-----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, VaJKcfqD/Wc8jph1GH5rTZWBr8mBFYoS3lXueTn3yuTrYQkpgjeIUiEuvC7lsfTV HV2uNic9/PxFQ3eeJZV38A== 0000950169-97-000379.txt : 19970501 0000950169-97-000379.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950169-97-000379 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19970201 FILED AS OF DATE: 19970430 SROS: NASD 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: 0203 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23874 FILM NUMBER: 97591663 BUSINESS ADDRESS: STREET 1: 500 HANOVER PIKE CITY: HAMPSTEAD STATE: MD ZIP: 21074 BUSINESS PHONE: 4102392700 10-K 1 JOS. A. BANK CLOTHIERS, INC. 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 1, 1997 ("Fiscal 1996"). [ ] 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 Section 12(g) of the Act: Securities registered pursuant to Section 12(b) of the Act: Title of each class None ------------------- Common Stock (the "Common Stock") par value $.01 per share
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 25, 1997 was approximately $25,891,267. The number of shares of Common Stock, par value $0.01 per share, outstanding on April 25, 1997 was 6,791,152. DOCUMENTS INCORPORATED BY REFERENCE: Portions of Definitive Proxy Statement for Annual Meeting of Shareholders to be held on June 10, 1997 are incorporated by reference into Part III hereof. Index to the exhibits appears on Page 18. PART I Item 1. BUSINESS General Jos. A. Bank Clothiers, Inc., (the "Company"), established in 1905, is a retailer, cataloger and manufacturer of Men's tailored and casual clothing and accessories. The Company's products are sold exclusively under the Jos. A. Bank label through its 68 Company-operated retail stores, 4 outlet stores and 8 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 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, which is offered at price points typically established at 20-30% 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 designing and manufacturing capabilities, and for other clothing and accessories by effectively sourcing and negotiating with vendors. The Company has two principal, wholly owned subsidiaries, The Joseph A. Bank Mfg. Co., Inc., (the "Manufacturer") and National Tailoring Services, Inc. ("NTS"). History In May 1991, the Company completed a debt and capital restructuring, under which the Company issued a combination of new preferred stock and Common Stock in exchange for all of its then outstanding preferred stock and Common Stock, senior subordinated notes and subordinated debentures issued in connection with the 1986 leveraged acquisition of the Company. As a result of this restructuring, JAB Holdings, Inc., a Delaware corporation ("Holdings"), was created and issued $47.4 million aggregate principal amount of 8% Secured Notes due December 31, 1998 (the "Notes") to the Company's former debtholders. There were no cash proceeds from the issuance of the Notes. During its existence, Holdings had no operations and did not incur any costs or expenses on behalf of the Company. As a result of this restructuring, Holdings became the holder of 90% of the Company's Common Stock. As of January 29, 1994, the Company and Holdings completed a capital restructuring, the overall substantive effect of which was to eliminate all of the debt incurred in connection with the 1986 leveraged acquisition of the Company. In connection with such restructuring, Holdings entered into an exchange agreement (the "Exchange Agreement") with the holders of its Notes pursuant to which all Notes were exchanged for common stock of Holdings. Concurrently with the execution of the Exchange Agreement, the Company entered into a merger and exchange agreement (the "Merger and Exchange Agreement") with Holdings and the Company's other stockholders. Pursuant to the Merger and Exchange Agreement: (i) the Company's preferred stock was converted into Common Stock; (ii) Holdings' common stock was converted into the Company's Common Stock; (iii) all existing shares of the Company's Common Stock other than the shares issued in exchange for the Company's preferred stock or Holdings' common stock were canceled; and (iv) Holdings was merged into the Company. On May 10, 1994, the Company sold 2,000,000 shares of its Common Stock for $10.00 per share in connection with an initial registration with the Securities Exchange Commission. The net proceeds of $16,894,000 were used to pay off long-term debt of approximately $8,100,000 and for the opening of new stores. In the first half of fiscal 1995, the men's and women's apparel industries began suffering a significant down-turn. In the face of a potential cash shortage and other factors affecting the women's business, the Company decided to discontinue the women's product line (which was sold in the same stores as the men's products) to generate cash. The women's product line represented approximately $33 million and $26 million of sales in fiscal 1994 and 1995, respectively (or 19% and 15% of sales, respectively). With this loss of the women's volume, and with the men's business experiencing a decline (but improving) certain previously-profitable stores became unprofitable since the store rents remained basically unchanged. Given these events, the Company performed a store-by-store analysis to determine which stores were losing money and not expected to generate future cash flows that were sufficient to support the book values of the related store assets. Based upon this analysis, the Company determined that (a) certain stores needed to be closed, down-sized or relocated and (b) a provision of $3.5 million was required to write-down specific store leasehold improvements and equipment and to cover costs of exiting several store locations. During fiscal year 1996, the Company focused on its core men's business after discontinuing the women's business in 1995. Operating income for the year ended February 1, 1997 improved $18.0 million to an operating income of $2.4 million from 2 an operating loss of $15.6 million in 1995. The Company improved its operating income in each quarter during fiscal 1996 compared to the same quarter in fiscal 1995. The turnaround in operating results for the year ended February 1, 1997 was due primarily to a) higher maintained margins which were driven by strong suit sales, b) the elimination of the unprofitable, lower margin women's business, c) men's comparable store sales increase of 9.3 percent, d) lower operating expenses and e) the closure of several unprofitable stores. The Company also restructured several leases to support its men's-only business, adjusted its manufacturing capacity, relocated three stores and lowered its store selling expenses. The increased men's comparable store sales was generated on men's average inventory levels that were approximately $5.6 million lower than the prior year as the Company improved its inventory turns as well as its product selection. The Company has not completely replaced the volume generated by the women's division which generated sales of approximately $26 million in fiscal 1995. To increase sales and improve the leverage of its assets, the Company is opening new stores, including six stores that were opened in fall 1996. The Company expects to open up to ten new stores in 1997. Strategy The Company's strategy is to further enhance its competitive position in men's proprietary label, updated apparel, including a full line of casual wear, and accessories and to capitalize on the strength of the Jos. A. Bank name and reputation through enhanced product offerings within its existing store base and to increase the number of full-line stores, primarily in existing markets. Store and Catalog Operations and Growth. The Company's strategy is to operate its stores and catalogs as an integrated business and to provide the same personalized service to its customers regardless of whether merchandise is purchased through its stores or catalogs. The Company believes that the synergy between the Company stores and catalogs offers an important convenience to its customers and a competitive advantage to the Company in identifying new store sites and testing new business concepts. 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 traffic. The Company believes there are opportunities to develop spin-off catalogs to the existing customer base to grow the catalog volume. The Company believes that it has substantial opportunity to increase its store base by adding stores in its existing markets and entering new markets. The Company opened four new full-line stores and two franchise stores in fall 1996 and it expects to open up to ten new stores in 1997. Substantially all of the stores to be opened in 1997 will be placed in existing markets which allows the Company to leverage its existing advertising, management and distribution. Competitive Pricing and Aggressive Promotion. The Company is a value oriented retailer with price points typically established at 20% to 30% below those of its principal competitors for items of comparable quality. In addition to the Company's everyday values, the Company has a Corporate Card program, which provides employees of participating businesses and their families with discounts on all Jos. A. Bank merchandise, and runs promotions throughout the year, such as wardrobe and trade-in sales, designed to generate store traffic and create shopping excitement. Merchandising The Company's target customer is a professional man, age 25 to 55, who is well-educated and relatively affluent. The Company's merchandising strategy focuses on achieving an updated classic look. The Company's stores offer a distinctive collection of proprietary label, classic career clothing and accessories, as well as casual wear for men, all made exclusively by or for the Company in predominantly natural fibers. The men's line includes all clothing and accessories necessary to dress the career man from head to toe, including suits, shirts, vests, ties, sport coats, pants, formal wear, overcoats, mufflers, sweaters, belts and braces, socks and underwear. The market for classic quality men's clothing is segmented at various points in men's careers and the Company has designed special collections to target these segments: 3 "Signature Collection" - is designed for the man who has achieved success and is willing to pay for the value of the best fabric, superior quality and extra details. "Corporate Collection" - was created for the confident executive who is making his mark and is looking to set himself apart. It features updated, tailored clothing and dress furnishings offered in a range of fabrics and silhouettes that reflect current trends in the men's market. "Executive Collection" - is designed for the executive creating or replenishing his wardrobe essentials. It includes tailored clothing and dress furnishings in a broad range of basic fabrics and styles at affordable prices. "Joe's Casual" - was created for the man who seeks the same quality for leisure wear as for their working lives. Classic sportswear featuring quality, styling, fabric and details comparable to brands which are considerably more expensive. Since Spring 1991, the Company has offered its male 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 fabric choices. Matching vests are also available in selected fabrics. The Business Express line allows a customer to buy a suit with minimal alteration that fits 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. The Company also signed a five-year agreement with David Leadbetter, a world-renowned golf professional, to produce golf and other apparel under his name. This line will be available in the Company's stores and catalog in fall 1997. Design and Purchasing The Jos. A. Bank merchandise is designed through the coordinated efforts of the Company's merchandising and buying staffs working in conjunction with either the Company's manufacturing division or contract manufacturers. The merchandising and buying staffs oversee 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-store date. In addition to being responsible together with the merchandising staff for selecting and developing appropriate products, the Company's buying staff is also responsible for providing the catalog operations and stores with the correct amount of products at all times. The Company believes that it gains a distinct advantage over many of its competitors in terms of quality and price by effectively sourcing piece goods and then having merchandise manufactured to its own specifications by contract manufacturers, either domestically or abroad, or in its own manufacturing facility. For example, the Company currently buys quality English and Italian wool for some of its suits and Italian silk for its neckwear, and then has the suits made at its factory and neckwear hand sewn by contract manufacturers in the U.S. 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 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 1996, Burlington Industries, Inc., Warren Corporation, Eighteen International 1981, Ltd., and High Mill Textiles accounted for over 70% 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 is has good relationships with its piece goods vendors 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. 4 Marketing, Advertising and Promotion Strategy Historically, the Company pursued a traditional or mass marketing approach in support of it's retail locations. In 1996, in addition to employing print and radio medias to convey its message, direct mail usage was enhanced to achieve improved marketing efficiency. Core to each campaign, while primarily promotional, is the identification of the Jos. A. Bank name as synonymous with high quality, updated classic clothing offered at price points typically established at 20-30% below those of its principal competitors for items of comparable quality. The Company has a database of over one million customers who have made purchases from either the catalog and/or retail stores. 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 1997, the Company is allocating a portion of its marketing expenditures to image advertising on CNN Headline News. The Company believes that it has strong brand recognition and wants to increase the awareness of its name as a complement to its store opening strategy. 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 $75 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. These events also include the wardrobe sale and the clearance and roundup sales. Twice a year the Company stores conduct wardrobe sales in which customers who purchase certain levels of merchandise receive an additional amount of merchandise selected free. At the end of each season, the Company stores conduct clearance sales to promote the sale of that season's merchandise. Corporate Card Through the Corporate Card program, the Company issues corporate discount cards to employees of major companies. The card provides the holder and members of his or her immediate family with a discount on all regularly priced merchandise. The Company believes that this program enhances customer loyalty from a core base of customers. Apparel Incentive Program Jos. A. Bank Clothiers apparel incentive gift certificates are used by various companies as a reward for achievement. The Company also redeems proprietary gift certificates marketed by major premium/incentive companies through its stores and catalogs. Jos. A. Bank Credit Card In addition to accepting cash, checks and major credit cards, since 1992 the Company has offered customers its own credit card. The Company pays an independent contractor to administer the Jos. A. Bank credit card and assume all credit risks. The Company believes that the Jos. A. Bank credit card enhances customer loyalty while providing the customer with additional credit. At the end of fiscal 1996, the Company had approximately 97,000 credit card accounts, and sales through the Jos. A. Bank credit card represented approximately 5% of total retail sales for the year. The Jos. A. Bank credit card also provides the Company with an important tool for building its customer mailing list. Stores At April 18, 1997, the Company operated 68 retail stores and 4 outlet stores and had 8 franchise locations in a total of 30 states and the District of Columbia. The following table sets forth the region and market of the 80 stores that were open at such date. 5 JOS. A. BANK STORES Total # Region & Market Of Stores - --------------- -------------- Northeast Connecticut 2 New York 5 Massachusetts 2 New Hampshire 1 Rhode Island 1 ---- Subtotal ............... 