1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
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Commission file number 0-19994
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SOLO SERVE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 74 - 2048057
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1610 Cornerway Blvd., San Antonio, Texas 78219
----------------------------------------------
(Address of principal executive offices)
(210) 662-6262
--------------
(Registrant's telephone number, including area code)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 2, 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the issuer's Common Stock, par value $.01 per share, and
Preferred Stock, par value $.01 per share, outstanding as of May 29, 1998, were
3,565,812 and 679,203 shares, respectively. Affiliates of the registrant held
2,038,595 shares of the Common Stock, and all of the shares of Preferred Stock,
outstanding on May 29, 1998.
2
INDEX
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1. Condensed Financial Statements ................................................ 3
Balance Sheets, May 3, 1997 (unaudited),
January 31, 1998 and May 2, 1998 (unaudited)................................... 3
Statements of Operations, thirteen weeks ended
May 3, 1997 (unaudited) and May 2, 1998 (unaudited)............................ 4
Statements of Cash Flows, thirteen weeks ended
May 3, 1997 (unaudited) and May 2, 1998 (unaudited)............................ 5
Notes to Condensed Financial Statements
(unaudited).................................................................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................... 8
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................................. 12
ITEM 6. Exhibits and Reports on Form 8 - K............................................. 12
Signatures..................................................................... 15
2
3
PART I
ITEM I. Financial Statements
SOLO SERVE CORPORATION
BALANCE SHEETS
MAY 3, JANUARY 31, MAY 2,
ASSETS 1997 1998 1998
------------ ------------ ------------
(unaudited) (unaudited)
CURRENT ASSETS:
Cash $ 1,570,864 $ 1,042,357 $ 1,487,472
Inventory 14,852,823 12,030,628 14,309,997
Other current assets 1,371,216 1,412,914 1,744,453
------------ ------------ ------------
Total current assets 17,794,903 14,485,899 17,541,922
Property and equipment, net 12,640,949 11,897,807 4,577,690
Goodwill, net 260,000 -- --
------------ ------------ ------------
TOTAL ASSETS $ 30,695,852 $ 26,383,706 $ 22,119,612
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 6,429,645 $ 7,295,493 $ 8,355,792
Accrued expenses 3,492,518 2,329,506 1,627,144
Current portion of long-term debt 785,096 5,140,895 4,893,661
------------ ------------ ------------
Total current liabilities 10,707,259 14,765,894 14,876,597
Long-term debt 18,286,915 13,340,959 9,170,000
Note payable to stockholder -- 500,000 500,000
Deferred gain, net -- -- 109,770
Commitments and contingencies -- -- --
------------ ------------ ------------
TOTAL LIABILITIES 28,994,174 28,606,853 24,656,367
------------ ------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock 13,889 13,889 13,889
Common stock 28,562 28,562 28,562
Capital in excess of par value 24,410,290 24,410,290 24,410,290
Accumulated deficit (22,751,063) (26,675,888) (26,989,496)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,701,678 (2,223,147) (2,536,755)
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 30,695,852 $ 26,383,706 $ 22,119,612
============ ============ ============
The accompanying notes are an integral part of these financial statements.
3
4
SOLO SERVE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
THIRTEEN WEEKS ENDED
------------------------------
MAY 3, 1997 MAY 2, 1998
------------ ------------
Net revenues $ 19,602,971 $ 16,509,908
Cost of goods sold (including buying and distribution, excluding
depreciation shown below) 13,986,059 10,992,754
------------ ------------
Gross profit 5,616,912 5,517,154
Selling, general, and administrative expenses 6,742,845 5,071,627
Store closure expense 607,000 --
Depreciation expense 480,324 330,548
Amortization expense 30,000 --
------------ ------------
Operating income (loss) (2,243,257) 114,979
Interest expense 389,926 428,587
------------ ------------
Net loss $ (2,633,183) $ (313,608)
============ ============
Loss per common share (basic and diluted) $ (.92) $ (.10)
============ ============
Weighted average common shares outstanding 2,856,126 3,214,868
============ ============
The accompanying notes are an integral part of these financial statements.
