-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N9sl5VXpcAgSaSIjtX4lgg6/XdqXpKjmr2BYISLrkIi3F61Uv50NVn44bZjcRB5e 6QupqNMNgGJ1jPLtbSXtpQ== 0000909518-00-000258.txt : 20000418 0000909518-00-000258.hdr.sgml : 20000418 ACCESSION NUMBER: 0000909518-00-000258 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20000129 FILED AS OF DATE: 20000417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEINERS STORES INC CENTRAL INDEX KEY: 0001053316 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 760355003 STATE OF INCORPORATION: DE FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-23671 FILM NUMBER: 603328 BUSINESS ADDRESS: STREET 1: 6005 WESTVIEW DRIVE CITY: HOUSTON STATE: TX ZIP: 77055 BUSINESS PHONE: 7136881331 MAIL ADDRESS: STREET 1: 6005 WESTVIEW DR CITY: HOUSTON STATE: TX ZIP: 77055 10-K405 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended January 29, 2000 or ---------------- [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________ to ___________ Commission File No. 0-23671 ------- WEINER'S STORES, INC. --------------------- (exact name of registrant as specified in its charter) Delaware 76-0355003 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 6005 Westview Drive, Houston, TX 77055 - -------------------------------------------------------------------------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code (713) 688-1331 -------------- Securities registered pursuant to Securities registered pursuant to Section Section 12(b) of the Act: None 12(g) of the Act: Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant as of March 31, 2000 was $5,182,719. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No __ As of April 16, 2000, there were 18,509,710 shares of Weiner's Stores, Inc. common stock, par value $.01 per share, outstanding. Documents incorporated by reference: 1. Portions of the Annual Report to Stockholders for the fiscal year ended January 29, 2000 are incorporated by reference into Part II - Items 6, 7 and 8. 2. Portions of the Company's definitive proxy statement relating to the Annual Meeting of Stockholders to be held on May 25, 2000 as filed with the Commission are incorporated by reference into Part III - Items 10, 11, 12 and 13. 1 PART I ITEM 1. BUSINESS GENERAL Weiner's Stores, Inc., a Delaware corporation (the "Company"), incorporated in December 1991, is a neighborhood family retailer of primarily branded apparel, shoes, related accessories and domestic products for value-conscious customers. The Company operates 136 stores located in Texas, Louisiana, Mississippi and Arkansas and employs approximately 3,000 full-time equivalent employees. References herein to "Weiner's Stores, Inc." or the "Company" are to Weiner's Stores, Inc., together with its subsidiary, unless the context otherwise indicates. The majority of the Company's stores are in strip shopping centers and freestanding structures. The current store prototype is approximately 25,000 square feet, with approximately 20,000 square feet for selling space and with the remaining space for office, receiving and layaway storage. The current stores range in total size from approximately 17,000 square feet to 53,000 square feet. On April 12, 1995 (the "Commencement Date"), the Company commenced its case (Case No. 95-417(PJW)) (the "Chapter 11 Case") under chapter 11 ("Chapter 11") of title 11 of the United States Code (the "Bankruptcy Code") before the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The Company operated its business and managed its properties as a debtor in possession in bankruptcy until August 26, 1997, the effective date of the Company's Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated June 24, 1997, as amended (the "Plan"), which was confirmed by order of the Bankruptcy Court on August 13, 1997. RETAILING STRATEGY The Company's retailing strategy is to focus closely on its unique markets and on the buying habits of its largely ethnic customer base. The strategy is intended to enhance the Company's ability to compete effectively with off-price retailers, specialty stores, discount stores and department stores. The Company believes its position as a local neighborhood retailer enables it to understand the needs of its shoppers, focus on the distinct priorities and tastes of its primarily ethnic customer base, provide more complete assortments than off-price retailers and specialty stores, sell major branded merchandise that is not available to discount stores and provide more convenient locations and offer better pricing than department stores. MERCHANDISING The Company's merchandising strategy is to focus closely on its markets and on the desires and preferences of its largely ethnic customer base. This strategy was undertaken after a review of the markets that the Company serves, including the demographics and income levels of its customers. The Company recognizes that one of its competitive strengths relative to many discounters is the availability of several key brands such as Nike(R), Reebok(R), K-Swiss(R), Adidas(R), Levi's(R), Lee(R), Bugle Boy(R), Wrangler(R), Westpoint Stevens(R), Fieldcrest Cannon(R), and Sag Harbor(R). Much of the in-store and overall marketing strategies focus on such brands. Management expects to continue to invest appropriate resources and priority to strengthen these relationships and add incremental products from these vendors. Additionally, the Company continues to identify other brands that would enhance the merchandise assortment and is developing action plans to address appropriate vendors. The Company continues to identify several merchandise departments and classifications that have previously been nonexistent at the Company's stores or insufficiently funded or spaced. The Company is continually reviewing classifications and/or items, identifying vendors, creating space allocations and developing pricing strategies to enhance these businesses. PRICING The Company offers substantially the same merchandise assortments and prices Company-wide. The Company prices its merchandise to be perceived as a good value at fair prices. The pricing structure must reflect the environment in which the stores and the customers are located. Sales prices of merchandise must be sharp and extremely competitive with respect to national mass merchandise discounters and better than the department stores. 2 PURCHASING AND DISTRIBUTION The Company purchases merchandise from many top brand name companies, primarily through domestic sources. The Company has focused on merchandise categories and product lines to enable the Company to work with fewer vendors than do most mall-based retailers. The Company has established relationships with many of its vendors to plan promotions, review marketing strategies, exchange information through electronic data interchange, manage stock levels and develop quick response inventory replenishment systems. At January 29, 2000, the Company employed one senior vice president/general merchandising manager, three divisional merchandising managers, 13 buyers, five merchandise planners, ten merchandise allocators, and two basic stock/ replenishment managers. During fiscal 1999, the Company purchased merchandise from approximately 780 vendors, of which two major vendors accounted for approximately 5.8% and 8.4% of total Company purchases of goods sold. The Company's 20 largest vendors accounted for approximately 46.2% of total Company purchases during fiscal 1999. The Company believes that its relationship with its vendors is strong. The Company's business is driven by brand names, and the loss of the use of a brand name could have a material adverse effect on the Company's business. The majority of the Company's purchases are shipped to the Company's centralized distribution center in Houston, Texas. At the distribution center, which is designed to handle up to approximately 175 stores, merchandise is received, counted and sorted for distribution to the Company's stores. A planning and allocation staff determines the quantities to be shipped to each store based on the store's needs and merchandise profile. After the merchandise is picked and packed, it is shipped to the stores at regular intervals via a commercial transportation service. STORE OPERATIONS As of January 29, 2000, the Company operated 132 stores in Texas, Louisiana and Mississippi. In March 2000, the Company opened four additional stores in Little Rock, Arkansas. The Company's stores range in total size from approximately 17,000 square feet to 53,000 square feet and average approximately 25,000 square feet. The majority of the Company's stores are located in strip shopping centers or are free standing. As all of the Company's stores have been and are currently located in Texas, Louisiana, Mississippi and Arkansas during the last three fiscal years the Company has received no revenues from external customers attributable to foreign countries except for certain revenues received from customers visiting the Company's stores from foreign countries, the amount of which revenues it is impracticable for the Company to determine and which is immaterial to the Company's total sales. All of the Company's long-lived assets are currently located in the United States. Each store is staffed by a store manager and/or one to two co-managers, one to two assistant managers and/or one to two floor managers, and several sales associates. Store managers report to district supervisors, who in turn report to the Company's senior vice president of stores and operations. The Company periodically reviews its store base and determines whether particular stores need to be improved or closed. The Company generally closes a store at the end of its lease term when the operating profit generated by the store is insufficient to make a contribution to fixed corporate overhead. Stores are closed prior to their lease expiration when they are unprofitable and/or have, in the Company's opinion, limited potential for improvement and the Company has reached a satisfactory agreement with the landlord for closing the location. The Company closed six stores in fiscal year 1999, three stores in fiscal year 1998, and seven stores in fiscal year 1997. 3 During fiscal 1999, the Company opened six new stores. The average capital cost to construct a new store is approximately $350,000 plus inventory requirements of approximately $450,000 per store (of which approximately 30% is currently financed by vendor accounts payable). The Company expects to open approximately ten new stores and remodel two stores in fiscal 2000. The Company believes that there are adequate real estate opportunities to open additional stores in the markets it currently serves and to enter new markets in its overall trade areas. These capital expenditures are expected to be funded with cash generated by operations and borrowings under the Company's revolving credit agreement. ADVERTISING AND PROMOTION All advertising and promotion decisions are made by the Company's central merchandising and advertising staff. Key advertising and promotional programs include: o Improving the quality of media with more thematic and ethnic presentations, illustration of products with greater impact and color assortment, and specialized merchandise classifications: o Improving and further refining the use of ethnic television and radio: o Coordinating with buyers to maximize return, ensure an in-stock position on advertised items, and evaluate pricing programs; o Moving the mix of media to more focused print programs; o Targeting print mailings in a more efficient manner and focusing on the ethnicity of different markets; o Upgrading in-store signage; and o Establishing promotional programs that highlight the branded merchandise available and the value pricing being offered to the consumers while also generating an exciting shopping experience for the consumer. The Company has laid out marketing strategies that target its strengths relative to certain demographic features of its customer base. These demographic features include: the ethnic make-up of its customers, value conscious women shoppers with more than one child in the household, fashion oriented young adult males with strong demand for identification with branded products, and the Company's neighborhood presence. MANAGEMENT INFORMATION SYSTEMS The Company uses an integrated merchandising package which includes modules for accounts payable, general ledger, loss prevention, planning, allocation, merchandise analysis, stores and the distribution center. The accounts payable and the general ledger modules were installed in fall 1996. In spring 1997, the allocations module was installed and in early fall 1997, the planning module was installed. The merchandise analysis and store sales modules and the distribution center module were installed in early 1998. The loss prevention module was installed in 1999. In fall 1999, the company completed installation of a payroll/benefit system. The Company operates its own in-house computer facility. The integrated merchandise package has generated benefits in the following areas: a more defined merchandise reporting system with incremental classification; improved open-to-buy reporting; better information with regard to markdowns; and improved price line reporting, vendor analysis reporting, open-to-ship reporting for improved allocation, loss prevention analysis and exception reporting. auto-allocation capabilities and marketing profitability analysis. To further enhance the capabilities of these systems, the Company is scheduled to begin the installation of a state of the art point of sale (POS) system in May 2000. The company expects to complete such installation in the first 30 stores in fiscal year 2000 and in another 30 stores in early fiscal 2001. The Company scans merchandise price tickets at the point-of-sale and point-of-sale registers automatically determine the correct price through a price look-up capability. The registers also capture financial, credit and statistical information and provide reports on sales by department and class for financial reporting purposes and weekly reports on sales by style, color and size for use by the Company's buyers and management. The merchandise planners and allocators use this information on a regular basis to evaluate and adjust each store's merchandise mix. 4 The Company continues to review its information systems needs. Currently, the Company is upgrading and updating some of its merchandising systems to client server based technology. As a result of these changes, when they are completed the Company should be able to access information more quickly, retain statistical information for longer periods of time and enhance its reporting capabilities. EMPLOYEES As of January 29, 2000, the Company had approximately 3,000 full time equivalent employees. The Company has a significant number of part-time store employees and, as is typical in the retail industry, experiences high turnover in its retail sales personnel. However, the Company has not experienced significant difficulty in hiring qualified personnel. Of such total work force, approximately 375 employees are employed in the Company's corporate offices and distribution center. METHOD OF PAYMENT Approximately 79.1% of the Company's net sales are made by cash or check, and 11.5% by national credit cards. Under the related credit card agreements, the Company receives daily payments on amounts charged on those credit cards. Such a payment is not subject to recovery by the payor under such agreements unless the charge in question involved an invalid use of such credit card. The Company has not had its own credit card program, but does offer a layaway program that accounts for approximately 9.4% of the Company's revenues. In fiscal 1999, layaways are recognized as revenue at the point-of-sale and as a receivable on the balance sheet. The Company generally requires a refundable deposit on layaway sales. As customers pay on their layaways, the payment reduces the receivable. See " - New Accounting Developments." SEASONALITY The Company's business is seasonal with approximately 40.3% of the Company's annual sales being generated during the back-to-school selling season in July and August and the Christmas selling season of November and December. In addition, the Company's performance, like that of many other retailers, is sensitive to the overall U.S. economy and economic cycles and related economic conditions that influence consumer trends and spending patterns. COMPETITION The retail industry is intensely competitive. The Company is in competition with numerous retail outlets in the geographic areas in which it operates, including general merchandise stores, off-price stores, large national discount chains and department stores. Many of the retailers with which the Company competes have greater financial resources than the Company and may have various other financial or other competitive advantages over the Company. TRADEMARKS AND SERVICE MARKS The mark "Weiner's" and other marks using the Company's distinctive logos are federally registered service marks of the Company, and the Company considers these marks and the accompanying goodwill and customer recognition to be valuable to its business. The Company also has registrations for certain other trademarks and service marks routinely used in the Company's marketing, advertising and promotions. Such registrations can be kept in force in perpetuity through continued use of the marks and timely applications for renewal. NEW ACCOUNTING DEVELOPMENTS The Company offers a layaway program pursuant to which its customers are permitted to purchase merchandise currently available for sale and pay for the goods over a 30 to 60 day period. At the time of the sale, the goods are segregated from the Company's inventory and held for the benefit of the customer pending payment in full for the goods. In 1999, the Company's layaway program accounted for approximately 9.4% of the Company's revenues. Layaways are recognized as revenue at the point of sale and as a receivable on the balance sheet (net layaway receivables at January 29, 2000 were $510,000 as compared to $847,000 at January 30, 1999). The Company provided an allowance for layaway 5 sales receivables based on management's estimate of the amount by which uncollected receivables would exceed the cost of the items reverting back to inventory. This estimate was based on the Company's historical calculation of layaway sales that will never be completed. The Company generally required a refundable deposit on layaway sales. As customers paid off the balance on their layaway purchases, the payment reduced the corresponding receivable. The Staff (the "Staff") of the U.S. Securities and Exchange Commission (the "SEC") has requested that the Company change its treatment regarding revenue recognition of layaway sales, commencing with the Company's fiscal year beginning January 30, 2000, to reflect layaway sales as deposits until the merchandise is paid in full and delivered to the customer. The Staff subsequently issued Staff Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements ("SAB 101") on December 3, 1999. SAB 101 requires that layaway sales be treated in a manner consistent with such request. As a result of the Staff's request and the subsequent issuance of SAB 101, the Company changed its treatment regarding revenue recognition of layaway sales commencing on the first day of the Company's fiscal year beginning January 30, 2000 to be consistent with the Staff's recommendation. The impact of this change in revenue recognition of layaway sales was very difficult to quantify because of information system constraints regarding the historical information of payments relating to specific transactions. The Company estimates that, in the year of adoption, approximately $1.0 to $2.0 million of revenue would be deferred into the following fiscal year. Once adopted, the Company believes there will be a minimal impact on an annual basis, however the impact on the results of operations on a quarter to quarter basis is expected to be much more pronounced. The impact is expected to be especially pronounced in the second and third quarters and first six and nine month periods because these periods include a portion of the Company's important back-to-school sales period. The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments and Hedging Activities", effective for years beginning after June 15, 1999. The Company believes that this statement will have no impact on its financial presentation. ITEM 2. PROPERTIES The Company leases all of its 132 stores in operation as of January 29, 2000, of which 106 stores are located in Texas, 23 stores are located in Louisiana, and three stores are located in Mississippi. Most leases are long-term net leases (i.e., lease contracts without a purchase option) which expire on varying dates through 2009. Most of the store leases include renewal options for an additional 5 to 15 years and require the Company to pay taxes, insurance and certain common area maintenance costs in addition to specified minimum rent. Most of the leases also require the payment of contingent rent based upon a specified percentage of sales in excess of a base amount. The following table sets forth, as of January 29, 2000, the number of store leases that will expire in each of the indicated fiscal years (excluding renewal options): Number of Number of Leases Year Leases Expiring with Renewal Options ---- --------------- -------------------- 2000 23 21 2001 16 14 2002 18 17 2003 25 23 2004 21 18 Thereafter 29 23 --------------- -------------------- Total 132 116 =============== ==================== 6 Most of the Company's stores are either freestanding structures or anchors in strip shopping centers. The Company opened 13 new stores and closed nine stores in the last two fiscal years. The Company enters into and terminates leases from time to time in the ordinary course of business as new stores are opened and stores are closed. See "Business - General" and " - Store Operations." The Company owns its distribution center/headquarters facility in Houston, Texas, which contains approximately 376,000 square feet and is located on approximately 8.2 acres of land. Such real property is subject to an encumbrance created by the Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement entered into by the Company in connection with its revolving credit agreement. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - - Revolving Credit Agreement." The Company considers its stores and its distribution center/headquarters facility to be suitable and adequate for its operations for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS The Company is party to ordinary routine litigation, arbitrations and proceedings incidental to its business, the dispositions of which are not expected to have a material adverse effect on the Company's business or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION As of August 17, 1998, the Company's common stock, par value $.01 per share ("Common Stock"), began trading on the Over-the-Counter Bulletin Board Service ("OTC") under the symbol "WEIR." There was previously no established public trading market for the Common Stock. The following table sets forth, for each full quarterly period in fiscal year 1999 and 1998 since trading on the OTC began, the high and low sales price per share of the Company's Common Stock as reported on the OTC. 1999 1998 High Low High Low ---- --- ---- --- First Quarter $0.66 $0.19 N/A N/A Second Quarter $1.19 $0.28 N/A N/A Third Quarter $1.16 $0.47 $1.50 $0.25 Fourth Quarter $0.81 $0.38 $0.28 $0.13 The last reported sale price per share of Common Stock as reported on the OTC on March 31, 2000 was $0.28. As of March 31, 2000, there were 482 holders of record of the Common Stock. This number does not include stockholders for whom shares are held in a "nominee" or "street" name. DIVIDENDS The Company did not declare or pay any cash dividends with respect to the Common Stock during fiscal years 1997, 1998 or 1999. The Company presently does not intend to pay cash dividends in the foreseeable future. In addition, the terms of the Company's revolving credit agreement prohibit payment of cash dividends on the Common Stock. The payment of cash dividends, if any, will be made only from assets legally available for that purpose, and will depend on the Company's financial condition, results of operations, current and anticipated 7 capital requirements, restrictions under then existing debt instruments and other factors deemed relevant by the Board of Directors. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference to the information contained in the Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit 13.1 to this Annual Report on Form 10-K, under the caption "Selected Financial Data" (included on page 5). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference to the information contained in the Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit 13.1 to this Annual Report on Form 10-K, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" (included on pages 6-11). ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference to the information contained in the Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit 13.1 to this Annual Report on Form 10-K, under the captions "Weiner's Stores, Inc. Consolidated Balance Sheets" (included on page 12), "Weiner's Stores, Inc. Consolidated Statements of Operations" (included on page 13), "Weiner's Stores, Inc. Consolidated Statements of Changes in Stockholders' Equity (Deficiency)" (included on page 13), "Weiner's Stores, Inc. Consolidated Statements of Cash Flows" (included on page 14), "Weiner's Stores, Inc. Notes to Consolidated Financial Statements" (included on pages 15-22) and "Independent Auditors' Reports" (included on page 23). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Reference is made to the information responsive to the Items comprising this Part III that is contained in the Company's definitive proxy statement for its 2000 Annual Meeting of Stockholders, which is incorporated herein by reference. 8 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits (1) The following financial statements filed as a part of this Annual Report on Form 10-K are incorporated by reference to the applicable portions of the Company's Annual Report to Stockholders for fiscal year 1999, filed as Exhibit 13.1 to this Annual Report on Form 10-K. See "Financial Statements and Supplementary Data." o Consolidated Balance Sheets as of January 29, 2000 and January 30, 1999 o Consolidated Statements of Operations for the Years Ended January 29, 2000 and January 30, 1999, for the twenty-three weeks ended January 31, 1998 (Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor Company) o Consolidated Statements of Changes in Stockholders' Equity (Deficiency) for the Years Ended January 29, 2000 and January 30, 1999, for the twenty-three weeks ended January 31, 1998 (Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor Company) o Consolidated Statements of Cash Flows for the Years Ended January 29, 2000 and January 30, 1999, for the twenty-three weeks ended January 31, 1998 (Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor Company) o Notes to Consolidated Financial Statements o Independent Auditors' Reports (2) Financial Statement Schedules No schedules have been included herein because the information required to be submitted has been included in the Consolidated Financial Statements or the notes thereto, or the required information is inapplicable. (3) Exhibits See the Exhibit Index for a list of those exhibits filed herewith, which includes and identifies management contracts and compensatory plans or arrangements required to be filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K. (b) The Company did not file any reports on Form 8-K during the fourth quarter of fiscal year 1999. 9 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. WEINER'S STORES, INC. April 17, 2000 By: /s/ Raymond J. Miller -------------- --------------------- (Date) Raymond J. Miller Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on April 17, 2000.