11 ---- Mid-Atlantic Delaware 1 New Jersey 3 Maryland 6(b) Pennsylvania 5(b) Washington, D.C. 1 ---- Subtotal ............... 16 ---- West Denver, Colorado 1 ---- Subtotal ............... 1 ---- Midwest Kansas 1 Illinois 6(a) Indiana 1 Michigan 3 Minnesota 1 Missouri 1 Ohio 4 Wisconsin 1 ---- Subtotal ................ 18 Total # Region & Market Of Stores - --------------- -------------- South Alabama 2(a) Florida 3 Georgia 3(a) North Carolina 5(a) South Carolina 1 Kentucky 1 Louisiana 1(a) Mississippi 1(a) Tennessee 3(a) Texas 6 Virginia 7(a),(b) West Virginia 1 ---- Subtotal .............. 34 ---- TOTAL 80 ==== (a) Indicates one or more franchise stores. (b) Indicates one or more outlet stores. 6 During 1996, the Company opened four new full-line stores and two franchise stores, and closed two unprofitable full-line stores and five catalog stores. The stores that were closed represented approximately 2% of sales in fiscal 1995. The Company-operated stores are located in a variety of retail settings, including high income shopping areas, malls, specialty village centers and urban locations. In general, the store space in existing stores is divided as follows: 71% selling space, 10% stockroom, 9% tailor shop and 10% service area. The full-line stores average 8,500 square feet, with sizes ranging from 4,500 square feet to 19,000 square feet. A new store model has been developed to support the mens-only business which requires approximately 5,000 square feet. The selling space in newer stores is typically higher than the average, (approximately 80%), as the Company decreased the space dedicated to the stockroom, service area and tailor shop. The newer stores are designed to utilize regional overflow tailor shops which allows the use of smaller tailor shops within each store. Each store's selling area is designed to present a broad selection of products with great depth of inventory, and is divided generally as follows: 35% men's tailored clothing; 40% other men's clothing and accessories; and 5% fitting rooms. The Company's principal consideration in selecting store sites is finding locations with excellent sales potential coupled with reasonable rental rates. Stores in suburban areas are usually not located in malls, but in high-income shopping areas near major malls. In urban locations, stores are generally located in major retail or financial areas. Since the Company believes that its stores are destination stores and that its customer do not like to be inconvenienced, the Company stores are generally most successful in locations that are easily accessible and provide sufficient parking. Thus, when stores are located within a mall, they often have a private entrance to the parking area. The Company has developed a standard store design to appeal to the Company's quality oriented customers while remaining consistent with the Company's value image. The design is based on the use of wooden fixtures with glass shelving, Shaker style furniture with numerous tables to feature fashion merchandise, carpet, quilted wall hangings and abundant accent lighting and is intended to promote a pleasant and comfortable shopping environment. The Company developed this standard design to effect cost savings in the design and construction of new stores. Stores normally employ a total of 5 to 25 full- and part-time sales associates depending on their size. Store management consists of a store manager and two or three department managers who are also sales associates. The typical store manager has ten to fifteen years of experience in the tailored clothing industry. Store management receives compensation in the form of a base salary plus a bonus based on achieving targeted profit goals. In addition, store managers are required to meet sales quotas. Sales associates receive a base salary against a commission. A number of programs offer incentives to both management and sales associates to increase sales. The Company attributes part of its success to its customer service policies. The Company encourages sales associates to develop one-on-one relationships with their customers. Sales associates maintain personal business planners containing information on customers' sizes, favorite styles and colors and are encouraged to call their customers when new items are stocked and before special promotions. The Company strives to create an environment in its stores in which sales associates are responsive to customers' needs. Sales associates are encouraged to assist customers in merchandise selection and wardrobe coordination, and thereby encourage multiple purchases. Each full line store has a tailor shop which provides a range of tailoring services. Approximately 79% of the tailor shops are owned by the Company, and the remainder are leased to independent tailors. The Company plans to convert most of the leased shops to Company-owned shops in 1997. The Company guarantees all the tailoring work and controls the pricing structure used in all stores. In addition, NTS, the Company's wholly-owned tailoring subsidiary, provides alteration services primarily to the Company's stores and, to a lesser extent, outside retailers. NTS has four locations - Houston (leased location), Atlanta (leased location), Chicago (in present store) and Hampstead, MD (in distribution facility). Operating NTS 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 eight 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 percentage of sales. To assure that customers at franchise locations receive the same personalized service offered at Company operated stores, the Company 7 typically requires certain franchisee employees to attend a Company sponsored training program. In addition, franchisees are required to present and sell merchandise according to the Company standardized procedures and to maintain and protect the Company's reputation for high quality, classic clothing. Franchisees purchase substantially all merchandise offered for sale in their stores from the Company. The Company presently has four outlet stores which are used to liquidate excess merchandise and typically offer 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 1996, the Company distributed approximately 7.5 million catalogs, including catalogs sent to stores for display and general distribution. During fiscal 1996, catalog sales represented approximately 11% of net sales. 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. Catalog circulation has traditionally included base catalogs offering a representative assortment of the Company's entire range of merchandise. In addition to providing customers convenience in ordering merchandise, the Company generally uses its catalogs to: (i) communicate its image of quality clothing; (ii) provide customers with fashion guidance in coordinating outfits; (iii) generate store traffic; and (iv) provide the Company with market data, including identification of new store locations. 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 efficient 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. Distribution Inventory of basic merchandise in the Company stores is replenished regularly based on sales tracked through its state-of-the-art point-of-sale terminals. The Company uses a centralized distribution system, under which all merchandise is received, processed and distributed through the Company's principal 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, usually within two days of receipt. 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. Shipments to catalog customers are also made from the central distribution facility. Management Information Systems Since November 1991, the Company has replaced substantially all of its management information systems with updated technology. The new systems provide for automated stock replenishment and distribution, integrated accounts payable and general ledger maintenance, purchase order management, forecasting and planning, extensive management reporting capabilities through interactive and batch processing and a comprehensive human resource/payroll system to support future growth plans. The Company uses IBM AS\400 systems for substantially all applications. In January 1993, a complete new mail order system was installed and integrated into the merchandising system and later 8 into the warehouse management system. Consistent with industry practice, the Company uses an outside service to analyze and provide data in connection with its catalog operations. The Company's last remaining mainframe system is used in its manufacturing operation and has been modified to interface with its merchandising systems. The Company plans to eliminate this remaining mainframe system in 1997. In order to assure the accuracy of inventory from purchase order through the sale of an item to the consumer, the Company employs sophisticated scanning, modern point-of-sale systems and updated distribution facilities. For any item to be moved between stores and for all sales in the stores a bar-coded tag must be scanned, which then causes the price to be captured via the price look-up feature in the IBM 4680 point-of-sale terminal. A warehouse management system was installed in August 1993 to improve the accuracy and control of warehouse inventory. Since Fall 1993, warehouse distributions have been controlled through the use of a "pick-to-light" system. In connection with the millennium, the systems in many companies will require significant modification to properly handle transactions. A thorough review of the impact of this change is expected in the next year. Manufacturing Through its subsidiary, Manufacturer, the Company makes men's suits, sport coats and pants at its two facilities located in the greater Baltimore area. (See Item 2-Description of Properties) As of April 18, 1997, 383 employees worked at these manufacturing facilities. From the initial inspection of piece goods through final finishing and distribution, the Company's manufacturing capabilities allow it complete control over merchandise flow, consistency of sizing, and quality. The Company believes that its manufacturing capabilities also allow the Company generally to achieve greater flexibility than it would be able to achieve if the Company purchased items of comparable quality from outside sources. In addition, the Company is using contract manufacturers for certain categories of its clothing which can provide a quality product at competitive prices. The Company believes that the equipment and machinery it uses in its manufacturing processes provide for efficient production and, in many instances, represent the state-of-the-art in the industry. The Company currently utilizes 50% of its cutting capacity based on one shift per day and 75% of its sewing capacity based on one shift per day. In fiscal 1996, the Company manufactured approximately 50% of its tailored clothing which accounts for over 60% of the Company's sales. 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 and catalog operations compete with Brooks Brothers, Nordstrom and Lands End, as well as local 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 established at 20-30% 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. The Company believes that it is able to achieve this pricing advantage for its men's suits, sports coats and pants primarily by designing and manufacturing substantially all of these items and for other men's clothing and accessories by effectively sourcing and negotiating with vendors. In addition, the Company believes that its Business Express program gives the Company distinct advantages relative to its competition. Trademarks The Company is the owner in the United States of the trademark "Jos. A. Bank". This trademark is 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. The Company is also the owner of pending applications for "The Miracle Tie Collection" (U.S. Serial No. 75/219,824) and "Joe's Casual" (U.S. Serial No. 74/726,017). 9 Employees As of April 18, 1997, the Company had 1,139 full-time employees and 281 part-time employees. As of April 18, 1997, 383 employees worked at the Company's manufacturing facilities, approximately 97% of whom are represented by the Union of Needletrades Industrial & Textile Employees. The current collective bargaining agreement, which was extended in 1997, expires on April 30, 2001. The Company believes that union relations are good. During the past 48 years, the Company has had only one work stoppage, which occurred more than 18 years ago. The Company believes that its relations with its non-union employees are also good. A small number of our sales associates are union members. Item 2. DESCRIPTION OF PROPERTY Except as noted below, the Company owns its manufacturing, distribution and corporate office facilities located in the Maryland area, subject to certain financing liens. See "Notes to Consolidated Financial Statements -- Note 6." The Company believes that its existing facilities are well maintained and in good operating condition. The table below presents certain information relating to the Company's corporate properties as of April 18, 1997:
Location Gross Square Feet Owned/Leased Primary Function - -------- ----------------- ------------ ---------------- Hampstead, Maryland......... 210,000 Owned Corporate offices, distribution center, catalog fulfillment and regional tailoring overflow shop Baltimore, Maryland......... 118,000 Owned Coat and pants sewing plant and central pressing. Baltimore, Maryland......... 51,000 Leased Cutting facility
As of April 18, 1997, the Company had 72 Company-operated stores, including its outlet stores, all of which were leased. The full line stores average 8,500 square feet, including selling ,storage, tailor shop, and service areas. The full line stores range in size from approximately 4,500 square feet to approximately 19,000 square feet. The leases typically provide for an initial term of between 10 and 15 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 a percentage rent based on the store's annual sales in excess of specified levels. Most leases also require the Company to pay 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. In July 1996, the Company sold a 35,000 square foot manufacturing facility in Hampstead, Maryland. Item 3. LEGAL PROCEEDINGS 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. 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 are unspecified. The Defendants have counterclaimed against the Company seeking declaratory judgements, compensatory damages and punitive damages. The Company denies the allegations in the counterclaims and intends to vigorously defend same. The unfair labor practice charge filed by the Regional Joint Board, Union of Needletrades, Industrial and Textile Employees (Baltimore Regional Office, National Labor Relations Board Case No. 5-CA-26484, as noted in the Company's third quarter 10-Q, has been withdrawn by the Union. 10 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 1, 1997. PART II Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Price Range of Common Stock, subsequent to its initial public offering in May 3, 1994 The Common Stock is quoted on the National Association of Securities Dealers Automated Quotation ("NASDAQ") National Market System under the trading symbol "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 bid 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 1995 Fiscal 1996 --------------- --------------- High Low High Low ---- --- ---- --- 1st Quarter ................ $4.25 $2.50 $2.50 $1.63 2nd Quarter ................ 3.63 2.09 6.13 2.50 3rd Quarter ................ 4.88 2.50 4.88 2.94 4th Quarter ................ 3.00 1.50 5.00 3.00 1st Quarter (through April 25, 1997) $4.38 $3.63 On April 25, 1997 the closing sale price of the Common Stock was $3.81. (b) Holders of Common Stock At April 25, 1997, there were 169 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. 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 1, 1997 have been derived from the Company's audited Consolidated Financial Statements. Fiscal years 1992 through 1994 and fiscal year 1996 were 52-week years, and fiscal year 1995 was a 53-week year, 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." 11
