lives are as follows:
F-7
<PAGE> 64
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
<TABLE>
<S> <C>
Land improvements............................ 20 years
Buildings and improvements................... 20 to 30 years
Equipment.................................... 3 to 10 years
Leasehold improvements....................... Lesser of useful life or lease term
Furniture and fixtures....................... 5 to 10 years
</TABLE>
Certain personnel costs and out-of-pocket costs directly associated with
the construction or remodeling of stores are capitalized and amortized over the
lease term.
The Company capitalizes interest in connection with the construction of new
stores which is amortized over the lesser of the assets' estimated useful life
or lease term. During fiscal 1997 and fiscal 1998 and the 13 weeks ended April
4, 1998 and April 3, 1999 $70,000, $59,000, $29,000 and $35,000, respectively,
of interest was capitalized.
ACCOUNTING FOR LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." Accordingly, in the event that facts and circumstances indicate
that property and equipment, and intangible or other assets, may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the assets is
compared to the assets' carrying amount to determine if a write-down to market
value or discounted cash flow value is necessary. Management believes that there
has been no impairment of the Company's long-lived assets.
DEFERRED RENT
Rent expense on leases is recorded on a straight-line basis over the lease
period. The excess of rent expense over actual cash paid has been recorded as
deferred rent in the accompanying consolidated balance sheets.
REVENUE RECOGNITION
The Company records revenue when an item is sold and delivered to a
customer. Revenue is recognized on special orders when the customer orders the
goods, the goods are owned by the Company and the Company receives 100% payment
for the goods. The Company's policy is not to accept returns of special order
goods. Layaway deposits are recorded as a liability and recognized as a sale
upon receipt of full payment. Alterations revenues are deferred until the work
is completed. Other income consists primarily of alterations revenue.
STORE OPENING
Store opening costs incurred at new store locations are charged to expense
as incurred.
ADVERTISING
Advertising costs are expensed the first time the advertising takes place.
For fiscal 1996, 1997 and 1998 and for the 13 weeks ended April 4, 1998 and
April 3, 1999, advertising expense, net of reimbursements received from vendors
for specific advertising events, was $4,910,000, $6,295,000, $8,088,000,
$2,602,000 and $4,837,000 respectively.
F-8
<PAGE> 65
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, deferred income tax assets and liabilities are determined
based on differences between the financial reporting and income tax basis of
assets and liabilities measured using enacted income tax rates and laws that are
expected to be in effect when the differences reverse.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Differences can arise between the
fair value and carrying amount of financial instruments that are recognized at
historical cost. The Company's financial instruments consist primarily of cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and debt instruments.
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses and current maturities of long-term debt
approximate fair value due to the short maturity of these instruments.
Debt instruments consist primarily of borrowings under a revolving credit
agreement which charges a variable rate of interest consistent with current
market rates, and mortgages with interest rates consistent with current market
rates. As of January 3, 1998, January 2, 1999 and April 3, 1999, the fair value
of these instruments approximated carrying value.
BUSINESS AND CREDIT RISK CONCENTRATION
Financial instruments which potentially subject the Company to
concentrations of credit risk are cash and cash equivalents and accounts
receivable. The Company limits its credit risk associated with cash and cash
equivalents by placing its investments in highly liquid funds. Receivables
associated with third party credit cards are processed by financial institutions
which are monitored for financial stability.
The Company utilizes international manufacturers (mainly in China) to
provide all of its bridal gowns and flower girl dresses. Should there be
significant changes in areas such as quotas, tariffs and fluctuations in
exchange rates, among others, the Company's ability to obtain merchandise at a
reasonable cost and in a timely manner could be significantly impaired.
Management monitors these risks and believes that its relationships are such
that alternative sourcing arrangements would be available.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENTLY ADOPTED ACCOUNTING PRINCIPLES
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and disclosure of comprehensive income. In June 1997, the FASB
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement establishes standards for reporting of information
F-9
<PAGE> 66
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
about operating segments and requires the reporting of selected information
about operating segments in interim financial statements. These standards were
adopted by the Company on January 4, 1998 and had no impact as the Company has
no "other comprehensive income" and operated as a single segment.
2. PROPOSED INITIAL PUBLIC OFFERING:
In 1999, the Board of Directors authorized the filing of a registration
statement for the sale of common stock to the public in an initial public
offering. On April 22, the Company changed its authorized common stock to
eliminate Class A, B and C common stock, and authorized 100,000,000 shares of
common stock. All outstanding shares of Class A common stock became common
stock. In addition, the Company authorized 5,000,000 shares of Preferred Stock.
Effective April 23, 1999, the Company effected a split of the Company's common
shares on a 1.473 to 1 basis. All references in the financial statements to the
number of common shares and to per share amounts have been retroactively
restated to reflect the common share split.
If an initial public offering is completed, all outstanding shares of
Preferred stock will be converted into 7,543,817 shares of Common stock upon
consummation of the offering. The pro forma balance sheet and pro forma basic
earnings per share (unaudited) include the conversion of the Class A, B and C
Preferred stock at a conversion rate of 16.332 to 1 and the conversion of the
Class D Preferred at a conversion rate of 1.473 to 1 (see Note 9 for conversion
features).
The Company expects to grant stock options to purchase 762,530 shares of
common stock to employees at an exercise price equal to the price at which
shares of common stock are sold in the offering.
Effective upon the consummation of the offering, the current Chairman of
the Board and Chief Executive Officer will become a consultant to the Company
for a three year term and be paid a consulting fee of $425,000 in each of the
first two years and $200,000 for the third year.
3. NET INCOME (LOSS) PER SHARE:
Net income (loss) per share is calculated utilizing the principles of
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share"
(EPS).
Basic EPS excludes dilution and is computed by dividing net income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS is computed assuming the conversion or
exercise of all dilutive securities such as preferred stock, options and
warrants.
F-10
<PAGE> 67
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
Under SFAS No. 128, the Company's granting of certain stock options and
convertible preferred stock resulted in potential dilution of basic EPS. The
following table summarizes the differences between basic weighted average shares
outstanding and diluted weighted average shares outstanding used to compute
diluted EPS.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------ -----------------------
JANUARY 4, JANUARY 3, JANUARY 2, APRIL 4, APRIL 3,
1997 1998 1999 1998 1999
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic weighted average number of
shares outstanding................. 10,206,764 9,849,419 9,751,000 9,784,409 9,739,848
Incremental shares from assumed
exercise or conversion of:
Stock options...................... -- -- 381,605 332,021 632,451
Preferred stock (see Note 9)....... -- 7,622,725 8,242,144 8,242,144 8,242,144
---------- ---------- ---------- ---------- ----------
Diluted weighted average number of
shares outstanding................. 10,206,764 17,472,144 18,374,749 18,358,574 18,614,443
========== ========== ========== ========== ==========
</TABLE>
The number of incremental shares from the assumed exercise of stock options
is calculated applying the treasury stock method. Preferred stock convertible
into 7,231,073 weighted average common shares was excluded from the fiscal 1996
calculation as it would be anti-dilutive due to the fiscal 1996 net loss. Common
stock options outstanding at January 4, 1997 and January 3, 1998 to purchase
950,085 and 1,053,195 shares of Common Stock, respectively, were not included in
the computation of diluted EPS in fiscal 1996 and 1997 because they were
antidilutive.
4. PROPERTY AND EQUIPMENT (IN THOUSANDS):
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, APRIL 3,
1998 1999 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Property and equipment consist of:
Land............................................... $ 1,047 $ 1,047 $ 1,047
Land improvements.................................. 149 149 149
Buildings and improvements......................... 1,275 2,635 2,641
Equipment.......................................... 3,198 5,145 6,340
Leasehold improvements............................. 7,622 10,798 11,041
Furniture and fixtures............................. 3,936 5,646 5,888
Construction in progress........................... 2,462 2,062 4,390
------- ------- -----------
19,689 27,482 31,496
Less--Accumulated depreciation and amortization.... (4,108) (6,832) (7,720)
------- ------- -----------
$15,581 $20,650 $ 23,776
======= ======= ===========
</TABLE>
5. INVESTMENTS IN AFFILIATES:
In December 1997, the Company purchased an equity interest in MDR
Associates LLC (MDR) for $460,000 which owns an interest in an aircraft. Two
shareholders of the Company also hold an indirect equity interest in MDR. The
investment was accounted for under the equity method of accounting and was
included in other assets in fiscal 1997. The equity interest was redeemed in
fiscal 1998 for $460,000.
F-11
<PAGE> 68
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
In August 1995, the Company entered into a joint venture agreement with
Addwood Limited for a 50% ownership in a newly formed Hong Kong corporation,
Fillberg Limited (Fillberg). The Company contributed nominal capital to Fillberg
and loaned $170,000 in a noninterest-bearing loan with no stated maturity. The
loan was repaid subsequent to January 2, 1999. Addwood Limited is indirectly
owned by a shareholder of the Company based in Hong Kong.
Under a buying agency agreement, Fillberg will be the exclusive buying
agent of the Company for ready made bridal garments from certain territories, as
defined, and the Company will be the primary client of Fillberg. Under the
agreement, the Company pays Fillberg commissions of 7% for merchandise purchased
by the Company.
The investment is accounted for under the equity method of accounting with
profits eliminated from net income in the application of the equity method to
the extent that the Company has not yet sold the merchandise. As of January 2,
1999, the investment and receivable of $170,000 are included in other assets.
Equity income of $166,000 was recognized in fiscal 1998. Commissions of
$683,000, $1,157,000, $1,294,000, $156,000 and $270,000 were recorded for
merchandise purchased during fiscal 1996, 1997, 1998 and the 13 weeks ended
April 4, 1998 and April 3, 1999, respectively, of which $999,000, $1,212,000 and
$986,000, were included in the cost of inventories on the accompanying
consolidated balance sheets at January 3, 1998, January 2, 1999 and April 3,
1999, respectively.
6. ACCRUED EXPENSES AND OTHER (IN THOUSANDS):
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, APRIL 3,
1998 1999 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and related expenses....................... $1,370 $1,432 $3,018
Sales tax expense.................................. 203 275 1,236
Other.............................................. 2,412 3,130 5,641
------ ------ ------
$3,985 $4,837 $9,895
====== ====== ======
</TABLE>
7. DEBT (IN THOUSANDS):
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, APRIL 3,
1998 1999 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit agreement......................... $14,900 $17,100 $7,000
Mortgages.......................................... 769 2,139 2,120
Demand note........................................ 460 -- --
Other.............................................. 338 274 252
------- ------- ------
16,467 19,513 9,372
Less--Current portion.............................. (551) (147) (150)
------- ------- ------
$15,916 $19,366 $9,222
======= ======= ======
</TABLE>
In April 1994, the Company entered into a revolving credit agreement with a
bank which was amended on March 12, 1996 to provide borrowings up to $17
million. Interest was calculated at prime plus 0% to 1% or LIBOR plus 2.5% to
3.5% based on certain ratios, as defined. This agreement was terminated in
August 1997.
On August 1, 1997, the Company entered into a new revolving credit
agreement with a bank which was amended on December 30, 1998 providing for
borrowings up to $30 million including a sublimit of
F-12
<PAGE> 69
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
$25 million for letters of credit. Borrowings are limited to the sum of 80% of
eligible receivables and 60% of eligible inventory, as defined. The Company may
exceed its borrowing base by $3 million during the months of October through
March for the period beginning December 1998 and October 1999 and by $2 million
for the period beginning October 2000. At the Company's election, interest is
calculated at (i) the Base Rate (higher of U.S. Federal Funds Rate plus .5% or
the bank's Prime Rate), or (ii) the adjusted LIBOR Rate, as defined, plus an
applicable margin ranging from 1.25% to 1.75% based on earnings ratios, as
defined. Interest will be increased by 2% for the duration of any events of
default. Interest is payable monthly on Base Rate borrowings and at the end of
each elected interest period on each LIBOR Rate borrowing. The weighted average
interest rate on Base Rate loans was 7.75% and the weighted average interest
rate on LIBOR Rate loans was 6.49% at January 2, 1999. The weighted average
interest on LIBOR Rate loans was 6.19% at April 3, 1999. There were no Base Rate
borrowings at April 3, 1999. Principal is payable July 31, 2001. An unutilized
commitment fee of .25% per annum is due quarterly.
The revolving credit agreement requires the Company to comply with various
covenants which include, among other things, the maintenance by the Company of
certain fixed charge, leverage and debt ratios at the end of each fiscal
quarter, as defined. The revolving credit agreement is secured by all tangible
and intangible assets of the Company and restricts distributions related to
equity interests which include the payment of dividends. In the event of
termination of the commitment or an event of default, the Bank may require the
Company to deliver cash or U.S. Treasury Bills in the amount of 105% of the
outstanding undrawn letters of credit.
The highest amount outstanding under these agreements was $11,005,000,
$15,018,000, $17,600,000, $15,900,000 and $18,300,000 during fiscal 1996, fiscal
1997, fiscal 1998 and the 13 weeks ended April 4, 1998 and April 3, 1999,
respectively. The average amount outstanding under these agreements was
$6,871,000, $11,740,000, $13,034,000, $14,210,000 and $13,133,000 and the
weighted average interest rate was 7.81%, 7.75%, 7.21%, 7.7% and 6.7% in fiscal
1996, 1997, 1998 and the 13 weeks ended April 4, 1998 and April 3, 1999,
respectively. The Company was contingently liable for open letters of credit of
$2,840,000, $4,145,000 and $3,356,000 at January 3, 1998, January 2, 1999 and
April 3, 1999, respectively.
In fiscal 1998, the Company entered into a master lease agreement with a
leasing company which provides for $1,819,000 for leasing equipment. The
agreement requires that the leases be capital in nature. During first quarter
1999, the Company financed $652,000 of equipment under the agreement. This
agreement expires in July, 1999.
In fiscal 1996, the Company entered into a $800,000 mortgage agreement with
a bank which is payable in monthly installments with interest, as defined
through 2011. The interest rate at January 2, 1999 and April 3, 1999 was 8%. The
mortgage is collateralized by the underlying property.
In fiscal 1998, the Company entered into a $1.4 million mortgage note with
a bank which is payable in monthly installments of principal and interest of
$14,000 with a final payment of $1,123,000 due on December 1, 2003. The note
bears interest at 8% and is subject to a prepayment penalty of 2%, as defined,
until December 1, 2000. The note is collateralized by the underlying property.
In December 1997, the Company issued a demand note in connection with its
borrowing of $460,000 from a shareholder. This note bears interest at 7.75% and
was repaid in January 1998.
The Company has agreements with certain landlords whereby the Company
received advances for construction of leasehold improvements which will be
repaid by the Company during the lease periods. Interest ranges from 8%-11% and
the notes are due through 2006. At January 3, 1998, January 2, 1999 and April 3,
1999, $338,000, $274,000 and $252,000, respectively, were outstanding under
these agreements.
F-13
<PAGE> 70
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
Future long-term debt maturities are as follows (in thousands).
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 2, 1999 APRIL 3, 1999
FISCAL --------------- -------------
(UNAUDITED)
<S> <C> <C>
1999.............................. $ 147 $ 106
2000.............................. 132 132
2001.............................. 17,222 7,122
2002.............................. 131 131
2003.............................. 1,246 1,246
2004 and thereafter............... 635 635
------- ------
$19,513 $9,372
======= ======
</TABLE>
8. INCOME TAXES:
The income tax provision (benefit) consists of the following components (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
JANUARY 4, JANUARY 3, JANUARY 2,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal........................................... $ (90) $1,538 $3,339
State............................................. 21 30 412
----- ------ ------
(69) 1,568 3,751
----- ------ ------
Deferred:
Federal........................................... (139) (272) (173)
State............................................. -- -- --
----- ------ ------
(139) (272) (173)
----- ------ ------
$(208) $1,296 $3,578
===== ====== ======
</TABLE>
F-14
<PAGE> 71
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
The deferred tax effect of temporary differences giving rise to the
Company's deferred tax assets and liabilities consists of the following
components (in thousands):
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2,
1998 1999
---------- ----------
<S> <C> <C>
Deferred tax assets--
Deferred rent............................................... $ 826 $ 973
Uniform inventory capitalization............................ 395 148
Benefits payable............................................ 93 --
Other....................................................... 102 143
------ ------
1,416 1,264
------ ------
Deferred tax liabilities--
Depreciation................................................ (211) (83)
Unrealized profit........................................... (159) (223)
Other....................................................... (134) (128)
------ ------
(504) (434)
------ ------
Net deferred tax asset...................................... $ 912 $ 830
====== ======
</TABLE>
The reconciliation of the federal statutory rate to the Company's effective
income tax rate is as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED ENDED
------------------------------------ -------------------
JANUARY 4, JANUARY 3, JANUARY 2, APRIL 4, APRIL 3,
1997 1998 1999 1998 1999
---------- ---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax at federal statutory rate................. (34.0)% 34.0% 34.0% 34.0% 34.0%
State taxes, net of federal benefit........... 3.5 0.5 3.1 3.2 4.0
Other......................................... 1.7 (0.2) 1.2 1.7 --
----- ---- ---- ---- ----
(28.8)% 34.3% 38.3% 38.9% 38.0%
===== ==== ==== ==== ====
</TABLE>
9. REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY:
In fiscal 1995, the Company entered into redemption agreements with certain
shareholders for the purchase of 1,907,902 shares of common stock for a total of
$7.4 million plus an amount calculated based on the timing of redemption, as
defined. This obligation has been reflected as Redeemable Common stock and has
been reclassified out of equity in the accompanying consolidated financial
statements. In fiscal 1996, the Company redeemed 1,099,653 shares under the
redemption agreements at a total purchase price of $4.5 million. In fiscal 1997,
in connection with the sale of the Class D Preferred stock, the redemption
agreements with certain shareholders were modified to eliminate any continuing
obligation by the Company to repurchase 698,694 of the shares. The remaining
109,555 shares were redeemed in February 1998 for $651,000.
In fiscal 1997, the Company sold 686,402 shares of Class D Preferred stock
for $7.25 per share under a capital call agreement with existing shareholders.
On August 13, 1997, the Company entered into the Second Amended and Restated
Stockholder's Agreement whereby the Company has the option for a period of three
years to require certain investors to purchase up to $4 million of additional
shares of the Company's Class D Preferred stock.
F-15
<PAGE> 72
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
The components of Preferred stock are as follows:
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, APRIL 3,
1998 1999 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Class A, $.01 par value, 175,000 shares authorized, 171,792
shares issued and outstanding, liquidation value of
$12,455,000 at January 2, 1999 and April 3, 1999.......... $1,718 $1,718 $1,718
Class B, $.01 par value, 125,000 shares authorized, 114,104
shares issued and outstanding, liquidation value of
$8,273,000 at January 2, 1999 and April 3, 1999........... 1,141 1,141 1,141
Class C, $.01 par value, 300,000 shares authorized, 114,104
shares issued and outstanding, liquidation value of
$8,273,000 at January 2, 1999 and April 3, 1999........... 1,141 1,141 1,141
Class D, $.01 par value, 1,250,000 shares authorized,
686,402 shares issued and outstanding, liquidation value
of $4,976,000 at January 2, 1999 and April 3, 1999........ 6,864 6,864 6,864
</TABLE>
The Class A, B and C Preferred had an initial conversion price of $4.92 per
share. The conversion price is subject to adjustment based on the valuation of
the Company upon a special event. A special event includes liquidating events, a
public offering, a change in control, a merger or consolidation and other
events, as defined. If a special event, as defined, had occurred at January 2,
1999, the conversion price would have been $4.01, or a conversion rate of 18.08
shares of Common stock for each share of Preferred unless the Preferred holders
had achieved a specified rate of return on their equity investment. If the
specified rate of return is achieved upon a special event, the conversion price
would be up to $4.92 and the conversion rate would be as low as 14.73 shares of
Common stock for each share of Preferred. The Class D Preferred is junior to the
Class A, B and C Preferred and has an initial conversion rate of $4.92. The
Company may require conversion of all classes of Preferred if the price per
share paid by the public in a public offering is at least equal to the
conversion price per share. The liquidation value of the Preferred is equal to
the greater of the amount that would be received if all of the Preferred were
converted into Common stock immediately prior to the liquidation or the price
originally paid.
The Class A and Class D Preferred have voting rights equal to the number of
Common shares into which they are convertible. The Class B Preferred has voting
rights equal to two votes for each share of Common into which it is convertible
and the Class C Preferred has no voting rights.
The Class A Common has voting rights equal to one vote per share. The Class
B Common has the number of votes equal to the sum of Class B and Class C Common
outstanding divided by Class B outstanding. The Class C Common has no voting
rights.
The Class A and Class D Preferred is convertible into Class A Common, the
Class B Preferred is convertible into Class B Common and the Class C Preferred
is convertible into Class C Common.
As of January 2, 1999, if converted, the Class A, B, C and D Preferred
stock would convert to 8,242,144 shares of Common stock at the conversion rates
outlined above. Assuming a specified rate of return is achieved upon a special
event, the conversion rate would be up to $4.92 for all shares if the Company
requires the Preferred to convert resulting in the issuance of at least
6,903,062 shares of Common stock. See Note 2 for information regarding the
conversion rate in the proposed initial public offering.
F-16
<PAGE> 73
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
10. STOCK OPTIONS:
The Company's 1995 Stock Option Plan (the Plan) provides for the grant of
Common Stock and Common Stock options to key employees, members of the board of
directors and certain consultants at prices determined by the Board. The Company
has reserved 1,473,000 shares of its Common stock for awards under the Plan. The
Company accounts for the Plan under APB Opinion No. 25, under which no
compensation cost has been recognized since the options were issued at or above
fair value.
Had compensation cost for the options issued to employees or directors been
determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net income (loss), basic EPS and diluted EPS would
have been equal to the pro forma amounts indicated below (in thousands except
for per share data):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
JANUARY 4, JANUARY 3, JANUARY 2,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) As reported $ (515) $2,480 $5,755
Pro forma (769) 2,178 5,359
Basic EPS As reported (0.05) 0.25 0.59
Pro forma (0.08) 0.22 0.55
Diluted EPS As reported (0.05) 0.14 0.31
Pro forma (0.08) 0.12 0.29
</TABLE>
The weighted average fair value of options granted during fiscal 1996, 1997
and 1998 was $0.83, $1.76 and $1.75, respectively. The fair value of each option
grant was estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
JANUARY 4, JANUARY 3, JANUARY 2,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Expected dividend rate.................................. -- -- --
Expected volatility..................................... 55% 55% 55%
Risk-free interest rate................................. 5.965% 6.076% 5.499%
Expected lives (years).................................. 3 3 3
</TABLE>
Because the SFAS No. 123 method of accounting is not required to be applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation charge may not be representative of that to be expected in future
years.
During fiscal 1996, 1997 and through May 1998, the Company granted options
to purchase 132,570 shares of common stock, 103,110 shares of common stock and
484,604 shares of common stock, respectively, under the Plan. These options vest
over a 3-year period and were issued with exercise prices equal to or above fair
market value on the grant date. In addition, in fiscal 1996, the Company granted
to two nonemployees an option to purchase 110,475 shares and 44,190 shares of
common stock at $4.92 and $6.11, per share, respectively. The value of these
options as determined using the Black-Scholes option pricing model consistent
with SFAS 123 was not material to the consolidated financial statements. These
options vest through September 1998.
F-17
<PAGE> 74
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
Information with respect to options outstanding is as follows:
<TABLE>
<CAPTION>
WEIGHTED
OPTION PRICE AGGREGATE AVERAGE EXERCISE
SHARES PER SHARE EXERCISE PRICE PRICE
--------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Options outstanding, December 30,
1995............................. 662,850 $ 4.92 $3,262,500 4.92
Granted.......................... 287,235 4.92 - 6.11 1,623,750 5.65
--------- ------------- ----------
Options outstanding, January 4,
1997............................. 950,085 4.92 - 6.11 4,886,250 5.14
Granted.......................... 103,110 6.11 630,000 6.11
--------- ------------- ----------
Options outstanding, January 3,
1998............................. 1,053,195 4.92 - 6.11 5,516,250 5.24
Granted.......................... 484,604 6.11 - 6.79 3,278,500 6.77
Cancelled........................ (109,000) 6.11 - 6.79 (705,000) 6.47
--------- ------------- ----------
Options outstanding January 2,
1999............................. 1,428,799 4.92 - 6.79 8,089,750 5.66
Cancelled (unaudited)............ (27,249) 6.11 - 6.79 (173,490) 6.37
--------- ------------- ----------
Options outstanding, April 3, 1999
(unaudited)...................... 1,401,550 $4.92 - 6.79 $7,916,260 5.65
========= ============= ==========
</TABLE>
As of January 2, 1999, the weighted average contractual life of options
outstanding was 8.13 years, there were options to purchase 921,362 shares of
common stock vested at a weighted average exercise price of $5.00 and there were
44,201 shares reserved under the Plan which were not granted.
