-----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, BB/MG6M5efMwkdgaYZvmjYZmaSMJzRGDOM29n8RC0Qp8K1ZJPYUkj1fjMccfMVP4 4dsyJOXDZSBic1KzhTv9Vw== 0000928385-01-500672.txt : 20010507 0000928385-01-500672.hdr.sgml : 20010507 ACCESSION NUMBER: 0000928385-01-500672 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010203 FILED AS OF DATE: 20010504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK JOS A CLOTHIERS INC /DE/ CENTRAL INDEX KEY: 0000920033 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-APPAREL & ACCESSORY STORES [5600] IRS NUMBER: 363189198 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 033-14657 FILM NUMBER: 1622922 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-K 1 d10k.txt FORM 10-K 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 February 3, 2001 ("Fiscal 2000"). [ ]Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act of 1934 for the transition period from to . [Commission file number 0-23874] JOS. A. BANK CLOTHIERS, INC. ---------------------------- (Exact name of registrant as specified in its character) Delaware 36-3189198 -------- ---------- (State of Incorporation) (I.R.S.Employer Identification No.) 500 Hanover Pike, Hampstead, MD 21074 ------------------------------- ----- (Address of principal executive offices) (zip code) (410) 239-2700 -------------- (Registrant's telephone number, including area code) Securities registered pursuant to Securities registered pursuant to Section 12(g) of the Act: Section 12(b) of the Act: Title of each class None ------------------- ---- Common Stock (the "Common Stock") par value $.01 per share Rights to purchase units of Series A Preferred Stock 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 the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III for this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the registrant, based upon the closing price of shares of Common Stock on the National Association of Securities Dealers Automated Quotation ("NASDAQ") National Market System at April 19, 2001 was approximately $37,937,344. The number of shares of Common Stock, par value $0.01 per share, outstanding on April 19, 2001 was 5,955,627. DOCUMENTS INCORPORATED BY REFERENCE: The Company will disclose the information required under Part III (items 10-13) either by (a) incorporating the information by reference from the Company's definitive proxy statement if filed by June 4, 2001 (the first business day following 120 days from the close of its fiscal year ending February 3, 2001) or (b) filing an amendment to this Form 10-K which contains the required information by June 4, 2001 (the first business day following 120 days from the close of the Company's fiscal year ending February 3, 2001). Index to the exhibits appears on Pages 13 and 14. PART I Item 1. BUSINESS General Jos. A. Bank Clothiers, Inc., a Delaware corporation (the "Company" or "Jos. A. Bank"), established in 1905, is a retailer and cataloger of men's tailored and casual clothing and accessories. The Company sells substantially all of its products exclusively under the Jos. A. Bank label through its 117 Company-operated retail stores (including seven outlet stores and ten franchise stores), located throughout the Northeast, Midwest, South and Mid-Atlantic regions of the U.S., as well as through the Company's nationwide catalog and Internet (www.josbank.com) operations. The Company's products are targeted at the male career professional, and its marketing emphasizes the Jos. A. Bank line of quality tailored and casual clothing and accessories, which is offered at price points typically below those of its principal competitors for items of comparable quality. The Company believes that it is able to achieve this pricing advantage for its men's suits, sport coats and pants primarily by its design capability and its sourcing leverage. In April, 1998, the Company completed the disposition of its remaining manufacturing operations and now sources all of its products through third party vendors. Strategy The Company's strategy is to further enhance its competitive position in men's proprietary label, updated apparel, and to capitalize on the strength of the Jos. A. Bank name and reputation by offering its customers multiple convenient outlets to purchase product, including its 117 retail stores, Internet site and catalog. Multi-Channel Retailing. The Company's strategy is to operate its three channels of selling as an integrated business and to provide the same personalized service to its customers regardless of whether merchandise is purchased through its stores, the Internet or catalog. The Company believes the synergy between its stores, its Internet site and its catalog offers an important convenience to its customers and a competitive advantage to the Company. The Company believes it has significant opportunity to leverage the three channels of selling by promoting each channel together to create awareness of the brand. For example, the Company promotes its Internet site in its stores, catalog and media advertising without incurring substantial costs to create the promotions. Conversely, the Internet site provides store location listings and can be used as a promotional source for the stores and catalog. The Company also uses its catalog to communicate the Jos. A. Bank image, to provide customers with fashion guidance in coordinating outfits and to generate store and Internet traffic. Store Growth. The Company believes that it has substantial opportunity to increase its store base by adding stores in its existing markets and by entering new markets. The Company opened eight new full-line stores and two outlet stores in fiscal 2000 and recently completed the first year of its plan to open approximately 75-100 new stores through fiscal 2003. Substantially all of the stores to be opened in the next several years will be placed in existing markets which allows the Company to leverage its existing advertising, management, distribution and sourcing infrastructure. However, certain new stores may be opened in new markets such as California, Washington, Arizona, etc., as opportunities warrant. Internet. The Company's success as a cataloger facilitated the development of on-line selling capabilities in August, 1998, providing a worldwide purchasing audience. The Internet accounted for approximately 2% of sales in fiscal 2000, increasing by 188% over the prior year and the Company expects its Internet sales volume to continue to grow at a significant rate. Sales Channels Stores. The Company has focused on three key factors that it believes will contribute to even greater success in its stores. The Company has targeted specialty retail centers with certain co-tenancy for new store locations, has developed and is implementing a new store prototype to attract customers and has shifted from heavy dependence on sales of suits to its successful Corporate Casual and Sportswear. At April 19, 2001, the Company operated 100 full-line retail stores, seven outlet and ten franchise locations in a total of 29 states and the District of Columbia. The following table sets forth the region and market of the stores that were open at such date. 1
JOS. A. BANK STORES Total # Total # State Of Stores State Of Stores - ----- --------- ----- --------- Alabama 2(a) Mississippi 1(a) Colorado 2 Missouri 1 Connecticut 4 New Jersey 8 Delaware 1 New York 9 Florida 4 North Carolina 6(a) Georgia 9(a)(b) Ohio 4 Illinois 7(a) Pennsylvania 5(b) Indiana 1 Rhode Island 1 Kansas 1 South Carolina 1 Kentucky 1 Tennessee 3(a) Louisiana 3(a) Texas 11 Maryland 9(b) Virginia 10(b) Massachusetts 3 Washington, D.C. 1 Michigan 4 Wisconsin 1 Minnesota 2 Utah 2 Total 117
(a) Indicates one or more franchise stores (b) Indicates one or more outlet stores The Company expects its 75-100 projected new stores to provide an additional $90 million in annual sales by the final year (fiscal 2003) of its store growth plan. To increase the assurance that the future new stores would be successful, the Company hired a firm that specializes in real estate selection to analyze the performance of all of its existing store sites. The real estate specialist identified a key factor that appears to point to the success of a Jos. A. Bank store -- that the Company's stores located in high-end, specialty retail centers with the proper co-tenancy significantly outperform stores that are in strip centers or are free-standing. These specialty centers include current store sites such as Reston, VA, Annapolis, MD and East Cobb, GA. The Company has identified approximately 200 sites that fit the profile of the specialty retail centers and expects many more to be developed over the next three years. Jos. A. Bank has identified the first 100 targeted locations and is aggressively pursuing them. The Company expects to open between 75-100 stores through 2003, including the 8 stores opened in fiscal 2000 and up to 30 stores in fiscal 2001. The Company's new store prototype was designed in the second half of 2000 and was introduced in March 2001 at its first new store of the fiscal year in Charlottesville, VA. The design emphasizes an open shopping experience that coordinates its successful Corporate Casual and Sportswear with its other products. The store design is based on the use of wooden fixtures with glass shelving, numerous tables to feature fashion merchandise, carpet and abundant accent lighting and is intended to promote a pleasant and comfortable shopping environment. In the stores that have been opened in the last four years, approximately 80% of a store's space is dedicated to selling activities, with the remainder allocated to stockroom, tailoring and other support areas. This compares favorably to other Company stores where approximately 65% is dedicated to selling activities. The full-line stores averaged 8,200 square feet at the beginning of fiscal 1997 and averaged 6,500 square feet at the end of fiscal 2000. The Company expects that future stores will vary in size from approximately 4,000 to 6,000 square feet depending on the market. The stores are designed to utilize regional overflow tailor shops which allows the use of smaller tailor shops within each store. Each full line store has a tailor shop which provides a range of tailoring services. The Company guarantees all the tailoring work. Operating National Tailoring Services (NTS), the company-owned regional tailor shops, has allowed the Company to reduce the number of tailors in the stores by sending all overflow work to NTS. These overflow shops experience higher productivity as the tailors are not interrupted by store personnel during the course of the day. In every store, the store manager and certain additional staff have been trained to fit tailored clothing for alterations. The Company has ten franchise locations. Generally, a franchise agreement between the Company and the franchisee provides for a ten-year term with an option, exercisable by the franchisee under certain circumstances, to extend the term for an additional ten-year period. Franchisees pay the Company an initial fixed franchise fee and then a 2 percentage of sales. To assure that customers at franchise locations receive the same personalized service offered at Company operated stores, the Company typically requires certain franchisee employees to attend a Company sponsored training program. In addition, franchisees are required to maintain and protect the Company's reputation for high quality, classic clothing and customer service. Franchisees purchase substantially all merchandise offered for sale in their stores from the Company at an amount above cost. The Company has seven outlet stores which are used to liquidate excess merchandise and offer certain first quality products at a reduced price. Because of the classic character of the Company's merchandise and aggressive store clearance promotions, historically, the Company has not had significant quantities of merchandise to sell through its outlet stores. Catalog The Company's catalogs offer potential and existing customers convenience in ordering the Company's merchandise. In fiscal 2000 and 1999, the Company distributed approximately 8.0 and 7.8 million catalogs, respectively, excluding catalogs sent to stores for display and general distribution. In fiscal 2000 and 1999, catalog sales represented approximately 10% and 12% of net sales, respectively. The Company divides the year into two merchandise seasons, Spring and Fall, and mails its catalog to active customers as often as every four weeks. Catalogs offer potential and existing customers an easy way to order the full range of Jos. A. Bank products. Catalogs are important tools in communicating our high-quality image, providing customers with guidance in coordinating outfits, generating store traffic and providing useful market data on customers. Customers increasingly are becoming more comfortable purchasing traditional business attire through the catalog. To make catalog shopping as convenient as possible, the Company maintains a toll-free telephone number accessible 24 hours a day, seven days a week. The Company utilizes on-line computer terminals to enter customer orders and to retrieve information about merchandise and its availability. Catalog sales associates are generally able to help select merchandise and can provide detailed information regarding size, color, fit and other merchandise features. In most cases, sample merchandise is available for catalog sales associates to view, thereby allowing them to better assist customers. Clothing purchased from the catalog may be returned to any Company store or to the Company by mail. To process catalog orders, sales associates enter orders on-line into a computerized catalog order entry system which automatically updates all files, including the Company's customer mailing list, and permits the Company to measure the response to individual merchandise and catalog mailings. Sales and inventory information is available to the Company's buyers the next day. Computer processing of orders is performed by the warehouse management system which permits efficient picking of inventory from the warehouse. The Company's order entry and fulfillment systems permit the shipment of most orders the following day. Orders are shipped primarily by second day delivery or, if requested, by expedited delivery services, such as UPS priority. The Company replaced its Catalog system in May 1999 which facilitated easier order entry and provides greater customer data, as well as being Y2K compliant. Internet The Company is committed to growing its Internet sales which increased 188% in fiscal 2000. The Company has established over 500 affiliate arrangements which drive a significant amount of traffic to its internet site. In 2001, the Company expects to continue pursuing similar arrangements. The Company invested approximately $1 million in 2000 to implement a new Internet site that has many customer-friendly features such as increased speed, real-time inventory status, order confirmation and product search capabilities, among others. The new site also enables the Company to be more responsive to trends to increase sales. The new site went "live" in August 2000 and replaced a site that had been hosted by a third party. The processing of orders for the Internet uses the same system used to fill catalog orders. As such, the Company has an existing infrastructure to service its internet customers efficiently and quickly. Merchandising The Company believes it fills a niche of providing classic, professional men's clothing with impeccable quality at a good price. The Company's merchandising strategy focuses on achieving an updated classic look with extreme attention to detail in quality materials and workmanship. The Company offers a distinctive collection of clothing and accessories necessary to dress the career man from head to toe, business dress and business casual, all sold under the Jos. 3 A. Bank label. Its product offering includes suits, tuxedos, shirts, vests, ties, sport coats, pants, sportswear, overcoats, sweaters, belts and braces, socks and underwear. The Company also sells branded shoes from Cole Haan, Johnston & Murphy and Allen-Edmonds. The Company believes its merchandise offering is well positioned to meet the changing trends of dress for its target customer. As the corporate work environment has trended to casual wear, the Company's product offering has been modified to meet the needs of the Jos. A. Bank customer. In 2000, casual wear (which includes sport coats, slacks and sportswear) accounted for 44% for the Company's sales, while suits represented less than 30% of sales. The Company made several key additions and changes to its product line in 2000. It introduced the TRIO/(R)/ collection as one of its solutions to Corporate Casual. The TRIO/(R)/ includes a jacket with coordinating pants and a second set of pants in a coordinating pattern. Therefore, the outfit can be worn as a suit or in a casual setting. The Company also offers its customers its Business Express line, a concept for purchasing suits that allows customers to customize their wardrobe by selecting separate, but perfectly matched, jackets and pants from one of three coat styles, plain front or pleated pants, and numerous updated fabric choices including Super 100 wool and natural stretch wool. The Business Express line allows a customer to buy a suit with minimal alteration and will fit their unique body size, similar to a custom-made suit. Jos. A. Bank is one of the few retailers in the country that has successfully developed this concept which the Company believes is a competitive advantage. During fiscal 2000, the Company upgraded its Business Express line by using Loro Piana Super 100s wool and adding other standard features. The Company also expanded its casual offering and believes it has one of the most extensive selections of sportcoats and dress pants in the industry. Its David Leadbetter Golf Apparel was expanded as was the offering of categories such as sportshirts, sweaters, casual trousers and shoes. Design and Purchasing The Jos. A. Bank merchandise is designed through the coordinated efforts of the Company's merchandising, buying and planning staffs working in conjunction with finished goods suppliers and contract manufacturers. Substantially all products are made to the Company's rigorous specifications, thus ensuring consistent fit and feel for the customer. The merchandising buying staff oversees the development of each product in terms of style, color and fabrication. Because the Company's designs are focused on updated classic clothing, the Company experiences much less fashion risk than other retailers. The process of creating a new garment begins approximately nine months before the product's expected in-stock date. The Company believes that it gains a distinct advantage over many of its competitors in terms of quality and price by effectively designing products, sourcing piece goods and then having merchandise manufactured to its own specifications by contract manufacturers, either domestically or abroad. The Company buys its shirts from leading U.S. and overseas shirt manufacturers who also supply shirts to many of the Company's competitors. All clothing manufactured for the Company by contract manufacturers must conform to the Company's rigorous specifications with respect to standardized sizing and quality. The Company's planning staff is responsible for providing each channel of business with the correct amount of products at all times. The Company transacts business on an order-by-order basis and does not maintain any long-term or exclusive contracts, commitments or arrangements to purchase from any piece goods vendor or contract manufacturer. During fiscal 2000, three vendors accounted for over 88% of the piece goods purchased by the Company. The Company does business with all of its vendors in U.S. currency and has not experienced any material difficulties as a result of any foreign political, economic or social instabilities. The Company believes that it has good relationships with its piece goods vendors, finished goods suppliers and contract manufacturers and that there will be adequate sources to produce a sufficient supply of quality goods in a timely manner and on satisfactory economic terms. Marketing, Advertising and Promotion Strategy. The Company has historically used mass media print and radio and direct mail marketing, advertising and promoting activities in support of its store and catalog operations. Core to each marketing campaign, while primarily promotional, is the identification of the Jos. A. Bank name as synonymous with high quality, updated classic clothing offered at value price points. The Company has a database of over 2.4 million names of people who have previously made a purchase from either the Company's retail store, Internet site or catalog or have requested a catalog from the Company. Of these, over .7 million individuals have made such purchase or catalog request in the past 24 4 months. The Company selects names from this database based on expectations of response to specific promotions which allows the Company to more efficiently use its advertising dollars. In the past two years, the Company has made significant investments in its systems which has improved its ability to capture customer purchasing data. The Company plans to increase its use of this data to improve its marketing efficiency. Product Specific Sales and Promotional Events. Throughout each season, the Company promotes specific items or categories at specific prices that are below the normal retail price. Examples are the trade-in sale whereby a customer receives a fixed dollar amount off the purchase of a suit by "trading-in" an old suit which is donated to charity and the "$199 Suit Sale". These sales are used to complement promotional events and to meet the needs of the customers. At the end of each season, the Company stores conduct clearance sales to promote the sale of that season's merchandise. Corporate Card. Certain organizations and companies can participate in our corporate card program, through which all of their employees receive a 20% discount off regularly-priced Jos. A. Bank merchandise. The card is honored at all stores as well as for catalog and Internet purchases. Over 7,500 companies nationally, from privately-owned to large public companies, are now participating in the program. Participating companies are able to promote the Card as a free benefit to their employees. Apparel Incentive Program. Jos. A. Bank Clothiers apparel incentive gift certificates are used by various companies as a reward for achievement for their employees. The Company also redeems proprietary gift certificates marketed by major premium/incentive companies through its stores and catalogs. Distribution The Company uses a centralized distribution system, under which all merchandise is received, processed and distributed through the Company's distribution facility located in Hampstead, Maryland. Merchandise received at the distribution center is promptly inspected to insure expected quality in workmanship and conformity to Company sizing specifications. The merchandise is then allocated to individual stores, packed for delivery and shipped to the stores, principally by common carrier. Each store generally receives a shipment of merchandise twice a week from the distribution center; however, when necessary because of a store's size or volume, a store can receive shipments more frequently. Inventory of basic merchandise in the Company stores is replenished regularly based on sales tracked through its point-of-sale terminals. Shipments to catalog customers are also made from the central distribution facility. To support the new store growth, the Company expects to upgrade its current distribution center by late 2001. Management Information Systems In connection with the new millennium and to retain a competitive edge, many of the Company's systems have been updated in the last two years. The Company devoted significant efforts and resources in 1998 and 1999 to ensure that its business-critical systems were "Year 2000 compliant" and has been able to use its systems in 2000 without failure. In August, 1998 the Company installed and implemented the latest version of its merchandising, warehouse, sales audit, accounts payable and general ledger system (which included many upgrades in addition to Y2K compliance), and in May 1999 completed the upgrade of its catalog system. To improve customer service and customer database management, the Company replaced its POS system in the second half of 1999. As a result of these efforts, the Company's systems are more efficient and capable of supporting future growth. By using these systems, the Company is able to capture greater customer data and expects to increase its marketing efficiency using such data. The Company also invested approximately $1 million in 2000 to design and implement a new Internet site. Manufacturing In fiscal 1997, the Company manufactured approximately 15% of its merchandise requirements at its two facilities located in Maryland. Prior to the end of fiscal 1997, the Company decided to discontinue its then remaining manufacturing operations and focus on its retailing expertise. In April 1998, the Company sold its manufacturing operations to a third party (the "Purchaser"). (See "Consolidated Financial Statements - Note 12" for a discussion of discontinued manufacturing operations). In conjunction with the sale, the Company entered into a long-term supply agreement with the purchaser to buy certain clothing units from the Purchaser subject to certain conditions and performance criteria. During 2000, the Company was advised that the Purchaser discontinued the Company's former manufacturing operations and filed for bankruptcy. In June 2000, the Company entered into an agreement with the Purchaser (which was approved by the bankruptcy court) relieving the Company from any further commitments to purchase merchandise under the supply agreement. The Company purchased 4% of its merchandise requirements from the Purchaser during fiscal 2000. 