Fiscal Year -------------------------------------------------------------------------- 1992 1993 1994 1995 1996 ----------- ----------- ----------- ------------ ------------ (in thousands, except per share data) Consolidated Statements of Income (Loss) Information: Net Sales: Men's...................... $99,461 $121,319 $143,465 $143,659 $155,058 Women's.................... 23,895 28,259 32,589 25,908 -- - -------------------------------------------------------------------------------------------------------------------- Net Sales (a)................ 123,356 149,578 176,054 169,567 155,058 Cost of goods sold........... 65,120 79,580 94,199 100,789 84,866 - -------------------------------------------------------------------------------------------------------------------- Gross profit................. 58,236 69,998 81,855 68,778 70,192 - -------------------------------------------------------------------------------------------------------------------- Operating Expenses: General and administrative. 15,258 15,168 16,817 17,852 16,720 Sales and marketing........ 37,540 47,156 59,375 63,013 50,924 Store opening costs........ 240 1,064 1,025 -- 192 Termination of executive equity plan -- 3,425(c) -- -- -- Termination of participation in multi-employer pension plan -- 3,300(b) -- -- -- Store repositioning costs.. -- -- -- 3,500(e) -- - -------------------------------------------------------------------------------------------------------------------- Total operating expenses.... 53,038 70,113 77,217 84,365 67,836 - -------------------------------------------------------------------------------------------------------------------- Operating income (loss)...... 5,198 (115) 4,638 (15,587) 2,356 Interest expense, net....... (2,043) (2,075) (2,430) (3,444) (1,946) Income (loss) before benefit (provision) for income taxes, extraordinary item and cumulative effect of change in accounting principle 3,155 (2,190) 2,208 (19,031) 410 (Provision) benefit for income taxes (1,222) 3,833 (861) 5,845 (159) - -------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary item and cumulative effect of change in accounting principle 1,933 1,643 1,347 (13,186) 251 Extraordinary Item: Utilization of tax operating loss carryforward 1,086 -- -- -- -- Cumulative effect of change in accounting principle...... -- 2,127 -- -- -- - -------------------------------------------------------------------------------------------------------------------- Net income (loss)............ $3,019 $3,770 $1,347 $(13,186) $251 - -------------------------------------------------------------------------------------------------------------------- Per Share Information: Income (loss) before extraordinary items and cumulative effect of change in accounting principle $0.40 $0.34 $0.22 ($1.94) $0.04 Extraordinary items........ 0.22 -- -- -- -- Cumulative effect of change in accounting principle -- 0.44 -- -- -- - -------------------------------------------------------------------------------------------------------------------- Net income (loss) per share.. $0.62 $0.78 $0.22 ($1.94) $0.04 - -------------------------------------------------------------------------------------------------------------------- Weighted average number of shares outstanding (d)..... 4,862 4,862 6,241 6,790 6,824 Balance Sheet Information (As of End of Fiscal Year): Working capital............ $26,547 $36,138 $45,089 $35,722 $28,631 Total assets............... 62,707 83,803 101,783 90,671 81,410 Total debt ................ 19,492 27,525 23,975 30,245 18,433 Total long-term obligations 21,013 31,730 28,180 33,632 21,366 Shareholder`s equity....... 25,115 30,390 48,631 35,445 35,699
12 (a) In 1995, the Company discontinued its womens product line to concentrate solely on its men's business. (b) During fiscal 1993, the Company recognized an expense and a corresponding liability of $3.3 million relating to its termination of participation in a multi-employer pension plan. (c) As of January 29, 1994, the employment agreements between the Company and two executives were amended to surrender the executives' rights to receive certain payments related to increases in the equity value of the Company in exchange for, among other things, 373,553 shares of the Company's Common Stock. (d) Gives effect to the exercise of all stock options and all shares issued in the initial public offering in May 1994. (e) In fiscal 1995, the Company recorded an expense of $3.5 million related to the early adoption of Statement of Financial Accounting Standards No. 121 and costs to exit certain leases and reposition stores. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview During fiscal year 1996, the Company focused on its core men's business after discontinuing the women's business in 1995. Operating income for the year ended February 1, 1997 improved $18.0 million to an operating income of $2.4 million from an operating loss of $15.6 million in 1995. The Company improved its operating income in each quarter during fiscal 1996 compared to the same quarter in fiscal 1995. The turnaround in operating results for the year ended February 1, 1997 was due primarily to a) higher maintained margins which were driven by strong suit sales, b) the elimination of the unprofitable, lower margin women's business, c) men's comparable store sales increase of approximately 9.3 percent, d) lower operating expenses and e) the closure of several unprofitable stores. The Company has also restructured several leases to support its men's-only business, adjusted its manufacturing capacity, relocated three stores and lowered its store selling expenses. The increase in men's comparable store sales was generated on men's average inventory levels that were approximately $5.6 million lower than the prior year as the Company improved its inventory turns. The Company has not completely replaced the volume generated by the women's division which generated sales of $25.9 million in fiscal 1995. To increase sales and improve the leverage of its assets, the Company is opening new stores, including six stores that were opened in fall 1996. The Company expects to open up to ten new stores in 1997. The Company's availability in excess of outstanding borrowings as supported by the existing borrowing base under its Credit Agreement has increased to $13.4 million at April 18, 1997 compared to $7.2 million at the same time in 1996. In April 1996 the Company extended its $40 million Credit Agreement to April 1999, which reduced the financial covenant requirements and provides for a seasonal over-advance. An additional $7.3 million of potential availability exists to support additional inventory purchases, if required. Results of Operations The following table is derived from the Company's Consolidated Statements of Income (Loss) and sets forth, for the periods indicated, the items included in the Consolidated Statements of Income (Loss), expressed as a percentage of net sales. 13 Percentage Of Net Sales Fiscal Years ------------------------------------- 1994 1995 1996 Sales: Men's .................................. 81.5% 84.7% 100.0% Women's ................................ 18.5 15.3 -- - -------------------------------------------------------------------------------- Net Sales ................................ 100.0 100.0 100.0 Cost of goods sold ....................... 53.5 59.4 54.7 - -------------------------------------------------------------------------------- Gross profit ............................. 46.5 40.6 45.3 General and administrative expenses ...... 9.6 10.5 10.8 Sales and marketing expenses ............. 33.7 37.2 32.8 Store opening costs ...................... 0.6 -- .1 Store repositioning costs ................ -- 2.1 -- - -------------------------------------------------------------------------------- Operating income (loss) .................. 2.6 (9.2) 1.5 Interest expense, net .................... (1.3) (2.0) 1.2 - -------------------------------------------------------------------------------- Income (loss) before income taxes ........ 1.3 (11.2) 0.3 Income taxes ............................. (0.5) 3.4 0.1 - -------------------------------------------------------------------------------- Net income (loss) ........................ 0.8% (7.8)% 0.2% - -------------------------------------------------------------------------------- Fiscal 1996 Compared to Fiscal 1995 Net Sales - Men's sales showed a strong improvement over the prior year as reflected in the men's total sales increase of $11.4 million or 7.9% on sales of $155.1 million in fiscal 1996 as compared to $143.7 million in fiscal 1995. Men's comparable store sales also posted an increase of $10.6 million or 9.3% in fiscal 1996, from $114.4 million to $125.0 million, while men's catalog sales posted a $1.3 million increase or 8.3% on sales of $16.9 million in fiscal 1996 and $15.6 million in fiscal 1995. The increase in men's sales can be attributed to favorable apparel trends, an improved merchandising mix, reduced competition from attrition within the industry and improved efficiency in the Company's marketing approach, among other factors. Total sales decreased $14.5 million or 8.5% to $155.1 million in fiscal 1996 from $169.6 million in fiscal 1995 due to the discontinuance of the women's product line which generated $25.9 million of net sales in fiscal 1995. Gross Profit - Gross profit as a percentage of net sales rose to 45.3% in fiscal 1996 from 40.6% in fiscal 1995. This improvement was due to the elimination of the women's product line and the improvement of margins in the continuing men's business through better sourcing and fresher product offering, particularly in the higher margin suit and tie categories. Gross profit also improved as the Company consolidated its in-store tailoring operations into several Company-owned overflow shops. The 1996 cost of goods sold includes a non-recurring cost of approximately $.4 million relating to cost overruns associated with the manufacturing of formal wear on a contract basis, which the Company has discontinued. General and Administrative Expenses - General and administrative expenses decreased $1.2 million to $16.7 million for fiscal 1996 compared to $17.9 million for fiscal 1995. Approximately $.7 million of the decrease was related to severance in the first quarter of 1995 for terminated employees. The remainder of the improvement was due primarily to lower professional fees and payroll and related expenses which reflects the Company's continued focus on controlling overhead costs. These reductions were partially offset by higher employee relocation expenses and performance incentive compensation in 1996. 14 Sales and Marketing Expenses - Sales and Marketing expense decreased $12.1 million to $50.9 million in fiscal 1996 from $63.0 million in fiscal 1995. These expenses also decreased to 32.8% of sales in 1996 from 37.2% in 1995 due primarily to a) more efficient retail store advertising expenditures resulting from a shift in strategy putting a greater emphasis on direct mail, b) the elimination of the women's product line and its related costs, c) the reduction of the number of catalogs mailed to prospects in the first half of 1996, and d) a $.3 million expense reduction related to a lease settlement. Store Opening Costs - The Company opened four new full-line stores in fiscal 1996 and incurred approximately $.2 million of new store opening expense. The Company expects the new store opening cost per store in 1997 to be comparable to the costs in 1996 as its strategy is to open new stores in existing markets which requires lower incremental costs of opening compared to a new market. Interest Expense - The decrease of $1.5 million in interest expense for fiscal 1996 is attributable to lower inventories and $.6 million of interest income related to an income tax refund received from the Company's pre-1986 parent. The Company expects interest expense to increase in fiscal 1997 as it increases its borrowings to finance new store openings. Income Taxes - The Company has net tax operating loss carryforwards (NOLs) of approximately $19.6 million which expire through 2010. The NOLs were generated during periods in which the Company operated its women's business along with the men's business. In 1995, the Company discontinued its women's business to focus its efforts on its men's business. Realization of the future tax benefits of the NOLs is dependent on the Company's ability to generate taxable income within the carryforward period. Management has determined, based on the Company's history of earnings and its repositioning strategy discussed earlier, that future earnings of the Company will more likely than not be sufficient to utilize at least $16 million of the NOLs prior to their expiration. Accordingly, the Company has recorded a deferred tax asset of $6.1 million and a valuation allowance of $1.4 million relating to the NOLs. The average minimum taxable income that the Company would need to generate prior to the expiration of the NOLs would be less than the average taxable income that the Company earned during fiscal years 1992 through 1994, as adjusted for unusual charges. Management believes that although the prior earnings and current year operating results might justify a higher amount, the $6.1 million represents a reasonable estimate of the future utilization of the NOLs and will continue to evaluate the likelihood of future profit and the necessity of future adjustments to the deferred tax asset valuation allowance. No assurance can be given that sufficient taxable income will be generated for full utilization of the NOLs. Fiscal 1995 Compared to Fiscal 1994 Net Sales - Net sales decreased $6.5 million or 3.7% to $169.6 million in fiscal 1995 from $176.1 million in fiscal 1994. Total men's sales of $143.7 million in fiscal 1995 were comparable to the prior year, and sales from the women's business declined $6.7 million from $32.6 million to $25.9 million as the Company was exiting this product line. Men's comparable store sales increased $4.1 million, or 3.6%, in fiscal 1995 while men's catalog sales decreased $5.1 million, or 21.8%. The increase in men's comparable store sales was primarily due to an increase in promotional activity and the expansion of the sportswear offering. The decrease in catalog sales was primarily due to decreased circulation as the Company reacted to increased paper and postage costs. Gross Profit - Gross profit as a percentage of net sales declined to 40.6% in fiscal 1995 from 46.5% in fiscal 1994 due primarily to the significant erosions in the women's gross margins resulting from the Company's decision to discontinue its women's product line and the resulting need to sell off the inventory (which was completed in fiscal 1995). Men's gross profit percentage declined slightly from 1994 to 1995 primarily as a result of increased promotional activity as the Company incurred startup costs for its new sportswear line and competitive pressures in the men's apparel market. General and Administrative Expenses - General and administrative expenses of $17.9 million increased $1.1 million from $16.8 million in fiscal 1995 due primarily to severance pay of $1.0 million, related to staff reductions during 1995. Sales and Marketing Expenses - Sales and marketing expenses increased as a percentage of net sales to 37.2% in fiscal 1995 from 33.7% in fiscal 1994 primarily as a result of higher marketing expenses for image advertising of the increased sportswear offering, higher catalog costs due to increased postage and paper costs and increased advertising necessitated by the promotional nature of the men's clothing industry in fiscal 1995. Store Opening Costs - The Company did not incur significant store opening costs in fiscal 1995, compared to fiscal 1994 when it incurred $1.0 million. 