SIGNATURE TITLE --------- ----- /s/ Herbert R. Douglas* President and Chief Executive Officer - --------------------------------------------------------- (Principal Executive Officer) and Chairman of the Board of Herbert R. Douglas Directors /s/ Raymond J. Miller Executive Vice President, Chief Operating Officer, Chief - --------------------------------------------------------- Financial Officer and Secretary (Principal Financial Officer) Raymond J. Miller and Director /s/ Michael S. Marcus* Vice President, Controller and Treasurer (Principal Accounting - --------------------------------------------------------- Officer) Michael S. Marcus /s/ Randall L. Lambert* Director - --------------------------------------------------------- Randall L. Lambert /s/ Gasper Mir* Director - --------------------------------------------------------- Gasper Mir /s/ F. Hall Webb* Director - --------------------------------------------------------- F. Hall Webb /s/ Melvyn L. Wolff* Director - --------------------------------------------------------- Melvyn L. Wolff *By: /s/ Raymond J. Miller ----------------------------------------------------- Raymond J. Miller Attorney-in-Fact
10 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's registration statement on Form 10 filed April 14, 1998) 3.2 Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's registration statement on Form 10 filed April 14, 1998) 10.1+ Employment Agreement, dated as of February 1, 1999, between the Company and Herbert R. Douglas (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 31, 1998) 10.2*+ Weiner's Stores, Inc. 1999 Stock Incentive Plan ("1999 Stock Plan") 10.3*+ Form of Incentive Stock Option Agreement between the Company and participants under the 1999 Stock Plan 10.4*+ Form of Nonqualified Stock Option Agreement between the Company and participants under the 1999 Stock Plan 10.5* Third Amendment, dated October 4, 1999, to the Revolving Credit Agreement, dated August 26, 1997, among the Company, the lenders party thereto and The CIT Group/Business Credit, Inc., as Agent, as amended 10.6*+ Agreement, dated December 10, 1999, between the Company and Michael S. Marcus 10.7*+ Employment Agreement, dated as of February 1, 2000, between the Company and Raymond J. Miller 10.8*+ Employment Agreement, dated as of February 1, 2000, between the Company and Joseph J. Kassa 10.9*+ Employment Agreement, dated as of February 1, 2000, between the Company and James L. Berens 13.1* Annual Report to Stockholders of the Company for fiscal year 1999 21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company's registration statement on Form 10 filed April 14, 1998) 23.1* Consent of Independent Auditors 24.1* Powers of Attorney 27.1* Financial Data Schedule - ---------- * Filed herewith + Management contracts or compensatory plans or arrangements EX-10.2 2 EXHIBIT 10.2 ------------ WEINER'S STORES, INC. 1999 STOCK INCENTIVE PLAN 1. PURPOSE. The Weiner's Stores, Inc. 1999 Stock Incentive Plan (the "Plan") is intended to provide incentives which will attract, retain and motivate highly competent persons as key employees and non-employee directors of Weiner's Stores, Inc. (the "Company") and of any subsidiary corporation now existing or hereafter formed or acquired, by providing them opportunities to acquire shares of the common stock, par value $.01 per share, of the Company ("Common Stock"). Furthermore, the Plan is intended to assist in aligning the interests of the Company's key employees and non-employee directors to those of its stockholders. 2. ADMINISTRATION. (a) The Plan shall be administered by a committee or subcommittee (the "Committee") appointed by the Board of Directors of the Company (the "Board") from among its members. Unless the Board determines otherwise, the Committee shall be comprised solely of not less than two members who each shall qualify as (i) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor rule) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii) an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make such determinations and interpretations and to take such action in connection with the Plan and any Awards (as defined in Section 4 below) granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Committee shall be binding and conclusive on all participants and their legal representatives. No member of the Board, no member of the Committee and no employee of the Company shall be liable for any act or failure to act hereunder, except in circumstances involving his or her bad faith, gross negligence or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated. The Company shall indemnify members of the Committee, and any agent of the Committee who is an employee of the Company, against any and all liabilities or expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan, except in circumstances involving such person's bad faith, gross negligence or willful misconduct. (b) The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the subsidiary or affiliate whose employees have benefitted from the Plan, as determined by the Committee. 3. PARTICIPANTS. Participants shall consist of such key employees and non-employee directors of the Company and any of its subsidiaries as the Committee in its sole discretion determines to be significantly responsible for the success and future growth and profitability of the Company and whom the Committee may designate from time to time to receive Awards under the Plan. Designation of a participant in any year shall not require the Committee to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the participant in any other year. The Committee shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of their respective Awards. 4. TYPES OF AWARDS. Awards under the Plan may be granted in the form of Stock Options (as described below, and collectively, the "Awards"). Awards shall be evidenced by agreements (which need not be identical) in such forms as the Committee may from 1 time to time approve; provided, however, that in the event of any conflict between the provisions of the Plan and any such agreements, the provisions of the Plan shall prevail. 5. COMMON STOCK AVAILABLE UNDER THE PLAN. The aggregate number of shares of Common Stock that may be subject to Awards, i.e., Stock Options, granted under this Plan shall be 1,000,000 shares of Common Stock, which may be authorized and unissued or treasury shares, subject to any adjustments made in accordance with Section 8 hereof. The maximum number of shares of Common Stock with respect to which Stock Options may be granted to an individual participant under the Plan during the term of the Plan shall not exceed 400,000 shares (subject to adjustments made in accordance with Section 8 hereof). Any shares of Common Stock subject to an Award which for any reason is canceled, terminated without having been exercised, forfeited, or delivered to the Company as part of full payment for the exercise of a Stock Option shall again be available for Awards under the Plan. The preceding sentence shall apply only for purposes of determining the aggregate number of shares of Common Stock subject to Awards and shall not apply for purposes of determining the maximum number of shares of Common Stock subject to Awards (including the maximum number of shares of Common Stock subject to Stock Options) that any individual participant may receive. 6. STOCK OPTIONS. (a) IN GENERAL. Stock Options shall consist of awards from the Company that will enable the holder to purchase a specific number of shares of Common Stock, at set terms and at a fixed purchase price. Stock Options may be (i) "incentive stock options" ("Incentive Stock Options"), within the meaning of Section 422 of the Code, or (ii) Stock Options which do not constitute Incentive Stock Options ("Nonqualified Stock Options"). The Committee shall have the authority to grant to any participant one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Stock Options. Each Stock Option shall be subject to such terms and conditions consistent with the Plan as the Committee may impose from time to time. In addition, each Stock Option shall be subject to the following limitations set forth in this Section 6. (b) EXERCISE PRICE. Each Stock Option granted hereunder shall have such per-share exercise price as the Committee may determine on the date of grant; provided, however, that the per-share exercise price shall not be less than 100 percent of the Fair Market Value (as defined in Section 11 below) of the Common Stock on the date the Stock Option is granted. (c) PAYMENT OF EXERCISE PRICE. The Stock Option exercise price may be paid in cash or, in the discretion of the Committee, by the delivery of shares of Common Stock then owned by the participant, by the withholding of shares of Common Stock for which a Stock Option is exercisable, or by a combination of these methods. In the discretion of the Committee, payment may also be made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of the Plan, including, without limitation, in lieu of the exercise of a Stock Option by delivery of shares of Common Stock then owned by a participant, providing the Company with a notarized statement attesting to the number of shares owned, where upon verification by the Company, the Company would issue to the participant only the number of incremental shares to which the participant is entitled upon exercise of the Stock Option. In determining which methods a participant may utilize to pay the exercise price, the Committee may consider such factors as it determines are appropriate; provided, however, that with respect to Incentive Stock Options, all such discretionary determinations by the Committee shall be made at the time of grant and specified in the Stock Option agreement. (d) EXERCISE PERIOD. Stock Options granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee; provided, however, that no Stock Option shall be exercisable later than 10 years after the date it is granted. All Stock Options shall terminate at such earlier times and upon such conditions or circumstances as the Committee shall in its discretion set forth in such Stock Option agreement on the date of grant. 2 (e) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted only to participants who are key employees of the Company or any of its subsidiaries on the date of grant. The aggregate market value (determined as of the time the Stock Option is granted) of the Common Stock with respect to which Incentive Stock Options (under all option plans of the Company) are exercisable for the first time by a participant during any calendar year shall not exceed $100,000. For purposes of the preceding sentence, (i) Incentive Stock Options shall be taken into account in the order in which they are granted and (ii) Incentive Stock Options granted before 1987 shall not be taken into account. Incentive Stock Options may not be granted to any participant who, at the time of grant, owns stock possessing (after the application of the attribution rules of Section 424(d) of the Code) more than 10 percent of the total combined voting power of all outstanding classes of stock of the Company or any of its subsidiaries, unless the option price is fixed at not less than 110 percent of the Fair Market Value of the Common Stock on the date of grant and the exercise of such option is prohibited by its terms after the expiration of 5 years from the date of grant of such option. In addition, no Incentive Stock Option shall be issued to a participant in tandem with a Nonqualified Stock Option. (f) SECTION 162(M) OF THE CODE. All Stock Options granted under this Section 6, and the compensation attributable to such Stock Options, are intended to (i) qualify as Performance-Based Awards (as described in Section 7 below) or (ii) be exempt from the deduction limitation imposed by Section 162(m) of the Code. 7. PERFORMANCE-BASED AWARDS. Certain Awards granted under the Plan may be granted in a manner such that the Awards qualify for the performance-based compensation exemption of Section 162(m) of the Code ("Performance-Based Awards"). Unless otherwise exempt from the deduction limitation imposed by Section 162(m) of the Code, all Stock Options granted under the Plan are intended to qualify as Performance-Based Awards. 8. ADJUSTMENT PROVISIONS. If there shall be any change in the Common Stock, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, split up, spinoff, combination of shares, exchange of shares, dividend in kind or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, an adjustment shall be made to each outstanding Stock Option such that each such Stock Option shall thereafter be exercisable for such securities, cash and/or other property as would have been received in respect of the Common Stock subject to such Stock Option had such Stock Option been exercised in full immediately prior to such change or distribution, and such an adjustment shall be made successively each time any such change shall occur. In addition, in the event of any such change or distribution, in order to prevent dilution or enlargement of participants' rights under the Plan, the Committee shall have the authority to adjust, in an equitable manner, the number and kind of shares that may be issued under the Plan, the number and kind of shares subject to outstanding Awards, the exercise price applicable to outstanding Awards, and the Fair Market Value of the Common Stock and other value determinations applicable to outstanding Awards. Appropriate adjustments may also be made by the Committee in the terms of any Awards under the Plan to reflect such changes or distributions and to modify any other terms of outstanding Awards on an equitable basis. In addition, other than with respect to Stock Options intended to constitute Performance-Based Awards, the Committee is authorized to make adjustments to the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations, or accounting principles. Notwithstanding the foregoing, (i) any adjustment with respect to an Incentive Stock Option shall comply with the rules of Section 424(a) of the Code and (ii) in no event shall any adjustment be made which would render any Incentive Stock Option granted hereunder other than an incentive stock option for purposes of Section 422 of the Code. 9. TRANSFERABILITY. Each Award granted under the Plan to a participant shall not be transferable otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the participant's lifetime, only by the participant. In the event of the death of a participant, each Stock Option theretofore granted to him or her shall be exercisable during such period after his or her death as the Committee shall in its discretion set forth in the 3 agreement granting such option or right on the date of grant and then only by the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant's rights under the Stock Option shall pass by will or the laws of descent and distribution. 10. OTHER PROVISIONS. Awards granted under the Plan may also be subject to such other provisions (whether or not applicable to the Award granted to any other participant) as the Committee determines on the date of grant to be appropriate, including, without limitation, for the installment purchase of Common Stock under Stock Options (to be authorized, in the case of Incentive Stock Options, at the time of grant), to assist the participant in financing the acquisition of Common Stock (to be authorized, in the case of Incentive Stock Options, at the time of grant), for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any form of Award, for the acceleration of exercisability or vesting of Awards in the event of a change in control of the Company, for the payment of the value of Awards to participants in the event of a change in control of the Company, or to comply with federal and state securities laws, or understandings or conditions as to the participant's employment in addition to those specifically provided for under the Plan. 11. FAIR MARKET VALUE. For purposes of this Plan and any Awards granted hereunder, Fair Market Value shall be (i) the closing price of the Common Stock on the date of calculation (or on the last preceding trading date if Common Stock was not traded on such date) if the Common Stock is readily tradeable on a national securities exchange or other market system or (ii) if the Common Stock is not readily tradeable, the amount determined in good faith by the Board as the fair market value of the Common Stock. 12. WITHHOLDING. All payments or distributions of Awards made pursuant to the Plan shall be net of any amounts required to be withheld pursuant to applicable federal, state and local tax withholding requirements. If the Company proposes or is required to distribute Common Stock pursuant to the Plan, it may require the recipient to remit to it or to the corporation that employs such recipient an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Stock. In lieu thereof, the Company or the employing corporation shall have the right to withhold the amount of such taxes from any other sums due or to become due from such corporation to the recipient as the Committee shall prescribe. The Committee may, in its discretion and subject to such rules as it may adopt (including any as may be required to satisfy applicable tax and/or non-tax regulatory requirements), permit an optionee or award or right holder to pay all or a portion of the federal, state and local withholding taxes arising in connection with any Award consisting of shares of Common Stock by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld, such tax calculated at rates required by statute or regulation. 13. TENURE. A participant's right, if any, to continue to serve the Company as a director, officer, employee, or otherwise, shall not be enlarged or otherwise affected by his or her designation as a participant under the Plan. 14. UNFUNDED PLAN. Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as 4 expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended. 15. NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 16. DURATION, AMENDMENT AND TERMINATION. No Award shall be granted more than 10 years after the Effective Date (as defined below); provided, however, that the terms and conditions applicable to any Award granted prior to such date may thereafter be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. Also, by mutual agreement between the Company and a participant hereunder, under this Plan or under any other present or future plan of the Company, Awards may be granted to such participant in substitution and exchange for, and in cancellation of, any Awards previously granted such participant under this Plan, or any other present or future plan of the Company. The Board may amend the Plan from time to time or suspend or terminate the Plan at any time; provided, however, that no action authorized by this Section 16 shall reduce the amount of any existing Award or change the terms and conditions thereof without the participant's consent. No amendment of the Plan shall, without approval of the stockholders of the Company, (i) increase the total number of shares which may be issued under the Plan, (ii) increase the maximum number of shares with respect to Stock Options that may be granted to any individual under the Plan, (iii) modify the requirements as to eligibility for Awards under the Plan, or (iv) disqualify any Incentive Stock Options granted hereunder. 17. GOVERNING LAW. This Plan, Awards granted hereunder and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws). 18. EFFECTIVE DATE. (a) The Plan shall be effective as of the date on which the Plan is adopted by the Board (the "Effective Date"); provided, however, that the Plan is approved by the stockholders of the Company at an annual meeting or any special meeting of stockholders of the Company within 12 months before or after the Effective Date, and such approval of stockholders shall be a condition to the right of each participant to receive Awards hereunder. The Committee shall not grant any Awards under the Plan until the date the stockholders approve the Plan. (b) This Plan shall terminate on the tenth anniversary of the Effective Date (unless sooner terminated by the Board). 5 EX-10.3 3 EXHIBIT 10.3 ------------ FORM OF INCENTIVE STOCK OPTION AGREEMENT GRANTED TO: [name of employee] DATE OF GRANT: [date] GRANTED PURSUANT TO: Weiner's Stores, Inc. 1999 Stock Incentive Plan NUMBER OF UNDERLYING SHARES: [number of shares] EXERCISE PRICE: [exercise price] VESTING SCHEDULE: [brief description of vesting schedule] 1. This Incentive Stock Option Agreement (the "Agreement") is made and entered into as of [ date ] (the "Date of Grant") between Weiner's Stores, Inc., a Delaware corporation (the "Company") and [ name of employee ] (the "Employee"). It is the intent of the Company and the Employee that the Option (as defined in Paragraph 2 below) shall qualify as an "incentive stock option" ("ISO") under Section 422 of the Internal Revenue Code of 1986, as amended from time to time, but the Company makes no warranty as to the qualification of the Option as an ISO. Moreover, to the extent that the aggregate fair market value of the shares with respect to which the Option and all other ISOs granted to the Employee by the Company are exercisable for the first time during any calendar year exceeds $100,000, such options shall not qualify as ISOs. 2. The Employee is granted an option to purchase [ number of shares ] shares of Weiner's Stores, Inc. Common Stock (the "Option"). The Option is granted under the Weiner's Stores, Inc. 1999 Stock Incentive Plan (the "Plan"), a copy of which is enclosed herewith, and is subject to the terms of the Plan and of this Agreement. Capitalized terms not defined herein shall have the meanings ascribed thereto in the Plan [or, if not defined therein, in the employment agreement between the Company and the Employee]. The Option granted hereunder is a matter of separate inducement and is not in lieu of salary or other compensation for the Employee's services. 3. The Option's Exercise Price is $__________ per share. 4. Subject to Paragraphs 5 and 6 below, the Option shall become exercisable according to the vesting schedule set forth below: [percentage of shares] shall become exercisable on [date] and shall remain exercisable until [date]; and [percentage of shares] shall become exercisable on [date] and shall remain exercisable until [date]. [Optional provisions:] Notwithstanding anything contained in this Agreement to the contrary, the entire Option shall immediately become exercisable on the date of a change in control of the Company and shall remain exercisable until the 10th anniversary of the 1 Date of Grant. For purposes of this Agreement, [whether a change in control of the Company has occurred shall be determined by applying the corresponding provision in the Employee's employment agreement that determines whether a change in control of the Company has occurred] [or] [a change in control of the Company shall occur when any "person" (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) becomes a "beneficial owner" (as such term is used in Rule 13d-3 under the Exchange Act) of more than 50 percent of the Voting Stock of the Company, except as may otherwise be provided for in a confirmed plan of reorganization. For purposes of this Paragraph 4, "Voting Stock" shall mean capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation]. 5. The Option, unless sooner terminated or exercised in full, shall expire on the 10th anniversary of the Date of Grant and, notwithstanding anything herein to the contrary, no portion of the Option may be exercised after such date. 6. (a) Death of Employee. In the event of the death of the Employee, the unexercisable portion of the Option held by the Employee on the date of the Employee's death shall immediately become exercisable as of such date and the entire Option held by the Employee on such date shall remain exercisable until the earlier of (i) the end of the 12-month period following the date of the Employee's death or (ii) the date the Option would otherwise expire. (b) Retirement of Employee. If the Employee's employment is terminated due to retirement, the unexercisable portion of the Option held by the Employee on the date of the Employee's retirement shall immediately be forfeited by the Employee as of such date, and the exercisable portion of the Option held by the Employee on such date shall remain exercisable until the earlier of (i) the end of the 3-month period following the date of the Employee's retirement or (ii) the date the Option would otherwise expire. (c) Termination of Employee's Employment for Cause or Voluntary Termination of Employment. If the Employee's employment is terminated (i) by the Company or any of its subsidiaries for Cause or (ii) by the Employee without Good Reason (other than due to death, Disability or retirement), the entire Option (both the exercisable and unexercisable portions of the Option) held by the Employee on the date of the termination of his or her employment shall immediately be forfeited by the Employee as of such date. (d) Termination of Employee's Employment Due to Disability, or Without Cause, or for Good Reason. If the Employee's employment is terminated (i) due to Disability, (ii) by the Company or any of its subsidiaries without Cause or (iii) by the Employee for Good Reason, the unexercisable portion of the Option held by the Employee on the date of the termination of his or her employment shall immediately become exercisable as of such date and the entire Option held by the Employee on such date shall remain exercisable until the earlier of (x) the end of the 3-month period following the date of the termination of the Employee's employment, or (y) the date the Option would otherwise expire. (e) Definitions. For purposes of this Agreement, the definitions of the terms "Cause," "Good Reason" and "Disability" shall be the same definitions of such terms as defined in the Employee's employment agreement with the Company as in effect; if there is no employment agreement between the Company and the Employee in effect, the definitions of the terms "Cause," "Good Reason" and "Disability" are set forth on Exhibit A attached hereto. 7. During the Employee's lifetime, the Option shall not be subject in any manner to alienation, anticipation, sale, assignment, pledge, encumbrance or other transfer and shall be exercisable only by the Employee. Upon the death of the Employee, (i) the Option shall be exercisable only by the executor or administrator of the estate of the deceased Employee or the person or persons to whom the deceased Employee's rights with respect to the Option shall pass by will or the laws of descent and distribution and (ii) the Option shall be exercisable (x) during the period specified in Paragraph 6(a) above, if the Employee's employment terminated as a result of his or her death, or (y) during the same period that the Option would have been exercisable by the Employee if he or she had survived, if the Employee's death occurred after the Employee's employment terminated. 2 8. The Employee may exercise the Option regardless of whether any other option that the Employee has been granted by the Company remains unexercised. In no event may the Employee exercise the Option for a fraction of a share or for less than 100 shares. 9. Any exercise of the Option shall be in writing addressed to the Corporate Secretary of the Company at the principal place of business of the Company, specifying the Option being exercised and the number of shares to be purchased. The Option's Exercise Price shall be paid by the Employee on the date the Option is exercised in cash or, if permitted by the Committee in its sole discretion, in shares of Common Stock owned by the Employee or by a combination of cash and previously owned shares. Any shares of Common Stock delivered in payment of the Exercise Price shall be valued at their then Fair Market Value. 10. By his or her acceptance of this Agreement, the Employee agrees to reimburse the Company for any taxes required by any government to be withheld or otherwise deducted and paid by the Company with respect to the issuance or disposition of the shares subject to the Option. In lieu thereof, the Company shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Company to the Employee. The Company may, in its discretion, hold the stock certificate or certificates to which the Employee is entitled upon the exercise of the Option as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated. In addition, at any time that the Company becomes subject to a withholding obligation under applicable law with respect to the exercise of a Nonqualified Stock Option (the "Tax Date"), except as set forth below, a holder of a Nonqualified Stock Option may elect to satisfy, in whole or in part, the holder's related personal tax liabilities (an "Election") by (a) directing the Company to withhold from shares issuable in the related exercise either a specified number of shares or shares having a specified value (in each case not in excess of the related personal tax liabilities), (b) tendering shares previously issued pursuant to the exercise of an Award or other shares of the Company's Common Stock owned by the holder or (c) combining any or all of the foregoing Elections in any fashion. An Election shall be irrevocable. The withheld shares and other shares of Common Stock tendered in payment shall be valued at their Fair Market Value on the Tax Date. The Committee may disapprove of any Election, suspend or terminate the right to make Elections or provide that the right to make Elections shall not apply to particular shares or exercises. The Committee may impose any additional conditions or restrictions on the right to make an Election as it shall deem appropriate, including any limitations necessary to comply with Section 16 of the Exchange Act. 11. The Employee shall not have any of the rights of a stockholder with respect to the shares of Common Stock underlying the Option until the Option is exercised and the Employee receives such shares. 12. If the Company, in its sole discretion, shall determine that it is necessary, to comply with applicable securities laws, the certificate or certificates representing the shares purchased pursuant to the exercise of the Option shall bear an appropriate legend in form and substance, as determined by the Company, giving notice of applicable restrictions on transfer under or with respect to such laws. 13. The Employee covenants and agrees with the Company that if, at the time of exercise of the Option, there does not exist a Registration Statement on an appropriate form under the Securities Act of 1933, as amended (the "Act"), which Registration Statement shall have become effective and shall include a prospectus that is current with respect to the shares subject to the Option, (i) that he or she is purchasing the shares for his or her own account and not with a view to the resale or distribution thereof, (ii) that any subsequent offer for sale or sale of any such shares shall be made either pursuant to (x) a Registration Statement on an appropriate form under the Act, which Registration Statement shall have become effective and shall be current with respect to the shares being offered and sold, or (y) a specific exemption from the registration requirements of the Act and any rules or regulations thereunder and any applicable state securities laws and regulations, but in claiming such exemption, the Employee shall, prior to any offer for sale or sale of such shares, obtain a favorable written opinion from counsel for or approved by the Company as to the applicability of such exemption and (iii) that the Employee agrees that the certificate or certificates evidencing such shares shall bear a legend to the effect of the foregoing. 3 14. This Agreement is subject to all terms, conditions, limitations and restrictions contained in the Plan, which shall be controlling in the event of any conflicting or inconsistent provisions. 15. This Agreement is not a contract of employment and the terms of the Employee's employment shall not be affected hereby or by any agreement referred to herein except to the extent specifically so provided herein or therein. Nothing herein shall be construed to impose any obligation on the Company to continue the Employee's employment, and it shall not impose any obligation on the Employee's part to remain in the employ of the Company. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] 4 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date written below. WEINER'S STORES, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- ACCEPTED: - ------------------------------- Signature of Employee - ------------------------------- Name of Employee (please print) Date: -------------------------- 5 EXHIBIT A --------- The terms "Cause," "Good Reason," and "Disability" shall have the meanings set forth below: I. "Cause" shall mean: (1) fraud; (2) material dishonesty relating to the conduct of the business of the Company or dishonesty which does not relate to the conduct of the business of the Company which adversely affects the Company or the Employee's ability to manage the business of the Company; (3) the Employee engages in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out the Employee's duties as an employee, resulting, in either case, in material economic harm to the Company, other than: (A) conduct which is the result of the Employee's exercise of reasonable business judgment which merely differs from the business judgment of the Company's chief executive officer; or (B) any act or omission which in the Employee's reasonable and good faith belief was in or not opposed to the best interests of the Company; (4) embezzlement; (5) chronic alcoholism or chronic drug dependency that in either case precludes the Employee from performing his or her duties as an employee of the Company; or (6) the conviction of, or plea of guilty or nolo contendere to, a felony or any crime involving (i) securities or commodities laws violations or (ii) moral turpitude. II. "Good Reason" shall mean the occurrence of any of the following events within the 30-day period preceding the termination of employment by the Employee: (1) a reduction of the Employee's base salary (other than any reduction applicable to management employees generally); (2) a material reduction in the Employee's position, duties or responsibilities with respect to his or her employment by the Company without the Employee's prior consent; (3) a change in the Employee's principal work location by more than 50 miles and more than 50 miles from the Employee's principal place of abode as of the date of such change in job location without the Employee's prior consent; or (4) the failure of the Company to obtain the assumption in writing of its obligations to pay any earned compensation under the Plan by any purchaser or other transferee of all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale or similar transaction. III. "Disability" shall mean a disability as determined under the Company's then existing long-term disability plan or program. EX-10.4 4 EXHIBIT 10.4 ------------ FORM OF NONQUALIFIED STOCK OPTION AGREEMENT GRANTED TO: [name of employee] DATE OF GRANT: [date] GRANTED PURSUANT TO: Weiner's Stores, Inc. 1999 Stock Incentive Plan NUMBER OF UNDERLYING SHARES: [number of shares] EXERCISE PRICE: [exercise price] VESTING SCHEDULE: [brief description of vesting schedule] 1. This Nonqualified Stock Option Agreement (the "Agreement") is made and entered into as of [ date ] (the "Date of Grant") between Weiner's Stores, Inc., a Delaware corporation (the "Company") and [ name of employee ] (the "Employee"). It is the intent of the Company and the Employee that the Option (as defined in Paragraph 2 below) will not qualify as an "incentive stock option" under Section 422 of the Internal Revenue Code of 1986, as amended from time to time. 2. The Employee is granted an option to purchase [ number of shares ] shares of Weiner's Stores, Inc. Common Stock (the "Option"). The Option is granted under the Weiner's Stores, Inc. 1999 Stock Incentive Plan (the "Plan"), a copy of which is enclosed herewith, and is subject to the terms of the Plan and of this Agreement. Capitalized terms not defined herein shall have the meanings ascribed thereto in the Plan [or, if not defined therein, in the employment agreement between the Company and the Employee]. The Option granted hereunder is a matter of separate inducement and is not in lieu of salary or other compensation for the Employee's services. 3. The Option's Exercise Price is $__________ per share. 4. Subject to Paragraphs 5 and 6 below, the Option shall become exercisable according to the vesting schedule set forth below: [ number ] shares shall become exercisable on [ date ] and shall remain exercisable until [ date ]; [ number ] shares shall become exercisable on [ date ] and shall remain exercisable until [ date ]; and [ number ] shares shall become exercisable on [ date ] and shall remain exercisable until [ date ]. [Optional provisions:] Notwithstanding anything contained in this Agreement to the contrary, the entire Option shall immediately become exercisable on the date of a change in control of the Company and shall remain exercisable until [ date ]. For purposes of this Agreement, [whether a change in control of the Company has occurred shall be 1 determined by applying the corresponding provision in the Employee's employment agreement that determines whether a change in control of the Company has occurred] [or] [a change in control of the Company shall occur when any "person" (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) becomes a "beneficial owner" (as such term is used in Rule 13d-3 under the Exchange Act) of more than 50 percent of the Voting Stock of the Company, except as may otherwise be provided for in a confirmed plan of reorganization. For purposes of this Paragraph 4, "Voting Stock" shall mean capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation]. 5. The Option, unless sooner terminated or exercised in full, shall expire on [ expiration date ] and, notwithstanding anything herein to the contrary, no portion of the Option may be exercised after such date. 6. (a) Death of Employee. In the event of the death of the Employee, the unexercisable portion of the Option held by the Employee on the date of the Employee's death shall immediately become exercisable as of such date and the entire Option held by the Employee on such date shall remain exercisable until the earlier of (i) the end of the 12-month period following the date of the Employee's death or (ii) the date the Option would otherwise expire. (b) Retirement of Employee. If the Employee's employment is terminated due to retirement, the unexercisable portion of the Option held by the Employee on the date of the Employee's retirement shall immediately be forfeited by the Employee as of such date, and the exercisable portion of the Option held by the Employee on such date shall remain exercisable until the earlier of (i) the end of the 3-month period following the date of the Employee's retirement or (ii) the date the Option would otherwise expire. (c) Termination of Employee's Employment for Cause or Voluntary Termination of Employment. If the Employee's employment is terminated (i) by the Company or any of its subsidiaries for Cause or (ii) by the Employee without Good Reason (other than due to death, Disability or retirement), the entire Option (both the exercisable and unexercisable portions of the Option) held by the Employee on the date of the termination of his or her employment shall immediately be forfeited by the Employee as of such date. (d) Termination of Employee's Employment Due to Disability, or Without Cause, or for Good Reason. If the Employee's employment is terminated (i) due to Disability, (ii) by the Company or any of its subsidiaries without Cause or (iii) by the Employee for Good Reason, the unexercisable portion of the Option held by the Employee on the date of the termination of his or her employment shall immediately become exercisable as of such date and the entire Option held by the Employee on such date shall remain exercisable until the earlier of (x) the end of the 3-month period following the date of the termination of the Employee's employment or (y) the date the Option would otherwise expire. (e) Definitions. For purposes of this Agreement, the definitions of the terms "Cause," "Good Reason" and "Disability" shall be the same definitions of such terms as defined in the Employee's employment agreement with the Company as in effect; if there is no employment agreement between the Company and the Employee in effect, the definitions of the terms "Cause," "Good Reason" and "Disability" are set forth on Exhibit A attached hereto. 7. During the Employee's lifetime, the Option shall not be subject in any manner to alienation, anticipation, sale, assignment, pledge, encumbrance or other transfer and shall be exercisable only by the Employee. Upon the death of the Employee, (i) the Option shall be exercisable only by the executor or administrator of the estate of the deceased Employee or the person or persons to whom the deceased Employee's rights with respect to the Option shall pass by will or the laws of descent and distribution and (ii) the Option shall be exercisable (x) during the period specified in Paragraph 6(a) above, if the Employee's employment terminated as a result of his or her death, or (y) during the same period that the Option would have been exercisable by the Employee if he or she had survived, if the Employee's death occurred after the Employee's employment terminated. 2 8. The Employee may exercise the Option regardless of whether any other option that the Employee has been granted by the Company remains unexercised. In no event may the Employee exercise the Option for a fraction of a share or for less than 100 shares. 9. Any exercise of the Option shall be in writing addressed to the Corporate Secretary of the Company at the principal place of business of the Company, specifying the Option being exercised and the number of shares to be purchased. The Option's Exercise Price shall be paid by the Employee on the date the Option is exercised in cash or, if permitted by the Committee in its sole discretion, in shares of Common Stock owned by the Employee or by a combination of cash and previously owned shares. Any shares of Common Stock delivered in payment of the Exercise Price shall be valued at their then Fair Market Value. 10. By his or her acceptance of this Agreement, the Employee agrees to reimburse the Company for any taxes required by any government to be withheld or otherwise deducted and paid by the Company with respect to the issuance or disposition of the shares subject to the Option. In lieu thereof, the Company shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Company to the Employee. The Company may, in its discretion, hold the stock certificate or certificates to which the Employee is entitled upon the exercise of the Option as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated. In addition, at any time that the Company becomes subject to a withholding obligation under applicable law with respect to the exercise of a Nonqualified Stock Option (the "Tax Date"), except as set forth below, a holder of a Nonqualified Stock Option may elect to satisfy, in whole or in part, the holder's related personal tax liabilities (an "Election") by (a) directing the Company to withhold from shares issuable in the related exercise either a specified number of shares or shares having a specified value (in each case not in excess of the related personal tax liabilities), (b) tendering shares previously issued pursuant to the exercise of an Award or other shares of the Company's Common Stock owned by the holder or (c) combining any or all of the foregoing Elections in any fashion. An Election shall be irrevocable. The withheld shares and other shares of Common Stock tendered in payment shall be valued at their Fair Market Value on the Tax Date. The Committee may disapprove of any Election, suspend or terminate the right to make Elections or provide that the right to make Elections shall not apply to particular shares or exercises. The Committee may impose any additional conditions or restrictions on the right to make an Election as it shall deem appropriate, including any limitations necessary to comply with Section 16 of the Exchange Act. 11. The Employee shall not have any of the rights of a stockholder with respect to the shares of Common Stock underlying the Option until the Option is exercised and the Employee receives such shares. 12. If the Company, in its sole discretion, shall determine that it is necessary, to comply with applicable securities laws, the certificate or certificates representing the shares purchased pursuant to the exercise of the Option shall bear an appropriate legend in form and substance, as determined by the Company, giving notice of applicable restrictions on transfer under or with respect to such laws. 13. The Employee covenants and agrees with the Company that if, at the time of exercise of the Option, there does not exist a Registration Statement on an appropriate form under the Securities Act of 1933, as amended (the "Act"), which Registration Statement shall have become effective and shall include a prospectus that is current with respect to the shares subject to the Option, (i) that he or she is purchasing the shares for his or her own account and not with a view to the resale or distribution thereof, (ii) that any subsequent offer for sale or sale of any such shares shall be made either pursuant to (x) a Registration Statement on an appropriate form under the Act, which Registration Statement shall have become effective and shall be current with respect to the shares being offered and sold, or (y) a specific exemption from the registration requirements of the Act and any rules or regulations thereunder and any applicable state securities laws and regulations, but in claiming such exemption, the Employee shall, prior to any offer for sale or sale of such shares, obtain a favorable written opinion from counsel for or approved by the Company as to the applicability of such exemption and (iii) that the Employee agrees that the certificate or certificates evidencing such shares shall bear a legend to the effect of the foregoing. 3 14. This Agreement is subject to all terms, conditions, limitations and restrictions contained in the Plan, which shall be controlling in the event of any conflicting or inconsistent provisions. 15. This Agreement is not a contract of employment and the terms of the Employee's employment shall not be affected hereby or by any agreement referred to herein except to the extent specifically so provided herein or therein. Nothing herein shall be construed to impose any obligation on the Company to continue the Employee's employment, and it shall not impose any obligation on the Employee's part to remain in the employ of the Company. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] 4 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date written below. WEINER'S STORES, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- ACCEPTED: - ------------------------------- Signature of Employee - ------------------------------- Name of Employee (please print) Date: -------------------------- 5 EXHIBIT A --------- The terms "Cause," "Good Reason," and "Disability" shall have the meanings set forth below: I. "Cause" shall mean: (1) fraud; (2) material dishonesty relating to the conduct of the business of the Company or dishonesty which does not relate to the conduct of the business of the Company which adversely affects the Company or the Employee's ability to manage the business of the Company; (3) the Employee engages in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out the Employee's duties as an employee, resulting, in either case, in material economic harm to the Company, other than: (A) conduct which is the result of the Employee's exercise of reasonable business judgment which merely differs from the business judgment of the Company's chief executive officer; or (B) any act or omission which in the Employee's reasonable and good faith belief was in or not opposed to the best interests of the Company; (4) embezzlement; (5) chronic alcoholism or chronic drug dependency that in either case precludes the Employee from performing his or her duties as an employee of the Company; or (6) the conviction of, or plea of guilty or nolo contendere to, a felony or any crime involving (i) securities or commodities laws violations or (ii) moral turpitude. II. "Good Reason" shall mean the occurrence of any of the following events within the 30-day period preceding the termination of employment by the Employee: (1) a reduction of the Employee's base salary (other than any reduction applicable to management employees generally); (2) a material reduction in the Employee's position, duties or responsibilities with respect to his or her employment by the Company without the Employee's prior consent; (3) a change in the Employee's principal work location by more than 50 miles and more than 50 miles from the Employee's principal place of abode as of the date of such change in job location without the Employee's prior consent; or (4) the failure of the Company to obtain the assumption in writing of its obligations to pay any earned compensation under the Plan by any purchaser or other transferee of all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale or similar transaction. III. "Disability" shall mean a disability as determined under the Company's then existing long-term disability plan or program. EX-10.5 5 EXHIBIT 10.5 ------------ [Letterhead of The CIT Group/Business Credit, Inc.] Date: October 4, 1999 Weiner's Stores, Inc. 6005 Westview Drive Houston, Texas 77055 Attn: Mr. Raymond J. Miller Executive Vice President and Chief Operating Officer Reference is made to that certain Revolving Credit Agreement dated as of August 26, 1997 (as amended, modified or supplemented from time to time, the "Credit Agreement"), among Weiner's Stores, Inc., a Delaware corporation (the "Borrower"), the financial institutions from time to time party thereto (collectively, the "Lenders" and individually, a "Lender"), and The CIT Group/Business Credit, Inc., as a Lender and as agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used but not otherwise defined herein shall have the same meanings ascribed to such terms in the Credit Agreement. The Borrower, the Lenders, and the Agent desire to amend certain provisions of the Credit Agreement. Accordingly, in accordance with Section 10.03 of the Credit Agreement, the Borrower, the Lenders, and the Agent hereby agree as follows: 1. Capital Expenditures. Section 8.08 of the Credit Agreement is hereby amended to read in its entirety as follows: "Make or be committed to make, or permit any of its Subsidiaries to make or be committed to make, any expenditure (by purchase or capitalized lease) for fixed or capital assets other than expenditures (including obligations under Capitalized Leases) which would not cause the aggregate amount of all such expenditures to exceed (i) $7,000,000 for the fiscal year of the Borrower ending January 29, 2000, (ii) $8,500,000 for each of the fiscal years ending February 3, 2001, February 2, 2002, and February 1, 2003, respectively, or (iii) $5,000,000 for the period beginning on February 2, 2003 and ending on August 30, 2003 and each fiscal year thereafter." 2. Cumulative FIFO EBITDA. Section 8.12 of the Credit Agreement is hereby amended to read in its entirety as follows: "Permit Cumulative FIFO EBITDA for any fiscal quarter (calculated on a rolling twelve (12) month basis) of the Borrower ending on the dates set forth below to be less than the amount specified opposite each such fiscal quarter. Fiscal Quarter Amount -------------- ------ October 30, 1999 $875,000 January 29, 2000 875,000 April 29, 2000 875,000 July 29, 2000 1,375,000 October 28, 2000 1,875,000 February 3, 2001 2,375,000 May 5, 2001 2,875,000 August 4, 2001 2,875,000 November 3, 2001 2,875,000 February 2, 2002 3,375,000 May 4, 2002 3,875,000 August 3, 2002 3,875,000 November 2, 2002 3,875,000 February 1, 2003 4,375,000 May 3, 2003 4,875,000 August 2, 2003 4,875,000" 3. Amendment to Definition of Cumulative FIFO EBITDA. The definition of the term "Cumulative FIFO EBITDA" in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "Cumulative FIFO EBITDA" shall mean with respect to the fiscal quarter ending on October 30, 1999 and each fiscal quarter thereafter, the aggregate FIFO EBITDA for such fiscal quarter and the preceding three fiscal quarters (i.e., a rolling twelve (12) month basis)." 4. Maintenance of Inventory. Section 8.16 of the Credit Agreement is hereby amended to read in its entirety as follows: "The Borrower shall not permit the aggregate amount of its Inventory (valued at Book Value) at the end of each fiscal quarter ending on the dates set forth below to be more than the amounts specified opposite each such fiscal quarter set forth below: Fiscal Quarter Maximum Amount -------------- -------------- October 30, 1999 90,000,000 January 29, 2000 90,000,000 April 29, 2000 90,000,000 July 29, 2000 90,000,000 October 28, 2000 90,000,000 February 3, 2001 90,000,000 May 5, 2001 96,000,000 August 4, 2001 96,000,000 November 3, 2001 96,000,000 2 February 2, 2002 96,000,000 May 4, 2002 102,000,000 August 3, 2002 102,000,000 November 2, 2002 102,000,000 February 1, 2003 102,000,000 May 3, 2003 108,000,000 August 2, 2003 and each fiscal year thereafter. 108,000,000" 5. The last sentence in paragraph 2.01(a) is deleted in its entirety and replaced with the following text: "The Termination Date means the earlier of (i) the date on which the Revolving Credit Commitment of each Lender expires, which shall be August 30, 2003 and (ii) the date on which the Revolving Credit Commitment is terminated by the Borrower pursuant to Section 2.04 hereof." 6. Subject to receipt and satisfaction with an inventory appraisal, by the Agent, as of the effective date of this Amendment, and as may be required from time to time hereafter, subsection (i) (A) of the definition of "Borrowing Base" is hereby deleted and the following is substituted in lieu thereof: "(A) The aggregate of 65% of the Book Value of Eligible Inventory for the months of June, July and November of each calendar year, and 60% of the Book Value of Eligible Inventory for each other month of each calendar year, and ..." 7. Early Termination Fee. Section 2.08(h) of the Credit Agreement is hereby amended to read in its entirety as follows: "If the Borrower elects to terminate the Revolving Credit Commitment pursuant to Section 2.04(a) hereof, or if an Event of Default described in subsections (g) or (h) of Section 9.01 hereof has occurred, or if the Agent elects to declare the Revolving Credit Commitment terminated pursuant to Section 9.02(a) hereof, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of the Lenders' lost profits as a result thereof, the Borrower shall pay to the Agent, for the account of each Lender in accordance with such Lender's Pro Rata Share, an early termination fee in an amount set forth below if such termination is effective in the period indicated: 3 Amount Period ------ ------ (i) 2% of the Revolving Credit any date on or prior to Commitment August 26, 2000 (ii) 1.50% of the Revolving Credit any date from August 26, 2000 Commitment through August 26, 2001 (iii) 1% of the Revolving Credit any date from August 26, 2001 Commitment through August 26, 2002 (iv) 0.50% of the Revolving Credit any date from August 26, 2002 Commitment through August 30, 2003" 8. Pursuant to mutual agreement, we shall charge you a one-time Facility Fee in the amount of $30,000.00 for this accommodation, which fee shall be in addition to other fees we are entitled to charge you under the Credit Agreement and shall be due and charged to your loan account upon execution of this agreement. You hereby confirm that we may charge your loan account with any such amount. [Remainder of this page intentionally left blank] 4 Except as specifically set forth herein, no other change in the terms or conditions of the Credit Agreement is intended or implied. If the foregoing is in accordance with your understanding, please so indicate by signing and returning to us the enclosed copy of this letter. Very truly yours, THE CIT GROUP/BUSINESS CREDIT, INC., as Agent and Lender By: /s/ Grant Weiss ------------------------------- Name: Grant Weiss Title: Assistant Vice President GENERAL ELECTRIC CAPITAL CORPORATION, a Lender By: /s/ Martin Greenberg -------------------------------- Name: Martin Greenberg Title: Duly Authorized Signatory Read and Agreed to: WEINER'S STORES, INC., Borrower By: /s/ Raymond J. Miller ------------------------ Name: Raymond J. Miller Title: Executive Vice President and Chief Operating Officer 5 EX-10.6 6 EXHIBIT 10.6 ------------ [LETTERHEAD OF WEINER'S STORES, INC.] December 10, 1999 Mr. Michael S. Marcus 6303 Gabrielle Canyon Court Katy, Texas 77450 Dear Mr. Marcus: This letter (this "Agreement") sets forth the terms of your offer of employment with Weiner's Stores, Inc. (the "Company"): 1. Your current base salary is at the rate of $110,000 annually, less payroll tax deductions required by law, payable at such times and in accordance with the Company's standard payroll practices for employees of the Company. 2. You shall also be entitled to participate in such employee benefit plans, policies or programs as the Company may maintain for its employees generally, as such plans, policies or programs may be adopted, modified or terminated from time to time in the Company's sole discretion. In addition, effective as of February 1, 2000, the Company shall pay or cause to be paid, or waive or reimburse you for, any costs or contributions otherwise payable by you as a condition to participation in the Company's medical plan or hospitalization plan, other than such deductible, co-payment or similar amounts as may be provided in any such plan, as any such plan or program may be adopted, modified or terminated from time to time in the Company's sole discretion. 3. You shall be entitled to an annualized vacation allotment of 3 weeks per year, without reduction in your salary, to be taken at such times as may be consistent with the needs of the Company. 4. In accordance with the Company's policies as they may be amended from time to time, you shall be reimbursed for any necessary business expenses upon submission of appropriate documentation. 5. If (a) the Company does not offer to renew your employment with the Company by December 2, 2002 and you remain continually employed by the Company, in accordance with this Agreement until January 31, 2003 (the "Termination Date") or (b) the Company terminates your employment for any reason other than cause prior to the Termination Date, then, within twenty (20) days after (i) the Termination Date, in the case of clause (a), or (ii) the date of such termination, in the case of clause (b), you shall be entitled to a payment equal to six months of your then current base salary. You shall not be entitled to any other payments or benefits from the Company upon the termination of your employment, other than such payments or benefits 1 expressly provided in any written agreement or employee benefit plan. If the Company terminates your employment for cause or if you should resign for any reason, you shall not be entitled to any payments or benefits under this Agreement as severance pay or otherwise. For purposes of this Agreement, "cause" shall mean conduct by you constituting (i) fraud; (ii) material dishonesty relating to the conduct of the business of the Company or dishonesty which does not relate to the conduct of the business of the Company which adversely affects the Company or your ability to carry out the business of the Company; (iii) willful and material breach of any of the provisions or covenants of this Agreement; (iv) willful gross neglect or willful gross misconduct in carrying out your duties as an employee resulting, in either case, in material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism or chronic drug dependency that in either case precludes your performing your duties contemplated herein; or (vii) the conviction of or plea or guilty or nolo contendere to a felony, or any crime involving securities or commodities laws violations or moral turpitude. 6. During your employment and for one (1) year following the termination of your employment, you shall not, directly or indirectly, solicit or induce any employee of the Company to terminate his or her employment for any purpose, including, without limitation, in order to enter into employment with any entity which competes with any business conducted by the Company. During your employment and for all time following the termination of your employment, you shall not, directly or indirectly, furnish or make accessible to any person, firm, or corporation or other business entity, whether or not he, she, or it competes with the business of the Company, any trade secret, technical data, or know-how acquired by you during your employment by the Company which relates to the business practices, methods, processes, equipment, or other confidential or secret aspects of the business of the Company without the prior written consent from the Company, unless such information is or hereafter may become in the public domain other than by being divulged or made accessible by you in breach of this provision, or which is demonstrated by you to the Company's reasonable satisfaction to be known by you prior to the disclosure to you by the Company, or which is or may hereafter be disclosed by the Company to third parties without similar restrictions on disclosure or use, or which is required to be disclosed pursuant to governmental or judicial process or procedure. The provisions of this paragraph 6 shall be in full force and effect in each state in the United States where the Company carries on business at any time during your employment and for one (1) year following the termination of your employment. You hereby acknowledge that your services are of a special, unique and extraordinary character and your position with the Company places you in a position of confidence and trust with the clients and employees of the Company, and that in connection with your services to the Company, you will have access to confidential information vital to the Company's businesses. You further acknowledge that in view of the nature of the business in which the Company is engaged, the foregoing restrictive covenants in this paragraph 6 are reasonable and necessary in order to protect the legitimate interests of the Company and that violation thereof would result in irreparable injury to the Company. Accordingly, you hereby consent and agree that if you violate or threaten to violate any of the provisions of this paragraph 6, the Company would sustain irreparable harm and, therefore, the Company shall be entitled to obtain from any court of 2 competent jurisdiction, without the posting any bond or other security, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies in law or equity to which the Company may be entitled. 7. Your relationship to the Company during your employment shall be that of an employee at-will. Thus, both you and the Company each may terminate the employment relationship at any time with or without notice. 8. This Agreement sets forth all of the terms of your employment, and supersedes all prior agreements, oral or written, relating to your employment by the Company or the termination thereof, and may not be modified except by a writing, signed by you and by the Chief Executive Officer of the Company. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its choice of law rules. Subject in all respects to the provisions set forth in paragraph 7, this Agreement shall terminate on the Termination Date; provided that paragraph 6 and this paragraph 8 shall survive any termination of this Agreement. If you agree that the above sets forth your understanding of our offer regarding the terms and conditions of your employment, please sign this Agreement in the space provided below and return it to me. Very truly yours, /s/ Raymond J. Miller -------------------------- Raymond J. Miller Executive Vice President, Chief Operating Officer & Chief Financial Officer Accepted and Agreed: /s/ Michael S. Marcus --------------------- Michael S. Marcus Date: 12/16/99 3 EX-10.7 7 EXHIBIT 10.7 ------------ EMPLOYMENT AGREEMENT -------------------- Agreement, dated as of February 1, 2000, between Weiner's Stores, Inc., a Delaware corporation (the "Company"), and Raymond J. Miller (the "Executive"). W I T N E S S E T H : ------------------- WHEREAS, the Company desires to continue the employment of the Executive, and the Executive desires to accept such employment, on all the terms and conditions specified herein; and WHEREAS, the Executive and the Company desire to set forth in writing all of their respective duties, rights and obligations with respect to the Executive's employment by the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment and Term. The Company hereby continues the employment of the Executive, and the Executive hereby accepts such employment by the Company, in the capacity and upon the terms and conditions hereinafter set forth. The term of employment under this Agreement shall be for the period commencing as of February 1, 2000 and ending on January 31, 2003, unless earlier terminated as herein provided (the "Term of Employment"). 2. Duties. During the Term of Employment the Executive shall continue to serve as the Company's Executive Vice President, Chief Operating Officer and Chief Financial Officer and as a member of the Company's Board of Directors (the "Board"). As such, the Executive shall direct and manage the affairs of the Company with such duties, functions and responsibilities (including the right to hire and dismiss employees (subject to approval of the Board in the case of corporate officers)) as are customarily associated with and incident to the position of Executive Vice President, Chief Operating Officer and Chief 1 Financial Officer, and as the Company may, from time to time, require of him, subject to the direction of the Company's Chief Executive Officer. The Executive shall serve the Company faithfully, conscientiously and to the best of the Executive's ability and shall promote the interests and reputation of the Company. Unless prevented by sickness or disability, the Executive shall devote all of the Executive's time, attention, knowledge, energy and skills, during normal working hours, and at such other times as the Executive's duties may reasonably require, to the duties of the Executive's employment, provided, however, that it shall not be a breach of this Agreement for the Executive to manage his own private financial investments; or with the consent of the Board (which consent shall not be unreasonably withheld) to be a member of the board of directors of other companies which do not compete with the Company, so long as, in either case, such activities do not require the Executive to spend a material amount of time away from his performance of his duties hereunder, do not otherwise interfere with the Executive's performance of his duties hereunder, or otherwise violate this Agreement (including, but not limited to, Section 4 hereof) or the Company's other policies. The principal place of employment of the Executive shall be the principal executive offices of the Company. The Executive acknowledges that in the course of his employment he may be required, from time to time, to travel on behalf of the Company. 3. Compensation, Benefits and Business Expenses. As full and complete compensation for the Executive's execution and delivery of this Agreement and performance of any services hereunder, and as the Company's policy with respect to the reimbursement or payment of the Executive's business expenses, the Company shall pay, grant or provide the Executive, and the Executive agrees to accept, the following: 2 a. Base Salary: The Company shall pay the Executive a base salary at an annual rate of $250,000 payable at such times and in accordance with the Company's standard payroll practices for senior executives of the Company. b. Medical, Dental and Disability Insurance: The Company shall afford the Executive the opportunity to participate during the Term of Employment in any medical, dental and disability insurance plans or programs which the Company maintains for its senior executive officers. In addition, the Company shall pay or cause to be paid, or waive or reimburse the Executive for, any costs or contributions otherwise payable by the Executive as a condition to participation in the Company's medical plan or hospitalization plan, other than such deductible, co-payment or similar amounts as may be provided in any such plan. Nothing in this Agreement shall require the Company to establish, maintain or continue any of the benefit programs already in existence or hereafter adopted for employees of the Company and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate any such benefit program. c. Expenses: The Executive shall be entitled to reimbursement or payment of reasonable business expenses (in accordance with the Company's policies as amended from time to time in the Company's sole discretion), following the Executive's submission of appropriate receipts and/or vouchers to the Company. d. Vacations, Holidays or Temporary Leave: The Executive shall be entitled to take annual vacation without loss or diminution of compensation, not exceeding four (4) weeks, such vacation to be taken at such time or times, and as a whole or in increments, as the Executive shall elect, consistent with the reasonable needs of the Company's business and such vacation policies as may be established by the Board. The Executive shall further be entitled to the number of paid holidays, and leaves for illness or temporary disability in accordance 3 with the policies of the Company for its senior executives, as the Company may amend or terminate such policies from time to time in its sole discretion. e. Management Incentive Compensation Plan: The Executive shall be entitled to participate in the Company's Management Incentive Compensation Plan (the "Incentive Plan") to the extent provided in, and subject to the conditions and any terms and limitations of, the Incentive Plan, and, subject to the discretion of the Board, any stock option plan ("Stock Plan") currently in effect or hereafter adopted by the Company which is applicable to employees or executive employees generally to the extent provided in, and subject to the conditions and any terms and limitations of, such Stock Plan; provided, however, that nothing in this Agreement shall require the Company to maintain or continue the Incentive Plan or any Stock Plan and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate the Incentive Plan or any Stock Plan. f. No Other Compensation or Benefits: The Executive agrees that he will not be entitled to and he shall not request or receive any compensation or benefits with respect to his services during the Term of Employment, that is in addition to or different from the compensation and benefits set forth in this paragraph 3 and in paragraph 6 of this Agreement. 4. Non-Competition and Protection of Confidential Information: a. Restrictive Covenants: (1) During the Term of Employment and for one (1) year following the termination of the Executive's employment with the Company ("Date of Termination"), the Executive shall not, directly or indirectly, solicit or induce any employee of the Company to terminate his or her employment for any purpose, including without limitation, in order to enter into employment with 4 any entity which competes with any business conducted by the Company. (2) During the Term of Employment and for all time following the Date of Termination, the Executive shall not, directly or indirectly, furnish or make accessible to any person, firm, or corporation or other business entity, whether or not he, she, or it competes with the business of the Company, any trade secret, technical data, or know-how acquired by the Executive during his employment by the Company which relates to the business practices, methods, processes, equipment, or other confidential or secret aspects of the business of the Company without the prior written consent from the Company, unless such information is or hereafter may become in the public domain other than by being divulged or made accessible by the Executive in breach of this provision, or which is demonstrated by the Executive to the Company's reasonable satisfaction to be known by him prior to the disclosure to him by the Company, or which is or may hereafter be disclosed by the Company to third parties without similar restrictions on disclosure or use, or which is required to be disclosed pursuant to governmental or judicial process or procedure. b. Geographic Scope: The provisions of this Section 4 shall be in full force and effect in each state in the United States where the Company carries on business at any time during the Term of Employment and for one (1) year following the Date of Termination. c. Remedies: The Executive acknowledges that his services are of a special, unique and extraordinary character and, his position with the Company places him in a position of confidence and trust with the clients and employees of the Company, and that in connection with his services to the Company, the Executive will have access to confidential information vital to the Company's businesses. The Executive further acknowledges that in view of the nature of the business in which the Company is engaged, the foregoing restrictive covenants in 5 this Section 4 hereof are reasonable and necessary in order to protect the legitimate interests of the Company and that violation thereof would result in irreparable injury to the Company. Accordingly, the Executive consents and agrees that if the Executive violates or threatens to violate any of the provisions of this Section 4 hereof the Company would sustain irreparable harm and, therefore, the Company shall be entitled to obtain from any court of competent jurisdiction, without the posting any bond or other security, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies in law or equity to which the Company may be entitled. 5. Termination of Employment: a. The Executive's employment with the Company shall terminate upon the occurrence of any of the following events: (1) The completion of the Executive's Term of Employment on January 31, 2003; (2) the death of the Executive during the Term of Employment; (3) the Disability (as defined below) of Executive during the Term of Employment; (4) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Executive from the Company of the termination of his employment for Cause (as defined below) ("Notice of Termination"); 6 (5) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Executive from the Company of termination of his employment Without Cause (as defined below); (6) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Company of the resignation by the Executive for Good Reason (as defined below) ("Notice of Resignation"), provided, however, notwithstanding Section 10 hereof relating to waivers, in the case of a resignation by the Executive due to a Change of Control, the Executive's resignation shall be deemed to have been for Good Reason hereunder only if such resignation occurs more than three (3) months following such Change of Control, but less than six (6) months following such Change of Control; or (7) During the Term of Employment, upon not less than fourteen (14) days' written notice to the Company of the resignation by the Executive Without Good Reason (as defined below) during the Term of Employment. b. For purposes of this Agreement, the "Disability" of the Executive shall mean his inability, because of mental or physical illness or incapacity, whether total or partial, to perform his duties under this Agreement for a continuous period of 120 days or for shorter periods aggregating 120 days out of any 180-day period. c. For purposes of this Agreement, "Cause" shall mean conduct by the Executive constituting (i) fraud; (ii) material dishonesty relating to the conduct of the business of the Company or dishonesty which does not relate to the conduct of the business of the Company which adversely affects the Company or the Executive's ability to manage the business of the Company; (iii) willful and material breach of any of the provisions or covenants of this Agreement; (iv) willful gross neglect or willful gross misconduct in carrying out the 7 Executive's duties as an employee of the Company resulting, in either case, in material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism or chronic drug dependency that in either case precludes his performing his duties contemplated herein; or (vii) the conviction of or plea or guilty or nolo contendere to a felony, or any crime involving securities or commodities laws violations or moral turpitude. d. For purposes of this Agreement, "Without Cause" shall mean any reason other than that defined in this Agreement as constituting Cause. The parties expressly agree that a termination of employment Without Cause pursuant to Section 5a(5) hereof may be for any reason whatsoever, or for no reason, in the sole discretion of the Company. e. For purposes of this Agreement, "Good Reason" shall mean (i) willful and material breach of the Agreement by the Company; (ii) assignment of duties or responsibilities materially inconsistent with those described in Section 2 hereof without the consent of the Executive; or (iii) any Change in Control (as defined below). Good Reason as defined in subdivision (ii) of this Section 5e includes: (1) The cessation of the Executive's membership on the Company's, or its successor's, Board and/or his removal from the position of Chief Operating Officer, of the Company or its successor; or (2) the Company's requiring, without the written consent of the Executive, the Executive to be based at any office or location more than 50 miles from the current offices of the Company in Houston, Texas. f. For purposes of this Agreement, "Without Good Reason" shall mean any reason other than that defined in this Agreement as constituting Good Reason. g. For purposes of this Agreement, "Change of Control" shall mean (a) the disposition, whether by sale, merger, consolidation, etc. of all or substantially all of the Company's assets, unless in advance of any such 8 disposition the Executive waives this provision in writing; (b) any person, entity or group (as the term "group" is defined in the rules and regulations relating to Section 13D of the Securities Exchange Act of 1934, as amended), other than Chase Bank of Texas, acquires 50% or more of the voting common stock of the Company; or (c) a contested proxy solicitation of Company shareholders that results in the contesting party obtaining the ability to cast 25% or more of the votes entitled to be cast in electing directors of the Company. h. Upon the termination of the Executive's employment for any reason, the Executive shall, upon the request of the Company, promptly resign from all officerships and directorships held by the Executive in the Company or any other business enterprise in which the Executive is serving at the Company's request. If the Executive refuses to resign in accordance herewith within seven (7) days of such request, the Executive agrees that the Executive shall be deemed to have resigned all of such officerships and directorships as of the date requested by the Company. i. A Notice of Termination described in Section 5a(4) shall state the Date of Termination and the basis for the Company's determination that the Executive's actions establish Cause hereunder. Upon the Executive's receipt of a Notice of Termination, the Executive may, prior to the Date of Termination, seek to cure any conduct identified in the Notice of Termination as establishing Cause (to the extent susceptible to cure) and shall, upon his written request, be accorded the right to address the Board, with or without counsel to the Executive present at the Executive's option, for the purpose of responding to the Notice of Termination. Following such meeting between the Executive and the Board, if the Board does not withdraw or modify the Notice of Termination, the Executive's employment shall terminate on the Date of Termination stated in the Notice of Termination. 9 j. A Notice of Resignation described in Section 5a(6) shall state the Date of Termination and the basis for the Executive's determination that the Company's actions establish Good Reason hereunder. Upon the Company's receipt of a Notice of Resignation, the Company may, prior to the Date of Termination, seek to cure any conduct identified in the Notice of Resignation as establishing Good Reason (to the extent susceptible to cure) and shall, upon the Company's request, be accorded the right to address the Executive, with or without counsel to the Executive present at the Executive's option, for the purpose of responding to the Notice of Resignation. Following such meeting between the Executive and the Board, if the Executive does not withdraw or modify the Notice of Resignation, the Executive's employment shall terminate on the Date of Termination stated in the Notice of Resignation. 6. Payments Upon Termination of Employment: Death or Disability: a. If the Executive's employment hereunder is terminated due to the Executive's death or Disability pursuant to Sections 5a(2) or (3) hereof, the Company shall pay or provide to the Executive, his designated beneficiary or to his estate (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; and (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination. Upon termination of the Executive's employment due to the Executive's Disability, the Executive shall continue to have the obligations provided for in Section 4 hereof. The Executive may designate in writing to the 10 Chief Executive Officer of the Company from time to time a beneficiary to whom payments shall be made hereunder in the event of the Executive's death. In the absence of such a designation payments shall be made to the Executive's estate in the event of the Executive's death. b. Termination for Cause or Resignation Without Good Reason: If the Executive's employment hereunder is terminated due to the termination of the Executive's employment by the Company for Cause pursuant to Section 5a(4) or due to the Executive's resignation Without Good Reason pursuant to Section 5a(7), the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; and (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination. c. Termination Without Cause or Resignation For Good Reason: If the Executive's employment hereunder is terminated due to the termination of the Executive's employment by the Company Without Cause pursuant to Section 5a(5) or due to the Executive's resignation for Good Reason pursuant to Section 5a(6), the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such 11 times as will be in accordance with the Company's normal payroll practices; (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination; and (iii) if the Company terminates the Executive's employment Without Cause pursuant to Section 5a(5) or due to the Executive's resignation for Good Reason pursuant to Section 5a(6) at any time during the Term of Employment, then the Company shall make a single lump sum payment within twenty (20) days of after the Date of Termination in an amount equal to twelve (12) months of the Executive's then current base salary. The Company's obligation to make the payment pursuant to Section 6c(iii) shall be conditioned upon the Company's prior receipt and the effective date of an executed general release of claims and covenant not to sue. d. Expiration of Term of Employment Without Renewal: If the Executive's employment terminates on January 31, 2003 pursuant to Section 1 of this Agreement, the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination of the Executive's employment, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination; and (iii) a single lump sum payment within twenty (20) days of after the Date of Termination in an amount equal to twelve (12) months of the Executive's then current base salary. Notwithstanding the foregoing, in the event that prior to the 12 termination of this Agreement on January 31, 2003 pursuant to Section 1 of this Agreement (i) on or before December 2, 2002 the Company offers to renew this Agreement upon the completion of the Executive's Term of Employment on January 31, 2003, or offers the Executive employment with the Company on substantially similar terms and conditions as those contained in this Agreement, or on terms and conditions more favorable to the Executive than the terms and conditions contained in this Agreement, in each case for a term of employment of no less than 24 months, and (ii) the Executive does not accept such offer of renewal or such employment on or before December 16, 2002, then the Company shall not be obligated to make the payment pursuant to Section 6d(iii). The Company's obligation to make the payment pursuant to Section 6d(iii) shall be conditioned upon the Company's prior receipt and the effective date of an executed general release of claims and covenant not to sue. e. No Other Payments: Except as provided in this Section 6, the Executive shall not be entitled to receive any other payments or benefits from the Company due to the termination of his employment by the Company, including, but not limited to, any employee benefits under any of the Company's employee benefits plans or programs (other than at the Executive's expense under the Consolidated Omnibus Budget Reconciliation Act of 1985 or pursuant to the terms of any pension plan which the Company may have in effect from time to time) or any right to be paid severance pay. 7. No Conflicting Agreements. The Executive hereby represents and warrants that he is not a party to any agreement, or non-competition or other covenant or restriction contained in any agreement, commitment, arrangement or understanding (whether oral or written), which would in any way conflict with or limit his ability to continue to work for the Company during the Term of Employment or would otherwise limit his ability to perform all responsibilities 13 in accordance with the terms and subject to the conditions of this Agreement. 8. Deductions and Withholding. The Executive agrees that the Company shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all federal, state, local and/or other taxes which the Company determines are required to be withheld in accordance with applicable statutes and/or regulations from time to time in effect and all amounts required to be deducted in respect of the Executive's coverage under applicable employee benefit plans. 9. Entire Agreement. This Agreement embodies the entire agreement of the parties with respect to the Executive's employment and supersedes any other prior oral or written agreements between the Executive and the Company with respect to the Executive's employment including, but not limited to, the Employment Agreement between the Company and the Executive dated February 24, 1995 and all amendments thereto. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the parties hereto. 10. Waiver. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any subsequent breach by the Executive. The waiver by the Executive of a breach of any provision of this Agreement by the Company shall not operate or be construed as a waiver of any subsequent breach by the Company. 11. Governing Law. This Agreement shall be subject to, and governed by, the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware, regardless of where the Executive is in fact required to work. 14 12. Assignability. The obligations of the Executive may not be delegated and, except as expressly provided in Section 6a relating to the designation of beneficiaries, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest therein. Any such attempted delegation or disposition shall be null and void and without effect. The Company and the Executive agree that this Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to and shall be assumed by and binding upon and shall inure to the benefit of any successor to the Company. The term "successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or a material part of the assets of the Company. 13. Severability. If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. If any court construes any of the provisions of Section 4 hereof, or any part thereof, to be unreasonable because of the duration of such provision or the geographic or other scope thereof, such court may reduce the duration or restrict the geographic or other scope of such provision and enforce such provision as so reduced or restricted. 14. Notices. All notices to the Executive hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to: Raymond J. Miller 1323 Winrock Blvd. Houston, Texas 77057 15 All notices to the Company hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to: Weiner's Stores, Inc. 6005 Westview Drive Houston, Texas 77055 Attn: Chief Executive Officer Either party may change the address to which notices shall be sent by sending written notice of such change of address to the other party. 15. Effective Date. This Agreement shall be effective, as of the date first above set forth, following execution of four originals of this Agreement by both parties. 16. Paragraph Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. 16 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Raymond J. Miller Weiner's Stores, Inc. - --------------------- Raymond J. Miller By: /s/ Herbert R. Douglas ------------------------------------- Herbert R. Douglas President and Chief Executive Officer 12/1/99 - --------------------- Date 17 EX-10.8 8 EXHIBIT 10.8 ------------ EMPLOYMENT AGREEMENT Agreement, dated as of February 1, 2000, between Weiner's Stores, Inc., a Delaware corporation (the "Company"), and Joseph J. Kassa (the "Executive"). W I T N E S S E T H : ------------------- WHEREAS, the Company desires to continue the employment of the Executive, and the Executive desires to accept such employment, on all the terms and conditions specified herein; and WHEREAS, the Executive and the Company desire to set forth in writing all of their respective duties, rights and obligations with respect to the Executive's employment by the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment and Term. The Company hereby continues the employment of the Executive, and the Executive hereby accepts such employment by the Company, in the capacity and upon the terms and conditions hereinafter set forth. The term of employment under this Agreement shall be for the period commencing as of February 1, 2000 and ending on January 31, 2003, unless earlier terminated as herein provided (the "Term of Employment"). 2. Duties. During the Term of Employment the Executive shall continue to serve as the Company's Senior Vice President, General Merchandise Manager. As such, the Executive shall direct and manage the affairs of the Company with such duties, functions and responsibilities (including the right to hire and dismiss employees (subject to approval of the Board in the case of corporate officers)) as are customarily associated with and incident to the position of Senior Vice President, General Merchandise Manager, and as the Company may, from time to time, require of him, subject to the direction of the Company's Chief Executive 1 Officer. The Executive shall serve the Company faithfully, conscientiously and to the best of the Executive's ability and shall promote the interests and reputation of the Company. Unless prevented by sickness or disability, the Executive shall devote all of the Executive's time, attention, knowledge, energy and skills, during normal working hours, and at such other times as the Executive's duties may reasonably require, to the duties of the Executive's employment, provided, however, that it shall not be a breach of this Agreement for the Executive to manage his own private financial investments; or with the consent of the Board (which consent shall not be unreasonably withheld) to be a member of the board of directors of other companies which do not compete with the Company, so long as, in either case, such activities do not require the Executive to spend a material amount of time away from his performance of his duties hereunder, do not otherwise interfere with the Executive's performance of his duties hereunder, or otherwise violate this Agreement (including, but not limited to, Section 4 hereof) or the Company's other policies. The principal place of employment of the Executive shall be the principal executive offices of the Company. The Executive acknowledges that in the course of his employment he may be required, from time to time, to travel on behalf of the Company. 3. Compensation, Benefits and Business Expenses. As full and complete compensation for the Executive's execution and delivery of this Agreement and performance of any services hereunder, and as the Company's policy with respect to the reimbursement or payment of the Executive's business expenses, the Company shall pay, grant or provide the Executive, and the Executive agrees to accept, the following: a. Base Salary: The Company shall pay the Executive a base salary at an annual rate of $200,000 payable at such times and in accordance with the Company's standard payroll practices for senior executives of the Company. 2 b. Medical, Dental and Disability Insurance: The Company shall afford the Executive the opportunity to participate during the Term of Employment in any medical, dental and disability insurance plans or programs which the Company maintains for its executive officers. In addition, the Company shall pay or cause to be paid, or waive or reimburse the Executive for, any costs or contributions otherwise payable by the Executive as a condition to participation in the Company's medical plan or hospitalization plan, other than such deductible, co-payment or similar amounts as may be provided in any such plan. Nothing in this Agreement shall require the Company to establish, maintain or continue any of the benefit programs already in existence or hereafter adopted for employees of the Company and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate any such benefit program. c. Expenses: The Executive shall be entitled to reimbursement or payment of reasonable business expenses (in accordance with the Company's policies as amended from time to time in the Company's sole discretion), following the Executive's submission of appropriate receipts and/or vouchers to the Company. d. Vacations, Holidays or Temporary Leave: The Executive shall be entitled to take annual vacation without loss or diminution of compensation, not exceeding four (4) weeks, such vacation to be taken at such time or times, and as a whole or in increments, as the Executive shall elect, consistent with the reasonable needs of the Company's business and such vacation policies as may be established by the Board. The Executive shall further be entitled to the number of paid holidays, and leaves for illness or temporary disability in accordance with the policies of the Company for its senior executives, as the Company may amend or terminate such policies from time to time in its sole discretion. 3 e. Management Incentive Compensation Plan: The Executive shall be entitled to participate in the Company's Management Incentive Compensation Plan (the "Incentive Plan") to the extent provided in, and subject to the conditions and any terms and limitations of, the Incentive Plan, and, subject to the discretion of the Board, any stock option plan ("Stock Plan") currently in effect or hereafter adopted by the Company which is applicable to employees or executive employees generally to the extent provided in, and subject to the conditions and any terms and limitations of, such Stock Plan; provided, however, that nothing in this Agreement shall require the Company to maintain or continue the Incentive Plan or any Stock Plan and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate the Incentive Plan or any Stock Plan. f. No Other Compensation or Benefits: The Executive agrees that he will not be entitled to and he shall not request or receive any compensation or benefits with respect to his services during the Term of Employment, that is in addition to or different from the compensation and benefits set forth in this paragraph 3 and in paragraph 6 of this Agreement. 