4
5
SOLO SERVE CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
THIRTEEN WEEKS ENDED
MAY 3, 1997 MAY 2, 1998
------------ ------------
NET LOSS $ (2,633,183) $ (313,608)
ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FROM OPERATIONS:
Depreciation 480,324 330,548
Amortization of intangibles 30,000 --
Loss on retirement of property 1,141 --
Accretion of deferred gain -- (923)
Changes in assets and liabilities:
(Increase) decrease in inventory (3,744,885) (2,279,369)
(Increase) decrease in other current assets (382,746) (331,539)
Increase (decrease) in accounts payable 2,445,747 1,060,299
Increase (decrease) in accrued expenses 1,152,901 (702,362)
------------ ------------
Total adjustments (17,518) (1,923,346)
------------ ------------
Net cash provided by (used in ) operations (2,650,701) (2,236,954)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property & equipment (184,808) (171,097)
------------ ------------
Net cash provided by (used in ) investing activities (184,808) (171,097)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long term debt 23,711,531 19,790,406
Payments under long term debt (20,370,722) (18,512,208)
Proceeds from sale of Distribution and Corporate Offices -- 1,574,968
------------ ------------
Net cash provided by (used in) financing activities 3,340,809 2,853,166
------------ ------------
NET INCREASE (DECREASE) IN CASH 505,300 445,115
CASH AT BEGINNING OF YEAR 1,065,564 1,042,357
============ ============
CASH AT END OF PERIOD $ 1,570,864 $ 1,487,472
============ ============
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 389,926 $ 397,463
SUPPLEMENTARY NON-CASH FINANCING ACTIVITIES:
Buyer's assumption of mortgage notes $ -- $ 5,696,391
Deferred gain $ -- $ 110,693
The accompanying notes are an integral part of these financial statements.
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6
SOLO SERVE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE 1:
The financial statements as of May 3, 1997 and May 2, 1998, and for the thirteen
week periods ended May 3, 1997 and May 2, 1998 are unaudited and reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position of Solo Serve Corporation (the "Company")
as of May 2, 1998, and the results of operations and cash flows for the periods
presented. Such adjustments are of a normal and recurring nature. The results of
operations for the thirteen week period are not necessarily indicative of the
operating results for a full year or of future operations. These unaudited
condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 31, 1998.
NOTE 2:
The Company's business has been affected by a number of factors, including
increased competition in its principal markets, weakness in the apparel
industry, unfavorable economic conditions in certain markets and other factors,
many of which are not within the Company's control. Increased promotional
activities by other retailers as well as the opening of additional store
locations in the Company's principal markets have resulted in significant sales
decreases. The Company has maintained inventory at planned levels; however, the
Company has experienced and continues to experience an unstable credit
environment, principally with third party factors, which has from time to time
resulted in constraints on the Company's ability to receive certain merchandise
at optimum times and in optimum quantities. Continuing unfavorable business
conditions and financial performance could heighten vendor and factor concern
regarding the Company's creditworthiness, which could adversely affect the
Company's ability to receive sufficient trade credit support to acquire adequate
levels of inventory in the future.
In response to these conditions, management restructured its lending
arrangements, opened stores in markets smaller than it has traditionally served,
sold and leased back its distribution center and corporate offices, and entered
into contracts to sell and leaseback its owned store locations. If current plans
to improve overall financial performance and meet liquidity requirements are not
successful, the Company would consider other alternatives designed to enhance
liquidity, including additional debt or equity financings, or other strategic
alternatives.
NOTE 3:
Long-term debt consists of the following:
MAY 3, 1997 JANUARY 31, 1998 MAY 2, 1998
----------- ---------------- -----------
Notes payable to bank, interest at prime plus 1/2%
(9.0% at May 2, 1998) secured by properties $ 5,048,064 $ 4,808,716 $ 4,721,891
Note payable to insurance company, interest at 8%; secured by
equipment and properties 561,467 272,127 171,770
Mortgage notes payable to insurance companies, interest at 9.5%;
secured by the distribution center 5,747,480 5,706,011 --
Revolving credit facility, interest at prime plus 1%
(9.5% at May 2, 1998); secured primarily by inventory 7,715,000 7,695,000 9,170,000
----------- ----------- -----------
19,072,011 18,481,854 14,063,661
Less current portion 785,096 5,140,895 4,893,661
----------- ----------- -----------
Long-term portion $18,286,915 $13,340,959 $ 9,170,000
=========== =========== ===========
6
7
The Company has a term note payable to Chase Bank -Texas ("Chase") due in equal
monthly payments of principal and interest of $64,117 until January 1999, when
the remaining principal balance of $4.5 million is due. The Chase note is
secured by the Company's three owned store locations. These properties are
currently subject to a contract for sale and leaseback, which, if completed, is
expected to result in the retirement of the Chase indebtedness. The transaction
is expected to close in early September 1998.
The Company also has a note payable to MetLife Capital Corporation (the "MetLife
Note"), which is secured by various equipment and fixtures located at the
corporate office and certain stores. The MetLife Note requires equal monthly
payments, including principal and interest, of $35,044 until September 1998.