15 Store Repositioning Costs - The Company has recorded a $3.5 million charge which includes a $2.3 million impairment of assets associated with the early adoption of Statement of Financial Accounting Standards No. 121 and a $1.2 million charge to exit certain leases and reposition stores. Interest Expense - Interest expense increased $1.0 million in fiscal 1995. The increase was due primarily to increased interest rates on the revolving loan and an increase in the outstanding balance. Income Taxes -The Company has net tax operating loss carryforwards (NOLs) of approximately $20 million which expire through 2010. SFAS No. 109 - Accounting for Income Taxes requires that the tax benefit of such NOL's be recorded as an asset to the extent that management assesses the utilization of such NOL's to be "more likely than not". Realization of the future tax benefits is dependent on the Company's ability to generate taxable income within the carryforward period. Future levels of operating income are dependent upon general economic conditions, including interest rates and general levels of economic activity, competitive pressures on sales and margins and other factors beyond the Company's control, and no assurance can be given that sufficient taxable income will be generated for full utilization of the NOL's. Management has determined, based on the Company's history of prior operating earnings and its expectations for the future, that operating income of the Company will more likely than not be sufficient to utilize at least $16 million NOL's prior to their expiration. Liquidity and Capital Resources The Company's availability in excess of outstanding borrowings as supported by the existing borrowing base under its Credit Agreement has increased to $13.4 million at April 18, 1997 compared to $7.2 million at the same time in 1996. In April 1996 the Company extended its $40 million Credit Agreement to April 1999, which reduced the financial covenant requirements and provides for a seasonal over-advance. An additional $7.3 million of potential availability exists to support additional inventory purchases if required. The Company's availability at April 18, 1997 has increased by $6.2 million compared to the same time in 1995 principally by a) lower inventory levels, b) better terms with vendors, c) the tax refund from its pre-1986 parent and d) reduced letter of credit requirements from several landlords. The Company reduced its total debt by $11.8 million in 1996 to $18.4 million at February 1, 1997 from $30.2 million at February 3, 1996. The following table summaries the Company's sources and uses of funds as reflected in the condensed consolidated statements of cash flows: Year Ended February 3, February 1, 1996 1997 ----------- ----------- Cash provided by (used in): Operating activities ................ $(3,564) $ 13,582 Investing activities, net ........... (2,094) (1,373) Financing activities ................ 5,565 (12,134) - -------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents ........................ $ (93) $ 75 - -------------------------------------------------------------------------------- Cash provided by the Company's operating activities was due primarily to improved operating results, the income tax refund received from its pre-1986 parent, improved vendor terms and lower inventory levels. Cash used in investing activities relates primarily to leasehold improvements in new and relocated stores and continued consolidation of the Company's tailoring operations, net of proceeds from the sale of one of the Company's three manufacturing plants. Cash used in financing activities represents primarily repayments of the revolving loan under the Credit Agreement. The Company spent $2.2 million on capital expenditures in fiscal year 1996 as it implemented its program to reposition its existing store base, which included $1.1 million to open four new company-owned stores in fall 1996 and $.8 million to relocate three stores. The Company also opened two new franchise stores. The Company closed two unprofitable full-line stores in 1996, as well as five catalog stores. These closed stores accounted for less than 2% of sales in 1995. 16 The Company expects to spend between $4.0 and $5.0 million in capital expenditures to open up to ten new stores and renovate existing stores in 1997. The Company believes that its current liquidity and Credit Agreement will be adequate to maintain its currently anticipated working capital and investment needs. The Company's plans and beliefs concerning 1997 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 operating results, liquidity, and financial condition. Seasonality Unlike many other retailers, the Company's operations are not 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. The Company does not expect seasonal fluctuation to materially affect its operations in the future. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENT 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 The information included under the captions "Directors", "Executive Officers" and "Compliance with Section 16(a) of the Exchange Act" in the Company' proxy statement for the 1997 Annual Meeting of Shareholders to be filed with the Commission (the "Proxy Statement") are incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION The information included under the captions "Executive Compensation", "Executive Employment Agreements", "Compensation of Directors", "Report of the Compensation Committee of the Board of Directors" and "Performance Graph" in the Company's Proxy Statement are incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information included under the caption "Security Ownership of Directors and Officers" in the Company's Proxy Statement is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS The information included under the caption "Certain Transactions" in the Company's Proxy Statement is incorporated herein by reference. 17 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-1 Consolidated Balance Sheets as of February 3, 1996 and February 1, 1997.... F-2 Consolidated Statements of Income (Loss) for the Years Ended January 28, 1995, February 3, 1996 and February 1, 1997.................. F-3 Consolidated Statement of Shareholders' Equity for the Years Ended January 28, 1995, February 3, 1996 and February 1, 1997.................. F-4 Consolidated Statements of Cash Flows for the Years Ended January 28, 1995, February 3, 1996 and February 1, 1997.................. F-5 Notes to Consolidated Financial Statements................................. F-6
2. Financial Statement Schedules All required information is included within the Consolidated Financial Statements and the notes thereto. (b) Forms 8-K No reports on Form 8-K were filed during the last quarter of the year covered by this Annual Report on Form 10-K, which ended on February 1, 1997. (c) Exhibits 3.1 -- Restated Certificate of Incorporation of the Company.*...................................... 3.2 -- By-laws of the Company, together with all amendments thereto.*.............................. 4.1 -- Form of Common Stock certificate.*.......................................................... 4.2 -- Amended and Restated Stockholders Agreement, dated as of January 29, 1994, among the parties named therein.*......................................................... 10.4(a) -- Second Amendment to Third Amended and Restated Credit Agreement, dated as of October 24, 1994, by and among the Company, Wells Fargo Bank, N.A. National Association and other lenders named therein **.................................................................. 10.4(b) -- Third Amendment to Third Amended and Restated Credit Agreement, dated as of April 26, 1995, by and among the Company, Wells Fargo Bank, N.A. and other lenders named therein. **............................................ 10.4(c) -- Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of June 30, 1995, by and among the Company, Wells Fargo Bank, N.A. and other lenders named therein. **............................................ 10.4(d) -- Fifth Amendment to Third Amended and Restated Credit Agreement, dated as of July 28, 1995, by and among the Company, Wells Fargo Bank, N.A. and other lenders named therein. **............................................ 10.4(e) -- Sixth Amendment to Third Amended and Restated Credit Agreement, dated as of August 15, 1995, by and among the Company, Wells Fargo Bank, N.A. and other lenders named therein. **............................................ 10.4(f) -- Fourth Amended and Restated Credit Agreement, April 30, 1996, by and among the Company, Wells Fargo Bank, N.A. ***............................................. 21.1 -- Company subsidiaries * 10.5(b) -- Amendment to Finley Employment Agreement, dated as of January 29, 1994, filed herewith...................................................................... 10.6(b) -- Amendment to Schwartz Employment Agreement, dated as of January 29, 1994, filed herewith............................................................................
18 10.5(a) -- Employment Agreement, dated as of March 31, 1994, between Timothy F. Finley and Jos. A. Bank Clothiers, Inc., filed herewith.............................................. 10.6(a) -- Employment Agreement, dated as of March 31, 1994, between Henry C. Schwartz and Jos. A. Bank Clothiers, Inc., filed herewith.............................................. 10.6(c) -- Amendment to Employment Agreement, dated February 3, 1996, by and between Henry C. Schwartz and Jos. A. Bank Clothiers, Inc., filed herewith........................ 10.7 -- Employment Agreement, dated February 5, 1996, between Frank Tworecke and Jos. A. Bank Clothiers, Inc., filed herewith...................................................... 10.8 -- Employment Agreement, dated February 5, 1996, between David E. Ullman and Jos. A. Bank Clothiers, Inc., filed herewith...................................................... 10.9 -- Jos. A. Bank Clothiers, Inc. Retirement and Savings Plan and Trust Agreement as amended and restated effective April 1, 1994., filed herewith............................. 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., filed herewith...................................................................... 10.11 -- Union Agreement, dated May 1, 1995, by and between Joseph A. Bank Mfg. Co., Inc. and Baltimore Regional Joint Board, Amalgamated Clothing and Textile Workers Union (also known as U.N.I.T.E.), filed herewith............................................................
- --------------- * Incorporated by reference to the Company's Registration Statement on Form S-1 filed May 3, 1994. ** Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended January 28, 1995. *** Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended February 3, 1996. Pursuant to the requirements 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 April 18, 1997. 19 JOS. A. BANK CLOTHIERS, INC. (registrant) By: /s/: Timothy F. Finley ---------------------- TIMOTHY F. FINLEY CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE /s/: Timothy F. Finley Director, Chairman of the Board and Chief - ----------------------- Executive Officer (Principal Executive Officer)... April 18, 1997 /s/: Frank Tworecke President and Chief Merchandising Officer......... April 18, 1997 - ----------------------- /s/: David E. Ullman Executive Vice President, Chief Financial Officer. April 18, 1997 - ----------------------- /s/: Thomas E. Polley Vice President, Controller (Principal - ----------------------- Accounting Officer), Treasurer.................... April 18, 1997 /s/: Robert B. Bank Director.......................................... April 18, 1997 - ----------------------- /s/: Andrew A. Giordano Director.......................................... April 18, 1997 - ----------------------- /s/: Gary S. Gladstein Director.......................................... April 18, 1997 - ----------------------- /s/: Peter V. Handal Director.......................................... April 18, 1997 - ----------------------- /s/: David A. Preiser Director......................................... April 18, 1997 - ----------------------- /s/: Robert N. Wildrick Director......................................... April 18, 1997 - -----------------------
20 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 February 3, 1996, and February 1, 1997, and the related consolidated statements of income (loss), shareholders' equity and cash flows for the years ended January 28, 1995, February 3, 1996, and February 1, 1997. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, 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 February 3, 1996, and February 1, 1997, and the results of its operations and its cash flows for the years ended January 28, 1995, February 3, 1996, and February 1, 1997, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP - ----------------------- Baltimore, Maryland, March 11, 1997 F-1 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- AS OF FEBRUARY 3, 1996 AND FEBRUARY 1, 1997 ------------------------------------------- (In Thousands, Except Share Information)
ASSETS February 3, 1996 February 1, 1997 ---------------- ---------------- CURRENT ASSETS: Cash and cash equivalents $ 644 $ 719 Accounts receivable 3,866 3,300 Inventories 43,273 40,883 Prepaid expenses and other current assets 4,333 4,874 Deferred income taxes 5,200 3,200 - ------------------------------------------------------------------------------------------------- Total current assets 57,316 52,976 NON-CURRENT ASSETS: Property, plant and equipment, net 25,671 22,840 Other noncurrent assets, net 1,717 1,511 Deferred income taxes 5,967 4,083 - ------------------------------------------------------------------------------------------------- Total assets $ 90,671 $ 81,410 - ------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 8,929 $ 12,357 Accrued expenses 10,896 10,484 Current portion of long-term debt 856 685 Current portion of capital lease obligations 183 16 Current portion of pension liability 730 803 - ------------------------------------------------------------------------------------------------- Total current liabilities 21,594 24,345 NON-CURRENT LIABILITIES: Long-term debt 29,389 17,748 Long-term capital lease obligations 16 -- Deferred rent 2,666 2,860 Pension liability 1,561 758 - ------------------------------------------------------------------------------------------------- Total liabilities 55,226 45,711 - ------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, $.01 par, 20,000,000 shares authorized, 6,999,567 issued and 6,790,152 outstanding as of February 3, 1996 and 7,000,567 issued and 6,791,152 outstanding as of February 1, 1997 70 70 Preferred stock, $1.00 par, 500,000 shares authorized, none outstanding -- -- Additional paid-in capital 56,333 56,336 Accumulated deficit (19,038) (18,787) Less 209,415 shares of common stock held in treasury, at cost (1,920) (1,920) - ------------------------------------------------------------------------------------------------- Total shareholders' equity 35,445 35,699 - ------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 90,671 $ 81,410 - ------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated balance sheets.