5 Competition The Company competes primarily with other specialty retailers, department stores and other catalogers engaged in the retail sale of apparel, and to a lesser degree with other retailers of men's apparel. Among others, the Company's store, Internet and catalog operations compete with Brooks Brothers, Nordstrom, Men's Wearhouse and Lands End, as well as competitors in each store's market. Many of these major competitors are considerably larger and have substantially greater financial, marketing and other resources than the Company. In general, the Company believes that it maintains its competitive position based not only on its ability to offer its quality career clothing at price points typically below those of its principal competitors for items of comparable quality, but also on greater selection of merchandise within the Company's focus on classic career clothing, the quality, consistency and value of the Jos. A. Bank brand, and superior customer service. Trademarks The Company is the owner in the United States of the trademark "Jos. A. Bank", "The Miracle Tie Collection" and "TRIO". These trademarks are registered in the United States Patent and Trademark Office. A federal registration is renewable indefinitely if the trademark is still in use at the time of renewal. The Company's rights in the Jos. A. Bank trademark are a significant part of the Company's business. Accordingly, the Company intends to maintain its trademark and the related registration. The Company is not aware of any claims of infringement or other challenges to the Company's right to use its trademark in the United States. In addition, the Company has registered "josbank.com" and various other internet domain names. The Company intends to renew its domain names from time to time for the conduct and protection of its e-commerce business. Employees As of April 19, 2001, the Company had 1,241 employees. As of April 19, 2001, 124 employees worked in the tailoring and distribution center, most of whom are represented by the Union of Needletrades Industrial & Textile Employees. The current collective bargaining agreement extends to April 30, 2003. The Company believes that union relations are good. During the past 50 years, the Company has had only one work stoppage, which occurred more than 20 years ago. The Company believes that its relations with its non-union employees are also good. A small number of sales associates are union members. Item 2. DESCRIPTION OF PROPERTY ----------------------- The Company owns its distribution and corporate office facility located in the Maryland area, subject to certain financing liens. (See "Consolidated Financial Statements -- Note 5.") The Company believes that its existing facility is well maintained and in good operating condition. The table below presents certain information relating to the Company's corporate properties as of April 19, 2001:
Gross Owned/ Location Square Feet Leased Primary Function - -------- ----------- ------ ---------------- Hampstead, Maryland 210,000 Owned Corporate offices, distribution center, catalog fulfillment and regional tailoring overflow shop
As of April 19, 2001, the Company had 107 Company-operated stores, including its outlet stores, all of which were leased. The full line stores average 6,500 square feet as of the beginning of fiscal 2001, including selling, storage, tailor shop, and service areas. The full line stores range in size from approximately 2,600 square feet to approximately 18,900 square feet. The leases typically provide for an initial term of between 5 and 10 years, with renewal options permitting the Company to extend the term for between 5 and 10 years thereafter. The Company generally has been successful in renewing its store leases as they expire. In most cases the Company pays a fixed annual base rent plus real estate taxes, insurance and utilities and, other than free standing locations, to make contributions toward the common area operating costs. Most of the Company's lease arrangements provide for an increase in annual fixed rental payments during the lease term. During fiscal 2000, the Company sold its former coat and pant sewing and central pressing plant located in Baltimore, Maryland. The plant had been sub-leased in connection with the disposition of the Company's manufacturing operations in April 1998. 6 Item 3. LEGAL PROCEEDINGS ----------------- On December 14, 1995, the Company filed a Verified Complaint in the United States District Court for the Northern District of Maryland (case No. MJG 95-3826) against J.A.B. of Lexington, Inc. and its principals (the "Defendants") alleging federal trademark infringement, common law trademark and service mark infringement, statutory unfair competition, common law unfair competition, breach of franchise agreement, breach of lease, breach of promissory note and breach of security agreement. Damages sought in the Verified Complaint were unspecified. The Defendants counterclaimed against the Company seeking declaratory judgements, compensatory damages and punitive damages. In March, 2000, the Company settled the dispute at no cost to either party. The Company has been named as a defendant in legal actions arising from its normal business activities. Although the outcome of these lawsuits or other proceedings against the Company cannot be accurately predicted, the Company does not expect that any such liability will have a material adverse effect on the business, net assets or financial position of the Company. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- No matters were submitted to a vote of the Company's security holders during the quarter ended February 3, 2001. PART II Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS --------------------------------------------------------------------- (a) Market Information. The Company's Common Stock is listed on The Nasdaq National Market ("NASDAQ") under the trading symblol "JOSB". The following table sets forth, for the periods indicated, the range of high and low bid prices for the Common Stock, as reported on NASDAQ. The approximate high and low closing prices for the Common Stock tabulated below represent inter-dealer quotations which do not include retail mark-ups, mark-downs or commissions. Such prices do not necessarily represent actual transactions. Fiscal 1999 Fiscal 2000 ----------- ----------- High Low High Low ---- --- ---- --- 1st Quarter $ 8.00 $ 6.00 $ 4.88 $ 3.19 2nd Quarter 8.13 5.25 5.47 3.63 3rd Quarter 5.50 3.00 4.75 3.94 4th Quarter 4.00 2.63 6.38 4.00 1st Quarter (through April 19, 2001) $ 7.25 $ 5.00 On April 19, 2001 the closing sale price of the Common Stock was $ 6.37. (b) Holders of Common Stock ----------------------- At April 19, 2001, there were 136 holders of record of the Company's Common Stock. (c) Dividend Policy --------------- The Company intends to retain its earnings to finance the development and expansion of its business and for working capital purposes, and therefore does not anticipate paying any cash dividends in the foreseeable future. In addition, the Company's Credit Agreement prohibits the Company from paying cash dividends. 7 Item 6. SELECTED CONSOLIDATED FINANCIAL DATA ------------------------------------ The following selected consolidated financial data with respect to each of the fiscal years in the five-year period ended February 3, 2001 have been derived from the Company's audited Consolidated Financial Statements. Fiscal year 2000 was a 53-week year and all other years consisted of 52-weeks, each of which ended on the Saturday closest to the end of January of the respective year. The information should be read in conjunction with the Consolidated Financial Statements and Notes thereto that appear elsewhere in the 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Fiscal Years 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- (in thousands, except per share data) Consolidated Statements of Income Information: Net Sales: $153,191 $172,174 $187,163 $193,529 $206,252 Cost of goods sold 82,598 92,001 96,281 100,030 104,943 -------- -------- -------- -------- -------- Gross Profit 70,593 80,173 90,882 93,499 101,309 -------- -------- -------- -------- -------- Operating Expenses: General and administrative 16,374 17,695 18,806 18,965 20,609 Sales and marketing 50,924 55,609 62,249 67,694 71,264 Store opening costs 229 301 617 153 363 Executive payouts and other one-time charges -- -- -- 3,102(c) -- -------- -------- -------- -------- -------- Total operating expenses 67,527 73,605 81,672 89,914 92,236 -------- -------- -------- -------- -------- Operating income 3,066 6,568 9,210 3,585 9,073 Interest expense, net 1,946 2,501 1,762 1,346 1,034 -------- -------- -------- -------- -------- Income from continuing operations before income taxes 1,120 4,067 7,448 2,239 8,039 Provision for income taxes 437 1,590 1,539(b) 873 3,015 -------- -------- -------- -------- -------- Income from continuing operations 683 2,477 5,909 1,366 5,024 Loss on disposal of manufacturing operations, net of tax(a) -- (1,512) -- -- -- Loss from discontinued operations, net of tax(a) (432) (266) (51) -- -- -------- -------- -------- -------- -------- Net income $ 251 $ 699 $ 5,858(b) $ 1,366 $ 5,024 -------- -------- -------- -------- -------- Per Share Information (diluted): Income from continuing operations $ 0.10 $ 0.36 $ 0.85(b) $ 0.20 $ 0.80 Loss on disposal of manufacturing operations -- (0.22) -- -- -- Loss from discontinued operations (0.06) (0.04) (0.01) -- -- -------- -------- -------- -------- -------- Net income per share $ 0.04 $ 0.10 $ 0.84 $ 0.20 $ 0.80 -------- -------- -------- -------- -------- Weighted average number of shares outstanding (diluted) 6,824 6,864 6,976 6,892 6,249 Balance Sheet Information (As of End of Fiscal Year): Working capital $ 28,989 $ 26,142 $ 27,062 $ 26,492 $ 28,650 Total assets 79,604 77,144 82,515 84,751 88,954 Total debt 18,415 12,999 9,177 9,366 6,869 Total long-term obligations (including debt) 21,472 15,105 11,808 11,725 9,893 Shareholders'equity 35,699 36,398 42,313 43,786 45,708 Number of stores 79 87 103 108 116
(a) Represents disposal of manufacturing operations in 1997. All years presented herein have been restated to reflect this discontinued operation. (b) Includes a benefit of $1,365 or $.20 per share related to the reversal of a valuation allowance which had been recorded in 1995 related to tax net operating losses. (c) Represents payouts to the Company's former Chairman/CEO and President, costs to hire and relocate successors, and the costs to discontinue an unprofitable business. 8 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- Overview The Company's net income of $.80 per share in fiscal 2000 increased 70% compared to adjusted income of $.47 per share in fiscal 1999 (before the $3.1 million one-time charges in fiscal 1999). During fiscal 2000, the Company continued a trend that began in the fourth quarter of 1999 when the Company generated record earnings (excluding one-time charges) for one quarter. The Company posted record earnings results in three of its four quarters in fiscal 2000, including the setting of another record in the fourth quarter. The Company expects to open up to 30 new stores during 2001 as part of its plan to open between 75-100 new stores between fiscal 2000 and the end of fiscal 2003. The new stores that have been targeted are mostly in existing markets in specialty retail centers. The Company has determined that its stores perform best in specialty retail centers with co-tenancy of other high-end retailers. The Company is also committed to growing its Internet business, through increased marketing and a state-of-the-art website. The Company's new internet site went "live" in August 2000 and has many features such as real-time inventory status, order conformation and product search capabilities. The Company negotiated a $50 million Credit Agreement with its bank through April 2004 replacing its existing credit agreement. The revised agreement increased the borrowing capacity, lowered the variable interest rate and reduced the covenant requirements. In April 2000, the Company repurchased 896,400 shares of its outstanding Common Stock from a shareholder at a cost of $3.1 million ($3.50 per share). The shares have been placed in treasury at cost. These shares represented approximately 13% of the then outstanding 6,852,000 shares. The purchase was financed using funds borrowed under its prior Credit Agreement prior to the previously mentioned amendment. The Company's availability in excess of outstanding borrowings, as supported by the existing borrowing base under its Credit Agreement, has increased to $36.5 million at April 19, 2001 compared to $26.4 million at the same time in 2000. Total bank debt decreased to $2.7 million at April 19, 2001 compared to $9.9 million at the same time in 2000. Results of Operations The following table is derived from the Company's Consolidated Statements of Income and sets forth, for the periods indicated, the items included in the Consolidated Statements of Income expressed as a percentage of net sales.
Percentage Of Net Sales Fiscal Years 1998 1999 2000 ---- ---- ---- Net Sales 100.0% 100.0% 100.0% ------ ------ ----- Cost of goods sold 51.4 51.7 50.9 Gross profit 48.6 48.3 49.1 General and administrative expenses 10.0 9.8 10.0 Sales and marketing expenses 33.3 35.0 34.6 Store opening costs 0.3 -- 0.2 Executive payouts and other one-time charges -- 1.6 -- ------ ------ ----- Operating income 4.9 1.9 4.4 Interest expense, net (0.9) (0.7) (0.5) ------ ------ ----- Income from continuing operations before income taxes 4.0 1.2 3.9 Income taxes (0.8) (0.5) (1.5) ------ ------ ----- Income from continuing operations, net of tax 3.2 0.7 2.4 Loss from discontinued operations, net of tax (0.1) -- -- ------ ------ ----- Net income 3.1% 0.7% 2.4% ------ ------ -----
9 Fiscal 2000 Compared to Fiscal 1999 Net Sales - Net sales increased 6.6% in fiscal 2000, primarily from a 6.8% -------- increase in comparable store sales, a 188% increase in Internet sales and a 11.7% decrease in catalog sales from fiscal 1999. The decrease in catalog sales was caused primarily by cannibalization from the Internet. Sales were driven by increases in Corporate Casual and Sportswear as the Company continues to address the changing clothing needs of men in the workplace. Gross Profit - Gross profit as a percentage of sales increased to 49.1% in ------------ fiscal 2000 from 48.3% in fiscal 1999 as the Company reduced promotional activities for its better selling products. In addition, several categories, including Corporate Casual, Sportswear and Ties, generated gross profit percentage increases. General and Administrative Expenses - General and administrative expenses ----------------------------------- increased to 10.0% of sales from 9.8% of sales in fiscal 1999 primarily from a $2.3 million increase in incentive compensation expense partially offset by a decrease in professional fees and travel expenses. Sales and Marketing Expenses - Sales and marketing expense (which consist ---------------------------- primarily of store occupancy, advertising and store payroll costs) decreased to 34.6% of sales in 2000 from 35.0% of sales in 1999 primarily as a result of leverage of expenses in existing stores which had a 6.8% sales increase and lower advertising costs. This decrease was partially offset by higher store payroll and occupancy costs as a percent of sales in the new stores. Store Opening Costs - Store opening costs increased $.2 million in fiscal ------------------- 2000 compared to fiscal 1999 as the Company opened 10 new stores in 2000 (including two outlet stores) compared to five new stores in 1999. Interest Expense - Interest expense decreased $.3 million in fiscal 2000 ---------------- due primarily to a lower average outstanding debt balance in 2000 compared to fiscal 1999. The weighted average interest rate increased in 2000 due primarily to increases in the prime rate. Income Taxes - The effective tax rate in fiscal 2000 was 37.5% compared to ------------ 39.0% in fiscal 1999. The decrease resulted from lower effective state tax rates. Fiscal 1999 Compared to Fiscal 1998 Net Sales - Net sales increased 3.4% over the prior year to $193.5 million --------- in fiscal 1999 from $187.2 million in fiscal 1998. The increase in net sales was due primarily to new stores. Gross Profit - Gross profit as a percent of sales decreased .3 percentage ------------ points to 48.3% in fiscal 1999 from 48.6% in fiscal 1998. The slight decrease was due primarily to the mix of product sold. General and Administrative Expenses - General and administrative expenses ----------------------------------- continued to decline as a percent of sales to 9.8% in fiscal 1999 from 10.0% and 10.3% in fiscal years 1998 and 1997, respectively, as the Company continues to leverage its overhead while opening new stores. Total general and administrative expenses increased to $19.0 million in fiscal 1999 compared to $18.8 million in fiscal 1998. Increases in payroll, professional fees, travel and other expenses were partially offset by a $1.6 million reduction in incentive compensation expense. Sales and Marketing Expense - Sales and marketing expenses increased $5.4 --------------------------- million to $67.7 million in fiscal 1999 from $62.2 million in fiscal 1998. This increase was primarily due to an increase in marketing expense and additional store occupancy and payroll costs in new stores. The higher marketing expense was primarily attributable to increased radio and newspaper advertising needed to increase customer traffic in stores. The higher occupancy and payroll costs relate to additional stores opened in 1998 and 1999. Store Opening Costs - Store opening costs decreased $.5 million as the ------------------- Company opened five stores in fiscal 1999 compared to 16 in fiscal 1998. Executive Payouts and Other One-Time Charges - Executive payouts consisted -------------------------------------------- of a $2.2 million charge resulting from the retirement of the Company's Chairman and CEO and a $.4 million charge related to the payout of its former President. Other one-time charges included approximately $.3 million related to hiring and relocation of new corporate officers and $.2 million resulting from discontinuing an unprofitable business. Interest Expense - Interest expense decreased $.4 million to $1.4 million ---------------- in fiscal 1999 compared to $1.8 million in 1998. This improvement was due primarily to a reduction in the total debt outstanding in fiscal 1999 compared to the prior year. The average daily bank debt balance decreased to $9.9 million in 1999 from $12.5 million in 1998. Income Taxes - The fiscal 1999 effective tax rate was 39% compared to 20.7% ------------ in fiscal 1998. The fiscal year 1998 rate was positively impacted by the elimination of the valuation reserve. 10 Liquidity and Capital Resources The Company's availability in excess of outstanding borrowings, as supported by the existing borrowing base under its Credit Agreement, increased to $36.5 million at April 19, 2001 compared to $26.4 million at the same time in 2000. In March 2001, the Company issued $5.5 million term debt (the "Term Debt") secured by its distribution center to finance part of its growth. The following table summarizes the Company's sources and uses of funds as reflected in the Condensed Consolidated Statements of Cash Flows: Years Ended ----------- Jan. 29, Feb. 3, 2000 2001 ---- ---- Cash provided by (used in): Operating activities $ 7,381 $11,059 Investing activities (6,780) (3,167) Financing activities 251 (5,599) Discontinued operations (513) (254) ------- ------- Net increase in cash and cash equivalents $ 339 $ 2,039 ------- ------- Cash provided by the Company's operating activities (net) was due primarily to operating results and an increase in accounts payable leverage. Cash used in investing activities relates primarily to leasehold improvements in new, renovated and relocated stores. The Company spent approximately $3.7 million on capital expenditures in fiscal 2000 primarily for the buildout of new stores and approximately $1 million to install a new Internet site. Cash used in financing activities relates primarily to repayments/borrowings of the revolving loan under the Credit Agreement and the repurchase of $3.1 million of Common Stock. The Company expects to spend between $15 and $17 million on capital expenditures in fiscal 2001, primarily to open up to 30 new stores, to renovate several stores and to install a new warehouse distribution system to accommodate future store growth. The capital expenditures will be financed through operations, the Credit Agreement and the Term Debt. Risks The Company's plans and beliefs concerning future operations contained herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forecast due to a variety of factors that can adversely affect the Company's expansion plans, operating results, liquidity and financial condition such as risks associated with economic, weather and other factors affecting consumer spending, the ability of the Company to finance its expansion plans, the mix of goods sold, pricing, availability of lease sites for new stores and other competitive factors. These risks should be carefully reviewed before making any investment decision. Growth Risks. A significant portion of the Company's growth has resulted and is expected to continue to result from the opening of new stores. While the Company believes that it will continue to be able to obtain suitable locations for new stores, negotiate acceptable lease terms, hire qualified personnel and open and operate new stores on a timely and profitable basis, no such assurances can be made. As the Company continues its expansion program, the opening of stores may adversely affect catalog sales in such markets, and the opening of additional stores in existing markets may adversely affect sales of established stores. Competition. The retail apparel business is highly competitive and is expected to remain so. The Company competes primarily with other specialty retailers, department stores and other catalogers engaged in the retail sale of apparel, and to a lesser degree with other apparel retailers. Many of these competitors have significantly greater financial, marketing and other resources than the Company. The Company believes that its emphasis on classic styles makes it less vulnerable to changes in fashion trends than many apparel retailers; however, the Company's sales and profitability depend upon the continued demand for its classic styles. Reliance on Key Suppliers. Historically, the Company has bought a substantial portion of its products from a limited number of suppliers. The loss of any one of these suppliers could cause a delay in the Company's sales process. Any significant interruption in the Company's product supply could have an adverse effect on its business due to delays in finding alternative sources and could result in increased costs to the Company. 