4. Non-Competition and Protection of Confidential Information: a. Restrictive Covenants: (1) During the Term of Employment and for one (1) year following the termination of the Executive's employment with the Company ("Date of Termination"), the Executive shall not, directly or indirectly, solicit or induce any employee of the Company to terminate his or her employment for any purpose, including without limitation, in order to enter into employment with any entity which competes with any business conducted by the Company. 4 (2) During the Term of Employment and for all time following the Date of Termination, the Executive shall not, directly or indirectly, furnish or make accessible to any person, firm, or corporation or other business entity, whether or not he, she, or it competes with the business of the Company, any trade secret, technical data, or know-how acquired by the Executive during his employment by the Company which relates to the business practices, methods, processes, equipment, or other confidential or secret aspects of the business of the Company without the prior written consent from the Company, unless such information is or hereafter may become in the public domain other than by being divulged or made accessible by the Executive in breach of this provision, or which is demonstrated by the Executive to the Company's reasonable satisfaction to be known by him prior to the disclosure to him by the Company, or which is or may hereafter be disclosed by the Company to third parties without similar restrictions on disclosure or use, or which is required to be disclosed pursuant to governmental or judicial process or procedure. b. Geographic Scope: The provisions of this Section 4 shall be in full force and effect in each state in the United States where the Company carries on business at any time during the Term of Employment and for one (1) year following the Date of Termination. c. Remedies: The Executive acknowledges that his services are of a special, unique and extraordinary character and, his position with the Company places him in a position of confidence and trust with the clients and employees of the Company, and that in connection with his services to the Company, the Executive will have access to confidential information vital to the Company's businesses. The Executive further acknowledges that in view of the nature of the business in which the Company is engaged, the foregoing restrictive covenants in this Section 4 hereof are reasonable and necessary in order to protect the legitimate interests of the Company and that violation thereof would result in irreparable injury to the Company. Accordingly, the Executive consents and 5 agrees that if the Executive violates or threatens to violate any of the provisions of this Section 4 hereof the Company would sustain irreparable harm and, therefore, the Company shall be entitled to obtain from any court of competent jurisdiction, without the posting any bond or other security, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies in law or equity to which the Company may be entitled. 5. Termination of Employment: a. The Executive's employment with the Company shall terminate upon the occurrence of any of the following events: (1) The completion of the Executive's Term of Employment on January 31, 2003; (2) the death of the Executive during the Term of Employment; (3) the Disability (as defined below) of Executive during the Term of Employment; (4) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Executive from the Company of the termination of his employment for Cause (as defined below) ("Notice of Termination"); (5) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Executive from the Company of termination of his employment Without Cause (as defined below); (6) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Company of the resignation by the Executive for Good Reason (as defined below) ("Notice of Resignation"), provided, however, 6 notwithstanding Section 10 hereof relating to waivers, in the case of a resignation by the Executive due to a Change of Control, the Executive's resignation shall be deemed to have been for Good Reason hereunder only if such resignation occurs more than three (3) months following such Change of Control, but less than six (6) months following such Change of Control; or (7) During the Term of Employment, upon not less than fourteen (14) days' written notice to the Company of the resignation by the Executive Without Good Reason (as defined below) during the Term of Employment. b. For purposes of this Agreement, the "Disability" of the Executive shall mean his inability, because of mental or physical illness or incapacity, whether total or partial, to perform his duties under this Agreement for a continuous period of 120 days or for shorter periods aggregating 120 days out of any 180-day period. c. For purposes of this Agreement, "Cause" shall mean conduct by the Executive constituting (i) fraud; (ii) material dishonesty relating to the conduct of the business of the Company or dishonesty which does not relate to the conduct of the business of the Company which adversely affects the Company or the Executive's ability to manage the business of the Company; (iii) willful and material breach of any of the provisions or covenants of this Agreement; (iv) willful gross neglect or willful gross misconduct in carrying out the Executive's duties as an employee of the Company resulting, in either case, in material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism or chronic drug dependency that in either case precludes his performing his duties contemplated herein; or (vii) the conviction of or plea or guilty or nolo contendere to a felony, or any crime involving securities or commodities laws violations or moral turpitude. 7 d. For purposes of this Agreement, "Without Cause" shall mean any reason other than that defined in this Agreement as constituting Cause. The parties expressly agree that a termination of employment Without Cause pursuant to Section 5a(5) hereof may be for any reason whatsoever, or for no reason, in the sole discretion of the Company. e. For purposes of this Agreement, "Good Reason" shall mean (i) willful and material breach of the Agreement by the Company; (ii) assignment of duties or responsibilities materially inconsistent with those described in Section 2 hereof without the consent of the Executive; or (iii) any Change in Control (as defined below). Good Reason as defined in subdivision (ii) of this Section 5e includes: (1) The removal from the position of Senior Vice President, General Merchandise Manager, of the Company or its successor; or (2) the Company's requiring, without the written consent of the Executive, the Executive to be based at any office or location more than 50 miles from the current offices of the Company in Houston, Texas. f. For purposes of this Agreement, "Without Good Reason" shall mean any reason other than that defined in this Agreement as constituting Good Reason. g. For purposes of this Agreement, "Change of Control" shall mean (a) the disposition, whether by sale, merger, consolidation, etc. of all or substantially all of the Company's assets, unless in advance of any such disposition the Executive waives this provision in writing; (b) any person, entity or group (as the term "group" is defined in the rules and regulations relating to Section 13D of the Securities Exchange Act of 1934, as amended), other than Chase Bank of Texas, acquires 50% or more of the voting common stock of the Company; or (c) a contested proxy solicitation of Company shareholders 8 that results in the contesting party obtaining the ability to cast 25% or more of the votes entitled to be cast in electing directors of the Company. h. Upon the termination of the Executive's employment for any reason, the Executive shall, upon the request of the Company, promptly resign from all officerships and directorships held by the Executive in the Company or any other business enterprise in which the Executive is serving at the Company's request. If the Executive refuses to resign in accordance herewith within seven (7) days of such request, the Executive agrees that the Executive shall be deemed to have resigned all of such officerships and directorships as of the date requested by the Company. i. A Notice of Termination described in Section 5a(4) shall state the Date of Termination and the basis for the Company's determination that the Executive's actions establish Cause hereunder. Upon the Executive's receipt of a Notice of Termination, the Executive may, prior to the Date of Termination, seek to cure any conduct identified in the Notice of Termination as establishing Cause (to the extent susceptible to cure) and shall, upon his written request, be accorded the right to address the Board, with or without counsel to the Executive present at the Executive's option, for the purpose of responding to the Notice of Termination. Following such meeting between the Executive and the Board, if the Board does not withdraw or modify the Notice of Termination, the Executive's employment shall terminate on the Date of Termination stated in the Notice of Termination. j. A Notice of Resignation described in Section 5a(6) shall state the Date of Termination and the basis for the Executive's determination that the Company's actions establish Good Reason hereunder. Upon the Company's receipt of a Notice of Resignation, the Company may, prior to the Date of Termination, seek to cure any conduct identified in the Notice of Resignation as establishing Good Reason (to the extent susceptible to cure) and shall, upon the Company's 9 request, be accorded the right to address the Executive, with or without counsel to the Executive present at the Executive's option, for the purpose of responding to the Notice of Resignation. Following such meeting between the Executive and the Board, if the Executive does not withdraw or modify the Notice of Resignation, the Executive's employment shall terminate on the Date of Termination stated in the Notice of Resignation. 6. Payments Upon Termination of Employment: Death or Disability: a. If the Executive's employment hereunder is terminated due to the Executive's death or Disability pursuant to Sections 5a(2) or (3) hereof, the Company shall pay or provide to the Executive, his designated beneficiary or to his estate (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; and (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination. Upon termination of the Executive's employment due to the Executive's Disability, the Executive shall continue to have the obligations provided for in Section 4 hereof. The Executive may designate in writing to the Chief Executive Officer of the Company from time to time a beneficiary to whom payments shall be made hereunder in the event of the Executive's death. In the absence of such a designation payments shall be made to the Executive's estate in the event of the Executive's death. 10 b. Termination for Cause or Resignation Without Good Reason: If the Executive's employment hereunder is terminated due to the termination of the Executive's employment by the Company for Cause pursuant to Section 5a(4) or due to the Executive's resignation Without Good Reason pursuant to Section 5a(7), the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; and (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination. c. Termination Without Cause or Resignation For Good Reason: If the Executive's employment hereunder is terminated due to the termination of the Executive's employment by the Company Without Cause pursuant to Section 5a(5) or due to the Executive's resignation for Good Reason pursuant to Section 5a(6), the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination; and (iii) if the Company terminates the 11 Executive's employment Without Cause pursuant to Section 5a(5) or due to the Executive's resignation for Good Reason pursuant to Section 5a(6) at any time during the Term of Employment, then the Company shall make a single lump sum payment within twenty (20) days of after the Date of Termination in an amount equal to twelve (12) months of the Executive's then current base salary. The Company's obligation to make the payment pursuant to Section 6c(iii) shall be conditioned upon the Company's prior receipt and the effective date of an executed general release of claims and covenant not to sue. d. Expiration of Term of Employment Without Renewal: If the Executive's employment terminates on January 31, 2003 pursuant to Section 1 of this Agreement, the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination of the Executive's employment, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination; and (iii) a single lump sum payment within twenty (20) days of after the Date of Termination in an amount equal to twelve (12) months of the Executive's then current base salary. Notwithstanding the foregoing, in the event that prior to the termination of this Agreement on January 31, 2003 pursuant to Section 1 of this Agreement (i) on or before December 2, 2002 the Company offers to renew this Agreement upon the completion of the Executive's Term of Employment on January 31, 2003, or offers the Executive employment with the Company on substantially similar terms and conditions as those contained in this Agreement, or on terms 12 and conditions more favorable to the Executive than the terms and conditions contained in this Agreement, in each case for a term of employment of no less than 24 months, and (ii) the Executive does not accept such offer of renewal or such employment on or before December 16, 2002, then the Company shall not be obligated to make the payment pursuant to Section 6d(iii). The Company's obligation to make the payment pursuant to Section 6d(iii) shall be conditioned upon the Company's prior receipt and the effective date of an executed general release of claims and covenant not to sue. e. No Other Payments: Except as provided in this Section 6, the Executive shall not be entitled to receive any other payments or benefits from the Company due to the termination of his employment by the Company, including, but not limited to, any employee benefits under any of the Company's employee benefits plans or programs (other than at the Executive's expense under the Consolidated Omnibus Budget Reconciliation Act of 1985 or pursuant to the terms of any pension plan which the Company may have in effect from time to time) or any right to be paid severance pay. 7. No Conflicting Agreements. The Executive hereby represents and warrants that he is not a party to any agreement, or non-competition or other covenant or restriction contained in any agreement, commitment, arrangement or understanding (whether oral or written), which would in any way conflict with or limit his ability to continue to work for the Company during the Term of Employment or would otherwise limit his ability to perform all responsibilities in accordance with the terms and subject to the conditions of this Agreement. 8. Deductions and Withholding. The Executive agrees that the Company shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all federal, state, local and/or other 13 taxes which the Company determines are required to be withheld in accordance with applicable statutes and/or regulations from time to time in effect and all amounts required to be deducted in respect of the Executive's coverage under applicable employee benefit plans. 9. Entire Agreement. This Agreement embodies the entire agreement of the parties with respect to the Executive's employment and supersedes any other prior oral or written agreements between the Executive and the Company with respect to the Executive's employment including, but not limited to, the Letter Agreement between the Company and the Executive dated February 5, 1996 and all amendments thereto. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the parties hereto. 10. Waiver. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any subsequent breach by the Executive. The waiver by the Executive of a breach of any provision of this Agreement by the Company shall not operate or be construed as a waiver of any subsequent breach by the Company. 11. Governing Law. This Agreement shall be subject to, and governed by, the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware, regardless of where the Executive is in fact required to work. 12. Assignability. The obligations of the Executive may not be delegated and, except as expressly provided in Section 6a relating to the designation of beneficiaries, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest therein. Any such attempted delegation or disposition shall be null and void and without effect. 14 The Company and the Executive agree that this Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to and shall be assumed by and binding upon and shall inure to the benefit of any successor to the Company. The term "successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or a material part of the assets of the Company. 13. Severability. If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. If any court construes any of the provisions of Section 4 hereof, or any part thereof, to be unreasonable because of the duration of such provision or the geographic or other scope thereof, such court may reduce the duration or restrict the geographic or other scope of such provision and enforce such provision as so reduced or restricted. 14. Notices. All notices to the Executive hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to: Joseph J. Kassa 2345 Bering Drive #805 Houston, Texas 77057 All notices to the Company hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to: 15 Weiner's Stores, Inc. 6005 Westview Drive Houston, Texas 77055 Attn: Chief Operating Officer Either party may change the address to which notices shall be sent by sending written notice of such change of address to the other party. 15. Effective Date. This Agreement shall be effective, as of the date first above set forth, following execution of four originals of this Agreement by both parties. 16. Paragraph Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. 16 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ Joseph J. Kassa Weiner's Stores, Inc. - ------------------- Joseph J. Kassa By: /s/ Raymond J. Miller ------------------------------------- Raymond J. Miller Executive Vice President, Chief Operating Officer and Chief Financial Officer 12/1/99 - ------------------- Date 17 EX-10.9 9 EXHIBIT 10.9 ------------ EMPLOYMENT AGREEMENT -------------------- Agreement, dated as of February 1, 2000, between Weiner's Stores, Inc., a Delaware corporation (the "Company"), and James L. Berens (the "Executive"). W I T N E S S E T H : ------------------- WHEREAS, the Company desires to continue the employment of the Executive, and the Executive desires to accept such employment, on all the terms and conditions specified herein; and WHEREAS, the Executive and the Company desire to set forth in writing all of their respective duties, rights and obligations with respect to the Executive's employment by the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment and Term. The Company hereby continues the employment of the Executive, and the Executive hereby accepts such employment by the Company, in the capacity and upon the terms and conditions hereinafter set forth. The term of employment under this Agreement shall be for the period commencing as of February 1, 2000 and ending on January 31, 2003, unless earlier terminated as herein provided (the "Term of Employment"). 2. Duties. During the Term of Employment the Executive shall continue to serve as the Company's Senior Vice President, Stores and Operations. As such, the Executive shall direct and manage the affairs of the Company with such duties, functions and responsibilities (including the right to hire and dismiss employees (subject to approval of the Board in the case of corporate officers)) as are customarily associated with and incident to the position of Senior Vice President, Stores and Operations, and as the Company may, from time to time, require of him, subject to the direction of the Company's Chief Executive 1 Officer. The Executive shall serve the Company faithfully, conscientiously and to the best of the Executive's ability and shall promote the interests and reputation of the Company. Unless prevented by sickness or disability, the Executive shall devote all of the Executive's time, attention, knowledge, energy and skills, during normal working hours, and at such other times as the Executive's duties may reasonably require, to the duties of the Executive's employment, provided, however, that it shall not be a breach of this Agreement for the Executive to manage his own private financial investments; or with the consent of the Board (which consent shall not be unreasonably withheld) to be a member of the board of directors of other companies which do not compete with the Company, so long as, in either case, such activities do not require the Executive to spend a material amount of time away from his performance of his duties hereunder, do not otherwise interfere with the Executive's performance of his duties hereunder, or otherwise violate this Agreement (including, but not limited to, Section 4 hereof) or the Company's other policies. The principal place of employment of the Executive shall be the principal executive offices of the Company. The Executive acknowledges that in the course of his employment he may be required, from time to time, to travel on behalf of the Company. 3. Compensation, Benefits and Business Expenses. As full and complete compensation for the Executive's execution and delivery of this Agreement and performance of any services hereunder, and as the Company's policy with respect to the reimbursement or payment of the Executive's business expenses, the Company shall pay, grant or provide the Executive, and the Executive agrees to accept, the following: a. Base Salary: The Company shall pay the Executive a base salary at an annual rate of $200,000 payable at such times and in accordance with the Company's standard payroll practices for senior executives of the Company. 2 b. Medical, Dental and Disability Insurance: The Company shall afford the Executive the opportunity to participate during the Term of Employment in any medical, dental and disability insurance plans or programs which the Company maintains for its executive officers. In addition, the Company shall pay or cause to be paid, or waive or reimburse the Executive for, any costs or contributions otherwise payable by the Executive as a condition to participation in the Company's medical plan or hospitalization plan, other than such deductible, co-payment or similar amounts as may be provided in any such plan. Nothing in this Agreement shall require the Company to establish, maintain or continue any of the benefit programs already in existence or hereafter adopted for employees of the Company and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate any such benefit program. c. Expenses: The Executive shall be entitled to reimbursement or payment of reasonable business expenses (in accordance with the Company's policies as amended from time to time in the Company's sole discretion), following the Executive's submission of appropriate receipts and/or vouchers to the Company. d. Vacations, Holidays or Temporary Leave: The Executive shall be entitled to take annual vacation without loss or diminution of compensation, not exceeding four (4) weeks, such vacation to be taken at such time or times, and as a whole or in increments, as the Executive shall elect, consistent with the reasonable needs of the Company's business and such vacation policies as may be established by the Board. The Executive shall further be entitled to the number of paid holidays, and leaves for illness or temporary disability in accordance with the policies of the Company for its senior executives, as the Company may amend or terminate such policies from time to time in its sole discretion. 3 e. Management Incentive Compensation Plan: The Executive shall be entitled to participate in the Company's Management Incentive Compensation Plan (the "Incentive Plan") to the extent provided in, and subject to the conditions and any terms and limitations of, the Incentive Plan, and, subject to the discretion of the Board, any stock option plan ("Stock Plan") currently in effect or hereafter adopted by the Company which is applicable to employees or executive employees generally to the extent provided in, and subject to the conditions and any terms and limitations of, such Stock Plan; provided, however, that nothing in this Agreement shall require the Company to maintain or continue the Incentive Plan or any Stock Plan and nothing in this Agreement shall restrict the right of the Company to amend, modify or terminate the Incentive Plan or any Stock Plan. f. No Other Compensation or Benefits: The Executive agrees that he will not be entitled to and he shall not request or receive any compensation or benefits with respect to his services during the Term of Employment, that is in addition to or different from the compensation and benefits set forth in this paragraph 3 and in paragraph 6 of this Agreement. 4. Non-Competition and Protection of Confidential Information: a. Restrictive Covenants: (1) During the Term of Employment and for one (1) year following the termination of the Executive's employment with the Company ("Date of Termination"), the Executive shall not, directly or indirectly, solicit or induce any employee of the Company to terminate his or her employment for any purpose, including without limitation, in order to enter into employment with any entity which competes with any business conducted by the Company. 5 (2) During the Term of Employment and for all time following the Date of Termination, the Executive shall not, directly or indirectly, furnish or make accessible to any person, firm, or corporation or other business entity, whether or not he, she, or it competes with the business of the Company, any trade secret, technical data, or know-how acquired by the Executive during his employment by the Company which relates to the business practices, methods, processes, equipment, or other confidential or secret aspects of the business of the Company without the prior written consent from the Company, unless such information is or hereafter may become in the public domain other than by being divulged or made accessible by the Executive in breach of this provision, or which is demonstrated by the Executive to the Company's reasonable satisfaction to be known by him prior to the disclosure to him by the Company, or which is or may hereafter be disclosed by the Company to third parties without similar restrictions on disclosure or use, or which is required to be disclosed pursuant to governmental or judicial process or procedure. b. Geographic Scope: The provisions of this Section 4 shall be in full force and effect in each state in the United States where the Company carries on business at any time during the Term of Employment and for one (1) year following the Date of Termination. c. Remedies: The Executive acknowledges that his services are of a special, unique and extraordinary character and, his position with the Company places him in a position of confidence and trust with the clients and employees of the Company, and that in connection with his services to the Company, the Executive will have access to confidential information vital to the Company's businesses. The Executive further acknowledges that in view of the nature of the business in which the Company is engaged, the foregoing restrictive covenants in this Section 4 hereof are reasonable and necessary in order to protect the legitimate interests of the Company and that violation thereof would result in irreparable injury to the Company. Accordingly, the Executive consents and 6 agrees that if the Executive violates or threatens to violate any of the provisions of this Section 4 hereof the Company would sustain irreparable harm and, therefore, the Company shall be entitled to obtain from any court of competent jurisdiction, without the posting any bond or other security, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies in law or equity to which the Company may be entitled. 5. Termination of Employment: a. The Executive's employment with the Company shall terminate upon the occurrence of any of the following events: (1) The completion of the Executive's Term of Employment on January 31, 2003; (2) the death of the Executive during the Term of Employment; (3) the Disability (as defined below) of Executive during the Term of Employment; (4) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Executive from the Company of the termination of his employment for Cause (as defined below) ("Notice of Termination"); (5) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Executive from the Company of termination of his employment Without Cause (as defined below); (6) during the Term of Employment, upon not less than fourteen (14) days' written notice to the Company of the resignation by the Executive for Good Reason (as defined below) ("Notice of Resignation"), provided, however, 7 notwithstanding Section 10 hereof relating to waivers, in the case of a resignation by the Executive due to a Change of Control, the Executive's resignation shall be deemed to have been for Good Reason hereunder only if such resignation occurs more than three (3) months following such Change of Control, but less than six (6) months following such Change of Control; or (7) During the Term of Employment, upon not less than fourteen (14) days' written notice to the Company of the resignation by the Executive Without Good Reason (as defined below) during the Term of Employment. b. For purposes of this Agreement, the "Disability" of the Executive shall mean his inability, because of mental or physical illness or incapacity, whether total or partial, to perform his duties under this Agreement for a continuous period of 120 days or for shorter periods aggregating 120 days out of any 180-day period. c. For purposes of this Agreement, "Cause" shall mean conduct by the Executive constituting (i) fraud; (ii) material dishonesty relating to the conduct of the business of the Company or dishonesty which does not relate to the conduct of the business of the Company which adversely affects the Company or the Executive's ability to manage the business of the Company; (iii) willful and material breach of any of the provisions or covenants of this Agreement; (iv) willful gross neglect or willful gross misconduct in carrying out the Executive's duties as an employee of the Company resulting, in either case, in material economic harm to the Company; (v) embezzlement; (vi) chronic alcoholism or chronic drug dependency that in either case precludes his performing his duties contemplated herein; or (vii) the conviction of or plea or guilty or nolo contendere to a felony, or any crime involving securities or commodities laws violations or moral turpitude. 