F-2 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME (LOSS) ---------------------------------------- FOR THE YEARS ENDED JANUARY 28, 1995, FEBRUARY 3, 1996 AND FEBRUARY 1, 1997 --------------------------------------------------------------------------- (In Thousands, Except Share Information)
Years Ended ---------------------------------------------- Jan. 28, 1995 Feb. 3, 1996 Feb. 1, 1997 ------------- ------------ ------------ NET SALES: Men's $ 143,465 $ 143,659 $ 155,058 Women's 32,589 25,908 -- - ----------------------------------------------------------------------------------------------------------------------- NET SALES 176,054 169,567 155,058 COST OF GOODS SOLD 94,199 100,789 84,866 - ----------------------------------------------------------------------------------------------------------------------- Gross profit 81,855 68,778 70,192 - ----------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES: General and administrative 16,817 17,852 16,720 Sales and marketing 59,375 63,013 50,924 Store opening costs 1,025 -- 192 Store repositioning costs -- 3,500 -- - ----------------------------------------------------------------------------------------------------------------------- Total operating expenses 77,217 84,365 67,836 - ----------------------------------------------------------------------------------------------------------------------- OPERATING INCOME (LOSS) 4,638 (15,587) 2,356 Interest expense, net (2,430) (3,444) (1,946) - ----------------------------------------------------------------------------------------------------------------------- Income (loss) before (provision) benefit for income taxes 2,208 (19,031) 410 (Provision) benefit for income taxes (861) 5,845 (159) - ----------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ 1,347 $ (13,186) $ 251 - ----------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE: Fully diluted earnings (loss) per common share $ .22 $ (1.94) $ .04 - ----------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES OUTSTANDING 6,240,700 6,790,152 6,824,117 - -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-3 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ----------------------------------------------- FOR THE YEARS ENDED JANUARY 28, 1995, FEBRUARY 3, 1996 AND FEBRUARY 1, 1997 --------------------------------------------------------------------------- (In Thousands, Except Share Information)
Additional Total Common Preferred Paid-In Accumulated Treasury Shareholders' Stock Stock Capital Deficit Stock Equity ------ --------- ---------- ----------- -------- ------------- BALANCE, January 29, 1994 $ 50 $ -- $ 39,459 $ (7,199) $ (1,920) $ 30,390 Net proceeds from issuance of common stock (2,000,000 shares) pursuant to initial public offering 20 -- 16,874 -- -- 16,894 Net income -- -- -- 1,347 -- 1,347 - ------------------------------------------------------------------------------------------------------------------------ BALANCE, January 28, 1995 70 -- 56,333 (5,852) (1,920) 48,631 Net loss -- -- -- (13,186) -- (13,186) - ------------------------------------------------------------------------------------------------------------------------ BALANCE, February 3, 1996 70 -- 56,333 (19,038) (1,920) 35,445 Net proceeds from issuance of common stock (1,000 shares) pursuant to Incentive Option Plan -- -- 3 -- -- 3 Net income -- -- -- 251 -- 251 - ------------------------------------------------------------------------------------------------------------------------ BALANCE, February 1, 1997 $ 70 $ -- $ 56,336 $ (18,787) $ (1,920) $ 35,699 - ------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-4 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- FOR THE YEARS ENDED JANUARY 28, 1995, FEBRUARY 3, 1996 AND FEBRUARY 1, 1997 --------------------------------------------------------------------------- (In Thousands)
Years Ended -------------------------------------------------- Jan. 28, 1995 Feb. 3, 1996 Feb. 1, 1997 ------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,347 $ (13,186) $ 251 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Deferred tax (benefit) expense 427 (5,533) 3,884 Depreciation and amortization 4,088 4,668 3,901 (Gain) loss on disposition of assets -- 168 (25) Store repositioning costs -- 3,500 -- Changes in assets and liabilities: (Increase) decrease in accounts receivable (1,082) 679 566 (Increase) decrease in inventories (8,941) 8,609 2,390 (Increase) decrease in prepaid expenses and other current assets (2,278) 3,491 (541) (Increase) decrease in other non-current assets -- (776) 101 Increase (decrease) in accounts payable 3,794 (5,386) 3,428 Increase (decrease) in long-term pension liability (665) (665) (730) Increase (decrease) in accrued expenses (350) 406 163 Increase in deferred rent 385 461 194 - --------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (3,275) (3,564) 13,582 - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (9,377) (2,231) (2,152) Proceeds from disposal of assets -- 137 779 - --------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (9,377) (2,094) (1,373) - --------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving loan agreement 67,310 54,364 29,786 Repayment of borrowings under revolving loan agreement (62,710) (47,550) (40,680) Proceeds from issuance of other long-term debt 324 -- -- Repayment of other long-term debt (8,474) (544) (918) Net proceeds from issuance of common stock 16,894 -- 3 Principal payments under capital lease obligations (196) (212) (183) Payments related to debt financing (130) (493) (142) - --------------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 13,018 5,565 (12,134) - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 366 (93) 75 CASH AND CASH EQUIVALENTS, beginning of year 371 737 644 - --------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of year $ 737 $ 644 $ 719 - ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. F-5 JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES --------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ JANUARY 28, 1995, FEBRUARY 3, 1996 AND FEBRUARY 1, 1997 ------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------- Description of Business - Jos. A. Bank Clothiers, Inc. (Clothiers) is a manufacturer and nationwide retailer of classic men's clothing through conventional retail stores, including catalog 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 28, 1995 (fiscal 1994) and February 1, 1997 (fiscal 1996), each contained fifty-two weeks and the fiscal year ended February 3, 1996 (fiscal 1995) contained fifty-three weeks. Basis of Presentation - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation - The consolidated financial statements include the accounts of Clothiers and its wholly-owned subsidiaries, The Joseph A. Bank Mfg. Co., Inc. and National Tailoring Services, Inc. (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. Supplemental Cash Flow Information - Interest and income taxes paid were as follows (in thousands): Years Ended ------------------------------------- January 28, February 3, February 1, 1995 1996 1997 ----------- ----------- ----------- Interest paid $2,125 $2,679 $2,784 Income taxes paid 323 30 100 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 manufactured and purchased 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 February 3, 1996 and February 1, 1997, prepaid catalog and promotional materials were approximately $1,375,000 and $1,505,000, respectively. 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 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 $620,000 and $514,000 as of February 3, 1996 and February 1, 1997, respectively. Deferred financing costs were incurred in connection with the Company's bank credit agreement described in Note 6 and are being amortized as additional interest expense over the remaining term of the agreement using the effective interest method. Other noncurrent assets include $776,000 and $675,000 of notes receivable as of February 3, 1996 and February 1, 1997, respectively. 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 balance sheets. Store Opening Costs - Costs incurred in connection with start-up and promotion of new store openings are expensed as incurred. F-6 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 - Net income (loss) per common share was computed based on the net income (loss) divided by the weighted average number of common shares outstanding. Primary income (loss) per share approximates fully diluted income per share in each year presented. For net income per common share, the effect of stock options is factored into the calculation of weighted average shares outstanding using the treasury stock method. Accounting for Stock Based Compensation - In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock Based Compensation." With respect to stock options granted to employees, SFAS No. 123 permits companies to continue using the accounting method promulgated by the Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees", to measure compensation expense or to adopt the fair value based method prescribed by SFAS No. 123. If APB No. 25's method is continued, pro forma disclosures are required as if SFAS No. 123 accounting provisions were followed. Management has elected to continue to measure compensation expense under APB No. 25, with pro forma footnote disclosures of the expense under the SFAS No. 123 method (See Note 11). Reclassifications - Certain reclassifications have been made to the February 3, 1996, financial statements in order to conform with the February 1, 1997, presentation. New Accounting Pronouncement - In February 1997, the FASB issued Statement No. 128 (SFAS 128), "Earnings per Share," which establishes new standards for computing and presenting earnings per share. SFAS 128 is effective for financial statements for periods ending after December 15, 1997, including interim periods. 2. CAPITAL STRUCTURE AND INITIAL PUBLIC OFFERING --------------------------------------------- Effective January 29, 1994, the Company changed its capital structure by authorizing 20,000,000 shares of new Common Stock, $.01 par value per share (Common Stock), and 500,000 shares of new preferred stock, $1.00 par value per share (Preferred Stock). The Company then issued 3,912,363 shares of its new Common Stock in exchange for all of its previously issued preferred stock. The Company also issued 713,651 shares of its new Common Stock to the holders of its former common stock. All of the previously issued preferred and common stock of the Company was canceled. On May 10, 1994, the Company sold 2,000,000 shares of its Common Stock for $10.00 per share in connection with an initial registration with the Securities Exchange Commission. In connection with this transaction, the Company incurred costs of $3,106,000 consisting principally of underwriting, legal, accounting and other fees. The net proceeds of $16,894,000 were used to pay off long-term debt of approximately $8,100,000 and for the opening of new stores. 3. INVENTORIES: ------------ Inventories at February 3, 1996 and February 1, 1997, consist of the following (in thousands): February 3, 1996 February 1, 1997 ---------------- ---------------- Finished goods $ 35,650 $ 32,104 Work in process 2,331 4,717 Raw materials 5,292 4,062 - ------------------------------------------------------------ Total $ 43,273 $ 40,883 - ------------------------------------------------------------ 4. PROPERTY, PLANT AND EQUIPMENT: ------------------------------ Property, plant and equipment at February 3, 1996 and February 1, 1997, consist of the following (in thousands): February 3, 1996 February 1, 1997 ---------------- ---------------- Land $ 671 $ 475 Buildings and improvements 28,112 28,062 Equipment, furniture and fixtures 20,088 19,541 - --------------------------------------------------------------- 48,871 48,078 Less: Accumulated depreciation and amortization (23,200) (25,238) - --------------------------------------------------------------- Property, plant and equipment, net $ 25,671 $ 22,840 - --------------------------------------------------------------- 5. ACCRUED EXPENSES: ----------------- Accrued expenses at February 3, 1996 and February 1, 1997, consist of the following (in thousands): F-7 Feb. 3, 1996 Feb. 1, 1997 ------------ ------------ Accrued compensation and benefits $ 3,129 $ 4,595 Accrued store repositioning costs 1,200 273 Accrued advertising 2,961 2,142 Gift certificate payable 1,108 1,135 Other accrued expenses 2,498 2,339 - -------------------------------------------------------- Total $ 10,896 $ 10,484 - -------------------------------------------------------- Other accrued expenses consist primarily of liabilities related to interest, sales taxes, customer deposits, and percentage rent. 6. LONG-TERM DEBT: --------------- Long-term debt at February 3, 1996 and February 1, 1997, consist of the following (in thousands): February 3, February 1, 1996 1997 -------------- ------------- Bank credit agreement- Borrowings under long-term revolving loan agreement $ 28,904 $ 18,010 Note related to lease termination, discounted at 10.5%, payable in variable installments through January 15, 1998 396 89 Notes related to lease- hold improvements, interest at 2% plus prime and 13.0%, payable in monthly installments through June 1, 2012 484 134 Notes related to building improve- ments, interest at 10%, payable in monthly installments through July 1, 1997 233 85 Mortgages payable, interest at 3%, payable in monthly installments through September 1, 1999; secured by related land and building 158 115 Mortgage payable, interest at 6.5%, payable in monthly installments through May 1, 2000; secured by related properties 70 -- - ------------------------------------------------------------- Total debt 30,245 18,433 Less: Current maturities 856 685 - ------------------------------------------------------------- Long-term debt $ 29,389 $ 17,748 - ------------------------------------------------------------- Bank Credit Agreement - The Company maintains a $40 million 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 real estate and equipment values. In April 1996, the Company extended the Credit Agreement to April 1999. The amended Credit Agreement changed the maximum borrowing under the revolver facility to $38,000,000 and provided a term loan facility of $2,000,000 payable in monthly installments based on a five-year amortization with any outstanding balance due in April 1999. The Credit Agreement also includes financial covenants concerning net worth and working capital, among others, limitations on capital expenditures (up to $7 million in fiscal 1997) and additional indebtedness and a restriction on the payment of dividends. Interest rates under the amended agreement range from prime plus 1.5% to prime plus 2.0% or LIBOR plus 3.5%. The amended agreement also includes an early termination fee and provisions for a seasonal over-advance. As of February 3, 1996 and February 1, 1997 the Company's availability in excess of outstanding borrowings under the formula was $5,500,000 and $13,750,000, respectively. Substantially all assets of the Company are collateralized under the Credit Agreement. During the years ended January 28, 1995 and February 3, 1996, borrowings under the Credit Agreement bore interest ranging from prime plus 1.5% to prime plus 2% or LIBOR plus 3%. Amounts outstanding under the Credit Agreement as of February 1, 1997, bear interest at rates ranging from 9.0% to 10.75% which will vary in the future depending upon prime and LIBOR. In addition to borrowings under the Credit Agreement, the Company has issued letters of credit aggregating approximately $517,000 at February 1, 1997, to secure the payment of certain liabilities. The aggregate maturities of the Company's long-term debt as of February 1, 1997, are as follows: year ending 1998-$685,000; 1999-$479,000; 2000-$17,269,000; F-8 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 financial statements taken as a whole. Employment Agreements - The Company has employment agreements with certain of its executives expiring between 1998 and 1999, aggregating base compensation of $2,177,000 over the term. The contracts also provide for additional incentive payments subject to performance standards. In addition, other employees are eligible for incentive payments based on performance. For fiscal 1996, the Company expensed approximately $925,000 in incentive payments. No incentive payments were expensed in fiscal years 1994 and 1995. 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. The Company has also entered into certain capital leases. Future minimum lease payments under noncancelable operating and capital leases together with the present value of net minimum lease payments of capital leases at February 1, 1997, are as follows (in thousands): Operating Capital Leases Leases --------- ------- 1998 $ 10,185 $ 20 1999 9,944 -- 2000 9,895 -- 2001 8,487 -- 2002 7,843 -- 2003 and thereafter 30,731 -- - -------------------------------------------- Total $ 77,085 20 - -------------------------------------------- Less: Executory costs 3 - -------------------------------------------- Net minimum lease payments 17 Less: Amounts representing interest 1 - -------------------------------------------- Present value of net minimum lease payments $ 16 - -------------------------------------------- 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, was $8,903,000, $ 10,189,000 and $10,224,000 for the years ended January 28, 1995, February 3, 1996 and February 1, 1997, respectively. Minimum rentals were $8,893,000, $ 10,023,000 and $9,986,000, respectively. Contingent rentals, which are based on a percentage of sales, approximated $259,000, $ 353,000 and $395,000, respectively. Additionally, sublease payments received approximated $249,000, $187,000 and $156,000, respectively. The Company has signed a five-year agreement 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. 