UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|x| Annual Report Pursuant To Section 13 or 15(d) Of The Securities Exchange Act
of 1934 (Fee Required)
For the fiscal year ended December 30, 1995
OR
| |Transition Report Pursuant To Section 13 or 15(d) Of The Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from
Commission file number 0-15385
ONE PRICE CLOTHING STORES, INC.
(Exact name of registrant as specified in its charter)
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Delaware 57-0779028
(State or other jurisdiction of organization) (I.R.S. Employer Identification No.)
1875 East Main Street
Highway 290, Commerce Park
Duncan, South Carolina 29334
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (864) 433-8888
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 22, 1996:
Common Stock, $0.01 Par Value - $26,811,231
The number of shares outstanding of the issuer's classes of common stock as of
March 22, 1996: Common Stock, $0.01 Par Value - 10,335,031 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be held
May 20, 1996 are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
General
One Price Clothing Stores, Inc. (the "Registrant" or the "Company") operates a
chain of off-price retail women's and children's specialty stores offering a
wide variety of first quality, contemporary, in-season apparel and accessories
for the uniform retail price of $7. The Company purchases merchandise at heavily
discounted prices in large quantities from a broad mix of manufacturers,
jobbers, importers and other suppliers. Items offered in the Company's stores
typically sell in department and specialty stores for $15 and up. The Company is
able to acquire such merchandise at heavily discounted prices because of its
willingness to purchase large quantities and odd lots and to buy goods later in
the season than most other retailers. The Company's buyers are able to take
advantage of situations such as over-production, order cancellations, excess
foreign factory capacity or quota and manufacturers' needs to liquidate stock.
This purchasing strategy allows the Company to obtain a price advantage and to
react quickly to seasonal fashion preferences and weather conditions affecting
consumer spending. It is the Company's policy to offer only first quality
apparel; the Company does not purchase "seconds" or irregular merchandise from
its suppliers. The Company increased its retail price from $6 to $7 on August 5,
1990, the only price increase since the Company began operations in 1984. At
this time, management does not anticipate increasing the retail price in the
near future.
Company History and Organization
The Company opened its first store in August 1984. The Company changed its
corporate domicile from South Carolina to Delaware on April 9, 1987 and
completed the initial public offering of its Common Stock on May 27, 1987. All
information contained herein has been adjusted to reflect the issuance of
10.120811 shares of the Company's Common Stock, $.01 par value, (the "Common
Stock") in exchange for each share of Common Stock then outstanding in
connection with the Company's re-incorporation in Delaware, a 3-for-2 stock
split effected in the form of a stock dividend paid on October 15, 1987, and a
3-for-2 stock split effected in the form of a stock dividend paid on April 29,
1994. On February 9, 1994, a wholly-owned subsidiary of the Company, One Price
Clothing of Puerto Rico, Inc., was incorporated in Puerto Rico. It commenced
operations on May 28, 1994. As used herein, unless the context otherwise
indicates, the "Company" refers to One Price Clothing Stores, Inc., a Delaware
corporation, to its immediate predecessor, a South Carolina corporation of the
same name, to the South Carolina corporation's predecessor, a North Carolina
corporation organized in 1984 under the name J. K. Apparel, Inc. and to One
Price Clothing of Puerto Rico, Inc.
Industry Segments
The Company operates in only one industry segment. All of the Company's assets
and significant revenues and pre-tax earnings relate to retail sales of women's
and children's apparel and accessories to the general public through
Company-operated stores. At the end of 1995, 1994 and 1993, the Company's total
assets were $79,364,000, $67,930,000 and $64,201,000, respectively. Net sales
were $294,692,000 in 1995, $283,326,000 in 1994 and $234,698,000 in 1993. The
Company had a net loss of $1,304,000 in 1995, net income of $4,389,000 in 1994
and net income of $8,724,000 in 1993. Other than operations in Puerto Rico, the
Company had no operations outside the continental United States at the end of
fiscal 1995 and no export sales. Reference is hereby made to the financial
statements included in Part II for more detailed information about the Company's
assets.
Operations
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The Company operates a chain of off-price retail women's and children's
specialty stores offering a wide variety of first quality, contemporary,
in-season apparel and accessories for the uniform retail price of $7. The
Company registered the trademark "One Price" with the United States Patent and
Trademark Office in June, 1990 for a ten-year period with the option to renew
upon expiration. The Company intends to apply for renewal for this trademark.
The Company registered the trademark "Every Day Every Item" in June, 1989 for a
twenty-year period with the United States Patent and Trademark Office. The
trademark expires in June, 2009 with the option to renew. The Company considers
these trademarks to be valuable and significant to the conduct of its business.
The Company registered "Every Day Every Item", "Todos Los Dias Todos Los
Articulos," "One Price" and "Un Solo Precio" in Mexico in June, 1993. Management
has decided to forego use of this mark at this time in Mexico which may result
in the lapsing of such registrations in Mexico.
The One Price Store. The Company's typical store has approximately 3,300 square
feet, of which approximately 2,400 square feet is devoted to selling space. All
of the Company's stores are located in leased facilities with convenient access
to adequate parking or public transportation. At December 30, 1995,
approximately 92% of the Company's stores were located in strip shopping centers
and the remaining stores were located in central business districts or malls.
The Company does not franchise its stores.
The Company's stores are primarily located in or near communities with a
population of at least 40,000 - 50,000 and above, as well as in large
metropolitan areas. Most of the Company's stores are open seven days a week and
typical hours of operation are from 10:00 a.m. until 7:00 p.m. or 9:00 p.m.,
Monday through Saturday, with shorter hours on Sunday. A typical store employs a
full-time manager, one or two full-time assistant managers and up to ten
additional part-time sales associates.
The Company's stores are designed for customer convenience and for attractive
presentation of merchandise. All apparel is displayed on hangers and is
organized by classification, style and color, promoting a pleasant shopping
environment and customer convenience.
The Company's store operations department is headed by a Senior Vice President
of Stores who is assisted by two Directors of Store Operations and Regional and
District Sales Managers. Each Regional Sales Manager is responsible for
approximately 9 districts. Each District Sales Manager is responsible for
approximately 10 to 12 stores and visits each store in his or her district on a
regular or as-needed basis to provide assistance in promoting sales, training,
store layout and merchandise presentation, and to monitor adherence to the
Company's operational and management policies.
Store Locations and Expansion. At December 30, 1995, the Company operated 701
stores in 28 states and Puerto Rico.
The Company opened a net of 83 stores and closed 23 underperforming stores in
fiscal 1995. The Company's expansion plans in 1996 include opening approximately
20 new stores primarily in existing markets, closing approximately 60 stores
(compared to an average of 30 stores over the last several years), and
relocating approximately 10 stores.
Purchasing. The Company's practice is to offer value to its customers by selling
desirable women's and children's apparel and accessories at considerably lower
prices than generally would be available from department stores and other
specialty retailers. The Company purchases its merchandise at heavily discounted
prices and on favorable terms from manufacturers, jobbers, importers and other
vendors.
The Company typically is able to purchase merchandise from vendors at
substantially discounted prices as a result of the following circumstances: the
inability of a manufacturer or importer to dispose of merchandise through
regular channels, the discontinuance of merchandise because of changes in color
or style, over-production by manufacturers, cancellation of orders by
conventional retail stores, the need of
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catalog retailers to dispose of inventories of unordered catalog merchandise,
and manufacturers' need to utilize excess capacity or import quota or need for
liquidity. The Company's ability and willingness to purchase in large quantities
and in odd-lot or broken-size assortments and its reputation for reliability in
the industry provide the Company with purchasing advantages. Typically, the
Company buys the majority of its merchandise close to and during each selling
season, later than department stores and other specialty retailers. This
purchasing strategy permits the Company to react to fashion trends and
opportunistic developments during a selling season. The Company may also
purchase selected merchandise in advance of a selling season.
During fiscal 1995, the Company purchased merchandise from approximately 940
vendors, including manufacturers, jobbers, importers and other vendors. No
vendor accounted for more than 10% of the Company's total purchases for the
year.
Although there can be no assurance that the Company will be able to continue to
acquire sufficient quantities of first quality merchandise at such low prices on
favorable terms, the Company continues to add new vendors and believes that
adequate sources of first quality merchandise are available at appropriate price
levels. The Company does not maintain long-term or exclusive purchase
commitments or arrangements with any vendor.
Corporate Offices and Distribution Center. The Company's Corporate Offices and
Distribution Center are located in Duncan, South Carolina. With the exception of
functions performed by certain merchandise buyers, regional directors of real
estate, district and regional sales managers, and certain administrative
functions performed in Puerto Rico, substantially all purchasing, accounting and
other administrative functions are centralized at the Corporate Offices.
Substantially all merchandise is shipped directly from vendors to the Company's
Distribution Center where the goods are processed and sent to the Company's
stores. The majority of shipments to stores are made by common carriers.
Merchandising. The Company's merchandising strategy emphasizes contemporary and
in-season apparel for juniors, misses, large-sized women and children. The
Company's target customers are value- and fashion-conscious women, primarily in
lower and middle income brackets. The Company offers only first quality
merchandise at the retail price of $7 per item and emphasizes the value of its
merchandise compared to similar merchandise sold elsewhere at higher prices.
Women's apparel sold by the Company includes contemporary sportswear such as
knit tops, pants, blouses, shirts, skirts, sweaters, jackets and shorts. In
addition, the Company occasionally sells other types of merchandise such as
dresses, swimsuits, jumpsuits, raincoats, lingerie and other related items. The
Company also offers selected accessories such as scarves, socks, belts,
handbags, jewelry and fragrances, in addition to apparel. Accessory sales as a
percentage of net sales were 10.9% in fiscal 1995, 10.7% in fiscal 1994 and
11.6% in fiscal 1993. Sales of children's clothing comprised less than 10% of
net sales in each of the last three fiscal years.
Management Information System. The Company's management information system,
featuring point-of-sale cash registers and a computerized inventory management
system, permits management to review each store's inventory on a daily and a
weekly basis thereby enabling the Company to tailor its purchasing strategies
and merchandise shipments to stores based on customer demand.
During fiscal 1995, the Company implemented a new warehouse management system to
improve the management of the location and flow of merchandise within the
Distribution Center.
Seasonality
The Company's sales and operating results are seasonal, as is typical in the
women's retail apparel
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industry. The Company's sales historically have been lowest during the first
quarter (January-March) and the third quarter (July-September) and highest
during the second quarter (April-June) and the fourth quarter
(October-December). Reduced sales volumes in first and third quarters coincide
with the transition of seasonal merchandise. Therefore, increased levels of
markdowns generally occur during these transitional periods and operating
expenses, when expressed as a percentage of net sales, are typically higher.
Working Capital Requirements
Historically, the Company's primary needs for liquidity and capital have been to
fund the cost of its new store expansion, the related growth in merchandise
inventories, and the expansion of the Corporate Offices and Distribution Center.
These needs have been met through cash provided by operations, the Company's
available line of credit, long-term debt and operating leases. The Company had
an agreement with its banks for a $25,000,000 unsecured line of credit and a
$15,000,000 letter of credit facility expiring May 31, 1996. Effective June 30,
1995, the Company's credit agreement was amended to convert the $25,000,000 line
of credit facility to a $19,000,000 line of credit and a $6,000,000 term loan
facility, collateralized by land, building and improvements at the Corporate
Office and Distribution Center.
In March 1996, the Company replaced its existing credit facilities with an
agreement with a new lender which provides for a revolving loan facility of up
to $37,500,000 (including a letter of credit sub-facility of up to $25,000,000)
and a $7,500,000 term loan facility . Borrowings under the new credit agreement,
based upon a borrowing base formula, are collateralized by all assets owned by
the Company during the term of the agreement which expires in March 1998. The
agreement contains certain covenants and terms described in Item 7 of this
report.
Merchandise inventories are typically purchased on credit, including the use of
letters of credit. Letters of credit are used to purchase merchandise
inventories from foreign suppliers. All such purchases are paid in United States
dollars; thus, the Company is not subject to foreign currency risks. As a result
of the Company's opportunistic buying strategy and to ensure that an adequate
supply of merchandise is available for shipment to its stores, the Company may,
at times, invest a significant amount of its working capital in merchandise
inventories.
Revenues from retail sales are recognized at the time of the sale. The Company
accepts cash, checks, and, in selected stores, certain major credit cards. All
stores offer a liberal exchange and return policy. An estimate for merchandise
returns is recorded in the period the merchandise was purchased.
Customers
No material part of the business of the Company is dependent upon a single
customer or a few customers.
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Competition
The women's retail apparel industry is highly competitive. In order to compete
effectively, the Company is dependent upon its ability to purchase merchandise
at substantial discounts. The Company does not know of any direct competition
from other specialty apparel retailers having a $7 one-price concept, though
other competitors do employ a similar ceiling price concept of $10. However, the
Company does compete with department stores, specialty stores, discount stores,
other off-price retailers and manufacturer-owned outlet stores, many of which
are owned by large national or regional chains with substantially greater
resources than the Company. There can be no assurance that other retailers with
substantially greater financial resources than the Company will not adopt a
purchasing and marketing concept similar to that of the Company. Management
believes that the primary competitive factors in the retail apparel industry are
price, quality, variety of merchandise, good site selection and low cost of
operation. The Company believes that it is well positioned in all of these areas
to compete in its markets.
Environmental Factors
The Company is not aware of any federal, state or local environmental
regulations which will materially affect its operations or competitive position
or require material capital expenditures. The Company cannot predict, however,
the impact of possible future legislation or regulation on its operations.
Employees
At December 30, 1995, the Company had approximately 4,800 employees, of which
approximately 48 percent were full-time employees. The Company, like other
retailers, experiences a high turnover rate of full-time and part-time store
employees but has generally not experienced difficulties in hiring qualified
personnel. None of the Company's employees are covered by a collective
bargaining agreement, and management believes that the Company's relationship
with its employees is good.
Change in Fiscal Year
In March 1996, the Company elected to change its fiscal year from the Saturday
nearest December 31 to the Saturday nearest January 31, beginning in fiscal
1996. This change was made to conform the Company's fiscal calendar to the
seasonal patterns it experiences, as well as to enhance comparability of its
fiscal quarterly and annual results with other retail companies.
Private Securities Litigation Reform Act of 1995
The statements contained in this Item 1 (Description of Business) and Item 6
(Management's Discussion and Analysis of Financial Condition and Results of
Operations) that are not historical facts may be forward-looking statements
subject to the safe harbor created by the Private Securities Litigation Reform
Act of 1995. The Company cautions readers of this Annual Report on Form 10-K
that a number of important factors could cause the Company's actual results in
1996 and beyond to differ materially from those expressed in any such
forward-looking statements. These factors include, without limitation, the
general economic and business conditions affecting women's apparel retailers,
competition from other existing or new women's apparel retailers, the Company's
ability to meet debt service obligations and other liquidity needs, the
seasonality of the Company's sales, the availability of both domestic and
foreign sources of merchandise inventories at substantially discounted prices,
Acts of God, and unusual seasonal weather patterns.
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ITEM 2. PROPERTIES
The Company leases all of its store locations. At December 30, 1995, the Company
had 701 stores operating in 28 states and Puerto Rico. The Company leases its
stores under operating leases generally with initial terms of five to ten years
and with one to two renewal option periods of five years each. The leases
typically contain kickout provisions based on that store's annual sales volume
or the shopping center's occupancy. The leases generally provide for increased
rents resulting from increases in operating costs and property taxes. Certain of
the leases provide contingent or percentage rentals based upon sales volume, and
other stores are leased on a month-to-month basis. To date, the Company has not
experienced difficulty in obtaining leases for suitable locations for its stores
on satisfactory terms. Approximately 60 existing store leases expire or have
initial lease terms containing lessee renewal options which may be exercised
during fiscal 1996. Management believes that the Company will not experience a
significant increase in lease expense as a result of exercising renewal options
or negotiating additional lease terms for such locations. The following is a
list of store locations by state as of December 30, 1995 (25 of these stores
have closed since year end):
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NUMBER OF
STATE STORES
Alabama................................................................................. ..16
Arizona.....................................................................................9
Arkansas....................................................................................5
California.................................................................................56
Florida....................................................................................68
Georgia....................................................................................45
Illinois...................................................................................35
Indiana....................................................................................16
Kansas......................................................................................4
Kentucky...................................................................................12
Louisiana..................................................................................17
Maryland...................................................................................14
Michigan...................................................................................19
Mississippi................................................................................11
Missouri...................................................................................17
North Carolina.............................................................................44
New Jersey..................................................................................8
New Mexico..................................................................................8
New York...................................................................................17
Ohio.......................................................................................32
Oklahoma....................................................................................9
Pennsylvania...............................................................................30
Puerto Rico................................................................................21
South Carolina.............................................................................37
Tennessee..................................................................................29
Texas......................................................................................88
Virginia...................................................................................25
West Virginia...............................................................................2
Wisconsin...................................................................................7
TOTAL STORES..............................................................................701
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The Company's Corporate Offices and Distribution Center are located in Duncan,
South Carolina on approximately 82 acres which are owned by the Company. In
fiscal 1993, the Company completed a 28,000 square foot expansion of its
Corporate Offices. During fiscal 1995, the Company expanded the Distribution
Center by approximately 90,000 square feet. These expansions increased the total
size of the Corporate Offices and Distribution Center to approximately 500,000
square feet at December 30, 1995. With the addition of certain equipment and
systems in fiscal 1995, the expanded Distribution Center should be able to
support the Company's growth over the next several years. The Company's
borrowings under its new credit facility are secured by all assets owned by the
Company during the term of the agreement.
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ITEM 3. LEGAL PROCEEDINGS
On September 22, 1994, two separate lawsuits making certain securities and
common law allegations and seeking unspecified damages were filed in the United
States District Court for the District of South Carolina, Columbia Division
against the Company and its Chairman and Chief Executive Officer Henry D.
Jacobs, Jr. A motion to consolidate these cases was filed. The lawsuits, which
sought certification as class actions, alleged that the Chairman and Chief
Executive Officer and the Company made materially false, misleading and untimely
projections and statements on earnings. The plaintiffs in these cases, which
were sought to be consolidated, were Leonard Pitten, Katherine Hogan and Anthony
J. Mallozzi. The Company moved to dismiss the lawsuits, and on July 10, 1995,
such lawsuits were dismissed by the Court. On August 7, 1995, the deadline
expired for the plaintiffs to appeal the dismissal, and these lawsuits are
permanently ended.
From time to time the Company is a defendant in legal actions involving claims
arising in the normal course of its business. The Company believes that, as a
result of its legal defenses and insurance arrangements, none of these other
actions presently pending, if decided adversely, would have a material adverse
effect on its financial position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
The Company's common stock is traded under the symbol ONPR in the National
Market System of NASDAQ. As of March 22, 1996, there were approximately 420
shareholders of record.
The Company has never paid cash dividends since its inception. The Company's
credit agreement contains covenants which, among other things, restricts the
Company from paying dividends. Currently, the Board of Directors intends to
continue its policy of retaining earnings for operations and expansion of the
business.
The quarterly high and low sales prices of the Company's Common Stock as quoted
by NASDAQ are shown below. Prices have been adjusted to reflect a 3-for-2 stock
split effected in the form of a stock dividend to shareholders of record on
April 15, 1994.
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1995 1994
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High Low High Low
First .................................8 3/8 6 1/8 17 2/3 11 1/2
Second ................................7 1/2 3 3/4 20 14 7/8
Third .................................6 1/8 3 3/4 18 8 1/2
Fourth ................................5 1/2 2 3/4 11 1/4 6 7/8
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The closing price on December 29, 1995 was $3.00 per share compared to $7.88 per
share at December 30, 1994.
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial data for the Company for each of
the five fiscal years ended December 28, 1991 through December 30, 1995. All of
the selected financial data are extracted from the Company's audited financial
statements and should be read in conjunction with the financial statements and
the notes thereto included under Item 8 of this Form 10-K and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included under Item 7 of this Form 10-K
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Fiscal Year Ended
Dec. 30, Dec. 31, Jan. 1 Jan. 2 Dec. 28
1995 1994 1994 1993(a) 1991
Dollars in thousands except per share amounts
1 Net sales $ 294,692 283,326 234,698 184,149 130,213
2 (Loss) income before taxes and cumulative effect
of a change in accounting principle $ (2,595) 7,138 13,959 10,913 7,180
3 (Loss) income before cumulative effect of a change
in accounting principle $ (1,304) 4,389 8,724 6,846 4,487
4 Cumulative effect on prior years of a change
in accounting principle $ -- -- -- -- 186
5 Net (loss) income $ (1,304) 4,389 8,724 6,846 4,673
6 Current assets $ 35,990 31,252 35,336 27,253 22,081
7 Long-term assets $ 43,374 36,678 28,865 23,465 17,626
8 Total assets $ 79,364 67,930 64,201 50,718 39,707
9 Current liabilities $ 18,594 13,035 14,798 10,861 8,668
10 Long term debt and note payable to be refinanced $ 6,579 -- -- -- --
11 Deferred income taxes $ 1,482 1,449 1,166 1,061 1,052
12 Other noncurrent liabilities $ 828 372 411 447 --
13 Shareholders' equity $ 51,881 53,074 47,826 38,349 29,987
14 Total investment $ 59,554 `53,226 48,158 39,228 30,636
15 Stores opened during the year, net # 60 101 94 81 70
16 Stores operating at year-end # 701 641 540 446 365
17 Number of employees # 4,841 4,907 4,199 3,723 2,829
18 Weighted average common shares (000) # 10,314 10,525 10,404 10,304 9,996
19 Common shares outstanding at year-end (000) # 10,335 10,305 10,221 10,123 9,918
20 (Loss) income per share before cumulative effect
of a change in accounting principle $ (0.13) 0.42 0.84 0.66 0.45
21 Cumulative effect on prior years per share
of a change in accounting principle $ -- -- -- -- 0.02
22 Net (loss) income per common share $ (0.13) 0.42 0.84 0.66 0.47
23 Book value per common share $ 5.02 5.15 4.68 3.79 3.02
24 Cash dividends declared per common share $ 0 0 0 0 0
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Notes to Summary of Selected Financial Data
a. Fiscal year 1992 was a 53 week year, while all other years presented
consisted of 52 weeks.
Line Definitions
14 Total investment -- Total of all interest-bearing debt,
capitalized leases, net deferred taxes, and shareholders'
equity.
17 Number of employees -- Number of full and part-time employees at
year-end.
23 Book value per common share -- Book value of shareholders' equity
per outstanding common share line 13 divided by line 19).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
FINANCIAL SUMMARY
The following table sets forth, for the three most recent fiscal years,
certain financial statement elements as a percentage of net sales:
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Fiscal Year Ended
Dec. 30, Dec. 31, Jan.1,
1995 1994 1994
PERCENT OF NET SALES:
Net sales 100.0% 100.0% 100.0%
Cost of sales 59.6% 60.0% 58.3%
-------- ------ ------
Gross margin 40.4% 40.0% 41.7%
-------- ------ ------
Selling, general and administrative expenses 30.9% 29.0% 27.7%
Store rent and related expenses 8.4% 7.1% 6.6%
Depreciation and amortization expense 1.5% 1.3% 1.4%
Interest expense 0.4% 0.1% 0.1%
------- ----- -----
41.2% 37.5% 35.8%
Interest income 0.0% 0.0% 0.0%
------- ----- -----
Net expenses 41.2% 37.5% 35.8%
------- ----- -----
(Loss) income before income taxes (0.8)% 2.5% 5.9%
(Benefit from) provision for income taxes (0.4)% 1.0% 2.2%
------ ----- -----
Net (loss) income (0.4)% 1.5% 3.7%
====== ===== =====
Stores in operation at year-end 701 641 540
====== ===== =====
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1995 COMPARED TO 1994
Net sales in 1995 increased 4% to $294.7 million compared to $283.3 million in
1994. This increase in sales is due to the net addition of 60 stores during the
year. Comparable store sales, those stores in operation at least eighteen
months, decreased 13% during 1995. Management believes the decline in comparable
store sales in 1995 compared to 1994 is due to the continued softness in the
women's apparel market. Sales results in January 1996, impacted by severe
weather conditions, were also disappointing; however, sales trends since that
time have shown some encouraging signs.
The Company opened 83 stores and closed 23 underperforming stores in 1995
compared to opening 128 stores and closing 27 underperforming stores in 1994.
Fourteen stores were relocated in 1995 compared to 6 relocations in 1994. In
light of recent results and the near-term outlook for the industry, the
Company's present plan for 1996 is to open approximately 20 stores, primarily in
existing markets, and to relocate approximately 10 stores. Additionally,
approximately 60 stores will be closed in 1996. Management has decided to slow
its previously announced plans to grow to 1,000 stores over the next several
years in order to focus on improving the profitability of the Company's existing
stores.
The Company's sales and operating results are seasonal, as is typical in the
women's retail apparel industry. The Company's sales historically have been
lowest during the first quarter (January - March) and the third quarter (July -
September) and highest during the second quarter (April - June) and the fourth
quarter (October - December). Reduced sales volumes in the first and third
quarters coincide with the transition of seasonal merchandise. Therefore,
increased levels of markdowns occur during these transitional periods and
operating expenses, when expressed as a percentage of net sales, are typically
higher. After the end of 1995, the Company elected to change its year from the
Saturday nearest December 31 to the Saturday nearest January 31, beginning in
1996. This change was made to conform the Company's calendar to the seasonal
patterns it experiences, as well as to enhance comparability of its quarterly
and annual results with other retail companies.
<PAGE>
Gross margins as a percentage of net sales increased to 40.4% in 1995 compared
to 40.0% in 1994. The improvement in gross margin was primarily the result of
management's efforts to control inventory levels and flow which resulted in
fewer markdowns when expressed as a percentage of net sales. Net sales of
apparel and of accessories represented approximately 89% and 11%, respectively,
of annual net sales in both 1995 and 1994.
Selling, general and administrative expenses increased as a percentage of net
sales to 30.9% in 1995 compared to 29.0% in 1994. This increase in selling,
general and administrative expenses, when expressed as a percentage of net
sales, is principally due to the 10% reduction in average store sales volumes
during 1995 compared to 1994. When expressed as a percentage of net sales, store
operations expenses and home office expenses increased while distribution costs
decreased. Selling, general and administrative expenses in dollars on an average
store basis decreased 4% for the Company as a whole during 1995 compared to 1994
primarily as a result of management's stringent efforts to control costs, the
completion of the distribution center conversion from hanging merchandise to a
flat pack operation and expansion of the facility and the implementation of a
new warehouse management system. Store operations expenses, distribution costs
and expenses at the corporate offices in dollars on an average store basis
decreased 1%, 11% and 7%, respectively.
Store rent expense as a percentage of net sales increased to 8.4% in 1995
compared to 7.1% in 1994. This increase is principally due to the lower sales
volumes during 1995 compared to last year. Average store rent expense increased
6% in 1995 compared to the same period last year, primarily due to the Company's
store expansion strategy of entering into larger, more costly urban and
metropolitan markets with higher base rent and common area charge structures,
and the closing of older, underperforming stores which had lower average rent
costs. Management anticipates that this trend of increasing average store rents
may continue. The Company has approximately 60 existing leases that expire or
have initial lease terms containing lessee renewal options which may be
exercised during 1996. Management believes that the Company will not experience
a material increase in aggregate store rents as a result of renewal options or
negotiating new lease terms for such locations.
Depreciation and amortization expense increased to 1.5% of net sales in 1995
from 1.3% of net sales in 1994. This increase resulted primarily from the
completion of the distribution center expansion.
The effective income tax rate for 1995 was 49.7% compared to 38.5% in 1994. This
increase was primarily due to the tax benefit arising in 1995 from the carryback
of the Federal Targeted Jobs Tax Credits and the recognition in 1995 of the
deferred income tax asset associated with the remaining net operating loss
carryforward generated by the Company's Puerto Rico subsidiary in 1994.
Management expects the Company's effective tax rate to decrease in 1996 because
the items creating the 1995 increase (tax benefit arising from carryback of the
Targeted Jobs Tax Credits and recognition of the tax benefit relating to future
benefit of prior year Puerto Rico net operating loss) will not be repeated.