11. BENEFIT PLAN:
On January 1, 1995, the Company adopted a 401(k) plan for its employees
(the 401(k) Plan). The 401(k) Plan allows participants to contribute up to 15%
of their compensation and permits an employer match of up to 6% of participant
compensation, subject to certain limitations, as defined. Employer contributions
vest 20% per year. The expense was $14,000, $14,000 and $18,000 during fiscal
1996, 1997 and 1998, respectively.
12. RELATED PARTY:
The Company purchased leasehold improvements and supplies from a company
owned by a shareholder of the Company totaling $153,000, $159,000, $297,000,
$133,000 and $140,000 in fiscal 1996, 1997, 1998 and the 13 weeks ended April 4,
1998 and April 3, 1999, respectively.
13. COMMITMENTS AND CONTINGENCIES:
The Company leases its retail stores, administrative offices and
distribution facilities under noncancellable operating leases. Most store leases
have an average initial term of ten years, with two five year renewal options,
and provide for predetermined escalations in future minimum annual rents.
Certain leases provide for additional rent contingent upon store sales levels.
The pro rata portion of scheduled rent escalations has been included in deferred
rent in the accompanying consolidated balance sheets. Rent expense under all
operating leases was $4,995,000, $7,011,000, $9,817,000, $2,163,000 and
$2,991,000 in fiscal 1996, 1997, 1998 and for the 13 weeks ended April 4, 1998
and April 3, 1999, respectively, excluding common area maintenance charges.
On December 27, 1996, the Company entered into a lease for software which
has been accounted for as a capital lease. The capitalized cost of $671,000 and
related accumulated amortization of $268,000 has
F-18
<PAGE> 75
DAVID'S BRIDAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF APRIL 3, 1999 AND FOR THE 13 WEEKS ENDED
APRIL 4, 1998 AND APRIL 3, 1999 IS UNAUDITED)
been included in net property and equipment at January 2, 1999. The present
value of the minimum lease payments is as follows (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 2, 1999 APRIL 3, 1999
--------------- -------------
(UNAUDITED)
<S> <C> <C>
Total minimum lease payments...................... $451 $1,160
Less--Amount representing interest................ (36) (157)
---- ------
Present value of minimum lease payments........... $415 $1,003
==== ======
</TABLE>
During first quarter 1999, the Company capitalized $652,000 under a master
lease equipment (see Note 7) which has been included in net property and
equipment at April 3, 1999.
Future minimum lease payments under all of the Company's operating and
capital leases are as follows (in thousands):
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 2, 1999 APRIL 3, 1999
-------------------- --------------------
(UNAUDITED)
OPERATING CAPITAL OPERATING CAPITAL
FISCAL --------- ------- --------- -------
<S> <C> <C> <C> <C>
1999................................. $11,632 $154 $ 10,026 $ 233
2000................................. 12,028 154 13,861 310
2001................................. 12,004 143 13,849 299
2002................................. 11,757 -- 13,544 156
2003................................. 11,169 -- 12,980 156
2004 and thereafter.................. 36,265 -- 45,321 6
------- ---- -------- ------
$94,855 $451 $109,581 $1,160
======= ==== ======== ======
</TABLE>
From time to time the Company is named as a defendant in legal actions
arising from its normal business activities. Although the amount of any
liability that could arise with respect to currently pending actions of this
nature cannot be accurately predicted, in the opinion of the Company, any such
liability will not have a material adverse effect on the financial position or
results of operations of the Company.
F-19
<PAGE> 76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[DAVID'S BRIDAL, INC. LOGO]
8,000,000 SHARES OF COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
LEGG MASON WOOD WALKER
INCORPORATED
-----------------------------
DLJdirect INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of David's
Bridal have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers, whether or not participating in this offering, that effect transactions
in these shares of common stock may be required to deliver a prospectus. This is
in addition to the dealer's obligation to deliver a prospectus when acting as an
underwriter and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, in connection with the issuance and
distribution of the shares of common stock being registered, all of which are
being borne by the Company:
<TABLE>
<S> <C>
Registration fee............................................ $ 44,480
NASD filing fee............................................. 16,500
Transfer agent and registrar fees........................... 20,000
Printing and engraving...................................... 150,000
Legal fees.................................................. 425,000
Blue Sky fees and expenses.................................. 10,000
New York Stock Exchange listing fee......................... 100,000
Accounting fees............................................. 475,000
Miscellaneous............................................... 59,020
----------
Total............................................. $1,300,000
==========
</TABLE>
- ------------------------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the Florida Business Corporation Act empowers a
corporation, subject to certain limitations, to indemnify any person who was or
is a party to any proceeding by reason of the fact that he or she was or is a
director, officer, employee or agent of the corporation, against liability and
expenses actually and reasonably incurred by him or her in connection with such
proceeding, including any appeal thereof, if such party acted in good faith and
in a manner reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to a criminal action or proceeding, had no
reasonable cause to believe his or her conduct to have been unlawful.
Our bylaws provide a right to indemnification to the full extent permitted
by law for expenses, attorneys' fees, judgments, fines and amounts paid in
settlement, actually and reasonably incurred by any of our directors, officers,
employees or agents, who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was our director, officer, employee or agent or that of our parent or any
of our subsidiaries, or was serving at our request, or at the request of our
parent or any of our subsidiaries as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
Our board of directors by resolution adopted in each specific instance may
similarly indemnify any person other than one of our directors or officers for
liabilities incurred by him in connection with services rendered by him for or
at our request, or at the request of any of our subsidiaries.
These indemnification provisions shall be applicable to all actions, suits
or proceedings commenced after the adoption of our bylaws, whether such arise
out of acts or omissions which occurred prior or subsequent to such adoption and
shall continue as to a person who has ceased to be a director or officer or to
render services for or at our request and shall inure to the benefit of the
heirs, executors and administrators of such a person. The rights of
indemnification provided for in our bylaws shall not be deemed the exclusive
rights to which any of our directors, officers, employees or agents may be
entitled.
Our bylaws provide that we may pay the expenses, including attorney's fees,
incurred by any person entitled to be indemnified by us in defending a civil or
criminal action, suit or proceeding in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking, by or on behalf of
II-1
<PAGE> 78
such person, to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by us as authorized by law.
We may purchase and maintain insurance on behalf of any person who is or
was our director or officer, employee or agent, or who is or was serving at our
request as a director, officer, employee or agent of another corporation or
other organization, against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether or not we
would have the power to indemnify him against such liability under law.
Pursuant to the Underwriting Agreement, the Underwriters have agreed to
indemnify the Company's directors and executive officers who signed the
Registration Statement against certain liabilities, including liabilities under
the Securities Act, under certain delineated circumstances, or to contribute to
payments that the directors and such officers may be required to make in respect
thereof.
The Registrant maintains, on behalf of its directors and officers,
insurance protection against certain liabilities arising out of the discharge of
their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Company has issued and sold the following
unregistered securities:
1. On August 15, 1997, pursuant to the terms of a series of
subscription agreements, we sold an aggregate of 686,402 shares of class D
preferred stock for an aggregate purchase price of $5.0 million or $7.25
per share. These shares were sold to our existing shareholders, as follows:
448,651 shares to The Clipper Group, an aggregate of 69,842 shares that are
beneficially owned by Steven J. Sidewater, 36,371 shares to Michael C.
Erlbaum, 24,317 shares that are beneficially owned by Gary E. Erlbaum,
14,478 shares to Shelly Shapiro, 10,155 shares to Mordechai Kafry, 32,653
shares to First Union National Bank, 15,013 shares to Addwood Limited and
34,922 shares to the Vederman Family Partnership. Each outstanding share of
class D preferred stock will be subject to mandatory conversion upon the
consummation of this offering into 1.473 shares of common stock, or an
aggregate of 1,011,070 shares of common stock.
The Company believes that the transactions described above were exempt from
registration under Section 4(2) of the Securities Act because the subject
securities were sold to a limited group of persons, each of whom was believed to
have been a sophisticated investor, was a shareholder of the Company, and had a
pre-existing business or personal relationship with the Company or its
management and was purchasing for investment without a view to further
distribution. Restrictive legends were placed on stock certificates evidencing
the shares and/or agreements relating to the right to purchase such shares
described above.
II-2
<PAGE> 79
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<S> <C> <C>
1.1 Form of Underwriting Agreement@
3.1 Articles of Incorporation@
3.2 Bylaws@
5.1 Opinion of Morgan, Lewis & Bockius LLP regarding legality of
shares of common stock being registered#
10.1 Amended and Restated 1995 Stock Option Plan@
10.2 Joint Venture and Shareholders Agreement dated August 1995
by and among David's Bridal Corporation and Addwood Limited*
10.3 Registration Agreement dated June 9, 1995 among David's
Bridal, Inc. and certain shareholders*
10.4 Amendment No. 1 to Registration Agreement, dated as of
August 15, 1997 by and among David's Bridal, Inc. and
certain shareholders*
10.5 Amended and Restated Credit Agreement dated December 31,
1997 among David's Bridal, Inc. and First Union Corporation*
10.6 Consulting Agreement between David's Bridal, Inc. and Steven
H. Erlbaum@
10.7 Employment Agreement between David's Bridal, Inc. and Robert
D. Huth@
10.8 Employment Agreement between David's Bridal, Inc. and Philip
Youtie@
23.1 Consent of Arthur Andersen LLP@
23.2 Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5.1 hereto)
23.3 Consent of Eugene Lynch*
24.1 Power of Attorney (included on signature page to this
Registration Statement)
24.2 Power of Attorney of Eugene Lynch@
27.1 Financial Data Schedule*
</TABLE>
- ------------------------------
* previously filed
@ filed herewith
# to be filed by amendment
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 80
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
Ardmore, Pennsylvania, on April 28, 1999.
DAVID'S BRIDAL, INC.
By /s/ STEVEN H. ERLBAUM
------------------------------------
Steven H. Erlbaum
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
<S> <C> <C>
/s/ STEVEN H. ERLBAUM Chairman of the Board (principal April 28, 1999
- ----------------------------------- executive officer) and Director
Steven H. Erlbaum
/s/ EDWARD S. WOZNIAK Chief Financial Officer (principal April 28, 1999
- ----------------------------------- financial and accounting officer)
Edward S. Wozniak
* Director April 28, 1999
- -----------------------------------
Robert D. Huth
* Director April 28, 1999
- -----------------------------------
Gary E. Erlbaum
* Director April 28, 1999
- -----------------------------------
Michael C. Erlbaum
Director
- -----------------------------------
Robert B. Calhoun, Jr.
* Director April 28, 1999
- -----------------------------------
Steven J. Sidewater
/s/ EUGENE P. LYNCH Director April 28, 1999
- -----------------------------------
Eugene P. Lynch
*By his signature set forth below,
the undersigned, pursuant to duly
authorized powers of attorney filed
with the Securities and Exchange
Commission, has signed this
Amendment to the Registration
Statement on behalf of the persons
indicated.
By /s/ STEVEN H. ERLBAUM
--------------------------------
Steven H. Erlbaum
(attorney-in-fact)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1.1
8,000,000 SHARES
DAVID'S BRIDAL, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
May __, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEGG MASON WOOD WALKER,
INCORPORATED
As representatives of the several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities
Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
David's Bridal, Inc., a Florida corporation (the "COMPANY"), proposes to
issue and sell to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"), and certain stockholders of the Company named in Schedule II
and Schedule III hereto (the "SELLING STOCKHOLDERS") severally propose to sell
to the several Underwriters, an aggregate of 8,000,000 shares of the common
stock, par value $.01 per share, of the Company (the "FIRM SHARES"), of which
1,613,000 shares are to be issued and sold by the Company and 6,387,000 shares
are to be sold by the Selling Stockholders, each Selling Stockholder selling the
amount set forth opposite such Selling Stockholder's name in Schedule II and
Schedule III hereto. The Company and the Selling Stockholders also severally
propose to sell to the several Underwriters not more than an additional
1,200,000 shares of common stock, par value $.01 (the "ADDITIONAL SHARES") if
requested by the Underwriters as provided in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter referred to collectively as the
"SHARES". The
<PAGE> 2
shares of common stock of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK".
The Company and the Selling Stockholders are hereinafter sometimes referred to
collectively as the "SELLERS."
SECTION 1. Registration Statement and Prospectus. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"ACT"), a registration statement on Form S-1, including a prospectus, relating
to the Shares. The registration statement, as amended at the time it became
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the "REGISTRATION STATEMENT"; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred to as the "PROSPECTUS". If the Company has filed or is required
pursuant to the terms hereof to file a registration statement pursuant to Rule
462(b) under the Act registering additional shares of Common Stock (a "RULE
462(b) REGISTRATION STATEMENT"), then, unless otherwise specified, any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462(b) Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, (i) the Company agrees to issue and sell
1,613,000 Firm Shares, (ii) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Stockholder's name in Schedule II and III hereto and (iii) each Underwriter
agrees, severally and not jointly, to purchase from each Seller at a price per
Share of $______ (the "PURCHASE PRICE") the number of Firm Shares (subject to
such adjustments to eliminate fractional shares as you may determine) that bears
the same proportion to the total number of Firm Shares to be sold by such Seller
as the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company and the Selling
Stockholders agree to sell the Additional Shares and the Underwriters shall have
the right to purchase, severally and not jointly, the Additional Shares in the
following manner; (i) up to 322,581 Additional Shares from the Company and (ii)
after such Additional Shares have been purchased from the Company, up to 877,419
Additional Shares proportionally from each Selling Stockholder, as specified in
Schedules II and III, in each case at the Purchase Price. Additional
2
<PAGE> 3
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The Underwriters may
exercise their right to purchase Additional Shares in whole or in part from time
to time by giving written notice thereof to the Company and the Selling
Stockholders, as applicable, who have agreed to sell Additional Shares within 30
days after the date of this Agreement. You shall give any such notice on behalf
of the Underwriters and such notice shall specify the aggregate number of
Additional Shares to be purchased pursuant to such exercise and the date for
payment and delivery thereof, which date shall be a business day (i) no earlier
than two business days after such notice has been given (and, in any event, no
earlier than the Closing Date (as hereinafter defined)) and (ii) no later than
ten business days after such notice has been given. If any Additional Shares are
to be purchased, each Underwriter, severally and not jointly, agrees to purchase
first from the Company, until the Company has sold all of the Additional Shares
to be sold by it, and thereafter from the Selling Stockholders the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
Each Seller hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. The Sellers are
not subject to clauses (i) and (ii) above with respect to transfers for family
planning purposes, but only if the transferee agrees to be subject to clauses
(i) and (ii) above. Notwithstanding the foregoing, during such period (i) the
Company may grant stock options pursuant to the Company's existing stock option
plan and (ii) the Company may issue shares of Common Stock upon the exercise of
an option or warrant or the conversion of a security outstanding on the date
hereof. The Company also agrees not to file any registration statement, other
than a registration statement on Form S-8 covering common stock issuable
pursuant to the Company's existing stock option plan, with respect to any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of 180 days after the date of the
Prospectus without the prior written consent of
3
<PAGE> 4
Donaldson, Lufkin & Jenrette Securities Corporation. In addition, each Selling
Stockholder agrees that, for a period of 180 days after the date of the
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, it will not make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock. The
Company shall, prior to or concurrently with the execution of this Agreement,
deliver an agreement executed by (i) each Selling Stockholder, and (ii) each
stockholder listed on Annex I hereto to the effect that such person will not,
during the period commencing on the date such person signs such agreement and
ending 180 days after the date of the Prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Corporation, (A) engage in any of the
transactions described in the first sentence of this paragraph (subject to the
exception set forth in the second sentence of this paragraph) or (B) make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Sellers are advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request not later than 9:00 A.M. on the second business day prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be. The Shares shall be delivered by or on behalf of the Sellers to
Donaldson, Lufkin & Jenrette Securities Corporation through the facilities of
The Depository Trust Company ("DTC"), for the respective accounts of the several
Underwriters, against payment to the Sellers of the Purchase Price therefor by
wire transfer of Federal or other funds immediately available in Philadelphia.
The certificates representing the Shares shall be made available for inspection
not later than 12:00 noon, New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date, as the case may be, at the
office of DTC or its designated custodian (the "DESIGNATED OFFICE"). The time
and date of delivery and payment for the Firm Shares shall be 9:00 A.M., New
York City time, on __________ , 1999 or such other time on the same or such
other date as Donaldson, Lufkin & Jenrette Securities Corporation and the
Company shall agree in writing. The time and date of delivery and payment for
the Firm Shares are hereinafter referred to as the "CLOSING DATE." The time and
date of delivery and payment for any Additional Shares to be purchased by the
4
<PAGE> 5
Underwriters shall be 9:00 A.M., New York City time, on the date specified in
the applicable exercise notice given by you pursuant to Section 2 or such other
time on the same or such other date as Donaldson, Lufkin & Jenrette Securities
Corporation and the Company shall agree in writing. The time and date of
delivery and payment for any Additional Shares are hereinafter referred to as an
"OPTION CLOSING DATE."
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 9 of this Agreement
shall be delivered at the offices of Morgan, Lewis & Bockius LLP, 1701 Market
Street, Philadelphia, Pennsylvania, and the Shares shall be delivered at the
Designated Office, all on the Closing Date or such Option Closing Date, as the
case may be.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to
the Registration Statement or amendments or supplements to the Prospectus
or for additional information, (ii) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or sale
in any jurisdiction, or the initiation of any proceeding for such
purposes, (iii) when any amendment to the Registration Statement becomes
effective, (iv) if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, when the
Rule 462(b) Registration Statement has become effective and (v) of the
happening of any event during the period referred to in Section 5(d) below
which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or
changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, the Company will use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish to you four signed copies of the Registration
Statement as first filed with the Commission and of each amendment to it,
including all exhibits, and to furnish to you and each Underwriter
designated by you such number of conformed copies of the Registration
Statement as so filed and of each amendment to it, without exhibits, as
you may reasonably request.
5
<PAGE> 6
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to you in your reasonable judgment, and to file the
Prospectus in such form with the Commission within the applicable period
specified in Rule 424(b) under the Act; during the period specified in
Section 5(d) below, not to file any further amendment to the Registration
Statement and not to make any amendment or supplement to the Prospectus of
which you shall not previously have been advised or to which you shall
reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or amendment or
supplement to the Prospectus which may be necessary or advisable in
connection with the distribution of the Shares by you, and to use its best
efforts to cause any such amendment to the Registration Statement to
become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business
day after the date of this Agreement and from time to time thereafter for
such period as in the opinion of counsel for the Underwriters a prospectus
is required by law to be delivered in connection with sales by an
Underwriter or a dealer, but no later than 90 days following the date of
this Agreement, to furnish in New York City to each Underwriter and any
dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of
the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter
or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with
you and counsel for the Underwriters in connection with the registration
or qualification of the Shares for offer and sale by the several
6
<PAGE> 7
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may
be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation in any jurisdiction in which
it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters
and transactions relating to the Prospectus, the Registration Statement,
any preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.
(g) To make generally available to its stockholders no later than 45
days following _______, 2000, an earnings statement covering the
twelve-month period ending [March 31,] 2000 within the meaning of the
provisions of Section 11(a) of the Act and any rules promulgated
thereunder, including Rule 158 under the Act.
(h) During the period of three years after the date of this
Agreement, to furnish to you as soon as available copies of all reports or
other communications furnished to the record holders of Common Stock or
furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed and
such other publicly available information concerning the Company and its
subsidiaries as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the Sellers' obligations
under this Agreement, including: (i) the fees, disbursements and expenses
of the Company's counsel, the Company's accountants and any Selling
Stockholder's counsel (in addition to the Company's counsel) in connection
with the registration and delivery of the Shares under the Act and all
other fees and expenses in connection with the preparation, printing,
filing and distribution of the Registration Statement (including financial
statements and exhibits), any preliminary prospectus, the Prospectus and
all amendments and supplements to any of the foregoing, including the
mailing and delivering of copies thereof to the Underwriters and dealers
in the quantities specified herein but not including any subsequent
distribution by the Underwriters and dealers, (ii) all costs and expenses
related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii)
7
<PAGE> 8
all costs of printing or producing the Registration Statement and the
Prospectus, (iv) all expenses in connection with the registration or
qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the several states and all costs of printing or producing
any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel
for the Underwriters in connection with such memoranda relating thereto),
such expenses and costs not to exceed an aggregate of $10,000, (v) the
filing fees and disbursements of counsel for the Underwriters in
connection with the review and clearance of the offering of the Shares by
the National Association of Securities Dealers, Inc., (vi) all fees and
expenses in connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and
expenses incident to the listing of the Shares on the NASDAQ, National
Market System, (vii) the cost of printing certificates representing the
Shares, (viii) the costs and charges of any transfer agent or registrar,
(ix) all fees and expenses in connection with the directed share program,
such expenses and costs not to exceed an aggregate of $5,000 and (x) all
other costs and expenses incident to the performance of the obligations of
the Company and the Selling Stockholders hereunder for which provision is
not otherwise made in this Section 5(i). The provisions of this Section
shall not supercede or otherwise affect any agreement that the Company and
the Selling Stockholders may otherwise have for allocation of such
expenses among themselves.
(j) To use its best efforts to list the Shares on the Nasdaq and to
maintain the listing of the Shares on the NASDAQ, National Market System
for a period of three years after the date of this Agreement.
(k) If the Registration Statement at the time of the effectiveness
of this Agreement does not cover all of the Shares, and the aggregate
initial offering price of Additional Shares does not exceed twenty percent
of the maximum aggregate offering price of the Shares set forth in the
"Calculation of the Registration Fee" table included on the front cover of
the Registration Statement, to transmit for filing a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered in compliance with Rule 462(b) in a manner that reasonably should
enable the Rule 462(b) Registration Statement to become effective by 10:00
P.M., New York City time, on the date of this Agreement and to pay to the
Commission the filing fee for such Rule 462(b) Registration Statement at
the time of the filing thereof or to give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
8
<PAGE> 9
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will be transmitted for
filing in a fashion that reasonably should enable the Rule 462(b)
Registration Statement to become effective no later than 10:00 P.M., New
York City time, on the date of this Agreement; and no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness
of this Agreement), when it became effective, did not contain and, as
amended, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement (other than any Rule 462(b) Registration
Statement to be filed by the Company after the effectiveness of this
Agreement) and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the applicable
requirements of the Act, (iii) if the Company is required to file a Rule
462(b) Registration Statement after the effectiveness of this Agreement,
such Rule 462(b) Registration Statement and any amendments thereto, when
they become effective (A) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and (B)
will comply in all material respects with the applicable requirements of
the Act and (iv) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
9
<PAGE> 10
(c) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties, and each is duly qualified and
is in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(d) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
granted or issued by the Company or any of its subsidiaries relating to or
entitling any person to purchase or otherwise to acquire any shares of the
capital stock of the Company or any of its subsidiaries, except as
otherwise disclosed in the Registration Statement.
(e) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights; and the Shares to be
issued and sold by the Company have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive or
similar rights.
(f) All of the outstanding shares of Classes A, B, C and D Preferred
Stock of the Company will be converted into 7,543,817 shares of Common
Stock as of the Closing Date pursuant to the Company's Third Amended and
Restated Articles of Incorporation immediately prior to the consummation
of the public offering of the Shares.
(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, and are owned by the Company, directly
or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature, except as set forth in the Prospectus and except for any liens
granted under the Second Amended and Restated Credit Agreement among the
Company and First Union National Bank, dated as of
10
<PAGE> 11
December 30, 1998, a copy of which has been filed as an Exhibit to the
Registration Statement.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of
any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective
property is bound; except for such violations, defaults or
non-performances that, individually or in the aggregate, would not result
in a material adverse effect on the Company and its subsidiaries taken as
a whole.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby will not (i)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company
or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which, to the knowledge of the Company, the
Company or any of its subsidiaries or their respective property is bound,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
expressly applicable to the Company, any of its subsidiaries or their
respective property or (iv) result in the suspension, termination or
revocation of any Authorization (as defined below) of the Company or any
of its subsidiaries or any other impairment of the rights of the holder of
any such Authorization.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or
to which any of their respective property is subject that are required to
be described in the Registration Statement or the Prospectus and are not
so described; nor are there any statutes, regulations, contracts or other
11
<PAGE> 12
documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement
that are not so described or filed as required.
(l) To the knowledge of the Company, neither the Company nor any of
its subsidiaries has violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS") or any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or the Foreign Corrupt
Practices Act or the rules and regulations promulgated thereunder, except
for such violations which, singly or in the aggregate, would not have a
material adverse effect on the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a
whole.
(m) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct
its business, except where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate,
have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole. Each such Authorization is valid and in full force and
effect and each of the Company and its subsidiaries is in compliance with
all the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect
thereto; and to the knowledge of the Company, no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any
such Authorization or which results or, after notice or lapse of time or
both, would result in any other impairment of the rights of the Company or
its subsidiaries; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a material adverse effect on
the
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<PAGE> 13
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(n) To the knowledge of the Company, there are no costs or
liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered
by the Company.