The Company also had two mortgage notes payable, with identical terms (the
"Mortgage Notes"), each of which was secured by the Company's corporate office
and distribution center in San Antonio, Texas. The Mortgage Notes required
aggregate monthly payments of principal and interest of $49,773 until December
2002, when the remaining aggregate principal balance of $5.4 million was due. On
April 6, 1998, the Company sold and leased back the distribution center and
corporate office. The buyer, in turn, assumed the outstanding Mortgage Notes,
which released the Company from any future liability on this indebtedness. The
transaction resulted in a gain of $110,693, which has been deferred and will be
amortized over the term of the lease.
The Company has a $12 million revolving credit facility with Sanwa Business
Credit Corporation ("Sanwa"). The loan matures October 2, 2000. Principal will
be due at maturity and interest only is due and payable in monthly installments.
Under the loan agreement, the advance rate under the Sanwa credit facility is in
an amount equal to 70% of the Company's eligible inventory during the period May
1 through December 10 of each year and 65% of eligible inventory at all other
times. In addition to advances made based upon the percentage of eligible
inventory, Sanwa made available an additional $750 thousand upon receipt of a
letter of credit in such amount from General Atlantic Corporation (`GAC"), one
of the Company's principal stockholders. In consideration for GAC's providing
the $750 thousand standby letter of credit to Sanwa, the Company granted GAC a
second lien security interest (subordinated to Sanwa) on the assets of the
Company pledged to Sanwa. Covenants under the loan agreement require the Company
to maintain certain financial ratios.
On March 17, 1998, the Company amended its loan agreement with Sanwa. The
amendment waives compliance with the financial covenants at January 31, 1998,
eliminates the Company's minimum net worth covenant entirely, and revises the
interest coverage ratios for 1998. If the Company fails to meet the revised
interest coverage ratio, the entire balance due under the loan agreement would
be reclassified as a current liability. The amendment also increases the advance
rate on the Company's eligible inventory from 65% to 70% from the date of the
amendment through December 10, 1998 and provides an additional $600 thousand
available to borrow based upon a new $600 thousand letter of credit in favor of
Sanwa provided by GAC. The new $600 thousand letter of credit, which is
anticipated to terminate thirty days after consummation of the pending sale of
the Company's three owned store locations, is in addition to the previously
discussed $750 thousand letter of credit provided by GAC, which is anticipated
to terminate December 31, 1998. The letters of credit are secured by a second
lien on substantially all of the assets of the Company other than real estate.
7
8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NUMBER OF STORES
FISCAL 1997 FISCAL 1998
----------- -----------
Beginning of year 28 27
END OF FIRST QUARTER 28 27
========== ==========
RESULTS OF OPERATIONS
The following table sets forth certain financial data of the Company expressed
as a percentage of net revenues for the thirteen weeks (first quarter) ended May
3, 1997 and May 2, 1998.
PERCENTAGE OF NET REVENUES
THIRTEEN WEEKS ENDED
MAY 3, 1997 MAY 2, 1998
----------- -----------
Net revenues 100.0% 100.0%
Cost of goods sold, including buying and distribution costs 71.3 66.6
--------- ---------
Gross profit 28.7 33.4
Selling, general and administrative expenses 34.4 30.7
Store closure expense 3.1 --
Depreciation 2.5 2.0
Amortization .1 --
--------- ---------
Operating income (loss) (11.4) 0.7
Interest expense 2.0 2.6
--------- ---------
Net (loss) (13.4) (1.9)
========= =========
8
9
THIRTEEN WEEKS (FIRST QUARTER) ENDED MAY 3, 1997 VERSUS
THIRTEEN WEEKS ENDED MAY 2, 1998
Recent Developments
On April 1, the Company entered into an agreement whereby the landlord bought
out and terminated the lease of one under-performing store in Austin, Texas. The
Company had previously closed a store in Shreveport, Louisiana in July 1997, but
remained subject to continuing lease payment obligations for the term of the
lease. Due to changing market conditions in Shreveport, the Company relocated
the assets of the Austin store to the Shreveport, Louisiana location and
reopened that store in May 1998.
In May 1998, the Company signed a lease for a new store in Kingsville, Texas,
which it plans to open in early June 1998. This new store continues the
Company's expansion into smaller markets, where the Company faces less direct
competition from larger off-price retailers, traditional department and
specialty stores and can operate under a lower occupancy expense structure than
that generally experienced in stores located in metropolitan areas.
Results of Operations
The Company's net revenues for the first quarter ended May 2, 1998 were $16.5
million as compared to $19.6 million during the first quarter of fiscal 1997.