8 d. For purposes of this Agreement, "Without Cause" shall mean any reason other than that defined in this Agreement as constituting Cause. The parties expressly agree that a termination of employment Without Cause pursuant to Section 5a(5) hereof may be for any reason whatsoever, or for no reason, in the sole discretion of the Company. e. For purposes of this Agreement, "Good Reason" shall mean (i) willful and material breach of the Agreement by the Company; (ii) assignment of duties or responsibilities materially inconsistent with those described in Section 2 hereof without the consent of the Executive; or (iii) any Change in Control (as defined below). Good Reason as defined in subdivision (ii) of this Section 5e includes: (1) The removal from the position of Senior Vice President, Stores and Operations, of the Company or its successor; or (2) the Company's requiring, without the written consent of the Executive, the Executive to be based at any office or location more than 50 miles from the current offices of the Company in Houston, Texas. f. For purposes of this Agreement, "Without Good Reason" shall mean any reason other than that defined in this Agreement as constituting Good Reason. g. For purposes of this Agreement, "Change of Control" shall mean (a) the disposition, whether by sale, merger, consolidation, etc. of all or substantially all of the Company's assets, unless in advance of any such disposition the Executive waives this provision in writing; (b) any person, entity or group (as the term "group" is defined in the rules and regulations relating to Section 13D of the Securities Exchange Act of 1934, as amended), other than Chase Bank of Texas, acquires 50% or more of the voting common stock of the Company; or (c) a contested proxy solicitation of Company shareholders that results in the contesting party obtaining the ability to cast 25% or more 9 of the votes entitled to be cast in electing directors of the Company. h. Upon the termination of the Executive's employment for any reason, the Executive shall, upon the request of the Company, promptly resign from all officerships and directorships held by the Executive in the Company or any other business enterprise in which the Executive is serving at the Company's request. If the Executive refuses to resign in accordance herewith within seven (7) days of such request, the Executive agrees that the Executive shall be deemed to have resigned all of such officerships and directorships as of the date requested by the Company. i. A Notice of Termination described in Section 5a(4) shall state the Date of Termination and the basis for the Company's determination that the Executive's actions establish Cause hereunder. Upon the Executive's receipt of a Notice of Termination, the Executive may, prior to the Date of Termination, seek to cure any conduct identified in the Notice of Termination as establishing Cause (to the extent susceptible to cure) and shall, upon his written request, be accorded the right to address the Board, with or without counsel to the Executive present at the Executive's option, for the purpose of responding to the Notice of Termination. Following such meeting between the Executive and the Board, if the Board does not withdraw or modify the Notice of Termination, the Executive's employment shall terminate on the Date of Termination stated in the Notice of Termination. j. A Notice of Resignation described in Section 5a(6) shall state the Date of Termination and the basis for the Executive's determination that the Company's actions establish Good Reason hereunder. Upon the Company's receipt of a Notice of Resignation, the Company may, prior to the Date of Termination, seek to cure any conduct identified in the Notice of Resignation as establishing Good Reason (to the extent susceptible to cure) and shall, upon the Company's 10 request, be accorded the right to address the Executive, with or without counsel to the Executive present at the Executive's option, for the purpose of responding to the Notice of Resignation. Following such meeting between the Executive and the Board, if the Executive does not withdraw or modify the Notice of Resignation, the Executive's employment shall terminate on the Date of Termination stated in the Notice of Resignation. 6. Payments Upon Termination of Employment: Death or Disability: a. If the Executive's employment hereunder is terminated due to the Executive's death or Disability pursuant to Sections 5a(2) or (3) hereof, the Company shall pay or provide to the Executive, his designated beneficiary or to his estate (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; and (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination. Upon termination of the Executive's employment due to the Executive's Disability, the Executive shall continue to have the obligations provided for in Section 4 hereof. The Executive may designate in writing to the Chief Executive Officer of the Company from time to time a beneficiary to whom payments shall be made hereunder in the event of the Executive's death. In the absence of such a designation payments shall be made to the Executive's estate in the event of the Executive's death. 11 b. Termination for Cause or Resignation Without Good Reason: If the Executive's employment hereunder is terminated due to the termination of the Executive's employment by the Company for Cause pursuant to Section 5a(4) or due to the Executive's resignation Without Good Reason pursuant to Section 5a(7), the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; and (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination. c. Termination Without Cause or Resignation For Good Reason: If the Executive's employment hereunder is terminated due to the termination of the Executive's employment by the Company Without Cause pursuant to Section 5a(5) or due to the Executive's resignation for Good Reason pursuant to Section 5a(6), the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination; and (iii) if the Company terminates the 12 Executive's employment Without Cause pursuant to Section 5a(5) or due to the Executive's resignation for Good Reason pursuant to Section 5a(6) at any time during the Term of Employment, then the Company shall make a single lump sum payment within twenty (20) days of after the Date of Termination in an amount equal to twelve (12) months of the Executive's then current base salary. The Company's obligation to make the payment pursuant to Section 6c(iii) shall be conditioned upon the Company's prior receipt and the effective date of an executed general release of claims and covenant not to sue. d. Expiration of Term of Employment Without Renewal: If the Executive's employment terminates on January 31, 2003 pursuant to Section 1 of this Agreement, the Company shall pay or provide to the Executive (i) all base salary pursuant to Section 3a hereof, any management incentive compensation earned in accordance with the Incentive Plan pursuant to Section 3e hereof, and any vacation pay pursuant to Section 3d hereof, in each case which has been earned but which remains unpaid as of the Date of Termination of the Executive's employment, such payments to be made at such times as will be in accordance with the Company's normal payroll practices; (ii) any benefits to which the Executive may be entitled under any medical, dental or disability plan or program pursuant to Section 3b hereof in which he is a participant in accordance with the terms of such plan or program up to and including the Date of Termination; and (iii) a single lump sum payment within twenty (20) days of after the Date of Termination in an amount equal to twelve (12) months of the Executive's then current base salary. Notwithstanding the foregoing, in the event that prior to the termination of this Agreement on January 31, 2003 pursuant to Section 1 of this Agreement (i) on or before December 2, 2002 the Company offers to renew this Agreement upon the completion of the Executive's Term of Employment on January 31, 2003, or offers the Executive employment with the Company on substantially similar terms and conditions as those contained in this Agreement, or on terms 13 and conditions more favorable to the Executive than the terms and conditions contained in this Agreement, in each case for a term of employment of no less than 24 months, and (ii) the Executive does not accept such offer of renewal or such employment on or before December 16, 2002, then the Company shall not be obligated to make the payment pursuant to Section 6d(iii). The Company's obligation to make the payment pursuant to Section 6d(iii) shall be conditioned upon the Company's prior receipt and the effective date of an executed general release of claims and covenant not to sue. e. No Other Payments: Except as provided in this Section 6, the Executive shall not be entitled to receive any other payments or benefits from the Company due to the termination of his employment by the Company, including, but not limited to, any employee benefits under any of the Company's employee benefits plans or programs (other than at the Executive's expense under the Consolidated Omnibus Budget Reconciliation Act of 1985 or pursuant to the terms of any pension plan which the Company may have in effect from time to time) or any right to be paid severance pay. 7. No Conflicting Agreements. The Executive hereby represents and warrants that he is not a party to any agreement, or non-competition or other covenant or restriction contained in any agreement, commitment, arrangement or understanding (whether oral or written), which would in any way conflict with or limit his ability to continue to work for the Company during the Term of Employment or would otherwise limit his ability to perform all responsibilities in accordance with the terms and subject to the conditions of this Agreement. 8. Deductions and Withholding. The Executive agrees that the Company shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all federal, state, local and/or other 14 taxes which the Company determines are required to be withheld in accordance with applicable statutes and/or regulations from time to time in effect and all amounts required to be deducted in respect of the Executive's coverage under applicable employee benefit plans. 9. Entire Agreement. This Agreement embodies the entire agreement of the parties with respect to the Executive's employment and supersedes any other prior oral or written agreements between the Executive and the Company with respect to the Executive's employment including, but not limited to, the Letter Agreement between the Company and the Executive dated January 29, 1996 and all amendments thereto. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the parties hereto. 10. Waiver. The waiver by the Company of a breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver of any subsequent breach by the Executive. The waiver by the Executive of a breach of any provision of this Agreement by the Company shall not operate or be construed as a waiver of any subsequent breach by the Company. 11. Governing Law. This Agreement shall be subject to, and governed by, the laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware, regardless of where the Executive is in fact required to work. 12. Assignability. The obligations of the Executive may not be delegated and, except as expressly provided in Section 6a relating to the designation of beneficiaries, the Executive may not, without the Company's written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest therein. Any such attempted delegation or disposition shall be null and void and without effect. 15 The Company and the Executive agree that this Agreement and all of the Company's rights and obligations hereunder may be assigned or transferred by the Company to and shall be assumed by and binding upon and shall inure to the benefit of any successor to the Company. The term "successor" shall mean, with respect to the Company or any of its subsidiaries, any corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or a material part of the assets of the Company. 13. Severability. If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. If any court construes any of the provisions of Section 4 hereof, or any part thereof, to be unreasonable because of the duration of such provision or the geographic or other scope thereof, such court may reduce the duration or restrict the geographic or other scope of such provision and enforce such provision as so reduced or restricted. 14. Notices. All notices to the Executive hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to: James L. Berens 6322 Shoreview Court Kingwood, Texas 77346 All notices to the Company hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to: 16 Weiner's Stores, Inc. 6005 Westview Drive Houston, Texas 77055 Attn: Chief Operating Officer Either party may change the address to which notices shall be sent by sending written notice of such change of address to the other party. 15. Effective Date. This Agreement shall be effective, as of the date first above set forth, following execution of four originals of this Agreement by both parties. 16. Paragraph Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. 17 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. /s/ James L. Berens Weiner's Stores, Inc. - ------------------- James L. Berens By: /s/ Raymond J. Miller -------------------------------------- Raymond J. Miller Executive Vice President, Chief Operating Officer and Chief Financial Officer 1/3/00 - ------------------- Date 18 EX-13.1 10 EXHIBIT 13.1 WEINER'S(R) STORES, INC. ----------------------------------------- Picture of merchandise that Weiner's sells - blue jeans, jackets, shirts and tennis shoes. ----------------------------------------- Annual Report 1999 CONTENTS Letter to Stockholders 1 Selected Financial Data 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Financial Statements 12 Market and Dividend Information and Related Stockholder Matters 24 Directors and Officers and Stockholder Information 25 Fellow Stockholders: Fiscal 1999 was a mixture of bright and dark times. We began the year with a focused and exciting merchandise and marketing strategy that was immediately accepted by our core customer. We expanded our borders to Jackson, Mississippi and were welcomed with open arms. Our average transaction increased 10.5% and our average items per transaction increased 8.6%. We saw our new Bed Bath Etc department, which opened in the fourth quarter of fiscal 1998, capture 4.4% of our business with continuing growth. We featured new media advertising in Spanish in our San Antonio, Corpus Christi and Texas border markets, which dramatically increased sales in these stores. Yet with all of these bright spots, we were not able to overcome the 3.1% decline in our fiscal 1999 holiday sales and the continued downturn in the Levi's(R) jeans, branded athletic shoes and branded activewear businesses. The result of these downturns was unacceptable results for the second half of fiscal 1999. Some of the risks of being an inner city retail provider also adversely impacted our fiscal 1999 profitability. We saw our inventory shrink grow 0.9% beyond last year's results. This exacerbated our poor results for the second half of the year. While highly disappointing, we recognize the difficulty we face in securing our inventory in high-risk neighborhoods. Our Loss Prevention department and stores organization have begun implementing new programs to reduce our shrink to manageable levels, while maintaining an open, friendly shopping environment. The bright spots did solidify our belief that we have chosen the correct course for the Company's future. The success we have experienced in the Jackson, Mississippi market bolstered our efforts to secure further urban inner city locations. We are starting fiscal 2000 with an expansion into Little Rock, Arkansas and will go west in the second quarter of fiscal 2000 with the addition of the El Paso, Texas market. We believe there are many exciting growth opportunities throughout the Southeast and Southwest. During fiscal 1999, the Company opened six new stores and closed six stores. Current plans are to open approximately ten new stores in fiscal 2000 and close five stores. In addition, we will begin installing a new state of the art point of sale system in our stores in fiscal 2000. We have reinvented our merchandise, planning and allocations groups to enhance our ability to utilize our information technology to better merchandise our individual store locations and the Company as a whole. These changes included the promotion of Joe Kassa to the position of Senior Vice President, General Merchandise Manager. With these changes, we have begun to strategize merchandise content and levels with a view toward improving the third and fourth quarter of fiscal 2000. When we introduced "Because Everybody Loves a Bargain" at the beginning of fiscal 1999, we felt strongly that our concepts of "The Big Deal," "Bargain Alley" and "Dare to Compare" would enhance our competitive position. We were able to significantly increase our transaction count for fiscal 1999. We continue to refine these merchandise programs with emphasis on value priced and name brand products at everyday low prices. For fiscal 2000, we will continue to expand our Bed Bath Etc department and establish a year-round toy and electronics department. Our buyers have been challenged to create excitement throughout our stores. We have tested and are now in the process of rolling out a young men's fashion department. Each successful refinement further enhances our competitive posture. While fiscal 1999 performance did not meet our expectations, it gave insight on what our future can be. We see in the acceptance of our "Everybody Loves a Bargain" programs a customer that prefers to shop in their neighborhood Weiner's store. Fiscal 2000 could be a defining moment for the Company. With the continued support of our associates, stockholders and vendors, we look forward to further growth and improvement in the coming years. - --------------------------------- Picture of Herbert R. Douglas - Chairman of the Board, President and Chief Executive Officer - --------------------------------- /s/ Herbert R. Douglas Herbert R. Douglas Chairman of the Board, President and Chief Executive Officer March 16, 2000 1 ------------- Weiner's Logo ------------- Because Everybody Loves a Bargain Weiner's Stores serves a growing ethnic and urban market with quality, well-established brand name clothing, shoes, accessories and home furnishings. In fiscal 1999, Weiner's continued to strengthen its presence in the urban neighborhood shopping experience with the addition of six new stores. - ------------------------- Two Pictures of marketing meetings - ------------------------- WEINER'S-A New Millennium Many changes, which began in 1999, will more fully develop in fiscal 2000. The merchandise team will work much more closely with merchandise planners and allocators in order to purchase the correct amount of merchandise and then to allocate the merchandise properly to each of our district regions and ethnic markets. Our buyers search out a wide variety of products and brand names that our customers recognize. The buyers will continue to negotiate off-price closeout merchandise in order to provide the customer with more value and thus encourage more frequent visits to our stores. Our home furnishings department, which was rolled out to the chain in April 1999, will be expanded to double in size in the majority of our stores. Based on the successes of the Juniors' and Women's areas in both buying and store presentation, we are creating a Young Men's fashion department in fiscal 2000. The buying team is committed to bringing new and exciting products to our customers. Our store district managers work closely with all divisions of the organization to better manage changes which occur in the retail environment. Monthly meetings at the corporate headquarters allow these district managers to interface with inventory control, human resources, merchandise information systems, the distribution center and, of utmost importance, the buyers. The growth and 2 development of the district managers, store managers, assistant store managers and key associates in the stores are critical to the success of any retailer. In fiscal 1999, we began to improve some of these programs and expect to expand our training and growth programs in fiscal 2000. In a marketplace with great competition for people assets, we believe training programs, retentive plans and advancement programs are key to our success. In order to reduce inventory shrinkage, control employee turnover and improve morale, we must seek out extraordinary people in our organization, aid in their development, expand their knowledge and increase their levels of responsibility. - ------------------------------ Picture of distribution center - ------------------------------ In fiscal 2000, our Distribution Center will undergo an approximate $300,000 renovation project that will facilitate ease of handling for the increase in volume of home furnishings and off-price closeout merchandise. The renovation is necessary to continue efficiency in the Distribution Center and aid in timely delivery of merchandise to our stores at an acceptable per-unit cost. We expect the Distribution Center project to be completed in fall 2000. Throughout fiscal 2000, we will cultivate the interface of communications among the Distribution Center associates, the planners and allocators and the buyers. This maintained dialogue and project management are destined to be the catalysts for further expense savings, quicker response times to the selling floor and stronger relations with our vendors. In fiscal 2000, the Company will begin the process of installing state-of-the-art point-of-sale ("POS") equipment in approximately 30 stores. The estimated cost of this first phase of new POS equipment is $1,200,000. For training and maximization purposes, we have chosen the Houston and San Antonio markets for our implementation. We expect to positively impact customer satisfaction with the efficiencies of the new POS terminals The Company currently plans to open ten new stores in fiscal 2000. Based on the strength of our Jackson, Mississippi openings in spring 1999, we entered the Little Rock, Arkansas market in March 2000 and opened four stores. We expect to open six additional stores in spring 2000, with one location in the Dallas, Texas market. Additionally, we will be entering the El Paso, Texas market with three new locations in May 2000. All of the new stores are designed to consistently drive home our approach of being the best neighborhood family retailer. - ---------------------------------- Picture of "Bargain Alley (Good Stuff...Cheap Prices)" signs in a Weiner's store - ---------------------------------- - ---------------------- Picture of Shoe Department at Weiner's - ---------------------- 3 LOCATIONS Weiner's Stores, Inc. is a Houston, Texas based neighborhood family retailer of primarily branded apparel, shoes, domestics, housewares and decorative home products for value conscious customers, operating 132 stores located primarily in strip shopping centers in Texas, Louisiana and Mississippi, and employs approximately 3,700 full- and part-time employees. - ----------------------------------------------- Map of states we do business in - Texas, Louisiana and Mississippi Also included is a map of Arkansas where we plan to do business in the future. - ----------------------------------------------- TEXAS Border Market Victoria Houston Market Brownsville Wharton Alvin Del Rio Baytown Eagle Pass Dallas Market Channelview Edinburg Dallas-5 Conroe Harlingen Ft. Worth-2 Deer Park Laredo Dickinson McAllen-2 LOUISIANA Galveston Mission Louisiana-Other Houston-28 Weslaco Market Humble Alexandria Missouri City Austin Market Baton Rouge-3 Pasadena-2 Austin-5 Bossier City Pearland Round Rock Covington Rosenberg San Marcos Gonzales Stafford Hammond Texas City San Antonio Houma Tomball Market Lafayette North San Antonio-7 Lake Charles Northeast Market Seguin La Place Bellmead Universal City Monroe Brenham New Iberia Bryan Corpus Christi Opelousas Cleveland Market Shreveport-2 Crockett Alice Jasper Corpus Christi-3 New Orleans Market Killeen Portland Chalmette Longview Gretna Lufkin Golden Triangle Marrero Marshall Market New Orleans-3 Temple Beaumont-2 Texarkana Pinehurst MISSISSIPPI Waco Port Arthur Clinton Jackson-2 Southwest Market Bay City * FUTURE LOCATIONS Beeville ARKANSAS Clute Little Rock-4 El Campo TEXAS Dallas El Paso-3 4 Selected FINANCIAL DATA
Successor Company(a) Predecessor Company --------------------------------------------- ------------------------------------------------- Fiscal Year Fiscal Year Twenty-Three Thirty Fiscal Year Ended (a) Ended Ended Weeks Ended Weeks Ended ---------------------------- January 29, January 30, January 31, August 25, January 25, January 27, 2000 1999 1998 1997(b) 1997 1996 ---- ---- ---- ---- ---- ---- (Dollars in thousands, except per share and per square foot data) Income Statement Data: Net sales $ 276,843 $ 260,908 $ 103,322 $ 160,315 $ 263,666 $ 260,712 Operating (loss) income (2,026) (3,979) (5,734) 1,250 (17,864) (25,847) Net (loss) income (3,133) (4,992) (5,885) 18,541 (17,220) (25,605) Net (loss) income per share of common stock (c) $ (0.17) $ (0.26) $ (0.31) $ 185.41 $ (172.20) $ (256.05) Balance Sheet Data: Working capital $ 35,583 $ 34,781 $ 41,249 $ 43,434 $ 54,728 $ 64,926 Total assets 89,674 87,644 80,739 99,241 91,285 103,242 Long-term debt 10,000 4,000 5,000 -- -- -- Selected Operating Data: Comparable store net sales increase (decrease) 3.4% (1.9)% (0.1)% (d) 6.7% (11.9)% Number of stores Beginning of period 132 128 134 131 139 158 Opened 6 7 1 3 -- -- Closed 6 3 7 -- 8 19 End of period 132 132 128 134 131 139 Total sales square feet at end of period (000's) 2,634 2,644 2,602 (d) 2,652 2,810 Average net sales per store $ 2,097 $ 2,007 $ 2,036 (d) $ 1,953 $ 1,756 Average net sales per square foot $ 105 $ 99 $ 100 (d) $ 97 $ 86
(a) Fiscal years 1999 and 1998, each of which contained 52 weeks, and fiscal year 1997, which contained 53 weeks, all ended on the Saturday closest to January 31st (i.e., January 29, 2000, January 30, 1999 and January 31, 1998, respectively). Fiscal years 1996 and 1995 each contained 52 weeks and ended January 25, 1997 and January 27, 1996, respectively. (b) Net income for the thirty weeks ended August 25, 1997 includes $1,519,000 in "fresh start" expense and $18,683,000 in extraordinary gain related to debt discharge. (c) Net loss per share of common stock for fiscal years 1999 and 1998 is based on a weighted average number of shares of common stock outstanding of 18,483,729 and 18,869,208, respectively. Net loss per share of common stock for the twenty-three weeks ended January 31, 1998 (Successor Company) is based on a weighted average number of shares of common stock outstanding of 19,000,000. Net income (loss) per share of common stock for the thirty weeks ended August 25, 1997 (Predecessor Company) and for fiscal years ended January 25, 1997 and January 27, 1996 is based on a weighted average number of shares of common stock outstanding of 100,000. Earnings per share for the Predecessor Company is not comparable due to the Company's reorganization. (d) Amount presented is for the fiscal year ended January 31, 1998. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The financial results of Weiner's Stores, Inc. (the "Company") have changed significantly over the past five years, principally as a result of its filing for reorganization under Chapter 11 ("Chapter 11") of Title 11 of the United States Code (the "Bankruptcy Code") on April 12, 1995, and the Company's subsequent emergence from Chapter 11 reorganization on August 26, 1997 (the "Effective Date"). The Company's net loss for the 52-week fiscal year ended January 29, 2000 ("1999") was $3,133,000 compared to a net loss of $4,992,000 for the 52-week fiscal year ended January 30, 1999 ("1998") and a net income of $12,656,000 for the 53-week fiscal year ended January 31, 1998 ("1997"). An extraordinary gain for debt discharge of $18,683,000 favorably impacted the results in 1997. Comparable 52-week store sales increased 3.4% for 1999 compared to a comparable store decrease of 1.9% for 1998. In 1997, comparable 53-week store sales were virtually flat. The Company had an operating loss as a percentage of sales of 0.7% in 1999, 1.5% in 1998 and 1.7% in 1997. The Company emerged from Chapter 11 reorganization on the Effective Date. The Company incurred reorganization expenses of $2,406,000 in 1997. These charges included $1,894,000 in professional fees, reduced by a $1,040,000 adjustment in respect to liabilities subject to settlement, $818,000 of administrative reorganization costs, $468,000 of system and store reorganization costs and approximately $266,000 in relation to closing of unprofitable stores and a warehouse facility. On the Effective Date, the Company restructured its capitalization in accordance with the Company's Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated June 24, 1997, as amended (the "Plan"), which was confirmed by order of the United States Bankruptcy Court for the District of Delaware on August 13, 1997. The application of "fresh start" reporting provisions of Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), as of the Effective Date included adjustments to certain assets, which resulted in a $1,519,000 one-time charge to expense. Further, the Company recognized reorganization value in excess of amounts allocable to identifiable assets ("Excess Reorganization Value") of $4,411,000. This Excess Reorganization Value is being amortized by the straight-line method over 15 years. Also on the Effective Date, the value of the cash and securities distributed by the Company in settlement of the claims resulted in an extraordinary gain of $18,683,000. Recent Developments In February 2000, the Company entered into the fourth amendment (the "Fourth Amendment") to its revolving credit agreement, dated as of the Effective Date (as amended, the "Revolving Credit Agreement"), which provides a $40,000,000, working capital facility including a sub-facility of $15,000,000 for letters of credit. The Fourth Amendment, among other things, provided for an adjustment to the financial covenant relating to earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined in the Revolving Credit Agreement. This adjustment was necessary because of the Company's change in its method regarding revenue recognition of layaway sales commencing with the fiscal year which begins January 30, 2000. In October 1999, the Company entered into the third amendment (the "Third Amendment") to its Revolving Credit Agreement. The Third Amendment, among other things, provided for the extension of the term of the Agreement for an additional three years to August 30, 2003, changing the Company's monthly financial covenant tests to quarterly tests, and an increase in the amount of capital expenditures in each of the respective years. Borrowings under the Revolving Credit Agreement are restricted for the sole use of funding working capital requirements in the ordinary course of business and for other general corporate purposes. Under the terms of the Revolving Credit Agreement, capital expenditures are limited to $8,500,000 in each of the years ended February 3, 2001, February 2, 2002, and February 1, 2003 and to $5,000,000 in the period commencing February 2, 2003 and ending August 30, 2003, the expiration date of the Revolving Credit Agreement. "Fresh Start" Reporting As a result of "fresh start" reporting under SOP 90-7, the financial information for the fiscal years ended January 29, 2000 and January 30, 1999 is not comparable to the information for the twenty-three weeks ended January 31, 1998, and the thirty weeks ended August 25, 1997. However, except as described below, the Company believes that the impact of the "fresh start" reporting adjustments, while material, is identifiable, and that combining the twenty-three weeks ended January 31, 1998 with the thirty weeks ended August 25, 1997 provides a useful basis for comparison to the current and prior periods. Therefore, the following discussion assumes that such periods in fiscal 1997 are combined. 6 Results of Operations The following table sets forth income statement data for 1999, 1998 and 1997 expressed as a percentage of sales:
1999 1998 1997* ---- ---- ----- Net sales 100.0% 100.0% 100.0% Cost of goods sold 67.7% 67.0% 67.8% ---- ---- ----- Gross margin 32.3% 33.0% 32.2% Selling, administrative and other operating costs 33.0% 34.5% 33.0% Reorganization expense 0.0% 0.0% 0.9% ---- ---- ----- Operating loss -0.7% -1.5% -1.7% Interest (expense) income, net -0.4% -0.4% 0.0% "Fresh start" adjustments 0.0% 0.0% -0.6% ---- ---- ----- Loss before extraordinary gain -1.1% -1.9% -2.3% Extraordinary gain 0.0% 0.0% 7.1% ---- ---- ----- Net (loss) income -1.1% -1.9% 4.8% ==== ==== =====