(p) Arthur Andersen LLP are independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
(q) The consolidated financial statements included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), together with related schedules and notes, present fairly the
consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries on the basis stated
therein at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; the supporting schedules, if any, included in the Registration
Statement present fairly in accordance with generally accepted accounting
principles the information required to be stated therein; and the other
financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) in all material respects fairly present the information and data
so set forth.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(s) Except as set forth in the Registration Agreement dated as of
April 9, 1995, as amended on August 13, 1997, described in the
Registration Statement, there are no contracts, agreements or
understandings between the Company and any person granting such
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<PAGE> 14
person the right to require the Company to file a registration statement
under the Act with respect to any securities of the Company or to require
the Company to include such securities with the Shares registered pursuant
to the Registration Statement.
(t) Since the January 3, 1999 other than as set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement), (i) there has not occurred any material
adverse change or any development involving a prospective material adverse
change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries,
taken as a whole, (ii) there has not been any material adverse change or
any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of its
subsidiaries and (iii) neither the Company nor any of its subsidiaries has
incurred any material liability or obligation, direct or contingent, other
than in the ordinary course of business.
(u) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
SECTION 7. Representations and Warranties of the Selling Stockholders.
Each Selling Stockholder represents and warrants to each Underwriter that:
(a) As of the date hereof, such Selling Stockholder has good title
to its shares of common and/or preferred stock of the Company, to be sold
by such Selling Stockholder upon conversion into Common Stock, as
applicable, pursuant to this Agreement and free of all adverse claims.
(b) As of the Closing Date all of such Selling Stockholder's shares
of Classes A, B, C and D Preferred Stock will have been converted, if
applicable, into shares of Common Stock pursuant to the Company's Third
Amended and Restated Articles of Incorporation.
(c) On the Closing Date, such Selling Stockholder will have good
title to the Shares to be sold by such Selling Stockholder pursuant to
this Agreement and free of all adverse claims.
(d) Such Selling Stockholder has, and on the Closing Date will have,
full legal right, power and authority, and all authorization and approval
required by law, to enter into this Agreement, the Custody
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<PAGE> 15
Agreement signed by such Selling Stockholder and The Bank of New York, as
Custodian, relating to the deposit of the Shares to be sold by such
Selling Stockholder (the "CUSTODY AGREEMENT") and the Power of Attorney of
such Selling Stockholder, except [Clipper Capital Associates, L.P.,
Clipper/European Re L.P., Clipper Merban L.P., Clipper Equity Partner I,
L.P., Clipper Merchant Partner L.P.] (the "CLIPPER SELLING STOCKHOLDERS"),
appointing certain individuals as such Selling Stockholder's
attorneys-in-fact (the "ATTORNEYS") to the extent set forth therein,
relating to the transactions contemplated hereby and by the Registration
Statement and the Custody Agreement (the "POWER OF ATTORNEY") and to sell,
transfer and deliver the Shares to be sold by such Selling Stockholder in
the manner provided herein and therein.
(e) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Stockholder.
(f) The Custody Agreement of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a
valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms.
(g) The Power of Attorney of such Selling Stockholder, if
applicable, has been duly authorized, executed and delivered by such
Selling Stockholder and is a valid and binding instrument of such Selling
Stockholder, but subject to any conditions or limitations set forth
therein, enforceable in accordance with its terms, and, pursuant to such
Power of Attorney, such Selling Stockholder has, among other things,
authorized the Attorneys, or any one of them, to execute and deliver on
such Selling Stockholder's behalf this Agreement and any other document
that they, or any one of them, may deem necessary or desirable in
connection with the transactions contemplated hereby or thereby and to
deliver the Shares to be sold by such Selling Stockholder pursuant to this
Agreement.
(h) Upon delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, good title to such Shares
will pass, free of all adverse claims.
(i) The execution, delivery and performance of this Agreement and
the Custody Agreement and Power of Attorney, if any, of such Selling
Stockholder by or on behalf of such Selling Stockholder, the compliance by
such Selling Stockholder with all the provisions hereof and thereof and
the consummation of the transactions contemplated hereby and thereby will
not (i) require any consent, approval, authorization or
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<PAGE> 16
other order of, or qualification with, any court or governmental body or
agency (except such as may be required under the securities or Blue Sky
laws of the various states), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the organizational
documents of such Selling Stockholder, if such Selling Stockholder is not
an individual, or any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or any property of such Selling Stockholder
is bound or (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental
body or agency expressly applicable to such Selling Stockholder or any
property of such Selling Stockholder.
(j) The information in the Registration Statement under the caption
"Principal and Selling Shareholders" which specifically relates to such
Selling Stockholder does not, and will not on the Closing Date, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(k) At any time during the period described in Section 5(d), if
there is any change in the information referred to in Section 7(h), such
Selling Stockholder will immediately notify you of such change.
(l) Each certificate signed by or on behalf of such Selling
Stockholder and delivered to the Underwriters or counsel for the
Underwriters shall be deemed to be a representation and warranty by such
Selling Stockholder to the Underwriters as to the matters covered thereby.
SECTION 8. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Underwriter, its directors, its officers and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements
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<PAGE> 17
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished in writing to the Company by such Underwriter through you
expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, prior or together
with the written confirmation of the sale of the Shares to such person, and if
the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to the assertion of such losses, claims, damages or liabilities.
(b) The Selling Shareholders identified in Schedule II (referred to each
as a "MANAGEMENT SELLING SHAREHOLDER"), severally and not jointly, agree to
indemnify and hold harmless each Underwriter, its directors, its officers and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, prior or together with the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities. Notwithstanding
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<PAGE> 18
the foregoing, (i) the liability of each Management Selling Stockholder pursuant
to this Section 8(b) shall be limited to an amount equal to the total net
proceeds (after deducting underwriting discounts and commissions and expenses)
received by such Management Selling Stockholder from the Underwriters for the
sale of the Shares sold by such Management Selling Stockholder hereunder and
(ii) the Management Selling Stockholders shall not be required to honor any
demand for indemnity from any Underwriter pursuant to this Section 8 unless,
prior to the making of such demand by the Underwriter, such Underwriter shall
have delivered a written demand to the Company seeking indemnity and the Company
shall have failed to perform its obligations in respect thereof pursuant to this
Section 8 and such failure shall have continued for a period of 90 days.
(c) The Selling Stockholders who are listed in Schedule III (referred to
herein as the "NON-MANAGEMENT SELLING STOCKHOLDERS"), severally and not jointly,
agree to indemnify and hold harmless each Underwriter, its directors, its
officers and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
such Underwriter through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, prior or together with the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities. Notwithstanding the foregoing, (i) the liability of each
Non-Management Selling Stockholder pursuant to this Section 8(c) shall be
limited to an amount equal to the total net proceeds (after deducting
underwriting discounts and commissions and expenses)
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received by such Stockholder from the Underwriters for the sale of the Shares
sold by such Stockholder hereunder, (ii) each of the Non-Management Selling
Stockholders will be liable in any such case only to the extent that such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement in or omission or alleged omission from any such
document is in reliance upon and in conformity with written information relating
to such Non-Management Selling Stockholder, furnished to the Company by such
Non-Management Selling Stockholder specifically for use therein, and (iii) the
Non-Management Selling Stockholders shall not be required to honor any demand
for indemnity from any Underwriter pursuant to this Section 8 unless, prior to
the making of such demand by the Underwriter, such Underwriter shall have
delivered a written demand to the Company seeking indemnity and the Company
shall have failed to perform its obligations in respect thereof pursuant to this
Section 8 and such failure shall have continued for a period of 90 days.
(d) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, who controls such Selling Stockholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Sellers to such Underwriter
but only with reference to information relating to such Underwriter furnished in
writing to the Company by such Underwriter expressly for use in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus.
(e) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8 (the "INDEMNIFIED
PARTY"), the indemnified party shall promptly notify each person against whom
such indemnity is being sought (each, an "INDEMNIFYING PARTY") in writing and
the indemnifying party shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to the indemnified party and the
payment of all fees and expenses of such counsel, as incurred (except that in
the case of any action in respect of which indemnity may be sought pursuant to
any of Sections 8(a), 8(b) or 8(c) and pursuant to Section 8(d), the Underwriter
shall not be required to assume the defense of such action pursuant to this
Section 8(e), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of such Underwriter). Any indemnified party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have
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been specifically authorized in writing by each indemnifying party, (ii) each
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and an indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying parties shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for (i) the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all Underwriters, their officers and
directors and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, (ii)
the fees and expenses of more than one separate firm of attorneys (in addition
to any local counsel) for the Company, its directors, its officers who sign the
Registration Statement and all persons, if any, who control the Company within
the meaning of either such Section and (iii) the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all
Selling Stockholders and all persons, if any, who control any Selling
Stockholder within the meaning of either such Section, and all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters, their officers and directors and such
control persons of any Underwriters, such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation. In the case of any such
separate firm for the Company and such directors, officers and control persons
of the Company, such firm shall be designated in writing by the Company. In the
case of any such separate firm for the Clipper Selling Stockholders and such
control persons of any Clipper Selling Stockholders, said firm shall be
designated in writing by The Clipper Group, L.P. In the case of any such
separate firm for the Selling Stockholders, other than Clipper Selling
Stockholders, and such control persons of such Selling Stockholders, such firm
shall be designated in writing by the Attorneys. The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action effected with its written consent. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or reasonably could have been a party and indemnity or contribution may be or
could have been sought hereunder by the indemnified party, unless such
settlement, compromise or judgment (i) includes an unconditional release of the
indemnified party from all
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liability on claims that are or reasonably could have been the subject matter of
such action and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of the indemnified
party.
(f) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 8(f)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(f)(i) above but also the
relative fault of the respective Sellers and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the respective Sellers and the
Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (after deducting underwriting discounts and
commissions but before deducting expenses) received by each such Seller, and the
total underwriting discounts and commissions received by the Underwriters, bear
to the total price to the public of the Shares, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the respective
Sellers and the Underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Management Selling Stockholders, the Non-Management
Selling Stockholders, or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions
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of this Section 8, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 8(f) are several in
proportion to the respective number of Shares purchased by each of the
Underwriters hereunder and not joint.
Notwithstanding anything in this Section 8 to the contrary, the liability
of each Selling Stockholder to each Underwriter, its directors, its officers and
the persons who control any Underwriter pursuant to this Section 8 shall be
limited to the net proceeds (after deducting underwriting discounts and
commissions and expenses) received by such Selling Stockholder from the sale of
the Shares by such Selling Stockholder hereunder. In addition, no Selling
Stockholder shall be required to make any payment to any Underwriter under this
Section 8 until such time as such Underwriter has asserted a demand against the
Company and the Company shall have failed to perform pursuant to the provisions
of Section 8.
(g) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(h) Each Selling Stockholder, except the Clipper Selling Stockholders,
hereby designates David's Bridal, Inc., 44 W. Lancaster Avenue, Suite 280,
Ardmore, PA 19004, as its authorized agent, upon which process may be served in
any action which may be instituted in any state or federal court in the City of
New York by any Underwriter, any director or officer of any Underwriter or any
person controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 8, and each such Selling
Stockholder will accept the jurisdiction of such court in such action, and
waives, to the fullest extent permitted by applicable law, any defense based
upon lack of personal jurisdiction or venue. A copy of any such process shall be
sent or given to such Selling Stockholder, at the address for notices specified
in Section 11 hereof.
(i) Each Clipper Selling Stockholder hereby designates [___________,
address], as its authorized agent, upon which process may be served in any
action which may be instituted in any state or federal court in the City of New
York by any Underwriter, any director or officer of any Underwriter or any
person
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controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 8, and each such Clipper Selling
Stockholder will accept the jurisdiction of such court in such action, and
waives, to the fullest extent permitted by applicable law, any defense based
upon lack of personal jurisdiction or venue. A copy of any such process shall be
sent or given to such Clipper Selling Stockholder, at the address for notices
specified in Section 11 hereof.
SECTION 9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York
City time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Steven H. Erlbaum, Robert D. Huth and Edward
S. Wozniak, in their capacities as the Chairman, the Chief Executive
Officer and President, and Chief Financial Officer of the Company,
confirming to their knowledge, the matters set forth in Sections 6(t),
9(a) and 9(b) and that the Company has complied in all material respects
with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied in all material
respects by the Company on or prior to the Closing Date.
(d) Since January 3, 1999, other than as set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the
Company and its subsidiaries, taken as a whole, (ii) there shall not have
been any change or any development involving a prospective change in the
capital stock or in the long-term debt of the Company or any of its
subsidiaries and (iii) neither the
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Company nor any of its subsidiaries shall have incurred any liability or
obligation, direct or contingent other than in the ordinary course of
business, the effect of which, in any such case described in clause
9(d)(i), 9(d)(ii) or 9(d)(iii), in your reasonable judgment, is so
material and adverse as to make it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
(e) All the representations and warranties of each Selling
Stockholder contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date and you shall have received on the Closing Date a certificate
dated the Closing Date from each Selling Stockholder (or their
attorney-in-fact) to such effect and to the effect that such Selling
Stockholder has complied with all of the agreements and satisfied all of
the conditions herein contained and required to be complied with or
satisfied by such Selling Stockholder on or prior to the Closing Date.
(f) You shall have received on the Closing Date an opinion
reasonably satisfactory to you and counsel for the Underwriters, dated the
Closing Date, of Morgan, Lewis & Bockius LLP, counsel for the Company and
the Selling Stockholders (except the Clipper Selling Stockholders,
Adwood/Kafry and Michael Moore), to the effect set forth in Exhibit A.
The opinion of Morgan, Lewis & Bockius LLP described in Section 9(f)
above and set forth in Exhibit B shall be rendered to you at the request
of the Company and the Selling Stockholders and shall so state therein.
(g) You shall have received on the Closing Date an opinion
reasonably satisfactory to you and counsel for the Underwriters, dated the
Closing Date, of Kirkland & Ellis, counsel to the Clipper Selling
Stockholders, to the effect set forth in Exhibit B.
(h) You shall have received on the Closing Date an opinion
reasonably satisfactory to you and counsel for the Underwriters dated the
Closing Date, of [COUNSEL FOR ADWOOD/KAFRY AND M. MOORE] to the effect set
forth in Exhibit D.
(i) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Davis Polk & Wardwell, counsel for the Underwriters,
as to the matters referred to in Exhibit A, Sections (iv), (v)
24
<PAGE> 25
(but only with respect to the Company), (ix) (but only with respect to the
statements under the caption "Underwriting") and (xv).
(j) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, reasonable to you, from Arthur Andersen LLP, independent
public accountants, containing the information and statements as set forth
in Exhibit C with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus.
(k) The Company shall have delivered to you the agreements specified
in the last sentence of Section 2 hereof which agreements shall be in full
force and effect on the Closing Date.
(l) The Shares shall have been duly listed, subject to notice of
issuance, on the NASDAQ, National Market System.
(m) The Company and the Selling Stockholders shall not have failed
on or prior to the Closing Date to perform or comply in any material
respect with any of the agreements herein contained and required to be
performed or complied with by the Company or the Selling Stockholders, as
the case may be, on or prior to the Closing Date.
(n) You shall have received on the Closing Date, a certificate of
each Selling Stockholder who is not a U.S. Person (as defined under
applicable U.S. federal tax legislation) to the effect that such Selling
Stockholder is not a U.S. Person, which certificate may be in the form of
a properly completed and executed United States Treasury Department Form
W-8 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
The several obligations of the Underwriters to purchase any Additional Shares
hereunder are subject to the delivery to you on the applicable Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of such Additional
Shares and other matters related to the issuance of such Additional Shares.
SECTION 10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
25
<PAGE> 26
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
so material and adverse as to make it impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus, (ii) the suspension or
material limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange or
the Nasdaq National Market, (iii) the suspension of trading of any securities of
the Company on any exchange or in the over-the-counter market, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, or New York state
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 10 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or
26
<PAGE> 27
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased by all
Underwriters and arrangements satisfactory to you, the Company and the Selling
Stockholders for purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders. In any such
case which does not result in termination of this Agreement, either you or the
Sellers shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. If, on an Option Closing Date, any Underwriter or Underwriters
shall fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased on such
date, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
SECTION 11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to David's
Bridal, Inc., 44 West Lancaster Avenue, Suite 250, Ardmore, Pennsylvania 19003,
(ii) if to the Clipper Selling Stockholders, to The Clipper Group, L.P.,
[address], with a copy to Kirkland & Ellis, att: Stephen L. Ritchie, 200 East
Randolph Drive, Chicago, Illinois 60601, (iii) if to the other Selling
Stockholders, to Steven H. Erlbaum and Robert D. Huth c/o David's Bridal, Inc.,
44 West Lancaster Avenue,, Suite 250, Ardmore, PA 19003 and (iv) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the officers
27
<PAGE> 28
or directors of any Underwriter, any person controlling any Underwriter, the
Company, the officers or directors of the Company, any person controlling the
Company, any Selling Stockholder or any person controlling such Selling
Stockholder, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10 or breach of this Agreement by any
Underwriter), the non-delivering Sellers agree, jointly and severally, to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers also
agree, jointly and severally, to reimburse the several Underwriters, their
directors and officers and any persons controlling any of the Underwriters for
any and all fees and expenses (including, without limitation, the fees and
disbursements of counsel) incurred by them in connection with enforcing their
rights hereunder (including, without limitation, pursuant to Section 8 hereof);
provided that the adjudication of such rights is determined by a court of
competent jurisdiction, not subject to further review and appeal, and the
Underwriter involved in such a dispute is the prevailing party.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
28
<PAGE> 29
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
DAVID'S BRIDAL, INC.
By:
------------------------------------
Title:
[CLIPPER MERCHANT PARTNER L.P.]
By:
------------------------------------
Title:
[CLIPPER EQUITY PARTNER I, L.P.]
By:
------------------------------------
Title:
[CLIPPER MERBAN L.P.]
By:
------------------------------------
Title:
[CLIPPER CAPITAL ASSOCIATES, L.P.]
By:
------------------------------------
Title:
29
<PAGE> 30
[CLIPPER/EUROPEAN RE L.P.]
By:
------------------------------------
Title:
THE SELLING STOCKHOLDERS NAMED IN SCHEDULE
II AND III HERETO, ACTING SEVERALLY (EXCEPT
FOR THE CLIPPER SELLING STOCKHOLDERS)
By:
------------------------------------
Attorney-in-fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEGG MASON WOOD WALKER,
INCORPORATED
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
------------------------------------
Title:
30
<PAGE> 31
SCHEDULE I
NUMBER OF FIRM SHARES
UNDERWRITERS TO BE PURCHASED
- ------------ ---------------
Donaldson, Lufkin & Jenrette Securities
Corporation
Legg Mason Wood Walker, Incorporated
---------------
Total 8,000,000
=========
<PAGE> 32
SCHEDULE II
MANAGEMENT SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF FIRM ADDITIONAL SHARES
NAME SHARES BEING SOLD BEING SOLD
- ---- ----------------- ----------
<S> <C> <C>
Steven H. Erlbaum 1,205,427 165,600
Philip Youtie 339,476 46,636
Gary E. Erlbaum 509,018 69,928
Michael C. Erlbaum 147,810 40,305
Robert D. Huth 96,775 13,294
Steven J. Sidewater 17,743 2,417
--------- ---------
Total 2,316,249 338,180
========= =========
</TABLE>
<PAGE> 33
SCHEDULE III
NON-MANAGEMENT SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF FIRM ADDITIONAL
NAME SHARES BEING SOLD SHARES BEING SOLD
- ---- ----------------- -----------------
<S> <C> <C>
Clipper Equity Partner I, 529,460 72,738
L.P.
163,296 22,433
Clipper Capital Associates,
L.P.
Clipper Merchant Partner, 705,946 96,981
L.P
Clipper/European RE L.P. 352,973 48,491
Clipper Merban L.P. 705,946 96,981
The Vederman Family 206,004 28,300
Partnership
Jon Erlbaum 18,207 2,501
Marc Erlbaum 18,207 2,501
Daniel Erlbaum 18,207 2,501
Michael Moore 38,938 5,349
Shelly Shapiro 48,627 6,680
Mordechai Kafry 60,567 8,320
First Union Corporation 194,753 26,754
Michael Erlbaum and Gary 83,692 11,497
Erlbaum as Trustees under
the Agreement of Trust of
S.H. Erlbaum
Addwood Limited 89,540 12,300
</TABLE>
<PAGE> 34
SCHEDULE III (CONTINUED)
<TABLE>
<S> <C> <C>
Michael Erlbaum and Gary 83,692 11,497
Eileen Rae Winkler Youtie, 24,333 3,342
Custodian for Haleigh R.
Youtie
Eileen Rae Winkler Youtie, 29,608 4,067
Custodian for Maxwell Evan
Youtie
Andrew Taussig 48,387 6,647
Erlbaum Family L.P. 74,694 10,261
Haleigh Youtie, PY as 3,194 338
custodian
Maxwell Youtie, PY as 454 62
custodian
MCE Family Limited 66,741 9,168
Partnership
Retained Annuity Trust of 79,530 10,925
S.Sidewater
SPWJ Associates, L.P. 79,530 10,925
Adam Erlbaum, Gary and 194,731 26,751
Michael Erlbaum as Trustees
Wendy Sidewater Trust 14,591 2,004
Peter Sidewater Trust 14,591 2,004
Nancy Sidewater Trust 206,004 28,300
--------- ---------
Total 4,070,751 559,121
========= =========
</TABLE>
2
<PAGE> 35
ANNEX I
PARTIES TO EXECUTE LOCK UPS
Steven H. Erlbaum Maxwell Youtie, PY as custodian
Philip Youtie MCE Family Limited Partnership
Gary E. Erlbaum Retained Annuity Trust of
S.Sidewater
Michael C. Erlbaum
SPWJ Associates, L.P.
Robert D. Huth
Adam Erlbaum, Gary and
Steven J. Sidewater Michael Erlbaum as Trustees
Clipper/Merchant Partner L.P. Wendy Sidewater Trust
Clipper Equity Partner I, L.P. Peter Sidewater Trust
Clipper/Merban L.P. Nancy Sidewater Trust
Clipper Capital Associates, L.P. Daniel Erlbaum
Clipper/European Re L.P. Michael Moore
The Vederman Family Partnership Shelly Shapiro
Jon Erlbaum Mordechai Kafry
Marc Erlbaum First Union Corporation
Eileen Rae Winkler Youtie, Michael Erlbaum and Gary
Custodian for Haleigh R. Youtie Erlbaum as Trustees under
the Agreement of Trust
Eileen Rae Winkler Youtie, of S.H. Erlbaum
Custodian for Maxwell Evan Youtie
Addwood Limited
Andrew Taussig
Erlbaum Family L.P.
Haleigh Youtie, PY as custodian
<PAGE> 36
EXHIBIT A
Form of opinion from Morgan, Lewis & Bockius LLP, counsel for the Company
and the Selling Shareholders, will include the following:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the state of Florida and
has the corporate power and authority to carry on its business as
described in the Prospectus and to own, lease and operate its properties;
(ii) all the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any statutory preemptive or, to such counsel's knowledge,
similar rights;
(iii) the Shares to be issued and sold by the Company hereunder have
been duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided by this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any statutory preemptive or, to such counsel's
knowledge, similar rights;
(iv) this Agreement has been duly authorized, executed and delivered
by the Company and by or on behalf of each Selling Stockholder, except the
Clipper Selling Stockholders, [Adwood/Kafry and Michael Moore] [NEED TO
KNOW WHO WILL OPINE]
(v) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(vi) based on the oral advisement of a member of the staff of the
Commission, the Registration Statement has become effective under the Act,
no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to such counsel's knowledge, pending
before the Commission;
(vii) the statements under the captions "Stock Option Plan", "Shares
Eligible for Future Sale", and "Description of Capital Stock" in the
Prospectus and Item 14 of Part II of the Registration Statement, insofar
as such statements constitute a summary of the legal matters or documents
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings;
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<PAGE> 37
(viii) the execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions hereof
and the consummation by the Company of the transactions contemplated
hereby will not (A) require any material consent, approval, authorization
or other order of, or qualification with, any court or governmental body
or agency (except such as may be required under the securities or Blue Sky
laws of the various states), (B) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or to such counsel's knowledge, any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party, (C) to such counsel's
knowledge, violate or conflict with any applicable law or any rule,
regulation, or any judgment, order or decree of any court or any
governmental body or agency expressly applicable to the Company, any of
its subsidiaries or their respective property;
(ix) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of their respective property is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described, or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required;
(x) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended;
(xi) to such counsel's knowledge, there are no contracts, agreements
or understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company or to require the
Company to include such securities with the Shares registered pursuant to
the Registration Statement except as set forth in the Registration
Agreement dated as of June 9, 1995, as amended on August 15, 1997.