1994 COMPARED TO 1993
In 1994, average store sales increased 19% in the first quarter, increased 5% in
the second quarter, were flat in the third quarter and declined 9% in the fourth
quarter compared to 1993. Management believes sales for 1994 were negatively
impacted by an industry-wide decline in consumer spending on women's apparel
throughout the latter part of the year, coupled with unseasonably warm fall
temperatures. Intense promotional pricing in the fall season by competitors in
the women's retail apparel industry, in response to the above factors, was also
believed to have further negatively impacted the Company's sales and margins. In
the latter part of the third quarter of 1994, the Company changed its method of
processing merchandise within its Distribution Center which temporarily caused a
disruption in its ability to sufficiently restock the Company's stores, thus
further negatively impacting sales.
<PAGE>
Net sales in 1994 were $283.3 million, an increase of 21% over 1993 net sales of
$234.7 million. The increase resulted from a net addition of 101 new stores
during 1994. The Company opened 128 stores and closed 27 underperforming stores
in 1994 compared to opening 125 stores and closing 31 underperforming stores in
1993. In 1994, comparable store sales, those stores in operation at least 18
months, increased 14% in the first quarter, were flat in the second quarter and
declined 5% and 13% in the third and fourth quarters, respectively.
Comparable store sales decreased 3% for the 1994 year.
Gross margin as a percentage of net sales decreased to 40.0% in 1994 compared to
41.7% in 1993. The reduction in the gross margin percentage resulted primarily
from increased markdowns on slow-moving segments of the Company's inventories.
The increase in the rate of markdowns in 1994 primarily resulted from: (1)
stocking stores that opened late in the summer season with warm weather type
merchandise that subsequently was found predominantly to have too short a
remaining selling season; and (2) the sluggish sell-through of merchandise as a
result of the industry-wide decline in consumer spending on women's apparel
during the latter part of the year.
Selling, general and administrative expenses increased as a percentage of net
sales to 29.0% in 1994 compared to 27.7% in 1993. Generally, net sales were
substantially below expectations for the second half of 1994, which resulted in
increased selling, general and administrative expenses when expressed as a
percentage of net sales. This increase in selling, general and administrative
expenses was primarily attributable to increased transportation costs and
increased costs in the Company's stores as well as a slight increase in expenses
at the Corporate Offices.
Transportation costs increased approximately 0.5 percentage points when
expressed as a percentage of net sales compared to 1993 due to a change in
transportation from the use of a leased fleet to the use of common carriers for
the delivery of merchandise to the majority of the Company's stores.
During the second half of 1994, the Company converted the Distribution Center's
production process from a hanging operation to a flatpack operation. In
conjunction with this change in the production process, the Company began the
expansion of the Distribution Center by approximately 90,000 square feet. These
changes were made to facilitate distribution to the increasing number of stores
and to reduce processing and transportation costs.
The increased costs in the Company's stores primarily resulted from additional
store labor and increases in other store operating expenses. The increase in
store labor resulted in a 0.4 percentage points increase in selling, general and
administrative expenses compared to last year. Other store operating expenses
increased 0.2 percentage points when expressed as a percentage of net sales.
Expenses at the Company's Corporate Offices increased 0.2 percentage points when
expressed as a percentage of net sales partially due to investments made in
personnel and management training during the latter part of the year. As noted
above, net sales were below expectations for the year which resulted in
increased selling, general and administrative expenses when expressed as a
percentage of net sales.
Store rent expense as a percentage of net sales increased to 7.1% in 1994
compared to 6.6% in 1993. This increase resulted primarily from the Company's
store expansion strategy of entering larger, metropolitan markets with higher
base rent and common area maintenance charge structures. As previously noted,
net sales were significantly below expectations for the second half of 1994,
which resulted in increased store rent expense when expressed as a percentage of
net sales.
Depreciation and amortization expense decreased to 1.3% of net sales in 1994
from 1.4% of net sales in 1993.
The effective income tax rate for 1994 was 38.5% compared to 37.5% in 1993. This
increase was primarily due to the start-up net operating loss in Puerto Rico for
which no tax benefit was recognized. This increase and the effect of slightly
higher state and local statutory income tax rates were minimized by the tax
benefit from charitable contributions of inventory and utilization of state and
Federal tax credits.
INFLATION
<PAGE>
During its three most recent years, the Company believes that the impact of
inflation has not been material to its financial condition or results of
operations. Occasionally, the Company may experience increases in the average
purchase price per unit of merchandise; however, such increases generally
reflect the impact of an increase in the quality of goods purchased rather than
inflationary factors.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary needs for liquidity and capital have been to
fund its new store expansion, the related growth in merchandise inventories and
the expansion of the Corporate Offices and Distribution Center. Until 1995,
these needs were met principally through cash provided by operations and the
Company's available line of credit. During 1995, the Company amended its credit
agreement to include a term loan facility to provide a source of capital and in
1996 replaced this facility with a new agreement described below.
At December 30, 1995, inventory increased by 10% compared to last year, while
average store inventories increased 1% compared to last year. This includes
inventory in the stores, in the Distribution Center and in- transit at year end.
The average inventories in the Company's stores decreased 13% to approximately
$25,000 per store compared to last year's $28,800 per store, reflecting
management's efforts to control inventories and minimize the effect of
markdowns. Inventories in-transit from foreign suppliers increased by $5,700 to
$8,500 per store compared to last year, primarily due to the timing of overseas
buying trips and due to the opportunistic purchases of Spring merchandise made
available by foreign suppliers. In 1995, import purchases were 16% of total
purchases compared to 10% in 1994. The level of merchandise inventories is
subject to fluctuations because of the Company's opportunistic buying strategy
and prevailing business conditions. In 1996, the Company intends to continue
this strategy and to opportunistically purchase merchandise in advance of the
selling seasons when it is to the Company's advantage. This strategy may impact
the level of total merchandise inventories at the end of each quarter in 1996
and the Company's liquidity and working capital needs.
The Company previously had an agreement with its banks that provided for a
$19,000,000 line of credit facility, a $15,000,000 letter of credit facility and
a $6,000,000 term loan facility scheduled to expire May 31, 1996. Borrowings
against the line of credit accrued interest at the Company's option of a Base
Rate (defined as the higher of the Agent Bank's prime interest rate or the
Federal Funds rate plus 0.50%) or the adjusted LIBOR rate plus 1.50%. The term
loan accrued interest, payable quarterly, at the Company's option of the Base
Rate, as defined above, plus 1.0% or the adjusted LIBOR rate plus 2.50%.
At December 30, 1995, the Company had $5,500,000 outstanding under the term loan
and $2,412,000 outstanding under the line of credit compared to no amounts
outstanding at December 31, 1994. The maximum amounts outstanding under the
credit facilities during 1995 and 1994, respectively were $24,540,000 and
$16,421,000. The average amounts outstanding under the credit facilities were
$16,264,000 during 1995 and $3,165,000 during 1994. The change in average
amounts outstanding principally resulted from the decrease in cash from the
beginning of 1994 to the end of 1994. The weighted average interest rates were
8.2% and 7.6% during 1995 and 1994, respectively.
Letters of credit are used primarily to purchase merchandise from foreign
suppliers. All such purchases are paid in United States dollars; thus, the
Company is not subject to foreign currency risks. Approximately 9% of the
Company's purchases in 1995 were paid by letters of credit compared to 6% in
1994. This increase in purchases paid by letters of credit is due to the
Company's opportunistic buying strategy and taking advantage of the increase in
the quota made available to the Company by foreign suppliers, particularly for
purchases made late in the year for Spring 1996 merchandise. The proportion of
merchandise purchased with letters of credit may vary in 1996.
On March 25, 1996, the Company replaced its existing credit facilities with an
agreement with a new lender which provides for a revolving loan facility of up
to $37,500,000 (including a letter of credit sub-facility of up to $25,000,000)
and a $7,500,000 term loan facility. The new credit facilities expire in March
1998 and may be extended at the lender's option for an additional year.
Borrowings under the credit agreement are collateralized by all assets owned by
the Company during the term of the agreement and bear interest, at the Company's
option (subject to certain limitations in the agreement), at the prime rate plus
0.5% or the Adjusted Eurodollar Rate, as defined, plus 2.5%. Maximum borrowings
under the revolving credit facility and utilization of
<PAGE>
the letter of credit facility are based on a borrowing base formula determined
with respect to eligible inventory (as defined in the agreement). At December
30, 1995, when the Company's inventories were at the seasonally lowest levels
and outstanding letters of credit were at the seasonally highest levels, the
Company would have had approximately $8.8 million of excess availability under
the borrowing base formula on a pro forma basis. Availability under the
revolving facility will fluctuate in accordance with the Company's seasonal
variations in inventory levels. The lending formula may be revised from time to
time by the lender in response to changes in the composition of the Company's
inventory or other business conditions. The term loan is payable in 57
consecutive equal monthly installments plus interest commencing July 1996. If
the new credit facility is not renewed in March 1998, the outstanding balance
under the term loan would be due and payable at that time. Current obligations
totaling $3,079,000 outstanding at December 30, 1995 under the former credit
agreement were classified as long term, as the Company had the intent and
ability to refinance such obligations on a long-term basis. Certain fees may be
payable by the Company for early termination of the credit agreement.
The new credit agreement contains certain covenants which, among other things,
restricts the ability of the Company to incur indebtedness, or encumber or
dispose of assets, and prohibits the Company from repurchasing its Common Stock
or paying dividends. Additionally, the Company must maintain a minimum adjusted
net worth (as defined in the agreement) of $34,000,000 and maintain minimum
working capital, exclusive of amounts outstanding under the credit facilities,
of $5,000,000.
Net cash provided by operating activities for 1995, 1994, and 1993 were
$3,694,000, $3,627,000 and $9,121,000, respectively. The slight increase in cash
provided by operating activities in 1995 was primarily the result of an increase
in accounts payable and other liabilities offset by an increase in the
merchandise inventories associated with the growth in the number of stores, an
increase in prepaid Federal and state income taxes and the Company's net loss.
Net cash used in investing activities for 1995, 1994, and 1993 was
$11,277,000, $12,625,000 and $9,388,000, respectively. The Company made capital
expenditures of $10,865,000, $12,294,000 and $8,932,000, respectively, in each
of the years presented. Capital expenditures were primarily for leasehold
improvements and equipment for new stores opened and for expansions to the
Distribution Center in each year, as well as the expansion of the Corporate
Offices during 1994 and 1993.
Net cash provided by financing activities was $7,889,000 for 1995 due, in large
part, to the issuance of $6,000,000 of long term debt and $2,412,000 of net
borrowings under the Company's line of credit. Net cash provided by financing
activities was $820,000 and $717,000 in 1994 and 1993, respectively, and
resulted primarily from the exercise of the Company's Common Stock options.
In 1996, the Company plans to spend approximately $2.5 million on capital
expenditures in part to open approximately 20 new stores and relocate
approximately 10 stores. The Company's liquidity requirements in 1996 will be
met principally through cash provided by operations and its credit facilities.
If deemed by management to be in the best interest of the Company, additional
long-term debt, capital leases or other permanent financing may be explored.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This statement essentially requires that
when the Company commits to closing specific stores and for other stores which
may be impaired, the fixed assets for such stores must be written down to fair
market value. The Company anticipates that the adoption of SFAS 121, required
for years beginning after December 15, 1995, will result in a decrease in net
fixed assets of approximately $1,630,000 and a charge of approximately
$1,395,000 (net of income taxes) which will be shown as the cumulative effect of
a change in accounting principle in the 1996 Statement of Operations.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
One Price Clothing Stores, Inc.
Duncan, South Carolina
We have audited the accompanying consolidated balance sheets of One Price
Clothing Stores, Inc. and subsidiary (the "Company") as of December 30, 1995 and
December 31, 1994, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 30, 1995. Our audits also included the financial statement
schedule listed in the Index at Item 14 (d). These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 30, 1995
and December 31, 1994, and the results of its operations and its cash flows for
each of the three years in the period ended December 30, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
February 15, 1996
(March 25, 1996 as to Note B and Note H)
<PAGE>
<TABLE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
December 30, December 31,
1995 1994
Assets -- Note B
CURRENT ASSETS
Cash and cash equivalents $ 668,000 $ 362,000
Miscellaneous receivables, net of allowance for
doubtful accounts of $275,000 (1995) and
$189,000 (1994) 1,017,000 907,000
Merchandise inventories 28,961,000 26,337,000
Prepaid Federal and state income taxes 1,363,000 71,000
Prepaid expenses 1,888,000 1,866,000
Deferred income taxes -- Note C 2,093,000 1,709,000
----------- -----------
TOTAL CURRENT ASSETS 35,990,000 31,252,000
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Land 914,000 914,000
Land improvements 494,000 475,000
Building 16,005,000 11,855,000
Leasehold improvements 11,277,000 10,055,000
Fixtures and equipment 30,069,000 25,697,000
----------- -----------
58,759,000 48,996,000
Less accumulated depreciation 17,575,000 13,606,000
----------- -----------
41,184,000 35,390,000
----------- -----------
OTHER ASSETS 2,190,000 1,288,000
----------- -----------
$79,364,000 $67,930,000
=========== ===========
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable $10,298,000 $ 6,470,000
Current portion of long term debt and note payable
-- Note B 1,333,000 --
Accrued salaries and wages 1,453,000 1,571,000
Accrued employee benefits 2,307,000 2,191,000
Sales tax payable 1,904,000 1,610,000
Other accrued and sundry liabilities 1,299,000 1,193,000
----------- -----------
TOTAL CURRENT LIABILITIES 18,594,000 13,035,000
----------- -----------
LONG TERM DEBT AND NOTE PAYABLE
TO BE REFINANCED -- Note B 6,579,000 --
----------- -----------
DEFERRED INCOME TAXES -- Note C 1,482,000 1,449,000
----------- -----------
OTHER NONCURRENT LIABILITIES -- Note F 828,000 372,000
----------- -----------
COMMITMENTS AND CONTINGENCIES -- Note D
SHAREHOLDERS' EQUITY -- Notes B, E and G
Preferred Stock, par value $0.01 - authorized
and unissued 500,000 shares
Common Stock, par value $0.01 - authorized 35,000,000
shares, issued and outstanding 10,335,031 (1995)
and 10,305,256 (1994) shares 103,000 103,000
Additional paid-in capital 11,002,000 10,891,000
Retained earnings 40,776,000 42,080,000
----------- -----------
51,881,000 53,074,000
----------- -----------
$79,364,000 $67,930,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
Period Ended
December 30, December 31, January 1,
1995 1994 1994
NET SALES $294,692,000 $283,326,000 $234,698,000
Cost of sales 175,754,000 170,066,000 136,727,000
-------------- ------------ -------------
GROSS MARGIN 118,938,000 113,260,000 97,971,000
-------------- ------------ --------------
Selling, general and administrative
expenses 91,048,000 82,118,000 65,124,000
Store rent and related expenses 24,810,000 20,210,000 15,599,000
Depreciation and amortization expense 4,394,000 3,612,000 3,184,000
Interest expense 1,326,000 271,000 166,000
-------------- ------------ --------------
121,578,000 106,211,000 84,073,000
Interest income 45,000 89,000 61,000
-------------- ------------ --------------
NET EXPENSES 121,533,000 106,122,000 84,012,000
-------------- ------------ --------------
(LOSS) INCOME BEFORE INCOME TAXES (2,595,000) 7,138,000 13,959,000
(Benefit from) provision for income taxes -- Note C (1,291,000) 2,749,000 5,235,000
--------------- ------------ --------------
NET (LOSS) INCOME $ (1,304,000) $ 4,389,000 $ 8,724,000
============== ============ ==============
Net (loss) income per common share $ (0.13) $ 0.42 $ 0.84
============== ============ =================
Weighted average shares outstanding 10,313,860 10,524,978 10,403,850
============= ============ ==============
</TABLE>
See notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Addditional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
Balance at January 2, 1993 10,123,173 $102,000 $ 9,280,000 $28,967,000 $38,349,000
Stock options exercised 98,325 753,000 753,000
Net income 8,724,000 8,724,000
---------- -------- ----------- ----------- -----------
Balance at January 1, 1994 10,221,498 102,000 10,033,000 37,691,000 47,826,000
Stock options exercised 83,758 1,000 858,000 859,000
Net income 4,389,000 4,389,000
---------- ---------- ----------- ----------- -----------
Balance at December 31, 1994 10,305,256 103,000 10,891,000 42,080,000 53,074,000
Stock options exercised 29,775 -- 111,000 111,000
Net loss (1,304,000) (1,304,000)
---------- ---------- ----------- ------------ ----------
Balance at December 30, 1995 10,335,031 $103,000 $11,002,000 $40,776,000 $ 51,881,000
========== ========== =========== ============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
Period Ended
December 30, December 31, January 1,
1995 1994 1994
OPERATING ACTIVITIES
Net (loss) income $ (1,304,000) $ 4,389,000 $ 8,724,000
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 4,394,000 3,612,000 3,184,000
Deferred income taxes (351,000) (145,000) (514,000)
Loss on disposal of property and equipment 789,000 947,000 460,000
(Increase) decrease in other noncurrent assets (522,000) 253,000 344,000
Changes in operating assets and liabilities:
(Increase) in miscellaneous receivables
and prepaid expenses (42,000) (644,000) (638,000)
(Increase) in merchandise inventories (2,624,000) (3,022,000) (6,376,000)
(Increase) decrease in prepaid Federal and
state income taxes (1,292,000) (2,661,000) 1,562,000
Increase in accounts payable and other liabilities 4,646,000 898,000 2,375,000
------------ -------------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,694,000 3,627,000 9,121,000
------------ -------------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment (10,865,000) (12,294,000) (8,932,000)
Purchases of other noncurrent assets (412,000) ( 331,000) (456,000)
------------- -------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (11,277,000) (12,625,000) (9,388,000)
------------- -------------- ------------
FINANCING ACTIVITIES
Net borrowings from line of credit 2,412,000 -- --
Proceeds from issuance of long term debt 6,000,000 -- --
Repayment of long term debt (500,000) -- --
Debt financing costs incurred (90,000) -- --
Decrease in other noncurrent liabilities (44,000) (39,000) (36,000)
Proceeds from exercise of Common Stock options 111,000 859,000 753,000
------------- ------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,889,000 820,000 717,000
------------- ------------- ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 306,000 (8,178,000) 450,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 362,000 8,540,000 8,090,000
------------- ------------- ------------
CASH AND CASH EQUIVALENTS AT END
OF YEAR $ 668,000 $ 362,000 $ 8,540,000
============= ============= ============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 477,000 $ 5,330,000 $ 3,953,000
Interest paid 1,117,000 298,000 166,000
</TABLE>
See notes to consolidated financial statements
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 30, 1995
NOTE A - Operations and Summary of Significant Accounting Policies
Business: One Price Clothing Stores, Inc. and subsidiary (the "Company")
operates a chain of off-price retail women's and children's specialty stores
offering a wide variety of first quality, contemporary, in- season apparel and
accessories for the uniform retail price of $7. At December 30, 1995, the
Company operated 701 stores in 28 states and Puerto Rico.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Accounting Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash
equivalents.
Merchandise Inventories: Merchandise inventories are stated at the lower of
average unit cost or market. Average unit cost is determined by the first-in,
first-out (FIFO) method.
Depreciation: Depreciation is computed by the straight-line method, based on
estimated useful lives of 10 years for land improvements, 33 to 40 years for
buildings, 5 to 10 years for leasehold improvements and 3 to 15 years for
fixtures and equipment.
Income Taxes: The Company accounts for income taxes using the principles of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under SFAS No. 109, deferred income taxes represent the future
income tax effect of temporary differences between the book and tax bases of the
Company's assets and liabilities, assuming they will be realized and settled at
the amount reported in the Company's financial statements.
Trademarks: The cost of trademarks is being amortized over their expected useful
lives of 10 years using the straight-line method.
Purchased Software: Purchased software is included in other assets and is
amortized over its estimated useful life of 5 years using the straight-line
method.
Revenue Recognition: Revenues from retail sales are recognized at the time of
the sale. An estimate for merchandise returns is recorded in the period the
merchandise was purchased.
Store Preopening Costs: Costs associated with the opening of new stores are
expensed as incurred.
Store Closing Costs: At the time management commits to close a store, a
provision is made and operations are charged for any remaining store lease
obligation after closing or penalty to cancel the lease obligation.
Advertising and Promotional Costs: Advertising and promotional costs are
expensed when incurred. Such expenses were $324,000, $347,000 and $141,000 in
1995, 1994 and 1993, respectively.
<PAGE>
Income Per Common Share: Net income per common share is computed by dividing net
income by the weighted average number of shares of Common Stock and dilutive
common stock equivalent shares for stock options (Note E) outstanding during the
period.
Fiscal Year: The Company's year ends on the Saturday nearest December 31.
Reclassifications: Certain amounts included in prior years' financial statements
have been reclassified to conform to the 1995 presentation.
NOTE B - Credit Facilities
The Company previously had an agreement with its banks that provided for a
$19,000,000 line of credit facility, a $15,000,000 letter of credit facility and
a $6,000,000 term loan facility scheduled to expire May 31, 1996. Borrowings
against the line of credit accrued interest at the Company's option of a Base
Rate (defined as the higher of the Agent Bank's prime interest rate or the
Federal Funds rate plus 0.50%) or the adjusted LIBOR rate plus 1.50%. The term
loan accrued interest, payable quarterly, at the Company's option of the Base
Rate, as defined above, plus 1.0% or the adjusted LIBOR rate plus 2.50%.
The maximum amounts outstanding under the credit facilities during 1995 and
1994 were approximately $24,540,000 and $16,421,000, respectively. The
average amounts outstanding under the credit facilities were $16,264,000
during 1995 and $3,165,000 during 1994. The weighted average interest rate
was 8.2% in 1995 and 7.6% in 1994. At December 30, 1995, the Company had
$5,500,000 outstanding under the term loan and $2,412,000 outstanding under
the line of credit compared to no amounts outstanding at December 31, 1994.
The Company had outstanding letters of credit for the purchase of
merchandise inventories totaling approximately $11,923,000 at December 30,
1995 compared to $7,656,000 at December 31, 1994.
The fair value of the Company's outstanding debt at December 30, 1995
approximates the carrying value.
On March 25, 1996, the Company replaced its existing credit facilities with
an agreement with a new lender which provides for a revolving loan facility
of up to $37,500,000 (including a letter of credit sub-facility of up to
$25,000,000) and a $7,500,000 term loan facility. The new credit facilities
expire in March 1998 and may be extended at the lender's option for an
additional year. Borrowings under the credit agreement are
collateralized by all assets owned by the Company during the term of the
agreement and bear interest, at the Company's option (subject to certain
limitations in the agreement), at the prime rate plus 0.5% or the Adjusted
Eurodollar Rate, as defined, plus 2.5%. Maximum borrowings under the
revolving credit facility and utilization of the letter of credit facility
are based on a borrowing base formula determined with respect to eligible
inventory (as defined in the agreement). At December 30, 1995, when the
Company's inventories were at the seasonally lowest levels and outstanding
letters of credit were at the seasonally highest levels, the Company would
have had approximately $8.8 million of excess availability under the
borrowing base formula on a pro forma basis. Availability under the
revolving facility will fluctuate in accordance with the Company's seasonal
variations in inventory levels. The lending formula may be revised from
time to time by the lender in response to changes in the composition of the
Company's inventory or other business conditions. The term loan is payable
in 57 consecutive equal monthly installments plus interest commencing July
1996. If the new credit facility is not renewed in March 1998, the
outstanding balance under the term loan would be due and payable at that
time. Current obligations totaling $3,079,000 outstanding at December 30,
1995 under the former credit agreement were classified as long term, as the
Company had the intent and ability to refinance such obligations on a
long-term basis. Certain fees may be payable by the Company for early
termination of the credit agreement.
The new credit agreement contains certain covenants which, among other
things, restricts the ability of the Company to incur indebtedness, or
encumber or dispose of assets, and prohibits the Company from repurchasing
its Common Stock or paying dividends. Additionally, the Company must
maintain a minimum adjusted net worth (as defined in the agreement) of
$34,000,000 and maintain minimum working capital, exclusive of amounts
outstanding under the credit facilities, of $5,000,000.
<PAGE>
NOTE C - Income Taxes
The (benefit from) provision for income taxes consists of the following:
<TABLE>
<S> <C> <C> <C>
Period Ended
December 30, December 31, January 1,
1995 1994 1994
Current:
Federal $(1,001,000) $2,400,000 $4,809,000
State and local 62,000 494,000 940,000
Deferred:
Federal (5,000) (116,000) (428,000)
State and local (145,000) (29,000) (86,000)
Puerto Rico (202,000) -- --
------------ ----------- ----------
Total (benefit from) provision for income taxes $(1,291,000) $2,749,000 $5,235,000
============ =========== ==========
Presented below are the elements which comprise deferred income tax assets
and liabilities:
December 30, December 31,
1995 1994
Gross deferred income tax assets:
Accrued employee benefits deductible
for tax purposes when paid $ 739,000 $ 568,000
Excess of tax over financial statement
basis of inventory 1,111,000 1,062,000
Accrued retirement benefits deductible
for tax purposes when paid 145,000 162,000
State and local net operating loss carryforwards 113,000 --
Puerto Rico net operating loss carryforward 202,000 292,000
Valuation allowance for Puerto Rico
loss carryforward -- (292,000)
Miscellaneous 186,000 185,000
------------ ------------
Gross deferred income tax assets 2,496,000 1,977,000
----------- ------------
Gross deferred income tax liabilities:
Excess of financial statement over tax basis
of property and equipment (1,794,000) (1,592,000)
Excess of financial statement over
tax basis of supplies (91,000) (125,000)
----------- ------------
Gross deferred income tax liabilities (1,885,000) (1,717,000)
----------- ------------
Net deferred income tax asset $ 611,000 $ 260,000
=========== ============
</TABLE>
The net deferred income tax asset is recognized in the accompanying balance
sheets as follows:
<TABLE>
<S> <C> <C>
December 30, December 31,
1995 1994
Current assets $ 2,093,000 $ 1,709,000
Noncurrent liabilities (1,482,000) (1,449,000)
------------ ------------
Net deferred income tax asset $ 611,000 $ 260,000
============= ============
</TABLE>
In 1994, the Company's Puerto Rico subsidiary generated a net
operating loss of approximately $696,000 which is available to offset
future taxable income in Puerto Rico through 2001. Due to the
subsidiary's short operating history (operations commenced in 1994),
management was not assured that the deferred income tax asset related
to the operating loss carryforward would be realized at the end of
1994. Accordingly, a valuation allowance for 100% of the deferred
income tax asset was established. In 1995, the subsidiary realized
taxable income of $212,000. Management believes that the operating loss in
1994 was attributable to the start-up of the Puerto Rico operations. Manage-
ment now believes that it is more likely than not that the remaining
deferred tax asset will be realized. Accordingly, the Company reversed
the valuation allowance that was previously provided and the deferred tax asset
related to the Puerto Rico subsidiary's net operating loss carryforward is
recognized at December 30, 1995. Management believes that scheduled
reversals of other temporary differences and anticipated future taxable
income are sufficient to realize the remaining net deferred income tax assets
at December 30, 1995.
A reconciliation of the statutory Federal income tax rate to the annual
effective income tax rate follows:
<TABLE>
<S> <C> <C> <C>
Period Ended
December 30, December 31, January 1,
1995 1994 1994
------------------ ------------------ --------
Federal income tax at statutory rate (35.0)% 35.0% 35.0%
State and local income tax, net of Federal
tax benefit (3.2) 4.5 4.0
Puerto Rico net operating loss (7.8) 3.4 --
Tax benefit from carryback of Federal Targeted
Jobs Tax Credits (5.9) -- --
Tax benefit from contributions of inventory -- (2.7) (0.6)
Other, net 2.2 (1.7) (0.9)
------- ------- ------
(49.7)% 38.5% 37.5%
======= ======= ======
</TABLE>
NOTE D - Operating Leases
The Company generally leases its stores under operating leases with initial
terms of five to ten years with one to two renewal option periods of five
years each. The leases generally provide for increased rents resulting from
increases in operating costs and property taxes. Certain of the leases
provide for contingent or percentage rentals based upon sales volume and
others are leased on a month-to-month basis.
In addition, the Company has operating leases for automobiles, trucks,
trailers and certain other equipment with one to ten year terms. The leases
for trucks and trailers also provide for contingent rentals based upon
miles driven.