The Company experienced a comparable store sales decrease of 9.9% for the first
quarter of fiscal 1998 as compared to the same period for fiscal 1997. During
the first quarter of fiscal 1998, the Company experienced an unstable credit
environment, principally with third party factors, which resulted in periodic
and occasionally significant constraints on the Company's ability to receive
certain merchandise at optimum times and in optimum quantities, and which
management believes negatively impacted sales.
Gross profit for the first quarter was $5.5 million in fiscal 1998 and $5.6
million for the same period in fiscal 1997, a decrease of $100 thousand. Gross
profit as a percent of net revenues was 4.7 percentage points higher than the
prior year, due primarily to the increase in initial markon, and decreases in
promotional activities.
For the first quarter of fiscal 1998, selling, general and administrative
expenses decreased $1.6 million to $5.1 million from $6.7 million in fiscal
1997. This is principally the result of a decrease in promotional and
advertising expenses of $335 thousand, a decrease in human resource costs of
$365 thousand, and a decrease in property expense of $595 thousand due to the
reversal of accrued rent associated with the closed store in Austin and lower
rent and operating costs at the two new stores opened late in 1997 as compared
to the stores that were closed in the third quarter of fiscal 1997. Selling,
general and administrative expenses as a percentage of revenues decreased to
31.0% from 34.4% for the comparable period of the prior year.
Depreciation and amortization in the first quarter of fiscal 1998 decreased 35%
to $331 thousand from $510 thousand in 1997 due to the write off of Goodwill in
fiscal 1997, and the lower capitalized cost of new stores as compared to closed
stores.
The Company incurred an operating profit of $115 thousand during the first
quarter of fiscal 1998 as compared to an operating loss of $2.2 million in
fiscal 1997. This is primarily due to increased gross margin and reduced
operating expenses.
The Company recorded net interest expense for the first quarter of fiscal 1997
of $429 thousand as compared to $390 thousand during the first quarter of fiscal
1997. This was principally the result of increased borrowing on the Company's
line of credit.
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10
Liquidity and Capital Resources
Cash used by operating activities in the first quarter of fiscal 1998 was $2.2
million. This was primarily the result of the net loss ($314 thousand),
increases in inventories ($2.3 million) and other current assets ($331
thousand), and a decrease in accrued expense ($702 thousand), net of an increase
in accounts payable ($1.1 million). Capital expenditures were $171 thousand,
consisting primarily of replenishment and refurbishment of existing equipment
and facilities.
On April 6, 1998, the Company sold and leased back its distribution center and
corporate offices. Net proceeds from the sale were approximately $1 million, and
the buyer assumed the mortgage note (approximately $5.7 million), relieving the
Company of that indebtedness.
The Company has a term note payable to Chase Bank-Texas ("Chase") due in equal
monthly payments of principal and interest of $64,117 until January 1999, when
the remaining principal balance of $4.5 million is due. The Chase note is
secured by the Company's three owned store locations. These properties are
currently subject to a contract for sale and leaseback, which, if completed, is
expected to result in the retirement of the Chase indebtedness. The transaction
is expected to close in early September 1998.
The Company also has a note payable to MetLife Capital Corporation (the "MetLife
Note"), which is secured by various equipment and fixtures located at the
corporate office and certain stores. The MetLife Note requires equal monthly
payments, including principal and interest, of $35,044 until September 1998.
The Company has a $12 million revolving credit facility with Sanwa Business
Credit Corporation ("Sanwa"). The loan matures October 2, 2000. Principal will
be due at maturity and interest only is due and payable in monthly installments.
Under the loan agreement, the advance rate under the Sanwa credit facility is in
an amount equal to 70% of the Company's eligible inventory during the period May
1 through December 10 of each year and 65% of eligible inventory at all other
times. In addition to advances made based upon the percentage of eligible
inventory, Sanwa made available an additional $750 thousand upon receipt of a
letter of credit in such amount from General Atlantic Corporation ("GAC"), one
of the Company's principal stockholders. In consideration for GAC's providing
the $750 thousand standby letter of credit to Sanwa, the Company granted GAC a
second lien security interest (subordinated to Sanwa) on the assets of the
Company pledged to Sanwa. Covenants under the loan agreement require the Company
to maintain certain financial ratios.
