Exhibit 10 - Letter of Understanding regarding Non-Executive Chairman of the
Board position and Consulting Agreement dated April 16, 1998 and Amendments to
Letter of Understanding and Consulting Agreement dated December 22, 1998 and
October 8, 1999 between the Registrant and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
April 16, 1998
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Subject: Letter of Understanding Regarding Non-Executive Chairman Position
Dear: Lenny:
We are very pleased that you have agreed to serve as a consultant to, and member
of, the Board of Directors of One Price Clothing Stores, Inc. ("Company"). In
addition to welcoming you onto the Board, we would like to confirm our mutual
understanding with respect to your serving in such positions, and, subsequently,
as Non-Executive Chairman of the Board.
I. Duties & Responsibilities - Upon execution of this agreement, your
appointment as a member of the Board of Directors ("Board") of the Company, and
Consultant to the Board, will become effective. Your name will be included in
the Proxy as a nominee to serve as a member of the Board for 1998, with a
statement of our intention to appoint you as Non-Executive Chairman. At the
meeting of the Board, which will immediately follow the June 10 Annual Meeting,
you will be appointed Non-Executive Chairman of the Board, at which time your
Position, as a consultant to the Board will end. In your capacity as
Non-Executive Chairman, you will have all the usual and customary duties and
responsibilities of such position, including, among other things, (i)
development (in conjunction with the CEO) of the agenda for meetings of the
Board of Directors and the Annual Meeting of Stockholders; (ii) designation and
appointment of members of the Committees of the Board and their Chairmen; and,
(iii) establishment, with the Chairman of each Committee, of the Agenda for
meetings of such Committee. As a consultant to the Board, and, subsequently as
Non-Executive Chairman, you agree to use your best efforts, in support of the
CEO, to ensure that the Company has in place a firm vision, solid management and
sound merchandising and operating strategies, all designed to maximize sales,
profits and growth opportunities. As appropriate, and again together with the
CEO, you will address issues involving such areas as stockholder relations,
Public audit, financing and financial relationships, and SEC matters. As
Non-Executive Chairman, you will be charged in monitoring and, in conjunction
with the Board, approving, both the short and long term goals of the Company.
You agree to devote the time necessary to faithfully perform your duties as a
member of, and Consultant to, the Board and as Non-Executive Chairman, in
accordance with the functions outlined above, and further agree to avoid taking
on other commitments which would jeopardize your ability to fully perform such
duties or such other duties as may reasonably be assigned to you from time to
time in agreement with the Board of Directors. For example, we understand that
you currently serve as a member of the Board of Directors of other,
non-competing, companies and agree that you are free to continue in such
capacity, provided the time requirements do not interfere with your duties as
described above. We have discussed and agree that you will not accept an
operating position with another company during the term of this agreement, nor
serve in the capacity of Chairman of the Board of another company during such
period.
II. Duration - So long as you reasonably fulfill your duties as described to the
reasonable satisfaction of the Board, and subject to re-election as a Director
by the stockholders of the Company, and to the By-Laws of the Company, you shall
serve as Non-Executive Chairman of the Board for a period of three years from
the date of your appointment, currently scheduled for June 10, 1998. The Company
agrees to use its best efforts to assure your election and re-election to the
Board. You may, of course, resign your appointment as Non-Executive Chairman, in
which case your compensation for such position would end. You have agreed to
give the Company at least 120 days advance written notice of such resignation.
III. Compensation & Termination - Commencing upon your execution of this letter,
for your services as a Consultant to the Board and member of the Board, you will
receive total compensation per annum of $150,000, of which $20,000 represents
Director's fees. Such sums shall be payable to you monthly, pro-rata, with the
Consultant's fees to be paid promptly upon receipt by the Company of your
monthly invoice for services rendered. Thereafter, upon your appointment as
Non-Executive Chairman, and as a member of the Board, your duties as a
Consultant will cease and, as both a Director and Non-Executive Chairman you
shall receive total combined annual compensation of $150,000 per year, payable
monthly, at $12,500 per month.
In addition, as an inducement to your accepting to so serve, you will receive a
grant of 80,000 stock options of One Price Common Stock, with an exercise price
equal to the average of high and low sales price per share of such Common Stock
as of the date of your execution of this agreement. The vesting schedule
regarding such options shall be: one-third (1/3) vested and exercisable
immediately upon registration of the underlying shares with the SEC on Form S-8
and transmittal to you of the required prospectus regarding your individual
stock option plan (the "Initial Vesting Date"). Thereafter, the remaining
two-thirds will vest in equal amounts (1/3 & 1/3, respectively) on the first and
second anniversary of the Initial Vesting Date, all as more fully described in
the prospectus to follow.
