<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number 0-14970
COST PLUS, INC.
(Exact name of registrant as specified in its charter)
California 94-1067973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Clay Street, Oakland, California 94607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 893-7300
Former name, former address and former fiscal year, N/A
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock, with $0.01 par value, outstanding on
September 6, 1996 was 8,072,753.
<PAGE>
COST PLUS, INC.
FORM 10-Q
FOR THE QUARTER ENDED AUGUST 3, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
Balance Sheets as of August 3, 1996 (unaudited),
February 3, 1996 and July 22, 1995 (unaudited) 3
Statements of Operations (unaudited)
for the thirteen and twenty-six weeks ended
August 3, 1996 and July 22, 1995 4
Statements of Cash Flows (unaudited)
for the twenty-six weeks ended August 3, 1996
and July 22, 1995 5
Notes to Condensed Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
ITEM 5. Other Information 10
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURE PAGE 11
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COST PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AUGUST 3, FEBRUARY 3, JULY 22,
1996 1996 1995
(UNAUDITED) (SEE NOTE 1) (UNAUDITED)
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,314 $ 2,181 $ 2,040
Merchandise inventories 41,231 35,213 32,805
Other current assets 2,060 1,960 2,001
-------- -------- --------
Total current assets 44,605 39,354 36,846
Property and equipment, net 58,026 58,300 56,033
Other assets 8,222 8,332 8,322
-------- -------- --------
Total assets $110,853 $105,986 $101,201
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,583 $ 9,422 $ 9,158
Income taxes payable 677 3,359 --
Accrued compensation 5,047 5,373 3,426
Revolving line of credit 2,909 3,165 10,503
Other current liabilities 6,718 6,933 5,683
-------- -------- --------
Total current liabilities 24,934 28,252 28,770
Capital lease obligations 14,424 14,633 14,801
Note payable to related parties -- 19,895 19,895
Deferred income taxes 4,455 4,455 4,646
Other long-term obligations 2,228 2,392 2,149
Shareholders' equity:
Preferred stock, $.01 par value: 5,000,000 shares
authorized at August 3, 1996; none issued and outstanding -- -- --
Common stock, $.01 par value: 30,000,000, 6,819,931
and 6,819,931 authorized; issued and outstanding
8,071,449, 5,906,264 and 5,821,928 81 59 58
Additional paid-in capital 90,788 61,765 61,722
Deficit (26,057) (25,465) (30,840)
-------- -------- --------
Total shareholders' equity 64,812 36,359 30,940
-------- -------- --------
Total liabilities and shareholders' equity $110,853 $105,986 $101,201
======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COST PLUS, INC.
STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNT, UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
August 3, July 22, August 3, July 22,
1996 1995 1996 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales $39,986 $33,083 $79,113 $64,957
Cost of sales and occupancy 25,774 21,457 51,326 42,581
------- ------- ------- -------
Gross profit 14,212 11,626 27,787 22,376
Selling, general and administrative
expenses 13,511 11,442 26,566 22,175
Preopening store expenses 556 527 840 610
------- ------- ------- -------
Income (loss) from operations 145 (343) 381 (409)
Interest expense 479 1,217 1,384 2,233
------- ------- ------- -------
Loss before income taxes (334) (1,560) (1,003) (2,642)
Benefit from income taxes (137) (640) (411) (1,084)
------- ------- ------- -------
Net loss $ (197) $ (920) $ (592) $(1,558)
======= ======= ======= =======
Net loss per common and common
equivalent share $ (.02) $ (.15) $ (.08) $ (.25)
======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding 8,511 6,153 7,733 6,153
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COST PLUS, INC.
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
----------------------
August 3, July 22,
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (592) $(1,558)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,285 2,671
Deferred income taxes -- (1,031)
Change in assets and liabilities:
Merchandise inventories (6,018) (3,679)
Other assets (242) 142
Accounts payable 512 (1,558)
Income taxes payable (2,682) (1,841)
Other liabilities (746) (1,374)
------- -------
Net cash used in operating activities (6,483) (8,228)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,110) (3,011)
------- -------
Net cash used in investing activities (3,110) (3,011)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under revolving line of credit (256) 10,503
Payment of note payable to related parties (19,895) --
Principal payments on capital lease obligations (168) (130)
Proceeds from issuance of stock, net of related costs 29,045 (409)
------- -------
Net cash provided by financing activities 8,726 9,964
------- -------
Net decrease in cash and cash equivalents (867) (1,275)
Cash and cash equivalents:
Beginning of period 2,181 3,315
------- -------
End of period $ 1,314 $ 2,040
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COST PLUS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 AND JULY 22, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared from the records of the Company without audit and, in the opinion of
management, include all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position at August 3, 1996
and July 22, 1995; the interim results of operations for the thirteen and
twenty-six weeks ended August 3, 1996 and July 22, 1995; and changes in cash
flows for the twenty-six weeks then ended. The balance sheet at February 3,
1996, presented herein, has been derived from the audited financial statements
of the Company for the fiscal year then ended.
Effective in fiscal 1995, the Company changed its fiscal year-end from the
Saturday closest to the end of February to the Saturday closest to the end of
January to conform to the National Retail Federation (NRF) calendar. As a
result, the fiscal period-end dates for the prior year may not be comparable to
the current year's fiscal period-end dates.
Accounting policies followed by the Company are described in Note 1 to the
audited consolidated financial statements for the fiscal year ended February 3,
1996. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted for purposes of the condensed
consolidated interim financial statements. The condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements, including notes thereto, for the year ended February 3, 1996.
The results of operations for the thirteen and twenty-six week periods herein
presented are not necessarily indicative of the results to be expected for the
full year.
2. STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES
Total cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
----------------------
August 3, July 22,
1996 1995
--------- --------
($000, unaudited)
<S> <C> <C>
Interest $1,763 $2,276
Income Taxes $2,322 $1,607
</TABLE>
3. INITIAL PUBLIC OFFERING OF COMMON STOCK
The Company sold 2,136,614 shares of its common stock in the Company's initial
public offering of shares of common stock registered on Form S-1 with the
Securities and Exchange Commission. These shares were sold at a price of $15.00
per share yielding net proceeds of approximately $29.1 million after deducting
underwriting discounts of $2.9 million and offering expenses of $0.7 million. As
described in the Company's prospectus dated April 4, 1996, the proceeds were
used primarily to retire the Company's note payable and to pay down outstanding
borrowings under its line of credit. All remaining unused proceeds were invested
in short-term, interest bearing instruments or used for working capital or
general corporate purposes.
6
<PAGE>
4. REVOLVING LINE OF CREDIT AGREEMENT
On May 7, 1996 the Company entered into a revolving line of credit agreement
with Bank of America which expires May 31, 1998. The Company's existing
revolving line of credit agreement was terminated. The new agreement allows for
cash borrowings and letters of credit of up to $20.0 million from January 1
through June 30 and $35.0 million from July 1 through December 31 of each year.
The Company is required to have not more than $5.0 million outstanding,
excluding letters of credit, for a period of 45 days between December 1 and
March 31 of the next year. Interest is paid monthly at the bank's reference rate
(8.25% at August 3, 1996) or LIBOR+2%, depending on the nature of the
borrowings. A commitment fee on the unused portion is payable quarterly, in
arrears, at .125% per year. The agreement is secured by the Company's inventory
and receivables. The Company is required to maintain certain financial loan
covenants including minimum tangible net worth, earnings coverage ratio and
inventory turn. Borrowings and letters of credit outstanding under the line were
$2.9 million and $1.8 million, respectively, at August 3, 1996 leaving
availability of $30.3 million.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The thirteen weeks (second quarter) and twenty-six weeks (year-to-date) ended
August 3, 1996 as compared to the thirteen weeks (second quarter) and twenty-six
weeks (year-to-date) ended July 22, 1995.
NET SALES. Net sales increased $6.9 million, or 20.9%, to $40.0 million in the
second quarter of 1996 from $33.1 million in the second quarter of 1995. Year-
to-date net sales were $79.1 million in 1996, an increase of $14.1 million or
21.7% from 1995 net sales of $65.0 million. The second quarter and year-to-date
increases in net sales were attributable to new stores and increases in
comparable and non-comparable store sales. At August 3, 1996, the Company
operated 52 stores compared to 45 stores at July 22, 1995. These seven new
stores contributed $4.2 million of the increase in second quarter net sales and
$7.5 million of the increase in year-to-date net sales. Comparable store sales,
calculated on a comparable, day-to-day basis, increased 4.9% for the second
quarter and 4.8% on a year-to-date basis.
GROSS PROFIT. As a percentage of net sales, second quarter gross profit
increased to 35.5% in 1996 from 35.1% in 1995. Year-to-date gross profit was
35.1% in 1996 and 34.4% in 1995. This increase resulted from leveraging
occupancy costs.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES. As a percentage of net
sales, SG&A expenses decreased to 33.8% in the second quarter from 34.6% in the
second quarter of the prior year. Year-to-date, SG&A expenses, as a percentage
of net sales, decreased to 33.6% from 34.1% in the prior year. These decreases
resulted mainly from leveraging store and corporate payroll expenses which
offset higher depreciation and amortization.
PREOPENING STORE EXPENSES. Preopening expenses, which include grand opening
advertising and preopening merchandising expenses, were $0.6 million and $0.5
million for the second quarter of 1996 and 1995, respectively. Year-to-date,
preopening expenses were $0.8 million in 1996 and $0.6 million in 1995. The
Company opened two stores in the second quarter of both 1996 and 1995. Year-to-
date, the Company opened three stores in 1996 and two stores in 1995.
INTEREST EXPENSE. Interest expense for the second quarter and year-to-date was
lower than the comparable periods of the prior year due to the repayment of
borrowings in April 1996 with the proceeds from the Company's initial public
offering of its common stock.
PROVISION FOR INCOME TAXES. The Company's effective tax rate for all periods
presented was 41%.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company has identified certain forward-looking statements in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations by a footnote #1. The Company may also make oral forward-looking
statements from time to time. Actual results may differ materially from those
projected in any such forward-looking statements due to a number of factors
including those set forth below.
Due to the importance of the Christmas selling season, the fourth quarter of
each fiscal year has historically contributed, and the Company expects it will
continue to contribute, a disproportionate percentage of the Company's net sales
and all of its net income for the entire fiscal year/1/. Any factors negatively
affecting the Company during the Christmas selling season in any year, including
unfavorable economic conditions, could have a material adverse effect on the
Company's financial condition and results of operations. In addition, the
Company makes decisions regarding merchandise well in advance of the season in
which it will be sold, particularly for the Christmas selling season.
Significant deviations from projected demand for products could have a material
adverse effect on the Company's financial condition and results of operations,
either by lost sales due to insufficient inventory or lost margin due to the
need to mark down excess inventory.
The Company's quarterly results of operations may fluctuate based upon such
factors as the number and timing of store openings and related preopening store
expenses, the amount of net sales contributed by new and existing stores, the
mix of
- ---------------------------
/1/ forward-looking statement
8
<PAGE>
products sold, the timing and level of markdowns, store closings, refurbishments
or relocations, competitive factors and general economic conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses for cash, other than to fund operating expenses, are
to support inventory requirements and for store expansion. Historically, the
Company has financed its operations primarily with borrowings under the
Company's credit facilities and internally generated funds. The Company believes
that the available borrowings under its revolving line of credit and internally
generated funds will be sufficient to finance its working capital and capital
expenditure requirements for the next 12 months/1/.