8. BENEFIT PLANS: -------------- Multi-Employer Pension Plan - Through the year ended January 29, 1994, the Company's employees covered by a collective bargaining agreement participated in plans with pension and post-retirement benefits administered by the national and local Union of Needletrades Industrial & Textile Employees. The Company made contributions to the plans in accordance with the collective bargaining agreement. During the year ended January 29, 1994, the Company's Board of Directors and management decided to terminate the Company's participation in the multi-employer pension plan. The related liability is being repaid in installments over four years through October, 1998. As of February 1, 1997 , the Company owed approximately $1,240,000 related to the termination. Defined Benefit Pension Plan - In connection with the above termination, the Company adopted a new noncontributory defined benefit pension plan to cover the above-mentioned union employees with equivalent benefits to the multi-employer plan. The Company's contributions are intended to provide for both benefits attributed to service to date and for benefits expected to be earned in the future. 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 following table sets forth the plan's funded status as of December 31, 1995 and 1996, the date of the latest actuarial valuations (in thousands). F-9 Actuarial present value of benefit obligations: Feb. 3, Feb. 1, 1996 1997 ------- ------- Accumulated benefit obligation, including vested benefits of $520 and $605 $ 564 $ 728 - ------------------------------------------------------------ Projected benefit obligation for service rendered to date $ (564) $ (728) Fair value of plan assets 250 531 - ------------------------------------------------------------ Fair value of plan assets less than projected benefit obligation (314) (197) Unrecognized net loss (18) -- Unrecognized net transition liability 328 303 Adjustment required to recognize minimum liability (328) (303) - ------------------------------------------------------------ Accrued pension cost $ (332) $ (197) - ------------------------------------------------------------ Net periodic pension expense for the years ended January 28, 1995, February 3, 1996 and February 1, 1997, includes the following components (in thousands): Jan. 28, Feb. 3, Feb. 1, 1995 1996 1997 -------- ------- ------- Normal service cost-benefits earned during the period $ 74 $ 101 $ 84 Interest cost on projected benefit obligation 20 40 48 Actual return on plan assets (1) (29) (48) Net amortization and deferral 14 42 37 - ------------------------------------------------------- Net periodic pension expense $ 107 $ 154 $ 121 - ------------------------------------------------------- The Company recorded minimum pension liabilities of $328,000 and $303,000 at February 3, 1996 and February 1, 1997, respectively, which is included in "non-current pension liability", representing the excess of the unfunded accumulated benefit obligation over previously accrued pension costs. A corresponding intangible asset was recorded as an offset to this additional liability, which is included in "other non-current assets". In determining the actuarial present value of the projected benefit obligation, the weighted average discount rate used was 7.75% fiscal 1996 and 8.0% in fiscal 1995 and the expected long-term rate of return on plan assets was 8.0% for fiscal years 1995 and 1996. Post-retirement Benefit Plan - In connection with the termination of participation in the multi-employer pension plan described above, the Company adopted a new post-retirement benefit plan to cover the above-mentioned union employees with equivalent benefits to the multi-employer plan. The Company does not pre-fund these benefits. 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 related transition liability over 20 years. The following table sets forth the post-retirement benefit program's funded status as of December 31, 1995 and 1996, the dates of the latest actuarial valuations for the related periods (in thousands): Accumulated post-retirement benefit: Feb. 3, Feb. 1, 1996 1997 ------- ------- Retirees $ -- $ -- Fully eligible active plan participants (1,440) (1,145) - ------------------------------------------------------------- (1,440) (1,145) Unrecognized net transition liability 985 931 Unrecognized net gain (loss) 68 (418) - ------------------------------------------------------------- Accrued post-retirement benefit cost $ (387) $ (632) - ------------------------------------------------------------- Net periodic post-retirement benefit expense for the years ended January 28, 1995, February 3, 1996 and February 1, 1997, includes the following components (in thousands): Jan. 28, Feb. 3, Feb. 1, 1995 1996 1997 -------- ------- ------- Normal service cost - benefits earned during the period $ 69 $ 99 $ 115 Interest cost on accumulated post- retirement benefit obligation 57 90 88 Net amortization and deferral 36 43 42 - ------------------------------------------------------------ Net periodic post- retirement benefit expense $ 162 $ 232 $ 245 - ------------------------------------------------------------ For measurement purposes, a 5% annual rate of increase in the per capita cost of covered health care benefits was assumed. F-10 The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated post-retirement benefit obligation by $190,000 and would increase net periodic post-retirement benefit cost by $35,000. The weighted average discount rate used in determining the accumulated post-retirement benefit obligation was 7.75%. Profit Sharing Plan - The Company maintains a defined contribution 401(k) profit sharing plan for its employees. All employees are eligible to participate after one year 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 $182,000, $239,000 and $223,000 for the years ended January 28, 1995 February 3, 1996 and February 1, 1997, respectively. 9. STORE REPOSITIONING COSTS: -------------------------- In the fourth quarter of fiscal 1995, the Company elected early adoption of SFAS No.121 -- "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". In the first half of fiscal 1995, the men's and women's apparel industries began suffering a significant down-turn. In the face of a potential cash shortage and other factors affecting the women's business, the Company decided to discontinue the women's product line (which was sold in the same stores as the men's products) to generate cash. The women's product line represented approximately $33 million and $26 million of sales in fiscal 1994 and 1995, respectively (or 18% and 15% of sales, respectively). With this loss of the women's volume, and with the men's business experiencing a decline (but improving) certain previously-profitable stores became unprofitable since the store rents remained basically unchanged. Given these events, the Company performed a store-by-store analysis to determine which stores were losing money and not expected to generate future cash flows that were sufficient to support the book values of the related store assets. Based upon this analysis, the Company determined that (a) certain stores needed to be closed, down-sized or relocated and (b) a write-down of the specific store leasehold improvements and equipment was required. As a result, the Company recorded an impairment loss of $2,300,000 representing the writedown of assets to fair value. The fair values were determined based on estimated future cash flows and market value of the assets. In addition, the Company recorded a $1,200,000 charge representing an estimate of costs to be incurred to implement the Company's plan to reposition its store base and to exit certain leases as it discontinued the women's business and re-aligned its stores to support the remaining men's-only business. These costs are included in "store repositioning costs" in the accompanying consolidated statement of income (loss) for the year ended February 3, 1996 (fiscal 1995). During fiscal 1996, the Company closed two unprofitable full-line stores and five catalog stores and relocated three stores at a cost of approximately $930,000, which included lease settlement payments and moving costs. The stores that were closed in 1996 represented approximately 2% of sales in fiscal 1995. In 1997, the Company expects to fully utilize the remaining reserve by relocating an additional full-line store and close up to three remaining catalog stores. 10. INCOME TAXES: ------------- At February 1, 1997, the Company had approximately $19.6 million of tax net operating loss carryforwards (NOLs) which expire as follows: In the year 2006 - $4.6 million, 2009 - $4.4 million and 2010 - $10.6 million. SFAS No. 109 requires that the tax benefit of such NOLs be recorded as an asset to the extent that management assesses the utilization of such NOLs to be "more likely than not". Realization of the future tax benefits is dependent on the Company' ability to generate taxable income within the carryforward period. Future, levels of operating income are dependent upon general economic conditions, including interest rates and general levels of economic activity, competitive pressures on sales and margins and other factors beyond the Company's control. Therefore no assurance can be given that sufficient taxable income will be generated for full utilization of the NOLs. Management has determined, based on the Company's history of earnings and its repositioning results in fiscal 1996, that future earnings of the Company will more likely than not be sufficient to utilize at least $16 million NOLs prior to their expiration. Accordingly, the Company has recorded a deferred tax asset of $6.1 million and a valuation allowance of $1.4 million relating to the NOLs. The average minimum taxable income that the Company would need to generate prior to the expiration of the NOLs would be less than the average taxable income that the Company earned during fiscal years 1992 through 1994, as adjusted for unusual charges. Management believes that although the prior earnings and current year operating results might justify a higher amount, the $6.1 million represents a reasonable estimate of the future utilization of the NOLs. Management will continue to evaluate the likelihood of future profit and the necessity of future adjustments to the deferred tax asset valuation allowance. During the year ended January 29, 1994, the Company filed for a prior year net operating loss carryback to a year in which the Company was included in the consolidated federal income tax return of its pre-1986 parent and the Company recorded a deferred tax asset of $3,000,000 in anticipation of collecting the refund. In March 1996, the refund plus interest was collected. Included in the fiscal 1996 Financial Statements is $600,000 of interest income related to the refund. F-11 The (provision) benefit for income taxes was comprised of the following (in thousands): Years Ended ------------------------------------------ January 28, February 3, February 1, 1995 1996 1997 ----------- ----------- ----------- Federal: Current $ (57) $ 74 $ (15) Deferred (372) 4,824 (126) State: Current (377) 238 -- Deferred (55) 709 (18) - ------------------------------------------------------------ Net (provision) benefit for income taxes $ (861) $ 5,845 $ (159) - ------------------------------------------------------------ The differences between the recorded income tax (provision) benefit and the "expected" tax (provision) benefit based on the statutory federal income tax rate is as follows (in thousands): Years Ended -------------------------------- Jan. 28, Feb. 3, Feb. 1, 1995 1996 1997 -------- ------- ------- Computed federal tax (provision) benefit at statutory rates $ (773) $ 6,470 $ (140) State income taxes, net of federal income tax effect (285) 626 (23) Valuation allowance -- (1,365) -- Other, net 197 114 4 - --------------------------------------------------------- Net (provision) benefit for income taxes $ (861) $ 5,845 $ (159) - --------------------------------------------------------- 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): Feb. 3, 1996 Feb.1, 1997 ------------ ----------- Deferred Tax Assets: Long-term pension liability $ 768 $ 484 Inventories 956 487 Property, plant and equipment 897 163 Accrued liabilities 1,919 2,085 Operating loss carryforwards and carrybacks 9,270 6,092 Valuation allowance (1,365) (1,365) - ----------------------------------------------------- 12,445 7,946 - ----------------------------------------------------- Deferred Tax Liabilities: Prepaid expenses and other current assets (252) (628) Property, plant and equipment (902) -- Miscellaneous (124) (35) - ----------------------------------------------------- (1,278) (663) - ----------------------------------------------------- Net Deferred Tax Asset $11,167 $ 7,283 - ----------------------------------------------------- 11. INCENTIVE OPTION PLAN: ---------------------- Effective January 28, 1994, the Company adopted an Incentive Plan (the Plan). The 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 954,000 shares of Common Stock have been reserved for issuance under the Plan. The exercise price of an option granted under the Plan may not be less than the fair market value of the underlying shares of Common Stock on the date of grant and the options expire at the earlier of termination of employment or ten years from the date of grant. As of February 1, 1997 options for approximately 826,300 shares had been granted under the plan at exercise prices ranging from $1.875 to $7.375 per share and options for approximately 409,000 shares were exercisable at February 1, 1997. In addition there are 209,415 options outstanding at $9.170 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 1995 and 1996, using the Black-Scholes option pricing model as prescribed by SFAS No. 123. Assumptions used for the pricing model include 7.8% for the risk-free interest rate in 1996, expected lives of 5-10 years, expected dividend yield of 0% each year and expected volatility of 70% each year. 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 (loss) net income would have been a loss of $(13,203,000) in 1995 and net income of $223,000 in 1996. F-12 Pro forma (loss) earnings per share would have been $(1.94) in 1995 and $.03 in 1996. The following table summaries the stock option activity for the years ended February 3, 1996 and February 1, 1997: Number of Exercise Price Shares Per Share --------- -------------- Outstanding as of January 28, 1995 741,965 $ 4.00 - 9.170 Granted 29,000 1.875 - 3.875 Exercised -- -- Terminated -- -- - ----------------------------------------------- Outstanding as of February 3, 1996 770,965 1.875 - 9.170 Granted 265,750 1.625 - 4.750 Exercised (1,000) 3.25 Terminated -- -- - ----------------------------------------------- Outstanding as of February 1, 1997 1,035,715 1.625 - 9.170 - ----------------------------------------------- Weighted average fair value of options granted for the years ended February 3, 1996 and February 1, 1997, was $1.40 and $1.78, respectively. 12. RELATED PARTY TRANSACTIONS: --------------------------- The Company has an executive who is the Chairman of the Board of a consulting group. The Company paid the group approximately $78,000 , $69,000 and $31,000 for the years ended January 28, 1995, February 3, 1996 and February 1, 1997, respectively, for professional services rendered. The Company has also made a $200,000 loan to its President in accordance with his employment contract which is included in "other noncurrent assets" in the accompanying consolidated balance sheet. 13. QUARTERLY FINANCIAL INFORMATION (Unaudited) -------------------------------------------
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- ----- (In Thousands Except Per Share Amounts) FISCAL 1996 - ----------- Men's Sales $ 37,346 $ 33,770 $ 36,817 $ 47,125 $ 155,058 Women's Sales -- -- -- -- -- Net sales 37,346 33,770 36,817 47,125 155,058 Gross profit 17,681 14,378 17,275 20,858 70,192 Income (loss) from operations 1,088 (878) 840 1,306 2,356 Net Income (loss) 228 (559) 109 473 251 Net Income (loss) per share .03 (.08) .02 .07 .04 FISCAL 1995 - ----------- Men's Sales $ 36,200 $ 31,788 $ 30,822 $ 44,849 $ 143,659 Women's Sales 8,223 9,483 7,016 1,186 25,908 Net sales 44,423 41,271 37,838 46,035 169,567 Gross profit 16,450 16,893 16,040 19,395 68,778 Store repositioning costs -- -- -- (3,500) (3,500) Income (loss) from operations (6,168) (2,422) (2,364) (4,633) (15,587) Net Income (loss) (4,203) (1,990) (2,043) (4,950) (13,186) Net Income (loss) per share (0.62) (0.29) (0.30) (0.73) (1.94)