(xii) the Registration Statement and the Prospectus and any
supplement thereto (except for the financial statements and other
financial
2
<PAGE> 38
and statistical data included therein as to which no opinion need be
expressed) comply as to form in all material respects with the Act;
(xiii) immediately prior to the sale of Shares to be sold by the
Selling Stockholders under this Agreement each respective Selling
Stockholder was the sole registered owner of the Shares to be sold under
this Agreement, and the certificates evidencing all of such Shares bore no
restrictive legends other than legends relating to limitations on
transferability under Federal and state securities laws and the
Stockholders' Agreement dated as of June 9, 1995, as amended;
(xiv) the Custody Agreement of each Selling Stockholder is a valid
and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms;
(xv) the Power of Attorney of each Selling Stockholder is a valid
and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms; and
(xvi) upon delivery of and payment for the Shares to be sold by each
Selling Stockholder pursuant to this Agreement, good title to such Shares
will pass to the Underwriters, free and clear of all adverse claims.
In addition, such counsel has participated in conferences with
representatives of the Underwriters, officers and other representatives of the
Company and representatives of the independent certified public accountants of
the Company, at which conferences the contents of the Registration Statement and
the Prospectus and related matters discussed and, although such counsel does not
pass upon and does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement and the
Prospectus, on the basis of the foregoing (relying as to materiality on the
factual representations of, and discussions with, officers and other
representatives of the Company), no facts have come to such counsel's attention
which cause such counsel to believe that (i) the Registration Statement, as of
the time it became effective under Securities Act, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) the
Prospectus, as of the date thereof and as of the Closing Date, includes any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; except that such counsel expresses no
comment with respect to the financial statements and notes thereto, financial
schedules, and other financial and statistical information contained in the
Prospectus.
3
<PAGE> 39
The foregoing opinions are limited to the federal laws of the United
States, the laws of the Commonwealth of Pennsylvania, and the Florida Business
Corporation Act. Such counsel's opinions in paragraph regarding the validity
of all issued shares of capital stock of the Company is based in part on such
counsel's assumption that the stock books of the Company provided to such
counsel document all issuances of capital stock of the Company since the
respective dates of their incorporation. No facts have come to such counsel's
attention that cause such counsel to believe that such assumption is not
correct. In addition, such counsel's opinion expressed in paragraph above as
to the existence in good standing of the Company is based solely on a
certificate of good standing issued by the Secretary of State of the State of
Florida, and has the meaning imparted by such certificate.
In rendering the foregoing opinions and advisements, whenever a statement,
opinion or advisement set forth therein is qualified to "our knowledge," or any
similar phrase, it is intended to indicate that, during the course of such
counsel's representation of the Company in the subject transaction, no
information that would give such counsel current actual knowledge of the
inaccuracy of such statement, opinion or advisement has come to the attention of
those attorneys in our firm who have rendered legal services in connection with
the preparation of the Registration Statement and Prospectus. However, such
counsel has not undertaken any independent investigation to determine the
accuracy of such statement, opinion or advisement and no inference as to such
counsel's knowledge of any matters bearing on the accuracy of any such
statement, opinion or advisement should be drawn from the fact of such counsel's
representation of the Company.
4
<PAGE> 40
EXHIBIT B
Form of opinion from Kirkland & Ellis, counsel for The Clipper Group L.P.,
will include the following:
(i) Each of [______________] is a [limited partnership] existing and
in good standing under the __________ Act.
(ii) the [General Partner] of each of the Clipper Selling
Stockholders has adopted by requisite vote the resolutions necessary to
authorize such Clipper Selling Stockholder's execution, delivery and
performance of the Underwriting Agreement. Each of the Clipper Selling
Stockholders has duly executed and delivered the Underwriting Agreement
and a Custody Agreement.
(iii) Each of the Clipper Selling Stockholders has the [partnership]
power to enter into the Underwriting Agreement and the Custody Agreement
and to sell, assign, transfer and deliver the Clipper Shares to be sold by
such Clipper Selling Stockholder in the manner provided in the
Underwriting Agreement.
(iv) Each Custody Agreement executed by a Clipper Selling
Stockholder is a valid and binding obligation of such Clipper Selling
Stockholder and (assuming the due authorization, execution and delivery
thereof by the other parties thereto) is enforceable against such Clipper
Selling Stockholder in accordance with its terms.
(v) Upon the Underwriters' payment to the Clipper Selling
Stockholders of the purchase price specified in the Underwriting Agreement
and the delivery to the Underwriters of the certificate or certificates
representing the Clipper Shares in accordance with the Underwriting
Agreement, the Underwriters will have acquired good title of the Clipper
Shares free of any adverse claim. For purposes of this opinion, we assume
that the Underwriters will have purchased the Clipper Shares in good faith
and without notice of any adverse claim or any defect in the validity of
the Clipper Shares and that the Underwriters will take possession at the
Closing of the Clipper Shares through DTC, pursuant to which the Selling
Shareholders have assigned the Clipper Shares to the Underwriters. The
term "adverse claim" as used in this opinion has the meaning given such
terms in Article 8 of the Uniform Commercial Code and does not include (A)
any claim which arises through the Underwriters or any person claiming
through the Underwriters (such as any security interest the Underwriters
may
1
<PAGE> 41
have granted in the shares) and (B) any adverse interest which would not
be extinguished upon the purchase of the Clipper Shares by a person who
qualifies as a "bona fide purchaser" or "protected purchaser" under
Section 8-303 of the Uniform Commercial Code. We have no actual knowledge
of the existence of any security interest of the kind specified in clause
(B) of the preceding sentence.
(vi) None of the Clipper Selling Stockholders were required to
obtain any consent, approval, authorization or order of or from any
governmental agency or body for the sale of the Clipper Shares being sold
by such Clipper Selling Stockholder or the consummation of the
transactions contemplated by the Underwriting Agreement, or the Custody
Agreement to which such Clipper Selling Stockholder is a party, except for
the order by the Commission declaring the Registration Statement
effective, and except registration of such Clipper Shares under the
Securities Act and such as may be required under state securities or blue
sky laws in connection with the offer, sale and distribution of such
Clipper Shares by the Underwriters.
(vii) the execution, delivery and performance of the Underwriting
Agreement and the Custody Agreement by each Clipper Selling Stockholder
and the sale of the Clipper Shares to you in accordance with the
Underwriting Agreement do not (A) violate the [partnership agreement] of
such Clipper Selling Stockholder or (B) constitute a violation by such
Clipper Selling Stockholder of any applicable provision of any law,
statute or regulation (except that we express no opinion in this paragraph
as to compliance with any disclosure requirement or any prohibition
against fraud or misrepresentation or as to whether performance of the
indemnification or contribution provision in the Underwriting Agreement
would be permitted).
2
<PAGE> 42
EXHIBIT C
Form of comfort letter from Arthur Andersen LLP, independent public
accountants, will contain the following information and statements with respect
to the financial statements and certain financial information contained in the
Registration Statement and the Prospectus:
(i) that in their opinion the financial statements examined by them
and included or incorporated by reference in the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related rules and regulations adopted by
the SEC;
(ii) that they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards No.
71, Interim Financial Information, on the unaudited financial statements
included in the Registration Statement;
(iii) that on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements of
the Company, inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified procedures,
nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related rules and regulations adopted by the SEC or any material
modifications should be made to such unaudited financial statements
for them to be in conformity with generally accepted accounting
principles;
(B) at the date of the latest available balance sheet read by
such accountants, or at a subsequent specified date not more than
[five] business days prior to the date of this Agreement, there was
any change in the capital stock or any increase in long-term debt or
decrease in consolidated Stockholders' equity of the Company; or
(C) for the period from the latest income statement included
in the Prospectus to the date of the latest available income
statement read by such accountants there were any decreases, as
compared with the corresponding period of the previous year
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included in the Prospectus, in consolidated net sales or net
operating income;
except in all cases set forth in clauses (B) and (C) above for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(iv) for specified dollar amounts (or percentages derived from such
dollar amounts) and other financial information contained in the
Registration Statement, they have performed additional procedures, as
detailed in the tickmarks contained in such letter, noting agreement
except as otherwise specified in such letter.
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EXHIBIT D
Form of opinion of counsel for Adwood/Kafry and M. Moore
<PAGE> 1
Exhibit 3.1
THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DAVID'S BRIDAL, INC.
ARTICLE I
The name of this Corporation shall be David's Bridal, Inc.
ARTICLE II
The Corporation may engage in any activity or business permitted under the
laws of the United States and of the State of Florida.
ARTICLE III
A. AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation has
authority to issue is 106,850,000 shares, consisting of:
(1) 175,000 shares of Class A Preferred Stock, par value $.0l
per share (the "Class A Preferred");
(2) 125,000 shares of Class B Preferred Stock, par value $.0l
per share (the "Class B Preferred");
(3) 300,000 shares of Class C Preferred Stock, par value $.0l
per share (the "Class C Preferred");
(4) 1,250,000 shares of Class D Preferred Stock, par value
$.0l per share (the "Class D Preferred");
(5) 5,000,000 shares of Undesignated Preferred Stock, par
value $.0l per share (the "Undesignated Preferred"). The
Undesignated Preferred may be issued
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from time to time in one or more series. The Board of Directors of
the Corporation is hereby authorized, by adopting a resolution or
resolutions and filing a certificate or certificates of designation
pursuant to the applicable provisions of the Business Corporation
Act, to establish from time to time the number of shares to be
included in each such series of Undesignated Preferred, and to fix
the preferences, limitations, and relative rights of the shares of
each such series, including, without limiting the generality of the
foregoing, the authority to provide that any such series may be (i)
subject to redemption at such time or times and at such price or
prices; (ii) entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or any other series;
(iii) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; or (iv) convertible
into, or exchangeable for, shares of any other class or classes of
stock, or of any other series of the same or any other class or
classes of stock, or other securities or property, of the
Corporation at such price or prices or at such rates of exchange and
with such adjustments; all as may be stated in such resolution or
resolutions; and
(6) 100,000,000 shares of Common Stock, par value $.0l per
share (the "Common Stock").
The Class A Preferred, the Class B Preferred, the Class C Preferred and
the Class D Preferred are hereafter collectively referred to as the "Preferred
Stock."
Each share of Class A Common Stock of the Corporation heretofore issued
and outstanding is, without any action by the Corporation or the holders of such
shares, hereby reclassified and changed into one fully paid, nonassessable share
of Common Stock of the Corporation. Until exchanged in accordance with the
procedures established by the Board of Directors, certificates formerly
representing shares of Class A Common Stock shall be treated for all corporate
purposes as representing the shares of Common Stock into which such shares of
Class A Common Stock have been converted.
B. PREFERRED STOCK
I. Terms Applicable to the Preferred Stock.
Section 1. Liquidation.
Upon any liquidation, dissolution or winding up of the Corporation,
each holder of (i) Class A Preferred, Class B Preferred or Class C Preferred
shall be entitled to be paid, before any distribution or payment is made upon
any Junior Securities, an amount in cash equal to the aggregate Liquidation
Value of all shares of Class A Preferred, Class B Preferred and Class C
Preferred held by such holder, and the holders of Class A Preferred, Class B
Preferred and Class C
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Preferred, as such, shall not be entitled to any further payment, and (ii) Class
D Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Common Stock, an amount in cash equal to the greater of (a) the
amount that would be received by each holder of the Class D Preferred in a
liquidation, dissolution or winding up of the Corporation if, immediately prior
to such liquidation, dissolution or winding up of the Corporation, all such
holders converted such Class D Preferred into Common Stock pursuant to the terms
of Section 4 hereof and (b) the purchase price paid to the Corporation for the
shares of Class D Preferred held by such holder, and the holders of Class D
Preferred, as such, shall not be entitled to any further payment. The
Corporation shall mail written notice of such liquidation, dissolution or
winding up not less than 60 days prior to the payment date stated therein, to
each record holder of Preferred Stock. Neither the consolidation or merger of
the Corporation into or with any other entity or entities, nor the sale or
transfer by the Corporation of all or any part of its assets, nor the reduction
of the capital stock of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
1.
Section 2. Dividends.
If the Corporation's Board of Directors declares or the Corporation
pays any dividends with respect to the Common Stock (whether payable in cash,
securities or other property except for dividends payable solely in shares of
Common Stock), the Corporation shall be deemed to have declared with respect to
all shares of Preferred Stock ("Shares") outstanding, and the Corporation shall
pay to each holder of shares of Preferred Stock, dividends in an amount equal to
the product of (i) the amount of dividends so declared or paid with respect to
each share of Common Stock and (ii) the number of shares of Common Stock
(including fractions thereof) issuable upon conversion of the Shares held by
such holder on the record date for such dividend with respect to the Common
Stock.
Section 3. Voting Rights.
(i) Class A Preferred. The holders of the Class A Preferred
shall be entitled to notice of all shareholders' meetings in accordance with the
Corporation's By-laws and shall be entitled to vote on all matters submitted to
the shareholders for a vote together with the holders of the Common Stock and
the other classes of voting stock entitled to vote thereon, voting together as a
single class, with each share of Common Stock entitled to the number of votes
per share specified in Section 1 of Part C hereof, each Share of Class A
Preferred entitled to one vote for each share of Common Stock issuable upon
conversion of the Class A Preferred at the time the vote is taken, each share of
Class B Preferred entitled to the number of votes per share specified in
subparagraph (ii) below, and each share of Class D Preferred entitled to the
number of votes per share specified in subparagraph (iv) below.
(ii) Class B Preferred. The holders of the Class B Preferred
shall be entitled to notice of all shareholders' meetings in accordance with the
Corporation's By-laws and shall be entitled to vote on all matters submitted to
the shareholders for a vote together with the
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<PAGE> 4
holders of the Common Stock and the other classes of voting stock entitled to
vote thereon, voting together as a single class, with each share of Common Stock
entitled to the number of votes per share specified in Section 1 of Part C
hereof, each Share of Class B Preferred entitled to two votes for each share of
Common Stock issuable upon conversion of the Class B Preferred at the time the
vote is taken, each share of Class A Preferred entitled to the number of votes
per share specified in subparagraph (i) above, and each share of Class D
Preferred entitled to the number of votes per share specified in subparagraph
(iv) below.
(iii) Class C Preferred. Except as otherwise provided herein
and as otherwise required by law, the Class C Preferred shall have no voting
rights; provided that each holder of Class C Preferred shall be entitled to
notice of all shareholders' meetings at the same time and in the same manner as
notice is given to the shareholders entitled to vote at such meeting.
(iv) Class D Preferred. The holders of the Class D Preferred
shall be entitled to notice of all shareholders' meetings in accordance with the
Corporation's By-laws and shall be entitled to vote on all matters submitted to
the shareholders for a vote together with the holders of the Common Stock and
the other classes of voting stock entitled to vote thereon, voting together as a
single class, with each share of Common Stock entitled to the number of votes
per share specified in Section 1 of Part C hereof, each Share of Class D
Preferred entitled to one vote for each share of Common Stock issuable upon
conversion of the Class D Preferred at the time the vote is taken, each share of
Class A Preferred entitled to the number of votes per share specified in
subparagraph (i) above, and each share of Class B Preferred entitled to the
number of votes per share specified in subparagraph (ii) above.
Section 4. Conversion.
4A. Conversion of Class A Preferred into Class C Preferred. Each
holder of Class A Preferred shall be entitled at any time, if such holder has or
is reasonably expected to have a Regulatory Problem, to convert any or all of
the Shares of such holder's Class A Preferred into an equal number of Shares of
Class C Preferred.
4B. Conversion Procedure.
(i) At any time and from time to time, any holder of Class A
Preferred, Class B Preferred or Class C Preferred may convert all or any portion
of such Preferred Stock (including any fraction of a Share) held by such holder
into a number of shares of Common Stock computed by multiplying the number of
Shares to be converted by $80.384375 (which is the product of $72.50 and
1.10875) and dividing the result by the Conversion Price then in effect. At any
time and from time to time, any holder of Class D Preferred may convert all or
any portion of such Preferred Stock (including any fraction of a Share) held by
such holder into a number of Shares of Common Stock computed by multiplying the
number of Shares to be converted by $7.25 and dividing the result by the
Conversion Price then in effect.
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(ii) Each conversion of Preferred Stock shall be deemed to
have been effected as of the close of business on the date on which the
certificate or certificates representing the Preferred Stock to be converted
have been surrendered at the principal office of the Corporation. At such time
as such conversion has been effected, the rights of the holder of such Preferred
Stock as such holder shall cease and the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock are to be
issued upon such conversion shall be deemed to have become the holder or holders
of record of the shares of Common Stock represented thereby.
(iii) Notwithstanding any other provision hereof, if a
conversion of Preferred Stock is to be made in connection with a Public
Offering, the conversion of any Shares may, at the election of the holder of
such Shares, be conditioned upon the consummation of the Public Offering in
which case such conversion shall not be deemed to be effective until the
consummation of the Public Offering.
(iv) As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such
conversion in such name or names and such denomination or
denominations as the converting holder has specified;
(b) payment in an amount equal to all accrued dividends
with respect to each Share converted, which have not been paid prior
thereto, plus the amount payable under subparagraph (vii) below with
respect to such conversion; and
(c) a certificate representing any Shares of Preferred
Stock which were represented by the certificate or certificates
delivered to the Corporation in connection with such conversion but
which were not converted.
(v) The issuance of certificates for shares of Common Stock
upon conversion of Preferred Stock shall be made without charge to the holders
of such Preferred Stock for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Common Stock. Upon conversion of each Share, the
Corporation shall take all such actions as are necessary in order to insure that
the Common Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.
(vi) The Corporation shall not close its books against the
transfer of Preferred Stock or of Common Stock issued or issuable upon
conversion of Preferred Stock in any manner which interferes with the timely
conversion of Preferred Stock. The Corporation shall
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<PAGE> 6
assist and cooperate with any holder of Shares required to make any governmental
filings or obtain any governmental approval prior to or in connection with any
conversion of Shares hereunder (including, without limitation, making any
filings required to be made by the Corporation).
(vii) If any fractional interest in a share of Common Stock
would, except for the provisions of this subparagraph (vii), be deliverable upon
any conversion of the Preferred Stock, the Corporation, in lieu of delivering
the fractional share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of conversion.
(viii) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon the conversion of the Preferred Stock, such number
of shares of Common Stock issuable upon the conversion of all outstanding
Preferred Stock. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such actions as may
be necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance).
(ix) If the shares of Common Stock issuable by reason of such
conversion of Preferred Stock are convertible into or exchangeable for any other
stock or securities of the Corporation, the Corporation shall, at the converting
holder's option, upon surrender of the Shares to be converted by such holder as
provided above together with any notice, statement or payment required to effect
such conversion or exchange of Common Stock, deliver to such holder or as
otherwise specified by such holder a certificate or certificates representing
the stock or securities into which the shares of Common Stock issuable by reason
of such conversion are so convertible or exchangeable, registered in such name
or names and in such denomination or denominations as such holder has specified.
4C. Conversion Price. The Conversion Price is $7.25 for the Class A
Preferred, Class B Preferred, Class C Preferred and the Class D Preferred. In
order to prevent dilution of the conversion rights granted under this
subdivision, the Conversion Price shall be subject to adjustment from time to
time pursuant to this Section 4.
4D. Subdivision or Combination of Common Stock. If the Corporation
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Corporation at any time combines
(by reverse stock split or otherwise) its outstanding shares of Common Stock
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
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4E. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets to another Person
or other transaction which is effected in such a manner that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an "Organic Change." Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the Preferred Stock then
outstanding, voting together as a single class) to insure that each of the
holders of Preferred Stock shall thereafter have the right to acquire and
receive, in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the conversion of
such holder's Preferred Stock, such shares of stock, securities or assets as
such holder would have received in connection with such Organic Change if such
holder had converted its Preferred Stock immediately prior to such Organic
Change. In each such case, the Corporation shall also make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Preferred Stock then outstanding, voting together as a single class) to
insure that the provisions of this Section 4 and Sections 5 and 6 hereof shall
thereafter be applicable to the Preferred Stock (including, in the case of any
such consolidation, merger or sale in which the successor entity or purchasing
entity is other than the Corporation, an immediate adjustment of the Conversion
Price to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate adjustment in the
number of shares of Common Stock acquirable and receivable upon conversion of
Preferred Stock, if the value so reflected is less than the Conversion Price in
effect immediately prior to such consolidation, merger or sale). The Corporation
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form reasonably satisfactory to the holders of
a majority of the Preferred Stock then outstanding, voting together as a single
class), the obligation to deliver to each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.
4F. Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 4 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of Preferred Stock;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 4 or decrease the number of shares
of Common Stock issuable upon conversion of each Share.
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4G. Notices.
(i) Immediately upon any adjustment of the Conversion Price,
the Corporation shall give written notice thereof to all holders of Preferred
Stock setting forth in reasonable detail the calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders
of Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock, or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the
holders of Preferred Stock at least 20 days prior to the date on which any
Organic Change shall take place.
4H. Mandatory Conversion. All of the outstanding Preferred Stock
shall automatically be converted into Common Stock effective immediately prior
to the consummation of a firm commitment underwritten initial Public Offering of
shares of its Common Stock in which the price per share paid by the public for
such shares shall be at least equal to the Conversion Price in effect
immediately prior to the closing of the sale of such shares pursuant to the
Public Offering. Upon such conversion, the Class A Preferred, Class B Preferred,
Class C Preferred and Class D Preferred shall no longer constitute authorized
stock of the Corporation, and the Class A Preferred, Class B Preferred, Class C
Preferred and Class D Preferred shall no longer be available for issuance.
Section 5. Liquidating Dividends.
If the Corporation declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Corporation shall pay to the holders
of Preferred Stock at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Common Stock had such Preferred
Stock been converted immediately prior to the date on which a record is taken
for such Liquidating Dividend, or, if no record is taken, the date as of which
the record holders of Common Stock entitled to such dividends are to be
determined.
Section 6. Purchase Rights.
If at any time the Corporation grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of Common Stock (the "Purchase
Rights"), then each holder of Preferred Stock shall be
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entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon conversion of such
holder's Preferred Stock immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
II. Miscellaneous.
Section 1. Registration of Transfer.
The Corporation shall keep at its principal office a register for
the registration of Preferred Stock. Upon the surrender of any certificate
representing Preferred Stock at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate.
Section 2. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
Shares of any class of Preferred Stock, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 3. Definitions.
"Common Stock" means the Corporation's no par value Common Stock.
"Junior Securities" means any of the Corporation's equity securities
other than the Class A Preferred, Class B Preferred and Class C Preferred.
"Liquidation Value" of any Share as of any particular date shall be
equal to the result of (i) the greater of (a) the amount that would be received
by the holders of the Class A Preferred, Class B Preferred and Class C Preferred
in a liquidation, dissolution or winding up of
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the Corporation if, immediately prior to such liquidation, dissolution or
winding up of the Corporation, such holders converted such Preferred Stock into
Common Stock pursuant to the terms of Section 4 hereof and (b) $29,000,000,
divided by (ii) the number of Shares outstanding on such date.
"Market Price" means as to any security the average of the closing
prices of such security's sales on all domestic securities exchanges on which
such security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day; provided, that if Market Price is
being determined in connection with a Public Offering, Market Price shall equal
the gross offering price to the public in such Public Offering; and provided
further that if such security is listed on any domestic securities exchange the
term "business days" as used in this sentence means business days on which such
exchange is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the Purchaser Representative; provided
that if such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected by
the Corporation and the Purchaser Representative. If the Corporation and the
Purchaser Representative are unable to agree upon an appraiser within a
reasonable period of time, the appraiser shall be a "big-five" accounting firm
selected by lot after the Corporation and the Purchaser Representative have each
eliminated one such firm. The determination of such appraiser shall be final and
binding on the Corporation and the Purchaser Representative, and the fees and
expenses of such appraiser shall be paid by the Corporation.
"Original Holders" means the Persons purchasing Preferred Stock on
June 9, 1995.
"Original Holders' Purchase Price" means $29,000,000.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that
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a Public Offering shall not include an offering made in connection with a
business acquisition or combination or an employee benefit plan.
"Purchaser Representative" means Clipper Capital Associates, L.P.,
or a Person designated by the holders of a majority of the Preferred Stock then
outstanding.
"Regulatory Problem" means when any holder and such holder's
affiliates would own, control or have power over a greater quantity of
securities of any kind issued by the Corporation than permitted under any
applicable requirement of any governmental authority, or would not be able to
hold an investment or provide financing to the Corporation in compliance with
any applicable requirement of any governmental authority.
"Subsidiary" means any corporation of which the Shares of
outstanding capital stock possessing the voting power (under ordinary
circumstances) in electing the Board of Directors are, at the time as of which
any determination is being made, owned by the Corporation either directly or
indirectly through Subsidiaries.