Future minimum rental commitments as of December 30, 1995 for
noncancelable leases, are approximately as follows:
<TABLE>
<S> <C> <C>
1996............................................... $21,266,000
1997.............................................. 18,183,000
1998.............................................. 13,758,000
1999.............................................. 10,122,000
2000............................................. 5,764,000
Later............................................. 11,435,000
Total.............................................. $80,528,000
</TABLE>
<PAGE>
Total rental expense for operating leases was as follows:
<TABLE>
<S> <C> <C> <C>
Period Ended
December 30, December 31, January 1,
1995 1995 1994
------------ ------------ ----------
Minimum rentals ...................... $21,686,000 $16,962,000 $13,782,000
Contingent rentals .................. 4,739,000 3,836,000 2,837,000
------------ ------------- -------------
$26,425,000 $20,798,000 $16,619,000
=========== ============= ============
</TABLE>
NOTE E - Employee Benefits
Stock Option Plans: The Company has three stock option plans (the 1991,
1988 and 1987 plans) which provide for grants to certain officers,
directors, and key employees of stock options to purchase shares of Common
Stock of the Company. Options granted under the plans expire ten years from
the date of grant and, to date, have been granted at prices not less than
the fair market value at the date of grant. Effective October 27, 1988, the
Board of Directors retired all unissued options under the Company's 1987
Plan. Options cancelled subsequent to October 27, 1988 under the 1987 Plan
are retired. Options cancelled under the 1991 and 1988 Plans are available
for reissuance.
Information with respect to the stock option plans is as follows:
<TABLE>
<S> <C> <C> <C> <C>
Year
1995 1994
-------------------------------------------------------------------------------
Number of Shares Price Per Share Number of Shares Price per Share
Outstanding at beginning of year 551,000 $2.67--$19.00 602,000 $2.67--$12.59
Options granted 108,000 $2.94--$ 7.87 77,000 $9.06--$19.00
Options exercised (30,000) $2.67--$ 5.08 (84,000) $2.67--$11.17
Options cancelled (68,000) $5.08--$14.81 (44,000) $5.33--$16.38
-------- ------------- -------- --------
Outstanding at end of year 561,000 $2.94--$19.00 551,000 $2.67--$19.00
======== ============== =========
Exercisable at end of year 247,000 222,000
======== =========
Available for future grants 301,000 341,000
======== =========
</TABLE>
At December 30, 1995, a total of 862,000 shares of Common Stock were
reserved for issuance under the Company's option plans.
Effective April, 1995, the Company adopted the 1995 Director Stock Option
Plan which provides for annual grants to non-employee members of the Board
of Directors. Such grants are immediately exercisable on the date of grant
and expire ten years from the date of grant. There was no activity under
this plan during 1995. At December 30, 1995, 105,000 shares of common stock
were reserved for issuance under the Director Stock Option Plan.
Retirement Plan: The Company has a 401(k) and profit-sharing plan, the One
Price Clothing Stores, Inc. Retirement Plan (the "Plan"). All employees in
the United States who are 21 years of age or older with at least one year
of service are eligible to participate in the Plan. Effective January 1995,
the Company's contribution obligation increased to 50% of each
participant's contribution with a maximum contribution of 2.5% of the
participant's base compensation. In 1994, the Company was obligated under
the Plan to make a matching contribution of 25% of each participant's
contribution with a maximum matching contribution of 1.25% of the
participant's base compensation. In addition, the Company may make an
annual discretionary contribution on behalf of the participants; no such
discretionary contributions have been made by the Company. Employer
contributions (approximately $292,000, $132,000, and $101,000 in 1995,
1994, and 1993, respectively) vest ratably over five years.
Stock Purchase Plan: The Company adopted a Stock Purchase Plan, effective
March 1995, that allows
<PAGE>
participating employees to purchase, through payroll deductions, shares of
the Company's Common Stock at prevailing market prices. All full-time
associates who are 18 years of age or older with at least six months of
service are eligible to participate in the Stock Purchase Plan. The Stock
Purchase Plan provides that participants may authorize the Company to
withhold from net earnings and deposit such amounts with an independent
custodian. The custodian purchases Common Stock of the Company at
prevailing market prices and distributes the shares purchased to the
participants upon request. The Company pays expenses associated with the
purchases of the Common Stock and administration of the Stock Purchase
Plan.
NOTE F - Related Party Transactions
The Company has a deferred compensation agreement with a former executive
officer who is currently a member of the Company's Board of Directors. The
agreement provides for monthly payments aggregating $75,000 annually
(including interest) through July 2002.
The Company paid approximately $171,000, $32,000 and $33,000 in 1995, 1994
and 1993, respectively, for legal services provided by the law firm of
which a Company Director is a member.
NOTE G - Shareholders' Equity
In March 1994, the Company declared a 3-for-2 stock split effected in the
form of a stock dividend payable April 29, 1994 to shareholders of record
as of the close of business on April 15, 1994. Accordingly, Common Stock
outstanding, the weighted average number of common and common equivalent
shares and per share amounts were retroactively adjusted to give effect to
the stock split.
The Company adopted a Shareholder Rights Plan in November 1994. Each
shareholder of record on November 15, 1994 is entitled to one Right for
each share of Common Stock held on such date. Each Right entitles the
registered holder to purchase from the Company one half share of Common
Stock at a specified price. The Rights become exercisable only upon the
occurrence of certain conditions set forth in the Shareholder Rights Plan
relating to the acquisition of 20% or more of the outstanding shares of
Common Stock.
NOTE H - Subsequent Events
On March 14, 1996, the Company's Board of Directors adopted a resolution to
change the Company's year end from the Saturday nearest December 31 to the
Saturday nearest January 31, beginning in 1996. This change was made to
conform the Company's calendar to the seasonal patterns it experiences, as
well as to enhance comparability of its quarter and annual results with
other retail companies.
On March 14, 1996, the Company's Board of Directors also approved changes
in the methods of accounting for merchandise inventories. The Company is
changing from the lower of average first-in, first-out (FIFO) cost or
market method of accounting to the FIFO retail method. The Company believes
that the retail method will provide improved information for the operation
of its business in a manner consistent with the method used widely in the
retail industry. The Company is also capitalizing into inventory certain
merchandise acquisition and distribution costs to provide a better matching
of revenues and expenses, particularly in interim periods. The effect of
these changes in accounting for merchandise inventories, effective
beginning in January 1996, will result in a net increase in merchandise
inventories of approximately $1,031,000 and a benefit of approximately
$629,000 (net of income taxes) which will be shown as the cumulative effect
of a change in accounting principle in the 1996 Statement of Operations.
NOTE I - Effect of New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement No.
121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This statement essentially requires
that when the Company commits to closing specific stores and for other
stores which may be impaired, the fixed assets for such stores must be
written down to fair market value. The Company anticipates that the
adoption of SFAS 121, required for years beginning after December 15, 1995,
will result in
<PAGE>
a decrease in net fixed assets of approximately $1,630,000 and a charge of
approximately $1,395,000 (net of income taxes) which will be shown as the
cumulative effect of a change in accounting principle in the 1996 Statement
of Operations.
NOTE J - Quarterly Results (Unaudited)
The following is a summary of quarterly (13 weeks) operations for the years
ended December 30, 1995 and December 31, 1994 (in thousands except per
share data).
<TABLE>
<S> <C> <C> <C>
1995 Quarters Ended
April 1, July 1 September 30, December 30,
1995 1995 1995 1995
-------------------------------------------------------
Net sales $54,639 $86,647 $74,307 $79,099
Gross margin 19,330 37,925 29,641 32,042
Net (loss) income (5,084) 4,314 (1,135) 601
Net (loss) income per common share $ (0.49) $ 0.42 $(0.11) $ 0.06
1994 Quarters Ended
April 2, July 2 October 1, December 31,
1994 1994 1994 1994
------------ --------- -------- -----------
Net sales $56,007 $82,566 $65,877 $78,876
Gross margin 21,119 36,508 23,736 31,897
Net (loss) income (872) 5,992 (1,835) 1,104
Net (loss) income per common share $ (0.08) $ 0.57 $ (0.17) $ 0.11
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item is incorporated herein by
reference to the sections entitled "Election of Directors" and "Executive
Officers of the Company and Security Ownership of Management" of the
Company's definitive Proxy Statement (the "Proxy Statement") filed with the
Securities and Exchange Commission in connection with the Annual Meeting of
Shareholders to be held May 20, 1996.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by
reference to the sections entitled "Compensation Committee Interlocks and
Insider Participation," "Compensation of Executive Officers," "Employment
Contracts and Deferred Compensation Arrangements," "Compensation Committee
Report on Executive Compensation," "Performance Graph" and "Election of
Directors - Directors' Fees" of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated herein by
reference to the sections entitled "Security Ownership of Certain
Beneficial Owners and Management," "Election of Directors" and "Executive
Officers of the Company and Security Ownership of Management" of the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in this item is incorporated herein by reference
to the sections entitled "Compensation Committee Interlocks and Insider
Participation" and "Employment Contracts and Deferred Compensation
Arrangements" of the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of One Price Clothing Stores, Inc are
included in Part II, Item 8:
<TABLE>
<S> <C> <C>
o Independent Auditors' Report
o Consolidated Balance Sheets as of December 30, 1995 and December 31, 1994
o Consolidated Statements of Operations for the years ended December 30, 1995, December 31,
1994 and January 1, 1994
o Consolidated Statements of Shareholders' Equity for the years ended December 30, 1995,
December 31, 1994 and January 1, 1994
o Consolidated Statements of Cash Flows for the years ended December 30, 1995, December 31,
<PAGE>
1994 and January 1, 1994
o Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedule
The following financial statement schedule of One Price Clothing Stores, Inc. is included in Item 14
(d):
o Schedule II -- Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because they are
not applicable or the information is included in the financial
statements or notes thereto.
(a) 3. Exhibits including those incorporated by reference:
</TABLE>
Exhibit
Number Description
3(a) Certificate of Incorporation of the Registrant, as amended
through April 1987: Incorporated by reference to exhibit of the
same number in Registrant's Registration Statement on Form S-1,
filed April 10, 1987, (File No. 33-13321) ("the S-1").
3(a)(1) Certificate of Amendment of Certificate of Incorporation of the
Registrant: Incorporated by reference to exhibit of the same
number in Registrant's Annual Report on Form 10-K for the year
ended January 1, 1994, (File No. 0-15385)("the 1993 Form 10-K").
3(b) Restated By-Laws of the Registrant, as of July 22, 1992 and
amended as of July 20, 1994 and March 14, 1996.
4(a) See Exhibits 3(a), 3(a)(1), and 3(b).
4(b) Specimen of Certificate of the Registrant's Common Stock:
Incorporated by reference to Exhibit 1 of the Registrant's
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on June 23, 1987, (File No. 0-15385).
4(c) Shareholder Rights Agreement by and between the Registrant and
Wachovia Bank of North Carolina, N. A. as Rights Agent dated
November 3, 1994: Incorporated by reference to Exhibit 2
to the Registrant's Form 8-K filed November 10, 1994
(File No. 0-15385).
4(d) Loan and Security Agreement by and between Congress Financial
Corporation (Southern) as Lender and the Registrant and One
Price Clothing of Puerto Rico, Inc., as Borrowers dated
March 25, 1996.
4(e) The Company hereby agrees to furnish to the Commission upon
request of the Commission a copy of any instrument with respect
to long-term debt not being registered in a principal amount
less than 10% of the total assets of the Company and its
subsidiary on a consolidated basis.
Material Contracts -- Executive Compensation Plans and Arrangements:
10(a)* Stock Option Plan of the Registrant dated February 20, 1987 and
related forms of Incentive and Non-qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(d) of the
S-1.
10(b)* Stock Option Plan of the Registrant dated December 12, 1988 and
related forms of Incentive and
<PAGE>
Non-qualified Stock Option Agreements: Incorporated by reference
to Exhibit 10(a) in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1988, (File No. 0-15385)
("the 1988 Form 10-K").
10(c)* One Price Clothing Stores, Inc. 1991 Stock Option Plan:
Incorporated by reference to Exhibit 10(b) in the Registrant's
Annual Report on Form 10-K for the year ended December 28, 1991,
(File No. 0-15385) ("the 1991 Form 10-K").
10(d)* Summary of Officer Bonus Plan: Incorporated by reference to
exhibit of the same number in Registrant's Annual Report on Form
10-K for the year ended January 2, 1993, (File No. 0-15385)
("the 1992 Form 10-K").
10(e)* Form of Employment Agreement between Registrant and Henry D.
Jacobs, Jr.: Incorporated by reference to Exhibit 10(j) in the
1988 Form 10-K.
10(f)* Employment Agreement dated February 1, 1991 between the
Registrant and Ethan S. Shapiro: Incorporated by reference to
Exhibit 10(m) in the Registrant's Annual Report on Form 10-K for
the year ended December 29, 1990, (File No. 0-15385) ("the 1990
Form 10-K").
10(g)* Key man term insurance policy, issued February 20, 1993, on the
life of Henry D. Jacobs, Jr.: Incorporated by reference to
exhibit of the same number in the 1992 Form 10-K.
10(h)* Employment Agreement dated January 16, 1995 between the
Registrant and Stephen A. Feldman: Incorporated by reference to
exhibit of the same number in Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994,
(File No. 0-15385)("the 1994 Form 10-K").
10(i)* Disability Income Policy for the benefit of Henry D. Jacobs, Jr.
: Incorporated by reference to exhibit of the same number in the
1992 Form 10-K.
10(j)* Disability Income Policy for the benefit of Ethan S. Shapiro:
Incorporated by reference to exhibit of the same number in the
1992 Form 10-K.
10(k)* Agreement between the Registrant and Jane R. Shapiro, Trustee of
the Ethan S. Shapiro Life Insurance Trust: Incorporated by
reference to exhibit of the same number in the 1992 Form 10-K.
10(l)* Agreement dated June 24, 1992 between the Registrant and Raymond
S. Waters: Incorporated by reference to exhibit of the same
number in the 1992 Form 10-K.
10(m)* Directors' Stock Option Plan effective April 19, 1995:
Incorporated by reference to exhibit of the same number in the
1994 Form 10-K.
10(n)* Employment Agreement dated March 30, 1992 between the Registrant
and Ronald Swedin.
10(o)* Employment Agreement dated December 12, 1995 between the
Registrant and Thomas Unrine.
Material Contracts -- Other:
10(p) Credit Agreement dated March 16, 1995 by and between the
Registrant and NationsBank (as agent) for an unsecured
$25,000,000 line of credit facility and a $15,000,000 letter of
credit facility: Incorporated by reference to Exhibit 10(q) in
the 1994 Form 10-K.
10(q) Assignment and Acceptance (dated April 24, 1995) of an interest
in the Credit Agreement (dated
<PAGE>
March 17, 1995) to CoreStates Bank and Promissory Notes dated
April 13, 1995 by and between the Registrant and CoreStates Bank
and NationsBank, N.A.: Incorporated by reference to Exhibit
10(a) in the Registrant's quarterly report on Form 10-Q for the
quarter ended July 1, 1995, (File No. 0-15385) ("the July 1995
Form 10-Q").
10(r) Amendment Number 1 to Credit Agreement (dated as of June 30,
1995) by and between the Registrant, various banks and lending
institutions, and NationsBank, N.A. (as agent), and Promissory
Notes and Mortgage and Security Agreement: Incorporated by
reference to Exhibit 10(b) in the July 1995 Form 10-Q.
11 Statement regarding computation of per share earnings.
21 Subsidiary of the Registrant.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule (electronic filing only).
---------------------------------------
* Denotes a management contract or compensatory plan or agreement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate
section of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S> <C>
ONE PRICE CLOTHING STORES, INC.
Date: March 29, 1996 /s/ Henry D. Jacobs, Jr.
------------------------
Henry D. Jacobs, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 /s/ Henry D. Jacobs, Jr.
------------------------
Henry D. Jacobs, Jr.
Chairman of the Board,
Chief Executive Officer and Director
(principal executive officer)
Date: March 29, 1996 /s/ Ethan S. Shapiro
--------------------
Ethan S. Shapiro
President, Chief Operating Officer and
Director
Date: March 29, 1996 /s/ Raymond S. Waters
---------------------
Raymond S. Waters
Secretary and Director
Date: March 29, 1996 /s/ Stephen A. Feldman
----------------------
Stephen A. Feldman
Executive Vice President and
Chief Financial Officer
(principal financial officer)
<PAGE>
Date: March 29, 1996 /s/ David F. Bellet
-------------------
David F. Bellet
Director
Date: March 29, 1996 /s/ Charles D. Moseley, Jr.
---------------------------
Charles D. Moseley, Jr.
Director
Date: March 29, 1996 /s/ Laurie M. Shahon
--------------------
Laurie M. Shahon
Director
Date: March 29, 1996 /s/ Malcolm L. Sherman
----------------------
Malcolm L. Sherman
Director
Date: March 29, 1996 /s/ James M. Shoemaker, Jr.
---------------------------
James M. Shoemaker, Jr.
Director
Date: March 29, 1996 /s/ Cynthia C. Turk
-------------------
Cynthia C. Turk
Director
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E
DESCRIPTION ADDITIONS
Balance at Charged to Charged Deduction - Balance
Beginning of Cost & to Other- Describe (1) at End of
Period Expenses Describe Period
YEAR ENDED
DECEMBER 30, 1995
Allowance for
doubtful accounts $189,000 $607,000 $521,000 $275,000
======== ======== ======== ========
YEAR ENDED
DECEMBER 31, 1994
Allowance for
doubtful accounts $135,000 $822,000 $768,000 $189,000
======== ======== ======== ========
YEAR ENDED
JANUARY 1, 1994
Allowance for
doubtful accounts $100,000 $723,000 $ 688,000 $135,000
======== ======== ========= ========
</TABLE>
(1) Write-offs charged against the allowance for returned customer checks
<PAGE>
ONE PRICE CLOTHING STORES, INC.
EXHIBIT INDEX
Exhibit
Number Description
3(a) Certificate of Incorporation of the Registrant, as amended through
April 1987: Incorporated by reference to exhibit of the same number
in Registrant's Registration Statement on Form S-1, filed April 10,
1987, (File No. 33-13321) ("the S-1").
3(a)(1) Certificate of Amendment of Certificate of Incorporation of the
Registrant: Incorporated by reference to exhibit of same number in
Registrant's Annual Report on Form 10-K for the year ended January 1,
1994, (File No. 0-15385) ("the 1993 Form 10-K").
3(b) Restated By-Laws of the Registrant, as of July 22, 1992 and amended
as of July 20, 1994 and March 14, 1996.
4(a) See Exhibits 3(a), 3(a)(1), and 3(b).
4(b) Specimen of Certificate of the Registrant's Common Stock:
Incorporated by reference to Exhibit 1 of the Registrant's
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on June 23, 1987, (File No. 0-15385).
4(c) Shareholder Rights Agreement by and between the Registrant and
Wachovia Bank of North Carolina, N.A. as Rights Agent dated November
3, 1994: Incorporated by reference to Exhibit 2 to the Registrant's
Form 8-K filed November 10, 1994 (File No. 0-15385).
4(d) Loan and Security Agreement by and between Congress Financial
Corporation (Southern) as Lender and the Registrant and One Price
Clothing of Puerto Rico, Inc., as Borrowers dated March 25, 1996.
4(e) The Company hereby agrees to furnish to the Commission upon request
of the Commission a copy of any instrument with respect to long-term
debt not being registered in a principal amount less than 10% of the
total assets of the Company and its subsidiary on a consolidated
basis.
Material Contracts -- Executive Compensation Plans and Arrangements:
10(a)* Stock Option Plan of the Registrant dated February 20, 1987 and
related forms of Incentive and Non- qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(d) of the S-1.
10(b)* Stock Option Plan of the Registrant dated December 12, 1988 and
related forms of Incentive and Non- qualified Stock Option
Agreements: Incorporated by reference to Exhibit 10(a) in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988, (File No. 0-15385) ("the 1988 Form 10-K").
10(c)* One Price Clothing Stores, Inc. 1991 Stock Option Plan: Incorporated
by reference to Exhibit 10(b) in the Registrant's Annual Report on
Form 10-K for the year ended December 28, 1991, (File No. 0-15385)
("the 1991 Form 10-K").
<PAGE>
10(d)* Summary of Officer Bonus Plan: Incorporated by reference to exhibit
of the same number in Registrant's Annual Report on Form 10-K for the
year ended January 2, 1993, (File No. 0-15385) ("the 1992 Form 10-
K").
10(e)* Form of Employment Agreement between Registrant and Henry D. Jacobs,
Jr.:Incorporated by reference to Exhibit 10(j) in the 1988 Form 10-K.
10(f)* Employment Agreement dated February 1, 1991 between the Registrant
and Ethan S. Shapiro: Incorporated by reference to Exhibit 10(m) in
the Registrant's Annual Report on Form 10-K for the year
ended December 29, 1990, (File No. 0-15385) ("the 1990 Form 10-K").
10(g)* Key man term insurance policy, issued February 20, 1993, on the life
of Henry D. Jacobs, Jr.: Incorporated by reference to exhibit of the
same number in the 1992 Form 10-K.
10(h)* Employment Agreement dated January 16, 1995 between the Registrant
and Stephen A. Feldman: Incorporated by reference to exhibit of the
same number in Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994, (File No. 0-15385)(the "1994 Form 10-K").
10(i)* Disability Income Policy for the benefit of Henry D. Jacobs, Jr.:
Incorporated by reference to exhibit of
the same number in the 1992 Form 10-K.
10(j)* Disability Income Policy for the benefit of Ethan S. Shapiro:
Incorporated by reference to exhibit of the same number in the 1992
Form 10-K.
10(k)* Agreement between the Registrant and Jane R. Shapiro, Trustee of the
Ethan S. Shapiro Life Insurance Trust: Incorporated by reference to
exhibit of the same number in the 1992 Form 10-K.
10(l)* Agreement dated June 24, 1992 between the Registrant and Raymond S.
Waters: Incorporated by reference to exhibit of the same number in
the 1992 Form 10-K.
10(m* Directors' Stock Option Plan effective April 19, 1995: Incorporated
by reference to exhibit of the same number in the 1994 Form 10-K.
10(n)* Employment Agreement dated March 30, 1992 between the Registrant and
Ronald Swedin.
10(o)* Employment Agreement dated December 12, 1995 between the Registrant
and Thomas Unrine.
Material Contracts -- Other:
10(p) Credit Agreement dated March 16, 1995 by and between the Registrant
and NationsBank (as agent) for an unsecured $25,000,000 line of
credit facility and a $15,000,000 letter of credit facility:
Incorporated by reference to Exhibit 10(q) in the 1994 Form 10-K.
10(q) Assignment and Acceptance (dated April 24, 1995) of an interest in
the Credit Agreement (dated March 17, 1995) to CoreStates Bank and
Promissory Notes dated April 13, 1995 by and between the Registrant
and CoreStates Bank and NationsBank, N.A.: Incorporated by reference
to Exhibit 10(a) in the Registrant's quarterly report on Form 10-Q
for the quarter ended July 1, 1995, (File No. 0-15385) ("the July
1995 Form 10-Q").
10(r) Amendment Number 1 to Credit Agreement (dated as of June 30, 1995) by
and between the Registrant, various banks and lending institutions,
and NationsBank, N.A. (as agent), and Promissory Notes and Mortgage
and Security Agreement: Incorporated by reference to Exhibit 10(b) in
the July 1995 Form 10- Q.
11 Statement regarding computation of per share earnings.
21 Subsidiary of the Registrant.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule (electronic filing only).
---------------------------------------
* Denotes a management contract or compensatory plan or agreement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate
section of this report.
<PAGE>
RESTATED
BY-LAWS
OF
ONE PRICE CLOTHING STORES, INC.
( a Delaware corporation)
<PAGE>
INDEX
Page
ARTICLE I. Offices ............................................ 1
ARTICLE II. Stockholders' Meetings .............................. 1
Section 2.1 Places of Meetings ....................... 1
Section 2.2 Annual Meetings ........................ 1
Section 2.3 Special Meetings ......................... 2
Section 2.4 Voting .................................. 2
Section 2.5 Quorum .................................... 2
Section 2.6 List of Stockholders ...................... 3
Section 2.7 Action Without Meeting...................... 4
ARTICLE III. Board of Directors ............................... 4
Section 3.1 Powers .................................... 4
Section 3.2 Numbers and Qualification................... 4
Section 3.3 Compensation .............................. 5
Section 3.4 Meetings and Quorum ....................... 5
Section 3.5 Committees ................................ 6
Section 3.6 Conference Telephone Meetings .............. 7
Section 3.7 Action Without Meeting .................. 7
ARTICLE IV. Officers .............................................. 7
Section 4.1 Titles and Election ....................... 7
Section 4.2 Duties .................................... 8
(a) Chairman of the Board of Directors......... 9
(b) President ................................. 9
(c) Vice President.............................. 9
(d) Secretary ................................... 10
(e) Treasurer ................................... 10
Section 4.3 Delegation of Authority .................... 11
Section 4.4 Compensation ............................... 11
<PAGE>
ARTICLE V. Resignation, Vacancies and Removals ...................... 11
Section 5.1 Resignations ................................ 11
Section 5.2 Vacancies..................................... 11
(a) Directors ................................... 11
(b) Officers...................................... 12
Section 5.3 Removals ..................................... 12
(a) Directors .................................... 12
(b) Officers .................................... 12
ARTICLE VI. Capital Stock .......................................... 12
Section 6.1 Certificates of Stock ....................... 12
Section 6.2 Transfer of Stock ........................... 13
Section 6.3 Record Dates ................................ 13
Section 6.4 Lost Certificates ............................ 14
ARTICLE VII. Fiscal Year, Bank Deposits, Checks, Etc................. 14
Section 7.1 Fiscal Year .................................. 14
Section 7.2 Bank Deposits, Checks, Etc. ................. 14
ARTICLE VIII. Books and Records ..................................... 15
Section 8.1 Place of Keeping Books ...................... 15
Section 8.2 Examination of Books ........................ 15
ARTICLE IX. Notices ................................................. 15
Section 9.1 Requirements of Notice ...................... 15
Section 9.2 Waivers ...................................... 16
ARTICLE X. Seal ............................................... 16
ARTICLE XI. Powers of Attorney ...................................... 16
ARTICLE XII. Indemnification of Directors, Officers and Employees .... 17
Section 12.1 Action Other Than By or in the Right
of the Corporation .......................... 17
Section 12.2 Action By or in the Right of the
Corporation................................... 18
Section 12.3 Determination of Right of Indmnification ..... 19
<PAGE>
Section 12.4 Indemnification Against Expenses of Successful
Party ........................................ 19
Section 12.5 Advances of Expenses ......................... 20
Section 12.6 Right of Agent to Indemnification
Upon Application; Procedure Upon
Application ................................. 20
Section 12.7 Other Rights and Remedies .................... 21
Section 12.8 Insurance .................................... 22
Section 12.9 Indemnity Fund ............................... 22
Section 12.10 Indemnification of Other Persons.............. 22
Section 12.11 Survival of Indemnification................... 23
Section 12.12 Saving Clause ................................ 23
Section 12.13 Certain Definitions .......................... 23
ARTICLE XIII. Amendments ............................................ 25
<PAGE>
ONE PRICE CLOTHING STORES, INC.
BY- LAWS
ARTICLE I
OFFICER
The Corporation shall at all times maintain a registered office in
the State of Delaware and a registered agent at that address but may have other
offices located in or outside of the State of Delaware as the Board of Directors
may from time to time determine.
ARTICLE II
Stockholders' Meetings
2.1 Places of Meetings. All meetings of stockholders shall be held at
such place or places in or outside of the State of Delaware as the Board of
Directors may from time to time determine or as may be designated in the notice
of meeting or waiver of notice thereof, subject to any provisions of the laws of
the State of Delaware.
2.2 Annual Meetings. The annual meeting of stockholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on such date and at such time as may be
designated from time to time by the Board of Directors within four months after
the end of each fiscal year of the Corporation. If the annual meeting is not
held on the date designated, it may be held as soon thereafter as convenient and
shall be called the annual meeting. Written notice of the time and place of the
annual meeting shall be given by mail to each stockholder entitled to vote
thereat at his address as it appears on the records of the Corporation not less
than ten (10) nor more than sixty (60) days prior to the scheduled date thereof,
unless such notice is waived as provided by Article IX of these By-laws.
<PAGE>
2.3 Special Meetings. Special meetings of stockholders may be called at
any time by the Board of Directors or the Chairman of the Board of Directors
stating the specific purpose or purposes thereof. Written notice of the time,
place and specific purposes of such meeting shall be given by mail to each
stockholder entitled to vote thereat at his address as it appears on the records
of the corporation not less than ten (10) nor more than sixty (60) days prior to
the scheduled date thereof, unless such notice is waived as provided by Article
IX of these By-laws.