Net cash used in operating activities in the twenty-six weeks ended August 3,
1996 totaled $6.5 million, a reduction of $1.7 million over the prior year. This
reduction was primarily the result of sales growth and leveraging expenses over
a higher sales base.
Net cash used in investing activities, primarily for new stores, totaled $3.1
million in the twenty-six weeks ended August 3, 1996 and $3.0 million for the
prior year. The Company estimates that 1996 capital expenditures will not exceed
$8.4 million/1/.
Net cash provided by financing activities in the twenty-six weeks ended August
3, 1996 included approximately $29.1 million received in April 1996 as a result
of the Company's initial public offering. The proceeds were used to retire the
$19.9 million long-term note payable and pay down the $3.2 million balance then
outstanding on the revolving credit line. Remaining unused proceeds were
invested in short-term interest bearing instruments or used for working capital
or general corporate purposes.
On May 7, 1996 the Company entered into a revolving line of credit agreement
with Bank of America which expires May 31, 1998. The Company's existing
revolving line of credit agreement was terminated. The new agreement allows for
cash borrowings and letters of credit of up to $20.0 million from January 1
through June 30 and $35.0 million from July 1 through December 31 of each year.
The Company is required to have not more than $5.0 million outstanding,
excluding letters of credit, for a period of 45 days between December 1 and
March 31 of the next year. Interest is paid monthly at the bank's reference rate
(8.25% at August 3, 1996) or LIBOR+2%, depending on the nature of the
borrowings. A commitment fee on the unused portion is payable quarterly, in
arrears, at .125% per year. The agreement is secured by the Company's inventory
and receivables. The Company is required to maintain certain financial loan
covenants including minimum tangible net worth, earnings coverage ratio and
inventory turn. Borrowings and letters of credit outstanding under the line were
$2.9 million and $1.8 million, respectively, at August 3, 1996 leaving
availability of $30.3 million.
- ----------------------
/1/ forward-looking statement
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On August 29, 1996 the Company announced two senior management changes,
associated with the recent development of a medical condition concerning Ralph
D. Dillon, the Company's Chairman of the Board and Chief Executive Officer.
Alan E. Zimtbaum was promoted to President and Chief Operating Officer, and will
continue his duties as Chief Financial Officer. He previously served as
Executive Vice President and Chief Financial Officer. Dennis R. Daugherty was
promoted to the newly created position of Executive Vice President of
Operations, where he will oversee the distribution and management information
systems areas of the Company. Mr. Dillon remains Chairman of the Board and
Chief Executive Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
3.1 Form of Amended and Restated By-laws
10.1 Business Loan Agreement, dated May 7, 1996, between
Cost Plus, Inc. and Bank of America National Trust
and Savings Association
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule (submitted for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
period covered by this report.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COST PLUS, INC.
-------------------------------
Registrant
Date: September 16, 1996 By: /s/ Alan E. Zimtbaum
---------------------------
Alan E. Zimtbaum
President and
Chief Financial Officer
11
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
BY-LAWS
OF
COST PLUS, INC.
(a California corporation)
(the "corporation")
Article I
OFFICES
Section 1.1 Principal Office. The principal office for the transaction
----------- ----------------
of the business of the corporation shall be located at 201 Clay Street, Oakland,
State of California. The Board of Directors of the corporation (the "Board" or
the "Board of Directors") is hereby granted full power and authority to change
said principal office to another location within or without the State of
California.
Section 1.2 Other Offices. One or more branch or other subordinate
----------- -------------
offices may at any time be fixed and located by the Board of Directors at such
place or places within or without the State of California as it deems
appropriate.
Article II
DIRECTORS
Section 2.1 Exercise of Corporate Powers. Except as otherwise provided by
----------- ----------------------------
the Articles of Incorporation of the corporation or by the laws of the State of
California now or hereafter in force, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operation as permitted by law provided that the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised under the ultimate direction of the Board. Without
limiting the foregoing, in addition to any other action required by law, by the
Articles of Incorporation or by these By-Laws, approval by the Board of
Directors or a duly established committee of the Board shall be required for any
of the following corporate actions:
(a) the election and removal of the Chairman (if any), the President, the
Chief Financial Officer, or any other executive officer of the corporation or
any significant subsidiary (as such term is defined in Regulation S-X
promulgated under the Securities Act of 1933, as amended) of the corporation,
the compensation of any of them, and the prescription of such powers and duties
for them as are not inconsistent with the Articles of Incorporation, these By-
Laws or applicable law;
<PAGE>
(b) lease of any real property on terms which exceed parameters approved by
the Board;
(c) ceasing of operations at any of the business locations of the
corporation and any writeoff for any such location in excess of $250,000;
(d) sale, exchange, mortgage, pledge or other disposition or encumbrance by
the corporation of any real property or any other assets of the corporation
having a net book or fair market value in excess of $1,000,000 other than sales
of inventory in the ordinary course of business;
(e) settlement of any claim involving a payment or forbearance, or any
writeoff, by the corporation in excess of $500,000 not included in the annual
capital expenditure budgets for the corporation;
(f) appointment of auditors for the corporation and any significant change
in the accounting principles or tax elections applicable to the corporation
which are not mandated by generally accepted accounting principles or applicable
law; and
(g) any contract or other transaction between the corporation and one or
more of its directors or officers or any entity in which one or more of its
directors or officers has a material financial interest.
Section 2.2 Number. The number of directors of the corporation shall be
----------- ------
not less than five nor more than nine. The exact number of directors shall be
seven until changed, within the limits specified above, by a bylaw amending this
Section 2.2, duly adopted by the Board of Directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
Articles of Incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than five cannot be adopted
if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
16-2/3% of the outstanding shares entitled to vote thereon. No amendment may
change the stated maximum number of authorized directors to a number greater
than two times the stated minimum number of directors minus one.
Section 2.3 Need not Be Shareholders. The directors of the corporation
----------- ------------------------
need not be shareholders of the corporation.
Section 2.4 Compensation. Directors shall receive such compensation for
----------- ------------
their services as directors and such reimbursement for their expenses of
attendance at meetings as may be determined from time to time by resolution of
the Board. Nothing herein contained shall be construed to preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
-2-
<PAGE>
Section 2.5 Election and Term of Office. At each annual meeting of
----------- ---------------------------
shareholders, directors shall be elected to hold office until the next annual
meeting, provided, that if for any reason, said annual meeting or an adjournment
thereof is not held or the directors are not elected thereat, then the directors
may be elected at any special meeting of the shareholders called and held for
that purpose. The term of office of the directors shall begin immediately after
their election and shall continue until the expiration of the term for which
elected and until their respective successors have been elected and qualified.
Section 2.6 Vacancies. A vacancy or vacancies in the Board of Directors
----------- ---------
shall exist when any authorized position of director is not then filled by a
duly elected director, whether caused by death, resignation, removal change in
the authorized number of directors (by the Board or the shareholders) or
otherwise. The Board of Directors may declare vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony. Except for a vacancy created by the removal of a director, vacancies on
the Board may be filled by a majority of the directors then in office, whether
or not less than a quorum, or by a sole remaining director. A vacancy created
by the removal of a director may be filled only by the approval of the
shareholders. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors, but any such election by written consent
requires the consent of a majority of the outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the Chairman of
the Board, the President, the Secretary or the Board of Directors of the
corporation, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation is effective at a future time, a successor
may be elected to take office when the resignation becomes effective.
Section 2.7 Removal. (a) Any and all of the directors may be removed
----------- -------
without cause if such removal is approved by the affirmative vote of a majority
of the outstanding shares entitled to vote at an election of directors, except
that no director may be removed (unless the entire Board is removed) when the
votes cast against removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election at
which the same total number of votes were cast (or, if such action is taken by
written consent, all shares entitled to vote were voted) and the entire number
of directors authorized at the time of the director's most recent election were
then being elected.
(b) Any reduction of the authorized number of directors does not remove any
director prior to the expiration of such director's term of office.
Article III
OFFICERS
Section 3.1 Election and Qualifications. The officers of this corporation
----------- ---------------------------
shall consist of a President, a Chief Financial Officer and a Secretary who
shall be chosen by the Board of Directors and such other officers, including a
Chairman of the Board, one or more Vice Presidents, an Assistant Treasurer, an
Assistant Secretary and a Controller, as the Board of Directors shall deem
expedient, who shall be chosen in such manner and hold their offices for such
terms as the Board of Directors may prescribe. Any two or more of such offices
may be held by the same person. Any Vice President,
-3-
<PAGE>
Assistant Treasurer or Assistant Secretary, respectively, may exercise any of
the powers of the President, the Chief Financial Officer, or the Secretary,
respectively, as directed by the Board of Directors and shall perform such other
duties as are imposed upon such officer by the By-Laws or the Board of
Directors.
Section 3.2 Term of Office and Compensation. The term of office and
----------- -------------------------------
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board from time to time at its pleasure, subject to the rights,
if any, of said officers under any contract of employment.
Section 3.3 Removal and Vacancies. Any officer of the corporation may be
----------- ---------------------
removed at the pleasure of the Board of Directors at any meeting or by vote of
shareholders entitled to exercise the majority of voting power of the
corporation at any meeting. Any officer may resign at any time upon written
notice to the corporation without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party. If any vacancy
occurs in any office of the corporation, the Board of Directors may elect a
successor to fill such vacancy for the remainder of the unexpired term and until
a successor is duly chosen and qualified.
Article IV
CHAIRMAN OF THE BOARD
Section 4.1 Powers and Duties. The Chairman of the Board of Directors, if
----------- -----------------
there be one, shall have the power to preside at all meetings of the Board of
Directors, and to call meetings of the shareholders and of the Board of
Directors to be held within the limitations prescribed by law or by these By-
Laws, at such times and at such places as the Chairman of the Board shall deem
proper. The Chairman of the Board shall have such other powers and shall be
subject to such other duties as the Board of Directors may from time to time
prescribe.
Article V
PRESIDENT
Section 5.1 Powers and Duties. The powers and duties of the President
----------- -----------------
are:
(a) To act as the chief executive officer of the corporation and, subject
to the control of the Board of Directors, to have general supervision, direction
and control of the business and affairs of the corporation.
(b) To preside at all meetings of the shareholders and, in the absence of
the Chairman of the Board, or if there be none, at all meetings of the Board of
Directors.
(c) To call meetings of the shareholders and also of the Board of Directors
to be held, subject to the limitations prescribed by law or by these By-Laws, at
such times and at such places as the President shall deem proper.
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(d) To affix the signature of the corporation to all deeds, conveyances,
mortgages, leases, obligations, bonds, certificates and other papers and
instruments in writing which have been authorized by the Board of Directors or
which do not require the approval of the Board of Directors under Section 2.1 of
the By-Laws and in the judgment of the President should be executed on behalf of
the corporation, to sign certificates for shares of stock of the corporation
and, subject to the direction of the Board of Directors, to have general charge
of the property of the corporation and to supervise and control all officers,
agents and employees of the corporation.
Section 5.2 President pro tem. If neither the Chairman of the Board, the
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President, nor any Vice President is present at any meeting of the Board of
Directors, a President pro tem may be chosen to preside and act at such meeting.
If neither the President nor any Vice President is present at any meeting of the
shareholders, a President pro tem may be chosen to preside at such meeting.