Section 4. Amendment and Waiver.
No amendment, modification or waiver shall be binding or effective
with respect to any provision of this Part B without the prior written consent
of the holders of at least two-thirds of the Preferred Stock outstanding, voting
together as a single class, at the time such action is taken to the extent that
any such amendment, modification or waiver would adversely affect the rights,
preferences or privileges of any class of Preferred Stock; provided that no
adverse change in the terms hereof may be accomplished by merger or
consolidation of the Corporation with another corporation or entity unless the
Corporation has obtained the prior written consent of the holders of the
applicable percentage of the class or classes of the Preferred Stock then
outstanding, and, provided further, that this Part B and references to Preferred
Stock (except for the Undesignated Preferred) in Part A and elsewhere in these
Articles of Incorporation may be deleted by the Board of Directors of the
Corporation if no shares of Preferred Stock (except Undesignated Preferred) are
outstanding.
Section 5. Notices.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, and shall be deemed to have been
given when so mailed or sent (i) to the Corporation, at its principal executive
offices and (ii) to any shareholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated by any such
holder).
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C. COMMON STOCK
Section 1. General.
Except as otherwise provided in this Part C or as otherwise required
by applicable law, all shares of Common Stock shall be identical in all respects
and shall entitle the holders thereof to the same rights, preferences and
privileges, subject to the same qualifications, limitations and restrictions, as
set forth herein.
Section 2. Dividends.
As and when dividends are declared or paid with respect to shares of
Common Stock, whether in cash, property or securities of the Corporation, the
holders of Common Stock shall be entitled to receive such dividends pro rata at
the same rate per share of Common Stock. The right of the holders of Common
Stock to receive dividends are subject to the provisions of the Preferred Stock.
Section 3. Liquidation.
Subject to the provisions of the Preferred Stock, the holders of the
Common Stock shall be entitled to participate pro rata in all distributions to
the holders of Common Stock in any liquidation, dissolution or winding up of the
Corporation.
Section 4. Registration of Transfer.
The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of shares of Common Stock. Upon the surrender of any certificate representing
shares of Common Stock at such place, the Corporation shall, at the request of
the registered holder of such certificate, execute and deliver a new certificate
or certificates in exchange therefore representing in the aggregate the number
of shares of such class represented by the surrendered certificate, and the
Corporation forthwith shall cancel such surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
shares of such class as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
Section 5. Replacement.
12
<PAGE> 13
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing one
or more shares of Common Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 6. Notices.
All notices referred to herein shall be in writing, shall be
delivered personally, by first class mail, postage prepaid and return receipt
requested, or sent by reputable overnight courier service, charges prepaid, and
shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any shareholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
Section 7. Amendment and Waiver.
No amendment or waiver of any provision of this Part C shall be
effective without the prior approval of the holders of a majority of the then
outstanding Common Stock.
ARTICLE IV
The Corporation shall have a perpetual existence.
ARTICLE V
The initial registered office of this Corporation was 1515 East Las
Olas Boulevard, Fort Lauderdale, Florida 33301 and the name of the initial
registered agent of this Corporation at that address was PHILIP YOUTIE. The
street address and mailing address of the principal office of the Corporation in
Florida is 2029 N. University Drive, Sunrise, Florida 33322. The Board of
Directors of the Corporation or an officer of the Corporation acting under the
authority of the Board of Directors is authorized to change the principal office
or mailing address of the Corporation from time to time without amendment to
these Articles of Incorporation.
ARTICLE VI
13
<PAGE> 14
The total number of directors of this Corporation shall be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the total number of directors that the Corporation would have if there were no
vacancies.
The directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, one class to be originally elected for a term expiring at the
annual meeting of shareholders to be held in 2000, another class to be
originally elected for a term expiring at the annual meeting of shareholders to
be held in 2001, and another class to be originally elected for a term expiring
at the annual meeting of shareholders to be held in 2002, with each class to
hold office until its successor is duly elected and qualified. At each
succeeding annual meeting of shareholders, directors elected to succeed those
directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of shareholders after their
election, with each director to hold office until such person's successor shall
have been duly elected and qualified.
The shareholders may remove one or more directors from office only
for cause by a vote of the holders of a majority of all the votes then entitled
to be cast on the matter. In case the Board of Directors or any one or more
directors is so removed at a meeting of shareholders, new directors may be
elected at the same meeting.
The affirmative vote of the holder of not less than 80% percent of
all the votes then entitled to be cast on the matter shall be required to amend,
repeal or adopt any provision inconsistent with this Article VI.
ARTICLE VII
Special meetings of the shareholders of the Corporation may be
called, for any purpose or purposes permitted by law, by the Board of Directors
on its own initiative and shall be called by the Board of Directors upon written
request by such person or persons authorized to do so by the bylaws or, upon
delivery to the secretary of one or more signed and dated written demands for
the meeting describing the purpose or purposes for which it is to be held, by
the holders of not less than 20 percent of all the votes entitled to be cast on
any issue proposed to be considered at the proposed special meeting. Only
business within the purpose or purposes described in the special meeting notice
may be conducted at a special shareholders' meeting.
ARTICLE VIII
Effective upon the time that the Corporation becomes subject to the
reporting requirements of Section 13(a) or 15(d) under the Securities Act of
1934 Act, as amended, no action required to be taken or which may be taken at
any annual or special meeting of shareholders of the Corporation may be taken by
shareholders without a meeting, and the power of shareholders to consent in
writing without a meeting to the taking of any such action is specifically
denied.
14
<PAGE> 15
ARTICLE IX
The Corporation may redeem shares of its capital stock to the full
extent permitted under Section 607.0902 of the Florida Business Corporation Act,
or any successor provision thereto. Nothing in this Article shall prohibit the
Corporation from otherwise redeeming shares of its capital stock to the full
extent permitted under applicable law.
ARTICLE X
Except as otherwise provided herein, these Articles of Incorporation
may be amended in the manner provided by law or the By-laws of this Corporation.
IN WITNESS WHEREOF, these Third Amended and Restated Articles of
Incorporation of David's Bridal, Inc. have been executed by David's Bridal, Inc.
by its President and Chief Operating Officer, this 21st day of April, 1999.
DAVID'S BRIDAL, INC.
By:________________________________
Robert D. Huth, President and
Chief Operating Officer
15
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
DAVID'S BRIDAL, INC.
(A FLORIDA CORPORATION)
<PAGE> 2
<TABLE>
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<S> <C>
ARTICLE I
Offices
Section 1.01. Principal Office....................................... 1
Section 1.02. Registered Office...................................... 1
Section 1.03. Other Offices.......................................... 1
ARTICLE II
Meetings of Shareholder
Section 2.01. Annual Meeting......................................... 1
Section 2.02. Special Meetings....................................... 1
Section 2.03. Place of Meetings...................................... 1
Section 2.04. Voting Lists........................................... 1
Section 2.05. Fixing of a Record Date................................ 2
Section 2.06. Notice of Meetings..................................... 2
Section 2.07. Precondition to Delivery of Notice of Special Meeting
of Shareholders Called by Shareholders.......................... 2
Section 2.08. Quorum................................................. 3
Section 2.09. Adjournment............................................ 3
Section 2.10. Organization........................................... 3
Section 2.11. Voting................................................. 3
Section 2.12. Proxies................................................ 5
Section 2.13. Action by Shareholders Without a Meeting............... 5
Section 2.14. Notice of Shareholder Business and Nominations......... 5
ARTICLE III
Board of Directors
Section 3.01. Powers and Duties...................................... 8
Section 3.02. Qualification and Election............................. 9
Section 3.03. Number and Term of Office.............................. 9
Section 3.04. Organization........................................... 9
Section 3.05. Place of Meetings...................................... 9
Section 3.06. Annual Meetings........................................ 9
Section 3.07. Regular Meetings....................................... 10
Section 3.08. Special Meetings....................................... 10
Section 3.09. Action by Written Consent Without a Meeting............ 10
Section 3.10. Conference Telephone Meetings.......................... 10
Section 3.11. Quorum................................................. 11
Section 3.12. Voting................................................. 11
Section 3.13. Adjournment............................................ 11
</TABLE>
i
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<TABLE>
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<S> <C>
Section 3.14. Compensation........................................... 11
Section 3.15. Resignations........................................... 11
Section 3.16. Vacancies.............................................. 11
Section 3.17. Removal................................................ 11
Section 3.18. Executive and Other Committees......................... 12
ARTICLE IV
Notice and Waiver of Notice
Section 4.01. Notice................................................. 13
Section 4.02. Waiver of Notice....................................... 13
ARTICLE V
Officers
Section 5.01. Number and Qualification............................... 13
Section 5.02. Election and Term of Office............................ 14
Section 5.03. Subordinate Officers, Committees and Agents............ 14
Section 5.04. The Chairman of the Board.............................. 14
Section 5.05. The President.......................................... 14
Section 5.06. The Chief Financial Officer............................ 14
Section 5.07. The Vice Presidents.................................... 15
Section 5.08. The Secretary.......................................... 15
Section 5.09. The Treasurer.......................................... 15
Section 5.10. Salaries and Compensation.............................. 15
Section 5.11. Resignations........................................... 16
Section 5.12. Removal................................................ 16
Section 5.13. Vacancies.............................................. 16
Section 5.14. Bond................................................... 16
ARTICLE VI
Certificates of Stock, Transfer
Section 6.01. Share Certificates, Issuance........................... 16
Section 6.02. Transfer............................................... 16
Section 6.03. Registered Shareholders................................ 16
Section 6.04. Lost, Destroyed or Mutilated Certificates.............. 17
ARTICLE VII
Indemnification of Directors, Officers,
Employees and Agents
Section 7.01. Directors, Officers, Employees and Agents.............. 17
Section 7.02. Expenses............................................... 18
Section 7.03. Determination of Standard of Conduct................... 18
</TABLE>
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<TABLE>
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<S> <C>
Section 7.04. Advance Expenses....................................... 18
Section 7.05. Benefit................................................ 18
Section 7.06. Insurance.............................................. 19
Section 7.07. No Rights of Subrogation............................... 19
Section 7.08. Indemnification for Past Directors..................... 19
Section 7.09. Affiliates............................................. 19
Section 7.10. Reliance............................................... 19
Section 7.11. Fund for Payment of Expenses........................... 19
Section 7.12. Amendments............................................. 20
ARTICLE VIII
Miscellaneous
Section 8.01. Checks................................................. 20
Section 8.02. Dividends.............................................. 20
Section 8.03. Deposits............................................... 20
Section 8.04. Fiscal Year............................................ 20
Section 8.05. Severability........................................... 20
ARTICLE IX
Amendments
Section 9.01. Amendments to the Bylaws......................... 21
</TABLE>
iii
<PAGE> 5
ARTICLE I
Offices
Section 1.01. Principal Office. The principal office of the
corporation in the State of Florida, which may also be the registered office,
shall be established at such place as the board of directors shall from time to
time determine.
Section 1.02. Registered Office. The registered office of the
corporation in the State of Florida shall be at the office of its registered
agent as stated in the articles of incorporation or such other office as the
board of directors shall from time to time determine.
Section 1.03. Other Offices. The corporation may have additional
offices at such other places, either within or without the State of Florida, as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
Meetings of Shareholders
Section 2.01. Annual Meeting. The annual meeting of shareholders
shall be held after the close of each fiscal year on such date and at such time
as determined by the board of directors. The shareholders entitled to vote at
such meeting shall elect directors and shall transact such other business as may
properly be brought before the meeting.
Section 2.02. Special Meetings. Special meetings of the
shareholders of the corporation may be called, for any purpose or purposes
permitted by law, by the board of directors on its own initiative and shall be
called by the board of directors upon written request by the chairman of the
board, the chief executive officer or the president of the corporation, or, upon
delivery to the secretary of one or more written demands for the meeting
describing the purpose or purposes for which it is to be held, by the holders of
not less than 20 percent of all the shares entitled to be cast on any issue
proposed to be considered at the proposed special meeting. Notice of such
meeting shall be given by the secretary as provided herein. Only business within
the purpose or purposes described in such special meeting notice may be
conducted at a special shareholders meeting.
Section 2.03. Place of Meetings. All meetings of the shareholders
of the corporation shall be held at such place within or without the State of
Florida as shall be designated from time to time by the board of directors and
stated in the notice of such meeting or in a duly executed waiver of notice
thereof.
Section 2.04. Voting Lists. The officer or agent of the
corporation having charge of the stock transfer books for shares of the
corporation shall make, at least ten days
<PAGE> 6
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at the meeting and any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each
shareholder, which list shall be kept on file at the place identified in the
meeting notice in the city where the meeting will be held or the corporation's
principal place of business or at the office of its registrar or transfer agent
for a period of at least ten days prior to the meeting, and shall be subject to
inspection by any shareholder at any time during such ten day period and during
usual business hours . Such list shall also be produced and kept open at the
time and place of the meeting, and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book, or to vote, in person or by proxy, at any meeting of the shareholders.
Section 2.05. Fixing of a Record Date. The board of directors may
fix in advance a date as the record date for any determination of shareholders
entitled to notice of, or to vote at, any meeting of shareholders, or entitled
to payment of a dividend or allotment of any rights or privileges, such date in
any case to be not more than seventy days and, in the case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders
entitled to notice of, or to vote at, a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which the secretary mails
the notice of the meeting or the date on which the resolution of the board of
directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, unless the board of
directors fixes a new record date under this section for the adjourned meeting.
The board of directors shall fix a new record date if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
Section 2.06. Notice of Meetings. Written notice stating the
place, day and hour of every meeting of the shareholders shall be given by the
secretary to each shareholder entitled to vote at such meeting, either
personally or by first class mail, at least ten days, but not more than sixty
days, prior to the meeting date. If mailed, such notice shall be deemed to be
delivered when deposited in the United States first-class mail postage prepaid,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation.
Section 2.07. Precondition to Delivery of Notice of Special
Meeting of Shareholders Called by Shareholders. The secretary shall inform
shareholders who have delivered a written request for a special meeting and
otherwise complied with section 2.02 of the reasonably estimated costs of
preparing and mailing a notice of the meeting, and, on payment of
2
<PAGE> 7
these costs to the corporation, the secretary shall deliver notice of such
meeting to each shareholder entitled thereto.
Section 2.08. Quorum. The presence, in person or by proxy, of
shareholders entitled to cast a majority of the votes which all shareholders are
entitled to cast shall constitute a quorum for such meeting. Treasury shares,
shares of this corporation's stock which are owned by another corporation the
majority of the voting stock of which is owned by this corporation, and shares
of this corporation's stock held by another corporation in a fiduciary capacity
for the benefit of this corporation shall not be counted in determining the
total number of outstanding shares for voting purposes at any given time. After
a quorum has been established at a shareholders' meeting, the subsequent
withdrawal of shareholders, so as to reduce the number of shareholders entitled
to vote at the meeting below the number required for a quorum, shall not affect
the validity of any action taken at the meeting or any adjournment thereof. When
a specified item of business is required to be voted on by any class or series
of stock, a majority of the shares of such class or series shall constitute a
quorum for transaction of such item of business by that class or series.
Section 2.09. Adjournment. When a meeting which is properly called
is adjourned to another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken, and at
the adjourned meeting any business may be transacted that might have been
transacted on the original date or place of the meeting. If, however, after the
adjournment the board fixes a new record date for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record on
the new record date entitled to vote at such meeting.
The holders of a majority of the shares represented, and who would
be entitled to vote at a meeting if a quorum were present, where a quorum is not
present, may adjourn such meeting from time to time.
Section 2.10. Organization. At every meeting of the shareholders,
the chairman of the board, if there be one, or in the case of vacancy in office
or absence of the chairman of the board, one of the following officers present
in the order stated: the vice chairman of the board, if there be one, the chief
executive officer, the president, the vice presidents in their order of rank and
then seniority, or a chairman chosen by the shareholders entitled to cast a
majority of the votes which all shareholders present in person or by proxy are
entitled to cast, shall act as chairman, and the secretary, or, in his absence,
an assistant secretary, or, in the absence of both the secretary and assistant
secretaries, a person appointed by the chairman, shall act as secretary.
Section 2.11. Voting. If a quorum is present at any meeting,
action on a matter (other than the election of directors) is approved if the
votes cast in favor exceed the votes cast in opposition, unless the question is
one for which, by express provision of the law or of the articles
3
<PAGE> 8
of incorporation or these bylaws, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Except as may be otherwise provided in the articles of
incorporation, every shareholder of record shall have the right, at every
shareholders' meeting, to one vote for every share, and if the corporation has
issued fractional shares, to a fraction of a vote equal to every fractional
share, of stock of the corporation standing in his name on the books of the
corporation. A shareholder may vote either in person or by proxy.
Treasury shares, shares of this corporation's stock which are
owned by another corporation the majority of the voting stock of which is owned
by this corporation, and the shares of this corporation's stock held by another
corporation in a fiduciary capacity for the benefit of this corporation shall
not be voted, directly or indirectly, at any meeting of shareholders.
At each election for directors, every shareholder entitled to vote
shall have the right to vote the number of shares owned by him, for as many
persons as there are directors to be elected at that time and for whose election
he has a right to vote or, if cumulative voting is authorized by the articles of
incorporation, to accumulate his votes by giving one candidate a number of votes
equal to the number of directors to be elected at that time multiplied by the
number of his votes or distribute such number of votes among any number of
candidates.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the bylaws
of the corporate shareholder; or, in the absence of any applicable bylaw, by
such person as the board of directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the bylaws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of conflicting designation, by the
corporate shareholder, the chairman of the board, the chief executive officer,
the president, any vice president, secretary and treasurer of the corporate
shareholder shall be presumed to possess, in that order, authority to vote such
shares.
Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a transfer of
such shares into the name of such person, provided, that if requested by the
chairman of the board, the chief executive officer, president, chief financial
officer, treasurer or secretary, such person has provided evidence of such
fiduciary status acceptable to such officer.
Shares standing in the name of a trustee may be voted by such
trustee, either in person or by proxy, but no trustee shall be entitled to vote
shares held by such trustee without a transfer of such shares into the name of
such trustee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him or the name of his nominee, without the transfer of such shares into his
name,
4
<PAGE> 9
provided, that if requested by the chairman of the board, chief executive
officer, president, chief financial officer, treasurer or secretary, such person
has provided evidence of such status acceptable to such officer.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee or the nominee of the pledgee shall be entitled to
vote the shares so transferred.
Section 2.12. Proxies. Every shareholder entitled to vote at a
meeting of shareholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for him
by proxy in accordance with applicable laws.
Section 2.13. Action by Shareholders Without a Meeting. Unless
otherwise provided in the articles of incorporation, any action required to be
taken at any annual or special meeting of shareholders of the corporation, or
any action which may be taken at any annual or special meeting of the
shareholders, may be taken without a meeting, without prior notice and without a
vote, if one or more consents in writing, setting forth the action so taken,
shall be dated and signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted, and delivered to the corporation by delivery to its principal
office in Florida, its principal place of business, the corporate secretary, or
another officer or agent of the corporation having custody of the minute book.
If any class of shares is entitled to vote thereon as a class, such written
consent shall be required of the holders of outstanding stock of such class and
of the total outstanding stock, respectively, having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of such class and all shares entitled to vote
thereon were present and voted. No written consent shall be effective to take
the corporate action referred to therein unless, within sixty days of the date
of the earliest dated consent delivered in the manner set forth above, written
consents signed by the holders of the number of shares required to take action
are delivered to the corporation by delivery as set forth above.
Section 2.14. Notice of Shareholder Business and Nominations.
Nominations of persons for election to the board of directors of the corporation
and the proposal of business to be considered by the shareholders may be made at
an annual meeting of shareholders (a) pursuant to the corporation's notice of
meeting pursuant to section 2.06 of these by-laws, (b) by or at the direction of
the board of directors, or (c) by any shareholder of the corporation who was a
shareholder of record at the time of giving of notice provided for in this
section 2.14, who is entitled to vote at the meeting and who complies with the
notice procedures set forth in this section 2.14.
5
<PAGE> 10
For nominations or other business to be properly brought before an
annual meeting of shareholders by a shareholder pursuant to this section 2.14,
the shareholder must have given timely notice thereof in writing to the
secretary of the corporation and such other business must otherwise be a proper
matter for shareholder action. To be timely, a shareholder's notice shall be
delivered to the secretary at the principal executive offices of the corporation
not later than the close of business on the 90th calendar day nor earlier than
the close of business on the 120th calendar day prior to the first anniversary
of the preceding year's annual meeting of shareholders; provided, however, that
in the event that the date of the annual meeting of shareholders is more than 30
calendar days before or more that 60 calendar days after such anniversary date,
notice by the shareholder to be timely must be so delivered not earlier than the
close of business on the 120th calendar day prior to such annual meeting of
shareholders and not later than the close of business on the later of the 90th
calendar day prior to such annual meeting of shareholders or the 10th calendar
day following the calendar day on which public announcement of the date of such
meeting is first made by the corporation. For purposes of determining whether a
shareholder's notice shall have been delivered in a timely manner for the annual
meeting of shareholders in 2000, the first anniversary of the previous year's
meeting shall be deemed to be May 1, 1999. In no event shall the public
announcement of an adjournment of an annual meeting of shareholders commence a
new time period for the giving of a shareholder's notice as described above.
Such shareholder's notice shall set forth, or be accompanied by, (a) in the
event the shareholder proposes to nominate one or more persons for election or
reelection as a director (1) the name and residence address of the shareholder
and of the person or persons to be nominated; (2) a representation that the
shareholder is a holder of record of voting stock of the corporation and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the Notice; (3) such information regarding each nominee as would
have been required to be included in a proxy statement filed pursuant to
Regulation 14A promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (or pursuant to any successor act or
regulation), including, without limitation, Rule 14a-11 thereunder, had proxies
been solicited with respect to such nominee by the management or board of
directors of the corporation; (4) a description of all arrangements or
understandings among the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; and (5) the written consent of
each nominee to serve as a director of the corporation if so elected; and (b) in
the event the shareholder proposes to bring any other business before the
meeting, (1) the name and residence address of the shareholder proposing to
bring business before the meeting and the beneficial owner, if any, on whose
behalf the proposal is made, (2) the class and number of shares of the
corporation which are owned beneficially and of record by such shareholder and
such beneficial owner, (3) a representation that the shareholder is a holder of
record of the voting stock of the corporation and intends to appear in person or
by proxy at the meeting to bring the business before the meeting; and (4) a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business of such shareholder and beneficial owner,
if any, on whose behalf the proposal is made.
6
<PAGE> 11
Notwithstanding anything in the second sentence of the preceding
paragraph to the contrary, in the event that the number of directors to be
elected to the board of directors of the corporation is increased and there is
no public announcement by the corporation naming all of the nominees for
director or specifying the size of the increased board of directors at least 100
calendar days prior to the first anniversary of the preceding year's annual
meeting of shareholders, a shareholder's notice required by this section 2.14
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the secretary at
the principal executive offices of the corporation not later than the close of
business on the 10th calendar day following the day on which such public
announcement is first made by the corporation.
Only such business shall be conducted at a special meeting of
shareholders as shall have been brought before the meeting pursuant to the
corporation's notice of meeting under section 2.06 of these by-laws. Nominations
of persons for election to the board of directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the board of
directors, or (b) provided that the board of directors has determined that
directors shall be elected at the meeting, by any shareholder of the corporation
who is a shareholder of record at the time of giving of notice provided for in
this section 2.14, who shall be entitled to vote at the meeting and who complies
with the notice procedures set forth in this section 2.14. In the event the
corporation calls a special meeting of shareholders for the purpose of electing
one or more directors to the board of directors, any shareholder may nominate a
person or persons (as the case may be), for election to such position(s) as
specified in the corporation's notice of meeting pursuant to such clause (b), if
the shareholder's notice required by the second preceding paragraph of this
section 2.14 shall be delivered to the secretary at the principal executive
offices of the corporation not earlier than the close of business on the 120th
calendar day prior to such special meeting and not later than the close of
business on the later of the 90th calendar day prior to such special meeting or
the 10th calendar day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
board of directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a shareholder's notice as described above.
Only such persons who are nominated in accordance with the
procedures set forth in this section 2.14 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of shareholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this section 2.14. Except as otherwise provided by law, the
articles of incorporation or these by-laws, the chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this section 2.14 and, if any
proposed nomination or business is not in compliance with this section 2.14, to
declare that such defective proposal or nomination shall be disregarded.
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For purposes of this section 2.14, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended.
Notwithstanding the foregoing provisions of this section 2.14, a
shareholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder with respect to
the matters set forth in this section 2.14. Nothing in this section 2.14 shall
be deemed to affect any rights of shareholders to request inclusion of proposals
in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
ARTICLE III
Board of Directors
Section 3.01. Powers and Duties. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, a board of directors,
except as may be otherwise provided in the Florida Business Corporation Act or
the articles of incorporation.