2.4 Voting. At all meetings of stockholders, each stockholder entitled
to vote on the record date as determined under Article VI, Section 6.3 of these
By-laws or , if not so determined, as prescribed under the laws of the State of
Delaware, shall be entitled to one vote for each share of stock standing of
record in his name, subject to any restrictions or qualifications set forth in
the Certificate of Incorporation or any amendment thereto.
2.5 Quorum. At any meeting of stockholders, a majority of the number of
shares of stock outstanding and entitled to vote thereat, present in person or
by proxy, shall constitute a quorum, but a smaller interest may adjourn any
meeting from time to time, and the meeting may be held as adjourned without
further notice, subject to such limitation as may be imposed under the laws of
the State of Delaware. When a quorum is present at any meeting, a majority of
the number of shares of stock entitled to vote present thereat shall decide any
question brought before such meeting unless the question is one upon which a
different vote is required by express provision of the laws of the State of
Delaware, the Certificate of Incorporation or these By-laws, in which case such
express provision shall govern.
2.6 List of Stockholders. At least ten (10) days before every meeting,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of and the number of shares
registered in the name of each stockholder, shall be prepared by the Secretary
or the transfer agent in charge of the stock ledger of the Corporation. Such
list shall be open for
<PAGE>
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine such list or the books of the corporation or to vote in person or by
proxy at such meeting.
2.7 Action Without Meeting. Any action required by the laws of the
State of Delaware to be taken at any annual or special meeting of stockholders,
or any action which may be taken at any annual or special meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing , setting forth the action so taken, shall be
signed by all the holders of outstanding stock entitled to vote at such meeting.
ARTICLE III
Board of directors
3.1 Powers. The business and affairs of the corporation shall be
carried on by or under the direction of the Board of Directors, which shall have
all the powers authorized by the laws of the State of Delaware, subject to such
limitations as may be provided by the Certificate of Incorporation or these
Bylaws.
3.2 Number and Qualification. The number of directors shall be not less
than three (3) and not more than nine (9), the exact number within such minimum
and maximum limits to be fixed and determined from time to time by resolution of
a majority of the Board of Directors. Each director shall serve until the
election and qualification of his successor or until his earlier resignation or
removal as
<PAGE>
provided in the Certificate of Incorporation or these By-laws. In case of an
increase in the number of directors between elections by the stockholders, the
additional directorships shall be considered vacancies and shall be filled in
the manner prescribed in Article V of these By-laws. Directors need not be
stockholders.
3.3 Compensation. The Board of Directors, or a committee thereof, may
from time to time by resolution, including, but not limited to, fees for
attendance at all meetings of the Board of Directors or any committee thereof,
and determine the amount of such fees and compensation.
3.4 Meeting and Quorum. Meetings of the Board of Directors may be held
either in or outside of the State of Delaware. A quorum shall be one-third (1/3)
of the then authorized number of directors, but not less than two (2) directors.
The Board of Directors shall, at the close of each annual meeting of
stockholders and without further notice other than these By-laws, if a quorum of
directors is then present or as soon thereafter as may be convenient, hold
regular meeting for the election of officers and the transaction of any other
business.
The Board of Directors may from time to time provide for the holding of
regular meetings with or without notice and may fix the times and places at
which such meetings are to be held. Meetings other than regular meetings may be
called at any time by the Chairman of the Board of Directors of the President
and must be called by the Secretary or an Assistant Secretary upon the request
of a majority of the Board of Directors.
Notice of each meeting other than a regular meeting (unless required by
the Board of Directors), shall be given to each director by mailing the same to
each director at his residence or business address at least two (2) days before
the meeting or by delivering the same to him personally or by telephone or
telegraph at least one (1) day before the meeting unless, in case of exigency,
the Chairman of the Board
<PAGE>
of Directors, the President or the Secretary shall prescribe a shorter notice to
be given personally or by telephone, telegraph, cable or wireless to all or any
one or more of the directors at their respective residences or places of
business.
Notice of any meeting shall state the time and place of such meeting,
but need not state the proposes thereof unless otherwise required by the laws of
the State of Delaware, the Certificate of Incorporation or the Board of
Directors.
3.5 Committees. The Board of Directors may, by resolution adopted by a
majority of the whole Board of Directors, provide for committees of two or more
directors and shall elect the members thereof to serve at the pleasure of the
Board of Directors and may at any time change the membership of each committee,
fill vacancies in it , authorize the committee to fill vacancies in such
committee, designated alternate members to replace any absent or disqualified
members at any meeting of such Committee, or dissolve it. Each such committee
shall have the powers and preform such duties, not inconsistent with law, as may
be assigned to it by the Board of Directors. Each committee may determine its
rules of procedure and the notice to be given of its meeting. A majority of the
members of each committee shall constitute a quorum.
3.6 Conference Telephone Meetings. Any one or more members of the Board
of Directors or any committee thereof may participate in a meeting by means of a
conference telephone or similar communication equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.
3.7 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting of all members of the Board of Directors or committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
<PAGE>
ARTICLE IV
OFFICERS
4.1 Titles and Election. The officers of the Corporation shall be the
President, one or more Vice Presidents, the Secretary and the Treasurer. The
officers of the Corporation shall initially be elected as soon as convenient by
the Board of Directors and thereafter, in the absence of earlier resignations or
removals, shall be elected at the first meeting of the Board of Directors
following each annual meeting of stockholders. Each officer shall hold office at
the pleasure of the Board of Directors except as may otherwise be approved by
the Board of Directors, or until his earlier resignation, removal under these
By-laws or other termination of his employment. Any person may hold more than
one office if the duties can be consistently performed by the same person.
The Board of Directors, in its discretion, may also at any time elect
or appoint a Chairman of the Board of Directors, Assistant Secretaries and
Assistant Treasures and such other officers as it may deem advisable, each of
whom shall hold office at the pleasure of the Board of Directors or until his
earlier resignation, removal or other termination of employment, and shall have
such authority and shall perform such duties as may be prescribed or determined
from time to time by the Board of Directors or , in case of officers other than
the Chairman of the Board of Directors as the President or the then senior
executive officer may prescribe or determine.
4.2 Duties. Subject to such extension, limitations, and other
provisions as the Board of Directors may from time to time prescribe or
determine, the following officers shall have the following powers and duties:
(a) Chairman of the Board of Directors. The Chairman of the board of
Directors, if one is elected, shall be a director and , when present, shall
preside at all meetings of the stockholders and of the Board of Directors and
shall be charged with general supervision of the management and policy of the
<PAGE>
Corporation and shall have such other powers and perform such other duties as
the Board of Directors may prescribe from time to time. Pursuant to the
foregoing provision, the Board of Directors in its discretion may appoint the
Chairman of the Board of Directors as Chief Executive Officer of the
Corporation.
(b) President. The President, if one is elected, shall be the chief
operating officer of the Corporation, shall exercise the power and authority and
perform all of the duties commonly incident to his office, shall in the absence
of the Chairman of the Board of Directors preside at all meetings of the
stockholders and of the Board of Directors if he is a director, and shall
perform such other duties as the Board of Directors may specify from time to
time. Pursuant to the foregoing provision, the Board of Directors in its
discretion may appoint the President as Chief Executive Office of the
Corporation. The President or a Vice President, or any officer specifically
authorized by the Board of Directors, shall sign all certificates for shares,
bonds, debentures, promissory notes, deeds and contracts of the Corporation.
(c) Vice President. The Vice President or Vice Presidents shall perform
such duties as may be assigned to them from time to time by the Board of
Directors or by the President if the Board of Directors does not do so. In the
absence or disability of the President, the Vice Presidents in order of
seniority may, unless otherwise determined by the Board of Directors, exercise
the powers and perform the duties pertaining to the office of President.
(d) Secretary. The Secretary, or in his absence an Assistant Secretary,
shall keep the minutes of all meetings of stockholders and of the Board of
Directors and any committee thereof, give and serve all notices, attend to such
correspondence as may be assigned to him, keep in safe custody the seal of the
Corporation, and affix such seal to all such instruments properly executed as
may reacquire, and shall perform all of the duties commonly incident to his
office and shall have such other duties and powers as may be prescribed or
determined from time to time by the Board of Directors or by the President if
the
<PAGE>
Board of Directors does not do so.
(e) Treasurer. The Treasurer, subject to the order of the Board of
Directors, shall have the care and custody of the monies, funds, and securities
of the Corporation (other than his own bond, if any, which shall be in the
custody of the President), shall maintain the general accounting book/accounting
records and forms of the Corporation and shall have, under the supervision of
the Board of Directors, all the powers and duties commonly incident to his
office. In addition to the foregoing, the Treasurer shall have such duties as
may be prescribed or determined from time to time by the Board of Directors of
by the President if the Board of Directors does not do so.
4.3 Delegation of Authority. The Board of Directors may at any time
delegate the powers and duties of any officer for the time being to any other
officer, director or employee.
4.4 Compensation. The compensation of the officers of the corporation
shall be fixed by the Board of Directors or a committee thereof, and the fact
that any officer is a director shall not preclude him form receiving
compensation or from voting upon the resolution providing the same.
ARTICLE V
Resignations, Vacancies and Removals
5.1 Resignations. Any director or officer may resign at any time by
giving written notice thereof to the Board of Directors, the President or the
Secretary. any such resignation shall take effect at the time specified therein
or , if the time be not specified, upon receipt thereof; and unless otherwise
specified therein, the acceptance of any resignation shall not be necessary to
make it effective.
5.2 Vacancies.
(a) Directors. Any vacancy in the Board of Directors caused by
reason of death, incapacity, resignation, removal, increase in the authorized
number of directors or otherwise, shall be filled by a majority vote of the
remaining directors though less than a quorum, or by the sole remaining
<PAGE>
director. Any director so filling such a vacancy shall serve until the next
annual meeting of stockholders and until election and qualification of his
successor or until his earlier resignation or removal.
(b) Officers. The Board of Directors may at any time or
from time to time fill any vacancy among the officers of the Corporation.
5.3 Removals.
(a) Directors. The entire Board of Directors, or any
individual member thereof, maybe removed, with or without cause, by the holders
of a majority of the shares of capital stock then entitled to vote at an
election of directors.
(b) Officers. Subject to the provisions of any validly
existing agreement, the Board of Directors may at any meeting remove from office
any officer, with or without cause, and may appoint a successor.
ARTICLE VI
Capital Stock
6.1 Certificates of Stock. Every stockholder shall be entitled to a
certificate or certificates for shares of the capital stock of the Corporation
in such form as may be prescribed or authorized by the Board of Directors, duly
numbered and setting forth the number and kind of shares represented thereby.
Such certificates shall be signed by the Chairman of the Board of Directors, or
by the President or a Vice President and by the Treasurer or an Assistant
Treasurer or by the Secretary or an Assistant Secretary. Any or all of such
signatures may be in facsimile. In case any officer, transfer agent or
registrant who has signed or whose facsimile signature has been placed on a
certificate has ceased to be such officer, transfer agent or registrar before
the certificate has been issued, such certificate may nevertheless be issued and
delivered by the Corporation with the same effect as if he were such officer,
transfer agent or
<PAGE>
registrar at the date of issue.
6.2 Transfer of Stock. Shares of the capital stock of the Corporation
shall be transferable only upon the books of the Corporation upon the surrender
of the certificate or certificates properly assigned and endorsed for transfer.
If the corporation has a transfer agent or registrar acting on its behalf, the
signature of any officer or representative thereof may be in facsimile. The
Board of Directors may appoint a transfer agent and one or more co-transfer
agents and a registrar and one or more co-registrars and may make or authorize
such agents to make all such rules and regulations deemed expedient concerning
the issuance, transfer and registration of shares of stock.
6.3 Record Dates. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a 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 change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix in advance a record date
which, in the case of a meeting, shall not be less than ten (10) nor more than
sixty (60) days prior to the scheduled date of such meeting and which, in the
case of any other action, shall be not more than sixty (60) days prior to any
such action permitted by the laws of the State of Delaware. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
6.4 Lost Certificates. In case of loss or mutilation or destruction of
a stock certificate, a duplicate certificate may be issued upon such terms as
may be determined or authorized by the Board of Directors or by the President if
the Board of Directors does not do so.
ARTICLE VII
<PAGE>
Fiscal Year Bank Deposits, Checks, Etc.
7.1 Fiscal Year. The fiscal year of the Corporation shall be the cal-
endar year unless otherwise fixed by resolution of the Board of Directors.
7.2 Bank Deposit, Checks, Etc.. The funds of the Corporation shall be
deposited in the name of the Corporation or of any division thereof in such
banks or trust companies in the United States or elsewhere as may be designated
from time to time by the Board of Directors, or by such officer or officers as
the Board of Directors may authorize to make such designations.
All checks, drafts or other orders for the withdrawal of funds from any
bank account shall be signed by such person or persons as may be designated from
time to time by the Board of Directors. The signatures on checks, drafts or
other orders for the withdrawal of funds may be in facsimile if authorized in
the designation.
ARTICLE VII
Books and Records
8.1 Place of Keeping Books. The books and records of the corporation
may be kept outside of the State of Delaware.
8.2 Examination of Books. Except as may otherwise be provided by the
laws of the State of Delaware, the Certificate of Incorporation or these
By-laws, the Board of Directors shall have the power to determine from time to
time whether and to what extent and at what times and places and under what
conditions any of the accounts, records and books of the Corporation are to be
open to the inspection of any stockholder. No stockholder shall have any right
to inspect any account or book or document of the Corporation except as
prescribed by law or authorized by express resolution of the stockholders or of
the Board of Directors.
ARTICLE IX
<PAGE>
Notices
9.1 Requirements of Notice. Whenever notice is required to be given by
statute, the Certificate of Incorporation or these By-laws, it shall not mean
personal notice unless so specified, but such notice may be given in writing by
deposition the same in a post office, letter box, or mail chute postage prepaid
and addressed to the person to whom such notice is directed at the address of
such person on the records of the Corporation, and such notice shall be deemed
given at the time when the same shall be thus mailed.
9.2 Waivers. Any stockholder, director or officer may, in writing or by
telegram or cable, at any time waive any notice or other formality required by
statute, the Certificate of Incorporation or these By-laws. Such waiver of
notice, whether given before or after any meeting or action shall be deemed
equivalent to notice. Presence of a stockholder either in person or by proxy at
any meeting of stockholders and presence of any director at any meeting of the
Board of Directors shall constitute a waiver of such notice as may be required
by any statute, the Certificate of Incorporation or these Bylaws.
ARTICLE X
Seal
The corporate seal of the Corporation shall be in such form as the
Board of Directors shall determine from time to time and may consist of a
facsimile thereof or the words "Corporate Seal" or "Seal" enclosed in
parentheses.
ARTICLE XI
Powers of Attorney
The Board of Directors may authorize one or more of the officers of the
Corporation to execute powers of attorney delegating to named representatives or
agents power to represent or act on behalf of the
<PAGE>
Corporation, with or without power of substitution.
In the absence of any action by the Board of Directors, any officer of
the Corporation may execute for and on behalf of the Corporation waivers of
notice of meeting of stockholders and proxies for such meetings of any company
in which the Corporation may hold voting securities.
ARTICLE XII
Indemnification of Directors, Officers and Employees
12.1 Action Other Than by or in the Right of the Corporation. Subject
to Section 12.3 hereof, the Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding , whether civil, criminal, administrative,
and whether external or internal to the Corporation, (other than a judicial
action or suit brought by or in the right of the Corporation) by reason of the
fact that he is or was a director or officer of the Corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise (all such
persons being referred to hereafter as an "Agent"), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonable incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order , settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interest of the Corporation, and with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
12.2 Action by or in the Right of the Corporation. The Corporation
shall indemnify any person
<PAGE>
who was or is a party or is threatened to be made a party to any threatened,
pending or completed judicial action or suit brought by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was an Agent against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interest of the Corporation, except that no
indemnification shall be made in respect of any claim, issued or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity of such expenses
which the Court of Chancery or other such court shall deem proper.
12.3 Determination of Right of Indemnification. Any indemnification
under Section 12.1 or 12.2 hereof (unless ordered by a court) shall be made by
the Corporation unless a determination is reasonably and promptly made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who are or were not parties to such action, suite or proceeding, or (ii) if such
a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders, that such person acted in bad faith and in a manner
that such person did not believe to be in or not opposed to the best interests
of the Corporation, or , with respect to any criminal proceeding, that such
person believed or had reasonable cause to believe that his conduct was
unlawful.
12.4 Indemnification Against Expense of Successful Party.
Notwithstanding the other provisions of this Article XII, to the extent that an
Agent has been successful on the merits or otherwise, including the dismissal
or an action without prejudice or the settlement of an action without admission
of
<PAGE>
liability, in defense of any proceeding or in defense of any claim, issue or
matter therein, such Agent shall be indemnified against all expenses incurred in
connection therewith.
12.5 Advances of Expenses. Except as limited by Section 12.6 hereof,
expenses incurred in defending or investigating any action, suit proceeding or
investigation shall be paid by the Corporation in advance of the final
disposition of such matter, if the Agent shall undertake to repay such amount in
the event that is ultimately determined, as provided herein , that such person
is not entitled to indemnification. However, no advance shall be made by the
Corporation if a determination is reasonably and promptly made by the Board of
Directors by a majority vote of a quorum of disinterested directors, or (if such
a quorum is not obtainable or , even if obtainable, a quorum if disinterested
directors so directs) by independent legal counsel in a written opinion, that,
based upon the facts known to the Board of Directors or counsel at the time such
determination is made, such person acted in bad faith and in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation, or , with respect to any criminal proceedings, that such person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Board of Directors or
independent legal counsel reasonably determines that such person deliberately
breached his duty to the Corporation or its stockholders.
12.6 Right of Agent to Indemnification Upon Application; Procedure Upon
Application. Any indemnification under Section 12.2, 12.3, and 12.4 hereof, or
advance under Section 12.5 hereof, shall be made promptly and in any event
within 45 days, upon the written request of the Agent, unless with respect to
applications under Section 12.2, 12.3, or 12.5 hereof, a determination is
reasonably and promptly made by the Board of Directors by a majority vote of a
quorum of disinterested directors that such Agent acted in a manner set forth in
such Sections as to justify the Corporation's not indemnifying or making an
advance to the Agent. In the event no quorum if disinterested directors is
obtainable, the
<PAGE>
board of Directors shall promptly direct that independent legal counsel shall
decide whether the Agent acted in the manner set forth in such Sections as to
justify the Corporation's not indemnifying or making and advance to the Agent.
The right to indemnification or advances as granted by this Article XII shall be
enforceable by the Agent in any court of competent jurisdiction of the Board of
Directors or independent legal counsel denies the claim, in whole or in part, or
if no disposition of such claim is made within 45 days. The Agent's expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
12.7 Other Rights and Remedies. The indemnification provided by his
Article XII shall not be deemed exclusive of any other rights to which an Agent
seeking indemnification may be entitled under any agreement, vote of
stockholders or disinterested directors, court order or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. It is the policy of the Corporation that indemnification of
Agents shall be made to the fullest extent permitted by law. All rights to
indemnification under this Article XII shall be deemed to be provided by a
contract between the Corporation and the Agent who serves in such capacity at
any time while these By-laws and other relevant provisions of the General
Corporation Law of the State of Delaware and other applicable law, if any, are
in effect Any repeal or modification thereof shall not affect any rights or
obligations then existing.
12.8 Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was an Agent against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of his Article XII.
12.9 Indemnity Fund. Upon resolution adopted by the Board of
Directors, the corporation may
<PAGE>
establish a trust or other designated account, grant a security interest or use
other means (including, without limitation, a letter of credit), to ensure the
payment of certain of its obligations arising under this Article XII and/or
agreements which may be entered into between the Corporation and its officers
and directors from time to time.
12.10 indemnification of Other Persons. The provisions of this Article
XII shall not be deemed to preclude the indemnification of any person who is not
an agent but whom the corporation has the power or obligation to indemnify under
the provisions of the General Corporation Law of the State of Delaware or other
vise. The Corporation may, in its sole discretion, indemnify an employee,
trustee or other agent as permitted by the General Corporation Law of the State
of Delaware. The Corporation shall indemnify an employee, trustee or other agent
where required by law.
12.11 Survival of indemnification. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article XII shall continue
as to a person who has ceased to be an Agent and shall inure to the benefit of
the heirs, executors and administrators of such Agent.
12.12 Savings Clause. If this Article XII or any portion thereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Agent against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether internal or external, including a grand jury
proceeding and an action or suit brought by or in the right of the Corporation,
to the full extent permitted by any applicably portion of this Article XII that
shall not have been invalidated, or by any other applicable law.
12.13 Certain Definitions. For purposes of this Article XII,
references to "the Corporation" shall include, in addition to the resulting or
surviving corporation, any constituent corporation (including any
constituent of a constituent absorbed in a consolidation or merger which, if its
separate existence had
<PAGE>
continued, would have had power to indemnify its directors, officers and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this Article XII with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued; references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to any employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonable believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article XII.
ARTICLE XIII
Amendments
These By-laws may be amended or repealed either:
(a) at any meeting of stockholders at which a quorum is present by vote
of a majority of the number of shares of stock entitled to vote present in
person or by proxy at such meeting as provided in Article II, Sections 2.5 and
2.6 of these By-laws, or
(b) at any meeting of the Board of Directors by a majority vote of the
directors then in office; provided that the notice of such meeting of
stockholders or directors or waiver of notice thereof contains a statement of
the substance of the proposed amendment or repeal.
<PAGE>
AMENDMENT TO BY-LAWS
OF
ONE PRICE CLOTHING STORES INC.
ADOPTED JULY 20, 1994
Article II, Shareholders' Meetings is hereby amended by adding the
following new Section 2.8:
2.8 Notice of Shareholders Proposals. Any shareholder desiring to
submit a proposal to an annual or special meeting of shareholders shall submit
information regarding the proposal, together with the proposal to the
corporation at least 45 days prior to the shareholders meeting at which such
proposal is to be present.
<PAGE>
AMENDMENT TO BY-LAWS
OF
ONE PRICE CLOTHING STORES INC.
ADOPTED MARCH 14, 1996
Article II, Shareholders' Meetings is hereby amended by replacing the
following Section 2.2:
2.2 Annual Meetings. The annual meeting of stockholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on such date and at such time as may be
designated from time to time by the Board of Directors within six months after
the end of each fiscal year of the Corporation. If the annual meeting is not
held on the date designated, it may be held as soon therefore as convenient and
shall be called the annual meeting. Written notice of the time and place of the
annual meeting shall be given by mail to each stockholder entitled to vote
thereat at his address as it appears on the records of the Corporation not less
than ten (10) nor more than sixty (6) days prior to the scheduled date thereof,
unless such notice is waived as provided by Article IX of these By-laws.
<PAGE>
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
as Lender
and
ONE PRICE CLOTHING STORES, INC.
and
ONE PRICE CLOTHING OF PUERTO RICO, INC.
as Borrowers
Dated: March 25, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. DEFINITIONS..........................................................................................1
SECTION 2. CREDIT FACILITIES...................................................................................12
2.1 Revolving Loans....................................................................................12
2.2 Letter of Credit Accommodations....................................................................13
2.3 Term Loan..........................................................................................16
2.4 Availability Reserves..............................................................................16
SECTION 3. INTEREST AND FEES.................................................................................. 17
3.1 Interest...........................................................................................17
3.2 Closing Fee........................................................................................19
3.3 Servicing Fee......................................................................................19
3.4 Unused Line Fee....................................................................................19
3.5 Changes in Laws and Increased Costs of Loans.......................................................19
3.6 Maximum Interest...................................................................................20
SECTION 4. CONDITIONS PRECEDENT.................................................................................22
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations......................................................................22
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations.........................................................................25
SECTION 5. SECURITY INTEREST...................................................................................25
SECTION 6. COLLECTION AND ADMINISTRATION.......................................................................27
6.1 Borrowers' Loan Accounts...........................................................................27
6.2 Statements.........................................................................................27
6.3 Collection of Accounts and other Proceeds of
Collateral....................................................................................27
6.4 Payments...........................................................................................30
6.5 Authorization to Make Loans........................................................................31
6.6 Use of Proceeds....................................................................................31
6.7 Appointment of One Price as Agent for One Price PR.................................................31
SECTION 7. COLLATERAL REPORTING AND COVENANTS..................................................................32
7.1 Collateral Reporting...............................................................................32
7.2 Accounts Covenants.................................................................................33
7.3 Inventory Covenants................................................................................35
7.4 Equipment Covenants................................................................................36
7.5 Power of Attorney..................................................................................37
(i)
<PAGE>
7.6 Right to Cure......................................................................................38
7.7 Access to Premises.................................................................................38
SECTION 8. REPRESENTATIONS AND WARRANTIES......................................................................38
8.1 Corporate Existence, Power and Authority;
Subsidiaries..................................................................................39
8.2 Financial Statements; No Material Adverse Change...................................................39
8.3 Chief Executive Office; Collateral Locations.......................................................39
8.4 Priority of Liens; Title to Properties.............................................................39
8.5 Tax Returns........................................................................................40
8.6 Litigation.........................................................................................40
8.7 Compliance with Other Agreements and Applicable
Laws..........................................................................................41
8.8 Environmental Compliance...........................................................................42
8.9 Credit Card Agreements.............................................................................42
8.10 Employee Benefits..................................................................................43
8.11 Accuracy and Completeness of Information...........................................................44
8.12 Interrelated Business..............................................................................44
8.13 Survival of Warranties; Cumulative.................................................................45
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..................................................................45
9.1 Maintenance of Existence...........................................................................45
9.2 New Collateral Locations...........................................................................45
9.3 Compliance with Laws, Regulations, Etc.............................................................45
9.4 Payment of Taxes and Claims........................................................................47
9.5 Insurance..........................................................................................47
9.6 Financial Statements and Other Information.........................................................48
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc..............................................................................50
9.8 Encumbrances.......................................................................................51
9.9 Indebtedness.......................................................................................52
9.10 Loans, Investments, Guarantees, Etc................................................................54
9.11 Dividends and Redemptions..........................................................................55
9.12 Transactions with Affiliates.......................................................................55
9.13 Credit Card Agreements.............................................................................56
9.14 Adjusted Net Worth.................................................................................57
9.15 Working Capital....................................................................................57
9.16 Compliance with ERISA..............................................................................57
9.17 Costs and Expenses.................................................................................57
9.18 Further Assurances.................................................................................58
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.....................................................................59
10.1 Events of Default.................................................................................59
10.2 Remedies..........................................................................................61
(ii)
<PAGE>
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW................................................................63
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver...................................................................63
11.2 Waiver of Notices.................................................................................64
11.3 Amendments and Waivers............................................................................64
11.4 Waiver of Counterclaims...........................................................................65
11.5 Indemnification...................................................................................65
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS....................................................................65
12.1 Term..............................................................................................65
12.2 Notices...........................................................................................67
12.3 Partial Invalidity................................................................................67
12.4 Successors........................................................................................67
12.5 Confidentiality...................................................................................68
12.6 Entire Agreement..................................................................................69
</TABLE>
(iii)
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Borrowing Base Certificate
Exhibit B Information Certificates
Schedule 6.3 Bank Accounts
Schedule 8.4 Existing Liens
Schedule 8.8 Environmental Compliance
Schedule 8.9 Credit Card Agreements
Schedule 9.7 Certain Retail Stores to be Closed
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Loans, Investments, Guarantees
(iv)
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated March 25, 1996 is entered into
by and among Congress Financial Corporation (Southern), a Georgia corporation
("Lender") and One Price Clothing Stores, Inc., a Delaware corporation ("One
Price") and One Price Clothing of Puerto Rico, Inc., a Puerto Rico corporation
("One Price PR", and together with One Price, individually referred to as a
"Borrower" and collectively as "Borrowers").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender enter into certain
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to Borrowers shall, unless the context otherwise expressly provides,
mean either Borrower and both Borrowers, individually and collectively, jointly
and severally. All references to Borrowers and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein",
<PAGE>
"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 11.3. Any accounting term used
herein unless otherwise defined in this Agreement shall have the meaning
customarily given to such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.1 "Accounts" shall mean, as to each Borrower, all present and future
rights of such Borrower to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance, including, without limitation, Credit Card
Receivables.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (1) the Eurodollar Rate for such Interest Period by (2) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to the difference between: (a) the aggregate net book value of all
<PAGE>
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose as the lower of cost, on a first-in-first-out average
cost basis, or market value computed under the retail method of accounting,
after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (b) the aggregate amount of the indebtedness
and other liabilities of such Person and its subsidiaries (including tax and
other proper accruals).