You will also be entitled to a cash bonus of 25% of your total annual
compensation of $150,000 for each year that the Company achieves its "stretch
plan" in fiscal years 1998, 1999 and 2000. For example, the Company's "stretch
plan" for fiscal 1998 is a pre-tax earnings number of $4,375,000, the equivalent
of 25 cents per share. If the Company meets or exceeds this pre-tax earnings
figure for fiscal 1998, you would be entitled to a cash bonus of $37,500,
payable upon completion by the Company's public accountants, currently Deloitte
& Touche, of their audit of the Company's books for such year and issuance of
their auditor's letter.
In the event that the Board terminates your appointment as Consultant or,
subsequently, as Non-Executive Chairman, without "cause" (as defined below), and
despite your having reasonably fulfilled your duties as described, then your
monthly payments of $12,500 shall continue for the lesser of (a) one year from
the date of such termination without "cause", or (b) the period remaining under
your original three year appointment from the date of the next annual meeting of
stockholders, scheduled for June 10, 1998 (the "Termination Payout Period"). For
purposes of this agreement "Cause" shall mean fraud, theft, dishonesty, criminal
activity, breach of the "Representation and Warranty" provision in section VII
of this agreement, or failure, following 30 days written notice, to comply with
the other provisions of this agreement, including the Confidentiality and
Non-Compete provisions. In the event of termination without Cause, and in
consideration for such termination payments, you agree to execute a general
release at the time of any such termination in favor of the Board and the
Company, in form and substance reasonably satisfactory to the Board.
The compensation and benefits described above, are inclusive of all your duties
and responsibilities as a Consultant to, and member of, the Board, and any
services you may perform on any Committees of the Board, whether as a member or
Chairman, as well as for your services as Non-Executive Chairman, following your
appointment to such position.
IV. Expenses - The Company agrees to reimburse you for your reasonable
out-of-pocket expenses incurred in the performance of fulfilling your
responsibilities as set forth above, upon submission of an expense report with
supporting information, wherever possible. You agree to comply with the
Company's policies regarding travel.
V. Confidentiality - As a publicly traded company, One Price Clothing is subject
to the rules and regulations of the SEC, and as a company listed on the NASDAQ,
to the rules of the NASD. You understand that you will be deemed to be an
"insider" for purposes of such rules and regulations. We are enclosing a copy of
our "▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Policy" for your review and execution in this regard. In
addition, you will be receiving highly confidential, non-public information
regarding the Company and agree to keep all such non-public information strictly
confidential. Documents provided, obtained or produced by you, as part of your
initial due diligence regarding serving as a consultant, Board member or as
Non-Executive Chairman, will remain the property of the Company and you agree to
return such property upon the request of the Company, along with any copies.
VI. Non-Compete - You have advised us that you are not currently, and will not,
during the period of your services with the Company, and for a period of two
years thereafter (one year thereafter in the case of termination without Cause),
provide services, as an employee, consultant, advisor, or otherwise, to any
other discount or off price retailer of women's apparel that is in significant
competition with the Company either currently or at the time of the termination
of your services for the Company. Similarly, you agree not to serve as a member
of, or advisor or consultant to, the Board of Directors of any such company for
a comparable period. You have agreed not to interfere, or attempt to interfere
with, or disrupt, the relationship between the Company and any of its employees,
customers, or suppliers. You agree not to employ, solicit the employment of, or
cause to be employed, any of the Company's associates for a period of two years
from the termination of your services with the Company, whether or not for
Cause.
VII. Representation & Warranty - You warrant and represent that you are not
bound by any commitment, including any contract of employment or consultancy,
which restricts or would preclude you from accepting to serve as a consultant
to, or member of, the Board or as Non-Executive Chairman of the Board, or from
fulfilling your obligations, as outlined in this letter. You agree to defend and
indemnify the Company against any claims by third parties arising from your
acceptance of such position(s) or the performance of your functions outlined
above.
VIII. Disputes - In the event of any dispute, we agree to first try to resolve
such differences together, failing which we agree that such differences shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"), and judgment, upon the award of
the arbitrator, may be rendered in any court having jurisdiction. Written notice
of a demand for arbitration must be mailed by either party to the other and sent
to AAA by certified mail within ninety (90) days of the occurrence of the
dispute. Failure to mail written notice of a demand for arbitration within such
ninety (90) day period and comply with all procedural requirements set forth in
the AAA's Commercial Arbitration Rules shall be an absolute bar to the
institution of any proceedings and a waiver of the claimed disagreement.
IX. Complete Agreement - You agree that this letter sets out our basic
understanding with respect to your serving as Director and Consultant and,
subsequently, as Non-Executive Chairman, and that no material change in such
understanding will be effective unless agreed to in a written amendment signed
by both parties.
X. Successors & Assigns - This agreement is personal to you and you may not
assign it. It shall, however, enure to the benefit of, and be binding upon, the
Company's successors and assigns.
If the foregoing meets with your approval, please sign the enclosed copy of this
letter of understanding and return it in the enclosed, self-addressed and
stamped envelope.