A director shall perform his duties as a director, including
duties as a member of any committee of the board upon which the director may
serve, in good faith, in a manner the director reasonably believes to be in the
best interests of the corporation, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances. In performing
his duties, a director shall be entitled to rely on information, opinions,
reports or statements, including financial statements and other financial data,
in each case prepared or presented by:
(1) one or more officers or employees of the corporation
whom the director reasonably believes to be reliable and competent in the
matters presented,
(2) counsel, public accountants or other persons as to
matters which the director reasonably believes to be within such person's
professional or expert competence, or
(3) a committee of the board upon which the director does
not serve, duly designated in accordance with provisions of the articles of
incorporation or these bylaws, as to matters within its designated authority,
which committee the director reasonably believes to merit confidence.
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A director shall not be considered to be acting in good faith if
the director has knowledge concerning the matter in question that would cause
such reliance described in the preceding subsection to be unwarranted.
A person who performs his duties in compliance with this section
shall not be liable for any action taken as a director or any failure to take
any action.
A director of the corporation who is present at a meeting of the
board of directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken, unless the director votes against
such action or abstains from voting in respect thereto.
Section 3.02. Qualification and Election. Unless otherwise
provided in the articles of incorporation, directors need not be residents of
Florida or shareholders of the corporation. Except in the case of vacancies,
directors shall be elected by the shareholders. If the board of directors is
classified with respect to the power to elect directors or with respect to the
terms of directors and if, due to a vacancy or vacancies, or otherwise,
directors of more than one class are to be elected, each class of directors to
be elected at the meeting shall be nominated and elected separately. The
candidates receiving the greatest number of votes, up to the number of directors
to be elected, shall be elected directors.
Section 3.03. Number and Term of Office. The board of directors
shall consist of the number of directors serving at the time of adoption of this
Section 3.03, or such other number as may thereafter be from time to time (i) be
determined by the board of directors or (ii) be set forth in a notice of a
meeting of shareholders called for the election of the board of directors.
Notwithstanding the foregoing, no decrease shall have the effect of shortening
the term of any incumbent director. Unless the board of directors is classified
with respect to the terms of directors, each director shall serve until the next
annual meeting of the shareholders and until his successor shall have been
elected and qualified or until his earlier resignation, removal from office or
death. If the board of directors is classified with respect to the terms of the
directors, each director shall serve until the annual meeting two years
thereafter if there are two classes of directors, or three years thereafter if
there are three classes of directors, and in either case until his successor
shall have been elected and qualified or until his earlier resignation, removal
from office or death.
Section 3.04. Organization. At every meeting of the board of
directors, the chairman of the board, if there be one, or in the absence of the
chairman of the board, the chief executive officer of the corporation or a
chairman chosen by a majority of the directors present, shall preside, and the
secretary or any person appointed by the chairman of the meeting shall act as
secretary.
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Section 3.05. Place of Meetings. Meetings of the board of
directors of the corporation, regular or special, may be held either within or
without the State of Florida.
Section 3.06. Annual Meetings. The board of directors shall hold
an annual meeting each year immediately following the annual meeting of the
shareholders at the place where such meeting of the shareholders was held for
the purpose of election of officers and consideration of any other business that
may be properly brought before the meeting. Notice of such annual meetings need
not be given to either old or new members of the board of directors.
Section 3.07. Regular Meetings. If the board of directors
determines to hold regular meetings, the board of directors may, at the annual
meeting of the board of directors, fix by resolution the date, time and place of
other regular meetings of the board. Notice of such regular meetings need not be
given to any member of the board of directors, unless the same is held at other
than the date, time and place of such meeting as fixed in accordance with this
Section 3.07, in which event notice shall be given in the same manner as is
provided in Section 3.08 with respect to special meetings of the board of
directors. In addition, announcement of a changed date, time or place at a
meeting of the board of directors shall be deemed adequate notice to the
directors present at such meeting.
Section 3.08. Special Meetings. Special meetings of the board of
directors may be called by a majority of the board of directors or the chairman
of the board. Notice of any special meeting of directors shall be given to each
director at his business or residence in writing by first class or overnight
mail or courier service, telegram or facsimile transmission, orally by telephone
or by hand delivery. If mailed by first class mail, such notice shall be deemed
adequately delivered when deposited in the United States mail so addressed, with
postage prepaid, at least five days before such meeting. If by telegram,
overnight mail or courier service, such notice shall be deemed adequately
delivered when the telegram is delivered to the telegraph company or the notice
is delivered to the overnight mail or courier service company at any time during
a day that is at least two days prior to the date of such meeting. If by
facsimile transmission, such notice shall be deemed adequately delivered when
the notice is transmitted at least 24 hours prior to the time set for the
meeting. If by telephone or by hand delivery, the notice shall be given at least
24 hours prior to the time set for the meeting.
Section 3.09. Action by Written Consent Without a Meeting. Any
action of the board of directors or of any committee thereof, which is required
or permitted to be taken at a regular or special meeting, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all of the members of the board of directors or of the committee, as the case
may be, is filed in the minutes of the proceedings of the board of directors or
committee.
Section 3.10. Conference Telephone Meetings. One or more members
of the board of directors may participate in meetings of the board or a
committee of the board by means
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of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
Section 3.11. Quorum. A majority of the directors in office shall
be present at each meeting in order to constitute a quorum for the transaction
of business. An interested director may be counted in determining the presence
of a quorum at a meeting of the board of directors which authorizes, approves or
ratifies a contract or transaction in which such director has an interest.
Section 3.12. Voting. Except as otherwise specified in the
articles of incorporation or these bylaws or provided by statute, the acts of a
majority of the directors present at a meeting at which a quorum is present
shall be the acts of the board of directors.
Section 3.13. Adjournment. A majority of the directors present,
regardless of whether or not a quorum exists, may adjourn any meeting of the
board of directors to another time and place, and no notice of any adjourned
meeting need be given, other than by announcement at the meeting.
Section 3.14. Compensation. The board of directors shall have the
authority to fix the compensation of directors for their attendance at meetings
of the board of directors or committees thereof, or otherwise, and such
compensation may include expenses, if any, associated with attendance at such
meetings.
Section 3.15. Resignations. Any director of the corporation may
resign at any time by giving written notice to the chief executive officer or
the secretary of the corporation. Such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3.16. Vacancies. Any vacancy occurring in the board of
directors, including any vacancy created by reason of an increase in the number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors, or by the shareholders in the manner provided in the
Florida Business Corporation Act. A director elected to fill a vacancy shall
hold office only until the next election of directors by the shareholders.
Section 3.17. Removal. The shareholders may remove one or more
directors from office, with or without cause (unless the articles of
incorporation provide that directors may be removed only for cause), by a vote
or written consent of the holders of a majority of the shares then entitled to
vote. In case the board of directors or any one or more directors is so removed,
new directors may be elected at the same meeting or by the same written consent.
If the corporation has cumulative voting and if less than the entire board is to
be removed, no
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individual director may be removed if the votes cast against the resolution for
his removal would be sufficient to elect him if then cumulatively voted at an
election of the entire board or a class of which he is part.
Section 3.18. Executive and Other Committees. The board of
directors, by resolution adopted by a majority of the entire board, may
designate from among its members an executive committee and one or more other
committees. The board may designate as alternate members of any committee, one
or more directors who may replace any absent or disqualified member at any
meeting of the committee.
The executive committee or other committee shall have and exercise
all of the authority of the board to the extent provided in the resolution
designating the committee, except that no such committee of the board shall have
the authority of the board to:
(1) approve or recommend to shareholders actions or
proposals required by law to be approved by shareholders;
(2) fill vacancies on the board of directors or any
committee thereof;
(3) amend or repeal these bylaws;
(4) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board of directors; or
(5) authorize or approve the issuance or sale of or contract
for the sale of shares or determine the designation and relative rights,
preferences and limitations of a voting group unless within limits specifically
prescribed by the board of directors.
A majority of the directors in office designated to a committee,
or directors designated to replace them as provided in this section, shall be
present at each meeting to constitute a quorum for the transaction of business,
and the acts of a majority of the directors in office designated to a committee
or their replacements shall be the acts of the committee.
Each committee shall keep regular minutes of its proceedings and
report such proceedings periodically to the board of directors.
Sections 3.05, 3.08, 3.09, and 3.10 and the second sentence of
section 3.11 shall be applicable to committees of the board of directors.
The chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that any nomination made at the meeting was not made
in accordance with the procedures of this section and, in such event, the
nomination shall be disregarded.
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ARTICLE IV
Notice and Waiver of Notice
Section 4.01. Notice. Whenever written notice is required to be
given to any director under the provisions of the articles of incorporation,
these bylaws or the Florida Business Corporation Act, it shall be given to such
director by personal delivery, facsimile transmission, delivery to an overnight
courier service or representative, deposit in the United States first-class
mail, or by certified or registered mail, addressed to the address of such
person (or, if applicable, such director's facsimile number) appearing on the
books of the corporation, or supplied by such person to the corporation for the
purpose of notice. A notice of a meeting shall specify the place, day and hour
of the meeting. Notices to directors shall be deemed adequately delivered as
provided in section 3.08 hereof. Notices to shareholders shall be given as
provided in Section 2.06 hereof.
Section 4.02. Waiver of Notice. Whenever any notice is required to
be given under the Florida Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Except in the case of a special meeting of shareholders, neither
the business to be transacted at, nor the purpose of, the meeting need be
specified in the waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any
meeting, shall constitute a waiver of notice of such meeting in the manner
provided in the Florida Business Corporation Act unless: (a) in the case of a
shareholders meeting, (i) the shareholder objects at the beginning of the
meeting to holding the meeting or transacting business at the meeting or (ii)
with respect to a matter that is not within the purpose or purposes described in
the meeting notice, the shareholder objects when the matter is presented and (b)
in the case of a directors' or committee meeting, the director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 5.01. Number and Qualification. The officers of the
corporation shall consist of such officers and agents as may be appointed by the
board of directors. One person may hold more than one office. Officers may but
need not be directors or shareholders of the corporation. The board of directors
may elect from among the members of the board a chairman of the board who, if
elected, shall be an officer of the corporation. A duly appointed officer may
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appoint one or more officers or assistant officers to the extent authorized by
the board of directors.
Section 5.02. Election and Term of Office. Except for such
officers as may be elected pursuant to Section 5.03, the officers of the
corporation shall be appointed to hold office until the next annual
organizational meeting of directors and until a successor shall have been duly
elected and qualified, or until his death, resignation or removal.
Section 5.03. Subordinate Officers, Committees and Agents. The
board of directors may from time to time elect such officers and appoint such
committees, employees or other agents as the board deems the business of the
corporation may require, to hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the board of
directors may delegate.
Section 5.04. The Chairman of the Board. The chairman of the
board, if elected, shall preside at all meetings of the shareholders and of the
board of directors, and shall, at each annual meeting of shareholders, present a
report with respect to the condition and business of the Company. He shall have
the authority to sign on behalf of the corporation, all reports, filings and
other documents with such government agencies as are required by applicable law
and shall perform such other duties as may from time to time be requested of him
by the board of directors. The chairman of the board shall assume the duties of
the chief executive officer when the chief executive officer is absent or
otherwise unable to discharge his responsibilities. To be eligible to serve, the
chairman of the board must be a director of the corporation.
Section 5.05. The Chief Executive Officer. The chief executive
officer shall be the chief executive officer of the corporation and shall have
general powers of supervision, direction and control over the business and
operations of the corporation, subject, however, to the authority of the board
of directors. He shall, at each annual meeting of shareholders, present a report
with respect to the condition and business of the Company. He shall have the
authority to supervise preparation of and sign on behalf of the corporation, all
reports, filings and other documents with such government agencies as are
required by applicable law. He shall sign, execute, and acknowledge, in the name
of the corporation, deeds, mortgages, bonds, contracts or other instruments
except in cases where the signing and execution thereof shall be expressly
delegated by the board of directors, or by these bylaws, to some other officer
or agent of the corporation; and, in general, shall perform all duties incident
to the office of chief executive officer and such other duties as from time to
time may be assigned to him by the board of directors. If the board of directors
has elected a chairman of the board, the chief executive officer shall assume
the duties of the chairman of the board when the chairman of the board is absent
or unable to discharge his responsibilities.
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Section 5.06. The President. The president, if a person other than
the chief executive officer, shall perform the duties of the chief executive
officer in the absence of such officer and such other duties as may from time to
time be assigned to the president by the Board of Directors or the chief
executive officer.
Section 5.07. The Chief Financial Officer. The Chief Financial
Officer shall be the principal financial officer of the corporation and, unless
another officer is so designated, principal accounting officer of the
corporation; whenever required by the Board of Directors, he shall render a
statement of the financial condition of the corporation; shall keep and
maintain, or cause to be kept and maintained, adequate and correct accounts of
the properties and business transactions of the corporation, including, but not
limited to, accounts of its assets, liabilities, receipts, disbursement, gains,
losses, capital surplus and shares; shall be responsible for assuming adherence
to such financial policies as are promulgated by the board of directors; and, in
general, shall discharge such other duties as may from time to time be assigned
to him by the board of directors or the president. The books of account shall be
open at all reasonable times to inspection by any director.
Section 5.08. The Vice Presidents. The vice presidents shall
perform duties as may from time to time be assigned to them by the board of
directors or the president.
Section 5.09. The Secretary. The secretary shall attend all
meetings of the board of directors and committees thereof and shall record the
time and place of holding of such meeting, whether regular or special, and if
special, how authorized, the notice given, the names of those present at
directors' meetings or the number of shares present or represented at share
holders' meetings in books to be kept for that purpose; shall see that notices
are given and records and reports properly kept and filed by the corporation as
required by law; shall, unless otherwise designated by the board of directors,
be the custodian of the seal of the corporation and see that it is affixed to
all documents to be executed on behalf of the corporation under its seal; and,
in general, shall perform all duties incident to the office of secretary, and
such other duties as may from time to time be assigned to him by the board of
directors or the president.
Section 5.010. The Treasurer. The treasurer shall have or provide
for the custody of the funds or other property of the corporation and shall keep
a separate book account of the same; shall collect and receive or provide for
the collection and receipt of moneys earned by or in any manner due to or
received by the corporation; shall deposit all funds in his custody as treasurer
in such banks or other places of deposit as the board of directors may from time
to time designate; shall, whenever so required by the board of directors, render
an accounting showing his transactions as treasurer; and, in general, shall
discharge such other duties as may from time to time be assigned to him by the
board of directors, the president or the chief financial officer. If the board
of directors fails to elect a chief financial officer, then the treasurer shall
perform the duties of the chief financial officer.
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Section 5.11. Salaries and Compensation. The salaries, if any, of
the officers elected by the board of directors shall be fixed from time to time
by the board of directors or by such officer as may be designated by resolution
of the board. The salaries or other compensation of any officers, employees and
agents elected, appointed or retained by an officer or committee to which the
board of directors has delegated such a power shall be fixed from time to time
by such officer or committee. No officer shall be prevented from receiving such
salary or other compensation by reason of the fact that he is also a director of
the corporation.
Section 5.12. Resignations. Any officer or agent may resign at any
time by giving written notice of resignation to the board of directors or to the
president or the secretary of the corporation. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5.13. Removal. Any officer, committee member, employee or
agent of the corporation may be removed, either for or without cause, by the
board of directors or other authority which elected or appointed such officer,
committee member or other agent.
Section 5.14. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the board of directors or by the officer or committee to which the power to fill
such office has been delegated, as the case may be.
Section 5.15. Bond. The chairman of the board, president, chief
financial officer and treasurer shall give such bond, if any, for the faithful
performance of the duties of such office as shall be required by the board of
directors.
ARTICLE VI
Certificates of Stock, Transfer
Section 6.01. Share Certificates, Issuance. Every shareholder
shall be entitled to have a certificate representing all shares to which he is
entitled; and such certificate shall be signed (either manually or in facsimile)
by the chairman of the board, if any, or by the president or a vice president
and by the secretary or any assistant secretary of the corporation and may be
sealed with the corporate seal or a facsimile thereof. In the event any officer
who has signed, or whose facsimile signature has been placed upon any share
certificate shall have ceased to be such officer because of death, resignation
or otherwise, before the certificate is issued, it may be issued with the same
effect as if the officer had not ceased to be such at the date of its issue.
Certificates representing shares of the corporation shall otherwise be in such
form as provided by statute and approved by the board of directors. Every
certificate exchanged or returned to the corporation shall be marked "CANCELED."
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Section 6.02. Transfer. Transfers of shares shall be made on the
books of the corporation upon surrender of the certificates therefor, endorsed
by the person named in the certificate or by an attorney lawfully constituted in
writing.
Section 6.03. Registered Shareholders. Except as otherwise
expressly set forth in these bylaws, the corporation shall be entitled to
recognize a person registered on its books in whose name any shares of the
corporation are registered as the absolute owner thereof with the exclusive
rights to receive dividends, and to vote such shares as owner. Except as
otherwise provided by law, the corporation shall not be bound to recognize any
equitable or other claim regardless of whether the corporation shall have
express or other notice thereof.
Section 6.04. Lost, Destroyed or Mutilated Certificates. The
holder of any shares of the corporation shall notify the corporation of any
loss, destruction or mutilation of the certificates therefor, and the board of
directors may, in its discretion, cause new certificates to be issued to him,
upon satisfactory proof of such loss, destruction, or mutilation and, if the
board of directors shall so determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.
ARTICLE VII
Indemnification of Directors, Officers,
Employees and Agents
Section 7.01. Directors, Officers, Employees and Agents. The
corporation shall indemnify any officer or director who was or is a party or is
threatened to be made a party (which shall include the giving of testimony or
similar involvement) to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by, or in the right of the corporation) by reason of the fact that he
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of any
other corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, including any appeal thereof, if he acted in good
faith in a manner he reasonably believed to be in, or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not create, of itself, a presumption that the person did not act in good faith
or in a manner which he reasonably believed to be in, or not opposed to, the
best interest of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
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The corporation shall indemnify any officer or director who was or
is a party, or is threatened to be made a party (which shall include the giving
of testimony or similar involvement), to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement (to the extent permitted by
law), including any appeal thereof. Such indemnification shall be authorized if
such person acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless, and only to the
extent that, the court in which such proceeding was brought, or any other court
of competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
The corporation may, by action of the board of directors and to
the extent provided in such action, indemnify employees and agents as though
they were officers and directors.
Section 7.02. Expenses. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
any defense of any claim, issue or matter therein, the corporation shall
indemnify him against expenses (including attorneys' fees) actually and reason
ably incurred by him in connection therewith.
Section 7.03. Determination of Standard of Conduct. Any
indemnification hereunder, unless pursuant to a determination by a court, shall
be made by the corporation as authorized upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth above. Such determination shall be made either (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such proceeding, (2) by majority vote of a committee duly designated
by the board of directors consisting of two or more directors not at the time
parties to the proceeding, (3) by a majority vote of the shareholders who were
not parties to such action, suit or proceedings, or (4) by independent legal
counsel selected in accordance with the provisions of the Florida Business
Corporation Act in a written opinion.
Section 7.04. Advance Expenses. To the extent permitted by
applicable law, expenses including attorney's fees incurred by an officer,
director, employee or agent of the corporation in defending any action, suit or
proceeding shall be paid, in the case of an officer or director, and may be
paid, in the case of an employee or agent, by the corporation in advance of
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the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized herein.
Section 7.05. Benefit. The indemnification provided by this
Article shall be in addition to the indemnification rights provided pursuant to
the Florida Business Corporation Act, and shall not be deemed exclusive of any
other rights to which person seeking indemnification may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office (provided that no indemnification may be made
if expressly prohibited by the Florida Business Corporation Act), and shall
continue as to a person who has ceased to be a director, officer, employee or
agent of the corporation and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 7.06. Insurance. The corporation shall be empowered to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against liability asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions contained
herein.
Section 7.07. No Rights of Subrogation. Indemnification herein
shall be a personal right, and the corporation shall have no liability under
this Article VII to any insurer or any person, corporation, partnership,
association, trust or other entity (other than the heirs, executors or
administrators of any person otherwise entitled to indemnification pursuant to
the provisions of this Article VII) by reason of subrogation, assignment or
succession by any other means to the claim of any person to indemnification
hereunder.
Section 7.08. Indemnification for Past Directors. Indemnification
as provided in this section shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
Section 7.09. Affiliates. For the purposes of this Article,
references to "the corporation" include any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, as well
as the resulting or surviving corporation, so that any person who is or was a
director, officer, employee or agent of a constituent corporation, or is or was
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as he would if he
had served the resulting or surviving corporation in the same capacity.
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Section 7.10. Reliance. Each person who shall act as an
authorized representative of the corporation shall be deemed to be doing so in
reliance upon such rights of indemnification as are provided in this Article.
Section 7.11. Fund for Payment of Expenses. The corporation may
create a fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise may secure in any manner its indemnification obligations,
whether arising hereunder, under the Articles, by agreement, vote of
shareholders or directors, or otherwise.
Section 7.12. Amendments. The provisions of this Article VII
relating to indemnification and to the advancement of expenses shall constitute
a contract between the corporation and each of its directors and officers which
may be modified as to any director or officer in a manner that is adverse to
such director or officer only with that person's consent or as specifically
provided in this section. Notwithstanding any other provision of these bylaws
relating to their amendment generally, any repeal or amendment of this Article
VII which is adverse to any director or officer shall apply to such director or
officer only on a prospective basis, and shall not limit the rights of a
director or officer to indemnification or to the advancement of expenses with
respect to any action or failure to act occurring prior to the time of such
repeal or amendment.
ARTICLE VIII
Miscellaneous
Section 8.01. Checks. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other person
or persons as the board of directors may designate from time to time.
Section 8.02. Dividends. The board of directors, at any regular or
special meeting thereof, subject to any restrictions contained in the articles
of incorporation, may declare and pay dividends upon the shares of the
corporation's stock in cash, property or the corporation's shares in accordance
with the Florida Business Corporation Act.
Section 8.03. Deposits. All funds of the corporation shall be
deposited from time to time to the credit of the corporation in such financial
institutions or other depositaries as the board of directors may approve or
designate.
Section 8.04. Fiscal Year. The fiscal year of the corporation
shall end on a Saturday near the 31st day of December as detailed in the retail
calendar prepared by the National Retail Federation, or as otherwise determined
by the board of directors.
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Section 8.05. Severability. The provisions of these bylaws shall
be separable each from any and all other provisions of these bylaws, and if any
such provision shall be adjudged to be invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provision hereof, or the powers
granted to this corporation by the articles of incorporation or bylaws.
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ARTICLE IX
Amendments
Section 9.01. Amendments to the Bylaws. Except as specifically set
forth elsewhere herein or in the articles of incorporation, the board of
directors may amend or repeal these bylaws. The shareholders entitled to vote
thereon may amend or repeal these bylaws even though the bylaws may also be
amended or repealed by the board of directors.
Adopted: April 16, 1999
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Exhibit 10.1
DAVID'S BRIDAL, INC.
STOCK OPTION AND RESTRICTED STOCK PLAN
(Formerly the David's Bridal, Inc. Stock Option Plan)
The purpose of the David's Bridal, Inc. Stock Option and Restricted
Stock Plan (which is an amendment and restatement of the David's Bridal, Inc.
Stock Option Plan) (the "Plan") is to provide (i) designated employees of
David's Bridal, Inc. (the "Company") and its subsidiaries, (ii) certain
consultants to the Company or its subsidiaries and (iii) non-employee members of
the Board of Directors of the Company (the "Board") with the opportunity to
receive grants of incentive stock options, nonqualified stock options and
restricted stock. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders. The Plan restatement shall be
effective as of the date on which the Company and its principal underwriters
execute the underwriting agreement for the initial public offering of the
Company's stock.
1. Administration
(a) The Plan shall be administered by a committee appointed by the
Board (the "Committee") consisting of two or more persons, all of whom may be
"outside directors" as defined under section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") and related Treasury regulations, and
"non-employee directors" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act"). Notwithstanding anything in the Plan
to the contrary, all actions of the Committee hereunder shall be subject to
ratification by the Board.
(b) Committee Authority. The Committee shall have the authority to (i)
determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability and (iv) deal
with any other matters arising under the Plan. All actions of the Committee
hereunder shall be subject to ratification by the Board.
<PAGE> 2
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals. All actions of the
Committee hereunder shall be subject to ratification by the Board.