F-13 EX-10 2 EXHIBIT 10.5(A) EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of March 31, 1994, between TIMOTHY F. FINLEY ("Executive") and JOS A. BANK CLOTHIERS, INC. ("Employer"). WHEREAS, the parties hereto are parties to a Management Agreement, dated as of May 10, 1991, as amended from time to time (the "Previous Agreement") pursuant to which Executive is currently serving as the Chief Executive Officer of Employer. WHEREAS, the parties wish by this Employment Agreement to provide for the terms of the continued employment of Executive and to terminate the Previous Agreement, except with respect to Section 6 thereof which was the subject of an amendment to the Previous Agreement, dated as of January 29, 1994, a copy of which is attached hereto ("Section 6 of the Previous Agreement, as amended"). NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment of Executive; Termination of Previous Agreement Employer hereby agrees to employ Executive, and Executive hereby agrees to be and remain in the employ of Employer, upon the terms and conditions hereinafter set forth. Employer and Executive hereby agree that upon the execution hereof, the Previous Agreement shall be deemed terminated except with respect to Section 6 of the Previous Agreement, as amended, which shall continue in full force and effect and be deemed a part of this Agreement. This Agreement is a contract for personal services of Executive and services pursuant hereto may only be performed by Executive. 2. Employment Period The term of Executive's employment under this Agreement (the "Employment Period") shall commence as of the date hereof and shall, subject to earlier termination as provided in Section 5, continue for a period of five years after commencement and be automatically renewed thereafter for successive one-year periods unless, at least 180 days before the end of the initial five-year period or any subsequent one-year period, either party gives notice to the other of his or its desire to terminate the Employment Period, in which case the Employment Period shall terminate as of the end of such period. 3. Duties and Responsibilities 3.1 General. During the Employment Period, Executive (i) shall have the title of Chairman and Chief Executive Officer and (ii) shall devote substantially all of his business time and expend his best efforts, energies and skills to the business of the Company. The preceding sentence shall not be construed to prohibit Executive from continuing to devote more than an insignificant amount of time, in accordance with his past practice, to management of his investments, serving on boards of directors, serving as Chief Executive Officer of the Finley Group and participation in civic and philanthropic activities. Executive shall perform such duties, consistent with his status as Chairman and Chief Executive Officer of Employer, as he may be assigned from time to time by Employer's Board of Directors. Executive shall have such authority, discretion, power and responsibility, and shall be entitled to office, secretarial and administrative (at least one secretary and/or administrative assistant of his selection) and other facilities and conditions of employment, as are customary or appropriate to his position and those currently exercised by and afforded to him. Without limitation of the generality of the foregoing, Executive, within the general guidelines adopted from time to time by the Board, shall have the power, without further approval of the Board of Directors, to hire, fire and establish the terms of employment (including all compensation and bonus arrangements of all employees of and consultants and other advisers to the Company (other than the President). Executive shall also serve without additional compensation as a director of the Company and, if he should so desire, any of its subsidiaries. For all purposes of this Agreement, the term "Company" means Employer and all corporations, associations, companies, partnerships, firms and other enterprises controlled by or under common control with Employer. 3.2 Location of Executive Offices. The Company will maintain its principal executive offices at a location in any state on the eastern coast of the United States from and including South Carolina to and including New York. Executive shall not be required to perform services for the Company at any other location, except for services rendered in connection with required travel on the Company's business to an extent not substantially in excess of Executive's past travel commitments for the Company. 4. Compensation and Related Matters 4.1 Base Salary. Employer shall pay to Executive during the Employment Period an annual base salary (the "Base Salary") equal to the sum of (a) $435,000, subject to such raises as the Compensation Committee (the "Committee") of the Board of Directors of the Company or the Board of Directors may from time to time determine in their sole discretion (the "Salary") and (b) the "cost of living adjustment" (as determined below). The "cost of living adjustment" shall be determined on each January 1 (or as soon as practicable thereafter) of the Employment Period, commencing January 1, 1995, and shall be an amount that equals the greater of (x) $0 or (y) the difference between (i) the Salary multiplied by a fraction, (A) the numerator of which shall be the Consumer Price Index for Urban Wage Earners and Clerical Workers (1967 = 100) (the "Index"), published by the Bureau of Labor Statistics of the United States Department of Labor in the column for the Baltimore, Maryland area entitled "All Items" for the month of January for the calendar year for which the cost of living adjustment is to be determined and (B) the denominator of which shall be such Index number of the month in which the date of this Agreement falls and (ii) the Salary. Any portion of increased Base Salary which is retroactively due to Executive hereunder shall be payable within 15 days after the computation thereof has been made. Appropriate adjustment shall be promptly made following receipt of notice from Executive in the event there is a published amendment of the Index figures upon which the computation is based. If publication of the Index is discontinued, the parties shall accept comparable statistics on the cost of living for the Baltimore, Maryland area as computed and published by any recognized authority acceptable to the parties. The Base Salary for each calendar year shall be payable in installments in accordance with the Company's policy on payment of executives in effect from time to time. 4.2 Annual Bonus. For fiscal year 1995 (ending January 28, 1995) and for each fiscal year that begins during the Employment Period (each such fiscal year, a "Bonus Year"), Executive shall be entitled to receive a bonus of 75% of Base Salary (each, a "Bonus") based upon attainment of annual quantitative and qualitative performance goals established by the Committee for such Bonus Year in consultation with Executive, such performance goals to be established as soon as possible following the beginning of each Bonus Year. The relationship between the size of each Bonus and degree of attainment of performance objectives shall be discretionary with the Committee. Bonus earned for any Bonus Year shall be payable promptly following the determination thereof, but in no event later than 90 days following the end of each Bonus Year. The Bonus payable for the Bonus Year in which the Employment Period terminates shall equal the Bonus that would have been paid had the Employment Period not so terminated, multiplied by a fraction, the numerator of which shall be the number of days of the Employment Period within the Bonus Year and the denominator of which shall be 365. 4.3 Life Insurance. Employer shall maintain in effect at all times during the Employment Period, at Employer's expense, a policy of term life insurance, or such other type of policy as Executive shall request provided that the cost to Employer thereof is approximately the same as the cost of such term policy, on the life of Executive in the amount of not less than $2,000,000 naming such person as Executive shall designate from time to time as the owner and beneficiary thereof. Executive agrees that Employer shall have the right to obtain other life insurance on Executive's life, at Employer's sole expense and with Employer or an affiliate thereof as the sole beneficiary thereof. Executive shall (i) cooperate fully with Employer in obtaining all such insurance, (ii) sign any necessary consents, applications and other related forms or documents, and (iii) take any required medical examinations. 4.4 Automobile. Throughout the Employment Period, Employer shall provide to Executive, at Employer's expense, a top-of-the-line Cadillac, Lincoln, Lexus or comparable luxury automobile selected by Executive on a biannual basis and equipped to Executive's satisfaction. Employer shall also be responsible for all expenses of use and operation thereof. 4.5 Other Benefits. During the Employment Period, subject to, and to the extent Executive is eligible under their respective terms, Executive shall be entitled to receive such fringe benefits as are, or are from time to time hereafter, generally provided by Employer to Employer's senior management employees or other employees (other than those provided under or pursuant to separately negotiated individual employment agreements or arrangements) under any pension or retirement plan, disability plan or insurance, group life insurance, medical and dental insurance, travel accident insurance, stock option, phantom stock or other similar plan or program of Employer. Executive's Base Salary shall (where applicable) constitute the compensation on the basis of which the amount of Executive's benefits under any such plan or program shall be fixed and determined. If, during the Employment Period, any plan or program in which Executive participates (including those in which Executive currently participates) shall be amended so as to result in an overall reduction of Executive's benefits, or shall be terminated without being replaced by a new plan or program providing for benefits equivalent overall to those provided for Executive prior thereto, the Company shall make arrangements, in addition to any such amended or terminated plan or program, for Executive to participate in a plan or program so as to provide benefits to Executive at least equivalent overall to those provided to Executive prior to such amendment or termination, such benefits to be provided through a plan or program of insurance if commercially available. 4.6 Expense Reimbursement. Employer shall reimburse Executive for all business expenses reasonably incurred by him in the performance of his duties under this Agreement and consistent with past practice upon his presentation, not less frequently than monthly, of signed, itemized accounts of such expenditures, all in accordance with Employer's procedures and policies as adopted and in effect from time to time and applicable to its senior management employees. Without limiting the generality of the foregoing, Employer shall continue to pay for all of Executive's reasonable travel expenses incurred in traveling from and to his permanent residence in Charlotte, North Carolina and his reasonable living expenses while the Executive is residing in the Baltimore, Maryland area, including, without limitation, hotel or other residential accommodation expenses and meals, all such amounts to be treated as additional salary for all securities acts reporting purposes. 4.7 Vacations. Executive shall be entitled to 20 days of vacation during each calendar year, which shall accrue in accordance with the Company's vacation policy in effect from time to time for its senior executive officers, with reasonable carry-over allowances, which vacations shall be taken at such time or times as shall not unreasonably interfere with Executive's performance of his duties under this Agreement. Upon termination of Executive's employment pursuant to Section 5 herein or non-renewal of the Employment Period as provided for under Section 2 herein, for any reason whatsoever, Employer shall pay Executive, in addition to any termination compensation provided for under Section 6 herein, all unused vacation benefits, including any carry-over, due Executive as of the date of termination, to be computed at the Executive's then current Base Salary rate. 4.8 Tax Gross-up. In the event that any payments made by Employer to or on behalf of Executive pursuant to the provisions of Section 4.3 through 4.6 hereof result in the payment of additional federal, state or local income taxes by Executive, Employer shall pay to Executive the amount of such additional taxes plus such additional amount as shall be necessary to hold harmless Executive, as nearly as can be, from the obligation to pay such taxes in respect of amounts payable pursuant to this Section 4.8. 5. Termination of Employment Period 5.1 Termination Without Cause. Employer or Executive may, by delivery of not less than 60 days' notice to the other at any time during the Employment Period, terminate the Employment Period without cause. 5.2 By Employer for Cause. Employer may, at any time during the Employment Period by notice to Executive in accordance with and only after full compliance with the procedure set forth herein terminate the Employment Period "for cause" effective immediately. For the purposes hereof, "for cause" means: (i) the conviction of Executive in a court of competent jurisdiction of a crime constituting a felony in such jurisdiction involving money or other property of Employer or any of its affiliates or any other felony involving moral turpitude; or (ii) the willful (a) commission of an act not approved of or ratified by the Board of Directors involving a serious and material conflict of interest or self-dealing relating to any material aspects of Employer or any such subsidiary or affiliate thereof; or (b) commission of an act of fraud or misrepresentation (including the omission of material facts), provided that such acts relate to the business of Employer and would materially and negatively impact upon Employer and its business; or (c) material failure of Executive to obey directions of the Board of Directors that are consistent with Executive's status of Chief Executive Officer; however, for the purposes of this subsection (ii), the refusal of Executive to comply with an order or directive of anyone other than the majority of the Board of Directors, or the refusal of Executive to perform an act which is contrary to his duties, responsibilities and/or authority as Chief Executive Officer or is unlawful shall not constitute "for cause". In the event of an act or omission as provided for in this subsection 5.2(ii), Employer shall provide Executive with a written notice of intent to terminate the Employment Period "for cause", setting forth, with reasonable particularity, the reasons and acts or omissions constituting "cause" under this subsection, and shall provide Executive with at least thirty (30) calendar days after such notice to cure or eliminate the problem or violation giving rise to such cause or any longer period as reasonably needed by Executive, provided that it is susceptible to cure or elimination and Executive is proceeding diligently and in good faith to cure such violation. In the event and only after the Executive fails to cure the problem or violation within the period provided for herein, Employer may exercise its right to terminate the Employment Period in accordance with the procedure set forth below. Termination "for cause" shall be effected only if (A) Employer has delivered to Executive a copy of a written notice of termination "for cause", setting forth, with reasonable particularity, the reasons for such "for cause" termination, and (B) has provided Executive with, on at least ten (10) business days' prior written notice, in the case of a termination pursuant to subsection 5.2(ii) the opportunity, together with Executive's counsel, to be heard before Employer's Board of Directors, said hearing to occur at such reasonable time and place that is mutually convenient to Executive, his counsel, and Employer, and (C) Employer's Board of Directors (after such notice and opportunity to be heard has been provided to Executive in the case of a termination pursuant to subsection 5.2(ii)), adopts a resolution concurred in by not less than majority of all of the directors of Employer then in office, including at least two-thirds of all of the directors who are not officers of Employer, that Executive was guilty of conduct constituting "for cause" hereunder, which conduct has not been cured (if applicable), and specifying the particulars thereof in detail. 