Article VI
VICE PRESIDENT
Section 6.1 Powers and Duties. In case of the absence, disability or
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death of the President, the Vice President, or one of the Vice Presidents, shall
exercise all the powers and perform all the duties of the President. If there
is more than one Vice President, the order in which the Vice Presidents shall
succeed to the powers and duties of the President shall be as fixed by the Board
of Directors. The Vice President or Vice Presidents shall have such other
powers and perform such other duties as may be granted or prescribed by the
Board of Directors.
Article VII
SECRETARY
Section 7.1 Powers and Duties. The powers and duties of the Secretary
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are:
(a) To keep a book of minutes at the principal office of the corporation,
or such other place as the Board of Directors may order, of all meetings of its
directors and shareholders with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the names
of those present at directors' meetings, the number of shares present or
represented at shareholders' meetings and the proceedings thereof.
(b) To keep the seal of the corporation and to affix the same to all
instruments which may require it.
(c) To keep or cause to be kept at the principal office of the corporation,
or at the office of the transfer agent or agents, a share register, or duplicate
share registers, showing the names of the shareholders and their addresses, the
number and classes of shares held by each, the number and date of certificates
issued for shares, and the number and date of cancellation of every certificate
surrendered for cancellation.
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(d) To keep a supply of certificates for shares of the corporation, to fill
in all certificates issued, and to make a proper record of each such issuance;
provided, that so long as the corporation shall have one or more duly appointed
and acting transfer agents of the shares, or any class or series of shares, of
the corporation, such duties with respect to such shares shall be performed by
such transfer agent or transfer agents.
(e) To transfer upon the share books of the corporation any and all shares
of the corporation; provided, that so long as the corporation shall have one or
more duly appointed and acting transfer agents of the shares, or any class or
series of shares, of the corporation, such duties with respect to such shares
shall be performed by such transfer agent or transfer agents, and the method of
transfer of each certificate shall be subject to the reasonable regulations of
the transfer agent to which the certificate is presented for transfer, and also,
if the corporation then has one or more duly appointed and acting registrars, to
the reasonable regulations of the registrar to which the new certificate is
presented for registration; and provided, further, that no certificate for
shares of stock shall be issued or delivered or, if issued or delivered, shall
have any validity whatsoever until and unless it has been signed or
authenticated in the manner provided in Section 14.4 hereof.
(f) To make service and publication of all notices that may be necessary or
proper, and without command or direction from anyone, in case of the absence,
disability, refusal or neglect of the Secretary to make service or publication
of any notices, then such notices may be served and/or published by the
President or a Vice President, or by any person thereunto authorized by either
of them or by the Board of Directors or by the holders of a majority of the
outstanding shares of the corporation.
(g) Generally to do and perform all such duties as pertain to the office of
Secretary and as may be required by the Board of Directors.
Article VIII
CHIEF FINANCIAL OFFICER
Section 8.1 Powers and Duties. The powers and duties of the Chief
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Financial Officer are:
(a) To supervise and control the keeping and maintaining of adequate and
correct accounts of the corporation's properties and business transactions,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall at
all reasonable times be open to inspection by any director.
(b) To have the custody of all funds, securities, evidence of indebtedness
and other valuable documents of the corporation and, at the Chief Financial
Officer's discretion, to cause any or all thereof to be deposited for the
account of the corporation with such depositary as may be designated from time
to time by the Board of Directors.
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(c) To receive or cause to be received, and to give or cause to be given
receipts and acquittances for moneys paid in for the account of the corporation.
(d) To disburse, or cause to be disbursed, all funds of the corporation as
may be directed by the Board of Directors, taking proper vouchers for such
disbursements.
(e) To render to the President and to the Board of Directors, whenever they
may require, accounts of all transactions and of the financial condition of the
corporation.
(f) Generally to do and perform all such duties as pertain to the office of
Chief Financial Officer and as may be required by the Board of Directors.
Article IX
TREASURER
Section 9.1 Powers and Duties. The Treasurer shall have such powers and
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duties as from time to time may be prescribed by the board of directors or these
By-Laws, including custody of and responsibility for all money and investments.
Article X
CONTROLLER
Section 10.1 Powers and Duties. The Controller, if there be one, shall
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have the power and duty to keep and maintain adequate and correct accounts of
the corporation's properties and business transactions, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings and shares, and to render to the Chief Financial Officer, the
President and the Board of Directors, whenever they may require, accounts of all
transactions and of the financial condition of the corporation. The Controller
shall generally have the power to do and perform all such other duties as
pertain to the office of Controller and as may be required by the Board of
Directors.
Article XI
COMMITTEES OF THE BOARD
Section 11.1 Appointments and Procedure. The Board of Directors may, by
------------ --------------------------
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the Board, designate members of any committee, and
designate one or more directors as alternate members of any committee, who may
replace any absent member at any meeting of the committee.
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Section 11.2 Powers. Any committee appointed by the Board of Directors,
------------ ------
to the extent provided in the resolution of the Board or in these By-Laws, shall
have all the authority of the Board except with respect to:
(a) the approval of any action for which the California General Corporation
Law or the Articles of Incorporation or these By-Laws requires the approval or
vote of the shareholders or of a majority or supermajority of the directors then
serving on the Board of Directors;
(b) the filling of vacancies on the Board or on any committee;
(c) the fixing of compensation of the directors for serving on the Board or
on any committee;
(d) the amendment or repeal of By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a rate
or in a periodic amount or within a price range determined by the Board; and
(g) the appointment of other committees of the Board or the members
thereof.
Section 11.3 Executive Committee. In the event that the Board of
------------ -------------------
Directors appoints an Executive Committee, such Executive Committee, in all
cases in which specific directions to the contrary shall not have been given by
the Board of Directors, shall have and may exercise, during the intervals
between the meetings of the Board of Directors, all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation (except as provided in Section 11.2 hereof) in such manner as the
Executive Committee may deem best for the interests of the corporation.
Article XII
MEETINGS OF SHAREHOLDERS
Section 12.1 Place of Meetings. Meetings (whether regular, special
------------ -----------------
or adjourned) of the shareholders of the corporation shall be held at the
principal office for the transaction of business as specified in accordance with
Section 1.1 hereof, or any place within or without the State which may be
designated by written consent of all the shareholders entitled to vote thereat,
or which may be designated by the Board of Directors.
Section 12.2 Time of Annual Meetings. The annual meeting of the
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shareholders shall be held at the hour of 9:00 o'clock in the morning on the
fourth Thursday in June in each year,
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if not a legal holiday, and if a legal holiday, then on the next succeeding
business day not a legal holiday, or such other time or date as may be set by
the Board of Directors.
Section 12.3 Special Meetings. Special meetings of the shareholders
------------ ----------------
may be called by the Board of Directors, the Chairman of the Board, the
President or the holders of shares entitled to cast not less than 10% of the
vote at the meeting.
Section 12.4 Notice of Meetings. (a) Whenever shareholders are
------------ ------------------
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given not less than 10 nor more than 60 days before the day of
the meeting to each shareholder entitled to vote thereat. Such notice shall
state the place, date and hour of the meeting and (1) in the case of a special
meeting, the general nature of the business to be transacted, and no other
business may be transacted, or (2) in the case of the annual meeting, those
matters which the Board, at the time of the mailing of the notice, intends to
present for action by the shareholder, but subject to the provisions of
subdivision (b) any proper matter may be presented at the meeting for such
action. The notice of any meeting at which directors are to be elected shall
include the names of nominees intended at the time of the notice to be
presented by management for election.
(b) Any shareholder approval at a meeting, other unanimous approval by
those entitled to vote, on any of the matters listed below shall be valid only
if the general nature of the proposal so approved was stated in the notice of
meeting or in any written waiver of notice:
(1) a proposal to approve a contract or other transaction between
a corporation and one or more of its directors, or between a corporation and any
corporation, firm or association in which one or more directors has a material
financial interest;
(2) a proposal to amend the Articles of Incorporation;
(3) a proposal regarding a reorganization, merger or
consolidation involving this corporation;
(4) a proposal to wind up and dissolve the corporation; and
(5) a proposal to adopt a plan of distribution of the shares,
obligations or securities of any other corporation, domestic or foreign, or
assets other than money which is not in accordance with the liquidation rights
of any preferred shares as specified in the Articles of Incorporation.
(c) To be properly brought before an annual meeting or special
meeting, nominations for the election of directors or other business (not
specified in Section 12.4 (b)) must be (1) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (2) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (3) otherwise properly brought before
the meeting by a shareholder. For such nominations or other business to be
considered properly brought before the meeting by a shareholder,
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such shareholder must have given timely notice and in proper form of his intent
to bring such business before such meeting. To be timely, such shareholder's
notice must be delivered to or mailed and received by the secretary of the
corporation not less than 35 days prior to the meeting; provided, however, that
in the event that less than 60 days notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the shareholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. To be in proper form, a shareholder's
notice to the secretary shall set forth:
(1) the name and address of the shareholder who intends to make the
nominations, propose the business, and, as the case may be, the name and address
of the person or persons to be nominated or the nature of the business to be
proposed;
(2) a representation that the shareholder is a holder of record of
stock of the corporation entitled to vote at such meeting and, if applicable,
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice or introduce the business specified in the
notice;
(3) if applicable, a description of all arrangements or
understandings between the shareholders 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);
(4) such other information regarding each nominee or each matter of
business to be proposed by such shareholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be nominated,
or the matter been proposed, or intended to be proposed by the board of
directors; and
(5) if applicable, the consent of each nominee to serve as director
of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
Section 12.5 Delivery of Notice. Notice of shareholders' meeting or
------------ ------------------
any report shall be given either personally or by mail or other means of written
communication, addressed to the shareholder at the address of such shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice; or if no such address appears or is
given, at the place where the principal executive office of the corporation is
located or by publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located. The notice or
report shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any notice or report in accordance with the provisions
of this section, executed by the
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Secretary, Assistant Secretary or any transfer agent, shall be prima facie
evidence of the giving of the notice or report.
If any notice or report addressed to the shareholders at the address
of such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the date of
the giving of the notice to all other shareholders.
Section 12.6 Adjourned Meetings. When a shareholders' meeting is
------------ ------------------
adjourned to another time or place, unless the By-Laws otherwise require and
except as provided in this section, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 45 days or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
Section 12.7 Consent to Shareholders' Meeting. The transactions of
------------ --------------------------------
any meeting of shareholders, however called and noticed, and wherever held, are
as valid as though had at a meeting duly held after regular call and notice, if
a quorum is present either in person or by proxy, and if either before or after
the meeting each of the persons entitled to vote, not present in person or by
proxy signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters required by
the California General Corporation Law to be included in the notice but not so
included in the notice if such objection is expressly made at the meeting.
Neither the business to be transacted at nor the purpose of any regular or
special meeting of shareholders need be specified in any written waiver of
notice, unless otherwise provided in the Articles of Incorporation or By-Laws,
except as provided in subdivision (b) of Section 12.4.
Section 12.8 Quorum. (a) The presence in person or by proxy of the
------------ ------
persons entitled to vote the majority of the voting shares at any meeting shall
constitute a quorum for the transaction of business. Except as otherwise
expressly required by statute, the Articles of Incorporation and these By-Laws,
if a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter shall be the act
of the shareholders.
(b) The shareholders present at a duly called or held meeting at which
a quorum is present may continue to transact business until adjournment
notwithstanding the withdrawal of the
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number of enough shareholders to leave less than a quorum, if any action taken
(other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
(c) In the absence of a quorum, any meeting of shareholders from time
to time by the vote of a majority of the shares represented either in person or
by proxy, but no other business may be transacted, except as provided in
subdivision (b).