On March 17, 1998, the Company amended its loan agreement with Sanwa. The
amendment waives compliance with the financial covenants at January 31, 1998,
eliminates the Company's minimum net worth covenant entirely, and revises the
interest coverage ratios for 1998. If the Company fails to meet the revised
interest coverage ratio, the entire balance due under the loan agreement would
be reclassified as a current liability. The amendment also increases the advance
rate on the Company's eligible inventory from 65% to 70% from the date of the
amendment through December 10, 1998 and provides an additional $600 thousand
available to borrow based upon a new $600 thousand letter of credit in favor of
Sanwa provided by GAC. The new $600 thousand letter of credit, which is
anticipated to terminate thirty days after consummation of the pending sale of
the Company's three owned store locations, is in addition to the previously
discussed $750 thousand letter of credit provided by GAC, which is anticipated
to terminate December 31, 1998. The letters of credit are secured by a second
lien on substantially all of the assets of the Company other than real estate.
During the first quarter of fiscal 1998, the Company's business has been
affected by a number of factors, including increased competition in its
principal markets, weakness in the apparel industry, unfavorable economic
conditions in certain markets and other factors, many of which are not within
the Company's control. Increased promotional activities by other retailers as
well as the opening of additional store locations in the Company's principal
markets have resulted in significant sales decreases. The Company has maintained
inventory at planned levels; however, the Company experienced an unstable credit
environment, principally with third party factors, which has from time to time
resulted in constraints on the Company's ability to receive certain merchandise
at optimum times and in optimum quantities. Continuing unfavorable business
conditions and financial performance could heighten vendor and factor concern
regarding the Company's creditworthiness, which could adversely affect the
Company's ability to receive sufficient trade credit support to acquire adequate
levels of inventory in the future. No assurance can be given that the Company
will be successful in its efforts to improve sales and operations and reverse
operating trends. Because of these uncertainties, any investment in the
Company's common stock should be considered speculative.
10
11
If initiatives implemented in 1997 and early 1998 are not successful in
improving overall financial performance and meeting liquidity requirements, the
Company would consider other alternatives, including, without limitation,
implementation of additional measures designed to enhance capital and reduce
expenses and/or additional debt or equity financings.
11
12
PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. In the opinion
of management, the outcome of this litigation will not have a material effect on
the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following Exhibits are incorporated by reference to the filing indicated or
are included following the Index to Exhibits:
Exhibit
Number Description of Exhibit
- -------- ----------------------
3.1 Restated Certificate of Incorporation of the Company (7)
3.2 Certificate of Designation of Rights and Preferences of Preferred
Stock (7)
3.3 Bylaws of the Company, as amended and restated (14)
4.1 Specimen Certificate for Common Stock of the Registrant
(representing shares of common stock of the Company after giving
effect to the previously reported 1-for-2 reverse split effected
July 18, 1995) (9)
10.1 Registration Rights Agreement among General Atlantic Corporation,
Robert J. Grimm and the Company (1)
10.2 Agreement Regarding Tax Consequences of Deconsolidation between the
Company and General Atlantic Corporation (1)
10.3 Tax Allocation Agreement between the Company and General Atlantic
Corporation (1)
10.4 Form of Indemnity Agreement between Directors, Executive Officers
and the Company (1)
10.5 Associate Stock Purchase Plan of the Company (2)
10.6 Retirement Savings Plan and Trust of the Company (2)
10.7 Mortgage Note A, dated November 20, 1992, in principal amount of
$4,940,000, with the Company as Maker and Nationwide Life Insurance
Company as Holder (2)
10.8 Mortgage Note B, dated November 20, 1992, in principal amount of
$1,000,000, with the Company as Maker and Employers Life Insurance
Company of Wausau as Holder (2)
10.9 Subscription Agreement between the Company and General Atlantic
Corporation (7)
10.10 Solo Serve Corporation 1995 Stock Incentive Plan (8) +
10.11 Solo Serve Corporation Director Stock Option Plan (8) +
10.12 First Amendment to Solo Serve Corporation Director Stock Option Plan
(20)+
10.13 Loan and Security Agreement, dated as of June 20, 1995, by and
between Solo Serve Corporation and Congress Financial Corporation
(Southwest) (7)
10.14 Amended Loan and Security Agreement, dated July 18, 1995, by and
between Solo Serve Corporation and MetLife Capital Corporation (8)
10.15 Loan Modification Agreement, dated July 18, 1995, by and among Solo
Serve Corporation, Nationwide Life Insurance Company, and Employers
Life Insurance Company (8)
10.16 Promissory Note, dated July 31, 1995, in principal amount of
$5,565,000, with the Company as Maker, and Texas Commerce Bank
National Association as Holder (8)
10.17 Loan Modification Agreement, dated October 27, 1995, by and between
Solo Serve Corporation and Congress Financial Corporation
(Southwest) (9)