11 Growth by Acquisition, etc. The Company may from time to time hold discussions and negotiations with (i) potential investors who express an interest in making an investment in or acquiring the Company, (ii) potential joint venture partners looking toward the formation of strategic alliances and (iii) companies that represent potential acquisition or investment opportunities for the Company. There can be no assurance any definitive agreement will be reached regarding the foregoing, nor does the Company believe that any such agreement is necessary to implement successfully its strategic plans. Seasonality Historically, the Company's operations had not been greatly affected by seasonal fluctuations. Although variations in sales volumes do exist between quarters, the Company believes the nature of its merchandise helps to stabilize demand between the different periods of the year. However, as the Company's merchandise continues to include more Corporate Casual and Sportswear, profits generated during the fourth quarter have become a larger portion of annual profits. Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At February 3, 2001, there were no derivative financial instruments. In addition, the Company does not believe it is materially at risk for changes in market interest rates or foreign currency fluctuations. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The financial statements listed in Item 14(a) 1 and 2 are included in the Report beginning on page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ---------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- Item 10 is omitted by the Company in accordance with General Instruction G to Form 10-K. The Company will disclose the information required under this item either by (a) incorporating the information by reference from the Company's definitive proxy statement if filed by June 4, 2001 (the first business day following 120 days from the close of its fiscal year ending February 3, 2001) or (b) filing an amendment to this Form 10-K which contains the required information by June 4, 2001. Item 11. EXECUTIVE COMPENSATION ---------------------- Item 11 is omitted by the Company in accordance with General Instruction G to Form 10-K. The Company will disclose the information required under this item either by (a) incorporating the information by reference from the Company's definitive proxy statement if filed by June 4, 2001 (the first business day following 120 days from the close of its fiscal year ending February 3, 2001) or (b) filing an amendment to this Form 10-K which contains the required information by June 4, 2001. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- Item 12 is omitted by the Company in accordance with General Instruction G to Form 10-K. The Company will disclose the information required under this item either by (a) incorporating the information by reference from the Company's definitive proxy statement if filed by June 4, 2001 (the first business day following 120 days from the close of its fiscal year ending February 3, 2001) or (b) filing an amendment to this Form 10-K which contains the required information by June 4, 2001. Item 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS --------------------------------------------- Item 13 is omitted by the Company in accordance with General Instruction G to Form 10-K. The Company will disclose the information required under this item either by (a) incorporating the information by reference from the Company's definitive proxy statement if filed by June 4, 2001 (the first business day following 120 days from the close of its fiscal year ending February 3, 2001) or (b) filing an amendment to this Form 10-K which contains the required information by June 4, 2001. 12 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K ----------------------------------------------------------------- (a) The following Financial Statements of Jos. A. Bank Clothiers, Inc., the notes thereto, and the related reports thereon of the independent public accountants are filed under Item 8 of this report: 1. Financial Statements Page Report of Independent Public Accountants. . . . . . . . . . . . . . F Consolidated Balance Sheets as of January 29, 2000 and February 3, 2001. . . . . . . . . . . . . . . . . . . . . . . . . . F-1 Consolidated Statements of Income for the Years Ended January 30, 1999, January 29, 2000 and February 3, 2001 . . . . . . F-2 Consolidated Statements of Shareholders' Equity for the Years Ended January 30, 1999, January 29, 2000 and February 3, 2001 . . . . . . F-3 Consolidated Statements of Cash Flows for the Years Ended January 30, 1999, January 29, 2000 and February 3, 2001 . . . . . . F-4 Notes to Consolidated Financial Statements . . . . . . . .. . . . . F-5 2. Financial Statement Schedules All required information is included within the Consolidated Financial Statements and the notes thereto. (b) Reports on Forms 8-K - None filed during the fourth quarter of fiscal 2000. (c) Exhibits 3.1 --Restated Certificate of Incorporation of the Company.*1 . . . . . . 3.2 --By-laws of the Company, together with all amendments thereto.*1 . . 4.1 --Form of Common Stock certificate.*1 . . . . . . . . . . . . . . . . 4.2 --Amended and Restated Stockholders Agreement, dated as of January 29, 1994, among the parties named therein.*1 . . . . . . . 4.3 --Rights Agreement dated as of September 19, 1997*5 . . . . . . . . . 4.4 --Certificate of Designation governing the Company's Series A Preferred Stock*5. . . . . . . . . . . . . . . . . . . . . 10.1 --1994 Incentive Plan*1 . . . . . . . . . . . . . . . . . . . . . . . 10.1(a) --Amendments to Incentive Plan dated as of October 6, 1997, *6. . . . 10.4(f) --Fourth Amended and Restated Credit Agreement, April 30, 1996, by and among the Company, Wells Fargo Bank, N.A. *3 . . . . . . . . 10.4(g) --Combined amendment number one to fourth amended and restated credit agreement, December 18, 2000, by and between the Company and Foothill Capital Corporation, filed herewith . . . . . . . . . . . . 10.7(a) --Amended and Restated Employment Agreement, dated as of September 19, 1997, between Frank Tworecke and Jos. A. Bank Clothiers, Inc.,*6 . . 10.7(b) --Amendment to the Employment Agreement dated February 9, 1999 between Frank Tworecke and Jos. A. Bank Clothiers, Inc., *7. . . . . 10.8(a) --Amended and Restated Employment Agreement, dated as of September 19, 1997, between David E. Ullman and Jos. A. Bank Clothiers, Inc., *6 . . . . . . . . . . . . . . . . . . . . . . . . 10.9 --Jos. A. Bank Clothiers, Inc. Retirement and Savings Plan and Trust Agreement as amended and restated effective April 1, 1994.*4 . . . . 10.10 --Collective Bargaining Agreement between Retail Employees Union Local 340, Amalgamated Clothing and Textile Workers Union, AFL-CIO and Jos. A. Bank Clothiers, Inc.*4 . . . . . . . . . . . . . . . . . . . 10.12 --Employment Agreement, dated September 19, 1997, between Gary W. Cejka and Jos. A. Bank Clothiers, Inc., *6 . . . . . . . . . . . . . 10.13 --Employment Agreement, dated September 19, 1997, between Charles D. Frazer and Jos. A. Bank Clothiers, Inc., *6. . . . . . . . . . . . . 10.13(a) --Amendment to the Employment Agreement dated February 14, 1999 between Charles D. Frazer and Jos. A. Bank Clothiers, Inc., *7 . . . 13 10.15 --Employment Agreement dated August 31, 1998 between J.F. Timothy Carroll and Jos. A. Bank Clothiers, Inc., *7 . . . . . . . . . . . . 10.15(a) --Employment Agreement dated November 1, 1999 between Robert N. Wildrick and Jos. A. Bank Clothiers, Inc., *8 . . . . . . . . . . . 10.16 --Amendment to Employment Agreement dated March 6, 2000 between Robert N. Wildrick and Jos. A. Bank Clothiers, Inc.,*9 . . . . . . . . . . 10.17 --Employment Agreement dated November 30, 1999 between Robert Hensley and Jos. A. Bank Clothiers, Inc., *8 . . . . . . . . . . . . . . . . 10.17(a) --First Amendment, dated as of January 1, 2001, to Employment Agreement between Robert Hensley and Jos. A. Bank Clothiers, Inc., filed herewith . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17(b) --Second Amendment, dated as of March 16, 2001, to Employment Agreement between Robert Hensley and Jos. A. Bank Clothiers, Inc., filed herewith . . . . . . . . . . . . . . . . . . . . . . . . 10.18 --Employment Agreement dated December 21, 1999 between R. Neal Black and Jos. A. Bank Clothiers, Inc., *9 . . . . . . . . . 10.18(a) --First Amendment dated as of March 16, 2001, to Employment Agreement between R. Neal Black and Jos. A. Bank Clothiers, Inc., filed herewith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.19 --Collective Bargaining Agreement dated March 1, 2000 by and between Joseph A. Bank Mfg. Co., Inc. and Baltimore Regional Joint Board, UNITE, filed herewith. . . . . . . . . . . . . . . . . . . . . . . . 10.20 --Employment offer letter, dated November 20, 2000, from Jos. A. Bank Clothiers, Inc. to Jerry DeBoer, filed herewith. . . . . . . . . . . 21.1(b) --Company subsidiaries, filed herewith . . . . . . . . . . . . . . . . *1 Incorporated by reference to the Company's Registration Statement on Form S-1 filed May 3, 1994. *2 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 28, 1995. *3 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 3, 1996. *4 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 1, 1997. *5 Incorporated by reference to the Company's Form 8-K dated September 22, 1997. *6 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 31, 1998. *7 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 30, 1999. *8 Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended October 30, 1999. *9 Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 29, 2000. Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hampstead, State of Maryland, on May 3, 2001. 14 JOS. A. BANK CLOTHIERS, INC. (registrant) By: /s/: Robert N. Wildrick -------------------------- ROBERT N. WILDRICK CHIEF EXECUTIVE OFFICER AND PRESIDENT Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE /s/: Robert N. Wildrick Director, Chief Executive Officer and President May 3, 2001 - ----------------------------- (Principal Executive Officer) /s/: R. Neal Black Executive Vice President, Marketing & Merchandising May 3, 2001 - ----------------------------- /s/: Robert B. Hensley Executive Vice President, Stores & Operations May 3, 2001 - ----------------------------- /s/: David E. Ullman Executive Vice President, Chief Financial Officer May 3, 2001 - ----------------------------- /s/: Richard E. Pitts Vice President - Treasurer (Principal Accounting Officer) May 3, 2001 - ----------------------------- /s/: Andrew A. Giordano Director, Chairman of the Board May 3, 2001 - ----------------------------- /s/: Gary S. Gladstein Director May 3, 2001 - ----------------------------- /s/: Peter V. Handal Director May 3, 2001 - ----------------------------- /s/: David A. Preiser Director May 3, 2001 - -----------------------------
15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Jos. A.Bank Clothiers, Inc.: We have audited the accompanying consolidated balance sheets of Jos. A. Bank Clothiers, Inc. (a Delaware corporation) and subsidiaries as of January 29, 2000 and February 3, 2001, and the related consolidated statements of income, shareholders' equity and cash flows for the years ended January 30, 1999, January 29, 2000 and February 3, 2001. 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jos. A. Bank Clothiers, Inc. and subsidiaries as of January 29, 2000 and February 3, 2001, and the results of their operations and their cash flows for the years ended January 30, 1999, January 29, 2000 and February 3, 2001, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Baltimore, Maryland March 5, 2001 (except with respect to the matter discussed in Note 14, as to which the date is March 27, 2001) JOS. A. BANK CLOTHIERS, INC. CONSOLIDATED BALANCE SHEETS --------------------------- AS OF JANUARY 29, 2000 AND FEBRUARY 3, 2001 (In Thousands, Except Share Information)
ASSETS Jan. 29, 2000 Feb. 3, 2001 ------------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 1,087 $ 3,126 Accounts receivable 2,601 2,724 Inventories 46,387 50,449 Prepaid expenses and other current assets 3,178 5,329 Deferred income taxes 2,479 375 ----------- ---------- Total current assets 55,732 62,003 NONCURRENT ASSETS: Property, plant and equipment, net 27,247 25,632 Other noncurrent assets, net 73 57 Deferred income taxes 1,699 1,262 ----------- ---------- Total assets $ 84,751 $ 88,954 ----------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 13,195 $ 16,663 Accrued expenses 14,573 16,268 Current portion of long-term debt 1,218 422 Net current liabilities of discontinued operations 254 -- ----------- ---------- Total current liabilities 29,240 33,353 NONCURRENT LIABILITIES: Long-term debt 8,148 6,447 Deferred rent 3,577 3,446 ----------- ---------- Total liabilities 40,965 43,246 ----------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $.01 par, 20,000,000 shares authorized, 7,039,442 issued and 6,830,027 outstanding as of January 29, 2000 and 7,061,442 issued and 5,955,627 outstanding as of February 3, 2001 70 71 Preferred stock, $1.00 par, 500,000 shares authorized, none issued or outstanding -- -- Additional paid-in capital 56,500 56,535 Accumulated deficit (10,864) (5,840) Less 209,415 shares of common stock held in treasury at January 29, 2000, and 1,105,815 held at February 3, 2001, at cost (1,920) (5,058) ----------- ---------- Total shareholders' equity 43,786 45,708 ----------- ---------- Total liabilities and shareholders' equity $ 84,751 $ 88,954 ----------- ----------
The accompanying notes are an integral part of these consolidated balance sheets. F-1 JOS. A. BANK CLOTHIERS, INC. CONSOLIDATED STATEMENTS OF INCOME --------------------------------- FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001 (In Thousands, Except Per Share Information)
Years Ended ------------------------------------------------ Jan. 30, 1999 Jan. 29, 2000 Feb. 3, 2001 ------------- ------------- ------------ NET SALES $ 187,163 $ 193,529 $ 206,252 COST OF GOODS SOLD 96,281 100,030 104,943 - ----------------------------------------------------------------------------------------------------- Gross Profit 90,882 93,499 101,309 - ----------------------------------------------------------------------------------------------------- OPERATING EXPENSES: General and administrative 18,806 18,965 20,609 Sales and marketing 62,249 67,694 71,264 Store opening costs 617 153 363 Executive payouts and other one-time charges -- 3,102 -- - ----------------------------------------------------------------------------------------------------- Total operating expenses 81,672 89,914 92,236 - ----------------------------------------------------------------------------------------------------- OPERATING INCOME 9,210 3,585 9,073 Interest expense, net 1,762 1,346 1,034 - ----------------------------------------------------------------------------------------------------- Income from continuing operations before provision for income taxes 7,448 2,239 8,039 Provision for income taxes 1,539 873 3,015 - ----------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 5,909 1,366 5,024 Discontinued operations, net of tax: Loss from discontinued operations (51) -- -- - ----------------------------------------------------------------------------------------------------- Net income $ 5,858 $ 1,366 $ 5,024 - ----------------------------------------------------------------------------------------------------- EARNINGS PER SHARE Income from continuing operations: Basic $ 0.87 $ 0.20 $ 0.82 Diluted $ 0.85 $ 0.20 $ 0.80 Discontinued operations (net of tax): Basic $ (0.01) $ -- $ -- Diluted $ (0.01) $ -- $ -- Net income: Basic $ 0.86 $ 0.20 $ 0.82 Diluted $ 0.84 $ 0.20 $ 0.80 Weighted average shares outstanding: Basic 6,791 6,801 6,136 Diluted 6,976 6,892 6,249
The accompanying notes are an integral part of these consolidated statements. F-2 JOS. A. BANK CLOTHIERS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ----------------------------------------------- FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001 (In Thousands)
Additional Total Total Common Paid-In Accumulated Treasury Shareholders' Stock Capital Deficit Stock Equity ------- ---------- ------------ -------- ------------ - ----------------------------------------------------------------------------------------------------------- BALANCE, January 31, 1998 $ 70 $ 56,336 $ (18,088) $ (1,920) $ 36,398 - ----------------------------------------------------------------------------------------------------------- Net Income -- -- 5,858 -- 5,858 Net proceeds from issuance of common stock (875 shares) pursuant to Incentive Option Plan -- 5 -- -- 5 Stock based compensation -- 52 -- -- 52 - ----------------------------------------------------------------------------------------------------------- BALANCE, January 30, 1999 70 56,393 (12,230) (1,920) 42,313 - ----------------------------------------------------------------------------------------------------------- Net income -- -- 1,366 -- 1,366 Net proceeds from issuance of common stock (38,000 shares) pursuant to Incentive Option Plan -- 62 -- -- 62 Stock based compensation -- 45 -- -- 45 - ----------------------------------------------------------------------------------------------------------- BALANCE, January 29, 2000 70 56,500 (10,864) (1,920) 43,786 - ----------------------------------------------------------------------------------------------------------- Net income -- -- 5,024 -- 5,024 Net proceeds from issuance of common stock (22,000 shares) pursuant to Incentive Option Plan 1 35 -- -- 36 Repurchase of 896,400 shares of Common Stock at $3.50 per share -- -- -- (3,138) (3,138) - ----------------------------------------------------------------------------------------------------------- BALANCE, February 3, 2001 $ 71 $ 56,535 $ (5,840) $ (5,058) $ 45,708 - -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-3 JOS. A. BANK CLOTHIERS,INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001 (In Thousands)
Years Ended -------------------------------------- Jan.30,1999 Jan.29,2000 Feb.3,2001 ----------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,858 $ 1,366 $ 5,024 Loss from discontinued operations 51 -- -- - ---------------------------------------------------------------------------------------------------------------------- Income from continuing operations 5,909 1,366 5,024 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax expense 827 705 2,541 Depreciation and amortization 4,105 3,973 4,195 Loss on disposition of assets -- 107 32 Stock based compensation 52 45 -- Changes in assets and liabilities: (Increase) decrease in accounts receivable (71) 207 (123) Increase in inventories (4,714) (1,559) (4,062) Decrease (increase) in prepaid expenses and other current assets 149 1,011 (2,151) Decrease in other noncurrent assets 53 439 16 Increase (decrease) in accounts payable 693 (817) 3,468 Decrease in long-term pension liability (437) (80) -- Increase in accrued expenses 2,730 2,069 2,250 Increase (decrease) in deferred rent 188 (85) (131) - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities of continuing operations 9,484 7,381 11,059 - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (6,319) (6,780) (3,695) Proceeds from disposal of assets -- -- 528 - ---------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities of continuing operations (6,319) (6,780) (3,167) - ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving loan agreement 36,549 60,161 60,108 Repayment of borrowings under revolving loan agreement (40,329) (61,311) (62,178) Borrowing of other long-term debt 277 1,686 -- Repayment of other long-term debt (319) (347) (427) Repurchase of Common Stock into Treasury -- -- (3,138) Net proceeds from issuance of common stock 5 62 36 - ---------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities of continuing operations (3,817) 251 (5,599) - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) discontinued operations 836 (513) (254) - ---------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 184 339 2,039 CASH AND CASH EQUIVALENTS, beginning of year 564 748 1,087 - ---------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of year $ 748 $ 1,087 $ 3,126 - ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --------------------------------- JANUARY 30, 1999, JANUARY 29, 2000 and FEBRUARY 3, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------ Description of Business - Jos. A. Bank Clothiers, Inc. ("Clothiers") is a nationwide retailer of classic men's clothing through conventional retail stores, catalog and internet direct marketing and franchisees. Fiscal Year - The Company maintains its accounts on a fifty-two/fifty-three week fiscal year ending on the Saturday nearest to January 31. The fiscal years ended January 30, 1999 (fiscal 1998) and January 29, 2000 (fiscal 1999), each contained fifty-two weeks. The fiscal year ended February 3, 2001 (fiscal 2000) contained fifty-three weeks. Basis of Presentation - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation - The consolidated financial statements include the accounts of Clothiers and its wholly-owned subsidiaries (collectively referred to as the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents - Cash and cash equivalents include overnight investments. Interest expense, net, includes interest income of approximately $10,000, $1,000 and $50,000 in fiscal 1998, 1999 and 2000, respectively. Supplemental Cash Flow Information -Interest and income taxes paid were as follows (in thousands):
Years Ended Jan. 30, Jan. 29, Feb. 3, 1999 2000 2001 -------- --------- ------- Interest paid $1,462 $1,162 $ 965 Income taxes paid $ 252 $ 163 $ 363
Inventories - Inventories are stated at the lower of first-in first-out, cost or market. The Company capitalizes into inventories certain warehousing and delivery costs associated with getting its merchandise to the point of sale. Catalogs and Promotional Materials - Costs related to mail order catalogs and promotional materials are included in prepaid expenses and other current assets. These costs are amortized over the expected periods of benefit, not to exceed six months. At January 29, 2000 and February 3, 2001, prepaid catalog and promotional materials were approximately $1,625,000 and $1,696,000, respectively, representing expenditures for the applicable subsequent spring catalog. Property, Plant and Equipment - Property, plant and equipment are stated at cost. The Company depreciates and amortizes property, plant and equipment on a straight-line basis over the following estimated useful lives: Estimated Asset Class Useful Lives ------------- ------------ Buildings and improvements 25 years Equipment 3-10 years Furniture and fixtures 10 years Leasehold improvements Initial term of lease, not to exceed 10 years Other Noncurrent Assets - Other noncurrent assets includes deferred financing costs of $0 and $57,000 as of January 29, 2000 and February 3, 2001, respectively. Deferred financing costs were incurred in connection with the Company's bank credit agreement described in Note 5 and are being amortized as additional interest expense over the remaining term of the agreement using the effec-tive interest method. Other noncurrent assets also include $73,000 of notes receivable as of January 29, 2000. Fair Value of Financial Instruments - For cash and equivalents, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. Franchise Revenue Recognition - Initial franchise fees for a store are generally recognized as revenue when the Company has provided substantially all the initial franchise services. Inventory sales (and cost of sales) to the franchisees are recognized when the inventory is shipped. Monthly franchise fees are recorded when earned under the franchise agreements. Lease Expense - The Company records lease expense in accordance with Statement of Financial Accounting Standards (SFAS) No. 13 -- Accounting for Leases. As such, rent expense on leases is recorded on a straight-line basis over the term of the lease and the excess of expense over cash amounts paid are reflected as "deferred rent" in the accompanying Consolidated Balance Sheets. Store Opening Costs - Costs incurred in connection with start-up and promotion of new store openings are expensed as incurred. F-5 Income Taxes - The Company accounts for income taxes in accordance with SFAS No. 109 -- Accounting for Income Taxes. Under SFAS 109, the liability method is used in accounting for income taxes. Deferred tax liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using tax rates and laws that are expected to be in effect when the differences are scheduled to reverse. Earnings Per Share - During 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings Per Share," (EPS) which requires presentation of basic earnings per share and diluted earnings per share. The weighted average shares used to calculate basic and diluted earnings per share in accordance with SFAS No. 128 are as follows:
1998 1999 2000 ----- ----- ----- Weighted average shares outstanding for basic EPS 6,791 6,801 6,136 - ----------------------------------------------------------------------------- Dilutive effect of common stock quivalents 185 91 113 - ----------------------------------------------------------------------------- Weighted average shares outstanding for diluted EPS 6,976 6,892 6,249 - -----------------------------------------------------------------------------
The Company uses the treasury method for calculating the dilutive effect of stock options. Impact of Recently Issued Accounting Pronouncements - In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 2000, SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," which amended SFAS No. 133, was issued. SFAS No. 133 and SFAS No. 138 establish new accounting rules and disclosure requirements for most derivative instruments and hedging activities. SFAS No. 133 and SFAS No. 138 require all derivatives to be recognized as assets or liabilities at fair value. Fair value adjustments are made either through earnings or equity, depending upon the exposure being hedged and the effectiveness of the hedge. The Company currently does not utilize any derivative instruments but may enter into such instruments in the future. SFAS No. 133 and SFAS No. 138 are effective beginning on January 1, 2001. 2. INVENTORIES: ----------- Inventories at January 29, 2000 and February 3, 2001, consist of the following (in thousands):
Jan. 29, 2000 Feb. 3, 2001 ------------- ------------ Finished goods $43,036 $46,588 Raw materials 3,351 3,861 - ------------------------------------------------------ Total $46,387 $50,449 - ------------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT: ----------------------------- Property, plant and equipment at January 29, 2000 and February 3, 2001, consists of the following (in thousands):
Jan. 29, 2000 Feb. 3, 2001 ------------- ------------ Land $ 475 $ 349 Buildings and improvements 10,923 9,693 Leasehold improvements 22,765 22,180 Equipment, furniture and fixtures 21,977 21,586 - ---------------------------------------------------------------------------- 56,140 53,808 Less: Accumulated depreciation and amortization (28,893) (28,176) - ---------------------------------------------------------------------------- Property, plant and equipment, net $ 27,247 $ 25,632
4. ACCRUED EXPENSES: ---------------- Accrued expenses at January 29, 2000 and February 3, 2001, consist of the following (in thousands):
Jan. 29, 2000 Feb. 3, 2001 ------------- ------------ Accrued compensation and benefits $ 4,266 $ 6,892 Accrued advertising 1,948 2,020 Gift certificate payable 2,327 2,618 Other accrued expenses 6,032 4,738 - -------------------------------------------------------------- Total $14,573 $16,268 - --------------------------------------------------------------
Other accrued expenses consist primarily of liabilities related to interest, sales taxes, property taxes, customer deposits, and percentage rent. 5. LONG-TERM DEBT: -------------- Long-term debt at January 29, 2000 and February 3, 2001, consists of the following (in thousands):
Jan. 29, Feb. 3, 2000 2001 -------- -------- Bank credit agreement- Borrowings under long-term revolving loan agreement, including term portion $ 7,166 $ 5,096 Notes related to lease- hold improvements, interest at 9.4%, 9.9% and 11.0%, respectively, payable in monthly installments through February 1, 2003 547 346 Note related to building improvements, interest at 9.1% payable in monthly installments through November 1, 2007 729 660 Notes related to POS equipment, interest at 9.7% payable in monthly installment through November 1, 2004 924 767 - -------------------------------------------------------------- Total debt 9,366 6,869 Less: Current maturities 1,218 422 - -------------------------------------------------------------- Long-term debt $ 8,148 $ 6,447 - --------------------------------------------------------------
F-6 Bank Credit Agreement - The Company maintains a bank credit agreement (the "Credit Agreement"), which provides for a revolving loan whose limit is determined by a formula based on the Company's inventories, accounts receivable and equipment values. In December, 2000, the Company extended the Credit Agreement to April, 2004. The amended Credit Agreement changed the maximum revolving amount under the facility to $50,000,000. The Credit Agreement also includes a) financial covenants concerning minimum EBITDA, b) limitations on capital expenditures and additional indebtedness and c) a restriction on the payment of dividends. The covenants are in effect only if the Company's availability in excess of outstanding borrowings is less than $10,000,000 and the Company may not borrow additional funds if its availability in excess of outstanding borrowings is less than $5,000,000. As of February 3, 2001, the Company was in compliance with all loan covenants. Interest rates under the amended agreement are prime or LIBOR plus 1.5%. The amended agreement also includes provisions for a seasonal over-advance. As of January 29, 2000 and February 3, 2001, the Company's availability in excess of outstanding borrowings under the formula was $29,916,000 and $33,079,000, respectively. Substantially all assets of the Company with the exception of its distribution center are collateralized under the Credit Agreement (see Note 14). During the year ended January 29, 2000, borrowings under the Credit Agreement bore interest ranging from prime to prime plus .75% or LIBOR plus 2.0% to LIBOR plus 2.75%. During the year ended February 3, 2001, borrowings under the Credit Agreement bore interest ranging from prime to prime plus .75% or LIBOR plus 1.5% to LIBOR plus 2.75%. The average daily outstanding balances under the Credit Agreement for the fiscal years ended January 29, 2000 and February 3, 2001 were $9,856,000 and $4,838,000, respectively. The highest month end outstanding balances under the Credit Agreement for the fiscal years ended January 29, 2000 and February 3, 2001 were $17,957,000 and $8,613,000, respectively. In addition to borrowings under the Credit Agreement, the Company has a letter of credit of $400,000 at January 29, 2000 and February 3, 2001, to secure the payment of rent. The aggregate maturities of the Company's long-term debt as of February 3, 2001, are as follows: year ending 2002-$422,000; 2003-$442,000, 2004-$298,000, 2005 and thereafter-$611,000. 6. EXECUTIVE PAYOUTS AND OTHER ONE-TIME CHARGES: --------------------------------------------- During the second quarter of fiscal 1999, the Company's Chairman/CEO retired and the Company recorded a one-time charge of $2.2 million associated with that event. The one-time charge includes a payout to the former Chairman/CEO of approximately $1.8 million and professional fees, primarily recruiting and related expenses, that were incurred in the second quarter of fiscal 1999. During the fourth quarter of fiscal 1999, the Company recorded an additional one-time charge of $.9 million. This charge included a $.4 million charge related to the departure of the Company's former President, a $.2 million charge related to discontinuing an unprofitable business and approximately $.3 million of costs related to the recruiting and relocation of new corporate officers that were incurred by the end of fiscal 1999. 7. COMMITMENTS AND CONTINGENCIES: ------------------------------ Litigation - Lawsuits and claims are filed from time to time against the Company in its ordinary course of business. Management, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the net assets of the Company or the accompanying consolidated financial statements taken as a whole. Employment Agreements - The Company has employment agreements with certain of its executives expiring in 2001, aggregating base compensation of $2,712,000 (not including annual adjustments) over the term. These executives would also be entitled to severance of approximately $2,235,000 (not including annual adjustments) if terminated without cause or if the executive left the Company for cause (as defined). The contracts also provide for additional incentive payments subject to perform-performance standards. In addition, other employees are eligible for incentive payments based on performance. The Company expensed approximately $1,885,000, $250,000 and $2,530,000 in incentive payments in fiscal years 1998, 1999 and 2000, respectively. Lease Obligations - The Company has numerous noncancelable operating leases for retail stores, certain office space and equipment. Certain facility leases provide for annual base minimum rentals plus contingent rentals based on sales. Renewal options are available under the majority of the leases. Future minimum lease payments under noncancelable operating leases at February 3, 2001, are as follows (in thousands):
Year Ending Amount - ----------- ------ 2002 $ 14,097 2003 13,472 2004 12,875 2005 10,533 2006 8,256 2007 and thereafter 22,855 - ---------------------------------------- Total $ 82,088 - ----------------------------------------
F-7 The minimum rentals above do not include additional payments for percentage rent, insurance, property taxes and maintenance costs that may be due as provided for in the leases. Many of the noncancelable operating leases include scheduled rent increases. Total rental expense for operating leases, including contingent rentals and net of sublease payments received, approximated $12,839,000, $12,826,000 and $13,319,000 for the years ended January 30, 1999, January 29, 2000 and February 3, 2001, respectively. Minimum rentals approximated $12,435,000, $12,383,000 and $12,757,000, respectively. Contingent rentals, which are based on a percentage of sales, approximated $423,000, $462,000 and $574,000, respectively. Additionally, sublease payments received approximated $19,000, $19,000 and $12,000, respectively. Inventories - The Company ordinarily commits to purchases of inventory at least one to two seasons in advance. The Company has committed to a substantial portion of its purchases for fiscal 2001. In 2000, the Company purchased less than 9% of its finished product from any single vendor. Other - During fiscal 1997, the Company signed a five-year agreement which expires in January, 2002 with David Leadbetter, a golf professional, to produce golf and other apparel under his name. Payments are based on sales volumes. The minimum annual commitment under this agreement is $150,000, which represents the amount paid in each of the fiscal years 1998, 1999 and 2000. 8. BENEFIT PLANS: -------------- Defined Benefit Pension & Post-Retirement Plans - In connection with the termination of certain plans in 1994, the Company adopted a noncontributory defined benefit pension plan and a post-retirement benefit plan to cover certain union employees with equivalent benefits to the predecessor plans. The annual contributions are not less than the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974, as amended. The plan provides for eligible employees to receive benefits based principally on years of service with the Company. The Company does not pre-fund the benefits from the post- retirement benefit plan. In accordance with SFAS No. 106, "Employers' Accounting for Post-Retirement Benefits Other than Pensions", the Company records the expected cost of these benefits as expense during the years that employees render service. The Company has adopted the standards on a prospective basis as permitted. As such, the Company amortizes the remaining related transition liability of $124,674 over 8 years. The following table sets forth the plan's funded status as of December 31, 1999 and 2000, the date of the latest actuarial valuations (in thousands):
Pension Benefits Other Post-retirement Benefits ---------------------- ------------------------------ 1999 2000 1999 2000 ------ ------ ------ ------ Change in benefit obligation: Benefit obligation at beginning of year $ 156 $ 206 $ 351 $ 338 Service cost 17 18 25 34 Interest cost 32 17 21 28 Actuarial (gain) loss 50 26 (59) 51 Benefits paid (49) (11) -- -- - ---------------------------------------------------------------------------------------------------------- Benefit obligation at end of year $ 206 $ 256 $ 338 $ 451 - ---------------------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year $ 206 $ 471 $ -- $ -- Actual return on plan assets 205 3 -- -- Employer contribution 109 -- -- -- Benefits paid (49) (11) -- -- - ---------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year $ 471 $ 463 $ -- $ -- - ---------------------------------------------------------------------------------------------------------- Funded status $ 265 $ 207 $ (338) $ (451) Unrecognized net actuarial loss (gain) (42) 18 (137) (80) Unrecognized initial net liability at transition 43 39 134 125 - ---------------------------------------------------------------------------------------------------------- Prepaid (accrued) benefit cost $ 266 $ 264 $ (341) $ (406) - ---------------------------------------------------------------------------------------------------------- Discount rate 7.25% 7.25% 7.25% 7.25% Expected return on plan assets 8.00% 8.00% -- -- Components of net periodic benefit cost: Service cost $ 17 $ 18 $ 25 $ 34 Interest cost 32 17 21 28 Amortization of net liability at transition 5 5 9 9 Expected return on plan assets (127) (38) -- -- Recognized net actuarial gain 66 -- (15) (6) - ---------------------------------------------------------------------------------------------------------- Net periodic benefit cost $ (7) $ 2 $ 40 $ 65 - --------------------------------------------------------- ------------------------------------------------
F-8 Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have less than a $13,000 effect on total service and interest costs and post-retirement benefit obligation. Profit Sharing Plan - The Company maintains a defined contribution 401(k) profit sharing plan for its employees. All non-union and certain union employees are eligible to participate after six months of service. Employee contributions to the plan are limited based on applicable sections of the Internal Revenue Code. The Company is required to match a portion of employee contributions to the plan and may make additional contributions at the discretion of the directors of the Company. Contributions by the Company to the plan were approximately $321,000, $384,000 and $373,000 for the years ended January 30, 1999, January 29, 2000 and February 3, 2001, respectively. The Company also established a non-qualified, unfunded deferred Compensation plan effective October 1, 1998. This plan is designed to provide a select group of management and highly-compensated employees with retirement benefits. All assets of the plan are fully subject to the Company's creditors. Contributions by the Company for the years ended January 30, 1999, January 29, 2000 and February 3, 2001 were approximately $10,000, $41,000 and $2,000, respectively. 9. INCOME TAXES: ------------- As of the beginning of the fiscal year 1998, the Company had a deferred tax asset related to tax net operating loss carry-forwards ("NOLs") and an offsetting valuation allowance. Management determined, based on the Company's recent history of earnings, that future earnings of the Company will more likely than not be sufficient to utilize the NOLs prior to their expiration. Accordingly, during the third quarter of fiscal 1998, the Company eliminated the valuation reserve. The provision for income taxes for continuing operations was comprised of the following (in thousands):
Years Ended --------------------------------- Jan. 30, Jan. 29, Feb. 3, 1999 2000 2001 -------- -------- ------- Federal: Current $ 712 $ 53 $ 325 Deferred 651 641 2,312 State: Current -- 115 149 Deferred 176 64 229 - ------------------------------------------------------------ Provision for income taxes $ 1,539 $ 873 $ 3,015 - ------------------------------------------------------------
The differences between the recorded income tax provision and the "expected" tax provision based on the statutory federal income tax rate is as follows (in thousands):
Years Ended --------------------------------- Jan. 30, Jan. 29, Feb. 3, 1999 2000 2001 -------- -------- ------- Computed federal tax provision at statutory rates $ 2,532 $ 761 $ 2,733 State income taxes, net of federal income tax effect 372 112 282 Valuation allowance (1,365) -- -- - ------------------------------------------------------------ Provision for income taxes $ 1,539 $ 873 $ 3,015 - ------------------------------------------------------------
Temporary differences between the financial reporting carrying amounts and tax basis of assets and liabilities give rise to deferred income taxes. Total deferred tax assets and deferred tax liabilities stated by sources of the differences between financial accounting and tax basis of the Company's assets and liabilities which give rise to the deferred tax assets and deferred tax liabilities are as follows (in thousands):
Jan. 29, Feb. 3, 2000 2001 -------- ------- Deferred Tax Assets: Inventories $ 766 $ 723 Property, plant and equipment 536 786 Accrued liabilities and other 3,388 1,218 Operating loss carryforwards and carrybacks 188 -- - ------------------------------------------------------- 4,878 2,727 Deferred Tax Liabilities: Prepaid expenses and other current assets (700) (1,090) - ------------------------------------------------------- Net Deferred Tax Asset $4,178 $1,637 - -------------------------------------------------------
10. INCENTIVE OPTION PLAN: ---------------------- Effective January 28, 1994, the Company adopted an Incentive Plan ("the 1994 Plan"). The 1994 Plan generally provides for the granting of stock, stock options, stock appreciation rights, restricted shares or any combination of the foregoing to the eligible participants, as defined. Approximately 893,000 shares of Common Stock have been reserved for issuance under the Plan. The exercise price of an option granted under the 1994 Plan may not be less than the fair market value of the underlying shares of Common Stock on the date of grant and employee options expire at the earlier of termination of employment or ten years from the date of grant. All options covered under the 1994 Plan vest in full upon a change of control of the Company. On September 14, 1999, in order to attract a new Chief Executive Officer ("CEO") to the Company, the Board of Directors authorized a pool of 600,000 shares of Common Stock to be available to support a grant of options to said CEO ("the 1999 Plan"). An Option to purchase up to 600,000 shares of Common Stock under the 1999 Plan was granted to the CEO pursuant to his Employment F-9 Agreement, dated as of November 1, 1999. Unless sooner terminated pursuant to those provisions of the Employment Agreement dealing with exercise of the option after termination of employment or death, and subject to acceleration of vesting as provided in the next sentence, the Option shall vest and become exercisable in whole or in part from time to time as to (a) 200,000 of the Option Shares on or after November 1, 1999, (b) an additional 200,000 of the Option Shares on or after November 1, 2000 and (c) an additional 200,000 Option Shares on and after the earlier of September 30, 2009 or the first date after which the average closing price of the Common Shares for any consecutive 90-day period equals or exceeds $8.00 per share. All options expire on November 1, 2009. Upon the occurrence of a change in control of the Company (as defined in the Optionee's Employment Agreement), any installments of the Option not then vested shall vest and become immediately exercisable. As of February 3, 2001, options outstanding for 505,025 shares had been granted under the 1994 Plan at exercise prices ranging from $1.88 to $8.00 per share and options for 447,480 shares were exercisable. As of February 3, 2001, options outstanding for 600,000 shares had been granted under the 1999 Plan at an exercise price of $3.41 per share, of which 400,000 shares were exercisable at February 3, 2001. In addition, there are 95,959 options outstanding and exercisable at $9.17 per share which were issued in fiscal 1993 under employment agreements. The Company has computed, for pro forma disclosure purposes, the value of all compensatory options granted during fiscal year 1998, 1999 and 2000, using the Black-Scholes option pricing model as prescribed by SFAS No 123. Assumptions used for the pricing model include 4.5% to 7.9% for the risk-free interest rate, expected stock option lives of 2-10 years, expected dividend yield of 0% each year and expected volatility of 61.3% to 69.0%. Options were assumed to be exercised upon vesting for the purposes of this valuation. Adjustments are made for options forfeited prior to vesting. Had compensation costs for compensatory options been determined consistent with SFAS No. 123, the Company's pro forma net income would have been $5,680,455 in fiscal 1998, $432,160 in fiscal 1999 and $4,911,022, in fiscal 2000. Pro forma basic earnings per share would have been $.84 in fiscal 1998, $.06 in fiscal 1999 and $.80 in fiscal 2000. Pro forma diluted earnings per share would have been $.81 in fiscal 1998, $.06 in fiscal 1999 and $.79 in fiscal 2000.
Transactions with respect to the plans were as follows (shares in thousands): January 30, 1999 January 29, 2000 February 3, 2001 ------------------ ------------------ ------------------ Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------- --------- ------- --------- ------- --------- Outstanding at beginning of year 1,081 $ 6.45 1,093 $ 6.48 1,307 $ 4.75 Granted 36 $ 6.57 739 $ 3.51 14 $ 4.44 Exercised (1) $ 4.00 (38) $ 1.63 (22) $ 1.63 Canceled (23) $ 6.65 (487) $ 6.49 (98) $ 5.39 ------ ------ ------ Outstanding at end of year 1,093 $ 6.48 1,307 $ 4.75 1,201 $ 4.75 ====== ====== ====== Exercisable at end of year 637 $ 7.14 729 $ 5.31 943 $ 5.00 ====== ====== ======
F-10
The following table summarizes information about stock options outstanding at February 3, 2001 (shares in thousands): Options Outstanding Options Exercisable - ----------------- ---------------------------------------------------- --------------------------------- Number Weighted Average Weighted Number Weighted Range of Exercise Outstanding Remaining Average Exercisable at Average Prices Feb. 3 2001 Contractual Life Exercise Price Feb. 3, 2001 Exercise Price - ----------------- ----------- ---------------- -------------- -------------- -------------- $1.88 - $4.00 806,125 8.29 $ 3.45 593,622 $ 3.45 $4.01 - $7.38 297,900 4.70 6.83 252,858 7.03 $7.39 - $9.17 96,959 2.99 9.16 96,959 9.16 The weighted average fair value of options granted for the years ended January 30, 1998, January 29, 2000 and February 3, 2001, was $4.80, $5.06 and $3.83, respectively.