2. Grants
Awards under the Plan may consist of grants of incentive stock options
as described in Section 5 ("Incentive Stock Options"), nonqualified stock
options as described in Section 5 ("Nonqualified Stock Options") (Incentive
Stock Options and Nonqualified Stock Options are collectively referred to as
"Options") and restricted stock as described in Section 6 ("Restricted Stock")
(hereinafter collectively referred to as "Grants"). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument or an amendment to the grant instrument (the "Grant Instrument"). The
Committee shall approve the form and provisions of each Grant Instrument.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, (i)
the aggregate number of shares of common stock of the Company ("Company Stock")
that may be issued or transferred under the Plan is 2,450,000 shares, (ii) the
maximum aggregate number of shares of Company Stock that shall be subject to
Grants made under the Plan to any individual during the 1999 calendar year shall
be 330,000 shares, and (iii) in subsequent years, the maximum aggregate number
of shares of Company Stock that shall be subject to grants made under the Plan
to any individual during any calendar year shall be 150,000 shares. The shares
may be authorized but unissued shares of Company Stock or reacquired shares of
Company Stock, including shares purchased by the Company on the open market for
purposes of the Plan. If and to the extent Options granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised, or if any shares of Restricted Stock are forfeited, the
shares subject to such Grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding
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Company Stock as a class without the Company's receipt of consideration, or if
the value of outstanding shares of Company Stock is substantially reduced as a
result of a spinoff or the Company's payment of an extraordinary dividend or
distribution, the maximum number of shares of Company Stock available for
Grants, the maximum number of shares of Company Stock for which any individual
participating in the Plan may receive Grants in any year, the number of shares
covered by outstanding Grants, the kind of shares issued under the Plan, and the
price per share of such Grants shall be appropriately adjusted by the Committee
to reflect any increase or decrease in the number of, or change in the kind or
value of, issued shares of Company Stock to preclude, to the extent practicable,
the enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive. Notwithstanding the foregoing, no adjustment shall be authorized
or made to an Incentive Stock Option pursuant to this Section to the extent that
such authority or adjustment would cause the Incentive Stock Option to fail to
comply with section 422 of the Code.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees"), including Employees who are officers or members of the Board, and
members of the Board who are not Employees ("Non-Employee Directors") shall be
eligible to participate in the Plan. Consultants who perform services for the
Company or any of its subsidiaries ("Key Advisors") shall be eligible to
participate in the Plan if the Key Advisors render bona fide services to the
Company or its subsidiaries, the services are not in connection with the offer
and sale of securities in a capital-raising transaction, and the Key Advisors do
not directly or indirectly promote or maintain a market for the Company's
securities.
(b) Selection of Grantees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees, Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive
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Stock Options and Nonqualified Stock Options, all in accordance with the terms
and conditions set forth herein. Incentive Stock Options may be granted only to
Employees. Nonqualified Stock Options may be granted to Employees, Non-Employee
Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be equal
to, greater than, or less than the Fair Market Value (as defined below) of a
share of Company Stock on the date the Option is granted; provided, however,
that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or
greater than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the Exercise
Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant.
(iii) If the Company Stock is not publicly traded or, if
publicly traded, is not subject to reported transactions or "bid" or "asked"
quotations as set forth below, the Fair Market Value per share shall be as
determined by the Committee. If the Company Stock is publicly traded, then the
Fair Market Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or the
Nasdaq National Market, the last reported sale price thereof on the relevant
date or, if there were no trades on that date, the latest preceding date upon
which a sale was reported, or (y) if the Company Stock is not principally traded
on such exchange or market, the mean between the last reported "bid" and "asked"
prices of Company Stock on the relevant date, as reported on Nasdaq or, if not
so reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines.
(c) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or
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member of the Board. In the event that a Grantee ceases to be employed by, or
provide service to, the Company for any reason other than Disability,
Retirement, death, or termination for Cause, any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days after
the date on which the Grantee ceases to be employed by, or provide service to,
the Company (or within such other longer or shorter period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Unless otherwise specified by the Committee, any
of the Grantee's Options that are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by, or provide service to, the Company
shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or
provide service to, the Company on account of a termination for Cause, any
Option held by the Grantee shall terminate as of the date the Grantee ceases to
be employed by, or provide service to, the Company.
(iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee is Disabled or on account of
Retirement, any Option which is otherwise exercisable by the Grantee shall
terminate unless exercised within six months after the date on which the Grantee
ceases to be employed by, or provide service to, the Company (or within such
other longer or shorter period of time as may be specified by the Committee),
but in any event no later than the date of expiration of the Option term. Unless
otherwise specified by the Committee, any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing
service to, the Company or within 90 days after the date on which the Grantee
ceases to be employed or provide service on account of a termination of
employment or service specified in Section 5(e)(i) above (or within such other
longer or shorter period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within six months after the date on which the Grantee ceases to be
employed by, or provide service to, the Company (or within such other longer or
shorter period of time as may be specified by the Committee), but in any event
no later than the date of expiration of the Option term. Unless otherwise
specified by the Committee, any of the Grantee's Options that are not otherwise
exercisable as of the date on which the Grantee ceases to be employed by, or
provide service to, the Company shall terminate as of such date.
(v) In addition, with respect to Options granted after the
effective date of the Plan restatement, if the Grantee breaches any
non-competition agreement in effect with the Company, all of the Grantee's
outstanding Options shall immediately terminate, and the Company may require
that the Grantee pay to the Company (in Company Stock or cash) an amount equal
to any Option gain arising from the exercise of Options during the period
described below. The forfeiture period is the period beginning on the date that
is 90 days before the
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Grantee's termination of employment or service with the Company and ending one
year after such termination. The Option gain is the amount by which the Fair
Market Value of the Company Stock on the date of the Committee's determination
(or the date of any earlier sale or other disposition of the Company Stock
covered by the Option, if greater) exceeds the Exercise Price of the Option.
(vi) For purposes of this Section 5(e) and Section 6:
(A) "Cause" shall mean (i) any act of fraud, intentional
misrepresentation, embezzlement or theft, (ii) conviction of a felony,
or (iii) unauthorized disclosure of trade secrets or confidential
information of the Company, as determined by the Committee. In the
event a Grantee's employment or service is terminated for Cause, in
addition to the immediate termination of all Options, the Grantee shall
automatically forfeit all shares underlying any exercised portion of an
Option for which the Company has not yet delivered the share
certificates, upon refund by the Company of the Exercise Price paid by
the Grantee for such shares.
(B) The term "Company" shall mean the Company and its parent
and subsidiary corporations.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of the Company's long-term disability plan
applicable to the Grantee, or if there is none, within the meaning of
section 22(e)(3) of the Code.
(D) "Employed by, or provide service to, the Company" shall
mean employment as an Employee or the provision of services to the
Company as a Key Advisor or member of the Board (so that, for purposes
of exercising Options and satisfying conditions with respect to
Restricted Stock, a Grantee shall not be considered to have terminated
employment or ceased to provide service until the Grantee ceases to be
an Employee, Key Advisor and member of the Board), unless the Grant
Instrument provides otherwise.
(E) The term "Retirement" shall mean the Grantee's retirement
from employment with the Company at or after age 65, or such other age
as the Committee may determine.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option by such method as the Committee shall approve from
the following methods: (i) in cash, (ii) by delivering shares of Company Stock
owned by the Grantee (including Company Stock acquired in connection with the
exercise of an Option, subject to such restrictions as the Committee deems
appropriate) and having a Fair Market Value on the date of exercise equal to the
Exercise Price or (iii) by such other method as the Committee may approve,
including payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Shares of Company
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Stock used to exercise an Option shall have been held by the Grantee for the
requisite period of time to avoid adverse accounting consequences to the Company
with respect to the Option. The Grantee shall pay the Exercise Price and the
amount of any withholding tax due (pursuant to Section 7) at the time of
exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary (within the meaning
of section 424(f) of the Code). If and to the extent that an Option designated
as an Incentive Stock Option fails so to qualify under the Code, the Option
shall remain outstanding according to its terms as a Nonqualified Stock Option.
6. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to an
Employee, Non-Employee Director or Key Advisor under a Grant of Restricted
Stock, upon such terms as the Committee deems appropriate. The following
provisions are applicable to Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, and subject to restrictions or no
restrictions, as the Committee may determine. The Committee may establish
conditions under which restrictions on shares of Restricted Stock shall lapse
over a period of time or according to such other criteria as the Committee deems
appropriate. The period of time during which the Restricted Stock will remain
subject to restrictions will be designated in the Grant Instrument as the
"Restriction Period."
(b) Number of Shares. The Committee shall determine the number of
shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(e))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified conditions are not met, the Restricted Stock Grant shall
terminate as to all shares covered by the Grant as to which the restrictions
have not lapsed, and those shares of Company Stock must be immediately returned
to the Company. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of
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Restricted Stock except to a Successor Grantee under Section 8(a). Each
certificate for a share of Restricted Stock shall contain a legend giving
appropriate notice of the restrictions in the Grant. The Grantee shall be
entitled to have the legend removed from the stock certificate covering the
shares subject to restrictions when all restrictions on such shares have lapsed.
The Committee may determine that the Company will not issue certificates for
shares of Restricted Stock until all restrictions on such shares have lapsed, or
that the Company will retain possession of certificates for shares of Restricted
Stock until all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted Stock
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Stock Grants, that the restrictions shall
lapse without regard to any Restriction Period.
7. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be
made subject to any applicable federal (including FICA), state and local tax
withholding requirements. The Company shall have the right to deduct from wages
paid to the Grantee any federal, state or local taxes required by law to be
withheld with respect to Grants, or the Company may require the Grantee or other
person receiving such shares to pay to the Company the amount of any such taxes
that the Company is required to withhold.
(b) Election to Withhold Shares. Subject to Committee consent,
a Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option or Restricted Stock by having shares withheld up to an
amount that does not exceed the Grantee's minimum applicable withholding tax
rate for federal (including FICA), state and local tax liabilities. The election
must be in a form and manner prescribed by the Committee and shall be subject to
the prior approval of the Committee.
8. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
Grantee or his or her authorized representative may exercise rights under a
Grant. A Grantee may not transfer those rights except by will or by the laws of
descent and distribution or, with respect to Nonqualified Stock Options, if
permitted in any specific case by the Committee, pursuant to a domestic
relations order. When a Grantee dies, the representative or other person
entitled to succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights. A
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Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable laws
of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may permit a Grantee to transfer Nonqualified Stock
Options to family members of the Grantee or to one or more trusts or other
entities for the benefit of or owned by such family members; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms as were
applicable to the Option before the transfer.
9. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) After the effective date of the Plan, any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 25% of the
voting power of the then outstanding securities of the Company;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than 50% of all votes to which all
shareholders of the surviving corporation would be entitled in the election of
directors and where, immediately after the merger or consolidation, persons who
were directors of the Company immediately before the merger or consolidation do
not constitute a majority of the board of directors of the surviving
corporation, (ii) a sale or other disposition of all or substantially all of the
assets of the Company, or (iii) a liquidation or dissolution of the Company;
(c) Any person has commenced a tender offer or exchange offer for 25%
or more of the voting power of the then outstanding shares of the Company; or
(d) After the effective date of this Plan, directors are elected such
that a majority of the members of the Board shall have been members of the Board
for less than two years, unless the election or nomination for election of each
new director who was not a director at the beginning of such two-year period was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period.
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10. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, except as
provided in subsection (b) below, unless the Committee determines otherwise, (i)
the Company shall provide each Grantee with outstanding Grants written notice of
such Change of Control, (ii) all outstanding Options shall automatically
accelerate and become fully exercisable and (iii) the restrictions and
conditions on all outstanding Restricted Stock shall immediately lapse.
(b) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
by, the surviving corporation and such Options shall not become fully
exercisable upon the Change of Control. Any replacement options shall entitle
the Grantee to receive the same amount and type of securities as the Grantee
would have received as a result of the Change of Control had the Grantee
exercised the Options immediately prior to the Change of Control.
(c) Surrender of Options. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
require that Grantees surrender their outstanding Options in exchange for a
payment by the Company, in cash or Company Stock as determined by the Committee,
in an amount equal to the amount by which the then Fair Market Value of the
shares of Company Stock subject to the Grantee's unexercised Options exceeds the
Exercise Price of the Options. Such surrender shall take place as of the date of
the Change of Control or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the right to
take any actions described in the Plan (including without limitation actions
described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
11. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required by Section 162(m) of the Code, Section 422
of the Code or applicable securities exchange requirements.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless
terminated earlier by the Board or extended by the Board with the approval of
the shareholders.
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(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 18(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Grant.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
12. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant.
13. Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be granted a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
14. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
15. Requirements for Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other
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<PAGE> 12
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend or legends be placed
thereon.
16. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
17. Effective Date of the Plan
The Plan was originally effective as of October 1, 1995. This amendment
and restatement of the Plan shall be effective as of the date on which the
Company and its principal underwriters execute the underwriting agreement for
the initial public offering of Company Stock, which will result in the initial
registration of the Company Stock under section 12(g) of the Exchange Act.
18. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant made by such
corporation. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In addition,
it is the intent of the Company that the Plan and applicable Grants under the
Plan comply with the applicable provisions of sections 162(m) and 422 of the
Code. To the extent that any legal requirement of section 16 of the Exchange Act
or section 162(m) or 422 of the Code as set forth in the Plan ceases to be
required under section 16 of the Exchange Act or section 162(m) or 422 of the
Code, that Plan provision shall cease to apply. The Committee may revoke any
Grant if it is contrary to law or modify a Grant to bring it into compliance
with any valid and mandatory government regulation. The
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<PAGE> 13
Committee may also adopt rules regarding the withholding of taxes on payments to
Grantees. The Committee may, in its sole discretion, agree to limit its
authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the State of
Florida, without giving effect to the conflict of laws provisions thereof.
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<PAGE> 1
Exhibit 10.6
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") made as of the day of March, 1999
between David's Bridal, Inc., a Florida corporation (the "Company") and Steven
H. Erlbaum, ("Consultant").
WHEREAS, the Company desires to obtain the services of Consultant for
certain purposes upon the terms and conditions hereinafter set forth; and
WHEREAS, Consultant is willing to enter into this Agreement and provide
certain services upon the terms and conditions hereinafter set forth.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties hereto, intending to be legally bound, agree as follows:
1. Services To Be Provided. The Company hereby retains Consultant, and
Consultant hereby accepts such retainer and agrees to perform Consultant's
duties and responsibilities hereunder, in accordance with the terms and
conditions hereinafter set forth. During the Term, Consultant shall serve as the
Chairman of the Board of Directors, presiding over all meetings of the Board of
Directors of the Company, and shall consult with the Chief Executive Officer of
the Company on issues Consultant or the Board of Directors consider pertinent.
2. Term. The term of this Agreement (the "Term") shall commence on the date of
the initial public offering of common stock of the Company (the "IPO") and shall
continue from that date for three (3) years. The Term shall be subject to one
(1) year extensions at the mutual agreement of Consultant and the Board of
Directors. The one year extensions must be exercised within forty-five (45) days
of the expiration of each contract year.
3. Compensation, Benefits and Expense Reimbursement.
(a) Compensation. As compensation for Consultant's performance of the
services to be provided hereunder, the Company shall pay Consultant $425,000 per
year during the first two years of the Term and $200,000 per year during the
third year of the Term, such amounts to be payable monthly.
(b) Bonus. During the first year of the Term, Consultant shall be eligible
to receive a bonus based on the earnings of the Company during that year as
compared to the budgeted
<PAGE> 2
earnings, to be determined by the Compensation Committee of the Board of
Directors. The manner of determining the bonus, if any, during the second two
years shall be established annually by the Compensation Committee of the Board
of Directors.
(c) Benefits. Consultant shall continue to participate in and receive
medical benefits provided by the Company that are currently enjoyed by
Consultant, either pursuant to the Company's medical policy or by reimbursing
Consultant for the cost of obtaining an equivalent individual medical policy,
and shall participate in any other benefits in which non-employee officers or
directors are eligible to participate.
(d) Expense Reimbursement. The Company shall reimburse Consultant for all
ordinary and necessary business expenses incurred by him in the performance of
his duties hereunder, which shall be accounted for in accordance with the
reimbursement policies of the Company.
(e) Furnishings. All furnishings, including artwork, currently contained
in Consultant's office shall be the property of Consultant.
(f) Office Support. Consultant shall provide services to the Company
hereunder at the existing offices of the Company. The secretarial support
currently provided to Consultant by the Company shall continue during the Term.
In the event of relocation by the Company or by Consultant during the Term, (i)
the Company shall pay any relocation and/or rental expenses incurred by
Consultant and (ii) Consultant's current secretary shall continue to be employed
by the Company on behalf of Consultant during the Term and shall continue to
receive both salary and benefits, including the vesting of options, under the
existing employment agreement between such secretary and the Company.
4. Independent Contractor Status. For purposes of this Agreement and all
services to be provided hereunder, Consultant shall not be considered a partner,
co-venturer, agent, employee, or representative of the Company, but shall remain
in all respects an independent contractor.
5. Confidentiality and Non-compete.
(a) Consultant recognizes and acknowledges that by reason of his service
to the Company, he has had and will continue to have (both during the Term and
at any time thereafter during which he may be retained by the Company), access
to confidential information of the Company and its affiliates, including,
without limitation, information and knowledge pertaining to products and
services offered, inventions, innovations, designs, ideas, plans, trade secrets,
proprietary information, manufacturing, packaging, advertising, distribution and
sales methods and systems, sales and profit figures, customer and client lists,
and relationships between the Company and its affiliates and dealers,
distributors, wholesalers, customers, clients, suppliers and others who have
business dealings with the Company and its affiliates ("Confidential
Information"). Consultant acknowledges that such Confidential Information is a
valuable and
2
<PAGE> 3
unique asset and covenants that he will not, either during or at any time after
the Term, disclose any such Confidential Information to any person for any
reason whatsoever (except as his duties described herein my require) without the
prior written authorization of the Board, unless such information is in the
public domain through no fault of Consultant or except as may be required by
law.
(b) Non-Competition. During the Term and for the twenty-four (24) month
period following the termination of services by Consultant for the Company or
any of its affiliates (whether or not such service is pursuant to this
Agreement), Consultant will not, unless acting pursuant hereto or with the prior
written consent of the Board, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit his name to be used in connection with, any business or enterprise
engaged within any portion of the United States (whether or not such business is
physically located within the United States) or any foreign market in which the
Company does business (i) in the retail sale and marketing of bridal gowns and
bridal related apparel for the female members of the bridal party, or (ii) any
of the same or similar type of products which the Company was designing,
developing, manufacturing, distributing or selling at the date of termination of
Consultant's service to the Company or at any time within two years prior
thereto (together, "Prohibited Products"), except that Consultant may become
employed as an employee or officer of a retailer where Prohibited Products are
not a material percentage of sales, so long as supervising the sale of
Prohibited Products is not a material portion of his duties.
(c) Non-Solicit. During the Term and for the twenty-four (24) month period
following the termination of services by Consultant for the Company Consultant
will not, either directly or indirectly, solicit the employment or hire any
person who was employed by the Company or any of its affiliates on a full or
part-time basis at any time during the course of Consultant's employment, except
that Consultant may hire a person who has ceased being employed by the Company
for at least 90 days and whose separation from employment with the Company did
not directly or indirectly result from solicitation by Consultant or any
representative of Consultant.
(d) Geographic Scope. It is recognized by Consultant that the business of
the Company and Consultant in connection therewith is or will be involved in
activity throughout the United States, and that more limited geographical
limitations on this non-competition covenant (and the non-solicitation covenant
set forth in this Section 5) are therefore not appropriate. In the event that
any of the provisions of this Section 5 should ever be adjudicated to exceed the
time, geographic, product or service, or other limitations permitted by
applicable law in any Jurisdiction, then such provisions shall be deemed
reformed in such jurisdiction to the maximum time, geographic, product or
service, or other limitations permitted by applicable law.
3
<PAGE> 4
(e) Equitable Relief. Consultant acknowledges that the restrictions
contained in this Section 5 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates, that the Company would
not have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in irreparable
injury to the Company. Consultant agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of this Section 5, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled.
6. Arbitration Clause. Any controversy between the parties to this Agreement
involving the construction or applications of the terms of this Agreement,
except for enforcement of the terms and provisions of Section 5 of this
Agreement, shall be submitted to binding arbitration, at the request of either
party hereto, in accordance with the rules of the American Arbitration
Association, with the situs of situs of such arbitration to be in the county and
state of the Company's offices in the Commonwealth of Pennsylvania.
7. Notices. Any notices to Consultant or company shall be deemed given if
delivered personally or mailed by certified mail to the address set forth below.
To Consultant: Mr. Steven H. Erlbaum
44 West Lancaster Avenue
Ardmore, PA 19003
To the Company: David's Bridal, Inc.
44 West Lancaster Avenue
Suite 250
Ardmore, PA 19003
Attn: Robert Huth,
President and CEO
With a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attn: Stephen M. Goodman, Esq.
Steven M. Cohen, Esq.
8. Applicable Law. The interpretation, validity and effect of this Agreement
shall be governed in accordance with the laws of the Commonwealth of
Pennsylvania.
9. Entire Agreement. This Agreement supersedes all prior agreements and sets
forth the entire understanding of the parties with respect to the terms of
Consultant's relationship with the
4
<PAGE> 5
Company, except that Consultant shall further be bound by the terms of all
manuals, hand books and guidelines generally applicable to consultants,
officers, or directors of the Company.
IN WITNESS WHEREOF, the parties hereof have executed this Consulting
Agreement as of the day and year first above written.
DAVID'S BRIDAL, INC.
BY: /s/ Robert Huth
------------------------------
Robert Huth, President and CEO
STEVEN H. ERLBAUM
/s/ Steven H. Erlbaum
---------------------------------
5
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") made as of the 30th day of March,
1999 between David's Bridal, Inc., a Florida corporation (the "Company") and
Robert Huth, ("Executive").
WHEREAS, the Company desires to employ the Executive upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement with
respect to his employment and services upon the terms and conditions hereinafter
set forth.
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties hereto, intending to be legally bound, agree as follows:
1. Employment. The Company hereby employs Executive, and Executive hereby
accepts such employment and agrees to perform Executive's duties and
responsibilities hereunder, in accordance with the terms and conditions
hereinafter set forth.
2. Term. The term of this Agreement (the "Employment Term") shall commence
on the date of the initial public offering of common stock of the Company, if
such offering is completed prior to December 31, 1999 (the "IPO") and shall
continue from that date for three (3) years. The Employment Term shall be
subject to one (1) year extensions at the mutual agreement of the Executive and
the Board of Directors. The one year extensions must be exercised within
forty-five (45) days of the expiration of each contract year.
3. Position and Duties. During the Employment Term, Executive shall serve
as the President and Chief Executive Officer of the Company, reporting to the
Board of Directors of the Company (the "Board"). Executive shall perform all
duties and accept all responsibility for, the general management and operation
of the Company and its subsidiaries, or as may be assigned to Executive by the
Board, and Executive shall cooperate fully with the Board. Executive shall at
all times be subject to the direction and control of The Board. Executive shall
use his best efforts in the business of the Company, and shall devote his full
time, attention and energy to the business and affairs of the Company and its
subsidiaries, provided, however, that the foregoing shall not be construed as
preventing Executive from making personal passive investments, participating in
charitable or non-profit pursuits or participating on the board of directors of
Stage Stores, Inc. or boards of directors of other companies approved by the
Board, as long as such activities will not conflict or interfere with
Executive's duties and responsibilities hereunder. The Executive shall be a
member of the Board on the first day of the Employment Term, and the Board shall
propose the Executive for re-election to the Board throughout the Employment
Term.
4. Compensation, Benefits and Expense Reimbursement.
(a) Salary. The Company shall pay Executive an annual salary of
$500,000 ("Annual Salary") payable in the manner consistent with the payroll
practices for the executive officers of the Company. The Annual Salary shall be
subject to review and increase by the Compensation Committee
<PAGE> 2
of the Board, in its sole discretion, with such review to be conducted at least
annually at such time as it reviews the salaries of the Company's officer.
(b) Bonus. Executive will participate in a bonus plan to be adopted
by the Compensation Committee of the Board with a target award of 55% of
Executive's base salary in each calendar year based upon achievement of
performance goals established annually by the Compensation Committee.
(c) Fringe Benefits. The Company shall provide to Executive such
fringe benefits as are accorded to other executive officers of the Company,
including use of an automobile of the same quality as currently provided to
Executive.
(d) Expense Reimbursement. The Company shall reimburse Executive for
all ordinary and necessary business expenses incurred by him in the performance
of his duties hereunder, which shall be accounted for in accordance with the
reimbursement policies of the Company.
5. Stock Options. The Company agrees to grant to Executive options to
purchase one (1%) percent of the Company's common stock (the "Stock Options")
outstanding immediately following the IPO pursuant to the Stock Option Plan of
the Company (the "Plan"). The Stock Options shall be granted as options under
the terms of the Plan and shall be granted on the day of the IPO at the IPO
price before giving effect to underwriter's discounts. Options shall vest in
three (3) years in accordance with the Plan and, in the event of termination due
to disability or without Cause pursuant to Section 7, Executive shall continue
to be considered employed by the Company for purposes of Stock Option vesting
and exercisability period so long as he continues to receive Annual Salary
pursuant to Section 7.