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations that would otherwise be available to Borrowers under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks that, as determined by Lender in good faith, do or may adversely affect
either (i) the Collateral or any other property which is security for the
Obligations or its value, (ii) the assets, business or prospects of either
Borrower or any Obligor or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Lender's good faith belief that any collateral report
or financial information furnished by or on behalf of either Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect or (c) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default, or (d) to reflect
outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or
(e) as otherwise provided in Section 2.4 hereof.
1.5 "Borrowing Base Certificate" shall mean a certificate substantially
in the form of Exhibit A hereto, as such form may from time to time be modified
by Lender, which is duly completed and executed by Borrowers and delivered to
Lender, from time to time in accordance with the terms hereof.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
<PAGE>
1.7 "Business Day" shall mean (a) for the Prime Rate Loans, any day
other than a Saturday, Sunday, or other day on which commercial banks are
authorized or required to close under the laws of the State of New York or the
State of Georgia or the Commonwealth of Pennsylvania, and a day on which the
Reference Bank and Lender are open for the transaction of business, and (b) for
all Eurodollar Rate Loans, any such day as described in (a) above in this
definition of Business Day, excluding any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.8 "Capital Stock" shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock or
partnership interests and any options or warrants with respect to any of the
foregoing.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.10 "Collateral" shall have the meaning set forth in
Section 5 hereof.
1.11 "Cost" shall mean, as to Inventory as of any date, the cost of
such Inventory as of such date, determined on a first-in- first-out average cost
basis in accordance with GAAP, except, that (i) there shall be excluded from
such cost, the aggregate amounts included by Borrowers in accounting for the
cost of Inventory in respect of capitalized amounts relating to Inventory,
commonly known as UNICAP amounts, and (ii) with respect to any Inventory sold by
one Borrower to the other Borrower, such term shall mean the original cost
thereof to the Borrower which originally purchased such Inventory and shall not
include any markup or profit on such intercompany sale.
1.12 "Credit Card Acknowledgments" shall mean, individually and
collectively, the agreements by Credit Card Issuers or Credit Card Processors
who are parties to Credit Card Agreements in favor of Lender acknowledging
Lender's first priority security interest in the monies due and to become due to
Borrowers
<PAGE>
(including, without limitation, credits and reserves) under the Credit Card
Agreements, and agreeing to transfer all such amounts to the Blocked Accounts,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.13 "Credit Card Agreements" shall mean all agreements now or
hereafter entered into by Borrowers with any Credit Card Issuer or any Credit
Card Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, including, but not
limited to, the agreements identified on Schedule 8.9 hereto.
1.14 "Credit Card Issuer" shall mean any person (other than a Borrower)
who issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank credit or debit cards or other bank credit or debit
cards, and American Express, Discover, Diners Club, Carte Blanche and other
non-bank credit or debit cards.
1.15 "Credit Card Processor" shall mean any servicing or processing
agent or any factor or financial intermediary who facilitates, services,
processes or manages the credit authorization, billing, transfer and/or payment
procedures with respect to any of Borrowers' sales transactions involving credit
card or debit card purchases by customers using credit cards or debit cards
issued by any Credit Card Issuer (including, but not limited to those Credit
Card Processors identified on Schedule 8.9 hereto.
1.16 "Credit Card Receivables" shall mean, as to each Borrower, all
Accounts consisting of the present and future rights of such Borrower to payment
for Inventory sold and delivered to customers who have purchased such goods
using a credit card or a debit card issued by a Credit Card Issuer.
1.17 "Direct Remittance Event" shall have the meaning set forth in
Section 6.3 hereof.
1.18 "Distribution Center" shall mean the distribution/ warehouse
facility owned by One Price and located in Duncan, Spartanburg County, South
Carolina.
<PAGE>
1.19 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of first quality finished goods consisting of apparel
or other merchandise categories acceptable to Lender, held for resale in the
ordinary course of the business of such Borrower that are acceptable to Lender
based on the criteria set forth below. In general, Eligible Inventory shall not
include (a) packaging and shipping materials; (b) supplies used or consumed in
Borrowers' business; (c) Inventory at premises other than those owned and
controlled by Borrowers, except (i) if the premises are occupied and operated by
such Borrower as a Retail Store or (ii) if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(d) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (e) bill and hold
goods; (f) unserviceable, obsolete or slow moving Inventory; (g) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (h) Inventory in transit, except Inventory in transit to the
Distribution Center or any Retail Store location located in the United States or
the Commonwealth of Puerto Rico, provided (A) title to such Inventory has passed
to a Borrower, (B) the documents of title covering such goods are consigned only
to a Borrower or to Lender and a Borrower, are in the possession of Lender or,
if permitted by Lender, are in the possession of a Borrower or the agent of a
Borrower, and (C) such Inventory has not been purchased under, and is not
otherwise covered by, a Letter of Credit Accommodation or other letter of credit
under which payment for such Inventory has not yet been fully made; (i) damaged
and/or defective Inventory (j) returned Inventory that is not first quality held
for resale; (k) Inventory to be returned to vendors; (l) Inventory subject to
deposits made by customers for sales of Inventory that has not been delivered;
(m) Inventory held after the applicable expiration date thereof; (n) samples;
and (o) Inventory purchased or sold on consignment. General criteria for
Eligible Inventory may be established and revised from time to time by Lender in
good faith and Lender shall advise Borrowers of
<PAGE>
any additional criteria as so established or any criteria so revised. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
1.20 "Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to either
Borrower's business and facilities (whether or not owned by it), including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes.
1.21 "Equipment" shall mean, as to each Borrower, all of such
Borrower's now owned and hereafter acquired equipment, machinery, computers and
computer hardware and software (whether owned or licensed), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.22 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.23 "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower or any of its subsidiaries under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
1.24 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
<PAGE>
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower and approved by Lender) on
or about 9:00 a.m. (Atlanta, Georgia time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to a
Borrower in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by such Borrower.
1.25 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.26 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
the Revolving Loans available to Borrowers as of such time based on the
applicable lending formula under Section 2.1 hereof, as determined by Lender,
and subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder and (ii) an amount equal to the Inventory Loan
Limit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations (but not including for this purpose the outstanding principal amount
of the Term Loan), plus (ii) the aggregate amount of all trade payables of
Borrowers which are more than forty-five (45) days past due as of such time and
are not then being disputed in good faith by Borrowers.
1.27 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.28 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by either
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.29 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the
<PAGE>
Accounting Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Boards which are applicable to the circumstances as of the date of
determination consistently applied, except that, for purposes of Sections 9.14
and 9.15 hereof, GAAP shall be determined on the basis of such principles in
effect on the date hereof and consistent with those used in the preparation of
the audited financial statements delivered to Lender prior to the date hereof.
1.30 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
1.31 "Information Certificates" shall mean the Information Certificates
of Borrowers constituting Exhibit B hereto containing material information with
respect to Borrowers, their business and assets provided by or on behalf of
Borrowers to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.32 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as either
Borrower may elect, commencing three (3) Business Days following Lender's
receipt of a request by a Borrower (or by One Price on behalf of One Price PR)
for such Interest Period under Section 3.1(b) hereof, the exact duration to be
determined in accordance with the customary practice in the applicable
Eurodollar Rate market; provided, that, a Borrower may
<PAGE>
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.33 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
one-half of one (1/2%) percent per annum in excess of the Prime Rate and, as to
Eurodollar Rate Loans, a rate of two and one-half (2 1/2%) percent per annum in
excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by the applicable Borrower for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to such Borrower); provided, that: the
Interest Rate shall be increased to the rate of two and one-half (2 1/2%)
percent per annum in excess of the Prime Rate as to Prime Rate Loans and the
rate of four and one-half (4 1/2%) percent per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option, without notice,
(a) for the period on and after (i) the date of termination or non-renewal
hereof and until such time as all Obligations are indefeasibly paid in full
(notwithstanding entry of any judgment against either Borrower), or (ii) the
date of the occurrence of any Event of Default or act, condition or event which
with notice or passage of time or both would constitute an Event of Default, and
for so long as such Event of Default or other event is continuing as determined
by Lender and (b) on the Loans at any time outstanding in excess of the amounts
available to the respective Borrowers under Section 2 (whether or not such
excess(es), arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default).
1.34 "Inventory" shall mean, as to each Borrower, all of such
Borrower's now owned and hereafter existing or acquired raw materials, work in
process, finished goods and all other inventory of whatsoever kind or nature,
wherever located.
1.35 "Inventory Loan Limit" shall mean $37,500,000.
1.36 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of any Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to
<PAGE>
the issuer the performance by a Borrower of its obligations to
such issuer.
1.37 "Loans" shall mean the Revolving Loans and the Term
Loan.
1.38 "Material Adverse Effect" shall mean any material adverse effect
upon the business, assets or financial condition of Borrowers, or any material
adverse effect upon the Collateral or Lender's rights or interests in or with
respect to the Collateral.
1.39 "Maximum Credit" shall mean $45,000,000.
1.40 "Maximum Interest Rate" shall mean the maximum non-usurious rate
of interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken, reserved, charged or received in respect of
the indebtedness of Borrowers to Lender, or to the extent that at any time such
applicable law may thereafter permit a higher maximum non-usurious rate of
interest, then such higher rate. Notwithstanding any other provision hereof, the
Maximum Interest Rate shall be calculated on a daily basis (computed on the
actual number of days elapsed over a year of three hundred sixty-five (365) or
three hundred sixty-six (366) days, as the case may be)
1.41 "Mortgage" shall mean the Open End Mortgage and Security
Agreement, dated of even date herewith, by One Price in favor of Lender with
respect to the Real Property and related assets of One Price located in Duncan,
Spartanburg County, South Carolina, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.42 "Net Recovery Cost Percentage" shall mean the fraction, expressed
as a percentage, (a) the numerator of which is the amount equal to the recovery
on the aggregate amount of the Inventory of a Borrower at such time on a "going
out of business sale" basis as set forth in the most recent acceptable appraisal
of such Inventory received by Lender in accordance with Section 7.3, net of
operating expenses, liquidation expenses and commissions, and (b) the
denominator of which is the aggregate original Cost of the Inventory subject to
appraisal.
<PAGE>
1.43 "Net Recovery Retail Percentage" shall mean the fraction,
expressed as a percentage, (a) the numerator of which is the amount equal to the
recovery on the aggregate amount of the Inventory of a Borrower at such time on
a "going out of business sale" basis as set forth in the most recent acceptable
appraisal of such Inventory received by Lender in accordance with Section 7.3,
net of operating expenses, liquidation expenses and commissions, and (b) the
denominator of which is the aggregate Retail Value of the Inventory subject to
appraisal.
1.44 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by either or both Borrowers to Lender and/or
its affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to either or both Borrowers under the United States Bankruptcy
Code or any similar statute (including, without limitation, the payment of
interest and other amounts which would accrue and become due but for the
commencement of such case), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by Lender.
1.45 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than a Borrower.
1.46 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.47 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Code), limited liability
corporation, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any
<PAGE>
government or any agency or instrumentality or political
subdivision thereof.
1.48 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.49 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
hereof.
1.50 "Puerto Rico Sublimit" shall have the meaning set forth in Section
2.1(c) hereof.
1.51 "Real Property" shall mean, as to each Borrower, all now owned and
hereafter acquired real property of such Borrower, including leasehold
interests, together with all buildings, structures, and other improvements
located thereon and all licenses, easements and appurtenances relating thereto,
wherever located, including without limitation, as to One Price, the real
property and related assets more particularly described in the Mortgage.
1.52 "Records" shall mean, as to each Borrower, all of such Borrower's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of such
Borrower with respect to the foregoing maintained with or by any other person).
1.53 "Refinancing Term Indebtedness" shall have the meaning set forth
in Section 9.9(f) hereof.
1.54 "Retail Value" shall mean, as to the Inventory of a Borrower as of
any date, the then current retail sales price of such Inventory as of such date,
net of markdowns from the original retail sales price or ticketed sales price
with respect
<PAGE>
thereto.
1.55 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrowers on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.56 "Term Loan" shall mean the term loan made by Lender to One Price
as provided for in Section 2.3 hereof.
1.57 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) Cost or (b) market value computed under
the retail method of accounting.
1.58 "Working Capital" shall mean, as to any person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book value
of inventory for this purpose as the lower of cost, on a first-in-first-out
average cost basis, or market value computed under the retail method of
accounting, and (b) all current liabilities of such Person and its subsidiaries
(as determined in accordance with GAAP); provided, that, as to Borrowers, for
purposes of Section 9.15, (i) the liabilities of Borrowers and their
subsidiaries to Lender under this Agreement shall not be considered current
liabilities (whether or not classified as current liabilities in accordance with
GAAP) and (ii) if One Price refinances the indebtedness owed to Lender evidenced
by the Term Loan as permitted under this Agreement, then, as of any date on or
after such refinancing, only the amount of the current liabilities, determined
in accordance with GAAP, in respect of such Refinancing Term Indebtedness that
exceeds the amount of liabilities of One Price to Lender in respect of the Term
Loan that would have been considered current liabilities, as of such date, had
the Term Loan been repaid to the extent of its regularly scheduled payment terms
through such date, as determined in accordance with GAAP notwithstanding clause
(i) of this proviso, shall be considered a current liability for purposes of
Section 9.15.
<PAGE>
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to each Borrower from time to time
in amounts requested by such Borrower (or by One Price on behalf of One Price
PR), up to the amount equal to the sum of: (i) the least of: (A) sixty (60%)
percent of the Value of the Eligible Inventory of such Borrower, or (B)
eighty-one (81%) percent of the Net Recovery Cost Percentage multiplied by the
Cost of the Eligible Inventory of such Borrower, or (C) eighty-one (81%) percent
of the Net Recovery Retail Percentage multiplied by the Retail Value of the
Eligible Inventory of such Borrower, minus (ii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to One Price, reduce the lending formula
with respect to Eligible Inventory to the extent that Lender determines that:
(i) the number of days of the turnover of the Inventory for any period has
changed in any material respect, taking into account seasonal fluctuations
consistent with historical seasonal fluctuations prior to the date hereof or
(ii) the nature and quality of the Inventory has deteriorated. In determining
whether to reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in determining
Eligible Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of
Revolving Loans and Letter of Credit Accommodations available in respect of
Eligible Inventory of One Price PR shall not, at any one time outstanding,
exceed an amount equal to the lesser of (i) the product of $80,000 multiplied by
the number of open Retail Stores operated in Puerto Rico by One Price PR at such
time, or (ii) $4,000,000 (such sublimit, the "Puerto Rico Sublimit").
(d) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit, and the aggregate amount of Revolving Loans and
Letter of Credit Accommodations outstanding at any time, shall not exceed the
<PAGE>
Inventory Loan Limit. In the event that the outstanding amount of the Loans, or
the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
Inventory Loan Limit, the sublimit for Letter of Credit Accommodations set forth
in Section 2.2(d) or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance or on
any future occasions and Borrowers shall, upon demand by Lender, which may be
made at any time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of a Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of such Borrower containing
terms and conditions acceptable to Lender and the issuer thereof. Any payments
made by Lender to any issuer thereof and/or related parties in connection with
the Letter of Credit Accommodations shall constitute additional Revolving Loans
to such Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations, each
Borrower shall pay to Lender a letter of credit fee at a rate equal to one and
three-quarters (1 3/4%) percent per annum on the daily outstanding balance of
the Letter of Credit Accommodations issued for its account for the immediately
preceding month (or part thereof), payable in arrears as of the first day of
each succeeding month, except that such Borrower shall pay to Lender such letter
of credit fee, at Lender's option, without notice, at a rate equal to three and
three-quarters (3-3/4%) percent per annum for (i) the period from and after the
date of termination or non-renewal hereof until Lender has received full and
final payment of all Obligations (notwithstanding entry of a judgment against
such Borrower) and (ii) the period from and after the date of the occurrence of
an Event of Default and for so long as such Event of Default is continuing. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days
<PAGE>
elapsed and the obligation of such Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available to a
Borrower unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to such Borrower (subject to the
Maximum Credit and the Inventory Loan Limit as to both Borrowers considered
together, the Puerto Rico Sublimit in the case of One Price PR and any
Availability Reserves) are equal to or greater than (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(i) above multiplied by the
Value of such Eligible Inventory (if the lending formula in Section 2.1(a)(i)(A)
is applicable), or multiplied by the Cost of such Eligible Inventory (if the
lending formula in Section 2.1(a)(i)(B) is applicable) or multiplied by the
Retail Value of such Eligible Inventory (if the lending formula in Section
2.1(a)(i)(C) is applicable), plus (B) fifty (50%) percent of the freight, taxes,
duty and other amounts that Lender estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of Borrowers' locations for
Eligible Inventory; and (ii) if the proposed Letter of Credit Accommodation is
for any other purpose an amount equal to one hundred (100%) percent of the face
amount thereof and all other commitments and obligations made or incurred by
Lender with respect thereto. Effective on the issuance of each Letter of Credit
Accommodations, an Availability Reserve shall be established in the applicable
amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at any
time exceed $25,000,000. At any time an Event of Default exists or has occurred
and is continuing, upon Lender's request, Borrowers will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise
<PAGE>
available to Borrowers shall not be reduced as provided in Section to 2.2(c) the
extent of such cash collateral.
(e) Borrowers shall indemnify and hold Lender harmless from
and against any and all losses, claims, damages, liabil ities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or corres pondent with
respect to any Letter of Credit Accommodation. Borrowers assume all risks with
respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer or beneficiary
shall be deemed the agent of Borrowers. Borrowers assume all risks for, and
agree to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Borrowers hereby release and hold
Lender harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrowers, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation. The provisions of
this Section 2.2(e) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrowers any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrowers. Lender shall have the sole and exclusive right and
authority to, and Borrowers shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to
<PAGE>
acceptance or rejection of any documents or goods or (C) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
and (ii) at all times, (A) grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances, or documents,
and (B) agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or docu ments, drafts or acceptances thereunder
or any letters of credit included in the Collateral. Lender may take such
actions either in its own name or in the name of a Borrower.
(g) Any rights, remedies, duties or obligations granted or
undertaken by a Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been granted or undertaken by such Borrower to Lender. Any duties
or obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by the applicable
Borrower to Lender and to apply in all respects to such Borrower.
2.3 Term Loan. Lender is making a Term Loan to One Price in the
original principal amount of $7,500,000. The Term Loan is (a) evidenced by a
Term Promissory Note in such original principal amount duly executed and
delivered by One Price to Lender concurrently herewith; (b) to be repaid,
together with interest and other amounts, in accordance with this Agreement, the
Term Promissory Note, and the other Financing Agreements and (c) secured by all
of the Collateral.
2.4 Availability Reserves. All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves. Without limiting any other rights
or remedies of Lender under this Agreement or any of the other Financing
Agreements with respect to the establishment of Availability Reserves, Lender's
default rights or remedies or
<PAGE>
otherwise, Lender may establish and revise Availability Reserves to reflect: (a)
inventory shrinkage; (b) the aggregate amount of deposits, if any, received by
Borrowers from its retail customers in respect of unfilled orders for
merchandise; (c) at any time after a Direct Remittance Event, amounts due or to
become due in respect of sales, use, personal property and/or withholding taxes,
other than sales taxes that have been and remain set aside and segregated by
Borrowers in a separate deposit account as provided in Section 6.3(c) hereof;
(d) at any time that Excess Availability is less than $3,000,000, or at any time
after the occurrence and during the continuance of an Event of Default, or the
occurrence of any event or existence of any state of facts that would with
notice or passage of time or both, constitute an Event of Default, an amount in
respect of rental payments or other amounts then or thereafter owed by Borrowers
to lessors of their Retail Stores, equal to $1,000,000 multiplied by a fraction,
the numerator of which is equal to the aggregate amount of monthly rent owed by
Borrowers to the lessors of their Retail Stores from whom Lender has not
received an agreement in writing, in form and substance satisfactory to Lender,
acknowledging Lender's priority security interest in the Inventory, waiving
security interests and claims by such lessor against the Inventory and
permitting Lender access to, and the right to remain on, the premises to
exercise Lender's rights and remedies and otherwise deal with the Collateral,
and the denominator of which is the aggregate amount of monthly rent owed by
Borrowers to their lessors for all Retail Stores; (e) at any time after the
occurrence and during the continuance of an Event of Default or the occurrence
of any event or existence of any state of facts that would, with notice or
passage of time, or both, constitute an Event of Default, amounts owing by
Borrowers to Credit Card Issuers or Credit Card Processors in connection with
the Credit Card Agreements; and (f) an Availability Reserve covering one hundred
and five (105%) percent of that portion of the undrawn amounts under certain
documentary letters of credit issued by NationsBank, N.A. for the account of One
Price prior to the date hereof, that may be drawn as of or after May 31, 1996
(the "May 31 Undrawn Amount"), which Availability Reserve shall be established
and increased in weekly installments of $170,000 each, commencing on March 28,
1996 and on each Thursday thereafter; provided, that the weekly increases in the
Availability Reserve under this clause (f) shall cease if, and such Availability
Reserve shall be reduced to the extent that, at
<PAGE>
any time, the aggregate amount of such Availability Reserve
exceeds the remaining May 31 Undrawn Amount, as advised in
writing by NationsBank N.A. to Lender.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable ON DEMAND.
(b) One Price (for itself and/or on behalf of One Price PR)
may from time to time request that Prime Rate Loans be converted to Eurodollar
Rate Loans or that any existing Eurodollar Rate Loans continue for an additional
Interest Period. Such request from One Price shall specify the amount of the
Prime Rate Loans which will constitute Eurodollar Rate Loans (subject to the
limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from One
Price, such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be, provided, that, as of
such date each of the following conditions is satisfied as determined by Lender:
(i) no Event of Default, or event which with notice or passage of time or both
would constitute an Event of Default exists or has occurred and is continuing,
(ii) no party hereto shall have sent any notice of termination or non-renewal of
this Agreement, (iii) Borrowers shall have complied with such customary
procedures as are established by Lender and specified by Lender to One Price
from time to time for requests by One Price for Eurodollar Rate Loans, (iv) no
more than five (5) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by or for
Borrowers shall not exceed the amount equal to eighty (80%) percent of the daily
average of the principal amount of the
<PAGE>
Loans which it is anticipated will be outstanding during the applicable Interest
Period, in each case as determined by Lender (but with no obligation of Lender
to make such Loans) and (vii) Lender shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Lender through the Reference
Bank and can be readily determined as of the date of the request for such
Eurodollar Rate Loan by One Price. Any request by One Price to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans shall be irrevocable. Notwithstanding anything to the contrary contained
herein, Lender and Reference Bank shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference Bank had purchased
such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to One Price, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which with the notice or passage of time or both would
constitute an Event of Default, shall exist, (ii) this Agreement shall terminate
or not be renewed, or (iii) the aggregate principal amount of the Prime Rate
Loans which have previously been converted to Eurodollar Rate Loans or existing
Eurodollar Rate Loans continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest Period exceed either (A)
the aggregate principal amount of the Loans then outstanding, or (B) the Loans
then available to Borrowers under Section 2 hereof. Borrowers shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrowers) any amounts required to compensate Lender, the Reference
Bank or any participant with Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a result of the conversion
of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
<PAGE>
(d) Interest shall be payable by Borrowers to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. Borrowers hereby acknowledge and understand that the calculation of
interest on the basis of the actual days elapsed over the period of a three
hundred and sixty (360) day year opposed to a year of three hundred sixty-five
(365) or three hundred and sixty-six (366) days results in a higher effective
rate of interest. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs.
(e) On the date hereof, the Prime Rate is eight and one
quarter (8.25%) percent and therefore the rate of interest in effect hereunder
for Prime Rate Loans outstanding on the date of this Agreement, expressed in
simple interest terms is eight and one quarter (8.25%) percent per annum.
3.2 Closing Fee. Borrowers shall pay to Lender as a
closing fee the amount of $450,000 which shall be fully earned as
of and payable on the date hereof.
3.3 Servicing Fee. Borrowers shall pay to Lender monthly a servicing
fee in the amount of $3,000 for each month (or part thereof) while this
Agreement is in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be payable on the first day of each month in
arrears.
3.4 Unused Line Fee. Borrowers shall pay to Lender monthly an unused
line fee at a rate equal to one-half of one (1/2%) percent per annum calculated
upon the amount by which the Inventory Loan Limit exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears.
3.5 Changes in Laws and Increased Costs of Loans.
<PAGE>
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to One Price, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, by an amount deemed by Lender to be material, or
(B) shall result in the increase in the costs to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans or (C) reduce the
amounts received or receivable by Lender in respect thereof, by an amount deemed
by Lender to be material or (ii) the cost to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans shall otherwise
increase by an amount deemed by Lender to be material. Borrowers shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrowers) any amounts required to compensate Lender, the Reference
Bank or any participant with Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such person as a result of the foregoing,
including, without limitation, any such loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
person to make or maintain the Eurodollar Rate Loans or any portion thereof. A
certificate of Lender setting forth the basis for the determination of such
amount necessary to compensate Lender as aforesaid shall be delivered to One
Price and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrowers) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired
<PAGE>
by such person to make or maintain such Eurodollar Rate Loans or any portion
thereof.
3.6 Maximum Interest.
(a) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Financing Agreements, in no event whatsoever shall
the aggregate of all amounts that are contracted for, charged or received by
Lender pursuant to the terms of this Agreement or any of the other Financing
Agreements and that are deemed interest under applicable law exceed the Maximum
Interest Rate (including, to the extent applicable, the provisions of Section
5197 of the Revised Statutes of the United States of America as amended, 12
U.S.C. Section 85, as amended). No agreements, conditions, provisions or
stipulations contained in this Agreement or any of the other Financing
Agreements, or any Event of Default, or the exercise by Lender of the right to
accelerate the payment or the maturity of all or any portion of the Obligations,
or the exercise of any option whatsoever contained in this Agreement or any of
the other Financing Agreements, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any event or contingency whatsoever, shall
entitle Lender to contract for, charge or receive in any event, interest or any
charges, amounts, premiums or fees deemed interest by applicable law in excess
of the Maximum Interest Rate. In no event shall Borrowers be obligated to pay
interest or such amounts as may be deemed interest under applicable law in
amounts which exceed the Maximum Interest Rate. All agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrowers to pay interest or such amounts which are
deemed to constitute interest in amounts which exceed the Maximum Interest Rate
shall be (i) without binding force or effect, at law or in equity, to the extent
of the excess of interest or such amounts which are deemed to constitute
interest over such Maximum Interest Rate, and (ii) deemed amended to conform to
the provisions of this Section 3.6.
(b) In the event any interest is charged or received in excess
of the Maximum Interest Rate ("Excess"), Borrowers acknowledge and stipulate
that any such charge or receipt shall be the result of an accident and bona fide
error, and that any Excess received by Lender shall be applied, first, to the
payment
<PAGE>
of the then outstanding and unpaid principal hereunder; second to the payment of
the other Obligations then outstanding and unpaid; and third, returned to
Borrowers, it being the intent of the parties hereto not to enter into a
usurious or otherwise illegal relationship. The right to accelerate the maturity
of any of the Obligations does not include the right to accelerate any interest
that has not otherwise accrued on the date of such acceleration, and Lender does
not intend to collect any unearned interest in the event of any such
acceleration. Borrowers recognize that, with fluctuations in the rates of
interest set forth in Section 3.1 of this Agreement and the Maximum Interest
Rate, such an unintentional result could inadvertently occur. All monies paid to
Lender hereunder or under any of the other Financing Agreements, whether at
maturity or by prepayment, shall be subject to any rebate of unearned interest
as and to the extent required by applicable law.
(c) By the execution of this Agreement, Borrowers agree that
(i) the credit or return of any Excess shall constitute the acceptance by
Borrowers of such Excess, and (ii) Borrower shall not seek or pursue any other
remedy, legal or equitable, against Lender, based in whole or in part upon
contracting for, charging or receiving any interest or such amounts which are
deemed to constitute interest in excess of the Maximum Interest Rate. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Lender, all interest at any time contracted for, charged
or received from Borrowers in connection with this Agreement or any of the other
Financing Agreements shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread during the entire term of this
Agreement in accordance with the amounts outstanding from time to time hereunder
and the Maximum Interest Rate from time to time in effect in order to lawfully
charge the maximum amount of interest permitted under applicable laws.