10.18 Consulting Services Agreement between the Company and Robert J.
Grimm (10) +
10.19 Second Amendment to Loan and Security Agreement, dated January 31,
1996, by and between Solo Serve Corporation and Congress Financial
Corporation (Southwest) (11)
10.20 Letter Agreement dated January 23, 1996 by and between the Company
and MetLife Capital Corporation modifying the Loan and Security
Agreement between the Company and MetLife Capital Corporation, as
amended on July 18, 1995 (11)
10.21 Amendment No. 3 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated June 26, 1996 (12)
12
13
10.22 Letter of Credit and Security Agreement between Solo Serve
Corporation and General Atlantic Corporation dated as of June 26,
1996 (12)
10.23 Intercreditor and Subordination Agreement between Congress Financial
Corporation (Southwest) and General Atlantic Corporation dated as of
June 26, 1996, as acknowledged and agreed to by Solo Serve
Corporation (12)
10.24 Consulting Agreement between the Company and Charles Siegel (13) +
10.25 Employment Agreement between the Company and Charles Siegel (13) +
10.26 Amendment No. 4 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated as of September 1, 1996 (13)
10.27 Amendment No. 5 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated as of March 31, 1997 (14)
10.28 Letter Agreement dated March 28, 1997 by and between the Company and
MetLife Capital Corporation modifying the Loan and Security
Agreement between the Company and MetLife Capital Corporation, as
amended on July 18, 1995 (14)
10.29 Letter Agreement dated July 8, 1996 by and between the Company and
Ross E. Bacon (14)+
10.30 Amendment No. 6 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated as of May 19, 1997 (14)
10.31 Agency Agreement by and between Solo Serve Corporation and
Hilco/Great American Group dated May 7, 1997, as amended together
with related agreements (15)
10.32 Amendment No. 7 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated June 16, 1997 (15)
10.33 Standby Guarantee and Indemnification Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated June 16, 1997 (15)
10.34 Commitment Letter of Sanwa Business Credit Corporation dated
September 5, 1997 (16)
10.35 Letter of Price Waterhouse LLP dated September 18, 1997 (17)
10.36 Loan and Security Agreement by and between the Company and Sanwa
Business Credit Corporation (18)
10.37 Employment Agreement by and between the Company and Charles M.
Siegel (18)+
10.38 Subordinated Promissory Note of the Company to Charles Siegel in
Principal Amount of $400,000 (18)
10.39 Subordinated Promissory Note of the Company to The Siegel Family
Trust in Principal Amount of $100,000 (18)
10.40 Letter of Credit and Security Agreement by and between the Company
and General Atlantic Corporation (18)
10.41 Subordination and Intercreditor Agreement by and among the Company,
Sanwa Business Credit Corporation, and General Atlantic Corporation
(18)
10.42 Subordination and Intercreditor Agreement by and among the Company,
Sanwa Business Credit Corporation, Charles M. Siegel, and The Siegel
Family Trust (18)
10.43 First Amendment to Loan and Security Agreement by and between the
Company and Sanwa Business Credit Corporation (19)
10.44 Amended and Restated Letter of Credit and Security Agreement by and
between the Company and General Atlantic Corporation (19)
10.45 Stockholder Agreement (19)
10.46 Employment Agreement between the Company and Ross Bacon (19)+
10.47 Employment Agreement between the Company and Mark Blankenship (19)+
10.48 Employment Agreement between the Company and Terry Lalosh (19)+
10.49 Lease Agreement between the Company and Koontz/McCombs 1, Ltd. (20)
10.50 Earnest Money Contract between the Company and Koontz/McCombs, LLC,
as amended*
10.51 Escrow and Security Agreement by and among the Company, Nationwide
Life Insurance Company, Employers Life Insurance Company of Wasuau,
Koontz/McCombs 1, Ltd. and Holliday Fenoglio Fowler, L.P. (20)
10.52 Assumption Agreement by and among the Company, Nationwide Life
Insurance Company, Employers Life Insurance Company of Wasuau,
Koontz/McCombs 1, Ltd., Koontz/McCombs, LLC and Bart C. Koontz (20)
10.53 Second Amendment to Solo Serve Corporation Director Stock Option
Plan *+
13
14
27 Financial Data Schedule *
- --------------
* Filed herewith.
+ Management Compensatory Plan or Arrangement
(1) Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-1 (No. 33-46324), as filed on
March 11, 1992, and amended by Amendment No. 1, filed on March
26, 1992, Amendment No. 2, filed on April 20, 1992, and Amendment
No. 3, filed on April 24, 1992.
(2) Incorporated by reference to the Exhibits to the Company's Annual
Report on Form 10-K for the Fiscal year ended January 30, 1993.