Once again we are delighted to welcome you to One Price Clothing and look
forward to working together with you.
Sincerely Yours, REVIEWED & AGREED:
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DATED: 4/16/98
Amendment to Agreement Dated April 16, 1998
Reference is made to the letter agreement dated April 16, 1998 ("Agreement") by
and between One Price Clothing Stores, Inc. ("Company") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("Chairman"). The Agreement is hereby amended to add the following new
provisions relating to termination of the Agreement following a "Change of
Control" (as hereinafter defined).
1. The following language is hereby added by mutual agreement to Section III
("Compensation & Termination") to the Agreement:
Change of Control - In the event the Chairman's Agreement with the Company is
terminated by the Company (or the Board of Directors) without Cause, or for
"Good Reason" by the Chairman, within 24 months after a "Change of Control" of
the Company (a "Trigger Event"), then the Company shall pay to Chairman, in one
lump sum, an amount equal to twenty-four (24) months compensation, rather than
the maximum twelve (12) months provided for in the Agreement. Termination for
"Good Reason" shall be deemed to have occurred, and the Chairman shall be
entitled to the benefits of this provision, if the Chairman voluntarily
terminates the Agreement after 30 days written notice to Company and following
the occurrence of any of the following events, provided a "Change of Control"
has occurred: (i) the assignment to the Chairman of any duties inconsistent with
the highest position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities attained by the Chairman
during the term of his Agreement with the Company or any action by the Company
or its Board of Directors which results in a material diminishment in such
position, authority, duties or responsibilities as were in effect immediately
prior to the Change in Control; (ii) a decrease in the Chairman's compensation
(including base salary, bonus or fringe benefits); (iii) a substantial increase
in the number of days required for the Chairman to fulfill his duties to the
Board or Company or a substantial increase in travel by the Chairman, in each
case as compared to the amount of days or travel required prior to such Change
in Control; or, (iv) failure of any successor of the Company to comply with this
Agreement. In consideration for the benefits conferred to the Chairman under
this provision, in the absence of a Trigger Event, the Chairman agrees to
continue his duties, following a Change of Control, for the term remaining under
the Agreement.
In addition, should a "Change of Control" occur, all stock options granted by
the Company to the Chairman, and not yet expired as of the date of such "Change
of Control," shall become immediately exercisable. In such event, the normal
expiration date shall apply to such options, provided, however, that the
Chairman shall have 90 days to exercise such options following a Trigger Event.
For purposes hereof, "Change of Control" shall be deemed to have occurred
following either of the following two events:
(i) A change in the Board of Directors of the Company, with the result that the
members of the Board, as elected by the stockholders of the Company on June 10,
1998 ("Incumbent Directors"), no longer constitute a majority of such Board,
provided that any person who becomes a director and whose appointment or
election was supported by a majority of the Incumbent Directors shall be
considered an Incumbent Director for purposes hereof; or,
(ii) a Section 11 (a) (ii) Event, as defined in the Shareholder Rights
Agreement, dated November 3, 1994, between Wachovia Bank of North Carolina,
N.A., as Rights Agent, and Employer ("Rights Agreement"), provided, however,
that for these purposes the applicable percentage for a Change of Control to
arise from a change in stock ownership shall be 40% and not 20% as provided for
in the Rights Agreement.
This Agreement shall be binding upon any successor of the Company.
Except as provided for herein by the foregoing amendment, the Agreement shall
continue unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
22, day of December, 1998.
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By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Chairman
Title: President & CEO
October 8, 1999
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Subject: Amendment to Letter of Understanding Regarding Non-Executive Chairman
Position, dated April 16, 1998
Dear Lenny:
On behalf of the Compensation Committee of the Board of Directors of One Price
Clothing Stores, Inc. ("Company"), I am pleased to advise you that such
Committee has approved an amendment to Section III of your original letter of
understanding, dated April 16, 1998, as follows. Notwithstanding the final
paragraph of Section III in such letter agreement which currently provides that
the compensation and benefits described are all inclusive, the Committee has
authorized you to participate in the Director Stock Option Plan, as amended
("Plan"), for the current Board year 1999-2000 and the Board year thereafter,
2000-2001. In all other respects your letter agreement remains in effect.
For the current Board year 1999-2000 you have been awarded 5,000 shares of
Restricted Stock at a price equal to the closing price of the Company's stock on
the NASDAQ on October 7, 1999. We anticipate granting you an additional 5,000
shares of Restricted Stock next year for the Board year 2000-2001.
This grant is subject to the terms and conditions of the Plan.
Please acknowledge your receipt and agreement to such amendment, along with your
acceptance of such grant, by signing below and returning such signed copy in the
enclosed envelope to the Company's Corporate Secretary.
Sincerely Yours,
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Chair - Compensation Committee
Acknowledged, Agreed & Accepted: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Dated: October 8, 1999
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