Section 12.9 Actions without Meeting. (a) Any action which may be
------------ -----------------------
taken at any annual or special meeting of shareholders may be taken without a
meeting and without prior notice, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares 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; provided that, subject to the provisions of Section 2.6,
directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors.
(b) Unless the consents of all shareholders entitled to vote have been
solicited in writing,
(1) notice of any shareholder approval on matters described in
subparagraphs (1), (3) or (5) of subdivision (b) of Section 12.4 or
respecting indemnification of agents of the corporation without a meeting
by less than unanimous written consent shall be given at least 10 days
before the consummation of the action authorized by such approval, and
(2) prompt notice shall be given of the taking of any other corporate
action approved by shareholders without a meeting by less than unanimous
written consent, to those shareholders entitled to vote but who have not
consented in writing; the provisions of Section 12.5 shall apply to such
notice.
Section 12.10 Revocation of Consent. Any shareholder giving a
------------- ---------------------
written consent, or the shareholder's proxy holders, or a transferee of the
shares or a personal representative of the shareholder or their respective proxy
holders, may revoke the consent by a writing received by the corporation prior
to the time that written consents of the number of shares required to authorize
the proposed action have been filed with the Secretary of the corporation, but
may not do so thereafter. Such revocation is effective upon its receipt by the
Secretary of the corporation.
Section 12.11 Voting Rights. Except as provided in Section 12.13 or
------------- -------------
in the Articles of Incorporation or in any statute relating to the election of
directors or to other particular matters, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote of
shareholders. Any holder of shares entitled to vote on any matter may vote part
of the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, other than elections to office, but,
if the shareholder fails to specify the number of shares such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares such shareholder is entitled to
vote.
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Section 12.12 Determination of Holders of Record. (a) In order that
------------- ----------------------------------
the corporation may determine the shareholders entitled to notice of or to vote
at any meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any rights in
respect of any other lawful action, the Board of Directors may fix in advance, a
record date, which shall not be more than 60 nor less than 10 days prior to the
date of such meeting nor more than 60 days prior to any other action.
(b) In the absence of any record date set by the Board of Directors
pursuant to subdivision (a) above, then:
(1) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business
on the business day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(2) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior
action by the Board has been taken, shall be the day on which the first
written consent is given.
(3) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto, or the 60th day prior to the date of such
other action, whichever is later.
(c) A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board fixes a new record date of the adjourned meeting, but
the Board shall fix a new record date if the meeting is adjourned for more than
45 days from the date set for the original meeting.
(d) Shareholders on the record date are entitled to notice and to vote
or to receive the dividend, distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date, except as otherwise provided
in the Articles of Incorporation or these By-Laws or by agreement or applicable
law.
Section 12.13 Election of Directors. (a) In any election of
------------- ---------------------
directors, the candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares are elected.
(b) Election for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting begins or unless
the By-Laws so require.
Section 12.14 Proxies. (a) Every person entitled to vote shares may
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authorize another person or persons to act by proxy with respect to such shares.
Any proxy purporting to be executed
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in accordance with the provisions of the General Corporation Law of the State of
California shall be presumptively valid.
(b) No proxy shall be valid after the expiration of 11 months from the
date thereof unless otherwise provided in the proxy. Every proxy continues in
full force and effect until revoked by the person executing it prior to the vote
pursuant thereto, except as otherwise provided in this section. Such revocation
may be effected by a writing delivered to the corporation stating that the proxy
is revoked or by a subsequent proxy executed by, or by attendance at the meeting
and voting in person by, the person executing the proxy. The dates contained on
the forms of proxy presumptively determine the order of execution, regardless of
the postmark dates on the envelopes in which they are mailed.
(c) A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the corporation.
Section 12.15 Inspectors of Election. (a) In advance of any meeting
------------- ----------------------
of shareholders the Board may appoint inspectors of election to act at the
meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any meeting of shareholders may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election (or
persons to replace those who so fail or refuse) at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed.
(b) The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders.
(c) The inspectors of election shall perform their duties,
impartially, in good faith, to the best of their ability and as expeditiously as
is practical. If there are three inspectors of election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by the inspectors of
election is prima facie evidence of the facts stated therein.
Article XIII
MEETINGS OF DIRECTORS
Section 13.1 Place of Meetings. Unless otherwise specified in the
------------ -----------------
notice thereof, meetings (whether regular, special or adjourned) of the Board of
Directors of this corporation shall be held at the principal office of the
corporation for the transaction of business, as specified in
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accordance with Section 1.1 hereof, which is hereby designated as an office for
such purpose in accordance with the laws of the State of California, or at any
other place within or without the State which has been designated from time to
time by resolution of the Board or by written consent of all members of the
Board.
Section 13.2 Regular Meetings. Regular meetings of the Board of
------------ ----------------
Directors, of which no notice need be given except as required by the laws of
the State of California, shall be held after the adjournment of each annual
meeting of the shareholders (which meeting shall be designated the Regular
Annual Meeting) and at such other times as may be designated from time to time
by resolution of the Board of Directors.
Section 13.3 Special Meetings. Special meetings of the Board of
------------ ----------------
Directors may be called at any time by the Chairman of the Board or the
President or by any Vice President or the Secretary or by any two or more of the
directors.
Section 13.4 Notice of Meetings. Except in the case of regular
------------ ------------------
meetings, notice of which has been dispensed with, the meetings of the Board of
Directors shall be held upon four days' notice by mail or 48 hours' notice
delivered personally or by telephone, telegraph or other electronic or wireless
means. If the address of a director is not shown on the records and is not
readily ascertainable, notice shall be addressed to him at the city or place in
which the meetings of the directors are regularly held. Except as set forth in
Section 13.6, notice of the time and place of holding an adjourned meeting need
not be given to absent directors if the time and place be fixed at the meeting
adjourned.
Section 13.5 Quorum. A majority of the authorized number of
------------ ------
directors constitutes a Quorum of the Board for the transaction of business.
Except as otherwise expressly required by statute, the Articles of Incorporation
or these By-Laws and every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 13.6 Adjourned Meeting. A majority of the directors present,
------------ -----------------
whether or not a quorum is present, may adjourn any meeting to another time and
place. If the meeting is adjourned for more than 24 hours, notice of any
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of the
adjournment.
Section 13.7 Waiver of Notice and Consent. (a) Notice of a meeting
------------ ----------------------------
need not be given to any director who signs a waiver of notice, whether before
or after the meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to such director.
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(b) The transactions of any meeting of the Board, however called and
noticed or wherever held, are as valid as though had at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the directors not present or who, though present, has
prior to the meeting or at its commencement, protested the lack of proper notice
to him, signs a written waiver of notice, a consent to holding the meeting or an
approval of the minutes thereof. All such waivers, consents and approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13.8 Action Without a Meeting. Any action required or
------------ ------------------------
permitted to be taken by the Board may be taken without a meeting, if all
members of the Board shall individually or collectively consent in writing to
such action. Such written consent or consents shall be filed with the minutes
of the proceedings of the Board. Such action by written consent shall have the
same force and effect as a unanimous vote of such directors.
Section 13.9 Conference Telephone Meetings. Members of the Board may
------------ -----------------------------
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting pursuant to this section
constitutes presence in person at such meeting.
Section 13.10 Meetings of Committees. The provisions of this Article
------------- ----------------------
apply also to committees of the Board and action by such committees.
Article XIV
SUNDRY PROVISIONS
Section 14.1 Instruments in Writing. All checks, drafts, demands for
------------ ----------------------
money and notes of the corporation, and all written contracts of the
corporation, shall be signed by such officer or officers, agent or agents, as
the Board of Directors may from time to time by resolution designate. No
officer, agent, or employee of the corporation shall have power to bind the
corporation by contract or otherwise unless authorized to do so by these By-Laws
or by the Board of Directors.
Section 14.2 Fiscal Year. The fiscal year of this corporation shall
------------ -----------
end on the Saturday nearest to the last day of January of each year.
Section 14.3 Shares Held by the Corporation. Shares in other
------------ ------------------------------
corporations standing in the name of this corporation may be voted or
represented and all rights incident thereto may be exercised on behalf of this
corporation by the President or by any other officer of this corporation
authorized so to do by resolution of the Board of Directors.
Section 14.4 Certificates of Stock. There shall be issued to each
------------ ---------------------
holder of fully paid shares of the capital stock of the corporation a
certificate or certificates for such shares. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief
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<PAGE>
Financial Officer or an Assistant Treasurer or the Secretary or any Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Section 14.5 Lost Certificates. The corporation may issue a new
------------ -----------------
share certificate or a new certificate for any other security in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate or the owner's legal representative to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate. The Board of Directors may
adopt such other provisions and restrictions with reference to lost
certificates, not inconsistent with applicable law, as it shall in its
discretion deem appropriate.
Section 14.6 Certification and Inspection of By-Laws. The
------------ ---------------------------------------
corporation shall keep at its principal executive office in this State, or if
its principal executive office is not in this State at its principal business
office in this State, the original or a copy of these By-Laws as amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the corporation
is outside this State and the corporation has no principal business office in
this State, it shall upon the written request of any shareholder furnish to such
shareholder a copy of the By-Laws as amended to date.
Section 14.7 Notices. Any reference in these By-Laws to the time a
------------ -------
notice is given or sent means, unless otherwise expressly provided, the time a
written notice by mail is deposited in the United States mails, postage prepaid;
or the time any other written notice is personally delivered to the recipient or
is delivered to a common carrier for transmission, or actually transmitted by
the person giving the notice by electronic means, to the recipient; or the time
any oral notice is communicated, in person or by telephone or wireless, to the
recipient or to a person at the office of the recipient who the person giving
wire the notice has reason to believe will promptly communicate it to the
recipient.
Section 14.8 Reports to Shareholders. Except as may otherwise be
------------ -----------------------
required by law, the rendition of an annual report to the shareholders is waived
so long as there are less than 100 holders of record of the shares of the
corporation (determined as provided in Section 605 of the California General
Corporation Law). At such time or times, if any, that the corporation has 100
or more holders of record of its shares, the Board of Directors shall cause an
annual report to be sent to the shareholders not later than 120 days after the
close of the fiscal year or within such shorter time period as may be required
by applicable law, and such annual report shall contain such information and be
accompanied by such other documents as may be required by applicable law.
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<PAGE>
Section 14.9 Indemnification of Officers, Directors, Employees and
------------ -----------------------------------------------------
Other Agents. (a) The corporation shall, to the fullest extent permissible
- ----- ------
under, and in the manner permitted by, California law, indemnify each of its
directors and officers against "Expenses" (as defined in Section 317(a) of the
California General Corporation Law), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any "Proceeding" (as
defined in Section 317(a) of the California General Corporation Law), arising by
reason of the fact that such person is or was an Agent (as defined in Section
317(a) of the California General Corporation Law) of the corporation. For
purposes of this Section 14.9, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director of officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
(b) The corporation shall have the power, to the fullest extent
permissible under, and in the manner permitted by, California law, to indemnify
each of its employees and other Agents against Expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any Proceeding, arising by reason of the fact that such person is or was an
employee or Agent of the corporation. For purposes of this Section 14.9, an
"employee" or "Agent" of the corporation includes any person (i) who is or was
an employee or Agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or Agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or Agent of the corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
(c) Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required or permitted pursuant to this
Section 14.9 shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Section 14.9.