6. Confidentiality and Non-compete.
(a) Executive recognizes and acknowledges that by reason of his
employment by and service to the Company, he has had and will continue to have
(both during the Employment Term and at any time thereafter during which he may
be employed by the Company), access to confidential information of the Company
and its affiliates, including, without limitation, information and knowledge
pertaining to products and services offered, inventions, innovations, designs,
ideas, plans, trade secrets, proprietary information, manufacturing, packaging,
advertising, distribution and sales methods and systems, sales and profit
figures, customer and client lists, and relationships between the Company and
its affiliates and dealers, distributors, wholesalers, customers, clients,
suppliers and others who have business dealings with the Company and its
affiliates ("Confidential Information"). Executive acknowledges that such
Confidential Information is a valuable and unique asset and covenants that he
will not, either during or at any time after the Employment Term, disclose any
such Confidential Information to any person for any reason whatsoever (except as
his duties described herein my require) without the prior written authorization
of the Board, unless such information is in the public domain through no fault
of Executive or except as may be required by law.
(b) Non-Competition. During the Employment Term and for the
twenty-four (24) month period following the termination of employment of
Executive with the Company or any of its affiliates has ended (whether or not
such employment is pursuant to this Agreement), Executive will not, unless
acting pursuant hereto or with the prior written consent of the Board, directly
or indirectly, own, manage, operate, join, control, finance or participate in
the ownership, management, operation, control or
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<PAGE> 3
financing of, or be connected as an officer, director, Executive, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged
within any portion of the United States (whether or not such business is
physically located within the United States) or any foreign market in which the
Company does business (i) in the retail sale and marketing of bridal gowns and
bridal related apparel for the female members of the bridal party, or (ii) any
of the same or similar type of products which the Company was designing,
developing, manufacturing, distributing or selling at the date of termination of
Executive's employment by the Company or at any time within two years prior
thereto (together, "Prohibited Products"), except that Executive may become
employed as an employee or officer of a retailer where Prohibited Products are
not a material percentage of sales, so long as supervising the sale of
Prohibited Products is not a material portion of his duties.
(c) Non-Solicit. During the Employment Term and for the twenty-four
(24) month period following the termination of employment of Executive with the
Company Executive will not, either directly or indirectly, solicit the
employment or hire any person who was employed by the Company or any of its
affiliates on a full or part-time basis at any time during the course of
Executive's employment, except that Executive may hire a person who has ceased
being employed by the Company for at least 90 days and whose separation from
employment with the Company did not directly or indirectly result from
solicitation by Executive or any representative of Executive.
(d) Geographic Scope. It is recognized by Executive that the
business of the Company and Executive in connection therewith is or will be
involved in activity throughout the United States, and that more limited
geographical limitations on this non-competition covenant (and the
non-solicitation covenant set forth in this Section 6) are therefore not
appropriate. In the event that any of the provisions of this Section 6 should
ever be adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any Jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.
(e) Equitable Relief. Executive acknowledges that the restrictions
contained in this Section 6 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates, that the Company would
not have entered into this Agreement in the absence of such restrictions, and
that any violation of any provision of those Sections will result in irreparable
injury to the Company. Executive agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of this Section 6, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled.
7. Arbitration Clause. Any controversy between the parties to this
Agreement involving the construction or applications of the terms of this
Agreement, except for enforcement of the terms and provisions of Section 8 of
this Agreement, shall be submitted to binding arbitration, at the request of
either party hereto, in accordance with the rules of the American Arbitration
Association, with the situs of situs of such arbitration to be in the county and
state of the Company's offices in the Commonwealth of Pennsylvania.
8. Termination.
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<PAGE> 4
8.1 Termination by the Company and Effect of Such Termination. The
Company may terminate this Agreement at any time upon delivery of written notice
to Executive, with the following effects:
(a) Without Cause. Upon termination of employment by the Company
without Cause prior to the end of the Employment Term, Executive will be paid
his then present base Annual Salary over the succeeding twelve (12) months.
(b) By Executive. If employment is terminated by Executive he will
only be entitled to compensation until his last day of employment.
(c) For Cause. In the event that Executive's employment hereunder is
terminated for Cause, as hereafter defined, this Agreement and rights of
Executive shall be terminated immediately. For these purposes, "Cause" shall
mean conviction of a crime, habitual absence from work, habitual insobriety or
drug addiction, material breach of this Agreement or failure to follow the
lawful directives of the Board of Directors after notice and a reasonable
opportunity to cure.
8.2 Death. If the Executive dies during the Employment Term, this
Employment Agreement shall automatically terminate, and thereafter the Company
shall not have any further liability or obligations under this Agreement to the
Executive, his executors, administrators, heirs, assigns or any other person
claiming under or through him except that the Executive's estate shall receive
any unpaid Annual Salary that has accrued through the date of termination plus
base Annual Salary over the succeeding six (6) months.
8.3 Total Disability. If the Executive becomes totally disabled (as
defined below), the Employment Term may be terminated by the Company, and the
Company shall have no further liability or obligation to the Executive under
this Agreement except as follows: the Executive shall receive any unpaid Annual
Salary that has accrued through the date of termination plus his then present
Annual Salary over twelve (12) months since the onset of the total disability.
The Executive shall be deemed to be "totally disabled" if the Executive is
considered totally disabled under the Company's group disability plan in effect
at that time, if any, or in the absence of any such plan, under applicable
Social Security regulations.
9. Notices. Any notices to Executive or company shall be deemed given if
delivered personally or mailed by certified mail to the address set forth below.
To Executive: Mr. Robert Huth
Oak Hill Condominium
1655 Oakwood Drive
Apartment N-203
Penn Valley, PA 19072
To the Company: David's Bridal, Inc.
44 West Lancaster Avenue
Suite 250
Ardmore, PA 19003
Attn: Steven H. Erlbaum,
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<PAGE> 5
Chairman of the Board
With a copy to: Stephen M. Goodman, Esq.
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103
10. Applicable Law. The interpretation, validity and effect of this
Agreement shall be governed in accordance with the laws of the Commonwealth of
Pennsylvania.
11. Entire Agreement. This Agreement supersedes all prior agreements and
sets forth the entire understanding of the parties with respect to the terms of
Executive's employment with the Company, except that Executive shall further be
bound by the terms of all employee manuals, hand books and guidelines generally
applicable to employees, officers, or directors of the Company.
IN WITNESS WHEREOF, the parties hereof have executed this Employment
Agreement as of the day and year first above written.
DAVID'S BRIDAL, INC.
BY: /s/ Steven H. Erlbaum
__________________________________
Steven H. Erlbaum, Chairman
ROBERT HUTH
/s/ Robert Huth
_______________________________________
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of February
__, 1999, between Davids Bridals, Inc., a Florida corporation (the "Company")
and Philip Youtie ("Employee").
W I T N E S S E T H
WHEREAS, the parties desire that this Agreement supersede any
agreement, arrangement or understanding with respect to the terms of the
employment of Employee by the Company.
NOW, THEREFORE, in consideration of the covenants and
conditions set forth in this Agreement, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Employment. Subject to Section 8 hereof, the Company shall
employ Employee, and Employee hereby accepts such employment and shall hereafter
perform his duties and responsibilities hereunder, in accordance with the terms
and conditions hereinafter set forth.
(a) Employment Term. The term of this Agreement
(the "Employment Term") shall commence on the date of the initial public
offering of securities of the Company ("IPO"), and shall continue for a period
of two years, unless terminated prior thereto in accordance with Section 8
hereof. Nothing in this Agreement shall be construed as giving Employee any
right to be retained in the employ of the Company beyond the expiration of the
Employment Term, and Employee specifically acknowledges that he shall be an
employee-at-will of the Company thereafter, and thus subject to discharge by the
Company with or without cause and without compensation of any nature.
(b) Duties and Responsibilities.
(i) During the Employment Term, Employee
shall serve as Executive Vice President - Bridal Product Development and
Sourcing of the Company and shall perform all duties and accept all
responsibilities incidental to such position or as may be assigned to him by the
CEO of the Company or by the board of directors of the Company, including,
without limitation, maximizing the performance of the Company's purchasing,
design, inventory, product development and import functions. Employee shall
<PAGE> 2
also cooperate fully with the board of directors and other executive officers of
the Company and its subsidiaries.
(ii) Employee shall at all times comply
with the policies and procedures adopted by the Company for employees of the
Company and its subsidiaries, including, without limitation, procedures and
policies regarding conflicts of interest.
(c) Extent of Service. During the Employment Term,
Employee agrees to use his best efforts to carry out his duties and
responsibilities under Section 1(b) hereof and to devote his full time,
attention and energy thereto. Except as provided in Section 5 hereof, the
foregoing shall not be construed as preventing Employee from making investments
in other businesses or enterprises provided that Employee agrees not to become
engaged in any other business activity which may, in the sole judgment of the
board of directors of the Company, interfere with his ability to discharge his
duties and responsibilities to the Company. Employee further agrees not to work
either on a part-time or independent contracting basis for any other business or
enterprise during the Employment Term without the prior written consent of the
Chairman or the Chief Executive Officer of the Company.
(d) Base Compensation.
(i) For all the services rendered by
Employee hereunder, the Company shall, during the first year of the Employment
Term, pay Employee an annual salary of $200,000.00, payable monthly in arrears,
which amount shall be increased by five percent in the second year of the
Employment Term. Employees shall also be eligible for an annual bonus according
to Company's bonus plan.
(ii) During the Employment Term, Employee
shall be entitled to participate in such vacation pay and other fringe benefit
plans, if any, as may be authorized from time to time by the board of directors
of the Company in its sole discretion for employees of the Company. Employee
alone, and not the Company, shall be responsible for the payment of all federal,
state and local taxes in respect of the payments to be made and benefits to be
provided under this Agreement or otherwise.
2. Expenses. Employee shall be reimbursed for the reasonable
business expenses incurred by him in connection with his performance of services
hereunder during the Employment Term upon presentation of an itemized account
and written proof of such expenses in accordance with policies established by
the Company.
3. Developments. All developments, including inventions,
whether patentable or otherwise, trade secrets, discoveries, improvements, ideas
and writings which
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either directly or indirectly relate to or may be useful in the business of the
Company or any of its affiliates (the "Developments") which Employee, either by
himself or in conjunction with any other person or persons, has conceived, made,
developed, acquired or acquired knowledge of during his employment by the
Company or which Employee, either by himself or in conjunction with any other
person or persons, shall conceive, make, develop, acquire or acquire knowledge
of during the Employment Term or at any time thereafter during which he is
employed by the Company, shall be the sole and exclusive property of the
Company. Employee hereby assigns, transfers and conveys, and agrees to so
assign, transfer and convey to the Company, all of his right, title and interest
in and to any and all such Developments and to disclose fully as soon as
practicable, in writing, all such Developments to the Chairman and the Chief
Executive Officer of the Company. At any time and from time to time, upon the
request and at the expense of the Company, Employee will execute and deliver any
and all instruments, documents and papers, give evidence and do any and all
other acts which, in the opinion of counsel for the Company, are or may be
necessary or desirable to document such transfer or to enable the Company to
file and prosecute applications for and to acquire, maintain and enforce any and
all patents, trademark registrations or copyrights under United States or
foreign law with respect to any such Developments or to obtain any extension,
validation, re-issue, continuance or renewal of any such patent, trademark or
copyright. The Company will be responsible for the preparation of any such
instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse Employee for all reasonable expenses incurred by
him in compliance with the provisions of this Section 3.
4. Confidential Information. Employee recognizes and
acknowledges that by reason of his employment by and service to the Company, he
has had, and will continue to have (both during the Employment Term and at any
time thereafter during which he may be employed by the Company), access to
confidential information of the Company and its affiliates, including, without
limitation, information and knowledge pertaining to products and services
offered, inventions, innovations, designs, ideas, plans, trade secrets,
proprietary information, manufacturing, packaging, advertising, distribution and
sales methods and systems, sales and profit figures, customer and client lists,
and relationships between the Company and its affiliates and dealers,
distributors, wholesalers, customers, clients, suppliers and others who have
business dealings with the Company and its affiliates ("Confidential
Information"). Employee acknowledges that such Confidential Information is a
valuable and unique asset and covenants that he will not, either during or at
any time after the Employment Term, disclose any such Confidential Information
to any person for any reason whatsoever (except as his duties described herein
may require) without the prior written authorization of the Chairman or the
Chief Executive Officer of the Company, unless such information is in the public
domain through no fault of Employee or except as may be required by law.
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<PAGE> 4
5. Non-Competition. During the Employment Term and for the
twenty-four (24) month period following the termination of employment of
Employee by the Company or any of its affiliates has ended (whether or not such
employment is pursuant to this Agreement), Employee will not, unless acting
pursuant hereto or with the prior written consent of the board of directors of
the Company, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with or use or permit
his name to be used in connection with, any business or enterprise engaged
within any portion of the United States (whether or not such business is
physically located within the United States) or any foreign market in which the
Company does business (i) in the wholesale or retail sale and marketing of
wedding-related products of any nature, or (ii) any of the same or similar type
of products which the Company was designing, developing, manufacturing,
distributing or selling at the date of termination of Employee's employment by
the Company or at any time within two years prior thereto. It is recognized by
Employee that the business of the Company and Employee's connection therewith is
or will be involved in activity throughout the United States, and that more
limited geographical limitations on this non-competition covenant (and the
non-solicitation covenant set forth in Section 6 hereof) are therefore not
appropriate.
6. No Solicitation. During the Employment Term and for the
twenty-four (24) month period following the termination of employment of
Employee by the Company or any of its affiliates has ended (whether or not such
employment is pursuant to this Agreement), Employee will not, either directly or
indirectly, (i) call on or solicit any person, firm, corporation or other entity
who or which at the time of such termination was, or within two years prior
thereto had been, a customer of the Company or any of their requisite affiliates
with respect to the activities prohibited by Section 5 hereof or (ii) solicit
the employment or hire any person who was employed by the Company or any of its
affiliates on a full or part-time basis at any time during the course of
Employee's employment.
7. Equitable Relief.
(a) Employee acknowledges that the restrictions
contained in Sections 3, 4, 5 and 6 hereof are reasonable and necessary to
protect the legitimate interests of the Company and its affiliates, that the
Company would not have entered into this Agreement in the absence of such
restrictions, and that any violation of any provision of those Sections will
result in irreparable injury to the Company. Employee represents that his
experience and capabilities are such that the restrictions contained in Sections
5 and 6 hereof will not prevent Employee from obtaining employment or otherwise
earning a living at the same general level of economic benefit as is provided by
his current employment with the Company or as is anticipated by this Agreement.
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<PAGE> 5
(b) Employee agrees that the Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, as well as an equitable accounting of all earnings,
profits and other benefits arising from any violation of Sections 3, 4, 5 or 6
hereof, which rights shall be cumulative and in addition to any other rights or
remedies to which the Company may be entitled. In the event that any of the
provisions of Sections 3, 4, 5 or 6 hereof should ever be adjudicated to exceed
the time, geographic, product or service, or other limitations permitted by
applicable law in any jurisdiction, then such provisions shall be deemed
reformed in such jurisdiction to the maximum time, geographic, product or
service, or other limitations permitted by applicable law.
(c) Employee irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding arising out of this
Agreement, including without limitation, any action commenced by the Company for
preliminary or permanent injunctive relief or other equitable relief, may be
brought in the United States District Court for the Eastern District of
Pennsylvania, or if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Philadelphia County,
Pennsylvania, (ii) consents to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding, and (iii) waives any objection which
Employee may have to the laying of venue of any such suit, action or proceeding
in any such court. Employee also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 14 hereof.
(d) Employee agrees that he will provide, and that
the Company may similarly provide, a copy of Sections 3, 4, 5 and 6 of this
Agreement to any business or enterprise (i) which he may directly or indirectly
own, manage, operate, finance, join, participate in the ownership, management,
operation, financing, control or control of, or (ii) with which he may be
connected with as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise, or in connection with which he may use
or permit his name to be used; provided, however, that this provision shall not
apply in respect of Sections 5 and 6 of this Agreement after expiration of the
time periods set forth therein.
8. Termination. This Agreement, except as otherwise provided
herein, shall terminate prior to the expiration of the term set forth in Section
1(a) above upon the occurrence of any one of the following events:
(a) Disability. In the event that Employee is
unable fully to perform his duties and responsibilities hereunder to the full
extent required by the board of directors of the Company by reason of illness,
injury or incapacity for ninety consecutive days, during which time he shall
continue to be compensated as provided in Section 1(d) hereof (less any payments
due Employee under disability benefit programs, including Social
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<PAGE> 6
Security disability, worker's compensation, and disability retirement benefits),
this Agreement may be terminated by the Company, and the Company shall have no
further liability or obligation to Employee for compensation hereunder;
provided, that Employee shall be entitled to receive the payments prescribed
under any disability benefit plan which may be in effect for employees of the
Company and in which he participated. Employee agrees, in the event of any
dispute under this Section 8(a), to submit to a physical examination by a
licensed physician selected by the Chairman or the Chief Executive Officer of
the Company.
(b) Death. In the event that Employee dies during the
Employment Term, the Company shall pay to his executors, legal representatives
or administrators an amount equal to the installment of his salary set forth in
Section 1(d)(i) hereof for the month in which he dies, and thereafter the
Company shall have no further liability or obligation hereunder to his
executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through him; provided, that Employee's estate or
designated beneficiaries shall be entitled to receive the payments prescribed
for such recipients under any death benefit plan which may be in effect for
employees of the Company and in which Employee participated and shall have the
rights provided in Section 8 hereof, subject to the limitations set forth in
such section.
(c) Cause. Nothing in this Agreement shall be
construed to prevent its termination by the Company at any time for "cause." For
purposes of this Agreement, "cause" shall mean the failure of Employee to
perform or observe any of the terms or provisions of this Agreement or to comply
fully with the lawful directives of the CEO of the Company or the board of
directors of the Company, dishonesty, misconduct, conviction of a crime
involving moral turpitude, substance abuse, misappropriation of funds,
disparagement of the Company (or its management or employees), or other proper
cause determined in good faith by a majority of the members of the Company's
board of directors. In the event of termination for cause, the Company shall
have no further liability or obligation to Employee for compensation hereunder.
Such termination shall be effected by notice thereof delivered by the Company to
Employee and shall be effective as of the date of such notice.
(d) Without Cause by the Company. The Company may
terminate this Agreement upon not less than 30 days' notice to Employee at and
for the Company's sole convenience and in its sole discretion and without
specifying any cause as set forth in Section 9(c) hereof. In such event, and
contingent upon (i) receipt by the Company of a valid and fully effective
release (in form and substance satisfactory to the Company) of all claims of any
nature which Employee might have at such time against the Company or any of its
officers, directors, agents or affiliates, except in payments due under this
Section 9(d), and (ii) the resignation of Employee from all positions of any
nature which Employee may then have held with the Company and any of its
affiliates, the Company shall continue
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<PAGE> 7
to pay Employee until the end of the Employment Term the cash compensation set
forth in Section 1(d)(i) hereof which Employee was receiving prior to the
effective date of such termination in an amount not to exceed 12 months cash
compensation.
9. Survival. Notwithstanding the termination of this Agreement
by the Company by reason of Employee's disability under Section 8(a), for cause
under Section 8(c), or without cause under Section 8(d), his obligations under
Sections 3, 4, 5, and 6 hereof shall survive and remain in full force and effect
for the periods therein provided, and the provisions for equitable relief
against Employee in Section 7 hereof shall continue in force. Notwithstanding
the termination of this Agreement under and subsection of Section 8, the
provisions of Sections 8 and 10 through 18 hereof shall survive and remain in
full force and effect except as limited by the periods therein provided.
10. Effectiveness of Agreement Notwithstanding anything to the
contrary set forth in this Agreement, this Agreement shall be null and void and
of no force and effect unless and until the Closing shall have occurred under
the Purchase Agreement (as defined therein), it being understood that any waiver
under or amendment or modification to the Purchase Agreement by any of the
parties thereto shall not affect or otherwise modify in any regard Employee's
obligations hereunder.
11. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed in the Commonwealth without regard to the
laws that might otherwise govern under the principles of conflicts of laws
applicable thereto.
12. Litigation Expenses. In the event of a lawsuit by either
party to enforce the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable costs, expenses and attorney's fees from the
other party.
13. Notices. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand delivered or mailed
by registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):
If to the Company, to:
Davids Bridals, Inc.
44 West Lancaster Avenue
Suite 250
Ardmore, PA 19003
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<PAGE> 8
Attention: Steven H. Erlbaum
Chairman and Chief Executive Officer
With a required copy to:
Morgan, Lewis & Bockius
1701 Market Street
Philadelphia, PA 19103-2921
Attention: Stephen M. Goodman
If to Employee, to the current residence address of the
Employee reflected in the books and records of the Company.
or to such other names or addresses as the Company or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
14. Entire Agreement; Contents of Agreement.
(a) This Agreement supersedes all prior agreements
and sets forth the entire understanding among the parties hereto with respect to
the subject matter hereof (except for the provisions of any confidentiality,
non-disclosure, invention assignment, intellectual property or similar
agreements which Employee may have entered into with Spearhead or its
predecessors, which shall all continue in full force and effect and be in
addition to the provisions of this Agreement) and cannot be changed, modified,
extended or terminated except upon written amendment executed by Employee and
approved by the board of directors of the Company and executed on behalf of the
Company by a duly authorized officer. Employee acknowledges that the effect of
this provision is that no oral modifications of any nature whatsoever to this
Agreement shall be permitted.
(b) Employee acknowledges that from time to time,
the Company may establish, maintain and distribute employee manuals or handbooks
or personnel policy manuals, and officers or other representatives of the
Company may make written or oral statements relating to personnel policies and
procedures. Such manuals, handbooks and statements are intended only for general
guidance. No policies, procedures or statements of any nature by or on behalf of
the Company (whether written or oral, and whether or not contained in any
employee manual or handbook or personnel policy manual), and no acts or
practices of any nature, shall be construed to modify this Agreement or to
create express or implied obligations of any nature to Employee.
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<PAGE> 9
15. Assignment. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, executors, administrators, legal representatives,
successors and assigns of the parties hereto, except that (i) the duties and
responsibilities of Employee hereunder are of a personal nature and shall not be
assignable or delegatable in whole or in part by Employee, and (ii) the Company
may not transfer its obligations hereunder to any third party (other than an
affiliate of the Company) without the prior express written consent of Employee.
16. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances is adjudicated to be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provision or application of this
Agreement which can be given effect without the invalid or unenforceable
provision or application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction.
17. Remedies Cumulative; No Waiver. No remedy conferred upon
the Company by this Agreement is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in
equity. No delay or omission by the Company in exercising any right, remedy or
power hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by the Company
from time to time and as often as may be deemed expedient or necessary by the
Company in its sole discretion.
18. Waiver of Registration Rights. Employee hereby waives any
and all rights to register securities of the Company in the IPO which he may
have under the Registration Agreement dated as of June 9, 1995, as amended, or
otherwise.
19. Miscellaneous. All section headings are for convenience
only. This Agreement may be executed in several counterparts, each of which is
an original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
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<PAGE> 10
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Employment Agreement as of the date first above
written.
DAVIDS BRIDALS, INC.
By /s/ Steven Erlbaum
-----------------------------
Name: Steven Erlbaum
Title: Chairman
By /s/ Robert Huth
-----------------------------
Name: Robert Huth
Title: President
/s/ Philip Youtie
-------------------------------
Philip Youtie
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<PAGE> 1
Exhibit 23.1
As independent public accountants, we hereby consent to the use in this
registration statement no. 333-72693 of our report included herein and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Philadelphia, Pa
April 28, 1999
<PAGE> 1
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS,
I, EUGENE P. LYNCH, the undersigned, do hereby make, constitute and appoint
STEVEN H. ERLBAUM, ROBERT D. HUTH AND EDWARD S. WOZNIAK, and each of them acting
alone, my true and lawful attorney-in-fact, with full power of substitution, to
perform each and all of the following acts for and on behalf of me in my name,
place and stead:
To execute and cause to be filed with the Securities and Exchange
Commission pursuant to the requirements of the Securities and Exchange
Commission pursuant to the requirements of the Securities Act of 1933, as
amended, any and all amendments and post-effective amendments to the
Registration Statement on Form S-1 for David's Bridal, Inc. filed on
February 19, 1999 (the "Registration Statement"), and including any
registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act, with exhibits
thereto and other documents in connection therewith, and hereby ratify and
confirm all that said attorney-in-fact or his substitute or substitutes may
do or cause to be done by virtue hereof.
I hereby revoke all other powers of attorney previously given by me to the
extent inconsistent herewith.
I hereby ratify all that such agent and attorney-in-fact may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand as of this __day of April, 1999.
WITNESS
/s/ Jean Le Goff /s/ Eugene P. Lynch
- --------------------------- -----------------------------
Name: Jean Le Goff Eugene P. Lynch