11. RIGHTS OFFERING: ---------------- In September, 1997, the Company adopted a Stockholder Rights Plan in which preferred stock purchase rights were distributed as a dividend at the rate of one Right for each share of Jos. A. Bank's outstanding Common Stock held as of the close of business on September 30, 1997. Each Right will entitle stockholders to buy one one-hundredth of a share of then newly designated Series A Preferred Stock of Jos. A. Bank at an exercise price of $40. The Rights will be exercisable only if a person or group acquires beneficial ownership of 20 percent or more of the Company's outstanding Common Stock (without the approval of the board of directors) or commences a tender or exchange offer upon consummation of which a person or group would beneficially own 20 percent or more of the Company's outstanding Common Stock. If any person becomes the beneficial owner of 20 percent or more of the Company's outstanding common stock (without the approval of the board of directors), or if a holder of 20 percent or more of the Company's Common Stock engaged in certain self-dealing transactions or a merger transaction in which the Company is the surviving corporation and its Common Stock remains outstanding, then each Right not owned by such person or certain related parties will entitle its holder to purchase, at the Right's then-current exercise price, units of the Company's Series A Preferred Stock (or, in certain circumstances, Common stock, cash, property or other securities of the Company) having a market value equal to twice the then-current exercise price of the Rights. In addition, if the Company is involved in a merger or other business combination transaction with another person after which its Common Stock does not remain outstanding, or sells 50 percent or more of its assets or earning power to another person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, shares of common stock of such other person having a market value equal to twice the then-current exercise price of the Rights. The Company will generally be entitled to redeem the Rights at $.01 per Right at any time until the tenth business day following the public announcement that a person or group has acquired 20 percent or more of the Company's Common Stock. 12. DISCONTINUED OPERATIONS: ------------------------ In January, 1998 (fiscal 1997), the Company formalized a plan to dispose of its manufacturing operations. Accordingly, the consolidated financial statements reflect the disposition of the manufacturing operations as discontinued operations. The revenues, costs and expenses, assets and liabilities, and cash flows of the manufacturing operations have been excluded from the respective captions in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows and the related footnotes included herein. In April, 1998, the Company entered into an agreement which included the disposition of the Company's manufacturing operations. Based upon the agreement, an estimated loss on disposal of $2,479,000 was reported net of an income tax benefit of $967,000, for an after-tax loss of $1,512,000 for fiscal 1997. In addition losses from operations have been reflected for each year presented. Summarized financial information for the discontinued operations is as follows (in thousands):
Jan 30, Jan 29, Feb 3, 1999 2000 2001 ------- ------- ------ Loss before income taxes $ (84) $ -- $ -- Net loss $ (51) $ -- $ -- - ------------------------------------------------------------------------ Current assets $ 1,159 $ 580 $ -- Less current liabilities $ 1,926 $ 834 -- - ------------------------------------------------------------------------ Net current liabilities $ (767) $ (254) $ -- - ------------------------------------------------------------------------ Noncurrent assets $ 241 $ -- $ -- Noncurrent liabilities $ 241 $ -- $ -- - ------------------------------------------------------------------------ Net noncurrent assets $ -- $ -- $ -- - ------------------------------------------------------------------------
Revenues of the manufacturing operations primarily represent intercompany sales which have been eliminated in consolidation. F-11 Net current and non-current assets/liabilities of discontinued operations noted above include receivables, inventories, plant and equipment, pension termination and other transaction costs associated with the discontinued manufacturing operations. 13. REPURCHASE OF COMMON STOCK: -------------------------- On April 12, 2000, the Company announced a repurchase of approximately 13% of its outstanding common stock. In a private transaction, the Company purchased 896,400 shares at $3.50 per share. 14. SUBSEQUENT EVENT: ---------------- On March 27, 2001 the Company closed a $5,500,000 real estate loan with General Electric Capital Business Asset Funding Corporation. The loan is amortized over twelve years at 8.15% and is collateralized by the Company's corporate offices and distribution center. 15. SEGMENT REPORTING (Unaudited): ----------------- The Company has two reportable segments: full line stores and catalog and Internet direct marketing. While each segment offers a similar mix of men's clothing to the retail customer, the full line stores also provide alterations. The accounting policies of the segments are the same as those described in the summary of significant policies. The Company evaluates performance of the segments based on "four wall" contribution which excludes any allocation of "management company" costs, distribution center costs (except order fulfillment costs which are allocated to catalog), interest and income taxes. The Company's segment are strategic business units that offer similar products to the retail customer by two distinctively different mentods. In full line stores the typical customer travels to the store and purchases men's clothing and/or alterations and takes their purchases with them. The catalog/direct marketing customer receives a catalog in his or her home, office and/or visits our web page via the Internet and either calls, mails, faxes or places an order online. The merchandise is then shipped to the customer. Segment data is presented in the following table (in thousands):
- ----------------------------------------------------------------------------------------------------------------------------------- Fiscal 2000 Full line Catalog & Internet direct (in thousands) stores marketing Other Total -------- ------------------------- --------- ----------- Net sales $173,762 $ 24,624 $ 7,866 (a) $206,252 Depreciation and amortization 3,145 25 1,025 4,195 Operating income (b) 28,806 1,845 (21,578) 9,073 Identifiable assets (c) 54,585 9,863 24,506 88,954 Capital expenditures (d) 2,192 935 568 3,695 Fiscal 1999 Full line Catalog & Internet direct (in thousands) stores marketing Other Total -------- ------------------------- --------- ----------- Net sales $161,285 $ 24,602 $ 7,642 (a) $193,529 Depreciation and amortization 3,123 15 835 3,973 Operating income (b) 24,362 2,377 (23,154)(e) 3,585 Identifiable assets (c) 51,307 8,862 24,582 84,751 Capital expenditures (d) 4,777 97 1,906 6,780 Fiscal 1998 Full line Catalog & Internet direct (in thousands) stores marketing Other Total -------- ------------------------- --------- ----------- Net sales $156,187 $ 23,783 $ 7,193 (a) $187,163 Depreciation and amortization 2,817 15 1,273 4,105 Operating income (b) 25,622 3,210 (19,622) 9,210 Identifiable assets (c) 47,562 9,192 25,761 82,515 Capital expenditures (d) 4,811 14 1,494 6,319 - -----------------------------------------------------------------------------------------------------------------------------------
(a) Revenue from segments below the quantitative thresholds are attributable primarily to four operating segments of the Company. Those seg- ments include factory stores, outlet stores, franchise and regional tailor shops. None of these segments has ever met any of the quantitative thresholds for determining reportable segments. (b) Operating income represents profit before allocations of overhead from corporate office and the distribution center, interest and income taxes which are included in other. (c) Identifiable assets include cash, accounts receivable, inventories, prepaid expenses and fixed assets residing in or related to the reportable segment. Assets included in Other are primarily fixed assets associated with the corporate office and distribution center, deferred tax assets,and inventory, which has not been assigned to one of the reportable segments. (d) Capital Expenditures include purchases of property, plant and equipment made for the reportable segment. (e) Includes one time charges of $3,102,000. F-12 16. QUARTERLY FINANCIAL INFORMATION (Unaudited): --------------------------------------------
- ------------------------------------------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ---------- --------- --------- --------- --------- (In Thousands, Except Per Share Amounts) FISCAL 2000 - ----------- Net sales $ 46,408 $ 44,869 $ 43,992 $ 70,983 $ 206,252 Gross profit 23,242 21,432 22,209 34,426 101,309 Operating income 2,065 1,253 938 4,817 9,073 Net Income 1,081 611 407 2,925 5,024 Net income per share (diluted) $ 0.16 $ 0.10 $ 0.07 $ 0.48 $ 0.80 FISCAL 1999 - ----------- Net sales $ 43,607 $ 44,203 $ 43,739 $ 61,980 $ 193,529 Gross profit 22,108 21,276 21,562 28,553 93,499 Operating income (loss) 1,102 (1,067) 23 3,527 3,585 Net Income (loss) 472 (801) (236) 1,931 1,366 Net income (loss) per share (diluted) $ 0.07 $ (0.12) $ (0.03) $ 0.28 $ 0.20 - -------------------------------------------------------------------------------------------
F-13 EX-10.4G 2 dex104g.txt COMBINED AMEND #1 TO FOURTH AMEND CREDIT AGREEMENT Exhibit 10.4G COMBINED AMENDMENT NUMBER ONE TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT This Combined Amendment Number One to Fourth Amended and Restated Credit Agreement ("Amendment") is entered into as of December 18, 2000, by and between Jos. A. Bank Clothiers, Inc., a Delaware corporation ("Company"), the various financial institutions that are or may from time to time become parties to the Agreement referred to below (collectively, the "Lenders" and each individually a "Lender"), and Foothill Capital Corporation, a California corporation as Agent for the Lenders ("Agent") in light of the following: A. Company, Wells Fargo Bank, National Association ("Wells Fargo") and Lenders have previously entered into that certain Fourth Amended and Restated Credit Agreement, dated as of April 30, 1996 (as amended from time to time the "Agreement"). B. Wells Fargo, Lenders and Company entered into four amendments to the Agreement between September 3, 1996 and June 1, 1998 (collectively, the "Wells Fargo Amendments"). C. Wells Fargo has assigned its interest in the Agreement (as amended by the Wells Fargo Amendments) and related Loan Documents to Foothill pursuant to that certain Assignment and Acceptance, dated as of June 2, 1999 and Foothill was appointed Agent under the terms of the Agreement. D. Agent, Lenders and Company have entered into that certain Fifth Amendment to the Agreement as of December 8, 1999, and that certain Sixth Amendment to the Agreement as of July 28, 2000 (collectively, the "Foothill Amendments"). E. Company, Lenders, and Agent desire to amend the Agreement as provided for and on the conditions herein; and in so doing, combine, amend and supersede the Wells Fargo Amendments and the Foothill Amendments. NOW, THEREFORE, Company, Lenders, and Agent hereby amend and supplement the Agreement as follows: 1. DEFINITIONS. All initially capitalized terms used in this ----------- Amendment shall have the meanings given to them in the Agreement unless specifically defined herein. 2. AMENDMENTS. ---------- (a) The definition of "Commitments" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Commitments" means the commitments of Lenders to make Revolving Loans, the Term Loan and to issue Letters of Credit (or purchase participations therein, as the case may be) as set forth in Sections 2.1 and 2.2." (b) The definition of "Current Asset Borrowing Base" in Section 1.1 of the Agreement is amended in its entirety to read as follows: 1 "Current Asset Borrowing Base" means, as of any date of determination, the sum of (y) the Eligible Inventory Borrowing Base plus ---- (z) the lesser of: (i) 10,000,000; and (ii) 85% of the Dollar value of credit card drafts payable to Company or any of its Subsidiaries (net of credits as a result of returns and net of amounts due to franchisees); provided that the Current Asset Borrowing Base may be reduced by customary -------- reserves in such amounts as Agent, acting in its reasonable discretion, may from time to time establish in good faith against the Current Asset Borrowing Base to reflect contingencies, risks or events which (in its reasonable judgment) may materially adversely affect the Collateral or the business or financial condition of Company and its Subsidiaries or the security of the Loans made hereunder. (c) The definition of "Eligible Inventory" set forth in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Eligible Inventory" means Eligible Landed Inventory or Eligible L/C Inventory. (d) The definition of "Eligible Inventory Borrowing Base" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Eligible Inventory Borrowing Base" means: (i) the lesser of: (a) 70% (increasing to 75% during the months of September, October and November) of the Value of Eligible Landed Inventory; or (b) 85% (increasing to 90% during the months of September, October and November) of the Net Liquidation Value of Eligible Landed Inventory; plus (ii) the lesser of: ---- (a) $3,000,000; (b) 70% (increasing to 75% during the months of September, October and November) of the Value of Eligible L/C Inventory; and (c) 85% (increasing to 90% during the months of September, October and November) of the Net Liquidation Value of Eligible L/C Inventory. (e) The definition of "Guaranties" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Guaranties" means the Continuing Guaranties of the Company's Obligations hereunder, executed by Manufacturing, NTS, IS and RS respectively. (f) The definition of "Letter of Credit" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Letter of Credit" means an L/C or an L/C Guaranty, as the context requires. (g) The definition of "Maturity Date" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Maturity Date" means April 30, 2004. 2 (h) The definition of "Real Estate Borrowing Base" in Section 1.1 of the Agreement is hereby deleted. (i) The definition of "Real Estate Collateral" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Real Estate Collateral" means all right, title and interest in and to real property, improvements and fixtures located at 500 Hanover Pike, Hampstead, Maryland. (j) The definitions of "Revolving Loans" and "Revolving Loan Commitment" or "Revolving Loan Commitments" in Section 1.1 of the Agreement are amended in their entirety to read as follows: "Revolving Loans" has the meaning set forth in Section 2.1A(i). "Revolving Loan Commitment" or "Revolving Loan Commitments" has the meaning set forth in Section 2.1A(iii). (k) The definition of "Term Loan" in Section 1.1 of the Agreement is amended in its entirety to read as follows: "Term Loan" has the meaning set forth in Section 2.1A(ii). (l) Section 1.1 of the Agreement is amended by adding the following definitions in the appropriate alphabetical order: "EBITDA" means, with respect to the 12 month period immediately prior to the date of determination, Company's and its Subsidiaries consolidated net earnings (or loss), minus one-time unusual non-cash gains, plus one-time unusual non-cash expenses, interest expense, income taxes, and depreciation and amortization for such period, as determined in accordance with GAAP. "Eligible L/C Inventory" means those items of Inventory that do not qualify as Eligible Landed Inventory solely because they are not in one of Company's locations or in transit among such locations, but as to which (a) the Inventory is or was the subject of a Qualified Import Letter of Credit, (b) such Inventory currently is in transit or will be in transit within 180 days of the issue date of the Qualified Import Letter of Credit relating to such Inventory (whether by vessel, air, or land) from a location outside of the continental United States to one of Company's locations that is the subject of a collateral access agreement, (c) title to such Inventory has passed or will pass to Company, prior to any draw being made on the Qualified Import Letter of Credit relating to such Inventory, and (d) upon transfer of title, such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent. 3 "Eligible Landed Inventory" means, as of any date determination, Inventory consisting solely of finished goods, which is and remains acceptable to Agent for lending purposes; provided that there shall be excluded from Eligible Inventory (to the extent not excluded above): (i) Finished goods which are not held by Company or one of its Subsidiaries for sale as Inventory in the ordinary course of their business or which are obsolete, not in good condition, not of merchantable quality or not saleable in the ordinary course of their business or which are subject to defects which would affect their market value; (ii) Fashion Items with respect to which more than twenty-four months have elapsed since the applicable Original Purchase Date for those items as designated in the ordinary course of business by Company and its Subsidiaries; (iii) Inventory in the possession of any Person other than Company or one of its Subsidiaries, except (subject to any additional requirements imposed by Agent, acting in good faith in its sole and absolute discretion, to protect title thereto of Company or one of its Subsidiaries or the Lien thereon granted in favor of Agent on behalf of Lenders) (A) goods held in storage solely for the account of Company or one of its Subsidiaries (subject to the Lien thereon granted in favor of Agent on behalf of Lenders), if the Person in possession has acknowledged in writing the Lien thereon granted in favor of Agent for the benefit of Lenders and has not issued a negotiable document of title as to the goods; and (B) other Inventory in transit between Company and/or Subsidiary locations. (iv) Inventory with respect to which Agent, on behalf of Lenders, does not have a valid and prior, fully perfected Lien or which is not free of all Liens (other than Liens in favor of Lenders) or other claims of all other Persons: and (v) the Dollar value shown on Company's general ledger account entitled "Finished Goods - Unicap (Uniform Capitalization)" or any other designation which Company uses subsequent to December 15, 2000 for the general ledger account representing expenses which the Internal Revenue Service requires to be capitalized to inventory, but which do not add to the intrinsic value of inventory, e.g., a portion of the Senior financial officer's salary. "IS" means IS Servicing Co., Inc. a Delaware corporation. "L/C" has the meaning set forth in Section 2.2(a). -------------- "L/C Guaranty" has the meaning set forth in Section 2.2(a). -------------- "Maximum Revolving Amount" means $50,000,000. 4 "Net Liquidation Value" means the net liquidation value of Eligible Inventory as determined by an appraisal of Company's Inventory satisfactory to Agent in its sole discretion. "Qualified Import Letter of Credit" means a Letter of Credit that (a) is issued to facilitate the purchase by Company of Eligible L/C Inventory, (b) is in form and substance acceptable to Agent, and (c) is only drawable by the beneficiary thereof by the presentation of, among other documents, either (i) a negotiable bill of lading that was issued by the carrier respecting the subject Eligible L/C Inventory, or (ii) a negotiable cargo receipt that was issued by a consolidator respecting the subject Eligible L/C Inventory; provided, however, that, in the latter case, no bill -------- ------- of lading shall have been issued by the carrier. "RS" means RS Servicing Co., Inc., a Delaware corporation. "Term Loan Commitment" has the meaning set forth in Section 2.1A(iii). "Value" means the lower of cost or fair market value of Eligible Inventory, as determined by Agent in its sole discretion. (m) Section 2.1(A) of the Agreement is amended in its entirety to read as follows: A. Commitments. ----------- (i) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender agrees (severally, not jointly or jointly and severally) to make advances ("Revolving Loans") to --------------- Company in an amount at any one time outstanding not to exceed such Lender's Pro Rata Share of the lesser of (a) the Maximum Revolving Amount less (A) the Letter of Credit Usage, less (B) the outstanding balance of ---- ---- the Term Loan or (b) the Current Asset Borrowing Base less (A) the Letter ---- of Credit Usage, and less (B) the aggregate amount of any reserves, if any, ---- established by Agent in accordance with this Agreement. Revolving Loans made on any Funding Date as LIBOR Rate Loans shall be in the minimum principal amount of $1,000,000 and integral multiples of $500,000 thereafter. (ii) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make one term loan (the "Term Loan") to or for the benefit of Company, in an aggregate amount at any one time outstanding for such Lender not to exceed such Lender's Pro Rata Share of the lesser of (i) 65% of the orderly liquidation value of the Real Estate Collateral (as determined by an appraisal, satisfactory to Agent, and dated no earlier than 60 days prior to the funding of the Term Loan); or (ii) $4,000,000. If funded the Term Loan will amortize over a 48 month period with any outstanding balance 5 due and payable and upon termination of this Agreement. Interest shall accrue at the rate for Prime Rate Loans. Agent and Lenders shall have no obligation to fund the Term Loan to the extent that funding the Term Loan would cause the sum of all outstanding Revolving Loans plus the all undrawn and unreimbursed Letters of Credit plus the Term Loan to exceed the Maximum Revolving Amount. If Company determines that it will not borrow the Term Loan, then upon notice to Agent, Agent and Lenders shall release Agent's (for the ratable benefit of Lenders) security interest in the Real Estate Collateral, as soon as practicable, but in no event any later than 30 days after receipt of such notice. Upon Agent's receipt of notice of Company's desire not to borrow the Term Loan, Agent's and Lenders' commitment to make the Term Loan shall be automatically terminated. All amounts outstanding under the Term Loan shall constitute Obligations. (iii) Each Lender's commitment to make Revolving Loans to Company pursuant to this subsection 2.1 is herein called its "Revolving Loan Commitment" and such commitments of all Lenders in the aggregate are herein called the "Revolving Loan Commitments". Each Lender's commitment to make its Pro Rata Share of the Term Loan to Company pursuant to this subsection 2.1 is herein called its "Term Loan Commitment" and such commitments of all Lenders in the aggregate are herein called the "Term Loan Commitments". The original amount of each Lender's Revolving Loan Commitment and Term Loan Commitment are set forth opposite its name on Schedule 2.1 annexed hereto; provided, that the Revolving Loan Commitments and Term Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments and Term Loan Commitments pursuant to subsection 9.1. (n) Section 2.2 is amended in its entirety to read as follows: 2.2 Letters of Credit. (a) Subject to the terms and conditions of this Agreement, Agent agrees to issue letters of credit for the account of Company (each, an "L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty") with respect to letters of credit issued by an issuing bank for the account of Company. Agent shall have no obligation to issue a Letter of Credit if either of the following would result: (i) the aggregate amount of all undrawn and unreimbursed Letters of Credit, would exceed the Current Asset Borrowing Base less the amount of outstanding Revolving Loans; or ---- (ii) the aggregate amount of all undrawn or unreimbursed Letters of Credit would exceed the lower of: (x) the Maximum Revolving Amount less the amount of outstanding Revolving ---- Loans; or (y) $10,000,000. 6 Company expressly understands and agrees that Agent and Lenders shall have no obligation to arrange for the issuance by issuing banks of the letters of credit that are to be the subject of L/C Guarantees. Each Letter of Credit shall have an expiry date no later than 60 days prior to the date on which this Agreement is scheduled to terminate (without regard to any potential renewal term) and all such Letters of Credit shall be in form and substance acceptable to Agent in its sole discretion. If issuing bank is obligated to advance funds under a Letter of Credit, Company shall immediately reimburse such advance to the issuing bank by paying to Agent an amount equal to such advance not later than 11:00 a.m., California time, on the date that advance is made, if Company shall have received written or telephonic notice of such advance prior to 10:00 a.m., California time, on such date, or, if such notice has not been received by Company prior to such time on such date, then not later than 11:00 a.m., California time, on the Business Day immediately subsequent to the date that Company receives such notice, and, in the absence of such reimbursement, any advance reimbursed by Agent immediately and automatically shall be deemed to be a Revolving Loan hereunder and, thereafter, shall bear interest at the rate then applicable to Revolving Loans that are Prime Rate Loans under Section 2.3. To the extent any ----------- reimbursement of an advance made by the issuing bank is deemed to be a Revolving Loan hereunder, Company's obligation to reimburse such advance shall be discharged and replaced by the resulting Revolving Loan and Agent shall be responsible for reimbursing with the funds realized from such Revolving Loan the issuing bank for any such advance under a Letter of Credit. Promptly following receipt by Agent of any payment from Company pursuant to this paragraph, Agent and Lenders shall distribute such payment to the issuing bank or, to the extent that Lenders have made payments pursuant to Section 2.2(b) to reimburse the issuing bank, then to such -------------- Lenders and the issuing bank as their interest may appear. (b) Promptly following receipt of a notice of an advance under a Letter of Credit pursuant to Section 2.2(a), each Lender -------------- agrees to fund its Pro Rata Share of any Revolving Loan deemed made pursuant to the foregoing subsection on the same terms and conditions as if Company had requested such Revolving Loan and Agent shall promptly pay to issuing bank the amounts so received by it from the Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the issuing bank or the Lenders, the issuing bank shall be deemed to have granted to each Lender, and each Lender shall be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its Pro Rata Share, and each such Lender agrees to pay to Agent, for the account of the issuing bank, such Lender's Pro Rata Share of any payments made by the issuing bank under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to Agent, for the account of the issuing bank, such Lender's Pro Rata Share of each advance made by the issuing bank under a Letter of Credit and not reimbursed by Company on the date due as provided in clause (a) of this Section, or of any reimbursement payment required to be refunded to Company for any reason. 