(d) Enforcement. Without the necessity of entering into an express
-----------
contract, all rights to indemnification and advances under this Section 14.9
shall be deemed to be contractual rights and be effective to the same extent and
as if provided for in a contract between the corporation and the director or
officer who serves in such capacity at any time while this By-Law and other
relevant provisions of the California General Corporation Law and other
applicable law, if any, are in effect. Any right to indemnification or advances
granted by this Section 14.9 to a director or officer shall be enforceable by or
on behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is denied, in
whole or in part or (ii) no disposition of such claim is made within 90 days of
request therefor. The claimant in such enforcement action (an "Action"), if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any Action that a claimant has
not met the standard of conduct which make it permissible under the California
General Corporation Law for
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<PAGE>
the corporation to indemnify the claimant for the amount claimed, provided that
such defense shall not be available for an Action brought to enforce a claim for
the advancement of expenses pursuant to subdivision (d) above if the claimant
has tendered the required undertaking to the corporation. It shall not be a
defense to an Action, nor shall it create a presumption that the claimant has
not met the applicable standard of conduct, that the corporation (including its
Board of Directors, independent counsel or shareholders) has failed, prior to
the commencement of the Action, to have made a determination that the
indemnification of the claimant is proper in the circumstances, or that the
corporation (including its Board of Directors, independent counsel or
shareholders) has actually determined that the claimant has not met the
applicable standard of conduct.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
-------------------------
this Section 14.9 shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Articles of
Incorporation, By-Laws, agreement, vote of shareholders or disinterested
directors or otherwise both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or other Agents respecting indemnification
and advances, to the fullest extent permitted by the California General
Corporation Law.
(f) No indemnification or advance shall be made under this Section
14.9, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(1) That it would be inconsistent with a provision of the
Articles of Incorporation, these By-Laws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(g) Survival of Rights. The rights conferred on any person by this
------------------
Section 14.9 shall continue as to a person who has ceased to be a director,
officer, employee or other Agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(h) Insurance. The corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was an Agent of the
corporation against any liability asserted against or incurred by such person in
such capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Section 14.9.
(i) Repeal or Modification. Any repeal or modification of this
----------------------
Section 14.9 shall not adversely affect any rights under this Section 14.9 of
any director, officer or other Agent of the corporation relating to acts or
omissions occurring prior to such repeal or modification.
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<PAGE>
(j) Saving Clause. If this Section 14.9 or any portion hereof shall
-------------
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director or officer, any may
nevertheless indemnify any employee or other Agent, to the full extent permitted
by any applicable portion of this Section 14.9 that shall not have been
invalidated, or by any other applicable law.
(k) If the California General Corporation Law is hereafter amended to
further indemnification of Agents of the corporation, then the Corporation shall
be authorized to indemnify such Agents to the fullest extent permissible under
the California General Corporation Law as so amended.
Article XV
CONSTRUCTION OF BY-LAWS WITH
REFERENCE TO PROVISIONS OF LAW
Section 15.1 Definitions. Unless defined otherwise in these By-Laws
------------ -----------
or unless the context otherwise requires, terms used herein shall have the same
meaning, if any, ascribed thereto in the California General Corporation Law, as
amended from time to time.
Section 15.2 By-Law Provisions Additional and Supplemental to
------------ ------------------------------------------------
Provisions of Law. All restrictions, limitations, requirements and other
- ------------- ---
provisions of these By-Laws shall be construed, insofar as possible, as
supplemental and additional to all provisions of law applicable to the subject
matter thereof and shall be fully complied with in addition to the said
provisions of law unless such compliance shall be illegal.
Section 15.3 By-Law Contrary to or Inconsistent with Provisions of
------------ -----------------------------------------------------
Law. Any article, section, subsection, subdivision, sentence, clause or phrase
- ---
of these By-Laws which upon being construed in the manner provided in Section
15.2 hereof, shall be contrary to or inconsistent with any applicable provision
of law, shall not apply so long as said provisions of law shall remain in
effect, but such result shall not affect the validity or applicability of any
other portions of these By-Laws, it being hereby declared that these By-Laws
would have been adopted and each article, section, subsection, subdivision,
sentence, clause or phrase thereof, irrespective of the fact that any one or
more articles, sections, subsections, subdivisions, sentences, clauses or
phrases is or are illegal.
Article XVI
ADOPTION, AMENDMENT OR REPEAL OF BY-LAWS
Section 16.1 By Shareholders. Except as otherwise expressly required
------------ ---------------
by statute, the Articles of Incorporation or these By-Laws, By-Laws may be
adopted, amended or repealed by the approval of the affirmative vote of a
majority of the outstanding shares of the corporation entitled to vote.
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<PAGE>
Section 16.2 By the Board of Directors. Except as otherwise
------------ -------------------------
expressly required by statute, the Articles of Incorporation or these By-Laws
and subject to the right of shareholders to adopt, amend or repeal By-Laws, By-
Laws other than a By-Law or amendment thereof changing the authorized number of
directors (except to fix the authorized number of directors pursuant to a By-Law
providing for a variable number of directors) may be adopted, amended or
repealed by the Board of Directors.
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<PAGE>
EXHIBIT 10.1
================================================================================
[LOGO OF BANK OF AMERICA]
BANK OF AMERICA BUSINESS LOAN AGREEMENT
National Trust and Savings Association
- --------------------------------------------------------------------------------
This Agreement dated as of May 7, 1996, is between Bank of America National
-----------
Trust and Savings Association (the "Bank") and Cost Plus, Inc. (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Commitment") is equal to the amount indicated for each period specified
below:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From January 1 through
June 30 of each year $20,000,000
From July 1 through
December 31 of each year $35,000,000
</TABLE>
(b) This is a revolving line of credit with a within line facility for letters
of credit. During the availability period, the Borrower may repay
principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of the
line of credit plus the outstanding amounts of any letters of credit,
including amounts drawn on letters of credit and not yet reimbursed, to
exceed the Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and May 31, 1998 (the "Expiration Date") unless the Borrower is
in default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as described below,
the interest rate is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time to
time by the Bank in San Francisco, California, as its Reference Rate. The
Reference Rate is set by the Bank based on various factors, including the
Bank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans. The Bank
may price loans to its customers at, above, or below the Reference Rate.
Any change in the Reference Rate shall take effect at the opening of
business on the day specified in the public announcement of a change in
the Bank's Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on May 31, 1996, and then monthly
thereafter until payment in full of any principal outstanding under this
line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest or
other charges outstanding under this line of credit no later than the
Expiration Date.
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(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period, which
shall be no later than the Expiration Date.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based on the Bank's
Reference Rate, the Borrower may elect to have all or portions of the line of
credit (during the availability period) bear interest at the rate(s) described
below during an interest period agreed to by the Bank and the Borrower. Each
interest rate is a rate per year. Interest will be paid on the last day of each
interest period, and on the last day of each month during the interest period.
At the end of any interest period, the interest rate will revert to the rate
based on the Reference Rate, unless the Borrower has designated another optional
interest rate for the portion.
1.6 LIBOR RATE. The Borrower may elect to have all or portions of the
principal balance bear interest at the LIBOR Rate plus 2.0 percentage points.
Designation of a LIBOR Rate portion is subject to the following requirements:
(a) The interest period during which the LIBOR Rate will be in effect will be
one, two, or three months. The first day of the interest period must be a
day other than a Saturday or a Sunday on which the Bank is open for
business in California, New York, and London and dealing in offshore
dollars (a "LIBOR Banking Day"). The last day of the interest period and
the actual number of days during the interest period will be determined by
the Bank using the practices of the London inter-bank market.
(b) Each LIBOR Rate portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000).
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts
in the calculation will be determined by the Bank as of the first day of
the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the interest rate (rounded
upward to the nearest 1/16th of one percent) at which the Bank's
London Branch, London, Great Britain, would offer U.S. dollar
deposits for the applicable interest period to other major banks in
the London inter-bank market at approximately 11:00 a.m. London time
two (2) London Banking Days before the commencement of the interest
period. A "London Banking Day" is a day on which the Bank's London
Branch is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal,
emergency, supplemental, special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate portion no later than
9:00 a.m. San Francisco time on the LIBOR Banking Day preceding the day on
which the London Rate will be set, as specified above.
(e) The Borrower may not elect a LIBOR Rate with respect to any principal
amount which is scheduled to be repaid before the last day of the
applicable interest period.
(f) Any portion of the principal balance already bearing interest at the LIBOR
Rate will not be converted to a different rate during its interest period.
- --------------------------------------------------------------------------------
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<PAGE>
(g) Each prepayment of a LIBOR Rate portion, whether voluntary, by reason of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid and a prepayment fee as described below. A
"prepayment" is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this Agreement. The
prepayment fee shall be equal to the amount (if any) by which:
(i) the additional interest which would have been payable during the
interest period on the amount prepaid had it not been prepaid,
exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the London inter-bank
market for a period starting on the date on which it was prepaid and
ending on the last day of the interest period for such portion (or
the scheduled payment date for the amount prepaid, if earlier).
(h) The Bank will have no obligation to accept an election for a LIBOR Rate
portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of a LIBOR Rate portion are not available in
the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR Rate
portion.
Otherwise, the Bank will not arbitrarily reject an election for a LIBOR
Rate portion if, at the time of such election, the Borrower is in
compliance with all the terms and conditions of this Agreement and there
is no default hereunder.
1.7 LETTERS OF CREDIT. This line of credit may be used for financing
commercial letters of credit with a maximum maturity of 9O days. Each commercial
letter of credit will require drafts payable at sight.
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the Bank, be
added to the principal amount outstanding under this Agreement. The amount
will bear interest and be due as described elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately prepay and make
the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary acceptable
to the Bank.
(d) to sign the Bank's form Application and Agreement for Commercial Letter of
Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the Borrower
will be charged for issuing and processing letters of credit for the
Borrower.
2. FEES AND EXPENSES
2.1 FEES.
(a) LOAN FEE. The Borrower agrees to pay a Thirty-Four Thousand Three Hundred
Seventy-Five Dollar ($34,375) fee due on the date of this Agreement.
- --------------------------------------------------------------------------------
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<PAGE>
(b) UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any difference
between the Commitment and the amount of credit it actually uses,
determined by the weighted average loan balance maintained during the
specified period. The fee will be calculated at 0.125% per year. This fee
is due on April 30,1996, and quarterly thereafter until the expiration of
the availability period.
2.2 EXPENSES.
(a) The Borrower agrees to immediately repay the Bank for expenses that
include, but are not limited to, filing, recording and search fees,
appraisal fees, title report fees and documentation fees.
(b) The Borrower agrees to reimburse the Bank for any expenses it incurs in
the preparation of this Agreement and any agreement or instrument required
by this Agreement. Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of the Bank's in-house
counsel.
(c) If there is a default under this Agreement and the Borrower has failed to
cure the same within the cure period, if any, applicable to such default,
the Borrower agrees to reimburse the Bank for the cost of periodic audits
and appraisals of the personal property collateral securing this
Agreement, at such intervals as the Bank may reasonably require after the
occurrence of the default and the expiration of the cure period (if any).
The audits and appraisals may be performed by employees of the Bank or by
independent appraisers.