(d) The provisions of this Section 3.6 shall be deemed to be
incorporated into each of the other Financing Agreements (whether or not any
provision of this Section is referred to therein). Each of the Financing
Agreements and communications relating to any interest owed by Borrowers and all
figures set forth therein shall, for the sole purpose of computing the extent of
the Obligations, be automatically recomputed by Borrowers, and
<PAGE>
by any court considering the same, to give effect to the adjustments or credits
required by this Section.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by NationsBank,
N.A., as agent, of its financing arrangements with Borrowers and the termination
and release by it of any interest in and to any assets and properties of
Borrowers and each Obligor, duly authorized, executed and delivered by it,
including, but not limited to, (i) UCC termination statements for all UCC
financing statements previously filed by it or its predecessors, as secured
party and Borrowers or any Obligor, as debtor and (ii) satisfactions and
discharges of any mortgages, deeds of trust or deeds to secure debt by Borrowers
or any Obligor in favor of NationsBank, N.A., as agent, or a trustee acting on
its behalf, in form acceptable for recording in the appropriate governmental
office;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) Lender shall have received, in form and substance
satisfactory to Lender, a valid and effective title insurance policy issued by a
company and agent acceptable to Lender (i) insuring the priority, amount and
sufficiency of the Mortgage and (ii) containing any legally available
endorsements, assurances or affirmative coverage requested by Lender for
protection of its interests;
<PAGE>
(d) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(e) no material adverse change shall have occurred in the
consolidated assets, business or prospects of Borrowers since the date of
Lender's latest field examination and no material change or event shall have
occurred which would impair the ability of either or both Borrowers or any
Obligor to perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;
(f) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Loans available to Borrowers, the results of which
shall be satisfactory to Lender, not more than three (3) Business Days prior to
the date hereof;
(g) Lender shall have received, in form and substance
satisfactory to Lender, a guarantee of payment by each Borrower with respect to
the Obligations owed by the other Borrower;
(h) Lender shall have received, in form and substance
satisfactory to Lender (i) an agreement with and duly authorized, executed and
delivered by NationsBank, N.A., individually and as agent, as agreed to and
acknowledged by Borrowers, providing for the relative rights and priorities of
such lender and Lender in certain cash collateral, documents of title and goods
covered thereby, relating to goods that are purchased by One Price under
outstanding letters of credit issued by such lender prior to the date hereof,
and related matters, and (ii) a letter agreement between NationsBank, N.A.,
individually and as agent, and One Price, duly authorized, executed and
delivered by such lender and One Price, setting forth such lender's agreements
with One Price
<PAGE>
regarding such outstanding letters of credit referred to in
clause (i);
(i) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgements
by lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral;
(j) Borrowers shall have established the Blocked Accounts and
Lender shall have received, in form and substance satisfactory to Lender, all
agreements with the depository banks and Borrowers with respect to such Blocked
Accounts as Lender may require pursuant to Section 6.3 hereof, duly authorized,
executed and delivered by such depository banks and Borrowers;
(k) Lender shall have received original letters executed by
Borrowers, in form and substance satisfactory to Lender, notifying each of the
depository banks used by Borrowers for the deposit of Retail Store receipts from
the sale of merchandise and by Borrowers for the deposit of other proceeds of
Collateral or other property which is security for the Obligations of Lender's
security interest therein and irrevocably authorizing and directing each such
bank to send all funds and deposits with such banks only to the Blocked Accounts
as required pursuant to Section 6.3 hereof or as Lender otherwise directs;
(l) Lender shall have received, in form and substance
satisfactory to Lender, an agreement by RGIS Inventory Specialists, Inc. or
another inventory counting service used by Borrowers and acceptable to Lender
pursuant to which such inventory counting service shall agree to promptly
deliver directly to Lender copies of all inventory reports or other reports
prepared by it with respect to Borrowers, duly authorized, executed and
delivered by RGIS Inventory Specialists,
<PAGE>
Inc. or such other inventory counting service;
(m) Lender shall have received Credit Card Acknowledgements in
each case, duly authorized, executed and delivered by the Credit Card Issuers
and Credit Card Processors;
(n) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorse ments naming Lender as loss payee and additional
insured;
(o) Lender shall have received, in form and substance
satisfactory to Lender, the opinion letter of counsel(s) to Borrowers with
respect to the Financing Agreements and the security interests and liens of
Lender with respect to the Collateral and such other matters and Lender may
request; and
(p) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrowers, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or
<PAGE>
providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. SECURITY INTEREST
To secure payment and performance of all Obligations, each Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
letters of credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of such Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
and all present and future liens, security interests, rights, remedies, title
and interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (i) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
<PAGE>
repossessed and reclaimed goods, and (iv) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment (other than motor vehicles);
5.6 Real Property, provided that, in the case of Real Property
acquired after the date hereof, the security interest in and lien hereby
intended to be granted by Borrowers shall be further evidenced and/or
effectuated by a mortgage or deed of trust or deed to secure debt satisfactory
to Lender, contemporaneously with the purchase of such hereafter acquired Real
Property;
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to One Price (for itself and on
behalf of One Price PR) each month a statement setting forth the balance in the
loan account(s) maintained by Lender for Borrowers pursuant to the provisions of
this Agreement, including principal, interest, fees, costs and expenses. Each
such statement shall be subject to subsequent adjustment by Lender but shall,
absent manifest errors or
<PAGE>
omissions, be considered correct and deemed accepted by Borrowers and
conclusively binding upon Borrowers as an account stated except to the extent
that Lender receives a written notice from either Borrower of any specific
exceptions of such Borrower thereto within sixty (60) days after the date such
statement has been mailed by Lender. Until such time as Lender shall have
rendered to One Price a written statement as provided above, the balance(s) in
Borrowers' loan account(s) shall be presumptive evidence of the amounts due and
owing to Lender by Borrowers.
6.3 Collection of Accounts and other Proceeds of
Collateral.
(a) Borrowers shall establish and maintain, at their expense,
deposit account arrangements and merchant payment arrangements with the banks
set forth on Schedule 6.3 hereto and after prior written notice to Lender, such
other banks as Borrowers may hereafter select as are acceptable to Lender. The
banks set forth on Schedule 6.3 constitute all of the banks with whom Borrowers
have deposit account arrangements and merchant payment arrangements as of the
date hereof and Schedule 6.3 identifies each of the deposit accounts at such
banks as applicable to a Retail Store of a Borrower using such deposit accounts
or otherwise describes the nature of the use of such deposit account by
Borrowers.
(i) Borrowers shall deposit all proceeds from
sales of Inventory in every form, including, without limitation, cash, checks
and other forms of daily store receipts, other than credit card sales drafts,
credit card sales or charge slips or receipts, from each Retail Store location
of Borrowers on or before the following business day, or, if Borrowers cannot,
or determine for safety or security reasons not to, deposit such proceeds on the
same day or the following business day, then on the second following business
day, in each case into the respective deposit accounts of Borrowers used solely
for such purpose and identified as applicable to such Retail Store location as
set forth on Schedule 6.3. All such funds deposited into the separate deposit
accounts shall be sent by wire transfer or other electronic transfer means on a
daily basis or other periodic basis acceptable to Lender and all other proceeds
of Collateral shall be sent by wire transfer, to the Blocked Accounts as
provided in Section 6.3(a)(iii) below. Borrowers
<PAGE>
shall irrevocably authorize and direct in writing, in form and substance
satisfactory to Lender, each of the banks into which proceeds from sales of
Inventory from each Retail Store location of Borrowers are at any time deposited
as provided above to send all funds deposited in such account by wire transfer
or other electronic transfer means on a daily basis or other periodic basis
acceptable to Lender solely to the Blocked Accounts, or as otherwise directed by
Lender. Such authorization and direction shall not be rescinded, revoked or
modified without the prior written consent of Lender.
(ii) All credit card sales drafts, credit card
sales or charge slips or receipts shall be delivered by Borrowers (either
physically or electronically) to the respective Credit Card Issuers and Credit
Card Processors on a daily basis or other periodic basis acceptable to Lender.
(iii) Borrowers shall establish and maintain, at
their expense, deposit accounts with such banks as are acceptable to Lender (the
"Blocked Accounts") into which Borrowers shall promptly either cause all amounts
on deposit in its deposit accounts used by each Retail Store location to be sent
as provided in Section 6.3(a)(i) above or shall itself deposit or cause to be
deposited in the Blocked Accounts all proceeds from sales of Inventory, all
amounts payable to Borrowers from Credit Card Issuers and Credit Card Processors
and all other proceeds of Collateral. The banks at which the Blocked Accounts
are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right of setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, at such time as Lender shall direct, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose ("Payment Account"). Borrowers
agree that all amounts deposited in such Blocked Accounts or other funds
received and collected by Lender, whether as proceeds of Inventory or other
Collateral or otherwise shall be the property of Lender. Notwithstanding the
foregoing, unless and until (A) the Excess Availability at any time hereafter
shall
<PAGE>
fall below $2,500,000, or (B) an Event of Default or condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
then exists or has occurred and is continuing, or (C) Borrower shall have failed
to deliver a Borrowing Base Certificate in accordance with the provisions
hereof, or (D) Lender believes in good faith that any information contained in
any Borrowing Base Certificate is incomplete, inaccurate or misleading in any
material respect (each of the foregoing under clauses (A), (B) (C) or (D), a
"Direct Remittance Event"), Lender shall direct the depository bank or banks
maintaining such Blocked Accounts to transfer any deposits or other amounts
transferred to the Blocked Accounts to an operating account of Borrowers as
directed by Borrowers. After the occurrence of a Direct Remittance Event, Lender
may notify the depository bank or banks maintaining such Blocked Accounts to
remit the funds received into the Blocked Accounts to the Payment Account of
Lender pursuant to the instructions set forth in the Blocked Account
Agreement(s) among Lender, Borrowers and the banks at which the Blocked Accounts
are established. Following a Direct Remittance Event, no elimination of the
Direct Remittance Event or other change in circumstance shall require Lender to
direct that amounts in the Blocked Accounts be transferred to an operating
account of Borrowers in lieu of the Payment Account.
(b) For purposes of calculating the amount of the Loans
available to the respective Borrowers, payments will be applied (conditional
upon final collection) to the Obligations on the business day of receipt by
Lender in the Payment Account, if such payments are received within sufficient
time (in accordance with Lender's usual and customary practices as in effect
from time to time) to credit the applicable Borrower's Revolving Loan account on
such day, and if not, then on the next business day. After Lender has exercised
its rights following a Direct Remittance Event as provided in Section
6.3(a)(iii), Borrowers shall provide Lender with sufficient information no less
frequently than weekly, to enable Lender to allocate (by adjusting entries or
otherwise) to the respective Revolving Loan accounts of Borrowers, their
respective portions of amounts transferred from the Blocked Accounts to the
Payment Account.
(c) Borrowers and all of their affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender,
<PAGE>
any monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts or other Collateral which come into their possession or
under their control and immediately upon receipt thereof, shall deposit or cause
the same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender, except for the portion thereof
representing sales and/or use taxes payable in connection with such sales or
otherwise, which, upon and after Lender's request subsequent to the occurrence
of a Direct Remittance Event, Borrowers shall cause to be deposited into a
separate bank account or accounts established for such purpose. In no event
shall the same be commingled with Borrowers' own funds. Borrowers agree to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The Obligations of
Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as designated under Section 6.3 or such other place as Lender may designate from
time to time. The Obligations shall be payable upon the effective date of
termination hereof, or earlier upon an Event of Default, or otherwise as
provided elsewhere herein or in the other Financing Agreements. Lender may apply
payments received or collected from Borrowers or for the account of Borrowers
(including, without limitation, the monetary proceeds of collections or of
realization upon any Collateral and expressly including, without limitation,
amounts received in the Payment Account after Lender exercises its rights under
Section 6.3(a)(iii) following a Direct Remittance Event) to such of the
Obligations in respect of Revolving Loans, whether or not then due, and to such
other Obligations then due, in each case in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers.
Borrowers shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
<PAGE>
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrowers shall be liable to pay to Lender, and each
Borrower does hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain
effective notwithstanding any contrary action which may be taken by Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of a
Borrower (including One Price for itself and/or on behalf of One Price PR) or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
12:00 noon Atlanta, Georgia time on any day shall be deemed to have been made as
of the opening of business on the immediately following business day. All Loans
and Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrowers when deposited to the credit of a Borrower or otherwise disbursed or
established in accordance with the instructions of a Borrower (including One
Price for itself and/or on behalf of One Price PR) or in accordance with the
terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the
Loans provided by Lender to Borrowers hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof and (b) costs, expenses and fees
in
<PAGE>
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.
6.7 Appointment of One Price as Agent for One Price PR. One Price PR
hereby irrevocably appoints One Price, and each officer thereof, as its agent
and attorney-in-fact to request Loans and Letter of Credit Accommodations on its
behalf, to receive disbursements of Loans on its behalf (which may be made to
the same account of One Price to which disbursements of Loans to One Price are
made) to make requests relating to Eurodollar Rate Loans, in its behalf, to
receive notices and statements of account from Lender, to take such other
actions in its behalf as is provided hereunder or under any of the other
Financing Agreements and generally to deal with Lender in its behalf, for all
matters pertaining to the financing arrangements under this Agreement.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Each Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a weekly basis or
more frequently as Lender may request, (i) reports of sales of Inventory,
indicating gross sales, returns, allowances and net sales, (ii) reports of all
Inventory purchases (including all costs related thereto, such as freight, duty
and taxes) and identifying items of Inventory in transit to Borrowers related to
the applicable documentary letter of credit and/or bill of lading number, (iii)
reports of the Retail Value of the Inventory and (iv) a Borrowing Base
Certificate setting forth Borrowers' calculation of the Revolving
<PAGE>
Loans and Letter of Credit Accommodations available to Borrower pursuant to the
terms and conditions contained herein as of the last day of the preceding week,
duly completed and executed by the chief financial officer or other appropriate
financial officer acceptable to Lender, together with all schedules required
pursuant to the terms of the Borrowing Base Certificate duly completed; (b) on a
monthly basis or more frequently as Lender may request, (i) perpetual Inventory
reports, (ii) Inventory reports by category, (iii) agings of accounts payable,
(iv) reports of sales for each category of Inventory, and (v) reports on sales
and use tax collections, deposits and payments, including a written analysis
prepared by Borrowers in respect of monthly sales and use tax and personal
property tax accruals and, if requested by Lender, copies of sales and use tax
and personal property tax returns filed by Borrowers, (c) upon Lender's request,
(i) copies of customer statements and credit memos, remittance advices and
reports, and copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, (iii) copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by Borrowers and (iv)
reports by Retail Store location of sales and operating profits for each such
Retail Store location; (v) monthly statements received by Borrowers from any
Credit Card Issuers or Credit Card Processors, together with such additional
information with respect thereto as shall be sufficient to enable Lender to
monitor the transactions pursuant to the Credit Card Agreements, (vi) agings of
accounts receivable, and (vii) reports on Accounts, including aggregate
outstanding amounts by category, payments, accruals and returns and other
credits, and (d) such other reports as to the Collateral as Lender shall request
from time to time. If any of Borrowers' records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrowers hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing. Nothing
contained in any Borrowing Base Certificate shall be deemed to limit, impair or
otherwise affect the rights of Lender contained herein and in the event of any
conflict or inconsistency between the calculation of the Revolving Loans and
Letter of Credit Accommodations available to Borrowers as set forth in any
Borrowing Base Certificate and as determined by
<PAGE>
Lender, the determination of Lender shall govern and be conclusive and binding
upon Borrowers. Without limiting the foregoing, Borrowers shall furnish to
Lender any information which Lender may reasonably request regarding the
determination and calculation of any of the amounts set forth in the Borrowing
Base Certificate.
7.2 Accounts Covenants.
(a) Borrowers shall notify Lender promptly of the assertion of
any claims, offsets, defenses or counterclaims involving amounts aggregating in
excess of $10,000 by any account debtor, Credit Card Issuer or Credit Card
Processor or any disputes involving amounts aggregating in excess of $10,000
with any of such persons or any settlement, adjustment or compromise thereof and
(ii) all material adverse information relating to the financial condition of any
account debtor, Credit Card Issuer or Credit Card Processor. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted by a Borrower to any account debtor, Credit Card Issuer or Credit Card
Processor except in the ordinary course of such Borrower's business in
accordance with its most recent past practices and policies. So long as no Event
of Default exists or has occurred and is continuing, each Borrower shall settle,
adjust or compromise any claim, offset, counterclaim or dispute with its account
debtors, Credit Card Issuers and Credit Card Processors. At any time that an
Event of Default exists or has occurred and is continuing, Lender shall, at its
option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors, Credit Card Issuers or
Credit Card Processors or grant any credits, discounts or allowances.
(b) Each Borrower shall notify Lender promptly of: (i) any
notice of a material default by such Borrower under any of the Credit Card
Agreements or of any default which might result in the Credit Card Issuer or
Credit Card Processor ceasing to make payments or suspending payments to such
Borrower aggregating in excess of $10,000, (ii) any notice from any Credit Card
Issuer or Credit Card Processor that such person is ceasing or suspending, or
will cease or suspend, any present or future payments due or to become due to
such Borrower from such person aggregating in excess of $10,000, or that such
person is
<PAGE>
terminating or will terminate any of the Credit Card Agreements, and (iii) the
failure of such Borrower to comply with any material terms of the Credit Card
Agreements or any terms thereof which might result in the Credit Card Issuer or
Credit Card Processor ceasing or suspending payments to such Borrower.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
deposited and/or transferred to the Blocked Accounts pursuant to the terms of
this Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted by a Borrower to any account debtor,
Credit Card Issuer or Credit Card Processor, except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of such Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal Laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender may, at any time or times that an Event of Default
exists or has occurred, (i) notify any or all account debtors, Credit Card
Issuers and Credit Card Processors that the Accounts have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all account debtors, Credit Card Issuers and Credit Card Processors to make
payments of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not
<PAGE>
be liable for its failure to collect or enforce the payment thereof not for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor, Credit Card Issuer or Credit Card Processor shall state that the
Accounts due from such account debtor, Credit Card Issuer or Credit Card
Processor and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrowers shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
(e) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(f) Each Borrower shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to such
Borrower, all chattel paper and instruments which such Borrower now own or may
at any time acquire immediately upon such Borrower's receipt thereof, except as
Lender may otherwise agree.
7.3 Inventory Covenants. With respect to the Inventory: (a) Each
Borrower shall at all times maintain inventory records reasonably satisfactory
to Lender, keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, such Borrower's Cost therefor and
daily withdrawals therefrom and additions thereto; (b) each Borrower shall
conduct a physical count of the Inventory at least once each year, but at any
time or times as Lender may request on or after an Event of Default, and
promptly following such physical inventory shall supply Lender with a report in
the form and with such specificity as may be reasonably satisfactory to Lender
concerning such physical count; (c) each Borrower shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of Lender, except (i) for sales of Inventory in the ordinary course of
such
<PAGE>
Borrower's business, (ii) to move Inventory directly from one location set forth
or permitted herein to another such location and (iii) prior to an Event of
Default, for donations to charities of Inventory consisting of damaged goods or
end of season Inventory in the ordinary course of such Borrower's business
consistent with past practices; (d) upon Lender's request, Borrowers shall, at
their expense, no more than once in any twelve (12) month period, but at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) upon Lender's request, in addition to any
inventory counting programs conducted by Borrowers on their own, through
counting services or otherwise (the reports for which shall be delivered
directly to Lender by the counting service or by Borrowers if no counting
service is employed), Borrowers shall, at their expense, conduct through RGIS
Inventory Specialists, Inc. or another inventory counting service acceptable to
Lender, a physical count of all or any portion of the Inventory of Borrowers as
determined by Lender, in form, scope and methodology acceptable to Lender no
more than once in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, the results of which shall
be reported directly by such inventory counting service to Lender and Borrowers
shall promptly deliver confirmation in a form satisfactory to Lender that
appropriate adjustments have been made to the inventory records of Borrowers to
reconcile the inventory count to Borrowers' inventory records; (f) each Borrower
shall produce, use, store and maintain the Inventory, with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (g) each Borrower assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (h) neither Borrower shall sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate either Borrower to repurchase such Inventory
other than returns by retail customers in the ordinary course of Borrowers'
business pursuant to the return policies of Borrowers previously disclosed to
Lender in writing;
<PAGE>
(i) each Borrower shall keep its Inventory in good and marketable condition; and
(j) neither Borrower shall, without prior written notice to Lender, acquire or
accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, each Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) each Borrower shall keep its Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (c) each
Borrower shall use its Equipment with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment of each Borrower is and shall be used in such
Borrowers' business and not for personal, family, household or farming use; (e)
neither Borrower shall remove any Equipment from the locations set forth or
permitted herein, except (i) to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of such Borrower
or (ii) in the case of Equipment at Retail Stores, to move Equipment directly
from one Retail Store location set forth or permitted herein to another such
location, or (iii) the movement after the date hereof of other Equipment having
a value not to exceed $40,000 from one of Borrowers' locations permitted herein
to another such location, including the movement of Equipment intended to be
personally carried by Borrowers' employees (such as laptop computers) or (iv)
the movement of motor vehicles used by or for the benefit of such Borrower in
the ordinary course of business or (v) to dispose of Equipment as permitted
under Section 9.7 hereof; (f) the Equipment is now and shall remain personal
property and neither Borrower shall permit any of the Equipment of Borrowers to
be or become a part of or affixed to real property; and (g) each Borrower
assumes all responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Each Borrower hereby irrevocably
designates and appoints Lender (and all persons designated by
Lender) as such Borrower's true and lawful attorney-in-fact, and
authorizes Lender, in such Borrower's or Lender's name, to: (a)
<PAGE>
at any time an Event of Default or event which with notice or passage of time or
both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of such Borrower's rights and remedies to collect
any Account or other Collateral, (iv) sell or assign any Account upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign such Borrower's name on any
proof of claim in bankruptcy or other similar document against an account
debtor, (viii) notify the post office authorities to change the address for
delivery of such Borrower's mail to an address designated by Lender, and open
all mail addressed to such Borrower, and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill such Borrower's obligations
under this Agreement and the other Financing Agreements and (b) at any time
after the occurrence of a Direct Remittance Event to (i) take control in any
manner of any item of payment or proceeds thereof, (ii) have access to any
lockbox or postal box into which such Borrower's mail is deposited, (iii)
endorse such Borrower's name upon any items of payment or proceeds thereof and
deposit the same in the Lender's account for application to the Obligations,
(iv) endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or any goods
pertaining thereto or any other Collateral, (v) sign such Borrower's name on any
verification of Accounts and notices thereof to account debtors and (vi) execute
in such Borrower's name and file any UCC financing statements or amendments
thereto. Each Borrower hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Lender's own gross negligence or wilful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) after the occurrence
and during the continuance of an Event of Default, cure any default by a
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against a Borrower, (b) discharge taxes, liens, security
interests or other
<PAGE>
encumbrances at any time levied on or existing with respect to the Collateral
and (c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge such Borrower's account
therefor, such amounts to be repayable by such Borrower on demand. Lender shall
be under no obligation to effect such cure, payment or bonding and shall not, by
doing so, be deemed to have assumed any obligation or liability of either
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrowers, (a) Lender or its designee, an identification
of which designee will be provided to Borrowers upon request, along with other
pertinent information with respect to the tasks to be performed by such designee
as may be reasonably requested by Borrowers, shall have complete access to all
of Borrowers' premises during normal business hours and after notice to
Borrowers, or at any time and without notice to Borrowers if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of Borrowers' books and records,
including, without limitation, the Records, and (b) Borrowers shall promptly
furnish to Lender such copies of such books and records or extracts therefrom as
Lender may request, and (c) use during normal business hours such of Borrowers'
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrowers hereby, jointly and severally, represent and warrant to
Lender the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations by Lender to
Borrowers:
<PAGE>
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each
Borrower is a corporation duly organized and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on such Borrower's financial
condition, results of operation or business or the rights of Lender in or to any
of the Collateral. The execution, delivery and performance of this Agreement,
the other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of each Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which either Borrower is a party or
by which either Borrower or its or their property or properties are bound. This
Agreement and the other Financing Agreements constitute legal, valid and binding
obligations of Borrowers enforceable in accordance with their respective terms.
Borrowers do not have any subsidiaries except as set forth on the Information
Certificates.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of the Borrowers
on a consolidated basis, since the date of the most recent audited financial
statements furnished by Borrowers to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower is located at the address set forth below, and each
Borrower's Records concerning Accounts and Inventory are primarily located at
the address set forth below and its only other places of business and the only
other
<PAGE>
locations of Collateral, if any, are the addresses set forth in the Information
Certificates, subject to the right of Borrowers to establish new locations in
accordance with Section 9.2 below. The Information Certificates correctly
identifies any of such locations which are not owned by Borrowers and sets forth
the owners and/or operators thereof.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on the Information
Certificates and Schedule 8.4 hereto and the other liens permitted under Section
9.8 hereof. Each Borrower has good and marketable title to all of its properties
and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Lender and such
others as are specifically listed on the Information Certificates and Schedule
8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it, except where the failure to do so does not, and could not
reasonably be expected to, result in any Material Adverse Effect. All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Each Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, and has collected, deposited and remitted in accordance with all
applicable laws all sales and/or use taxes applicable to the conduct of its
business, except taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed. Each Borrower has collected and
remitted when due to the appropriate tax authority all sales and/or use taxes
applicable to its business required to be collected under the laws of the United
States and each possession or territory thereof, and each State or political
subdivision thereof,
<PAGE>
including any State in which Borrowers own any Inventory or own
or lease any other property.
8.6 Litigation. Except as set forth on the Information Certificates,
there is no present investigation by any govern mental agency pending, or to the
best of either Borrower's knowledge threatened, against or affecting either
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of either Borrower's knowledge
threatened, against either Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against either Borrower would result in any material adverse change
in the assets, business or prospects of Borrowers on a consolidated basis, or
would impair the ability of either Borrower to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Neither Borrower is in default in any respect under, or in
violation in any respect of any of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound, except for any such default or
violation which does not, and could not reasonably be expected to, result in a
Material Adverse Effect. Each Borrower is in compliance in all material respects
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority relating to its business, including, without
limitation, those set forth in or promulgated pursuant to the Occupational
Safety and Hazard Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as amended, ERISA, the Code, as amended, and the rules and regulations
thereunder, all federal, state and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and
orders promulgated thereunder), all federal, state and local states,
regulations, rules and orders pertaining to sales of consumer goods (including,
without limitation, the Consumer Products Safety Act of 1972, as amended,
<PAGE>
and the Federal Trade Commission Act of 1914, as amended, and all regulations,
rules and orders promulgated thereunder).
(b) Each Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any governmental
agency required for the lawful conduct of its business and is in compliance in
all material respects with the requirements of all applicable laws, rules,
regulations and orders of any governmental agency (including, but not limited
to, the Department of State, the Department of Commerce, the Bureau of Alcohol,
Tobacco and Firearms, and the Environmental Protection Agency) relating to its
business (including, without limitation, those set forth in or promulgated
pursuant to ERISA, the Occupational Safety and Hazard Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, the Code, and the
Environmental Laws). Each Borrower has all of the permits, licenses, approvals,
consents, certificates, orders or authorizations (the "Permits") issued by the
appropriate federal, state or local governmental agency necessary for each
Borrower to own and operate its business as presently conducted or proposed to
be conducted, except where the failure to have such Permits does not, and could
not reasonably be expected to, result in a Material Adverse Effect or any
adverse effect on the legality, validity or enforceability of this Agreement or
the other Financing Agreements or the ability of either Borrower to perform its
obligations under the Agreement or any of the other Financing Agreements or the
rights and remedies of Lender under this Agreement or any of the other Financing
Agreements. All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or threatened that
seek the revocation, cancellation, suspension or modification of any of the
Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, to the best of
Borrowers' knowledge, Borrowers have not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off their premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
<PAGE>
operations of Borrowers comply in all material respects with all Environmental
Laws and all licenses, permits, certificates, approvals and similar
authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, to the best of
Borrowers' knowledge, there has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental authority or any
other person nor is any pending or to the best of either Borrower's knowledge
threatened, with respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrowers or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects either Borrower or its business, operations or assets or
any properties at which either Borrower has transported, stored or disposed of
any Hazardous Materials.
(c) To the best of Borrowers' knowledge, Borrowers have no
material liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.
(d) To the best of Borrowers' knowledge, Borrowers have all
licenses, permits, certificates, approvals or similar authorizations required to
be obtained or filed in connection with the operations of Borrowers under any
Environmental Law and all of such licenses, permits, certificates, approvals or
similar authorizations are valid and in full force and effect.