* Reflects the combining of the twenty-three weeks ended January 31, 1998 (Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor Company). 1999 Compared to 1998 Net sales increased to $276,843,000 in 1999 from $260,908,000 in 1998. The sales increase was primarily due to a 3.4% comparable store sales increase and the opening of six new stores, offset by the closing of six stores. The comparable store sales increase is primarily attributable to the growth of the Bed Bath Etc department, offset by continued declines in the Levi's(R) jeans sales, branded athletic shoes and branded activewear. Cost of goods sold increased $12,673,000 to $187,423,000 in 1999 from $174,750,000 in 1998. As a percentage of sales, cost of goods sold increased to 67.7% in 1999 from 67.0% in 1998. Gross margin increased $3,262,000 to $89,420,000 in 1999 from $86,158,000 in 1998. This increase in gross margin is primarily due to the sales increases discussed above. Gross margin as a percentage of sales decreased to 32.3% in 1999 from 33.0% in 1998. The decline in the gross margin as a percentage of sales is primarily due to a decline in the initial markup on those products changed to an everyday low price concept and an increase in the merchandise shrinkage, offset by a decrease in markdowns as a percentage of sales. Selling, general and administrative expenses increased $1,309,000 to $91,446,000 in 1999 from $90,137,000 in 1998. This increase is primarily due to increased rent expense, outbound freight and new store opening expenses, offset by reductions in payroll costs and promotional advertising. Selling, general and administrative expenses, as a percentage of sales, decreased to 33.0% in 1999 compared to 34.5% in 1998 due primarily to the increase in sales. Operating loss decreased to $2,026,000 in 1999 from $3,979,000 in 1998. The Company recorded interest expense of $1,107,000 in 1999 compared to $1,013,000 in 1998. This increase is primarily attributable to an increase in the average borrowings under the Revolving Credit Agreement in 1999. The Company provides United States federal income taxes based on its estimated annual effective tax rate for the fiscal year. No income tax provision was recorded in either 1999 or 1998. The recognition of income tax benefits is affected by limitations on the Company's ability to utilize net operating loss ("NOL") carryforwards. The Company's net loss for 1999 was $3,133,000 compared to a net loss of $4,992,000 in 1998. Loss per share of common stock was $0.17 in 1999 compared to $0.26 in 1998. 1998 Compared to 1997 Net sales decreased to $260,908,000 in 1998 from $263,637,000 in 1997. The sales decrease was primarily attributable to the number of weeks in 1998 (52 weeks) compared to 1997 (53 weeks), offset by the opening of seven new stores in 1998. Comparable store sales on a 52-week comparable basis decreased 1.9%. The decrease is primarily attributable to the decline in Levi's(R) jeans sales, offset by the introduction of domestics in the fourth quarter of 1998. Cost of goods sold decreased $3,908,000 to $174,750,000 in 1998 from $178,658,000 in 1997. As a percentage of sales, cost of goods sold decreased to 67.0% in 1998 from 67.8% in 1997. Gross margin increased $1,179,000 to $86,158,000 in 1998 from $84,979,000 in 1997. Gross margin as a percentage of sales increased to 33.0% in 1998 compared to 32.2% in 1997. This increase in gross margin is 7 primarily due to an increase in initial markup and a decrease in merchandise shrinkage, offset by an increase in markdowns as a percentage of sales. Selling, general and administrative expenses increased $3,080,000 to $90,137,000 in 1998 from $87,057,000 in 1997. This increase is primarily due to increased payroll costs due to federally mandated minimum wage increases, promotional advertising and rent expense. Selling, general and administrative expenses, as a percentage of sales, increased to 34.5% in 1998 from 33.0% in 1997 due primarily to the decline in sales. Fiscal 1997 included $2,406,000 of reorganization expense. There has been no reorganization expense since August 26, 1997 when the Company emerged from Chapter 11 reorganization. Operating loss decreased to $3,979,000 in 1998 from $4,484,000 in 1997. Had the Company not incurred the reorganization expense referred to above, operating loss would have been $2,078,000 in 1997. The Company recorded interest expense of $1,013,000 in 1998 compared to $201,000 in 1997. During its bankruptcy proceedings, the Company discontinued accruing interest on substantially all of its prepetition debt. Interest expense has increased due to the increase in borrowings under the Revolving Credit Agreement since the Company's emergence from Chapter 11 reorganization on August 26, 1997. Interest income during 1998 was approximately zero compared to $177,000 during 1997. This decline in interest income is primarily due to the reduction in cash available for investment in 1998 as compared to 1997. The Company recorded $1,519,000 in "fresh start" expense in relation to its emergence from Chapter 11 reorganization in August 1997. The Company provides United States federal income taxes based on its estimated annual effective tax rate for the fiscal year. No income tax provision was recorded in either 1998 or 1997. The recognition of income tax benefits is affected by limitations on the Company's ability to utilize NOL carryforwards. Extraordinary gain of $18,683,000 related to debt discharged in the Company's emergence from Chapter 11 reorganization was recognized in August 1997. The Company's net loss for 1998 was $4,992,000 compared to a net income of $12,656,000 for 1997. The Company adopted "fresh start" accounting upon its emergence from Chapter 11 reorganization. Earnings per share for prior periods is based on the Predecessor Company shares then outstanding; such information is not comparable due to the Company's reorganization. Liquidity and Capital Resources Cash from Operations and Working Capital The Company's primary sources of liquidity have been cash flow from operations and borrowings under the Revolving Credit Agreement. For the three fiscal years ended January 29, 2000, net cash flow from operations was as follows ($ in thousands):
1999 1998 1997* ---- ---- ----- Net (loss) income $(3,133) $(4,992) $ 12,656 Depreciation and amortization 3,977 4,079 4,083 Other non-cash charges 29 125 (14,771) Changes in current assets and liabilities (4,636) 9,699 (15,377) ------- ----- -------- Net cash (used in) provided by operating activities $(3,763) $ 8,911 $(13,409) ======= ======= ========
* Reflects the combining of the twenty-three weeks ended January 31, 1998 (Successor Company) and the thirty weeks ended August 25, 1997 (Predecessor Company). The decrease in cash provided by operating activities in 1999 reflects an increase in inventory, primarily attributable to the new store openings planned to be opened in March 2000, an increase in prepaid expenses, with a slight decrease in accounts payable. The increase in cash provided by operating activities in 1998 reflects an increase in vendor credit since the Company's emergence from Chapter 11 reorganization, offset by increased inventory. 8 The Company's working capital, current ratio and ratio of sales to average working capital at the end of the three fiscal years ended January 29, 2000 were as follows ($ in thousands): 1999 1998 1997 ---- ---- ---- Working capital $35,583 $34,781 $41,249 Current ratio 2.2 2.1 3.4 Ratio of sales to average working capital 7.9 6.9 5.5 The Company funds inventory purchases through cash flows from operations, from borrowings under the Revolving Credit Agreement and through favorable payment terms the Company has established with its vendors. Revolving Credit Agreement The Company's Revolving Credit Agreement provides a $40,000,000 working capital facility, including a $15,000,000 sub-facility for the issuance of letters of credit. The Revolving Credit Agreement is secured by substantially all of the Company's assets. The Revolving Credit Agreement provides that proceeds may be used solely to fund working capital in the ordinary course of business and for other general corporate purposes. Borrowings under the Revolving Credit Agreement bear interest at the reference rate thereunder plus 0.5% or, at the option of the Company, the Eurodollar Rate thereunder plus 2.5%. Under the terms of the Revolving Credit Agreement, capital expenditures are limited to $8,500,000 in fiscal year 2000. The Revolving Credit Agreement further stipulates certain borrowing limitations based on the Company's inventory levels and requires that the Company comply with certain financial covenants. The Revolving Credit Agreement expires on August 30, 2003. As of January 29, 2000, the Company was in compliance with all of its covenants under the Revolving Credit Agreement. At January 29, 2000, the Company had approximately $15,749,000 of availability under the working capital facility, after considering borrowings and outstanding letters of credit. At January 29, 2000, the outstanding letters of credit thereunder were approximately $3,616,000. The Company believes that the financial covenants established in the Fourth Amendment will be achieved based upon the Company's current and anticipated performance. Based upon management's 2000 operating plan and availability under the Revolving Credit Agreement, the Company believes that there is adequate liquidity to fund the Company's operations during fiscal year 2000. However, material shortfalls or variances from anticipated performance could require the Company to seek a further amendment to the Revolving Credit Agreement or alternative sources of financing or to limit capital expenditures to an amount less than that currently anticipated by the Company or permitted under the Revolving Credit Agreement. See "- Capital Expenditures." Capital Expenditures The Company's capital expenditures were approximately $6,077,000 in 1999, $4,380,000 in 1998, and $6,823,000 in 1997. The majority of capital expenditures were for fixtures, equipment and leasehold improvements for new, relocated and remodeled stores and the upgrade of the management information systems. The Company opened six new stores in 1999, seven new stores in 1998, and four new stores in 1997. Underperforming stores are closed upon lease termination, or earlier, if possible. The Company closed six underperforming stores in 1999, three underperforming stores in 1998 and seven underperforming stores in 1997. See "- Revolving Credit Agreement." The Company's capital expenditures are expected to be approximately $7,000,000 in fiscal 2000 for the opening of new stores, remodeling of existing stores, installation of a new point-of-sale system in approximately 30 stores and management information system enhancements. The Company expects to fund these capital expenditures from cash generated by operations and borrowings under the Revolving Credit Agreement. Impact of Inflation In recent years, the impact of inflation on the Company's results of operations has been insignificant. As operating expenses have increased, the Company has been unable, due to competitive pressure, to recover these increases in costs by increasing prices over time. Future results of the Company will depend on, among other things, the competitive environment, the prevailing economic climate and the ability of the Company to adapt to these conditions. 9 Seasonality The Company's business is seasonal with approximately 40% of the Company's annual sales being generated during the back-to-school selling season in July and August and the Christmas selling season of November and December. In addition, the Company's performance, like that of many other retailers, is sensitive to the overall U.S. economy and economic cycles and related economic conditions that influence consumer trends and spending patterns. New Accounting Developments The Company offers a layaway program pursuant to which its customers are permitted to purchase merchandise currently available for sale and pay for the goods over a 30 to 60 day period. At the time of the sale, the goods are segregated from the Company's inventory and held for the benefit of the customer pending payment in full for the goods. In 1999, the Company's layaway program accounted for approximately 9.4% of the Company's revenues. Layaways are recognized as revenue at the point of sale and as a receivable on the balance sheet (net layaway receivables at January 29, 2000 were $510,000 as compared to $847,000 at January 30, 1999). The Company provided an allowance for layaway sales receivables based on management's estimate of the amount by which uncollected receivables would exceed the cost of the items reverting back to inventory. This estimate is based on the Company's historical calculation of layaway sales that will never be completed. The Company generally required a refundable deposit on layaway sales. As customers paid off the balance on their layaway purchases, the payment reduced the corresponding receivable. The Staff (the "Staff") of the U.S. Securities and Exchange Commission (the "SEC") has requested that the Company change its treatment regarding revenue recognition of layaway sales, commencing with the Company's fiscal year beginning January 30, 2000, to reflect layaway sales as deposits until the merchandise is paid in full and delivered to the customer. The Staff subsequently issued Staff Accounting Bulletin No. 101 - Revenue Recognition in Financial Statements ("SAB 101") on December 3, 1999. SAB 101 requires that layaway sales be treated in a manner consistent with such request. As a result of the Staff's request and the subsequent issuance of SAB 101, the Company changed its treatment regarding revenue recognition of layaway sales commencing on the first day of the Company's fiscal year beginning January 30, 2000 to be consistent with the Staff's recommendation. The impact of this change in revenue recognition of layaway sales is very difficult to quantify because of information system constraints regarding the historical information of payments relating to specific transactions. The Company estimates that, in the year of adoption, approximately $1.0 to $2.0 million of revenue would be deferred into the following fiscal year. Once adopted, the Company believes there will be a minimal impact on an annual basis; however, the impact on the results of operations on a quarter to quarter basis is expected to be much more pronounced. The impact will be especially pronounced in the second and third quarters and first six and nine month periods because these periods include a portion of the Company's important back-to-school sales period. The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments and Hedging Activities," effective for years beginning after June 15, 2000. The Company believes that this statement will have no impact on its financial presentation. Year 2000 Readiness Disclosure In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company is not aware of any material problems resulting from Year 2000 issues, either the Company's products or internal systems, or the products and services of outside parties. The Company expensed $50,000 during fiscal 1999 in connection with remediating its systems. During fiscal 2000, the Company does not expect to incur any material expenses in regard to the remediation of non-critical systems. The Company will continue to monitor its mission critical applications and those of its suppliers and vendors throughout 2000 that any latent Year 2000 matters that may arise addressed promptly. 10 Foreign Operations As all of the Company's stores have been and are currently located in Texas, Louisiana, Mississippi and, as of March 2000, Arkansas, during the last three fiscal years the Company has received no revenues from external customers attributable to foreign countries except for certain revenues received from customers visiting the Company's stores from foreign countries, the amount of which revenues it is impracticable for the Company to determine and which the Company believes is immaterial to the Company's sales. All of the Company's long-lived assets are currently located in the United States. Forward-Looking Statements This Annual Report contains forward-looking statements. The words "anticipate," "believe," "expect," "plan," "intend," "seek," "estimate," "project," "will," "could," "may" and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures and future net cash flow. Such statements reflect the Company's current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, general economic and business conditions, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, the ability of the Company and its competitors to predict fashion trends and customer preferences and achieve further market penetration and additional customers, consumer apparel buying patterns, adverse weather conditions, inventory risks due to shifts in market demand, Year 2000 issues, and various other matters, many of which are beyond the Company's control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Consequently, all of the forward-looking statements made in this Annual Report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effect on the Company or its business or operations. The Company does not undertake and expressly disclaims any obligation to publicly update or revise any such forward-looking statements even if experience or future changes make it clear that the projected results expressed or implied therein will not be realized. 11 WEINER'S STORES, INC. CONSOLIDATED BALANCE SHEETS
January 29, January 30, 2000 1999 ----------- ----------- ASSETS Current Assets: Cash $ 3,336,000 $ 7,176,000 Receivables, net 1,100,000 1,252,000 Merchandise inventories, net 57,293,000 54,243,000 Prepaid expenses and other assets 3,287,000 2,380,000 ----------- ----------- Total current assets 65,016,000 65,051,000 ----------- ----------- Property and Equipment: Land 258,000 258,000 Building - distribution center and office facility 1,996,000 1,996,000 Furniture, fixtures and leasehold improvements 26,759,000 20,728,00 ----------- ----------- Total 29,013,000 22,982,000 Less accumulated depreciation and amortization (7,967,000) (4,296,000) ----------- ----------- Total property and equipment, net 21,046,000 18,686,000 ----------- ----------- Excess Reorganization Value, less accumulated amortization of $799,000 and $504,000, respectively 3,612,000 3,907,000 ----------- ----------- $89,674,000 $87,644,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Trade accounts payable $ 21,592,000 $21,000,000 Accrued expenses and other current liabilities 7,841,000 9,270,000 ----------- ----------- Total current liabilities 29,433,000 30,270,000 ----------- ----------- Deferred Taxes 397,000 397,000 Long-Term Debt 10,000,000 4,000,000 ----------- ----------- Commitments and Contingencies -- -- Stockholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized, 19,000,000 shares issued 190,000 190,000 Additional paid-in capital 63,664,000 63,664,000 Accumulated deficit (14,010,000) (10,877,000) Treasury stock, at cost, 523,170 in both years -- -- ----------- ----------- Total stockholders' equity 49,844,000 52,977,000 ----------- ----------- $89,674,000 $87,644,000 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 12
WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Successor Company Predecessor Company ----------------------------------------------------- ---------------- Year Year Twenty-Three Weeks Thirty Weeks Ended Ended Ended Ended January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997 ---------------- ---------------- ---------------- --------------- Net sales $ 276,843,000 $ 260,908,000 $ 103,322,000 $ 160,315,000 Cost of goods sold 187,423,000 174,750,000 72,308,000 106,350,000 ---------------- ---------------- ---------------- --------------- Gross margin 89,420,000 86,158,000 31,014,000 53,965,000 Selling, administrative and other operating costs 91,446,000 90,137,000 36,748,000 50,309,000 Reorganization expense -- -- -- 2,406,000 ---------------- ---------------- ---------------- --------------- Operating (loss) income (2,026,000) (3,979,000) (5,734,000) 1,250,000 Interest expense (1,107,000) (1,013,000) (161,000) (40,000) Interest income -- -- 10,000 167,000 "Fresh start" adjustments -- -- -- (1,519,000) ---------------- ---------------- ---------------- --------------- Loss before income taxes and extraordinary gain (3,133,000) (4,992,000) (5,885,000) (142,000) Income tax -- -- -- -- ---------------- ---------------- ---------------- --------------- Loss before extraordinary gain (3,133,000) (4,992,000) (5,885,000) (142,000) Extraordinary gain -- -- -- 18,683,000 ---------------- ---------------- ---------------- --------------- Net (loss) income $ (3,133,000) $ (4,992,000) $ (5,885,000) $ 18,541,000 ================ ================ ================ =============== Earnings per share of common stock: Loss before extraordinary gain $ (0.17) $ (0.26) $ (0.31) $ (1.42) Extraordinary gain -- -- -- 186.83 ---------------- ---------------- ---------------- --------------- Net (loss) income per share of common stock $ (0.17) $ (0.26) $ (0.31) $ 185.41 ================ ================ ================ =============== Weighted average number of shares of common stock outstanding 18,483,729 18,869,208 19,000,000 100,000 ================ ================ ================ ===============
The accompanying notes are an integral part of these consolidated financial statements. WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Additional Accumulated Treasury Stock Paid-In Capital Deficit Stock Total ---------------- ------------- ---------------- ------------- ------------- Predecessor Company: Balances at January 26, 1997 $ 10,000,000 $ -- $(34,446,000) $ -- $(24,446,000) Net income for the thirty weeks ended August 25, 1997 -- -- 18,541,000 -- 18,541,000 Cancellation of stock of Predecessor Company (10,000,000) -- 15,905,000 -- 5,905,000 Issuance of Successor Company common stock 190,000 63,664,000 -- -- 63,854,000 ---------------- ------------- ---------------- ------------- ------------- Successor Company: Balances at August 26, 1997 190,000 63,664,000 -- -- 63,854,000 Net loss for the twenty-three weeks ended January 31, 1998 -- -- (5,885,000) -- (5,885,000) ---------------- ------------- ---------------- ------------- ------------- Balances at January 31, 1998 190,000 63,664,000 (5,885,000) -- 57,969,000 Treasury stock of 523,170 shares revested on November 1, 1998 -- -- -- -- -- Net loss -- -- (4,992,000) -- (4,992,000) ---------------- ------------- ---------------- ------------- ------------- Balances at January 30, 1999 $ 190,000 $ 63,664,000 $ (10,877,000) $ -- $ 52,977,000 Net loss -- -- (3,133,000) -- (3,133,000) ---------------- ------------- ---------------- ------------- ------------- Balances at January 29, 2000 $ 190,000 $ 63,664,000 $ (14,010,000) $ -- $ 49,844,000 ================ ============= ================ ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 13 WEINER'S STORES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Predecessor Successor Company Company --------------------------------------------------------- ---------------- Year Year Twenty-Three Weeks Thirty Weeks Ended Ended Ended Ended January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997 ---------------- ---------------- ---------------- --------------- Cash Flows From Operating Activities: Net (loss) income $ (3,133,000) $ (4,992,000) $ (5,885,000) $ 18,541,000 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 3,977,000 4,079,000 1,842,000 2,241,000 Reorganization expense - - - 2,406,000 "Fresh start" adjustments - - - 1,519,000 Extraordinary gain - - - (18,683,000) Impairment of assets - - - - Loss on disposition of assets 36,000 4,000 35,000 - Change in deferred taxes - (53,000) - - Change in other (7,000) 174,000 (48,000) - Net change in current assets and liabilities (4,636,000) 9,699,000 (10,059,000) (5,318,000) ---------------- ---------------- ---------------- --------------- Total adjustments (630,000) 13,903,000 (8,230,000) (17,835,000) ---------------- ---------------- ---------------- --------------- Net cash (used in) provided by operating activities (3,763,000) 8,911,000 (14,115,000) 706,000 ---------------- ---------------- ---------------- --------------- Cash Flows From Investing Activities: Capital expenditures (6,077,000) (4,380,000) (3,010,000) (3,813,000) Proceeds on disposition of assets - 71,000 26,000 61,000 ---------------- ---------------- ---------------- --------------- Net cash used in investing activities (6,077,000) (4,309,000) (2,984,000) (3,752,000) ---------------- ---------------- ---------------- --------------- Cash Flows From Financing Activities: Net borrowings (payments) under revolving credit facility 6,000,000 (1,000,000) 5,000,000 - ---------------- ---------------- ---------------- --------------- Net cash provided by (used in) financing activities 6,000,000 (1,000,000) 5,000,000 - ---------------- ---------------- ---------------- --------------- Net (decrease) increase in cash (3,840,000) 3,602,000 (12,099,000) (3,046,000) Cash, beginning of period 7,176,000 3,574,000 15,673,000 18,719,000 ---------------- ---------------- ---------------- --------------- Cash, end of period $ 3,336,000 $ 7,176,000 $ 3,574,000 $ 15,673,000 ================ ================ ================ ===============
The accompanying notes are an integral part of these consolidated financial statements. 14 WEINER'S STORES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 Organization and Summary of Significant Accounting Policies Weiner's Stores, Inc. (the "Company") operates, as of January 29, 2000, 132 retail stores in Texas, Louisiana and Mississippi. As more fully described in Notes 7 and 8, the Company emerged from Chapter 11 bankruptcy on August 26, 1997 and adopted "fresh start" reporting as set forth in the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Fiscal Year The Company's fiscal year ends on the Saturday nearest January 31 of the following calendar year. Fiscal year 1999 contains 52 weeks, fiscal year 1998 contains 52 weeks and fiscal year 1997 contains 53 weeks. Cash Cash includes temporary investments in short-term securities with original maturities of three months or less. Merchandise Inventories Merchandise inventories are stated at the lower of cost (applied on a first-in, first-out basis using the retail inventory method) or market. Trade and purchase discounts are recorded as a reduction in inventory cost in the period in which the merchandise is received. Certain general and administrative costs associated with both the buying and the distribution of merchandise from the distribution center to the stores are included in inventory. These costs were approximately $2,400,000 at January 29, 2000 and at January 30, 1999. Property and Equipment Property and equipment were restated at approximate fair market value at August 26, 1997. Additions subsequent to August 26, 1997 are recorded at cost. Depreciation is provided using the 150% declining-balance method on the distribution center and office facility based on an average life of 28 years. Equipment is depreciated using the straight-line method based on an average useful life of ten years. Store fixtures and leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful life of ten years or the term of the lease. Expenditures for maintenance and repairs are charged to operations as incurred, while renewals and betterments are capitalized. Long-lived assets are reviewed for impairment upon occurrence of events or changes in circumstances that indicate that the carrying value of these long-lived assets may not be recoverable, as measured by comparing the net book value of the assets to the estimated future cash flows generated by their use. Impaired assets which are held for use are recorded at the lesser of their carrying value or fair value. Software is capitalized with a useful life of five years. Excess Reorganization Value Excess reorganization value represents the adjustment of the Company's balance sheet for reorganization value in excess of amounts allocable to identifiable assets. Excess reorganization value is being amortized over 15 years. The Company reviews, at least annually, whether events or circumstances have occurred that may impact the recoverability of excess reorganization value. If this review indicates that this intangible asset will not be recoverable, as determined based on the undiscounted cash flow over the remaining amortization periods, the carrying value is reduced by the estimated shortfall of the discounted cash flows. Income Taxes Deferred income taxes reflect the future tax consequences attributable to temporary differences between the Company's assets and liabilities for financial reporting and income tax purposes, using income tax rates in effect during the periods presented. The effect of a change in existing income tax rates is recognized in the income tax provision in the period that includes the enactment date. Earnings per Share of Common Stock Earnings per share of common stock is computed as net (loss) income divided by the weighted average number of shares of common stock outstanding during the period. There is no difference between basic and dilutive earnings per share, as the inclusion of options to purchase 1,615,000 shares of common stock in fiscal 1999 and 945,500 shares of common stock in fiscal 1998 would have had an anti-dilutive effect. Earnings per share for prior periods is based on the Predecessor Company shares then outstanding; such information is not comparable due to the Company's reorganization. 15 Fair Value of Financial Instruments The Company's financial instruments include cash, receivables, trade accounts payable and long-term debt. The fair values of cash, receivables and trade accounts payable approximate recorded amounts as a result of their short-term nature. The fair value of long-term debt approximates its recorded amount due to the floating interest rate. Advertising The Company expenses advertising costs when the event advertised occurs. Advertising expense, included in selling, administrative and other operating costs in the accompanying consolidated statements of operations, was $13,081,000 for fiscal 1999 and $13,415,000 for fiscal 1998, $5,436,000 for the twenty-three weeks ended January 31, 1998 (Successor Company) and $7,166,000 for the thirty weeks ended August 25, 1997 (Predecessor Company). Revenue Recognition Policy The Company recognizes revenue at the point of sale. The Company has a layaway program that in fiscal year 1999 accounted for approximately 9.4% of the Company's revenues. Layaways are recognized as revenue at the point of sale and as a receivable on the balance sheet (net layaway receivables at January 29, 2000 was $510,000 as compared to $847,000 at January 30, 1999). The Company provided an allowance for layaway sales receivables based on management's estimates of the amount by which uncollected receivables would exceed the cost of the items reverting back to inventory. The estimate was based on the Company's historic calculation of layaway sales that will never be completed. The Company generally required a refundable deposit on layaway sales. As customers paid on their layaways, the payment reduced the receivable. The Staff (the "Staff") of the U.S. Securities and Exchange Commission (the "SEC") has requested that the Company change its treatment regarding revenue recognition of layaway sales, commencing with the Company's fiscal year which begins January 30, 2000, to reflect layaway sales as deposits until the merchandise is paid in full and delivered to the customer. The Staff subsequently issued Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial Statements" ("SAB 101") on December 3, 1999. As a result of the Staff's request and subsequent issuance of SAB 101, the Company changed its treatment regarding revenue recognition to recognize layaway sales upon delivery of the merchandise to the customer commencing the first day of the Company's fiscal year which began on January 30, 2000. Recent Accounting Pronouncements The Staff of the SEC has issued Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial Statements," effective for fiscal years beginning after December 15, 1999. The Company is in compliance with SAB 101, except with regard to leased department sales and layaway sales, as discussed above. The Company has implemented all provisions of SAB 101, including treatment of leased department and layaway sales, effective for fiscal year 2000, beginning January 30, 2000. The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards No. 133 - "Accounting for Derivative Instruments and Hedging Activities," effective for years beginning after June 15, 2000. The Company believes that this statement will have no impact on its financial presentation. Reclassifications Certain prior year balances have been reclassified to conform to current year presentation. 2 Long-Term Debt The Company believes that the financial covenants established in the Fourth Amendment to the Company's Revolving Credit Agreement will be achieved based upon the Company's current and anticipated performance. Based upon management's 2000 operating plan and availability under the Revolving Credit Agreement, the Company believes that there is adequate liquidity to fund the Company's operations during fiscal year 2000. However, material shortfalls or variances from anticipated performance could require the Company to seek a further amendment to the Revolving Credit Agreement or alternative sources of financing or to limit capital expenditures to an amount less than that currently anticipated by the Company or permitted under the Revolving Credit Agreement. The Company's Revolving Credit Agreement provides a $40,000,000 working capital facility, including a $15,000,000 sub-facility for the issuance of letters of credit. The Revolving Credit Agreement is secured by substantially all of the Company's assets. The Revolving Credit Agreement provides that proceeds may be used solely to fund working capital in the ordinary course of business and for other general corporate purposes. Borrowings under the Revolving Credit Agreement bear interest at the reference rate thereunder plus 0.5% or, at the option of the Company, the Eurodollar Rate thereunder plus 2.5% and are due August 30, 2003. The Company's blended interest rate was 9.0% at January 29, 2000. The working capital facility may also be used to fund letters of credit. 16 At January 29, 2000, the Company had approximately $15,749,000 available under its working capital facility, after considering outstanding letters of credit of approximately $3,616,000 and borrowings of $10,000,000. The Company's peak borrowings under the working capital facility during fiscal year 1999, including outstanding letters of credit, were approximately $26,830,000 in July 1999. The Company may prepay amounts outstanding under the working capital facility without penalty. The Revolving Credit Agreement requires that the Company maintain certain financial covenants and stipulates certain borrowing limitations based on the Company's inventory levels. The Revolving Credit Agreement also restricts future liens and indebtedness, sales of assets and dividend payments. Capital expenditures are restricted to $8,500,000 in each of fiscal years 2000, 2001 and 2002 and to $5,000,000 for the period commencing February 2, 2003 and ending August 30, 2003. As of January 29, 2000, the Company was in compliance with all of its covenants under the Revolving Credit Agreement. Cash interest paid was approximately $951,000 during the fiscal year 1999, $925,000 during fiscal year 1998, $153,000 during the twenty-three weeks ended January 31, 1998 (Successor Company) and $33,000 during the thirty weeks ended August 25, 1997 (Predecessor Company). 3 Accrued Expenses Accrued expenses consisted of the following: January 29, January 30, 2000 1999 ----------- ----------- Payroll and related benefits $1,706,000 $2,210,000 Taxes other than income taxes 1,308,000 1,563,000 Rent and other related costs 1,943,000 2,264,000 Other 2,884,000 3,233,000 ----------- ----------- Total $7,841,000 $9,270,000 =========== =========== 4 Statements of Cash Flows The net change in current assets and liabilities reflected in the consolidated statements of cash flows was as follows:
Successor Company Predecessor Company ---------------------------------------------------- --------------- Year Year Twenty-Three Weeks Thirty Weeks Ended Ended Ended Ended January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997 ---------------- ---------------- ---------------- --------------- Increase (decrease) in cash: Receivables $ (111,000) $ 95,000 $ 2,799,000 $ (1,960,000) Merchandise inventories (2,765,000) (4,297,000) 5,489,000 (2,453,000) Prepaid expenses and other assets (907,000) 757,000 (792,000) (241,000) Accounts payable 577,000 11,703,000 (10,625,000) 10,256,000 Accrued expenses (1,430,000) 1,441,000 (6,930,000) (10,920,000) ---------------- ---------------- ---------------- ---------------- $ (4,636,000) $ 9,699,000 $ (10,059,000) $ (5,318,000) =============== ================ ================ ================
5 Leases The Company leases store locations under operating lease agreements, which expire at varying dates through 2009. Most of the store leases include renewal options for an additional 5 to 15 years and require the Company to pay taxes, insurance and certain common area maintenance costs in addition to specified minimum rents. Most of the store leases also require the payment of contingent rent based upon specified percentages of sales in excess of a base amount. Total rent expense for all operating leases was as follows:
Successor Company Predecessor Company ------------------------------------------------- ---------------- Year Year Twenty-Three Weeks Thirty Weeks Ended Ended Ended Ended January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997 ---------------- ---------------- --------------- ---------------- Minimum rentals $ 11,003,000 $ 10,186,000 $ 3,950,000 $ 5,426,000 Contingent rentals 422,000 427,000 67,000 419,000 ---------------- ---------------- --------------- ---------------- Total $ 11,425,000 $ 10,613,000 $ 4,017,000 $ 5,845,000 ================ ================ ============== ================
17 At January 29, 2000, future minimum rental payments under all noncancelable operating leases with initial or remaining lease terms of one year or more were as follows: Fiscal Year ----------- 2000 $ 11,121,000 2001 9,223,000 2002 7,824,000 2003 6,256,000 2004 4,299,000 Thereafter 7,903,000 --------- Total $ 46,626,000 ========== 6 Income Taxes A reconciliation of the Company's effective tax rate with the statutory federal income tax rate is as follows:
Successor Company Predecessor Company ------------------------------------------------- ------------------- Year Year Twenty-Three Weeks Thirty Weeks Ended Ended Ended Ended January 29, 2000 January 30, 1999 January 31, 1998 August 25, 1997 ---------------- ---------------- --------------- ---------------- Expense (benefit) at statutory rate (34.0) % (34.0) % (34.0) % 34.0 % Operating losses not providing current benefit 34.0 34.0 34.0 - Operating loss carryforwards - - - (34.0) ---------------- ---------------- --------------- ---------------- Effective rate - - - - ================ ================ =============== ================
Deferred tax assets and liabilities and the related valuation allowance were as follows:
January 29, January 30, 2000 1999 ----------- ----------- Deferred tax liabilities - depreciation and other $ 1,143,000 $ 958,000 ----------- ----------- Deferred tax assets: Operating loss carryforwards 15,442,000 13,961,000 Targeted jobs credit carryforward 779,000 779,000 Accrued expenses and other 830,000 1,158,000 ----------- ----------- 17,051,000 15,898,000 Valuation allowance (16,305,000) (15,337,000) ----------- ----------- Deferred income taxes, net $ 397,000 $ 397,000 =========== ===========
The valuation allowance reduces deferred tax assets to the amount that the Company believes is most likely to be realized. The Company has determined that a $16,305,000 valuation allowance at January 29, 2000 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The $968,000 increase in the valuation allowance in the current year is the result of current year net operating losses, which may not be realized. At January 29, 2000, the Company had federal income tax net operating loss ("NOL") carryforwards of approximately $45,418,000. The NOL and targeted jobs credit carryforwards expire in various years through 2020. The amount of the NOL carryforwards and certain other tax attributes available to the Company as of the Effective Date (see Note 7) were reduced substantially, to approximately $31,000,000 as a result of the discharge and cancellation of various prepetition liabilities under the Plan (see Note 7). Tax attributes remaining after the application of cancellation of indebtedness rules are subject to limitation-on-utilization rules. The federal tax code imposes limitations on the utilization of tax attributes, such as NOL carryforwards, after certain changes in the ownership of a loss company. The Company is a loss company. The income tax benefit, if any, resulting from any future realization of the NOL carryforwards existing as of the Effective Date will be credited to Excess Reorganization Value (see Note 8) and then to additional paid-in-capital. 18 7 Plan of Reorganization On April 12, 1995 (the "Petition Date"), the Company filed a petition for reorganization under Chapter 11 ("Chapter 11") of the Federal Bankruptcy Code (the "Bankruptcy Code"). Subsequent to the Petition Date, the Company operated as a debtor-in-possession under the supervision of the United States Bankruptcy Court for the District of Delaware (the "Court"). As of the Petition Date, actions to collect prepetition indebtedness were stayed and other contractual obligations could not be enforced against the Company. In addition, under the Bankruptcy Code, the Company could reject leases and executory contracts. Parties affected by the rejections could file claims with the Court in accordance with the reorganization process. Substantially all liabilities as of the Petition Date were subject to settlement under a plan of reorganization that was to be voted on by the creditors and approved by the Court. As a result of extensive negotiations, the Company reached a compromise agreement with representatives of all of its major creditor constituencies, as well as the Predecessor Company's common stockholders. This compromise agreement was then incorporated into and became the Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated June 24, 1997, as amended (the "Plan"). On August 13, 1997, the Court commenced a hearing that resulted in the entering of a court order confirming the Plan, which became effective August 26, 1997 (the "Effective Date"). Pursuant to the Plan, all outstanding shares of common stock and any options, warrants or other agreements requiring the issuance of any such stock were extinguished. The Plan was designed to repay all priority creditors in full on the Effective Date or thereafter as provided in the Plan and to repay secured creditors in full over time with interest. Allowed unsecured claims totaling approximately $85,200,000 were cancelled in exchange for $5,000,000 of cash and 18,600,000 shares of newly issued common stock, par value $.01 per share, of the reorganized company. An additional 400,000 shares of the newly issued common stock were issued to senior management. Consequently, a total of 19,000,000 shares of newly issued common stock of the Successor Company were issued under the Plan. In addition, the Plan authorized the issuance of options to purchase up to 1,000,000 shares of newly issued common stock of the Successor Company for purposes of providing incentives intended to retain and motivate highly competent persons as key employees of the Company. In connection with the Chapter 11 proceedings, the Company incurred reorganization expenses as follows ($ in thousands): Predecessor Company ------------------- Thirty Weeks Ended August 25, 1997 --------------- Professional fees $ 1,894 Store/warehouse closings 266 System and store reorganization costs 468 Administrative reorganization costs 818 Adjustment of liabilities subject to settlement (1,040) --------------- Total $ 2,406 =============== 8 "Fresh Start" Reporting In accounting for the effects of the reorganization, the Company has adopted the "fresh start" reporting provisions of Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), and reflected the effects of such adoption in the financial statements for the twenty-three weeks from inception (August 26, 1997) to January 31, 1998. SOP 90-7 was applicable because the pre-reorganization stockholders received less than 50% of the Successor Company's newly issued common stock and the enterprise value of the assets of the Successor Company was less than the total of all prepetition liabilities. In adopting "fresh start" reporting, the Company was required to determine its enterprise value, which represented the fair value of the entity before considering its liabilities. The Company's enterprise value was determined with the assistance of its financial advisor to be within a range that centered around a point of estimate of $75,000,000. The enterprise value of the Company was determined by consideration of several factors and reliance on various valuation methods, including discounted future cash flows, market comparables and price/earnings ratios. The adjustments that reflected the adoption of "fresh start" reporting, including the adjustments to record assets and liabilities at their fair market values, were reflected in the financial statements as of August 25, 1997 as "fresh start" adjustments. In addition, the Successor Company's opening balance sheet was further adjusted to eliminate existing equity and to reflect the aforementioned $75,000,000 enterprise value, which included the establishment of $4,411,000 of reorganization value in excess of amounts allocable to identifiable assets ("Excess Reorganization Value"). The Excess Reorganization Value is being amortized using the straight-line method over a 15-year useful life which is based on the average remaining life of the Company's operating leases. 19 9 Employee Benefit Plans The Company sponsors the Weiner's Stores, Inc. 401(k) Plan, a defined contribution plan. This plan allows participants to defer up to 15% of their income. Company contributions are at the discretion of the Board of Directors. No contributions were made by the Company in the fiscal years currently being reported. The Company also sponsors the Weiner's Stores, Inc. Employees' Profit Sharing Plan. The Board of Directors of the Company resolved that it was in the best interest of the Company to terminate the profit sharing plan, effective December 31, 1998. The Company is in the process of complying with this resolution. The Company made no contribution in fiscal year 1999 and $5,000 in each of the fiscal years 1998 and 1997. On August 5, 1999, at a special meeting of the stockholders, the stockholders approved the 1999 Stock Incentive Plan (the "1999 Stock Plan"). The Company's 1997 Stock Incentive Plan (the "1997 Stock Plan") and the 1999 Stock Plan are accounted for using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations, under which no compensation cost has been recognized. Had compensation cost for this plan been determined consistent with the provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," there would have been no changes to the Company's reported net loss per share of common stock of $0.17 as of January 29, 2000 and $0.26 as of January 30, 1999 and $0.31 as of the twenty-three weeks ended January 31, 1998 (Successor Company). The weighted average fair value of options granted was estimated to be zero on the date of grant using the Black-Scholes option pricing model with the assumptions that the risk-free interest rate was 4.5%, price volatility was 0.001% and the expected term of the options was 2.5 years and no dividends were expected. The effect on fiscal 1999, 1998 and fiscal 1997 pro forma net income and net income per share of common stock of expensing the estimated fair value of stock options is not necessarily representative of the effect on reported earnings in future years due to the vesting period of stock options and the potential for issuance of additional stock options in future years. Under the 1997 Stock Plan and the 1999 Stock Plan (collectively, the "Stock Plans"), a committee of the Board of Directors may grant options to key employees to purchase common stock at not less than the fair market value at the date of the grant. These options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Board of Directors, provided that no stock option shall be exercisable later than 10 years after the date it is granted. Further, the 1997 Stock Plan allows that the Board of Directors may grant stock awards consisting of common stock issued or transferred to participants as additional compensation with or without other payments to the Company. On the Effective Date of the Plan, stock awards of 400,000 shares were granted. The 1997 Stock Plan allows the Board of Directors to grant options and awards up to the plan limit of 1,400,000 shares and the 1999 Stock Plan allows the Board of Directors to grant options up to the plan limit of 1,000,000 shares. If not exercised, these options revert back to the respective Stock Plans and can be reissued as new options. The number of options available to be granted under the 1997 Stock Plan and the 1999 Stock Plan as of January 29, 2000 was 54,500 and 330,500, respectively. A summary of options granted under the Stock Plans at January 29, 2000 is presented below: Weighted Average Option Shares Exercise Price ------------- -------------- Outstanding, January 25, 1997 - $ - Granted 900,000 1.15 Forfeited (1,500) 1.15 ------------- -------------- Outstanding, January 31, 1998 898,500 $ 1.15 ============= ============== Exercisable, January 31, 1998 83,333 $ 1.15 ============= ============== Weighted Average Option Shares Exercise Price ------------- -------------- Outstanding, January 31, 1998 898,500 $ 1.15 Granted 51,500 1.00 Forfeited (4,500) 1.15 ------------- -------------- Outstanding, January 30, 1999 945,500 $ 1.14 ============= ============== Exercisable, January 30, 1999 534,366 $ 1.15 ============= ============== 20 Weighted Average Option Shares Exercise Price ------------- -------------- Outstanding, January 30, 1999 945,500 $ 1.14 Granted 890,000 0.87 Forfeited (220,500) 1.11 ------------- -------------- Outstanding, January 29, 2000 1,615,000 $ 1.00 ============= ============== Exercisable, January 29, 2000 718,174 $ 1.09 ============= ============== The Company has an employment agreement with each of its four most senior officers, which prescribe a minimum base salary and severance payments if the executives are terminated for any reason other than cause, including if they resign for good reason. Further, the Company has entered into agreements with certain key employees in an effort to retain continuity for a meaningful period of time. In addition, the Company, with respect to certain of its officers (other than the four most senior officers) and key employees and without altering their employment-at-will status, has provided for a separation payment equal to six months base salary in the event of termination for any reason other than cause. If all officers and key employees, including the three most senior officers, were terminated, the Company's estimated maximum aggregate severance payment obligations would be approximately $1,493,000. 10 Stockholders' Equity At both January 29, 2000 and January 30, 1999, 50,000,000 shares of common stock, $0.01 par value per share, were authorized and 19,000,000 shares were issued. The Company had 18,476,830 shares outstanding at January 29, 2000 and at January 30, 1999. On November 1, 1998, the Company acquired 523,170 treasury shares, at a cost of zero, as a result of unclaimed distributions as described in the Plan, which called for unclaimed distributions to be revested in the Company. 11 Quarterly Financial Data (Unaudited) (Dollars in thousands, except per share data)
Fiscal Year Ended January 29, 2000 -------------------------------------------------------- First Second Third Fourth Total ----- ------ ----- ------ ----- Net sales $ 69,602 $ 79,532 $ 58,859 $ 68,850 $ 276,843 Gross profit 24,222 24,352 20,798 20,048 89,420 Operating income (loss) 2,243 881 (2,188) (2,962) (2,026) Net income (loss) $ 2,033 $ 463 $ (2,437) $ (3,192) $ (3,133) Weighted average number of shares of common stock outstanding 18,477 18,487 18,497 18,477 18,484 Earnings (loss) per share (a) $ 0.11 $ 0.03 $ (0.13) $ (0.17) $ (0.17) Fiscal Year Ended January 30, 1999 -------------------------------------------------------- First Second Third Fourth Total ----- ------ ----- ------ ----- Net sales $ 61,579 $ 68,548 $ 60,585 $ 70,196 $ 260,908 Gross profit 22,791 22,485 20,601 20,281 86,158 Operating income (loss) 781 (331) (2,400) (2,029) (3,979) Net income (loss) $ 604 $ (596) $ (2,709) $ (2,291) $ (4,992) Weighted average number of shares of common stock outstanding 19,000 19,000 19,000 18,476 18,869 Earnings (loss) per share (a) $ 0.03 $ (0.03) $ (0.14) $ (0.13) $ (0.26)
(a) The sum of the four quarterly earnings per share amounts does not agree with the earnings per share as calculated for the full year due to the fact that the full year calculation uses a weighted average number of shares based on the sum of the four quarterly weighted average numbers of shares divided by four quarters. The Company implemented SAB 101 commencing with the Company's fiscal year beginning January 30, 2000. The Company believes there will be minimal impact on an annual basis; however, the impact on the results of operations on a quarter to quarter basis is expected to be much more pronounced. The impact will be especially pronounced in the second and third quarters and first six and nine month periods because these periods include a portion of the Company's important back-to-school sales period. 21 12 Commitments and Contingencies There are various suits and claims against the Company that have arisen in the normal course of business. The total liability on these matters cannot be determined with certainty. However, in the opinion of management, the ultimate liability, to the extent not otherwise provided for, will not materially impact the financial statements of the Company. - -------------------------------------------------------------------------------- MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING Weiner's Stores, Inc.'s management is responsible for the fair presentation of the consolidated financial statements and the related financial data presented in this Annual Report. The statements were prepared in accordance with generally accepted accounting principles and include amounts determined by management's estimates and judgments, based on currently available information, which it believes are reasonable under the circumstances. Actual results could differ from those estimates. The Company maintains a system of internal controls that management believes provides reasonable assurance that the financial statements are reliably prepared, assets are properly accounted for and safeguarded and transactions are properly recorded and authorized. The concept of reasonable assurance implies that the cost of controls should not exceed their benefits, recognizing that limitations exist within any system. The Board of Directors oversees management's administration of the Company's financial and accounting policies and practices and the preparation of the financial statements. The Audit Committee, which consists of three non-management directors, meets regularly with management and the independent auditors to review their activities. The independent auditors have direct access to the Audit Committee and meet regularly with the Audit Committee, with and without management representatives present. /s/ Raymond J. Miller Raymond J. Miller Executive Vice President, Chief Operating Officer and Chief Financial Officer 22 INDEPENDENT AUDITORS' REPORTS Board of Directors and Stockholders of Weiner's Stores, Inc. We have audited the accompanying consolidated balance sheets of Weiner's Stores, Inc. (Company) as of January 29, 2000 and January 30, 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Weiner's Stores, Inc. at January 29, 2000 and January 30,1999, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Houston, Texas /s/ Ernst & Young LLP March 16, 2000 Board of Directors and Stockholders of Weiner's Stores, Inc. We have audited the accompanying consolidated statements of operations, changes in stockholders' equity (deficiency) and of cash flows for the twenty-three weeks ended January 31, 1998 (Successor Company operations) and the thirty weeks ended August 25, 1997 (Predecessor Company operations) of Weiner's Stores, Inc. and subsidiary. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Notes 1 and 7 to the consolidated financial statements, on August 13, 1997, the Bankruptcy Court entered an order confirming the plan of reorganization of Weiner's Stores, Inc., which became effective after the close of business on August 25, 1997. Accordingly, the accompanying financial statements have been prepared in conformity with AICPA Statement of Position 90-7, "Financial Reporting for Entities in Reorganization Under the Bankruptcy Code" for the Successor Company as a new entity with assets, liabilities, and a capital structure having carrying values not comparable with prior periods as described in Note 8. In our opinion, the Successor Company consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the twenty-three weeks ended January 31, 1998 in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Predecessor Company financial statements referred to above present fairly, in all material respects, the results of the Predecessor Company's operations and its cash flows for the thirty weeks ended August 25, 1997 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Houston, Texas March 19, 1998 23 MARKET AND DIVIDEND INFORMATION AND RELATED STOCKHOLDER MATTERS Market Price Information As of August 17, 1998, the Company's Common Stock began trading on the Over-the-Counter Bulletin Board Service ("OTC") under the symbol "WEIR." There was previously no established public trading market for the Common Stock. The following table sets forth, for each full quarterly period in fiscal year 1998 since trading on the OTC began, the high and low sales price per share of the Company's Common Stock as reported on the OTC. 2000 High Low ---- ---- --- 1st Quarter (through March 31) $0.41 $0.28 1999 High Low ---- ---- --- 1st Quarter $0.66 $0.19 2nd Quarter 1.19 0.28 3rd Quarter 1.16 $0.47 4th Quarter 0.81 0.38 1998 High Low ---- ---- --- 3rd Quarter $1.50 $0.25 (from August 17, 1998) 4th Quarter 0.28 0.13 The last reported sale price per share of Common Stock as reported on the OTC on March 31, 2000 was $0.28. As of March 31, 2000, there were 482 holders of record of the Common Stock. This number does not include stockholders for whom shares are held in a "nominee" or "street" name. The Company did not declare or pay any cash dividends with respect to the Common Stock during fiscal 1999, fiscal 1998 or fiscal 1997. The terms of the Revolving Credit Agreement prohibit payment of cash dividends on the Common Stock. Form 10-K A copy of Form 10-K filed by the Company with the Securities and Exchange Commission for the fiscal year ended January 29, 2000 may be obtained by stockholders without charge (except exhibits) upon written request to Raymond J. Miller, Executive Vice President, Chief Operating Officer and Chief Financial Officer, at the Executive Offices of the Company. 24 DIRECTORS Herbert R. Douglas Chairman of the Board, President and Chief Executive Officer Raymond J. Miller Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary Randall L. Lambert Managing Director, Chanin Capital Partners Gasper Mir President, Mir-Fox & Rodriguez, P.C. F. Hall Webb Senior Vice President, Chase Bank of Texas Melvyn L. Wolff Chairman of the Board and Chief Executive Officer, Star Furniture Company OTHER CORPORATE OFFICERS James L. Berens Senior Vice President, Stores Joseph J. Kassa Senior Vice President, General Merchandise Manager John P. Dineen Vice President, Divisional Merchandise Manager Michael G. Klaiman Vice President, Divisional Merchandise Manager Michael S. Marcus Vice President, Controller and Treasurer STOCKHOLDER INFORMATION Annual Meeting The Annual Meeting of Stockholders will be held at 8:30 a.m. local time on Thursday, May 25, 2000 at the executive offices of the Company, 6005 Westview Drive, Houston, Texas. Executive Offices Legal Counsel 6005 Westview Drive Weil, Gotshal & Manges LLP Houston, Texas 77055 700 Louisiana, Suite 1600 Houston, Texas 77002 Independent Auditors Transfer Agent and Registrar Ernst & Young LLP American Stock Transfer & Trust Company 1221 McKinney, Suite 2400 40 Wall Street Houston, Texas 77010 New York, New York 10005 25 Weiner's (R) Because Everybody Loves A Bargain! 6005 Westview Drive, Houston, Texas 77055 www.weiners.com EX-23.1 11 EXHIBIT 23.1 ------------ CONSENT OF INDEPENDENT AUDITORS ------------------------------- We consent to the incorporation by reference in this Annual Report (Form 10-K) of Weiner's Stores, Inc. of our report dated March 16, 2000, included in the 1999 Annual Report to Stockholders of Weiner's Stores, Inc. /s/ Ernst & Young LLP April 14, 2000 Houston, Texas EX-24.1 12 EXHIBIT 24.1 ------------ POWER OF ATTORNEY Herbert R. Douglas hereby designates and appoints Raymond J. Miller as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorney-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as the Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ Herbert R. Douglas President and Chief March 24, 2000 - ----------------------- Executive Officer and Chairman Herbert R. Douglas of the Board of Directors 1 POWER OF ATTORNEY Raymond J. Miller hereby designates and appoints Herbert R. Douglas as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorney-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as the Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ Raymond J. Miller Executive Vice President, Chief March 24, 2000 - --------------------- Operating Officer, Chief Financial Raymond J. Miller Officer, Secretary and Director 2 POWER OF ATTORNEY Michael S. Marcus hereby designates and appoints Herbert R. Douglas and Raymond J. Miller and each of them (with full power to each of them to act alone) as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as either Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ Michael S. Marcus Vice President, Controller and March 24, 2000 - --------------------- Treasurer Michael S. Marcus 3 POWER OF ATTORNEY Randall L. Lambert hereby designates and appoints Herbert R. Douglas and Raymond J. Miller and each of them (with full power to each of them to act alone) as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as either Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ Randall L. Lambert Director March 24, 2000 - ---------------------- Randall L. Lambert 4 POWER OF ATTORNEY Gasper Mir hereby designates and appoints Herbert R. Douglas and Raymond J. Miller and each of them (with full power to each of them to act alone) as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as either Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ Gasper Mir Director March 24, 2000 - ------------- Gasper Mir 5 POWER OF ATTORNEY F. Hall Webb hereby designates and appoints Herbert R. Douglas and Raymond J. Miller and each of them (with full power to each of them to act alone) as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as either Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ F. Hall Webb Director March 24, 2000 - ---------------- F. Hall Webb 6 POWER OF ATTORNEY Melvyn L. Wolff hereby designates and appoints Herbert R. Douglas and Raymond J. Miller and each of them (with full power to each of them to act alone) as his attorney-in-fact, with full power of substitution and resubstitution (the "Attorneys-in-Fact"), for him and in his name, place and stead, in any and all capacities, to execute the annual report on Form 10-K (the "Annual Report") to be filed by Weiner's Stores, Inc. with the Securities and Exchange Commission and any amendment(s) to the Annual Report, which amendment(s) may make such changes in the Annual Report as either Attorney-in-Fact deems appropriate, and to file the Annual Report and each such amendment to the Annual Report together with all exhibits thereto and any and all documents in connection therewith. Signature Title Date --------- ----- ---- /s/ Melvyn L. Wolff Director March 24, 2000 - ------------------- Melvyn L. Wolff 7 EX-27 13
5 This schedule contains summary financial information extracted from the Company's financial statements incorporated by reference in the accompanying Annual Report on Form 10-K and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS JAN-29-2000 JAN-29-2000 3,336 0 1,100 0 57,293 65,016 29,013 7,967 89,674 29,433 0 0 0 190 49,844 89,674 276,843 276,843 187,423 187,423 91,446 0 1,107 (3,133) 0 (3,133) 0 0 0 (3,133) (0.17) (0.17)
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