(3) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended July 30,
1994.
(4) Incorporated by reference to the Exhibits filed to the Company's
Annual Report on Form 10-K for the Fiscal Year ended January 28,
1995.
(5) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended April 29,
1995.
(6) Incorporated by reference to the Exhibits filed to the Company's
Current Report on Form 8-K for July 6, 1995.
(7) Incorporated by reference to the Exhibits filed to the Company's
Current Report on Form 8-K for July 18, 1995.
(8) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended July 29,
1995.
(9) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended October 28,
1995.
(10) Incorporated by reference to the Exhibits filed to the Company's
Annual Report on Form 10-K for the Fiscal Year ended February 3,
1996.
(11) Incorporated by reference to the Exhibits filed to the Company's
Current Report on Form 8-K for February 8, 1996.
(12) Incorporated by reference to the Exhibits filed to the Company's
Current Report on Form 8-K for July 2, 1996.
(13) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended August 3,
1996.
(14) Incorporated by reference to the Exhibits filed to the Company's
Annual Report on Form 10-K for the Fiscal Year ended February 1,
1997.
(15) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended May 3, 1997.
(16) Incorporated by reference to the Exhibits filed to the Company's
Quarterly Report on Form 10-Q for the Quarter ended August 2,
1997.
(17) Incorporated by reference to the Exhibits filed on the Company's
Current Report on Form 8-K for September 18, 1997.
(18) Incorporated by reference to the Exhibits filed to the Company's
Current Report on Form 8-K for October 2, 1997.
(19) Incorporated by reference to the Exhibits filed to the Company's
Current Report on Form 8-K for March 17, 1998.
(20) Incorporated by reference to the Exhibits filed to the Company's
Annual Report on Form 10-K for the Fiscal Year ended January 31,
1998.
(b) Reports on Form 8-K. A report on Form 8-K was filed on March 17, 1998
announcing the amendment of the Company's loan agreement with its
primary lender to increase the Company's access to working capital and
to amend certain covenants. It also announced the investment by three
members of senior management in which they acquired capital stock of
the Company.
14
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
SOLO SERVE CORPORATION
By: /s/ CHARLES SIEGEL
-------------------------------------
Charles Siegel,
President and Chief Executive Officer
By: /s/ ROSS E. BACON
-------------------------------------
Ross E. Bacon,
Executive Vice President and Chief
Operating and Financial Officer
15
16
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- -------- ----------------------
3.1 Restated Certificate of Incorporation of the Company (7)
3.2 Certificate of Designation of Rights and Preferences of Preferred
Stock (7)
3.3 Bylaws of the Company, as amended and restated (14)
4.1 Specimen Certificate for Common Stock of the Registrant
(representing shares of common stock of the Company after giving
effect to the previously reported 1-for-2 reverse split effected
July 18, 1995) (9)
10.1 Registration Rights Agreement among General Atlantic Corporation,
Robert J. Grimm and the Company (1)
10.2 Agreement Regarding Tax Consequences of Deconsolidation between the
Company and General Atlantic Corporation (1)
10.3 Tax Allocation Agreement between the Company and General Atlantic
Corporation (1)
10.4 Form of Indemnity Agreement between Directors, Executive Officers
and the Company (1)
10.5 Associate Stock Purchase Plan of the Company (2)
10.6 Retirement Savings Plan and Trust of the Company (2)
10.7 Mortgage Note A, dated November 20, 1992, in principal amount of
$4,940,000, with the Company as Maker and Nationwide Life Insurance
Company as Holder (2)
10.8 Mortgage Note B, dated November 20, 1992, in principal amount of
$1,000,000, with the Company as Maker and Employers Life Insurance
Company of Wausau as Holder (2)
10.9 Subscription Agreement between the Company and General Atlantic
Corporation (7)
10.10 Solo Serve Corporation 1995 Stock Incentive Plan (8) +
10.11 Solo Serve Corporation Director Stock Option Plan (8) +
10.12 First Amendment to Solo Serve Corporation Director Stock Option Plan
(20)+
10.13 Loan and Security Agreement, dated as of June 20, 1995, by and
between Solo Serve Corporation and Congress Financial Corporation
(Southwest) (7)
10.14 Amended Loan and Security Agreement, dated July 18, 1995, by and
between Solo Serve Corporation and MetLife Capital Corporation (8)
10.15 Loan Modification Agreement, dated July 18, 1995, by and among Solo
Serve Corporation, Nationwide Life Insurance Company, and Employers
Life Insurance Company (8)
10.16 Promissory Note, dated July 31, 1995, in principal amount of
$5,565,000, with the Company as Maker, and Texas Commerce Bank
National Association as Holder (8)
10.17 Loan Modification Agreement, dated October 27, 1995, by and between
Solo Serve Corporation and Congress Financial Corporation
(Southwest) (9)