8.9 Credit Card Agreements. Set forth in Schedule 8.9 hereto is a
correct and complete list of (a) all of the Credit Card Agreements and all other
agreements, documents and instruments existing as of the date hereof between or
among Borrowers, any of their affiliates, the Credit Card Issuers, the Credit
Card Processors and any of their affiliates, (b) the percentage of each sale
payable to the Credit Card Issuer or Credit Card Processor under the terms of
the Credit Card Agreements, (c) all other fees and charges payable by Borrowers
under or in connection with the Credit Card Agreements and (d)
<PAGE>
the term of such Credit Card Agreements. The Credit Card Agreements constitute
all of such agreements necessary for Borrowers to operate their business as
presently conducted with respect to credit cards and debit cards and no Accounts
of Borrowers arise from purchases by customers of Inventory with credit cards or
debit cards, other than those which are issued by Credit Card Issuers with whom
Borrowers have entered into one of the Credit Card Agreements set forth on
Schedule 8.9 hereto or with whom Borrowers has entered into a Credit Card
Agreement in accordance with Section 9.13 hereof. Each of the Credit Card
Agreements constitutes the legal, valid and binding obligations of Borrowers and
to the best of Borrowers' knowledge, the other parties thereto, enforceable in
accordance with their respective terms and are in full force and effect. No
default or event of default, or act, condition or event which after notice or
passage of time or both, would constitute a default or an event of default under
any of the Credit Card Agreements exists or has occurred. Borrowers and the
other parties thereto have complied with all of the terms and conditions of the
Credit Card Agreements to the extent necessary for Borrowers to be entitled to
receive all payments thereunder. Borrowers have delivered, or caused to be
delivered to Lender, true, correct and complete copies of all of the Credit Card
Agreements.
8.10 Employee Benefits.
(a) Borrowers have not engaged in any transaction in
connection with which Borrowers or any of their ERISA Affiliates could be
subject to either a civil penalty assessed pursuant to ERISA or a tax imposed
the Code, including any accumulated funding deficiency described in Section
8.10(c) hereof and any deficiency with respect to vested accrued benefits
described in Section 8.10(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrowers to be incurred with respect to any employee
benefit plan of Borrowers or any of their ERISA Affiliates. There has been no
reportable event (within the meaning of ERISA) or any other event or condition
with respect to any employee benefit plan of Borrowers or any of their ERISA
Affiliates which presents a risk of termination of any such plan by the Pension
Benefit Guaranty Corporation.
<PAGE>
(c) Full payment has been made of all amounts which Borrowers
or any of their ERISA Affiliates are required under ERISA and the Code to have
paid under the terms of each employee benefit plan as contributions to such plan
as of the last day of the most recent fiscal year of such plan ended prior to
the date hereof, and no accumulated funding deficiency (as defined in ERISA and
the Code), whether or not waived, exists with respect to any employee pension
benefit plan, including any penalty or tax described in Section 8.10(a) hereof
and any deficiency with respect to vested accrued benefits described in Section
8.10(d) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrowers that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.10(a) hereof and any accumulated funding deficiency
described in Section 8.10(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrowers nor any of their ERISA Affiliates is or
has ever been obligated to contribute to any "multiemployer plan" (as such term
is defined in ERISA) that is subject to Title IV of ERISA.
8.11 Accuracy and Completeness of Information. All information
furnished by or on behalf of either Borrower in writing to Lender in connection
with this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificates is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of either
Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.12 Interrelated Business. One Price is the direct and
beneficial owner and holder of all of the issued and outstanding
shares of Capital Stock of one Price PR. Borrowers share an
<PAGE>
identity of interests such that any benefit received by either Borrower benefits
the other. Each Borrower (a) renders services to or for the benefit of the other
Borrower, (b) makes loans and advances and provides other financial
accommodations to or for the benefit of the other Borrower (including, inter
alia, the payment and or guaranties by one Borrower of indebtedness of the other
Borrower), and (c) provides administrative, marketing, payroll and management
services to or for the benefit of the other Borrower. Borrowers have centralized
purchasing, collection, distribution, accounting, legal and other services.
8.13 Survival of Warranties; Cumulative. All representa tions and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrowers shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times
preserve, renew and keep in full, force and effect its corporate existence and
rights and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Each Borrower shall give Lender thirty (30) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and such Borrower shall deliver to Lender a copy of the amendment to
the Certificate of Incorporation of such Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of such
Borrower as soon as it is available.
9.2 New Collateral Locations. A Borrower may open any new
location within the continental United States or Puerto Rico
<PAGE>
provided such Borrower (a) gives Lender fourteen (14) days prior written notice
of the intended opening of any such new location and (b) executes and delivers,
and, to the extent within such Borrower's control, causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including, without limitation, UCC financing
statements; provided, that the inability or failure of such Borrower to cause
any of such agreements, documents or instruments to be executed or delivered
because the same are not within such Borrower's control or otherwise shall not
affect any of Lender's other rights hereunder, including, without limitation,
Lender's rights to establish or increase Availability Reserves in accordance
herewith.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all material requirements of any
Federal, State or local governmental authority, including, without limitation,
the Employee Retirement Security Act of 1974, as amended, the Occupational
Safety and Hazard Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as amended, and all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee health and safety,
including, without limitation, all of the Environmental Laws.
(b) Each Borrower shall establish and maintain, at its
expense, a system to assure and monitor its continued compliance with all
Environmental Laws in all of its operations, which system shall include annual
reviews of such compliance by employees or agents of such Borrower who are
familiar with the requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies and results of
remedial investigations shall be promptly furnished, or caused to be furnished,
by Borrowers to Lender. Borrowers shall take prompt and appropriate action to
respond to any non-compliance with any of the Environmental Laws and shall
regularly report to Lender on such response.
<PAGE>
(c) Each Borrower shall give both oral and written notice to
Lender immediately upon such Borrower's receipt of any notice of, or such
Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by such Borrower or (B) the release,
spill or discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which materially affects such Borrower
or its business, operations or assets or any properties at which such Borrower
transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of a Borrower in order to avoid any
material non-compliance, with any Environmental Law, such Borrower shall, at
Lender's request and such Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where such Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or such Borrower's response thereto or the estimated costs
thereof, shall change in any material respect.
(e) Borrowers shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material,
<PAGE>
including, without limitation, the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrowers and the
preparation and implementation of any closure, remedial or other required plans.
All representations, warranties, covenants and indemnifications in this Section
9.3 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers and with respect to which adequate reserves have been
set aside on its books, and except for any such failure to pay taxes that does
not, and could not reasonably be expected to, result in a Material Adverse
Effect. Each Borrower shall be liable for any tax or penalties imposed on Lender
as a result of the financing arrangements provided for herein and Borrowers
agrees to indemnify and hold Lender harmless with respect to the foregoing, and
to repay to Lender on demand the amount thereof, and until paid by Borrowers
such amount shall be added and deemed part of the Loans, provided, that, nothing
contained herein shall be construed to require Borrowers to pay any income or
franchise taxes attributable to the income of Lender from any amounts charged or
paid hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Each Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to form,
amount and insurer. Each Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if either Borrower fails to do so, Lender is authorized, but not required, to
obtain such insurance at the expense of Borrowers. All policies shall provide
for at least thirty (30) days prior written notice to Lender of any cancellation
or reduction of
<PAGE>
coverage and that Lender may act as attorney for Borrowers in obtaining, and at
any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance. Each Borrower shall
cause Lender to be named as a loss payee and an additional insured (but without
any liability for any premiums) under such insurance policies and each Borrower
shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance satisfactory to Lender. Such lender's
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Lender as its interests may appear and further specify that
Lender shall be paid regardless of any act or omission by any Borrower or any of
its affiliates. At its option, Lender may apply any insurance proceeds received
by Lender at any time to the cost of repairs or replacement of Collateral and/or
to payment of the Obligations, whether or not then due, in any order and in such
manner as Lender may determine or hold such proceeds as cash collateral for the
Obligations; provided, however, that if no Event of Default or event or state of
facts, which with notice or passage of time, or both, would constitute an Event
of Default, exists or has occurred and is continuing, (i) Lender shall release
to Borrowers or credit to the applicable Borrower's Revolving Loan account,
insurance proceeds so received by Lender with respect to Collateral located at
the Retail Stores under arrangements satisfactory to Lender for the repair or
replacement of such Collateral and (ii) Lender shall not require that Lender be
the payee of any check delivered to Borrowers in settlement of a claim of less
than $100,000, provided that such check shall nevertheless be deposited by
Borrowers in one of the Blocked Accounts.
9.6 Financial Statements and Other Information.
(a) Each Borrower shall keep proper books and records in which
true and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower and its
subsidiaries (if any) in accordance with GAAP and such Borrower shall furnish or
cause to be furnished to Lender: (i) within thirty (30) days after the end of
each fiscal month, except within forty-five (45) days after the end of each
fiscal month that coincides with the end of a fiscal quarter, monthly unaudited
consolidated financial statements, and, if a Borrower has any subsidiaries or
any other
<PAGE>
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss statements of cash flow and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrowers and each
of their subsidiaries as of the end of and through such fiscal month and (ii)
within ninety (90) days after the end of each fiscal year, audited consolidated
financial statements (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrowers
and their subsidiaries as of the end of and for such fiscal year, together with
the opinion of independent certified public accountants, which accountants shall
be an independent accounting firm selected by Borrowers and reasonably
acceptable to Lender, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrowers and their subsidiaries as of the end of and for the
fiscal year then ended.
(b) Borrowers shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations, having a value in excess of $25,000, or which does, or could
reasonably be expected to, result in any Material Adverse Effect not involving
any Collateral, (ii) the occurrence of any Event of Default or act, condition or
event which, with the passage of time or giving of notice or both, would
constitute an Event of Default.
(c) Borrowers shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
Borrowers send to their stockholders generally and copies of all reports and
registration statements which Borrowers file with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrowers shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of
<PAGE>
Borrowers, as Lender may, from time to time, reasonably request. Lender is
hereby authorized to deliver a copy of any financial statement or any other
information relating to the business of Borrowers to any court or other
government agency or to any participant or assignee or prospective participant
or assignee. Borrowers hereby irrevocably authorizes and directs all accountants
or auditors to deliver to Lender, at Borrowers' expense, copies of the financial
statements of Borrowers and any reports or management letters prepared by such
accountants or auditors on behalf of Borrowers and to disclose to Lender such
information as they may have regarding the business of Borrowers. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrowers to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution,
Etc. Neither Borrower shall, directly or indirectly:
(a) merge into or with or consolidate with any other
Person or permit any other Person to merge into or with or
consolidate with it, or
(b) sell, assign, lease, transfer, abandon or otherwise
dispose of any stock or indebtedness to any other Person or any of its assets to
any other Person, except for:
(i) sales and issuance by One Price of its
Capital Stock or issuance of Capital Stock of One Price upon the exercise of
stock options issued by One Price (subject, in each case, nevertheless to
Section 10.1(j) hereof),
(ii) sales of Inventory in the ordinary course of
business and donations to charity of damaged and end of season
Inventory to the extent permitted under Section 7.3(c) hereof,
(iii) the disposition of worn-out or obsolete
Equipment so long as (A) if an Event of Default exists or has occurred and is
continuing, any proceeds are paid to Lender and (B) such sales do not involve
Equipment having an aggregate fair market value in excess of $250,000 for all
such Equipment disposed of in any fiscal year of Borrowers under this clause
(iii) and/or clause (iv) of this Section 9.7(b), and
<PAGE>
(iv) sales or other dispositions by Borrowers of
assets in connection with the closing or sale of a Retail Store location of a
Borrower in the ordinary course of such Borrower's business which consist of
leasehold interests in the premises of such store, the Equipment and fixtures
located at such premises and the books and records relating exclusively and
directly to the operations of such store; provided, that, as to each and all
such sales, (A) on the date of, and after giving effect to, any such sale, in
any calendar year, Borrowers shall not have closed or sold during the calendar
year in which this Agreement is executed, in addition to those Retail Store
locations listed on Schedule 9.7 hereto which are closed or sold, Retail Store
locations accounting for more than five (5%) percent of all sales of Borrowers
in the immediately preceding twelve (12) month period, and in any subsequent
calendar year, Borrowers shall not have closed or sold Retail Store locations
accounting for more than ten (10%) percent of all sales of Borrowers in the
immediately preceding twelve (12) month period, (B) Lender shall have received
not less than ten (10) business days prior written notice of such sale or other
disposition, which notice shall set forth in reasonable detail satisfactory to
Lender, the parties to such sale or other disposition, the assets to be sold or
otherwise disposed of, the purchase price and the manner of payment thereof and
such other information with respect thereto as Lender may request, (C) as of the
date of such sale or other disposition and after giving effect thereto, no Event
of Default, or act, condition or event which with notice or passage of time
would constitute an Event of Default, shall exist or have occurred, (D) such
sale or other disposition, shall be on commercially reasonable prices and terms
in a bona fide arm's length transaction, and (E) any and all net proceeds
payable or delivered to such Borrower in respect of such sale or other
disposition, if an Event of Default exists or has occurred and is continuing or
after the aggregate amounts thereof received in any fiscal year of Borrowers,
plus the amounts received from dispositions under Section 9.7(b)(iii) hereof,
exceeds $250,000, shall be paid or delivered, or caused to be paid or delivered,
to Lender in accordance with the terms of this Agreement either, at Lender's
option, for application to the Obligations in accordance with the terms hereof
(except to the extent such proceeds reflect payment in respect of indebtedness
secured by a properly perfected first priority security interest in the assets
sold, in which case, such proceeds shall be applied to such indebtedness
<PAGE>
secured thereby) or to be held by Lender as cash collateral for
the Obligations on terms and conditions acceptable to Lender; or
(c) form or acquire any subsidiaries, or
(d) wind up, liquidate or dissolve, or
(e) agree to do any of the foregoing, unless Lender's prior
written consent is expressly required as a condition of any binding effect upon
either Borrower of any such agreement.
9.8 Encumbrances. Neither Borrower shall create, incur, assume or
suffer to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrowers and with
respect to which adequate reserves have been set aside on its books; (c) non-
consensual statutory liens (other than liens securing the payment of taxes)
arising in the ordinary course of Borrowers' business to the extent: (i) such
liens secure indebtedness which is not overdue or (ii) such liens secure
indebtedness relating to claims or liabilities which are fully insured and being
defended at the sole cost and expense and at the sole risk of the insurer or
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have been
set aside on its books; (d) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of Real Property which do not interfere
in any material respect with the use of such Real Property or ordinary conduct
of the business of Borrowers as presently conducted thereon or materially impair
the value of the Real Property which may be subject thereto; (e) purchase money
security interests in Equipment (including capital leases) and purchase money
mortgages on real estate not to exceed $2,500,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of Borrowers other than the Equipment or real estate so acquired, such
Equipment or real estate is acquired
<PAGE>
contemporaneously with the granting of any such security interest or mortgage or
is acquired within one hundred and eighty (180) days before such security
interest or mortgage lien is granted, and the indebtedness secured thereby does
not exceed the cost of the Equipment or real estate so acquired, as the case may
be; (f) liens or rights of setoff or credit balances of Borrowers with Credit
Card Issuers, but not liens on or rights of setoff against any other property or
assets of Borrowers, pursuant to the Credit Card Agreements (as in effect on the
date hereof) to secure the obligations of Borrowers to the Credit Card Issuers
as a result of fees and chargebacks; (g) deposits of cash with the owner or
lessor of premises leased and operated by Borrowers in the ordinary course of
the business of Borrowers to secure the performance by Borrowers of their
obligations under the terms of the lease for such premises; (h) a mortgage lien
solely upon the Real Property covered by the Mortgage, granted by One Price in
favor of the holder of, and securing only, Refinancing Term Indebtedness
permitted hereunder, to which mortgage lien, Lender shall subordinate the lien
of the Mortgage, provided the holder of such mortgage lien executes and delivers
in favor of Lender a written agreement, in form and substance satisfactory to
Lender, waiving any security interest in or lien upon any Inventory, Equipment
and other personal property Collateral located at or upon such Real Property,
permitting Lender access to, and the right to remain on, such Real Property to
exercise its rights and remedies and otherwise deal with any such Inventory,
Equipment and other personal property Collateral; and (i) the liens and security
interests set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Neither Borrower shall incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except:
(a) the Obligations;
(b) trade obligations (other than trade obligations of One
Price PR to One Price), obligations under operating leases of real estate or
equipment and normal accruals in the ordinary course of business not yet due and
payable, or with respect to which either Borrower is contesting in good faith
the amount or validity thereof by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books;
<PAGE>
(c) purchase money indebtedness (including capital leases) to
the extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;
(d) obligations or indebtedness of One Price PR to One Price
for short term loans and advances, inventory purchases, overhead allocations and
other trade obligations and intercompany accounts, in the ordinary course of
business, in the aggregate amount not to exceed, at any one time outstanding, an
amount equal to $12,000,000 minus the amount of Revolving Loans outstanding at
such time to One Price PR;
(e) obligations or indebtedness existing as of the date hereof
set forth on Schedule 9.9 hereto, provided, that, (i) Borrowers may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, and (iii) Borrowers shall furnish
to Lender all notices or demands in connection with such indebtedness either
received by Borrowers or on its behalf, promptly after the receipt thereof, or
sent by Borrowers or on its behalf, concurrently with the sending thereof, as
the case may be; and
(f) indebtedness of One Price issued in exchange for, or the
proceeds of which are used to refinance, replace or substitute for indebtedness
to Lender evidenced by the Term Loan, as otherwise permitted hereunder
("Refinancing Term Indebtedness"); provided, that, (i) the principal amount of
such Refinancing Term Indebtedness shall not be less than the then outstanding
principal amount of indebtedness evidenced by the Term Loan, nor more than
eighty (80%) percent of the fair market value of the Real Property subject to
the Mortgage as shown on a then-current appraisal in form, scope, methodology
and by an appraiser acceptable to Lender, (ii) Lender shall have received not
less than fifteen (15) days prior written notice of the
<PAGE>
intention to incur such indebtedness and shall have received such other
information and documentation with respect thereto as Lender may request and
(iii) One Price may only make regularly scheduled or other mandatory payments of
principal and interest in respect of such indebtedness, or, with Lender's prior
written consent, voluntary prepayments of such indebtedness, (iv) One Price
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such indebtedness or any agreement, document or instrument related thereto,
or (B) as to such indebtedness, redeem, retire, defease, purchase or otherwise
acquire such indebtedness or set aside or otherwise deposit or invest any sums
for such purpose and (v) One Price shall furnish to Lender all notices, demands
or other materials in connection with such indebtedness either received by One
Price or on its behalf, promptly after the receipt thereof, or sent by One Price
or on its behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Neither Borrower shall,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part of
the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of any
of Borrowers or to bearer and, upon Lender's request, delivered to Lender, and
(iii) commercial paper rated A1 or P1; provided, that, as to any of the
foregoing, unless waived in writing by Lender, Borrowers shall, upon Lender's
request, take such actions as are deemed necessary by Lender to perfect the
security interest of Lender in such investments; (c) loans and advances by
Borrowers to employees of Borrowers for relocation and hardship situations in a
manner consistent with the most recent past practices of Borrowers, provided,
that, in no event shall the total amount of such loans and advances outstanding
at any one time exceed $500,000; (d) advances by Borrowers to lessors of Retail
Stores for the
<PAGE>
construction and/or renovation of Retail Store locations in a manner consistent
with the most recent past practices of Borrowers, provided, that, (i) no Event
of Default or act, condition or event which with notice or passage of time or
both would constitute an Event of Default shall exist or have occurred and be
continuing, (ii) in no event shall the total amount of such advances outstanding
at any one time exceed $250,000 and (iii) Lender shall have received prior
written notice of any such advance made after the date hereof in excess of
$50,000; (e) advances by Borrowers to vendors of Inventory as deposits against
purchase orders of Inventory in a manner consistent with the most recent past
practices of Borrowers, provided, that, (i) no Event of Default or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred and be continuing, (ii) in no
event shall the total amount of such advances outstanding at any one time exceed
$1,000,000 and (iii) Lender shall have received prior written notice of any such
advance made after the date hereof in excess of $100,000; (f) advances by
Borrowers to utility providers as security deposits in a manner consistent with
the most recent past practices of Borrowers; (g) loans and advances by one
Borrower to the other Borrower constituting permitted indebtedness of the
recipient Borrower under Section 9.9 hereof; and (h) the existing loans,
advances and guarantees by Borrowers outstanding as of the date hereof as set
forth on Schedule 9.10 hereto and any guarantees by One Price of the Obligations
of One Price PR to lessors, utility providers, and construction suppliers with
respect to Retail Stores operated by One Price PR; provided, that, as to such
loans, advances and guarantees, (i) Borrowers shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of such loans, advances or
guarantees or any agreement, document or instrument related thereto, or (B) as
to such guarantees, redeem, retire, defease, purchase or otherwise acquire such
guarantee or set aside or otherwise deposit or invest any sums for such purpose
and (ii) Borrowers shall furnish to Lender all notices, demands or other
materials in connection with such loans, advances or guarantees either received
by Borrowers or on their behalf, promptly after the receipt thereof, or sent by
Borrowers or on their behalf, concurrently with the sending thereof, as the case
may be.
9.11 Dividends and Redemptions. Neither Borrower shall,
directly or indirectly, declare or pay any dividends on account
<PAGE>
of any shares of class of Capital Stock of either Borrower now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing,
except that, provided no Event of Default, and no event which with notice or
passage of time or both would constitute an Event of Default, exists or has
occurred and is continuing, a Borrower may declare and pay, dividends payable
solely in its common stock or rights to acquire its common stock.
9.12 Transactions with Affiliates. Neither Borrower shall, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, employee, shareholder, director, agent or
any other affiliate of such Borrower, except for sales of Inventory to or
purchases of Inventory by a Borrower, as to which the selling or purchase price
is not less than the cost thereof to the seller thereof, except retail or sample
sales to employees in the ordinary course of business, or (b) make any payments
of management, consulting or other fees for management or similar services, or
of any indebtedness owing to any officer, employee, shareholder, director or
other person affiliated with such Borrower except (i) for repayments of short
term loans and advances made by one Borrower to the other Borrower otherwise
permitted hereunder, (ii) reasonable compensation to officers, employees and
directors for services rendered to such Borrower in the ordinary course of
business, and (iii) termination, severance or other similar payments to
employees or officers of a Borrower in connection with the termination of their
employment with a Borrower determined by such Borrower to be payable according
to past practices of such Borrower in the case of employees or officers whose
employment is not subject to contractual agreements, and, in the case of
employees or officers of Borrowers whose employment is subject to contractual
agreements, according to contractual obligations of Borrowers for such
termination, severance or other similar payments incurred when no Event of
Default or event or condition which, with notice or
<PAGE>
passage of time, or both, would constitute an Event of Default, exists or has
occurred and is continuing.
9.13 Credit Card Agreements. Each Borrower shall (a) observe and
perform all material terms, covenants, conditions and provisions of the Credit
Card Agreements to be observed and performed by it at the times set forth
therein; (b) not do, permit, suffer or refrain from doing anything, as a result
of which there could be a default under or breach of any of the terms of any of
the Credit Card Agreements and (c) at all times maintain in full force and
effect the Credit Card Agreements and not terminate, cancel, surrender, modify,
amend, waive or release any of the Credit Card Agreements, or consent to or
permit to occur any of the foregoing; except, that, (i) each Borrower may
terminate or cancel any of the Credit Card Agreements in the ordinary course of
the business of such Borrower; provided, that, each of Borrowers shall give
Lender not less than fifteen (15) days prior written notice of its intention to
so terminate or cancel any of the Credit Card Agreements; (d) not enter into any
new Credit Card Agreements with any new Credit Card Issuer unless (i) Lender
shall have received not less than fifteen (15) days prior written notice of the
intention of such Borrower to enter into such agreement (together with such
other information with respect thereto as Lender may request) and (ii) each of
Borrowers delivers, or causes to be delivered to Lender, a Credit Card
Acknowledgment in favor of Lender; (e) give Lender immediate written notice of
any Credit Card Agreement entered into by such Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Lender may request; and (f) furnish to
Lender, promptly upon the request of Lender, such information and evidence as
Lender may require from time to time concerning the observance, performance and
compliance by Borrowers or the other party or parties thereto with the terms,
covenants or provisions of the Credit Card Agreements.
9.14 Adjusted Net Worth. Borrowers shall, at all times,
maintain Adjusted Net Worth of not less than $34,000,000.
9.15 Working Capital. Borrowers shall, at all times,
maintain Working Capital of not less than $5,000,000.
<PAGE>
9.16 Compliance with ERISA. Except as set forth in the Information
Certificates, Borrowers shall not with respect to any "employee benefit plans"
maintained by a Borrower or any of its ERISA Affiliates:
(a) (i) terminate any of such employee pension plans so as to
incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee benefit plans or any trust created thereunder
which would subject Borrowers or such ERISA Affiliate to a tax or penalty or
other liability on prohibited transactions imposed under the Code or ERISA, (b)
fail to pay to any such employee benefit plan any contribution which it is
obligated to pay under ERISA, the Code or the terms of such plan, (i) allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such employee benefit plan, (ii) allow or suffer to exist any
occurrence of a reportable event or any other event or condition which presents
a material risk of termination by the Pension Benefit Guaranty Corporation of
any such employee benefit plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation or
(iii) incur any withdrawal liability with respect to any multiemployer pension
plan.
(c) As used in this Section 9.16, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
the Code and ERISA.
9.17 Costs and Expenses. Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial
<PAGE>
Code financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) costs and
expenses for all title insurance and other insurance premiums, environmental
audits, surveys, assessments, engineering reports and inspections, appraisal
fees and search fees; (c) costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including, without limitation, preparations for and consultations concerning
any such matters); (g) all out-of-pocket expenses and costs heretofore and from
time to time hereafter incurred by Lender during the course of periodic field
examinations of the Collateral and Borrowers' operations; and (h) the reasonable
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.18 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers shall, at Borrowers' expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a certificate
from an officer of each Borrower representing that all conditions precedent to
the making of Loans and providing Letter of Credit Accommodations contained
herein are satisfied. In the event of such request by Lender, Lender may, at its
option, if such certificate has not been delivered within five (5) days after
such request, cease to make any further Loans or provide any
<PAGE>
further Letter of Credit Accommodations until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied. Where permitted by law, each of Borrowers hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) either Borrower fails to pay when due any of the
Obligations or (ii) either Borrower or any Obligor fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement or any of
the other Financing Agreements other than as described in Section 10.1(a)(i) and
such failure shall continue for twenty (20) days; provided, that, such twenty
(20) day period shall not apply in the case of: (A) any failure to observe any
such term, covenant, condition or provision which is not capable of being cured
at all or within such twenty (20) day period or which has been the subject of a
prior failure within a six (6) month period or (B) an intentional breach by
either Borrower or any Obligor of any such term, covenant, condition or
provision, or (C) the failure to observe or perform any of the covenants or
provisions contained in Sections 9.1, 9.5, 9.7, 9.8, 9.10, 9.11 or 9.12 of this
Agreement or any covenants or agreements covering substantially the same matter
as such sections in any of the other Financing Agreements; or
(b) any representation, warranty or statement of fact made by
either Borrower to Lender in this Agreement, the other Financing Agreements or
any other agreement, schedule, confirmatory assignment or otherwise shall when
made or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
<PAGE>
(d) any judgment for the payment of money is rendered against
either Borrower or any Obligor in excess of $250,000 in any one case or in
excess of $500,000 in the aggregate and shall remain undischarged or unvacated
for a period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against either
Borrower or any Obligor or any of their assets, and, unless an injunction
prevents either Borrower from operating its business in the ordinary course,
such injunction remains in effect for a period in excess of thirty (30) days;
(e) any Obligor (being a natural person or a general partner
of an Obligor which is a partnership) dies or either Borrower or any Obligor,
which is a partnership or corporation, dissolves or suspends or discontinues
doing business;
(f) either Borrower or any Obligor becomes insolvent (however
defined or evidenced), makes an assignment for the benefit of creditors, makes
or sends notice of a bulk transfer or calls a meeting of its creditors or
principal creditors;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against either Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or either Borrower or any Obligor shall
file any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by either Borrower or any Obligor or for all or any part of
its property; or
<PAGE>
(i) any default by either Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, Retail Store operating leases, contingent indebtedness in
connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lender, in any case involving
indebtedness in an amount in excess of $500,000 with respect to defaults arising
under agreements, documents and instruments other than Retail Store operating
leases, or $500,000 with respect to defaults in current rent, additional rent,
maintenance, repair or other current lease obligations arising under one or more
Retail Store operating leases, in each case, which default continues for more
than the applicable cure period, if any, with respect thereto, or any default by
any Borrower or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) any change in the ownership of One Price resulting in any
one Person, directly or indirectly, becoming the beneficial owner of fifty (50%)
percent or more of the combined voting power of the then outstanding securities
of One Price, or One Price PR ceases to be a wholly-owned subsidiary of One
Price;
(k) the indictment or threatened indictment of either Borrower
or any Obligor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against either Borrower or any
Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the Collateral of such Borrower
or such Obligor;
(l) any act, condition or event shall exist or have occurred
that results in a Material Adverse Effect relating to the Collateral or Lender's
rights or interests in or with respect to the Collateral; or
(m) there shall be an event of default under any of the other
Financing Agreements which has not been cured by Borrowers within the applicable
cure period thereunder, if any.