3. COLLATERAL
3.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower. In addition, all personal property
collateral securing this Agreement shall also secure all other present and
future obligations of the Borrower to the Bank (excluding any consumer credit
covered by the federal Truth in Lending law, unless the Borrower has otherwise
agreed in writing). All personal property collateral securing any other present
or future obligations of the Borrower to the Bank shall also secure this
Agreement.
(a) Inventory.
(b) Receivables.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 REQUESTS FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
4.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made for the account of the Bank's branch selected by the Bank from time
to time;
(c) made in immediately available funds, or such other type of funds selected
by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
4.3 TELEPHONE AND TELEFAX AUTHORIZATION.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates given by any
one of the individuals authorized to sign loan agreements on behalf of the
Borrower, or any other individual designated by any one of such authorized
signers.
- --------------------------------------------------------------------------------
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<PAGE>
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number ________________________, or such other of the
Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection
with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by the Borrower
to give such instructions. This indemnity and excuse will survive this
Agreement.
4.4 DIRECT DEBIT (LINE OF CREDIT).
(a) The Borrower agrees that the Bank may create advances under the line of
credit to pay interest and any fees that are due under this Agreement
(including, but not limited to, any fees due under Paragraphs 1.7 and 2.1
of this Agreement).
(b) The Bank will create such advances on the dates the payments become due.
If a due date does not fall on a banking day, the Bank will create the
advance on the first banking day following the due date.
(c) If the creation of an advance under the line of credit causes the total
amount of credit outstanding under the line to exceed the limitations set
forth in this Agreement, the Borrower will immediately pay the excess to
the Bank upon Bank's demand.
4.5 BANKING DAYS. Unless otherwise provided in this Agreement, a banking day
is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. All payments and disbursements which would be due on a
day which is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.
4.6 TAXES. The Borrower will not deduct any taxes from any payments it makes
to the Bank. If any government authority imposes any taxes on any payments made
by the Borrower, the Borrower will pay the taxes and will also pay to the Bank,
at the time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not been imposed. Upon request by the Bank, the Borrower will confirm
that it has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date. However, the Borrower will
not pay the Bank's net income taxes.
4.7 ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
The Borrower's obligations under this paragraph shall be limited to the Bank's
costs and losses arising on or after the date that is 90 days after the date the
Bank sends written notice to the Borrower confirming the Borrower's obligations
under this paragraph and describing in reasonably sufficient detail such costs
and losses.
4.8 INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used.
4.9 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at the Bank's Reference Rate plus 1.0 percentage
point. This may result in compounding of interest.
- --------------------------------------------------------------------------------
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<PAGE>
4.10 DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 2.0 percentage points
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any default.
5. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:
5.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any instrument or agreement required under
this Agreement have been duly authorized.
5.2 SECURITY AGREEMENTS. Signed original security agreements, assignments and
financing statements (together with collateral in which the Bank requires a
possessory security interest), which the Bank requires.
5.3 EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor
of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
5.4 INSURANCE. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
5.5 OTHER ITEMS. Any other items that the Bank reasonably requires.
6. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation.
6.1 ORGANIZATION OF BORROWER. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
6.2 AUTHORIZATION. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.
6.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
6.4 GOOD STANDING. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
6.5 NO CONFLICTS. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower is bound.
6.6 FINANCIAL INFORMATION. All financial and other information that has been
or will be supplied to the Bank is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's financial condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
6.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower, which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
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<PAGE>
6.8 COLLATERAL. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others.
6.9 PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
6.10 OTHER OBLIGATIONS. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
6.11 INCOME TAX RETURNS. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
6.12 NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse
of time or both would be, a default under this Agreement.
6.13 LOCATION OF BORROWER. The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
7. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
7.1 USE OF PROCEEDS. To use the proceeds of the credit only for the
operations of the Borrower and for working capital and general corporate
purposes.
7.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:
(a) Within 9O days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited (with an
unqualified opinion) by one of the accounting firms commonly known as the
"Big 6".
(b) Within 30 days of the period's end, the Borrower's monthly financial
statements. These financial statements may be Borrower prepared. For the
month of January in each year, these monthly financial statements will be
prepared as part of the Borrower's annual financial statements required
under (a) above and may be provided to the Bank together with those annual
statements.
(c) Within the period provided in (b) above, a compliance certificate of the
Borrower signed by an authorized financial officer of the Borrower setting
forth (i) the information and computations (in sufficient detail) to
establish that the Borrower is in compliance with all financial covenants
at the end of the period covered by the financial statements then being
furnished and (ii) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate, any
default under this Agreement and, if any such default exists, specifying
the nature thereof and the action the Borrower is taking and proposes to
take with respect thereto.
(d) An inventory listing within 30 days after the end of each month; the
listing must include a description of the inventory, its retail value, and
such other information as the Bank may require.
(e) Within 45 days of the Borrower's fiscal year end, the Borrower's annual
business plan/budget for the then current fiscal year in form satisfactory
to the Bank.
7.3 TANGIBLE NET WORTH. To maintain tangible net worth equal to at least
Thirty Million Dollars ($30,000,000) from the date of this Agreement through
January 31, 1997; Thirty-Two Million Dollars ($32,000,000) as of February
1, 1997; and thereafter, an amount equal to the sum of the following:
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(a) Thirty Million Dollars ($30,000,000); plus
(b) the sum of 90% of net income after income taxes (without subtracting
losses) earned in the fiscal year ending February 1, 1997.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles) plus
debt subordinated to the Bank in a manner acceptable to the Bank (using the
Bank's standard form) less total liabilities, including but not limited to
accrued and deferred income taxes, and any reserves against assets.
Compliance with this financial covenant will be measured as of the end of each
fiscal quarter.
7.4 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. To maintain a ratio of
total liabilities not subordinated to tangible net worth not exceeding the
amounts indicated as of the end of each fiscal quarter specified below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
1st fiscal quarter of each fiscal year 2.0:1.0
2nd fiscal quarter of each fiscal year 2.5:1.0
3rd fiscal quarter of each fiscal year 3.0:1.0
4th fiscal quarter of fiscal year ending
February 1, 1997 1.75:1.0
4th fiscal quarter of fiscal year ending
January 31, 1998 1.50:1.0
</TABLE>
"Total liabilities not subordinated" means the sum of current liabilities plus
long term liabilities, excluding debt subordinated to the Borrower's obligations
to the Bank in a manner acceptable to the Bank, using the Bank's standard form.
7.5 COVERAGE RATIO. To maintain a Coverage Ratio of at least 1.1:1.0.
"Coverage Ratio" means the ratio of net income after taxes and before
extraordinary items plus interest expense plus capitalized lease interest
---- ----
expense plus depreciation plus amortization to nonfinanced capital expenditures
---- ----
plus interest expense plus capitalized lease interest expense plus cash
- ---- ---- ----
dividends paid plus the current portion of long-term liabilities. It is
----
provided, however, that the first Two Million Five Hundred Thousand Dollars
($2,500,000) in capital expenditures in the fiscal year ending February 1, 1997,
and the first Three Million Five Hundred Thousand Dollars ($3,500,000) in
capital expenditures in the fiscal year ending January 31, 1998, will be
excluded from the Coverage Ratio calculation. This ratio will be calculated at
the end of each fiscal year. Any non-cash impact on the Borrower's net income
resulting from changes in generally accepted accounting principles; changes in
financial accounting standards promulgated by the Financial Accounting Standards
Board; changes in regulations of the Internal Revenue Service; changes in
accounting rules by the Securities and Exchange Commission; or other non-cash
items outside the control of the Borrower will be excluded from calculation of
this covenant.
7.6 INVENTORY TURN. To maintain an Inventory Turn of at least 2.75:1.0 during
the fiscal year ending February 1, 1997, and at least 2.90:1.0 during the fiscal
year ending January 31, 1998, and thereafter.
"Inventory Turn" means the ratio of cost of goods sold to the average book value
of the Borrower's inventory. This ratio will be calculated at the end of each
month, with the "average book value" equal to the average of the book values of
the Borrower's inventory at the end of that month and each of the 12 immediately
preceding
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months and using the Borrower's cost of goods sold for that month and each of
the 11 immediately preceding months.
7.7 MINIMUM NET INCOME. To earn net income after taxes and extraordinary
items of at least Two Million Dollars ($2,000,000). Compliance with this
financial covenant will be measured at the end of each month, using the results
of that month and each of the 11 immediately preceding months.
7.8 OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts or capital lease obligations (other than those to the Bank), or become
liable for the debts of others without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts, lines of credit and leases in existence on the date of this
Agreement disclosed in writing to the Bank prior to closing and acceptable
to the Bank.
(e) Additional debts and capital lease obligations for the acquisition of
fixed or capital assets, to the extent permitted under Paragraph 7.10 of
this Agreement. Such debts and obligations may include Purchase Money
Indebtedness. "Purchase Money Indebtedness" means (i) indebtedness for the
payment of all or any part of the purchase price of any fixed or capital
assets, (ii) indebtedness incurred at the time of or within ten (10) days
prior to or after the acquisition of any fixed or capital assets for the
purpose of financing all or any part of the purchase price thereof and
(iii) any renewals, extensions or refinancings thereof, but not any
increases in the principal amounts thereof outstanding at the time.
(f) Additional debts arising from the refinance of existing real property
owned by the Borrower.
(g) Obligations under capital leases of the Borrower's stores and warehouses
entered into in conjunction with the acquisition of fixed or capital
assets permitted under Paragraph 7.10 of this Agreement.
(h) Other unsecured indebtedness incurred in the ordinary course of business.
(i) Indebtedness of any subsidiary of the Borrower to the Borrower incurred in
the ordinary course of business.
7.9 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank prior to closing and acceptable to the Bank.
(d) Additional purchase money security interests or purchase money liens in
personal or real property acquired after the date of this Agreement which
secure Purchase Money Indebtedness permitted by subparagraph (e) of the
preceding paragraph.
(e) Liens on the refinanced real property which secure indebtedness permitted
by subparagraph (f) of the preceding paragraph.
(f) Liens arising in the ordinary course of the Borrower's business by
operation of law or regulation, but only if payment in respect of such
lien is not yet due.
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(g) Judgment liens in existence less than thirty (30) days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies.
(h) Liens in favor of customs and revenues authorities which secure payment of
customs duties in connection with the importation of goods.
(i) Liens on insurance policies and the proceeds thereof securing the
financing of the premiums arising by the issuer of such policies accepting
installments of premium instead of lump sum payments with respect thereto.
(j) Such minor defects, irregularities, encumbrances, easements, rights of
way, and clouds on title as normally exist with respect to similar
properties and which do not, individually or in the aggregate, materially
impair the property affected thereby or limit its use to the purpose for
which it was acquired.
(k) Landlord's liens arising under lease contracts or by operation of law in
the ordinary course of business which are not delinquent or remain payable
without penalty.
7.10 CAPITAL EXPENDITURES. Not to spend or incur obligations (including the
total amount of capital leases of equipment but excluding capital leases of the
Borrower's stores and warehouses) for more than Ten Million Dollars
($10,000,000) in the fiscal year ending February 1, 1997, and Thirteen Million
Dollars ($13,000,000) in the fiscal year ending January 31, 1998, to acquire
fixed or capital assets. It is provided, however, that in either such fiscal
year the total amount of capital expenditures attributable to indebtedness
(including obligations under capital leases of equipment) incurred by the
Borrower (i.e., the financed capital expenditures) may not exceed 50% of the
total amount of capital expenditures made during such fiscal year.