10.18 Consulting Services Agreement between the Company and Robert J.
Grimm (10) +
10.19 Second Amendment to Loan and Security Agreement, dated January 31,
1996, by and between Solo Serve Corporation and Congress Financial
Corporation (Southwest) (11)
10.20 Letter Agreement dated January 23, 1996 by and between the Company
and MetLife Capital Corporation modifying the Loan and Security
Agreement between the Company and MetLife Capital Corporation, as
amended on July 18, 1995 (11)
10.21 Amendment No. 3 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated June 26, 1996 (12)
17
10.22 Letter of Credit and Security Agreement between Solo Serve
Corporation and General Atlantic Corporation dated as of June 26,
1996 (12)
10.23 Intercreditor and Subordination Agreement between Congress Financial
Corporation (Southwest) and General Atlantic Corporation dated as of
June 26, 1996, as acknowledged and agreed to by Solo Serve
Corporation (12)
10.24 Consulting Agreement between the Company and Charles Siegel (13) +
10.25 Employment Agreement between the Company and Charles Siegel (13) +
10.26 Amendment No. 4 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated as of September 1, 1996 (13)
10.27 Amendment No. 5 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated as of March 31, 1997 (14)
10.28 Letter Agreement dated March 28, 1997 by and between the Company and
MetLife Capital Corporation modifying the Loan and Security
Agreement between the Company and MetLife Capital Corporation, as
amended on July 18, 1995 (14)
10.29 Letter Agreement dated July 8, 1996 by and between the Company and
Ross E. Bacon (14)+
10.30 Amendment No. 6 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated as of May 19, 1997 (14)
10.31 Agency Agreement by and between Solo Serve Corporation and
Hilco/Great American Group dated May 7, 1997, as amended together
with related agreements (15)
10.32 Amendment No. 7 to Loan and Security Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated June 16, 1997 (15)
10.33 Standby Guarantee and Indemnification Agreement by and between Solo
Serve Corporation and Congress Financial Corporation (Southwest)
dated June 16, 1997 (15)
10.34 Commitment Letter of Sanwa Business Credit Corporation dated
September 5, 1997 (16)
10.35 Letter of Price Waterhouse LLP dated September 18, 1997 (17)
10.36 Loan and Security Agreement by and between the Company and Sanwa
Business Credit Corporation (18)
10.37 Employment Agreement by and between the Company and Charles M.
Siegel (18)+
10.38 Subordinated Promissory Note of the Company to Charles Siegel in
Principal Amount of $400,000 (18)
10.39 Subordinated Promissory Note of the Company to The Siegel Family
Trust in Principal Amount of $100,000 (18)
10.40 Letter of Credit and Security Agreement by and between the Company
and General Atlantic Corporation (18)
10.41 Subordination and Intercreditor Agreement by and among the Company,
Sanwa Business Credit Corporation, and General Atlantic Corporation
(18)
10.42 Subordination and Intercreditor Agreement by and among the Company,
Sanwa Business Credit Corporation, Charles M. Siegel, and The Siegel
Family Trust (18)
10.43 First Amendment to Loan and Security Agreement by and between the
Company and Sanwa Business Credit Corporation (19)
10.44 Amended and Restated Letter of Credit and Security Agreement by and
between the Company and General Atlantic Corporation (19)
10.45 Stockholder Agreement (19)
10.46 Employment Agreement between the Company and Ross Bacon (19)+
10.47 Employment Agreement between the Company and Mark Blankenship (19)+
10.48 Employment Agreement between the Company and Terry Lalosh (19)+
10.49 Lease Agreement between the Company and Koontz/McCombs 1, Ltd. (20)
10.50 Earnest Money Contract between the Company and Koontz/McCombs, LLC,
as amended*
10.51 Escrow and Security Agreement by and among the Company, Nationwide
Life Insurance Company, Employers Life Insurance Company of Wasuau,
Koontz/McCombs 1, Ltd. and Holliday Fenoglio Fowler, L.P. (20)
10.52 Assumption Agreement by and among the Company, Nationwide Life
Insurance Company, Employers Life Insurance Company of Wasuau,
Koontz/McCombs 1, Ltd., Koontz/McCombs, LLC and Bart C. Koontz (20)
10.53 Second Amendment to Solo Serve Corporation Director Stock Option
Plan *+