<PAGE>
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by either Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by either Borrower of
this Agreement or any of the other Financing Agreements. Lender may, at any time
or times, proceed directly against either Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into
<PAGE>
contracts with respect thereto, public or private sales at any exchange,
broker's board, at any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of either Borrower, which right or equity of redemption is
hereby expressly waived and released by each Borrower and/or (vii) terminate
this Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5) days prior notice by
Lender to Borrowers designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof to Borrowers and
each of Borrowers waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, each of Borrowers waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Each Borrower shall remain liable
to Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrowers and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrowers.
<PAGE>
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Georgia
(without giving effect to principles of conflicts of law), except as expressly
provided in any other Financing Agreement with respect to governing law for
purposes of such other Financing Agreement.
(b) Each Borrower and Lender irrevocably consent and submit to
the non-exclusive jurisdiction of the Superior Court of Fulton County, Georgia
and the United States District Court for the Northern District of Georgia and
waive any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Agreement or any of the other
Financing Agreements or in any way connected with or related or incidental to
the dealings of the parties hereto in respect of this Agreement or any of the
other Financing Agreements or the transactions related hereto or thereto, in
each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against a Borrower or its
property in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against such Borrower or its property).
(c) Each Borrower hereby waives personal service of
any and all process upon it and consents that all such service of
process may be made by certified mail (return receipt requested)
directed to its address set forth on the signature pages hereof
and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails,
or, at Lender's option, by service upon Borrowers in any other
manner provided under the rules of any such courts. Within
<PAGE>
thirty (30) days after such service, such Borrowers shall appear in answer to
such process, failing which Borrowers shall be deemed in default and judgment
may be entered by Lender against Borrowers for the amount of the claim and other
relief requested.
(d) EACH BORROWER AND LENDER HEREBY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND
LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EITHER BORROWER
OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to either Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by either
Borrower in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on
<PAGE>
either Borrower which Lender may elect to give shall entitle Borrowers to any
other or further notice or demand in the same, similar or other circumstances.
Without limiting the generality of the foregoing, each Borrower waives (i)
notice prior to Lender's taking possession or control of any of the collateral
or any bond or security which might be required by any court prior to allowing
Lender to exercise any of Lender's remedies, including the issuance of an
immediate writ of possession and (ii) the benefit of all valuation, appraisement
and exemption laws.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold Lender,
and its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
<PAGE>
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, each Borrower shall pay the maximum portion
which it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on March 31, 1998 (the
"Renewal Date"), and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof; provided, that, Lender may, at its option, extend
the Renewal Date to March 31, 1999 by giving Borrowers notice at least sixty
(60) days prior to March 31, 1998. Lender or Borrowers may terminate this
Agreement and the other Financing Agreements effective on the Renewal Date or on
the anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrowers shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such
payments and cash collateral shall be remitted by wire transfer in Federal funds
to such bank account of Lender, as Lender may, in its discretion, designate in
writing to Borrowers for such purpose. Interest shall be due until and including
the next business day, if the amounts so paid
<PAGE>
by Borrowers to the bank account designated by Lender are received in such bank
account later than 12:00 noon, Atlanta, Georgia time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge either Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrowers agree to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
<TABLE>
<S> <C> <C> <C>
Amount Period
(i) 1.5% of the Inventory March 25, 1996 to and
Loan Limit including March 25, 1997
(ii) 1% of the Inventory March 26, 1997 to and
Loan Limit including March 30, 1998
</TABLE>
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section 12.1 shall be deemed included in
the Obligations. Notwithstanding anything to the contrary contained in Section
12.1, no early termination fee shall be payable if all of the following
conditions have been met upon the effective date of termination and the payment
and performance of all Obligations in connection therewith: (i) Borrowers elect
to terminate the Agreement and the other Financing Agreements, (ii) Borrowers
have
<PAGE>
entered into an agreement with only CoreStates Bank, N.A. or with a group or
syndicate of banks of which CoreStates Bank, N.A. is the lead or agent bank, to
replace the financing arrangements with Lender, pursuant to which CoreStates
Bank, N.A. or such group or syndicate of banks as to which CoreStates Bank, N.A.
is agent or lead bank, agrees to make loans and provide financial accommodations
to Borrowers for working capital, and (iii) no Event of Default has occurred
that is continuing and no event has occurred or condition exists that would,
with notice or passage of time or both, constitute an Event of Default.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to each
Borrower at its chief executive office set forth below, or to such other address
as either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign its rights and delegate its obligations under
<PAGE>
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation. If Lender assigns its rights and
obligations hereunder or all or any part of the Loans to a foreign lender
(excluding United States subsidiaries, affiliates, agencies or branches of a
foreign bank) and Borrowers incur additional borrowing costs attributable to
Borrowers' obligations hereunder to gross up payments subject to tax withholding
requirements applicable to such foreign lender as to interest or other
compensation paid hereunder, then the early termination fee that would otherwise
be payable by Borrowers upon their voluntary termination under Section 12.1
hereof shall not be payable.
12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrowers pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information is
furnished by a Borrower to Lender, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order, (ii) to bank examiners
and other regulators, auditors and/or accountants, (iii) in connection with any
litigation to which Lender is a party, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) shall have first agreed in writing to treat
such information as confidential in accordance with this Section 12.5, or (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee).
(b) In no event shall this Section 12.5 or any other
provision of this Agreement or applicable law be deemed: (i) to
apply to or restrict disclosure of information that has been or
<PAGE>
is made public by a Borrower or any third party without breach of this Section
12.5 or otherwise become generally available to the public other than as a
result of a disclosure in violation hereof, (ii) to apply to or restrict
disclosure of information that was or becomes available to Lender on a
non-confidential basis from a person other than a Borrower, (iii) require Lender
to return any materials furnished by a Borrower to Lender or (iv) prevent Lender
from responding to routine informational requests in accordance with the Code of
Ethics for the Exchange of Credit Information promulgated by The Robert Morris
Associates or other applicable industry standards relating to the exchange of
credit information. The obligations of Lender under this Section 12.5 shall
supersede and replace the obligations of Lender under any confidentiality letter
signed prior to the date hereof.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instru ments or documents delivered
or to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
IN WITNESS WHEREOF, Lender and each of Borrowers have caused these
presents to be duly executed as of the day and year first above written.
<PAGE>
<TABLE>
<S> <C>
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION ONE PRICE CLOTHING STORES, INC.
(SOUTHERN)
By: /s/ B. Griffith By: /s/ Stephen A. Feldman
Title: V. P. Title: Executive Vice President
Address: Chief Executive Office:
1000 Parkwood Circle 1875 East Main Street
Suite 800 Duncan, South Carolina 29334
Atlanta, Georgia 30339
ONE PRICE CLOTHING OF PUERTO
RICO, INC.
By: /s/ C. Burt Duren
Title: Treasurer
Chief Executive Office:
1875 East Main Street
Duncan, South Carolina 29334
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 30th day of March, 1992, by
and between One Price Clothing Stores, Inc., a Delaware corporation with its
principal place of business in Spartanburg County, South Carolina, hereinafter
referred to as "Employer," and Ron Swedin, a resident of Bloomingdale, State of
New Jersey, hereinafter referred to as "Employee."
W I T N E S S E T H :
For and in consideration of the mutual covenants and promises of the
parties hereto and the benefits inuring to the parties hereto, Employer and
Employee agrees as follows:
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
employer employs Employee as its Vice President of Stores and Employee accepts
such employment with Employer. The employment hereunder shall commence on the
date Employee reports for full time work, and shall continue until terminated as
hereinafter provided.
2. TERMINATION. The employment hereunder shall terminate at the
will of either party at any time, with or without cause, or upon the mutual
agreement of the parties hereto.
3. DUTIES OF EMPLOYEE. Employee shall serve Employer faithfully
and to the best of his ability. Employee shall devote his full time and efforts
to his duties as an employee of Employer.
4. COMPENSATION AND BENEFITS.
(a) Salary. For all services rendered to Employer under this
Agreement, Employer shall pay Employee an annual base salary of not less than
$160,000, subject to annual review, payable in bi-weekly installments in
accordance with the usual payroll practice of Employer, less all legally
required deductions.
(b) Bonus. In addition to the above salary, the Board of
Directors of Employer, in its sole discretion, may award to Employee an annual
bonus in accordance with a bonus plan that has been adopted by the Board of
Directors. Employee shall be entitled to a first year minimum bonus of $16,000,
provided Employee is actively employed by Employer at January 31, 1993.
(c) Special Stock Option. Employee shall be granted an option
for 15,000 shares of Employer's common stock at the market price on the day of
grant, exercisable twenty (20%) percent annually commencing twelve (12) months
from the day of grant. This option shall be granted on the day Employee reports
for fulltime work.
(d) Automobile. Employer shall provide Employee with the use
of an automobile, with a value not to exceed $25,000.00. In addition, Employer
agrees to take care of maintenance, insurance, gas and oil, etc. Adjustment for
personal use shall be accounted for under appropriate Internal Revenue Service
Regulations.
<PAGE>
(e) Other Benefits.
(i) During the term of his employment, Employee
shall be entitled to participate in all employee benefits as are customarily
provided to its officers by Employer, and to participate in such other employee
benefits as may from time to time be instituted by Employer's Board of Directors
(ii) Employee shall also be entitled to
reimbursement of all reasonable hotel, travel, entertainment and other business
expenses actually incurred by Employee in the course of Employee's employment
upon submission to Employer of satisfactory documentation thereof.
(f) Moving Expenses. Employer shall reimburse Employee
for:
(i) Employer agrees to reimburse Employee for air travel
up to six (6) round trip airline tickets, other than first-class,
to and from Greenville/Spartanburg, SC/New York, NY or Newark, NJ.
(ii) Transportation of household goods and effects, and not
more than two (2) automobiles.
(iii) Upon reporting for work Employer agrees to reimburse
Employee for up to three (3) months for the cost of interim living expenses,
such reimbursement to cover lodging only. Total cost of interim living
expenses not to exceed $2,500.
(iv) Employer agrees to reimburse Employee for lodging,
meals, etc., for a maximum of three (3) trips, which includes the actual moving
event.
(g) Employer shall pay Employee up to $30,000 of documented
expenses for brokerage fees, closing costs, double mortgage payments and any and
all other related relocation expenses. This payment will be made upon
presentation of documentation on or after the first day of employment.
(h) Payments Upon Termination. In the event Employee is
terminated by Employer, with our without cause, except for fraud, theft,
dishonesty or criminal intent, Employer shall continue Employee's salary
following Employee's termination for six (6) additional months at the annual
base salary in effect at the date of Employee's termination, payable in
accordance with Employer's usual payroll practices. In the event Employee
voluntarily terminates his employment with Employer, he shall be entitled to no
additional payment upon such termination other than any then accrued but unpaid
salary, vacation pay, or other normal reimbursement items. In the event Employee
shall voluntarily terminate his employment with Employer prior to his first
anniversary of employment, Employee shall reimburse Employer fifty (50%) percent
of payments received for moving expenses and relocation expense reimbursement
set forth in paragraph (f) and paragraph (g) above.
<PAGE>
5. CONFIDENTIAL INFORMATION. Employee acknowledges that during his
employment he will have access to confidential information belonging to the
Employer. Such confidential information shall consist of all information
disclosed to Employee as a result of employment by Employer not generally known
in the retail business in which Employer is engaged including information
concerning Employer's suppliers, including the costs, quantities and types of
goods supplied, and the identity of such suppliers; information concerning the
Employer's marketing and/or sales strategy or plans; real estate strategy and
expansion plans; all pricing information relating to merchandise offered for
sale by Employer; customers' list and all information dealing with customers'
needs or preferences; all data processing information; all financial information
including financial statements, financing plans and forecasts, and any and all
information designated or marked as confidential. Employee will not use or
disclose, or otherwise make available, such confidential information to any
other person or entity without prior express written consent of Employer, either
during or following the termination of Employee's employment. Upon termination
of employment, Employee shall turn over to Employer all property then in his
possession or custody belonging to Employer and shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the affairs of Employer.
6. NON-COMPETITION.
(a) Upon termination of Employee's employment with Employer,
whether voluntary or involuntary and whether with our without cause, Employee
will not for a period of three (3) years from date of such termination conduct
or engage in, directly or indirectly, alone or jointly, with any other person or
corporation as agent, consultant, employee, manager, purchaser, proprietor,
stockholder, co- partner, or otherwise, any type of retail apparel business
which uses the one price concept or a substantially similar concept, such as a
ceiling price point. This restriction applies to the continental United States.
(b) Employee agrees not to employ or cause to be employed any
other employee of Employer for a period of three (3) years after Employee's
termination of employment. This restriction applies to any type of business
which Employee may enter.
7. NOTICES. All notices, consents, changes of address and other
communications (hereinafter referred to as "Notice(s)") required or permitted to
be made under the terms of this Agreement shall be in writing and shall be (i)
personally delivered by an agent of the relevant Party, or (ii) transmitted by
postage prepaid, certified or registered mail:
<TABLE>
<S> <C> <C>
To Employer: One Price Clothing Stores, Inc.
Post Office Box 2487
Spartanburg, SC 29304
To Employee: Ron Swedin
Bloomingdale, NJ
</TABLE>
8. WAIVER OF BREACH. The waiver of Employer of a breach by Employee of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in writing
and signed by any authorized officer of Employer.
9. ASSIGNMENT. Employee acknowledges that the services to be
rendered by Employee are unique and personal. Accordingly, Employee may not
assign any of Employee's rights or delegate any of Employee's duties or
obligations under this Agreement. The rights and obligations of Employer under
this Agreement shall inure to the benefit of and all be binding upon the
Employer, and its successors and assigns.
<PAGE>
10. REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants to Employer that he is under no obligation to or bound by any contract
with any person, corporation or other entity which would prohibit or in any way
interfere with the performance of his duties and obligations to Employer under
this Agreement.
11. SEVERABILITY. If any provision of this Agreement as applied
to either party or to any circumstance shall be adjudged by a court to be
invalid or unenforceable, the same shall in no way affect any other provision of
this Agreement, or the application of each provision to any other fact or
circumstances.
12. ENTIRE AGREEMENT, MODIFICATION OR AMENDMENTS. This Agreement
constitutes the entire agreement of the parties with respect to its subject
matter and supersedes all prior oral or written agreements. This Agreement may
be modified or amended from time to time by the mutual agreement of the parties
hereto. No modification or amendment of this Agreement shall be binding upon
either party unless it is in writing and executed by the party sought to be
charged.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
14. CAPTIONS. The captions contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of South Carolina,
without giving effect to South Carolina's rules of conflicts of law, and regard-
less of the place or places of its physical execution and performance.
16. ENFORCEMENT. This Agreement may only be enforced in a court of
competent jurisdiction in Spartanburg County, South Carolina. Employee agrees to
submit to the jurisdiction of a court of competent jurisdiction in Spartanburg
County, South Carolina, whether or not then residing in South Carolina. The
prevailing party shall be entitled to recover from the other party the cost of
any court action, including reasonable attorneys fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C>
Witnesses: One Price Clothing Stores, Inc.
/s/ Diane O'Bryant By: /s/ Henry D. Jacobs, Jr. (Seal)
- -------------------------------------------- -------------------------------------------------------
Henry D. Jacobs, Jr.
Chairman of Board of Directors
- ------------------------------------------------------
As to Employer
"EMPLOYER"
/s/ J. Coursen /s/ Ron Swedin (Seal)
As to Employee Ron Swedin
"EMPLOYEE"
<PAGE>
</TABLE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 12th day of December, 1995,
by and between One Price Clothing Stores, Inc., a Delaware corporation with its
principal place of business in Spartanburg County, South Carolina, hereinafter
referred to as "Employer," and Thomas Unrine, a resident of Dallas, State of
Texas, hereinafter referred to as "Employee."
W I T N E S S E T H :
For and in consideration of the mutual covenants and promises of the
parties hereto and the benefits inuring to the parties hereto, Employer and
Employee agrees as follows:
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
employer employs Employee as its Senior Vice President, Merchandising and
Employee accepts such employment with Employer. The employment hereunder shall
commence on the date Employee reports for full time work, and shall continue
until terminated as hereinafter provided.
2. TERMINATION. The employment hereunder shall terminate at the will
of either party at any time, with or without cause, or upon the mutual agreement
of the parties hereto.
3. DUTIES OF EMPLOYEE. Employee shall serve Employer faithfully
and to the best of his ability. Employee shall devote his full time and efforts
to his duties as an employee of Employer.
4. COMPENSATION AND BENEFITS.
(a) Salary. For all services rendered to Employer under this
Agreement, Employer shall pay Employee an annual base salary of not less than
$250,000, subject to annual review, payable in bi-weekly installments in
accordance with the usual payroll practice of Employer, less all legally
required deductions.
(b) Bonus. In addition to the above salary, the Board of
Directors of Employer, in its sole discretion, may award to Employee an annual
bonus in accordance with a bonus plan that has been adopted by the Board of
Directors.
(c) Special Stock Option. Employee shall be granted an option
for 30,000 shares of Employer's common stock at the market price on the day of
grant, exercisable twenty (20%) percent annually commencing twelve (12) months
from the day of grant. This option shall be granted on the day Employee reports
for fulltime work.
(d) Other Benefits.
(i) During the term of his employment, Employee
shall be entitled to participate in all employee benefits as are customarily
provided to its officers by Employer, and to participate in such other
employee benefits as may from time to time be instituted by Employer's Board of
Directors.
(ii) Employee shall also be entitled to
reimbursement of all reasonable hotel, travel, entertainment and other business
expenses actually incurred by Employee in the course of Employee's employment
upon submission to Employer of satisfactory documentation thereof.
(e) Moving Expenses. Employer shall reimburse Employee
for:
<PAGE>
(i) Employer agrees to reimburse Employee for
air travel up to (TBD) round trip airline tickets, other than first-class, to
and from Greenville/Spartanburg, SC/Dallas, TX.
(ii) Transportation of household goods and
effects, and not more than two (2) automobiles.
(iii) Upon reporting for work Employer agrees to
reimburse Employee for up to (TBD) for the cost of interim living expenses,
such reimbursement to cover lodging only.
(f) Employer shall pay Employee up to $60,000 of documented
expenses for brokerage fees, closing costs, double mortgage payments and any
similar expenses related to the sale of Employee's current home and purchase of
a new one (excluding loan discount points, if any). This payment will be made
upon presentation of documentation on or after the first day of employment.
(g) Payments Upon Termination.
(i) In the event Employee is terminated by
Employer, with our without cause, except for fraud, theft, dishonesty or
criminal intent, Employer shall continue Employee's salary following Employee's
termination for six (6) additional months at the annual base salary in effect
at the date of Employee's termination, payable in accordance with Employer's
usual payroll practices.
(ii) In the even Employee has not taken a
position with another company by the end of six months from the date of
Employee's involuntary termination, Employer shall pay to Employee up to an
additional six (6) months salary continuation on
a bi-weekly basis so long as other employment has not begun.
(iii) In the event Employee voluntarily terminates
his employment with Employer, he shall be entitled to no additional payment
upon such termination other than any then accrued but unpaid salary, vacation
pay, or other normal reimbursement items.
(iv) In the event Employee shall voluntarily
terminate his employment with Employer prior to his first anniversary of
employment, Employee shall reimburse Employer fifty (50%) percent of
payments received for moving expenses and relocation expense reimbursement
set forth in paragraph (e) and paragraph (f)
above.
<PAGE>
5. CONFIDENTIAL INFORMATION. Employee acknowledges that during his
employment he will have access to confidential information belonging to the
Employer. Such confidential information shall consist of all information
disclosed to Employee as a result of employment by Employer not generally known
in the retail business in which Employer is engaged including information
concerning Employer's suppliers, including the costs, quantities and types of
goods supplied, and the identity of such suppliers; information concerning the
Employer's marketing and/or sales strategy or plans; real estate strategy and
expansion plans; all pricing information relating to merchandise offered for
sale by Employer; customers' list and all information dealing with customers'
needs or preferences; all data processing information; all financial information
including financial statements, financing plans and forecasts, and any and all
information designated or marked as confidential. Employee will not use or
disclose, or otherwise make available, such confidential information to any
other person or entity without prior express written consent of Employer, either
during or following the termination of Employee's employment. Upon termination
of employment, Employee shall turn over to Employer all property then in his
possession or custody belonging to Employer and shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the affairs of Employer.
6. NON-COMPETITION.
(a) Upon termination of Employee's employment with Employer,
whether voluntary or involuntary and whether with our without cause, Employee
will not for a period of one (1) year from date of such termination conduct or
engage in, directly or indirectly, alone or jointly, with any other person or
corporation as agent, consultant, employee, manager, purchaser, proprietor,
stockholder, co-partner, or otherwise, any type of retail apparel business which
uses the one price concept or a substantially similar concept, such as a ceiling
price point. This restriction applies to the continental United States.
(b) Employee agrees not to employ or cause to be employed any
other employee of Employer for a period of three (3) years after Employee's
termination of employment. This restriction applies to any type of business
which Employee may enter.
7. NOTICES. All notices, consents, changes of address and other
communications (hereinafter referred to as "Notice(s)") required or permitted to
be made under the terms of this Agreement shall be in writing and shall be (i)
personally delivered by an agent of the relevant Party, or (ii) transmitted by
postage prepaid, certified or registered mail:
<TABLE>
<S> <C> <C>
To Employer: One Price Clothing Stores, Inc.
Post Office Box 2487
Spartanburg, SC 29304
To Employee: Thomas Unrine
6622 Waggoner Drive
Dallas, TX 75230
</TABLE>
8. WAIVER OF BREACH. The waiver of Employer of a
breach by Employee of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by Employee. No waiver shall be
valid unless in writing and signed by any authorized officer of Employer.
9. ASSIGNMENT. Employee acknowledges that the
services to be rendered by Employee are unique and personal. Accordingly,
Employee may not assign any of Employee's rights or delegate any of Employee's
duties or obligations under this Agreement. The rights and obligations of
Employer under this Agreement shall inure to the benefit of and all be binding
upon the Employer, and its successors and assigns.
<PAGE>
10. REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants to Employer that he is under no obligation to or bound by any contract
with any person, corporation or other entity which would prohibit or in any way
interfere with the performance of his duties and obligations to Employer under
this Agreement.
11. SEVERABILITY. If any provision of this Agreement as applied
to either party or to any circumstance shall be adjudged by a court to be
invalid or unenforceable, the same shall in no way affect any other provision of
this Agreement, or the application of each provision to any other fact or
circumstances.
12. ENTIRE AGREEMENT, MODIFICATION OR AMENDMENTS. This Agreement
constitutes the entire agreement of the parties with respect to its subject
matter and supersedes all prior oral or written agreements. This Agreement may
be modified or amended from time to time by the mutual agreement of the parties
hereto. No modification or amendment of this Agreement shall be binding upon
either party unless it is in writing and executed by the party sought to be
charged.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
14. CAPTIONS. The captions contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of South Carolina,
without giving effect to South Carolina's rules of conflicts of law, and
regardless of the place or places of its physical execution and performance.
16. ENFORCEMENT. This Agreement may only be enforced in a court of
competent jurisdiction in Spartanburg County, South Carolina. Employee agrees to
submit to the jurisdiction of a court of competent jurisdiction in Spartanburg
County, South Carolina, whether or not then residing in South Carolina. The
prevailing party shall be entitled to recover from the other party the cost of
any court action, including reasonable attorneys fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
<TABLE>
<S> <C>
Witnesses: One Price Clothing Stores, Inc.
/s/ Keith Holtz By: /s/ Henry D. Jacobs, Jr. (Seal)
Henry D. Jacobs, Jr.
/s/ Rhonda C. Bishop Chairman of Board of Directors
As to Employer
"EMPLOYER"
/s/ Rebecca A. Luce /s/ Thomas Unrine (Seal)
Thomas Unrine, Senior Vice President,
/s/ Joseph Reed Merchandising
As to Employee "EMPLOYEE"
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<S> <C> <C> <C>
December 30, December 31, January 1,
1995 1994 1994
PRIMARY
Average shares outstanding 10,313,860 10,287,727 10,167,537
Net effect of dilutive stock options-
based on the treasury stock method
using the average market price -- 237,251 236,313
-------------- -----------
TOTAL 10,313,860 10,524,978 10,403,850
============== =========== ============
Net (loss) income $ (1,304,000) $ 4,389,000 $ 8,724,000
============== =========== ============
Net (loss) income per common share $ (0.13) $ 0.42 $ 0.84
============== =========== ============
FULLY DILUTED
Average shares outstanding 10,313,860 10,287,727 10,167,537
Net effect of dilutive stock options -
based on the treasury stock method
using the greater of ending or
average market price -- 239,083 316,067
------------- ----------- ------------
TOTAL 10,313,860 10,526,810 10,483,604
============== =========== ============
Net (loss) income $ (1,304,000) $ 4,389,000 $ 8,724,000
============== =========== ============
Net (loss) income per common share $ (0.13) $ 0.42 $ 0.83
============== =========== ============
</TABLE>
Note: Net income per share for the year ended January 1, 1994 was reported as
$0.84 due to the immaterial difference between fully diluted and primary net
income per share.
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
EXHIBIT 21 -- SUBSIDIARY OF THE REGISTRANT
On February 9, 1994, a subsidiary of the Company, One Price Clothing of Puerto
Rico, Inc., was incorporated in Puerto Rico.
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
EXHIBIT 23 - Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements No.
33-20529, 33-31623, 33-48091 and 33-61803 on Form S-8 pertaining to the 1987
Stock Option Plan, the 1988 Stock Option Plan, the 1991 Stock Option Plan and
the Director Stock Option Plan, respectively, of One Price Clothing Stores, Inc.
of our report dated February 15, 1996 (March 25, 1996 as to Note B and Note H)
appearing in Form 10-K of One Price Clothing Stores, Inc. for the year ended
December 30, 1995.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
March 29,1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 3530
<SECURITIES> 0
<RECEIVABLES> 2494
<ALLOWANCES> 204
<INVENTORY> 38928
<CURRENT-ASSETS> 50080
<PP&E> 56143
<DEPRECIATION> 15346
<TOTAL-ASSETS> 92291
<CURRENT-LIABILITIES> 33496
<BONDS> 0
0
0
<COMMON> 103
<OTHER-SE> 52237
<TOTAL-LIABILITY-AND-EQUITY> 92291
<SALES> 141287
<TOTAL-REVENUES> 141287
<CGS> 84032
<TOTAL-COSTS> 84032
<OTHER-EXPENSES> 14071
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 509
<INCOME-PRETAX> (1264)
<INCOME-TAX> (493)
<INCOME-CONTINUING> (771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (771)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 668
<SECURITIES> 0
<RECEIVABLES> 1017
<ALLOWANCES> 275
<INVENTORY> 28961
<CURRENT-ASSETS> 35990
<PP&E> 58759
<DEPRECIATION> 17575
<TOTAL-ASSETS> 79364
<CURRENT-LIABILITIES> 21673
<BONDS> 0
0
0
<COMMON> 103
<OTHER-SE> 51778
<TOTAL-LIABILITY-AND-EQUITY> 79364
<SALES> 294692
<TOTAL-REVENUES> 294692
<CGS> 175754
<TOTAL-COSTS> 175754
<OTHER-EXPENSES> 29204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1326
<INCOME-PRETAX> (2595)
<INCOME-TAX> (1291)
<INCOME-CONTINUING> (1304)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1304)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
<PAGE>
</TABLE>