7 Each Lender acknowledges and agrees that its obligation to deliver to Agent, for the account of the issuing bank, an amount equal to its respective Pro Rata Share pursuant to this Section 2.2(b) shall be absolute -------------- and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3 hereof. If any such Lender --------- fails to make available to Agent the amount of such Lender's Pro Rata Share of any payments made by the issuing bank in respect of such Letter of Credit as provided in this Section, Agent (for the account of the issuing bank) shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Default Rate until paid in full. (c) Company hereby agrees to indemnify, save, defend, and hold Agent and Lenders harmless from any loss, cost, expense, or liability, including payments made by Agent and Lenders, expenses, and reasonable attorneys fees incurred by Agent arising out of or in connection with any Letter of Credit. Company agrees to be bound by the issuing bank's regulations and interpretations of any letters of credit guarantied by Agent and Lenders and opened to or for Company's account or by Agent's interpretations of any Letter of Credit issued by Agent to or for Company's account, even though this interpretation may be different from Company's own, and Company understands and agrees that neither Agent nor any Lender shall be liable for any error, negligence, or mistake, whether of omission or commission, in following Company's instructions or those contained in the Letter of Credit or any modifications, amendments, or supplements thereto. Company understands that the L/C Guarantees may require Agent and Lenders to indemnify the issuing bank for certain costs or liabilities arising out of claims by Company against such issuing bank. Company hereby agrees to indemnify, save, defend, and hold Agent and Lenders harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or liability incurred by Agent or any Lender under any L/C Guaranty as a result of Agent's and Lenders' indemnification of any such issuing bank. (d) Company hereby authorizes and directs any bank that issues a letter of credit guaranteed by Agent and Lenders to deliver to Agent all instruments, documents, and other writings and property received by the issuing bank pursuant to such letter of credit, and to accept and rely upon Agent's instructions and agreements with respect to all matters arising in connection with such letter of credit and the related application. Company may or may not be the "applicant" or "account party" with respect to such letter of credit. (e) Any and all charges, commissions, fees, and costs incurred by Agent and Lenders relating to the letters of credit guaranteed by Agent and Lenders shall be immediately reimbursable by Company to Agent and Lenders. (f) Immediately upon the termination of this Agreement, Company agrees to either (i) provide cash collateral to be held by 8 Agent in an amount equal to 102% of the maximum amount of Agent's and Lenders' obligations under outstanding Letters of Credit, or (ii) cause to be delivered to Agent releases of all of Agent's and Lenders' obligations under outstanding Letters of Credit. At Agent's discretion, any proceeds of Collateral received by Agent or any Lender after the occurrence and during the continuation of an Event of Default may be held as the cash collateral required by this Section 2.2(f). -------------- (g) If by reason of (i) any change in any applicable law, treaty, rule, or regulation or any change in the interpretation or application by any governmental authority of any such applicable law, treaty, rule, or regulation, or (ii) compliance by the issuing bank, Agent, or any Lender with any direction, request, or requirement (irrespective of whether having the force of law) of any governmental authority or monetary authority including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect (and any successor thereto): (i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letters of Credit issued hereunder, or (ii) there shall be imposed on the issuing bank, Agent or any Lender any other condition regarding any letter of credit, or Letter of Credit, as applicable, issued pursuant hereto; and the result of the foregoing is to increase, directly or indirectly, the cost to the issuing bank, Agent or any Lender of issuing, making, guaranteeing, or maintaining any letter of credit, or Letter of Credit, as applicable, or to reduce the amount receivable in respect thereof by such issuing bank, Agent or any Lender, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Company, and Company shall pay on demand such amounts as the issuing bank or Agent may specify to be necessary to compensate the issuing bank, Agent or any Lender for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate set forth in Section 2.3(A)(i). The determination by the issuing bank ----------------- or Agent, as the case may be, of any amount due pursuant to this Section ------- 2.2(g), as set forth in a certificate setting forth the calculation thereof ------ in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto, unless challenged by Company within 45 days of the date of delivery of such certificate to the Company. (h) Company acknowledges and agrees that certain of the Qualified Import Letters of Credit may provide for the presentation of time drafts to the issuing bank. If an issuing bank accepts such a time draft that is presented under a Letter of Credit, it is acknowledged and agreed that (i) the Letter of Credit will require Agent and Lenders to reimburse the issuing bank for 9 amounts paid on account of such time draft on or after the maturity date thereof, (ii) the pricing provisions hereof shall continue to apply, until payment of such time draft on or after the maturity date thereof, as if the issuing bank's Letters of Credit were still outstanding, and (iii) on the date on which Agent on behalf of Lenders makes payment to the issuing bank of the amounts paid on account of such time draft, Company immediately shall reimburse such amount to Agent and such amount shall constitute Revolving Loans hereunder. (o) Section 2.3(A) of the Agreement is amended in it entirety to read as follows: A. Rate of Interest. Subject to the provisions of subsections 2.3E and 2.8, the Loans shall bear interest from the date made through maturity as follows: (i) if a Prime Rate Loan, then at a rate per annum equal to the Prime Rate; or (ii) if a LIBOR Rate Loan, then at a rate per annum equal to the sum of the LIBOR Rate plus 1.5% per annum. If on any day a Loan is outstanding with respect to which notice has not been delivered to Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest at the Prime Rate Loan rate. (p) The first paragraph of Section 2.3(B) of the Agreement is amended in it entirety to read as follows: B. Interest Periods. In connection with each LIBOR Rate Loan, provided no Event of Default has occurred and is continuing, Company may, pursuant to the applicable Notice of LIBOR Rate Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be, at Company's option, either a one, two, three, or six month period; provided that: (q) Section 2.3(B) of the Agreement is further amended by adding the following clause (vii): (vii) If an Event of Default has occurred and is continuing, Agent, at Requisite Lenders option, may automatically convert all outstanding LIBOR Rate Loans to Prime Rate Loans at the end of the applicable interest period. 10 (r) The first paragraph of Section 2.3(D) of the Agreement is amended in it entirety to read as follows: D. Conversion or Continuation. Subject to the provisions of subsection 2.7, Company shall have the option (i) to convert at any time all or any part of its Revolving Loans equal to $1,000,000 and integral multiples of $500,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to the other basis; provided that any such conversion of Prime Rate Loans into LIBOR Rate Loans shall be in amounts of $1,000,000 and integral multiples of $500,000 in excess thereof or (ii) upon the expiration of any Interest Period applicable to a LIBOR Rate Loan, to continue all or any portion of such Loan equal to $1,000,000 and integral multiples of $500,000 in excess of that amount as a LIBOR Rate Loan having a particular interest period; provided, however, that a LIBOR Rate Loan may only be converted into a Prime Rate Loan on the expiration date of an Interest Period applicable thereto. There shall be no more than seven LIBOR Rate Loans outstanding at any time. (s) Section 2.4 of the Agreement is amended in it entirety to read as follows: 2.4 Fees. ---- A. Fees. Company agrees to pay to Agent, fees in the following amounts: (i) an annual facility fee in an amount equal to the product of: (i) the Maximum Revolving Amount; multiplied by (ii) 0.10%, such fee to be fully earned and payable on May 1, 2001 and on each May 1 thereafter so long as this Agreement has not terminated; (ii) an unused line fee equal to: (a) $45,000,000, minus the average of the daily amount of Revolving Loans; times (b) 0.375% per annum calculated on the basis of a 360-day year and the actual number of days elapsed and payable monthly in arrears on the first day of each calendar month through the Maturity Date so long as this Agreement has not terminated, provided, however, that if this Agreement terminates on a date other than the 1/st/ of a month, the unused line fee will be prorated for the partial month on which the termination occurs and payable on the date of termination; (iii) an annual servicing fee in the amount of $50,000 to be fully earned and payable on August 31, 2001, and on each August 31 thereafter so long as this Agreement has not terminated; (iv) A Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.2(f)) which shall --------------- accrue at a rate equal to 1.375% per annum times the Daily Balance of the undrawn amount of all outstanding Letters of Credit calculated on the basis of a 11 360-day year and the actual number of days elapsed and payable monthly in arrears on the first day of each calendar month through the Maturity Date. (v) For the separate account of Agent, audit, appraisal, and valuation fees and charges as follows (i) a fee of $750 per day, per auditor, plus out-of-pocket expenses for each financial audit of Company performed by personnel employed by Agent, (ii) a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal of the Collateral performed by personnel employed by Agent, and (iii) the actual charges paid or incurred by Agent if it elects to employ the services of one or more third Persons to perform financial audits of Company, to appraise the Collateral, or any portion thereof, or to assess Company's business valuation, provided the fee for financial audits performed by a third party shall not exceed the fees charged by Agent for audits performed by personnel employed by Agent. Agent and Lenders agree that so long as no Event of Default has occurred and is continuing, Company will be charged for no more than one financial audit and one inventory appraisal per year. (t) Section 2.5(A) of the Agreement is amended in its entirety to read as follows: A. Prepayments Due to Reductions or Restrictions of ------------------------------------------------ Revolving Loan Commitments. Company shall from time to time prepay the -------------------------- Revolving Loans to the extent necessary so that the Total Current Utilization shall not at any time exceed the lesser of (1) the Maximum Revolving Amount; minus the outstanding balance of the Term Loan, minus, the Letter of Credit Usage; or (2) the Current Asset Borrowing Base, minus the Letter of Credit Usage, minus any reserves established by Agent pursuant to the terms of this Agreement. (u) Section 3.1(G) of the Agreement is hereby deleted. (v) Sections 4.3 and 4.4 of the Agreement are amended in their entirety to read as follows: 4.3 Financial Condition. ------------------- All financial statements delivered to Agent were prepared in accordance with GAAP and fairly present the consolidated financial position of Company, Manufacturing, NTS, IS, and RS as at the respective dates thereof and the consolidated results of operations and cash flows of Company, Manufacturing, NTS, IS, and RS for each of the relevant periods. Except as permitted by this Agreement, none of Company, Manufacturing, NTS, IS, or RS or any of their respective Subsidiaries have any material Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment, which is not reflected in the foregoing financial statements, the notes thereto, the schedules to this Agreement or the most recent financial statements delivered pursuant to subsection 5.l of this Agreement except those incurred in the ordinary course of business consistent with past practice. 12 4.4 No Adverse Material Change. -------------------------- Since the date of the latest financial statements submitted to Agent, no event or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. (w) Section 5.1(i) of the Agreement is amended in it entirety to read as follows: (i) Borrowing Base Certificates. If Company has Revolving --------------------------- Loan borrowing availability of less than $10,000,000, prior to noon, California time, on each Tuesday, a borrowing base certificate, in form and detail acceptable to Agent, as of the close of Company's business on the immediately preceding Saturday; or if Company has Revolving Loan borrowing availability of $10,000,000 or more, prior to noon, California time, on the third Business Day of any fiscal month, a borrowing base certificate, in form and detail acceptable to Agent, as of the close of Company's business on the last day of the immediately preceding fiscal month; (x) Section 5.14 of the Agreement is amended in its entirety to read as follows: 5.14 Borrowing Availability. Company agrees that it will ---------------------- maintain Revolving Loan borrowing availability of no less than $5,000,000 at any one time. (y) Section 6.1(vi) of the Agreement is amended in it entirety to read as follows: (vi) Company may become and remain liable with respect to Indebtedness to IS to the extent permitted by subsection 6.3; provided that -------- all such intercompany Indebtedness shall be evidenced by a promissory note. (z) Section 6.1 of the Agreement is amended by adding the following subsection (vii) and (viii): (vii) in the event Company notifies Agent that Company has determined not to borrow the Term Loan, Company and its subsidiaries may become and remain liable with respect to Indebtedness secured by the Real Estate Collateral in an amount not to exceed $5,000,000, provided, such -------- Indebtedness is secured solely by the Real Estate Collateral and the lender providing such Indebtedness agrees to execute a mortgagee's waiver, in form and substance satisfactory to Agent, waiving any interest such lender may have to the personal property located in the premises relating to such Real Estate Collateral and agreeing to provide access to such premises for the purpose of removing all personal property in the event Agent and Lenders are permitted to do so pursuant to the terms of this Agreement. 13 (viii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness in addition to Indebtedness described in clauses (i)-(vii) above in an aggregate principal amount not to exceed $2,000,000 at any time outstanding. (aa) Section 6.3, 6.4 and 6.5 of the Agreement are amended in their entirety to read as follows: 6.3 Investments. ----------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly make or own any Investment in any Person, except: (i) Company's direct Investments in IS, NTS and Manufacturing; (ii) IS ownership of the capital stock of RS; and (iii) extensions of credit made by IS to Company. 6.4 Contingent Obligations. ---------------------- Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or become or be liable with respect to any Contingent Obligation, except: (i) guaranties resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) Manufacturing, NTS, IS, and RS may become and remain liable with respect to the Guaranties; (iii) contingent reimbursement obligations with respect to Letters of Credit; and (iv) Contingent Obligations set forth on the Information Certificate. 6.5 Restricted Payments. ------------------- Company will not, and will not permit its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for dividends or distributions, other than dividends or distributions to Company and dividends and distributions by NTS, RS to IS. (bb) Section 6.6 of the Agreement is amended in it entirety to read as follows: Agent shall set a minimum EBITDA covenant for each fiscal month commencing with the fiscal month ending on or about March 31, 2001 and a maximum Capital Expenditure covenant for each fiscal year commencing with the fiscal year ending on or about January 31, 2002. The 14 covenants shall be based upon Company's projections for the fiscal year containing that fiscal month and fiscal year, which projections must be delivered to Agent prior to the commencement of such fiscal year. The projections shall be satisfactory to Agent in its reasonable credit judgment. Agent shall set the future periods EBITDA covenant based on 85% of the expected performance set forth in the projections delivered to Agent. The covenants set forth in this Section will not be applicable to Company in any fiscal month during which Company maintains a daily average of Revolving Loans borrowing availability of $10,000,000 or more, provided, no Event of Default has occurred and is continuing. (cc) Section 6.8 of the Agreement is amended in its entirety to read as follows: 6.8 Conduct of Business. ------------------- Company will not engage in any business other than the business engaged in by Company, Manufacturing, NTS, IS, or RS on the date hereof, substantially similar or related businesses and other lines of business consented to by Agent and Requisite Lenders. Company will not permit Manufacturing, NTS, IS, and RS to engage in any business other than the business engaged in by Manufacturing, NTS, IS and RS on the date hereof or substantially similar or related businesses, or to sell or dispose of its products in any manner different from the manner in which Manufacturing, NTS, IS, or RS sold or disposed of its products on the date hereof. Company will not form, create, or take any interest in, any Subsidiary other than those Subsidiaries listed in the Information Certificate and NTS, IS and RS. (dd) Sections 6.9, 7.12 and 7.13 of the Agreement are hereby deleted. (ee) Section 7.10 of the Agreement is amended in its entirety to read as follows: 7.10 Invalidity of Guaranty. ---------------------- The Guaranties for any reason, other than the satisfaction in full of all Obligations, are declared by a court of competent jurisdiction to be null and void, or any of Manufacturing, NTS, IS or RS denies that it has any further liability, including without limitation with respect to future advances by Lenders, under the Guaranties or gives notice to such effect; or 3. REPRESENTATIONS AND WARRANTIES. Company hereby affirms to ------------------------------ Agent and the Lenders that all of Company's representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof. 4. DELETION OF TRANCHE A AND TRANCHE B LOANS. After the date ----------------------------------------- of this Agreement there shall be no Tranche A Loans and Tranche B Loans and only one class of Revolving Loans will be available. All references to Tranche A Loans and Tranche B 15 Loans in the Loan Agreement and the Loan Documents shall be deemed to refer to Revolving Loans. 5. COMBINED AMENDMENT. This Amendment combines, amends and ------------------ supersedes the Wells Fargo Amendments and the Foothill Amendments. 6. NO DEFAULTS. Company hereby affirms to Agent and the Lenders that ----------- no Event of Default has occurred and is continuing as of the date hereof. 7. CONDITIONS PRECEDENT. The effectiveness of this Amendment is -------------------- expressly conditioned upon the following: (a) Payment by Company to Agent of an amendment fee in the aggregate amount of $60,000, such fee to be charged to Company's loan account pursuant to terms of the Agreement; (b) Company shall have engaged an appraiser, satisfactory to Agent, to conduct an appraisal of Company's Inventory (the "Inventory Appraisal"); (c) Receipt by Agent of the Amended and Restated Revolving Note in the amount of $50,000,000; and (d) Receipt by Agent of a copy of this Amendment executed by Company and Required Lenders. 8. CONDITIONS SUBSEQUENT. Agent and Lenders obligation to continue --------------------- to extend credit under the Agreement is expressly conditioned upon the following: (a) Receipt by Agent of a copy of an updated Inventory Appraisal no later than December 31, 2000; (b) Within 30 days of the date of this Amendment, receipt by Agent of an Amendment to the Deed of Trust relating to the Real Estate Collateral, together with the necessary endorsements to the title insurance policy. (c) Within 10 Business Days of the date of this Amendment, receipt by Agent of fully executed duplicate originals of the following documents: (1) Continuing Guaranty (RS Servicing); (2) Continuing Guaranty (IS Servicing); (3) Security Agreement - Stock Pledge; (4) Security Agreement (RS Servicing); (5) Security Agreement (IS Servicing); (6) Collateral Assignment of License Agreement; (7) Trademark Security Agreement; (8) Secretary's Certificate (IS Servicing); (9) Secretary's Certificate (RS Servicing). (10) UCC-1 Financing Statement (IS Servicing); and 16 (11) UCC-1 Financing Statement (RS Servicing); (d) Agent shall have completed a field audit of Company's operations by no later than January 31, 2001; and (e) Upon funding of the Term Loan, Company agrees to deliver to Agent a promissory note for each Lender setting forth the terms of such Lender's Pro Rata Share of the Term Loan. 9. COSTS AND EXPENSES. Company shall pay to Agent all of Agent's ------------------ out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel, which counsel may include any local counsel deemed necessary, search fees, filing and recording fees, documentation fees, appraisal fees, travel expenses, and other fees) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents. 10. LIMITED EFFECT. In the event of a conflict between the terms and -------------- provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect. 11. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in --------------------------- any number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of a counterpart of this Amendment by each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above. FOOTHILL CAPITAL CORPORATION, a California corporation, as Agent and as the sole Lender By: /s/:Matthew J. Simoneau ----------------------------------------- Title: Sr. Vice President -------------------------------------- JOS. A. BANK CLOTHIERS, INC., a Delaware corporation By: /s/:David E. Ullman ----------------------------------------- Title: EVP-CFO -------------------------------------- 17 Each of the undersigned has executed a Continuing Guaranty in favor of Foothill Capital Corporation, as Agent for the Lenders (as defined in the Amendment) ("Foothill") respecting the obligations of Jos. A. Bank Clothiers, Inc., a Delaware corporation ("Company") owing to Agent and Lenders. Each of the undersigned acknowledges the terms of the above Amendment and reaffirms and agrees that: its Continuing Guaranty remains in full force and effect; nothing in such Continuing Guaranty obligates Agent or any Lender to notify the undersigned of any changes in the financial accommodations made available to Company or to seek reaffirmations of the Continuing Guaranty; and no requirement to so notify the undersigned or to seek reaffirmations in the future shall be implied by the execution of this reaffirmation. JOSEPH A. BANK MFG. CO., a New Jersey corporation By: /s/:David E. Ullman ------------------- Name: David E. Ullman --------------- Title: EVP-CFO ------- NATIONAL TAILORING SERVICES, INC., a Delaware corporation By: /s/:David E. Ullman ------------------- Name: David E. Ullman --------------- Title: EVP-CFO ------- RS SERVICING CO., INC., a Delaware corporation By: /s/:David E. Ullman ------------------- Name: David E. Ullman --------------- Title: EVP-CFO ------- IS SERVICING CO., INC., a Delaware corporation By: /s/:David E. Ullman ------------------- Name: David E. Ullman --------------- Title: EVP-CFO ------- 18 Exhibit 21.1(b) JOS. A. BANK CLOTHIERS, INC. SUBSIDIARIES - - The Joseph A. Bank Mfg. Co., Inc., a New Jersey corporation - - National Tailoring Services, Inc., a Delaware corporation - - Jos. Bank of Fishkill, Inc., a Maryland corporation - - RS Servicing Co., Inc., a Delaware corporation - - IS Servicing Co., Inc., a Delaware corporation EX-10.17A 3 dex1017a.txt FIRST AMEND EMPLOYMENT AGREE/HENSLEY Exhibit 10.17A FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT (this "Amendment") is made as of this 1st day of --- January, 2000 to that certain EMPLOYMENT AGREEMENT, dated as of November 30, l999 (the "Employment Agreement"), by and between ROBERT HENSLEY ("Employee") and JOS. A. BANK CLOTHIERS, INC. ("Employer"). WHEREAS, the offer letter pursuant to which the Employment Agreement was negotiated stated that Employee would receive, among such other compensation as may be due and payable, a car allowance in the amount of $800.00 per month; and WHEREAS, the car allowance was inadvertently omitted from the Employment Agreement; and WHEREAS, Employer and Employee have agreed to amend the Employment Agreement to reflect the original terms of the offer letter with regard to the car allowance. NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Employer and Employee, being the sole parties to the Employment Agreement, hereby amend the Employment Agreement by adding thereto a new Section 3.7 as follows: 3.7 Car Allowance. In addition to such other compensation as may be ------------- due and payable hereunder, Employer shall pay to Executive a car allowance in the amount of $800.00 per month during the Employment Period. Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Employment Agreement, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Employment Agreement. This Amendment shall hereafter be deemed a part of the Employment Agreement for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By: /s/: Robert N. Wildrick /s/: Robert Hensley ---------------------------------------- ------------------- Robert N. Wildrick, ROBERT HENSLEY Chief Executive Officer EX-10.17B 4 dex1017b.txt SECOND AMEND EMPLOYMENT AGREE/HENSLEY Exhibit 10.17B SECOND AMENDMENT TO EMPLOYMENT AGREEMENT THIS SECOND AMENDMENT (this "Amendment") is made as of this 16th day of March, 2001 to that certain EMPLOYMENT AGREEMENT, dated as of November 30, l999, as amended (the "Employment Agreement"), by and between ROBERT HENSLEY ("Employee") and JOS. A. BANK CLOTHIERS, INC. ("Employer"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Employer and Employee, being the sole parties to the Employment Agreement, hereby amend the Employment Agreement as follows: 1. Subject to earlier termination otherwise set forth in the Employment Agreement, the last day of the Employment Period shall be February 1, 2003. 2. Effective July 1, 2000 and unless otherwise increased in the discretion of the Company, Base Salary shall be $254,950. Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Employment Agreement, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Employment Agreement. This Amendment shall hereafter be deemed a part of the Employment Agreement for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By: /s/: Robert N. Wildrick /s/: Robert Hensley --------------------------- -------------------- Robert N. Wildrick, ROBERT HENSLEY Chief Executive Officer EX-10.18A 5 dex1018a.txt FIRST AMEND EMPLOYMENT AGREE/BLACK Exhibit 10.18A FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS FIRST AMENDMENT (this "Amendment") is made as of this 16th day of ---- March, 2001 to that certain EMPLOYMENT AGREEMENT, dated as of December 21, 1999 (the "Employment Agreement"), by and between R. NEAL BLACK ("Employee") and JOS. A. BANK CLOTHIERS, INC. ("Employer"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Employer and Employee, being the sole parties to the Employment Agreement, hereby amend the Employment Agreement as follows: 1. Subject to earlier termination otherwise set forth in the Employment Agreement, the last day of the Employment Period shall be February 1, 2003. 2. Effective July 1, 2000 and unless otherwise increased in the discretion of the Company, Base Salary shall be $252,475. Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Employment Agreement, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Employment Agreement. This Amendment shall hereafter be deemed a part of the Employment Agreement for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By:: /s/: Robert N. Wildrick /s/: R. Neal Black ------------------------------- ------------------- Robert N. Wildrick, R. NEAL BLACK Chief Executive Officer EX-10.19 6 dex1019.txt COLLECTIVE BARGAINING AGREEMENT MARCH 1, 2000 Exhibit 10.19 AGREEMENT dated March 1, 2000 by and between Joseph A. Bank Mfg. Co., Inc. (hereinafter referred to as the "Employer") and the BALTIMORE REGIONAL JOINT BOARD, UNITE, an unincorporated association (hereinafter collectively referred to as the "Union"), for and in behalf of itself and the employees now employed, or hereafter to be employed by the Employer at its Hampstead, Maryland, Distribution Center and National Tailoring Service branch. In consideration of the mutual covenants, promises and agreements herein contained, the parties hereto agree as follows: ARTICLE I COVERAGE: A. The term "Employees" as used in this Agreement shall include all employees of the Employer's Hampstead, Maryland, Distribution Center and Hampstead Maryland, National Tailoring Service branch, except executive, administrative, office clericals, supervisors and guards as defined in the National Labor Relations Act. This collective bargaining agreement is gender neutral, and wherever the pronouns "he" or "his" are used in the interests of brevity, they are intended to mean female employees as well. ARTICLE II UNION RECOGNITION: A. The Employer recognizes the Union as the exclusive collective bargaining agent for the employees in the bargaining unit described above with reference to wages, hours and working conditions. B. The Employer shall recognize and deal with such representatives of the employees as the Union may elect or appoint and shall permit such representatives elected or appointed by the Union to visit its Hampstead Distribution Center and Hampstead NTS at any time during working hours in accordance with existing rules. C. The Employer agrees to make available to the Union such payroll and production records as the Union may reasonably require as the collective bargaining agent and/or contracting party hereunder. ARTICLE III UNION SECURITY: A. In the manner and to the extent permitted by law, membership in the Union on completion of the trial period of each employee or on and after the 30th day following execution of this Agreement, whichever is later, shall be required as a condition of continued employment of each employee. In the event that the trial period is less than thirty (30) days, membership in the Union shall not be required until thirty (30) days after date of employment. All employees who are now members or hereafter become members of the Union shall, as a condition of continued employment, remain members in good standing during the term of this Agreement. B. Trial Period: Hampstead Distribution Center and Hampstead NTS; All new experienced employees shall have a trial period of two (2) weeks. All new inexperienced employees shall have a trial period of ninety (90) days. It is agreed that the Employer shall pay to an employee who has completed his probationary period indicated in the collective bargaining agreement at least twenty-five (25) cents an hour above the then existing Federal or State minimum wage whichever is 2 higher. This provision is not to substitute for or supersede higher straight- time hourly rates and incentive base rates, if any exist. ARTICLE IV WAGES: 1. Effective March 1, 2000, the Employer shall grant a wage increase of 30cents per hour to all employees in the bargaining unit. 2. Effective March 1, 2001, the Employer shall grant a wage increase of 30cents per hour to all employees in the bargaining unit. 3. Effective March 1, 2002, the Employer shall grant a wage increase of 30cents per hour to all employees in the bargaining unit. 4. If an employee is temporarily transferred from one job to another at the request of the Employer, he shall, while working on the job to which he has been transferred, be paid (a) if an hourly paid employee, his regular hourly straight-time rate of pay prevailing at the time of the transfer or the hourly straight-time rate of the job to which he is transferred, whichever shall be higher; or (b) if an incentive paid employee, his regular straight time hourly incentive rate* or the hourly straight-time base rate for the job to which he is transferred, whichever shall be higher. ARTICLE V REPORTING PAY: Employees who report for work at their regular starting time, or at such hour designated by the Employer, shall be paid their regular straight-time hourly incentive 3 rate, or regular, whichever is applicable, straight-time hourly rate of pay for all work performed between the hour they report for work and the hour that they are dismissed, but in no event shall they be paid less than six (6) hours, or four (4) hours on Saturday. This clause shall not apply in the event of power failure, fire, or other cause over which the Employer has no control. In the case of the first five (5) hours of call in pay, failure of other employees to report for work shall be considered cause over which the Employer has no control only if an emergency arises which it could not foresee and it had taken adequate steps to train and provide relief workers. Excessive absenteeism shall relieve the Employer of the obligation to pay the sixth hour of call in pay. ARTICLE VI HOURS OF WORK: 1. Regular Work Week: The regular hours of work for all employees may be eight (8) hours in any one day, from Monday to Friday inclusive. The time when work shall begin and end each day shall be agreed upon by the Employer and the Union. 2. Overtime: Time and one-half shall be paid for all work outside the regular daily hours. As long as the regular work week shall be from Monday to Friday inclusive, time and one-half shall be paid for all work performed on Saturdays and double time for work performed on Sunday irrespective of the number of hours worked during the week. In the event the Employer deems it necessary for business reasons to institute a multi-shift operation during the regular work week Monday through Friday, inclusive, it ________________________________________________________________________________ * An incentive employee's regular straight-time hourly incentive rate is the employee's average straight-time hourly earnings for the first thirteen (13) weeks of the calendar year, effective July 4 of each year. 4 will give the Union no less than thirty (30) days notice of such intention, and the parties shall meet promptly for the purpose of negotiating a shift premium(s). 3. In the event the Employer deems it necessary for business reasons to adopt a seven day operation, Saturday and/or Sunday will become part of a regular five day work week for those employees scheduled regularly to work either or both of those days and Saturday and Sunday premium pay will not be applicable to those employees so scheduled. It is further understood, however, that premium pay of time and one-half for Saturday work and double time for Sunday work, whichever is appropriate, will continue to be applicable to those employees for whom Saturday or Sunday work constitutes a sixth or seventh consecutive work day. 4. No work shall be performed on a designated holiday except by mutual agreement of the parties, and, if agreed upon, at double time. Overtime pay for work on a designated holiday shall be in addition to holiday pay to which the employee is entitled pursuant to the provisions hereinafter set forth in HOLIDAYS, Article IX, Sections B1 or B2, whichever is applicable. 5. Notice of Overtime: The Employer agrees to give reasonable notice to the employees and the appropriate union shop committee representative when overtime is to be worked. ARTICLE VII EQUIPMENT BREAKDOWN TIME AND WAITING TIME: An employee paid on an incentive basis who is required to wait for work due to equipment breakdown beyond his control shall be compensated at his straight-time 5 hourly incentive rate for all such waiting time in excess of fifteen (15) minutes per day. An employee paid on an incentive basis who is required to wait for work due to cause beyond his control other than for equipment breakdown shall be compensated at his straight-time hourly incentive rate for all such waiting time in excess of thirty (30) minutes per day. However, in no event will the combined unpaid equipment down time and waiting time exceed thirty minutes per day. Any employee who finds it necessary to wait for work shall, on each separate occasion, notify his immediate supervisor both at the beginning and end of such waiting period. Payment for waiting time shall cover only such time as follows such notification. The Employer may transfer such employees to other equipment during equipment down time, in the same department or to another department if the employee is qualified to perform the required work, and the employee will be paid his straight-time hourly incentive rate. ARTICLE VIII VACATIONS: I. Hampstead Distribution Center ----------------------------- A. Vacation Period. It is mutually agreed that there shall be the following vacation periods for the Hampstead Distribution Center employees entitled to vacation pay as hereinafter provided. 1. Unless changed by mutual agreement between the Employer and the Union, the Summer Vacation Period shall be June 1 through August 31. There shall be no shut down of Distribution Center operations for the purpose of observing summer 6 vacations. Summer Vacations shall be scheduled individually with due regard to seniority and subject to the approval of the Employer based upon business needs. 2. The Christmas Vacation Period shall be between Christmas Day and New Year's Day of each year. 3. Fourth Week of Vacation: Any Hampstead Distribution employee with 20 years, or more, of employment, with the Employer is entitled to a fourth (4th) week of paid vacation to be taken during the ensuing twelve (12) month period following the date that the employee reaches 20 or more years of employment. The schedule of vacations shall be fixed by mutual agreement with the Union in accordance with the needs of business. Individual employees may bid for an available week in order of seniority or such other rotational system as mutually agreed to with the Union. If mutually agreed to with the Union, an employee may elect to work during the employee's week of vacation at straight time in addition to vacation pay. The amount of time off and pay shall be the same as the preceding Winter Vacation. 4. In the event that a paid holiday falls within the employee's vacation, Hampstead Distribution Center employees entitled to holiday pay shall be entitled to such holiday pay in addition to vacation pay hereinafter provided. B. Eligibility and Pay for Hampstead Distribution Center Employees Employed Prior to October 1, 1985: 1. For the Summer Vacation: (a) All employees who have been on the payroll of the Employer for at least six (6) months prior to the commencement of the Summer Vacation period and, 7 except as hereinafter provided, who are on such payroll at the commencement of the Summer Vacation Period are eligible for a paid vacation. (b) The amount of each employee's vacation pay for Summer Vacation shall be determined in the manner set forth in this subparagraph. If the employee has been on the payroll of the Employer: (i) Six (6) months but less than nine (9) months, he shall receive one-half of one week's pay, (ii) Nine (9) months but less than one (1) year, he shall receive three-fourths of one week's pay, (iii) One year or more, he shall receive two (2) week's pay. (c) (i) First Week: One week's pay shall be forty (40) times the employee's regular straight-time hourly incentive rate if an incentive paid employee scheduled to work forty (40) hours per week, or forty (40) times the employee's straight-time hourly rate if so compensated. The full amount of the wage increases scheduled to be paid on March 1, 2001 and March 1, 2002 shall be included as applicable. (ii) Second Week: An eligible employee who has worked not less than 1000 hours in the 12 months beginning June 1st in the previous calendar year and ending May 31st in the current vacation year shall receive for his second week's vacation pay the same amount as the employee's vacation pay for the first week. (d) For those eligible Hampstead Distribution Center employees regularly scheduled to work less than eight (8) hours daily, one week's vacation pay shall consist of their regular straight-time hourly incentive rate or regular straight-time hourly rate of pay, whichever is applicable, times the average weekly hours they were scheduled 8 to work during the twelve (12) months beginning June 1/st/ in the previous calendar year and ending May 31/st/ in the current vacation year. (e) For those eligible employees who worked less than 1000 hours during the entire aforesaid twelve (12) months period, the second week's vacation pay shall be two and one-half percent (2 1/2%) of the employee's straight-time earnings for up to forty (40) hours per week in the twelve (12) months beginning June 1st in the previous calendar year and ending May 31st in the current vacation year. 2. For the Christmas Vacation Period: (a) All Hampstead Distribution Center employees who have been on the payroll of the Employer one year or more prior to December 1st and, except as hereinafter provided, who are on such payroll at the commencement of the Christmas Vacation Period are eligible for a paid Christmas vacation. (b) The amount of each employee's vacation pay for the Christmas Vacation Period shall be determined in the manner set forth in the following subparagraphs; (i) An employee who has worked not less than 1000 hours in the entire aforesaid twelve (12) months period, shall receive 40 times his regular straight time hourly incentive rate or forty (40) times his straight- time hourly rate, whichever is applicable, adjusted by three-quarters of the wage increases scheduled to be paid pursuant to Article IV hereof, as applicable. (ii) An employee who worked less than 1000 hours in the entire aforesaid twelve (12) months period shall receive one week's vacation for up to forty (40) hours calculated on the basis of two and one-half percent (2 1/2%) of his straight time 9 earnings in the twelve (12) months beginning December 1st in the previous calendar year and ending November 30th in the current vacation year. C. Eligibility for Hampstead Distribution Center Employees Employed After October 1, 1985: Each employee hired by the Employer on or after October 1, 1985 shall receive vacation pay in accordance with the following requirements: (i) On completion of 1 year of service, 1 week vacation at the next ensuing regularly scheduled vacation period (either winter or summer, whichever comes first). (ii) On completion of 2 years of service, 2 weeks of summer vacation except that an employee who first becomes eligible for two weeks of vacation prior to the winter vacation shall receive one week of winter vacation and one week of summer vacation. (iii) On completion of 3 years of service, 2 weeks of summer vacation and 1 week of winter vacation. 10 II. Hampstead National Tailoring Service Employees ---------------------------------------------- A. Vacation Period It is mutually agreed that there shall be the following vacation periods for Hampstead National Tailoring Service employees entitled to vacation pay as hereinafter provided. 1. The Summer Vacation Period shall be July 15 through September 15 of each calendar year. 2. The Winter Vacation Period shall be January 15 through March 15 of each calendar year. 3. If mutually agreed to with the Union, an employee may elect to work during the employee's vacation week at his/her straight-time hourly rate in addition to vacation pay. The amount of time off and pay shall be the same as that to which the employee was entitled during the immediately preceding vacation period. B. Eligibility and Pay for Hampstead National Tailoring Service Employees 1. Hampstead NTS employees shall be entitled to receive paid vacations in accordance with the following schedule:
Length of Service Vacation Entitlement ----------------- -------------------- a) One (1) year but less than two (2) One (1) week's vacation with pay b) Two (2) years but less than three (3) Two (2) weeks' vacation with pay c) Three (3) years but less than twenty (20) Three (3) weeks vacation with pay d) Twenty (20) years or more Four (4) weeks of vacation with pay
11 e) One (1) week's vacation pay for eligible employees who worked not less than 1000 hours in the 12 months preceding their vacation shall consist of forty (40) times the employee's then current regular straight-time hourly rate of pay. f) For eligible employees who worked less than 1000 hours in the twelve (12) month period preceding their vacation, one (1) week's vacation pay shall be two and one half percent (2 1/2%) of their straight time earnings in the preceding twelve (12) months. g) Employees entitled to more than one (1) week's vacation with pay may schedule up to two (2) weeks during either of the Winter or Summer vacation periods. h) All scheduled vacations are subject to approval of the Employer based upon business needs. i) Where a dispute arises between two (2) or more employees seeking to schedule the same vacation period, preference shall be determined by order of seniority. III. General Vacation Conditions: 1. In the event a paid holiday falls within an employee's vacation, if the employee is entitled to holiday pay, he shall receive such holiday pay in addition to vacation pay. 2. An employee otherwise eligible for a paid vacation shall not be deemed ineligible because of the fact that he is temporarily laid off or ill at the commencement of the vacation period. The Arbitrator is expressly empowered to determine, in accordance with the arbitration procedure provided in this Agreement, whether an employee discharged prior to the commencement of a vacation period but otherwise eligible for a paid vacation, shall be entitled to vacation pay. 12 3. An employee who has been in the employ of the Employer a sufficient length of time to have earned a paid vacation as herein set forth but whose employment has been terminated because of termination of business shall be entitled to vacation pay pro-rated as of the date of termination of employment. 4. Vacation pay as hereinabove provided shall be paid on the pay day immediately preceding the applicable vacation period. 5. Where an employee has been permanently and formally scheduled to work less than the regular work week for his operation the work eligibility and vacation pay for such employee shall be adjusted pro-rata. 6. Retired and Permanently Disabled Employees: Employees who, during any vacation year, retire or receive Federal Old Age Social Security Retirement Benefits, or become totally and permanently disabled so as to become eligible for and subsequently receive disability insurance benefits pursuant to the Social Security Act, as amended, shall receive pro-rata vacation pay for any untaken vacation for which they were eligible. The vacation pay herein provided shall be paid upon presentation to the Employer of proof of retirement or the Certificate of Award issued by the Social Security Administration, as appropriate. 7. Anything to the contrary notwithstanding contained in this Article VIII, the Union shall have the right to present to the Employer the question of vacation pay for the Christmas vacation period on behalf of a Hampstead Distribution Center employee who does not qualify for same because he was employed after December 1st but prior to Christmas Day during the previous calendar year. If agreement between the 13 Union and the Employer is not reached the Arbitrator is expressly empowered to settle said matter. 8. For the purpose of Sections I. B and C and II. A, above, an employee who has completed a probationary period with a prior employer in contractual relationship with the Union and who has been unemployed because of layoff or plant closing and is reemployed in the same local market within one year of loss of employment shall receive credit for each year of employment with the prior employer. 9. Employees entitled to a fourth (4/th/) week of vacation may take that week one (1) day at a time subject to: (a) Mutual agreement between the employee and his supervisor on the vacation day to be taken. The Company's agreement will not be unreasonably withheld. (b) Where more than one (1) employee seeks to take the same vacation day off, the Company shall have the right to limit the number of employees permitted off in order not to interfere with the production process. (c) Where more than one employee seeks the same vacation day off and production requirements will not so permit, the choice shall be made by seniority. 14 ARTICLE IX HOLIDAYS: A. 1. All employees shall be entitled to the following eleven (11) holidays with pay subject to paragraph E: New Years Day; National Observance of Martin Luther King, Jr.'s Birthday; Good Friday; Easter Monday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Friday After Thanksgiving Day; Last Weekday Prior to the Commencement of Christmas Vacation; Christmas Day. The Employer and the Union may substitute two other holidays for those listed above, by mutual agreement. Should any of the above holidays fall on Sunday, the day celebrated as such shall be considered the holiday. 2. All such holidays shall be paid for irrespective of the day of the week on which the holiday falls. 3. In the event of back-to-back paid holidays, if a worker is absent without reasonable excuse, either the day before or the day after the paid holiday, he shall lose only one holiday's pay. B. The pay for each holiday shall be: 1. For Hampstead Distribution Center employees regularly scheduled to work forty (40) or more hours per week, eight times their regular straight- time hourly incentive rate or regular straight-time hourly rate of pay, whichever is applicable. For those Hampstead Distribution Center employees regularly scheduled to work less than eight (8) hours daily, their regular straight-time hourly incentive rate or regular straight 15 time hourly rate of pay, whichever is applicable, times the daily hours they are regularly scheduled to work. 2. For Hampstead NTS employees eight (8) times the employee's then current straight-time hourly rate of pay. C. Any employee who, without reasonable excuse, is absent from work or who does not work all his scheduled hours on the work day before or the work day after a holiday shall not be entitled to holiday pay. Reasonable excuse shall be limited to the following: 1. Illness of the employee; 2. Death in the immediate family of the employee; 3. Lack of work for the employee. D. Notwithstanding the provisions of this Article IX, it is understood that holiday pay shall not be paid any employees of the Employer's Hampstead Distribution Center or Hampstead NTS, whichever is applicable, if such operation is shutdown for five (5) consecutive weeks as follows: 1. The entire two (2) weeks immediately preceding the week in which such paid holiday occurs; and 2. The entire week during which such paid holiday occurs; and 3. The entire two (2) weeks immediately following the week in which such paid holiday occurs. E. Trial Period, Intervening Holidays: If a holiday falls within the initial trial period, the employee shall receive his holiday pay on the first full pay period following the successful completion of the trial period. If the employee does not complete the initial 16 trial period for any reason no holiday pay is payable. This paragraph shall not apply to employees who have completed their initial trial period with any employer in contractual relations with the Union. ARTICLE X BEREAVEMENT PAY: A. An employee who has been on the payroll of the Employer for six (6) months or more shall be granted bereavement pay in the event of a death in his immediate family. B. The immediate family is defined as father, mother, sister, brother, spouse, children, mother-in-law, father-in-law, brother-in-law, sister-in-law, grandmother, grandfather and grandchildren. C. Bereavement pay shall be paid for the day before, the day of and the day following the funeral when these days fall on days the employee would otherwise have worked. In the event that the death occurs outside the United States and notice thereof does not reach the employee until after the funeral, bereavement pay shall be paid for the three (3) days following receipt of notice provided that such days are days on which the employee would otherwise have worked. D. For each day of bereavement leave, pay shall be calculated for Hampstead Distribution Center employees scheduled to work forty (40) hours per week at the rate of eight (8) times the employee's regular straight-time hourly incentive rate if an incentive paid employee, or eight (8) times the employee's regular straight-time hourly rate if paid on that basis. Distribution Center employees scheduled to work less than eight (8) hours daily shall for each day of bereavement leave receive their regular straight-time hourly 17 incentive rate incentive rate or regular straight-time hourly rate of pay, whichever is applicable, times the daily hours they are regularly scheduled to work. Hampstead NTS employees shall receive eight (8) times their regular straight- time hourly rate of pay for each day of bereavement leave. E. No bereavement pay will be granted unless the employee notifies the Employer and requests leave. At its discretion, the Employer may require evidence of death and kinship. ARTICLE XI EQUAL DIVISION OF WORK: During any slack season or whenever there is insufficient work, the available work shall be divided, insofar as is practicable, equally among all regular employees of the Employer in order that continuity of employment may be maintained unless the Employer and the Union shall mutually agree upon a lay-off and the conditions applicable thereto. It is understood that this clause has been mutually interpreted to provide for seniority of the employee as the basis for layoff. 