7.11 MAXIMUM OUTSTANDINGS. Not to permit the principal balance of advances
outstanding under this Agreement to exceed Five Million Dollars ($5,000,000) for
a period of at least 45 consecutive days between December 1 of each year and
March 31 of the next year. For the purposes of this paragraph, "advances" does
not include undrawn amounts of outstanding letters of credit.
7.12 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over One Million Dollars ($1,000,000) against the Borrower.
(b) any substantial dispute between the Borrower and any government
authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's financial condition or
operations.
(e) any change in the Borrower's name, legal structure, place of business, or
chief executive office if the Borrower has more than one place of
business.
7.13 BOOKS AND RECORDS. To maintain adequate books and records.
7.14 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.
7.15 COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.
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<PAGE>
7.16 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has.
7.17 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements
to keep the Borrower's properties in good working condition.
7.18 PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
7.19 Cooperation. To take any action requested by the Bank to carry out the
intent of this Agreement.
7.20 INSURANCE.
(a) INSURANCE COVERING COLLATERAL. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to
the Bank and must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(b) GENERAL BUSINESS INSURANCE. To maintain insurance satisfactory to the
Bank as to amount, nature and carrier covering property damage (including
loss of use and occupancy) to any of the Borrower's properties, public
liability insurance including coverage for contractual liability, product
liability and workers' compensation, and any other insurance which is
usual for the Borrower's business.
(c) EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
7.21 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination.
(d) lease, or dispose of all or a substantial part of the Borrower's business
or the Borrower's assets.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair market value,
or enter into any sale and leaseback agreement covering any of its fixed
or capital assets, except for sale and leaseback agreements covering the
Borrower's existing real property located in San Francisco and Modesto.
8. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
8.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
when due.
8.2 LIEN PRIORITY. The Bank fails to have an enforceable first lien (except
for any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for this loan. If, in the Bank's
opinion, the breach is capable of being remedied, the breach will not be
considered an event of default under this Agreement for a period of fifteen (15)
days after the earlier of (a) the date the Borrower knew or should have known of
such breach or (b) the date on which the Bank gives written notice of such
breach to the
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<PAGE>
Borrower; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during that period.
8.3 FALSE INFORMATION. The Borrower knowingly has given the Bank false or
misleading information or representations.
8.4 BANKRUPTCY. The Borrower files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower, or the Borrower makes a general
assignment for the benefit of creditors.
8.5 RECEIVERS. A receiver or similar official is appointed for the Borrower's
business, or the business is terminated.
8.6 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of Five Million
Dollars ($5,000,000) or more in excess of any insurance coverage.
8.7 JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower, or the Borrower enters into any settlement agreements with respect to
any litigation or arbitration, in an aggregate amount of Five Million Dollars
($5,000,000) or more in excess of any insurance coverage.
8.8 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's financial condition or
ability to repay.
8.9 MATERIAL ADVERSE CHANGE. A material adverse change occurs. "Material
adverse change" means (a) a material impairment of the ability of the Borrower
to perform its payment obligations under this Agreement or any document required
by this Agreement, or (b) a material adverse effect upon the legality, validity,
binding effect or enforceability against the Borrower of this Agreement or any
document required by this Agreement.
8.10 CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit the Borrower has obtained from anyone else or which the Borrower has
guaranteed and, if there is a cure period applicable to such default, such
default continues beyond the applicable cure period.
8.11 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination agreement,
security agreement, deed of trust, or other document required by this Agreement
is no longer in effect or is violated and, if there is a cure period applicable
to such violation, such violation continues beyond the applicable cure period.
8.12 OTHER BANK AGREEMENTS. The Borrower fails to meet the conditions of, or
fails to perform any obligation under any other agreement the Borrower has with
the Bank or any affiliate of the Bank and, if there is a cure period applicable
to such failure, such failure continues beyond the applicable cure period.
8.13 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article. If, in the Bank's opinion, the breach
is capable of being remedied, the breach will not be considered an event of
default under this Agreement for a period of fifteen (15) days after the date on
which the Bank gives written notice of the breach to the Borrower; provided,
however, that the Bank will not be obligated to extend any additional credit to
the Borrower during that period.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
9.2 CALIFORNIA LAW. This Agreement is governed by California law.
9.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent.
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The Bank may sell participations in or assign this loan, and may exchange
financial information about the Borrower with actual or potential participants
or assignees. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against the Borrower.
9.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those that
arise from:
(i) This Agreement (including any renewals, extensions or modifications
of this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted between
the Borrower and the Bank, including claims for injury to persons,
property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United States
Arbitration Act. The United States Arbitration Act will apply even though
this Agreement provides that it is governed by California law.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the filing
of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated
under this paragraph is subject to any applicable statute of limitations.
The arbitrators will have the authority to decide whether any such claim
or controversy is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be submitted
to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or claim,
at the time of the proposed submission to arbitration, arises from or
relates to an obligation to the Bank secured by real property located in
California. In this case, both the Borrower and the Bank must consent to
submission of the claim or controversy to arbitration. If both parties do
not consent to arbitration, the controversy or claim will be settled as
follows:
(i) The Borrower and the Bank will designate a referee (or a panel of
referees) selected under the auspices of the American Arbitration
Association in the same manner as arbitrators are selected in
Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will be appointed
by a court as provided in California Code of Civil Procedure Section
638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or the
panel) will be entered as a judgment in the court that appointed the
referee, in accordance with the provisions of California Code of
Civil Procedure Sections 644 and 645.
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(h) This provision does not limit the right of the Borrower of the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if the
other party contests the lawsuit. However, if the controversy or claim
arises from or relates to an obligation to the Bank which is secured by
real property located in California at the time of the proposed submission
to arbitration, this right is limited according to the provision above
requiring the consent of both the Borrower and the Bank to seek resolution
through arbitration.
(j) If the Bank forecloses against any real property securing this Agreement,
the Bank has the option to exercise the power of sale under the deed of
trust or mortgage, or to proceed by judicial foreclosure.
9.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
9.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.
9.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any reasonable
costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. As
used in this paragraph, "attorneys' fees" includes the allocated costs of in-
house counsel.
9.8 ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
9.9 NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.
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9.10 HEADINGS. Article and paragraph headings are for reference only and shall
not affect the interpretation or meaning of any provisions of this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
This Agreement is executed as of the date stated at the top of the first page.
[LOGO OF BANK OF AMERICA]
BANK OF AMERICA COST PLUS, INC.
NATIONAL TRUST AND SAVINGS ASSOCIATION
X /s/ W. F. Rodgers X /s/ Alan E. Zimtbaum
---------------------------------- ----------------------------------
By: W.F. Rodgers By: Alan E. Zimtbaum
Title: Vice President Title: Executive Vice President
Chief Financial Officer
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE BORROWER
ARE TO BE SENT: ARE TO BE SENT:
International Trade Banking Office #1768
201 California Street 201 Clay Street
San Francisco, CA 94111 Oakland, CA 94607
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<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF BANK OF AMERICA]
BANK OF AMERICA SECURITY AGREEMENT (RECEIVABLES AND INVENTORY)
- --------------------------------------------------------------------------------
1. THE SECURITY
The undersigned Cost Plus, Inc. ("Borrower") hereby assigns and grants to Bank
of America National Trust and Savings Association ("Bank") a security interest
in the following described property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Borrower: accounts, contract rights, chattel paper, instruments,
deposit accounts, and general intangibles.
B. All inventory now owned or hereafter acquired by Borrower.
C. All negotiable and nonnegotiable documents of title now owned or
hereafter acquired by Borrower.
D. All rights under contracts of insurance now owned or hereafter
acquired by Borrower covering any of the above-described property.
E. All proceeds, product, rents and profits now owned or hereafter
acquired by Borrower of any of the above-described property.
F. All books and records now owned or hereafter acquired by Borrower
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS.
The collateral secures and will secure all Indebtedness of Borrower to Bank. For
the purposes of this Agreement, "Indebtedness" means all loans and advances made
by Bank to Borrower and all other obligations and liabilities of Borrower to
Bank, whether now existing or hereafter incurred or created, whether voluntary
or involuntary, whether due or not due, whether absolute or contingent, or
whether incurred directly or acquired by Bank by assignment or otherwise. Unless
Borrower shall have otherwise agreed in writing, Indebtedness, for the purposes
of this Agreement, shall not include "consumer credit" subject to the disclosure
requirements of the Federal Truth in Lending Act or any regulations promulgated
thereunder.
3. BORROWER'S COVENANTS.
Borrower covenants and warrants that unless compliance is waived by Bank in
writing:
A. Borrower will properly preserve the Collateral; defend the
Collateral against any adverse claims and demands; and keep accurate
Books and Records.
B. Borrower has notified Bank in writing of, and will notify Bank in
writing prior to any change in the locations of (i) Borrower's place
of business or Borrower's chief executive office if Borrower has
more than one place of business and (ii) any Collateral, including
the Books and Records.
C. Borrower will notify Bank in writing prior to any change in
Borrowers name, identity or business structure.
D. Borrower will maintain and keep in force insurance covering
Collateral designated by Bank against fire and extended coverages.
Such insurance shall require losses to be paid on a replacement cost
basis, be issued by insurance companies acceptable to Bank and
include a loss payable endorsement in favor of Bank in a form
acceptable to Bank
E. Borrower has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral
free of all liens, claims, security interests and encumbrances of
any kind or nature, except the security interest of Bank.
F. Borrower will not sell, lease, agree to sell or lease, or otherwise
dispose of or remove from Borrower's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Borrower, or (ii) any other Collateral except with the
prior written consent of Bank.
G. Borrower will promptly notify Bank in writing of any event which
affects the value of any Collateral, the ability of Borrower or Bank
to dispose of any Collateral, or the rights and remedies of Bank in
relation thereto, including but not limited to, the levy of any
legal process against any Collateral and the adoption of any
marketing order, arrangement or procedure affecting the Collateral,
whether governmental or otherwise.
H. If any Collateral is or becomes the subject of any negotiable
document of title including any warehouse receipt or bill of lading,
Borrower shall immediately deliver such document to Bank.
I. Until Bank exercises its rights to make collection, Borrower will
diligently collect all Collateral.
- --------------------------------------------------------------------------------
N-255 M(3-91) -1- 006445-T2007
<PAGE>
- --------------------------------------------------------------------------------
4. ADDITIONAL OPTIONAL REQUIREMENTS.
Borrower agrees that Bank may at its option at any time, whether or not Borrower
is in default:
A. Require Borrower to deliver to Bank (i) copies of or extracts from
the Books and Records, and (ii) information on any contracts or
other matters affecting the Collateral.
B. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such
purposes enter at any reasonable time upon the property where any
Collateral or any Books and Records are located.
C. Require Borrower to deliver to Bank any instruments or chattel
paper.
5. DEFAULTS.
Any one or more of the following shall be a default hereunder.
A. Borrower fails to pay any indebtedness when due.
B. Borrower breaches any term, provision, warranty or representation
under this Agreement or under any other obligation of Borrower to
Bank.
C. Any custodian, receiver or trustee is appointed to take possession,
custody or control of all or a substantial portion of the property
of Borrower or of any guarantor of any indebtedness.
D. Borrower or any guarantor of any indebtedness becomes insolvent, or
is generally not paying or admits in writing its inability to pay
its debts as they become due, fails in business, makes a general
assignment for the benefit of creditors, dies or commences any case,
proceeding or other action under any bankruptcy or other law for the
relief of or relating to, debtors.