18 ARTICLE XII PAYMENT OF WAGES AND CHECKOFF: A. The Employer agrees to pay its employees on a prescribed day in each week. B. The Employer shall deduct from the wages of its employees upon written authorization of the employees, union dues, initiation fees and assessments. The amounts deducted pursuant to such authorization shall be transmitted at intervals to the properly designated official of the Union, together with a list of names of the employees from whom the deductions were made on forms to be provided by the Union. Sums deducted by the Employer as union dues, initiation fees or assessments shall be kept separate and apart from general funds of the Employer and shall be deemed trust funds. The above mentioned monies are to be paid to the Baltimore Regional Joint Board, UNITE. immediately after it is collected at least once a month. ARTICLE XIII INSURANCE: The Employer will continue the existing Amalgamated Cotton Garment and Allied Industries Fund (social insurance) program and adopt any adjustments in premium cost negotiated between the CMA and UNITE during their next negotiations that as of their effective date or dates would fall due during the life of this collective bargaining agreement. 19 ARTICLE XIV HEALTH AND WELFARE FUND: The Employer agrees to contribute sums of money equal to two (2) percent of its payroll to the Baltimore Regional Joint Board, UNITE, Union Health and Welfare Fund, to be used to provide health and welfare benefits to the members. The terms and provisions of Exhibit I attached hereto being specifically incorporated herein by reference. ARTICLE XV MILITARY SERVICE: In the event that an employee enlists or is conscripted into the Armed Forces of the United States of America or is called into service as a member of the National Guard or Army, Navy, Air Force or Marine Corps Reserves, he shall, upon discharge from service be reinstated with all his rights and privileges enjoyed by him at the time he entered service; provided, that he shall request reinstatement within the period fixed by law and provided that the Employer shall have the right to discharge any person whom it hired by reason of the entry into military service of the person to be reinstated. ARTICLE XVI DISCHARGES AND DISCIPLINE: A. No employee covered by this Agreement shall be discharged without just cause. The Union shall present all complaints of discharge without just cause to the Employer within seven (7) days after the discharge. If the complaint cannot be adjusted by mutual consent, it shall be submitted to the Arbitrator hereinafter designated in this 20 Agreement for determination pursuant to the procedure provided. The Arbitrator shall issue his decision and award within seven (7) days from the conclusion of the hearing of the discharge in dispute. If the Arbitrator finds that the employee was discharged without just cause, he shall order reinstatement and may require the payment of back pay in such amount as, in his judgment, the circumstances warrant. This paragraph shall not apply to an employee during his trial period. B. In the manner and to the extent permitted by law, it shall not be a violation of this Agreement nor grounds for discharge, discipline or permanent replacement for employees covered by this Agreement to refuse voluntarily to cross a lawful picket line. ARTICLE XVII GRIEVANCE AND ARBITRATION PROCEDURE: A. Any complaint, grievance or dispute arising under, out of or relating directly or indirectly to the provisions of this Agreement between the Union or any employees and the Employer, or the interpretation or performance thereof, shall, in the first instance be taken up for adjustment by a representative of the Union and a representative of the Employer. Any and all matters in dispute, including a dispute concerning the interpretation or application of the arbitration provision, which have not been adjusted pursuant to the procedure therein provided shall be referred for arbitration and final determination to the Arbitrator herein designated, and his decision or award shall be final, conclusive and binding on all parties; and the parties hereby 21 stipulate and consent that the Arbitrator may make findings, decisions and awards which may be enforced by appropriate judgment thereon to be entered in a Court of Law or Equity. Any grievance which is submitted to arbitration shall be heard by one of the members of a panel of three arbitrators, who shall be Jerome H. Ross, Bernard Cushman and Joseph M. Sharnoff. These arbitrators shall hear grievances on a rotating basis in order set forth above, provided that if the arbitrator whose turn it is to hear a grievance cannot meet the timetable set forth herein, the next available arbitrator shall hear the case and the rotation shall continue from there. If none of the arbitrators can hear the case within said timetable, then the arbitrator who can hear it first will be utilized and the rotation will continue from there. Hearings shall be held no later than fifteen calendar days after the arbitrator has received his assignment at a place mutually agreeable to the Union and the Company. The hearing shall be conducted by the arbitrator in whatever manner will most expeditiously permit the full presentation of all evidence and arguments for both parties, provided, however, that the parties shall have the right to file written briefs with the arbitrator within seven calendar days following the closing of the hearing record. The award of the arbitrator shall be rendered no later than ten calendar days from the day the hearing concluded or the briefs are submitted unless an extension of time is mutually agreed upon by the parties. A lengthy opinion shall not be requested or required from the arbitrator. Rather, the arbitrator is instructed to issue an award and a summary statement of no more than five pages which briefly sets forth the basis for the 22 award. The parties may request the arbitrator to notify them of his award by telephone after the award has been mailed. The decision of the arbitrator shall be limited to the matter presented to him; he shall have no authority to amend, alter or change any provision of this Agreement. The decision of the arbitrator shall be final and conclusive on the Company, the Union and the employee(s) involved. The arbitrator's fees and expenses shall be borne equally by the Union and the Company. Except as expressly provided otherwise in the Agreement, with respect to any dispute subject to arbitration or any claim, demand, or act arising under the Agreement which is subject to arbitration, the procedure established in this Agreement for the adjustment thereof shall be the exclusive means for its determination. No proceeding or action in a court of law or equity or administrative tribunal shall be initiated with respect thereto other than to compel arbitration or to enforce, modify, or vacate an award. This paragraph shall constitute a complete defense to or ground for a stay of an action instituted contrary hereto. ARTICLE XVIII CIVIL RIGHTS 1. The Employer and the Union shall not discriminate nor perpetuate the effect of past discrimination, if any, against any employee or applicants for employment on account of race, color, religion, creed, sex, or national origin. This clause shall be interpreted broadly to be co-extensive with all federal, state or local anti-discrimination laws and where available, judicial interpretations thereof. 23 2. Representatives of the Employer and the Union shall meet to review compliance with this provision and to mutually agree upon such steps as are necessary to achieve compliance. If, upon failure to so mutually agree, either party invokes the arbitration procedure of the Agreement to resolve the dispute, the Arbitrator shall fashion his award to grant any and all relief appropriate to effectuate this Article. ARTICLE XIX STRIKES, STOPPAGES AND LOCKOUTS A. This Agreement provides for an orderly adjustment of differences. Strikes, stoppages, and lockouts are therefore prohibited. If a strike, stoppage or lockout shall occur then the parties agree that any remedy sought by either party arising from such act shall be resolved through the medium of the arbitration machinery and the aggrieved party shall have the right to demand an immediate hearing on twenty-four (24) hours notice before the Arbitrator. B. In the event either party fails to comply with the decision or award of the Arbitrator within ten (10) days after service of a copy thereof, the other party shall be free to call a strike, stoppage or lockout as the case may be, unless the failure to comply is the result of a suit filed by either party in the U.S. District Court for the District of Maryland within ten (10) days from the date of receipt of the Award seeking to set aside or modify the award. 24 ARTICLE XX LEAVE OF ABSENCE: A. Leave of absence shall be granted an employee upon request if the employee is ill or a member of his immediate family is seriously ill. Illness shall be certified by a doctor's certificate. Leave on account of illness shall include leave of absence in maternity cases. Leave of absence shall be for an initial period of not more than one (1) month. In the event of a leave of absence for personal illness including maternity, the leave of absence may be extended to an additional period of one (1) month each up to a total of one (1) year unless the employee was employed for less than six (6) months. In the event of a leave of absence because of serious illness in the employee's immediate family, the initial leave and extension shall not extend for more than three months unless mutually agreed otherwise. Such employee shall upon return to work from such leave be reinstated to his previous job. In the case where a job or operation has been abolished during employee's absence such provision shall apply to re-employment as would have applied had such employee been at work at the time the job or operation was abolished. B. Leaves of absence shall be granted for justifiable personal reasons. The Employer may limit the number of leaves for personal reasons granted at any given time to avoid an unreasonable effect on the Employer's ability to operate. Such leaves may be limited to an initial period of two (2) weeks with extensions granted by mutual agreement. C. An employee who becomes a paid officer of the Union shall be entitled to a leave of absence for the term of his office. 25 B. FAMILY AND MEDICAL LEAVE PURSUANT TO THE FMLA ACT: 1. An employee who has been employed by the Employer for at least twelve (12) months (and who has worked at least 1,250 hours during the twelve (12) months immediately preceding the employee's request for leave under this paragraph) shall be entitled to at least twelve (12) weeks of unpaid Family Leave, within any twelve (12) month period, without loss of seniority rights for the following reasons: a. For the birth or placement of a child for adoption or foster care; or b. To care for a spouse, child or parent with a serious health condition as such terms are defined by the Family and Medical Leave Act of 1993 ("FMLA"); or c. To take medical leave when the employee is unable to work because of the employee's own serious health condition as defined in the FMLA. 2. An employee requesting Family Leave shall present satisfactory proof of the reason for such leave. 3. Family Leave may be taken on an intermittent basis under 1b) and c) above when there is a medical necessity for such intermittent leave as provided in the FMLA. 4. Leave pursuant to FMLA shall be coordinated with any other leave of absence provided for in this Agreement. They shall not be cumulated, and one shall be offset against the other. C. Child Care Facilities: The Employer and the Union shall establish a local committee to study the availability of child care facilities. 26 ARTICLE XXI MORE FAVORABLE PRACTICES: Any custom or practice existing at the time of the execution of this Agreement more favorable to the employees than the provisions hereof shall be continued as heretofore. It is understood that this clause is to be mutually interpreted to provide that prior contrary past practices do not prevail over subsequently negotiated contract provisions. ARTICLE XXII JURY DUTY: Hampstead Distribution Center employees scheduled to work forty (40) hours per week and Hampstead NTS employees called for involuntary trial jury duty will be paid each day for the period of such jury duty the difference, if any, between the pay received for such jury duty and their regular straight-time hourly rate or straight-time hourly incentive rate, whichever is applicable, for up to eight (8) hours. Hampstead Distribution Center employees called to such jury duty who are scheduled to work less than eight (8) hours daily shall receive for each day of jury duty the difference, if any, between the pay received for such jury service and their straight-time hourly rate or straight- time hourly incentive rate for the daily hours they are regularly scheduled to work. The employee shall present a receipt for the amount of jury duty pay received. An employee who receives a notice to serve as a juror must notify the Employer not later than the next work day. If the Employer deems it necessary to have the employee excused from jury duty, the Union and the employee agree to cooperate in seeking to have the employee excused. 27 ARTICLE XXIII TECHNOLOGICAL CHANGE: The parties hereto anticipate the possibility of technological change in the equipment of the Employer's Hampstead Distribution Center and Hampstead NTS designed to improve productivity and efficiency. The Employer and the Union recognize that such change should not reduce the wages of the workers affected thereby or result in workers losing employment provided they are capable of being trained within a reasonable period of time to operate the new or modified equipment involved. In the interests of improving productivity and efficiency and at the same time protecting the earning opportunity and job security of the employee affected by technological change the parties hereto are agreed that: 1. The Employer shall give prior notice to the Union of such change. 2. Rates for newly introduced or changed equipment shall be established by mutual agreement. 3. Reasonable training periods for the new or modified equipment shall be established by mutual agreement. 4. During any required training period, employees employed on the new or modified equipment shall be paid on the basis of wages earned plus the difference, if any, between the expected earnings under the newly established rates and their prior earnings. 5. Where the new or changed equipment eliminates the need for an employee or employees or an employee employed on the new or modified equipment is 28 unable after the agreed upon training period to perform the new or changed job satisfactorily, the employee or employees so affected shall not be terminated. Instead, if a job or job is available on a substantially equivalent operation with the opportunity for substantially equivalent earnings, the employee or employees may be transferred to such job or jobs. When so transferred, employees will receive a period of re-training equal to the normal training period for similarly experienced workers during which they will receive their former average hourly earnings. If there are no jobs available on a substantially equivalent operation with the opportunity for substantially equivalent earnings to which the affected employee or employees may transfer, they shall have the option to (a) accept any other available job and receive the normal training period on such job during which they will receive their former average hourly earnings or (b) they can leave the employee of the Employer voluntarily and receive severance pay in an amount mutually agreed to by the Employer and the Union. A displaced employee who at first elects to take an available job which does not provide substantially equivalent earning opportunity, at the completion of the normal training period may at that time elect to accept severance pay and voluntarily leave the employ of the Employer. In that event the employee's severance pay shall be reduced by any makeup pay paid the employee during his normal training period. In the event an employee elects to accept severance pay, he shall retain for one year his seniority and recall rights to his former job if such an opening becomes available. ARTICLE XXIV SEPARABILITY: 29 Should any part or provision of this Agreement be rendered or declared illegal by reasons of any existing or subsequently enacted legislation or by any decree of a court of competent jurisdiction or by the decision of any authorized government agency such invalidation of such part or provision shall not invalidate the remainder thereof. In such event, the parties agree to negotiate substitute provisions. ARTICLE XXV VOLUNTARY CHECKOFF FOR POLITICAL CONTRIBUTIONS: In the event that voluntary authorization to deduct voluntary political contributions weekly from an individual member's pay is signed, the Employer agrees to deduct the said amount and remit the said sum to the Baltimore Regional Joint Board Political Education Committee. The Union shall reimburse the Employer for any expense incurred due to this provision. ARTICLE XXVI SAFETY AND HEALTH STUDY COMMITTEE: A Safety and Health Study Committee composed of an equal number of Management members and Union members from the bargaining unit shall be established. It will meet regularly at dates, times, and place to be determined by management after consultation with the Union. The employees shall be paid their established hourly straight-time rate of pay by the Employer while attending such meetings. ARTICLE XXVII FEDERAL FUNDS: 30 The Union shall cooperate with the Employer to facilitate the availability of federal funds for training programs. ARTICLE XXVIII SUB PROGRAM: Should the employees agree to purchase additional insurance coverage provided by the Amalgamated Life Insurance Company, the Employer shall check off the employees' cost of the program, upon presentation of proper authorization, and pay the same over to the Amalgamated Life Insurance Company as required by the contract between the employees and the Amalgamated Life Insurance Company. ARTICLE XXIX ORGANIZATIONAL HIRING: The Employer agrees that it will hire employees who have been discharged from other employers during an organizing campaign conducted by the Union. The Employer is not required by this Section to hire an employee who is not qualified to perform the job that is being applied for. The Employer is not required to employ such applicants if it does not have jobs available. Any employee hired under this Section is subject to the Employer's regular probationary period for new employees. The Employer is not required to unlawfully give preference to employees applying under this section. The Union will hold the Employer harmless for any liability, included but not limited to attorney's fees imposed by enforcement of this clause. 31 ARTICLE XXX PERSONAL DAYS OFF WITHOUT PAY In the administration of the Employer's Absence and Lateness Policy, the parties are agreed that: 1) Commencing March 1, 2000, employees who have a perfect attendance record for six (6) consecutive months under the criteria set forth in the Attendance and Lateness Policy will be entitled to one (1) personal day off without pay to be taken within the next consecutive six (6) months. Example: Those employees who have perfect attendance records measured ------- by the six (6) consecutive months ending August 31, 2000 will thereafter be entitled to one (1) personal day off without pay to be taken within the next consecutive six (6) months, without that time off being counted as an occurrence. 2) Personal days off shall be scheduled by mutual agreement between the employee so entitled and his/her immediate supervisor. The Employer's agreement shall not be unreasonably withheld. 3) The Employer shall have the right to limit the number of employees who chose to take the same day as a personal day off when granting such requests would interfere with production needs. In the event that only a certain number of employees may be permitted to take the same personal day off, the choice shall be decided by seniority. 32 4) Personal days off may not be cumulated and no more than two (2) personal days off may be taken in any one contract year. ARTICLE XXXI SUCCESSORS AND ASSIGNS This Agreement shall be binding upon the parties hereto and thereafter upon any successor, purchaser, transferee, lessee or assignee of the Employer's Hampstead Distribution Center and/or Hampstead National Tailoring Service. The Employer shall give notice in writing of the existence of this Agreement to any successor, purchaser, transferee, lessee or assignee with a copy to the Union no later than the effective date of such purchase, sale, transfer, lessee or assignment. ARTICLE XXXII TERM OF AGREEMENT: This Agreement shall be effective upon the date hereof and shall remain in full force and effect until midnight February 28, 2003. It shall be automatically renewed from year to year thereafter unless on or before December 31, 2003, or December 31, of any year thereafter, notice in writing by certified mail is given by either the Employer or the Union to the other of its desire to propose changes in this Agreement or of intention to terminate the same, in either of which events this Agreement shall terminate upon the ensuing February 28 (or 29 in a Leap Year). IN WITNESS WHEREOF, the parties hereto have caused their signatures to be affixed effective the day and year hereinabove first written. JOSEPH A BANK MFG. CO. 33 _____________________________ BALTIMORE REGIONAL JOINT BOARD, UNITE _____________________________ Co-Manager _____________________________ Co-Manager 34 AGREEMENT dated March 1, 2000 by and between Joseph A. Bank Mfg. Co., Inc. (Hampstead Distribution Center & Hampstead National Tailoring Service) and Baltimore Regional Joint Board, UNITE TABLE OF CONTENTS
Page ARTICLE I -- Coverage.......................................... 1 ARTICLE II -- Union Recognition................................ 1 ARTICLE III -- Union Security.................................. 2 ARTICLE IV -- Wages............................................ 3 ARTICLE V -- Reporting Pay..................................... 4 ARTICLE VI -- Hours of Work.................................... 4 ARTICLE VII - Equipment Breakdown Time and Working Time........ 6 ARTICLE VIII -- Vacations...................................... 6 ARTICLE IX -- Holidays......................................... 15 ARTICLE X -- Bereavement Pay................................... 17 ARTICLE XI -- Equal Division of Work........................... 18 ARTICLE XII -- Payment of Wages and Checkoff................... 19 ARTICLE XIII -- Insurance...................................... 19 ARTICLE XIV -- Health and Welfare Fund......................... 20 ARTICLE XV -- Military Service................................. 20 ARTICLE XVI -- Discharges and Discipline....................... 20 ARTICLE XVII -- Grievance and Arbitration Procedure............ 21 ARTICLE XVIII -- Civil Rights.................................. 23 ARTICLE XIX -- Strikes, Stoppages and Lockouts................. 24 ARTICLE XX -- Leave of Absence................................. 25
ARTICLE XXI -- More Favorable Practices........................ 27 ARTICLE XXII -- Jury Duty...................................... 27 ARTICLE XXIII - Technological Change........................... 28 ARTICLE XXIV -- Separability................................... 30 ARTICLE XXV -- Voluntary Checkoff for Political Contributions.. 30 ARTICLE XXVI -- Safety and Health Study Committee.............. 31 ARTICLE XXVII - Federal Funds.................................. 31 ARTICLE XXVIII - Sub Program................................... 31 ARTICLE XXIX - Organizational Hiring........................... 32 ARTICLE XXX - Personal Days Off Without Pay.................... 32 ARTICLE XXXI - Successors and Assigns.......................... 33 ARTICLE XXXII - Term of Agreement.............................. 34
EXHIBIT I SUPPLEMENTAL AGREEMENT dated as of March 1, 2000 by and between JOSEPH A. BANK MFG., CO. (hereinafter called the "Employer") and the BALTIMORE REGIONAL JOINT BOARD, UNITE (hereinafter called the "Union"). WITNESSETH: The Employer and the Union have executed a Collective Bargaining Agreement wherein the Employer agreed to contribute 2% of its gross payroll to a fund to be used to provide medical benefits to employees, subject to such conditions as the Trustees may determine with reference to length of service in the clothing industry and length of payment by the Employer of contributions to the Fund. The Trustees shall have the right at any time and from time to time modify, change, amend or terminate to any extent any or all of the terms or provisions of such plan and to make rules and regulations to carry out the provisions hereof. This SUPPLEMENTAL AGREEMENT, EXHIBIT I, is hereby made a part of the Collective Bargaining Agreement and shall run concurrent to the date of its expiration. JOSEPH A. BANK MFG. CO. /s/: Robert B. Hensley ------------------------------ BALTIMORE REGIONAL JOINT BOARD UNITE /s/: Joan Davis ------------------------------ Joan Davis, Co-Manager /s/: Carmine D'Alessandro ------------------------------- Carmine D'Alessandro, Co-Manager EX-10.20 7 dex1020.txt EMPLOYMENT OFFER LTR/DEBOER Exhibit 10.20 November 20, 2000 Mr. Jerry DeBoer 278 Trace Ridge Rd. Hoover, AL 35244 Dear Jerry, I would like to extend to you an offer for the position of Senior Vice President of Marketing with Jos. A. Bank Clothiers, Inc. with a total compensation opportunity of $262,000 during your first year of employment. This would be comprised of a salary of $180,000 per year, a bonus potential of forty (40%) percent and a signing bonus of $10,000 if you report to work by December 4, 2000. As a participant in the company's Executive Bonus Program (40%), you will be eligible to receive up to $72,000 if the company achieves its financial goals and you satisfy approved personal goals. Although generally there is no entitlement to payment of a bonus, Jos. A. Bank will guarantee $10,000 of this bonus for fiscal 2001 (assuming you continue to be employed by the Company as of the payment date of the 2001 bonus). We are offering the incentive for you to report to work by December 4, 2000 to ensure that you will be a part of the important fiscal 2001 planning process. You will also be entitled to four weeks of vacation time to be accrued throughout your first year of employment. Jos. A. Bank will also pay you a car allowance in the amount of $350.00 per month. In the event that your employment would end due to reasons other than voluntary resignation or for cause, you will continue to receive twelve months of compensation at your normal base salary. The full relocation package will be extended to you. Relocation expenses will be capped at $60,000 for all expenses associated with moving including any gross up amount necessary for tax purposes. In addition, you will be entitled to all company benefits listed on the enclosed benefit summary sheet, generally effective on the first day of the month following 60 days of employment. We will pay for any COBRA premiums you incur prior to eligibility in our health plan. As is our practice, we would like you to understand that this letter in no way constitutes an employment contract and your employment may be terminated by either you or the company. In addition, we reserve the right to alter our benefit plans at any time. Please let me know if you have any questions. I look forward to speaking to you in the near future. Sincerely, /s/:Neal Black Neal Black Executive Vice President - Merchandising and Marketing REVISED EX-21.1B 8 dex211b.txt SUBSIDIARIES Exhibit 21.1(b) JOS. A. BANK CLOTHIERS, INC. SUBSIDIARIES - - The Joseph A. Bank Mfg. Co., Inc., a New Jersey corporation - - National Tailoring Services, Inc., a Delaware corporation - - Jos. Bank of Fishkill, Inc., a Maryland corporation - - RS Servicing Co., Inc., a Delaware corporation - - IS Servicing Co., Inc., a Delaware corporation -----END PRIVACY-ENHANCED MESSAGE-----