E. Any case, proceeding or other action is commenced against Borrower
or any guarantor of any indebtedness under any bankruptcy or other
law for the relief of or relating to, debtors.
F. Any involuntary lien of any kind or character attaches to any
Collateral.
G. Any financial statements, certificates, schedules or other
information now or hereafter furnished by Borrower to Bank proves
false or incorrect in any material respect.
6. BANK'S REMEDIES AFTER DEFAULT.
In the event of any default Bank may do any one or more of the following:
A. Declare any indebtedness immediately due and payable, without
notice or demand.
B. Enforce the security interest given hereunder pursuant to the
Uniform Commercial Code and any other applicable law.
C. Enforce the security interest of Bank in any deposit account of
Borrower maintained with Bank by applying such account to the
Indebtedness.
D. Require Borrower to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by
Bank.
E. Enter upon the property where any Collateral, including any Books
and Records are located and take possession of such Collateral and
such Books and Records, and use such property (including any
buildings and facilities) and any of Borrower's equipment, if Bank
deems such use necessary or advisable in order to take possession
of, hold, preserve, process, assemble, prepare for sale or lease,
market for sale or lease, sell or lease, or otherwise dispose of any
Collateral.
F. Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Borrower.
G. Use or transfer any of Borrower's rights and interest in any
Intellectual Property now owned or hereafter acquired by Borrower,
if Bank deems such use or transfer necessary or advisable in order
to take possession of, hold, preserve, process, assemble, prepare
for sale or lease, market for sale or lease, sell or lease, or
otherwise dispose of, any Collateral. Borrower agrees that any such
use or transfer shall be without any additional consideration to
Borrower. As used in this paragraph, "Intellectual Property"
includes, but is not limited to, all trade secrets, computer
software, service marks, trademarks, trade names, trade styles,
copyrights, patents, applications for any of the foregoing, customer
lists, working drawings, instructional manuals, and rights in
processes for technical manufacturing, packaging and labeling in
which Borrower has any right or interest, whether by ownership,
license, contract or otherwise.
- --------------------------------------------------------------------------------
N-255 M(3-91) -2- 006445-T2007
<PAGE>
- --------------------------------------------------------------------------------
H. Have a receiver appointed by any court of competent jurisdiction to take
possession of the Collateral.
I. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for sale
or lease, market for sale or lease, sell or lease, or otherwise dispose
of, any Collateral, and Borrower hereby irrevocably constitutes and
appoints Bank as Borrowers attorney-in-fact to perform all acts and
execute all documents in connection therewith.
J. Require Borrower to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
K. Require Borrower to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any inventory.
L. Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
M. Require Borrower to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's exclusive
control.
N. Demand and collect any payments and proceeds of the Collateral. In
connection therewith Borrower irrevocably authorizes Bank to endorse or
sign Borrower's name on all checks, drafts, collections, receipts and
other documents, and to take possession of and open the mail addressed to
Borrower and remove therefrom any payments and proceeds of the Collateral.
7. MISCELLANEOUS.
A. Any waiver, expressed or implied, of any provision hereunder and
any delay or failure by Bank to enforce any provision shall not
preclude Bank from enforcing any such provision thereafter.
B. Borrower shall, at the request of Bank, execute such other
agreements, documents, instruments, or financing statements in
connection with this Agreement as Bank may reasonably deem
necessary.
C. All notes, security agreements, subordination agreements and other
documents executed by Borrower or furnished to Bank in connection
with this Agreement must be in form and substance satisfactory to
Bank.
D. This Agreement shall be governed by and construed according to the
laws of the State of California, to the jurisdiction of which the
parties hereto submit.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare
for sale or lease, market for sale or lease, sell or lease, or
otherwise dispose of, any Collateral, Borrower agrees to pay
immediately the costs and expenses thereof, together with reasonable
attorney's fees and allocated costs for in-house legal services.
Dated: 5/7/96
------
BANK OF AMERICA Borrower
National Trust and Savings Association Cost Plus, Inc.
X /s/ W.F. Rodgers X /s/ Alan E. Zimtbaum
---------------------------------- ----------------------------------
By: W.F. Rodgers, Vice President By: Alan E. Zimtbaum,
Executive Vice President/
Chief Financial Officer
X
----------------------------------
By:
- --------------------------------------------------------------------------------
N-255 M(3-91) -3- 006445-T2007
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF BANK OF AMERICA]
BANK OF AMERICA CORPORATE RESOLUTIONS TO OBTAIN CREDIT
- --------------------------------------------------------------------------------
RESOLVED, that this corporation, Cost Plus, Inc., may:
1. borrow money from BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("Bank");
2. obtain for the account of this corporation commercial and standby
letters of credit issued by Bank;
3. obtain for the account of this corporation Bank's acceptance of
drafts and other instruments; and
4. discount with or sell to Bank notes, acceptances, drafts,
receivables and other evidences of indebtedness, and assign or
otherwise transfer to Bank any security interest or lien for such
obligations;
from time to time, in such amount or amounts as in the judgment of the
Authorized Officers (as hereinafter defined) this corporation may require (the
credit facilities described in the first part of this resolution are
collectively referred to herein as the "Credit Facilities"); provided, however,
that the aggregate principal amount outstanding at any one time under the Credit
Facilities authorized by this resolution shall not exceed the sum of Thirty Five
Million Dollars ($35,000,000), which sum shall be in addition to such other
amount or amounts as otherwise may be authorized.
RESOLVED FURTHER, that the Authorized Officers are hereby authorized and
directed, as security for any obligation or obligations of this corporation to
Bank whether arising pursuant to these Resolutions or otherwise, to grant in
favor of Bank a security interest in or lien on any real or personal property
belonging to or under the control of this corporation.
RESOLVED FURTHER, that
1. If only one signature is obtained, any one of the following:
a. Alan E. Zimtbaum, Executive Vice President/Chief
Financial Officer
b. Malcolm Carden, Director of Finance
c. Patricia Saucy, Vice President/Controller
d.
e.
f.
2. If two signatures are obtained, any one of the following:
a.
b.
c.
d.
e.
f.
together with any one of the following:
g.
h.
i.
j.
k.
l.
of this corporation, acting individually or in any combination as may be set
forth above (the "Authorized Officers"), are hereby authorized and directed, in
the name of this corporation, to execute and deliver to Bank, and Bank is
requested to accept:
a. the notes, credit agreements, advance account agreements, acceptance
agreements, letter of credit applications and agreements, purchase agreements or
other instruments, agreements and documents which evidence the obligations of
this corporation under the Credit Facilities obtained or to be obtained pursuant
to these resolutions;
b. any and all security agreements, deeds of trust, mortgages, financing
statements, fixture filings or other instruments, agreements and documents with
respect to any security interest or lien authorized to be given pursuant to
these resolutions; and
c. any other instruments, agreements and documents as Bank may require
and the Authorized Officers may approve.
- --------------------------------------------------------------------------------
N-243 11-87 (Reprint 12-87) -1- 006444-T2007
<PAGE>
- --------------------------------------------------------------------------------
RESOLVED FURTHER, that the Authorized Officers are hereby authorized and
directed, in the name of this corporation, to endorse, assign to Bank, and
deliver to Bank, any and all notes, acceptances, drafts, receivables and other
evidences of indebtedness discounted with or sold to Bank, together with any
security interest or lien for such obligations, and to guarantee the payment of
the same to Bank.
RESOLVED FURTHER, that any and all of the instruments, agreements and
documents referred to above may contain such recitals, covenants, agreements and
other provisions as Bank may require and the Authorized Officers may approve,
and the execution of such instruments, agreements and documents by the
Authorized Officers shall be conclusive evidence of such approval, and that the
Authorized Officers are authorized from time to time to execute renewals or
extensions of any and all such instruments, agreements and documents.
RESOLVED FURTHER, that Bank is authorized to act upon the foregoing
resolutions until written notice of revocation is received by Bank, and that the
authority hereby granted shall apply with equal force and effect to the
successors in office of the Authorized Officers.
CORPORATE SECRETARY'S CERTIFICATE
I, Alan E. Zimtbaum, Secretary of Cost Plus, Inc., a corporation organized
and existing under the laws of the State of California (the "Corporation"),
hereby certify that the foregoing is a full, true and correct copy of
resolutions of the Board of Directors of the Corporation, duly and regularly
adopted by the Board of Directors of the Corporation in all respects as required
by law and the by-laws of the Corporation on April 26, 1996 at a meeting at
--------------
which a quorum of the Board of Directors of the Corporation was present and the
requisite number of such directors voted in favor of said resolutions, or by the
unanimous consent in writing of all members of the Board of Directors of the
Corporation to the adoption of said resolutions.
I further certify that said resolutions are still in full force and effect
and have not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for the Corporation
by virtue of such resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of the
Corporation, and affixed the corporate seal of the Corporation, on May 7, 1996.
-----------
AUTHORIZED SIGNATURES:
X /s/ Alan E. Zimtbaum X /s/ Alan E. Zimtbaum
- ------------------------------------ ------------------------------------
Alan E. Zimtbaum, Executive Vice Alan E. Zimtbaum, Secretary of
President/Chief FinanciaI Officer Cost Plus, Inc.
a California corporation
X /s/ Malcolm Carden
- ------------------------------------
Malcolm Carden, Director of Finance
Affix Corporate Seal Here:
X /s/ Patricia Saucy
- ------------------------------------
Patricia Saucy, Vice President/
Controller
X
- ------------------------------------
X
- ------------------------------------
X
- ------------------------------------
- --------------------------------------------------------------------------------
N-243 11-87 (Reprint 12-87) -2- 006444-T2007
<PAGE>
(Exhibit 11)
COST PLUS, INC.
COMPUTATION OF NET LOSS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS, UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
August 3, July 22, August 3, July 22,
1996 1995 1996 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
NET LOSS $ (197) $ (920) $ (592) $(1,558)
====== ====== ====== =======
Weighted average shares outstanding
during the period:
Common Stock 8,067 5,849 7,354 5,849
Add incremental shares from assumed
exercise of stock options 444 304 379 304
------ ------ ------ -------
Weighted average common and common
equivalent shares outstanding 8,511 6,153 7,733 6,153
====== ====== ====== =======
PRIMARY NET LOSS PER SHARE $ (.02) $ (.15) $ (.08) $ (.25)
====== ====== ====== =======
Weighted average shares outstanding
during the period:
Common Stock 8,067 5,849 7,354 5,849
Add incremental shares from assumed
exercise of stock options 444 304 424 304
------ ------ ------ -------
Weighted average common and common
equivalent shares outstanding 8,511 6,153 7,778 6,153
====== ====== ====== =======
FULLY DILUTED NET LOSS PER SHARE $ (.02) $ (.15) $ (.08) $ (.25)
====== ====== ====== =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COST PLUS, INC. FOR THE SIX MONTHS ENDED AUGUST 3, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<CASH> 1,314
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 41,231
<CURRENT-ASSETS> 44,605
<PP&E> 86,198
<DEPRECIATION> 28,172
<TOTAL-ASSETS> 110,853
<CURRENT-LIABILITIES> 24,934
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 64,731
<TOTAL-LIABILITY-AND-EQUITY> 110,853
<SALES> 79,113
<TOTAL-REVENUES> 79,113
<CGS> 51,326
<TOTAL-COSTS> 78,732
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,384
<INCOME-PRETAX> (1,003)
<INCOME-TAX> (411)
<INCOME-CONTINUING> (592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (592)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