5.3 By Executive for Good Reason. Executive may, at any time during the Employment Period by notice to Employer, terminate the Employment Period under this Agreement "for good reason" effective immediately. For the purposes hereof, "good reason" means (i) any material breach by Employer of any provision of this Agreement which , if susceptible of being cured, is not cured within 30 days of delivery of notice thereof to Employer by Executive or (ii) the occurrence of a change in control (as hereinafter defined) of Employer provided that not more than 90 days shall have elapsed subsequent to Executive's becoming aware of the occurrence of the change in control. Without limitation of the generality of the foregoing, each of the following shall be deemed to be a material breach of this Agreement by Employer: (x) any failure timely to pay (or any reduction in) compensation (including benefits) paid or payable to Executive pursuant to the provisions of Section 4 hereof; (y) any reduction in the duties, responsibilities or perquisites of Executive as provided in Section 3.1 hereof and (z) any transfer of the Company's principal executive offices outside the geographic area described in Section 3.2 hereof or requirement that Executive principally perform his duties outside such geographic area. For purposes of this Agreement, a "change in control" of the Company shall be deemed to have occurred if, as a result of a single transaction or a series of transactions, (A) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the Company's then outstanding securities; or (B) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities and there are at least a majority of directors serving on the Board of Directors who were not serving in such capacity as of the date hereof or who were not elected with the consent of the Executive; or (C) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; provided, however, the change in ownership of the Company's securities resulting from the initial public offering thereof shall not be deemed a "change in control" for purposes of this Agreement. 5.4 Disability. During the Employment Period, if, as a result of physical or mental incapacity or infirmity (including alcoholism or drug addiction), Executive shall be unable to perform his material duties under this Agreement for (i) a continuous period of at least 180 days, or (ii) periods aggregating at least 270 days during any period of 12 consecutive months (each a "Disability Period"), and at the end of the Disability Period there is no reasonable probability that Executive can promptly resume his material duties hereunder pursuant hereto, Executive shall be deemed disabled ("the Disability") and Employer, by notice to Executive, shall have the right to terminate the Employment Period for Disability at, as of or after the end of the Disability Period. The existence of the Disability shall be determined by a reputable, licensed physician mutually selected by Employer and Executive, whose determination shall be final and binding on the parties, provided, that if Employer and Executive cannot agree upon such physician, such physician shall be designated by the then acting President of the Baltimore City Medical Society, and if for any reason such President shall fail or refuse to designate such physician, such physician shall, at the request of either party, be designated by the American Arbitration Association. Executive shall cooperate in all reasonable respects to enable an examination to be made by such physician. 5.5 Death. The Employment Period shall end on the date of Executive's death. 6. Termination Compensation; Non-Compete 6.1 Termination Without Cause by Employer or for Good Reason by Executive. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3 hereof, Employer will pay to Executive (i) the greater of (a) the Base Salary for the balance of the Employment Period, or (b) Base Salary for one (1) year, calculated in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of Employment Period, assuming no termination, payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated; and (ii) on the date due pursuant to the provisions of Section 4.2 hereof, the Bonus for the then current Bonus Year prorated as provided in Section 4.2; provided, however, in the event the Employment Period is terminated by Executive because of a "change in control" pursuant to Section 5.3 (ii), then clause (i) of this sentence shall be modified to read: "the Base Salary for the period which is the greater of (a) eighteen (18) months or (b) the balance of the Employment Period not to exceed twenty-four (24) months (calculated, in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of the Employment Period, assuming no termination) payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminate." All other benefits provided for in Sections 4.3, 4.4, 4.5 and 4.8 shall be continued at the expense of Employer for the period that payments are required to be made pursuant to the preceding provisions of this Section 6.1. 6.2 Certain Other Terminations. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.2, by Executive pursuant to Section 5.1, or by death, pursuant to the provisions of Section 5.5, Employer shall pay to Executive (i) Base Salary (calculated at its then current rate per year) through the date of termination and (ii) in the case of termination by death pursuant to the provisions of Section 5.5, when due pursuant to provisions of Section 4.2 the Bonus for the Bonus Year in which the date of termination occurred prorated as provided in said Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.3 Termination for Disability. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.4, Employer shall make all payments and continue all benefits provided for in Section 6.1 for the balance of the Employment Period (assuming no termination), provided, however, that such payments shall be reduced by any amounts actually paid to Executive pursuant to any disability insurance or other such similar program maintained by Employer. 6.4 Termination by Non-Renewal. In the event the Employment Period expires because of an election by Employer to allow the Employment Period to expire at the end of its then stated term as provided in Section 2 hereof, Employer shall pay to Executive (i) Base Salary for the one year period following the date of termination (calculated at its then current rate per year), payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated and (ii) when due pursuant to the provisions of Section 4.2 the Bonus for the Bonus Year in which the Employment Period expired prorated as provided in said Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.5 Tax Grossup. In the event that any amounts paid to Executive pursuant to the provisions of this Section 6 (including benefits continued and payments deemed received by reason of changes in stock options provided for therein, all such amounts, collectively, the "Severance Payments") shall be deemed to be subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Excise Tax"), an additional amount (the "Grossup Amount") shall be paid by Employer to Executive such that the net amount retained by Executive, after deduction of any Excise Tax on the Severance Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this sentence, shall be equal to the Severance Payments. The provisions of this Section 6.5 shall survive the expiration of the Employment Period and shall continue in effect until expiration of the statute of limitations for tax returns filed that include the period in which any Severance Payments are made or, if earlier, final determination of tax liability relating thereto. Payment of the Grossup Amount shall be made in accordance with the computation thereof by the accountant to Executive in connection with preparation of Executive's tax return for the relevant tax year, and shall be adjusted upon final determination of tax liability, with any increase therein being paid by the Employer to Executive or decrease therein being paid by Executive to Employer within 30 days following the date of final determination of tax liability. 6.6 No Other Termination Compensation. Executive shall not, except as set forth in this Section 6 and in Section 4.7, be entitled to any compensation following termination of the Employment Period, except as otherwise provided in any stock options granted by Employer to Executive. 6.7 Mitigation. Executive shall not be required to mitigate the amount of any payments or benefits provided for hereunder upon termination of the Employment Period by seeking employment with any other person, or otherwise, nor shall the amount of any such payments or benefits be reduced by any compensation, benefit or other amount earned by, accrued for or paid to Executive as the result of Executive's employment by or consultancy or other association with any other person, provided, that any medical, dental or hospitalization insurance or benefits provided to Executive with his employment by or consultancy with an unaffiliated person during such period shall be primary to the benefits to be provided to Executive pursuant to this Agreement for the purposes of coordination of benefits. 6.8 Non-Compete. For the 6 month period following the termination of the Employment Period for any reason whatsoever, including termination pursuant to Section 6.4 (other than a termination by Executive pursuant to Section 5.1, in which case the applicable period shall be one year) and for so long as Employer is making and Executive is accepting the payments required to be made to Executive pursuant to Section 6.1 or 6.4 hereof, Executive shall not, directly or indirectly, (i) engage in any activities that are in competition with the Company in any geographic area where the Company is engaged in business, (ii) solicit any customer of the Company or (iii) solicit any person who is then employed by the Company or was employed by the Company within one year of such solicitation to (a) terminate his or her employment with the Company, (b) accept employment with anyone other than the Company, or (c) in any manner interfere with the business of the Company; provided, however, in the event Executive violates any of the provisions of the foregoing at any time after the expiration of 6 months (one year, in the case of a termination by Executive pursuant to Section 5.1) following the termination of the Employment Period, Employer's sole remedy under this Agreement shall be the right to terminate any and all severance payments required under Section 6.1 or 6.4 hereof. Executive acknowledges and agrees that in the event of any violation or threatened violation by Executive of his obligations under the preceding sentence during the six month (or, in the case of a termination pursuant to Section 5.1, the one year) period following the termination of the Employment Period, Employer shall be entitled to injunctive relief without any necessity to post bond. 7. Indemnification The Company shall indemnify and hold Executive harmless from and against any expenses (including attorneys' fees of the attorneys selected by Executive to represent him, which shall be advanced as incurred), judgements, fines and amounts paid in settlement incurred by him by reason of his being made a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of any act or omission to act by Executive during or before the Employment Period or otherwise by reason of the fact that he is or was a director or officer of Employer or any subsidiary or affiliate included as a part of the Company, to the fullest extent and in the manner set forth and permitted by the General Corporation Law of the State of Delaware and any other applicable law as from time to time in effect. The provisions of this Section 7 shall survive any termination of the Employment Period or any deemed termination of this Agreement. 8. Miscellaneous. 8.1 Notices. Any notice, consent or authorization required or permitted to be given pursuant to this Agreement shall be in writing and sent to the party for or to whom intended, at the address of such party set forth below, by registered or certified mail, postage paid (deemed given five days after deposit in the U.S. mails) or personally or by facsimile transmission (deemed given upon receipt), or at such other address as either party shall designate by notice given to the other in the manner provided herein. If to Employer: Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, Maryland 21074-2095 Attn: Secretary With a copy to: Ralph J. Sutcliffe, Esq. Kronish, Lieb, Weiner & Hellman 1114 Avenue of the Americas New York, New York 10036 If to Executive: Mr. Timothy F. Finley Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, Maryland 21074-2095 8.2 Legal Fees. The Company shall pay the reasonable legal fees and expenses incurred by Executive in connection with preparation, negotiation, execution and delivery of this Agreement, as well as such fees and expenses incurred in connection with any amendment or modification hereof or enforcement of Executive's rights hereunder. 8.3 Taxes. Employer is authorized to withhold (from any compensation or benefits payable hereunder to Executive) such amounts for income tax, social security, unemployment compensation and other taxes as shall be necessary or appropriate in the reasonable judgment of Employer to comply with applicable laws and regulations. 8.4 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed therein. 8.5 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Baltimore, Maryland in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until expiration of the Employment Period during the pendency of any arbitration. 8.6 Headings. All descriptive headings in this Agreement are inserted for convenience only and shall be disregarded in construing or applying any provision of this Agreement. 8.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 8.8 Severability. If any provision of this Agreement, or any part thereof, is held to be unenforceable, the remainder of such provision and this Agreement, as the case may be, shall nevertheless remain in full force and effect. 8.9 Entire Agreement and Representation. This Agreement contains the entire agreement and understanding between Employer and Executive with respect to the subject matter hereof. No representations or warranties of any kind or nature relating to the Company or its several businesses, or relating to the Company's assets, liabilities, operations, future plans or prospects have been made by or on behalf of Employer to Executive. This Agreement supersedes any prior agreement between the parties relating to the subject matter hereof. 8.10 Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors, heirs (in the case of Executive) and assigns. [signatures on next page] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By:_________________________ Name:_______________________ Title:______________________ ____________________________ Timothy F. Finley EX-10 3 EXHIBIT 10.5(B) AMENDMENT TO FINLEY EMPLOYMENT AGREEMENT AMENDMENT TO FINLEY EMPLOYMENT AGREEMENT, dated as of January 29, 1994, between TIMOTHY F. FINLEY ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Clothiers"). WHEREAS, Executive, Clothiers and The Finley Group, Inc. ("Finley Group") entered into a Management Agreement dated as of May 10, 1991, under which Finley Group caused Executive to provide certain services to Clothiers (the "Management Agreement"), which agreement was amended by an Amendment dated August 24, 1992, and further amended by an Amendment and Novation Agreement dated as of May 1, 1993, which Amendment and Novation Agreement substituted Executive for Finley Group so that Finley's services are provided directly to Clothiers (the Management Agreement, as so amended, the "Employment Agreement"); WHEREAS, Executive is currently employed by Clothiers under the Employment Agreement; WHEREAS, the Employment Agreement provides, in Section 6 thereof, that the Executive is entitled to receive certain payments upon the occurrence of certain events described in such Section 6; WHEREAS, Clothiers proposes to enter into the Merger and Exchange Agreement, of even date herewith, with JAB Holdings, Inc. ("Holdings") and each of the Preferred Shareholders listed therein (the "Merger and Exchange Agreement"), whereby, among other things, Holdings shall be merged (the "Merger") into Clothiers; WHEREAS, Executive and Clothiers deem it desirable that, in connection with the Merger, Executive shall surrender his rights under Section 6 of the Employment Agreement, in exchange for shares of common stock of Clothiers ("Common Stock"), upon the terms and conditions of this Amendment; WHEREAS, it is condition precedent to the Merger that Executive and Clothiers enter into this Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 6 of the Employment Agreement is deleted in its entirety, and replaced with the following: 6. Issuance of Stock and Option. Concurrently with consummation of the Merger: (a) Clothiers shall issue to Executive 210,144 shares of Common Stock (the "Shares"), and shall deliver to Executive a stock certificate, registered in the name of Executive, representing the Shares (net of 72,395 Shares being withheld by Clothiers for payment of related payroll and withholding taxes by Clothiers (the "Withheld Shares"). The surrender of Executive's rights under Section 6 of the Employment Agreement as heretofore in effect, accomplished by the execution of this Amendment, shall constitute full and complete payment for the Shares; (b) Immediately following the issuance of the Shares, Executive shall sell to Clothiers, and Clothiers shall purchase, 41,061 of the Shares for an aggregate cash purchase price equal to $376,529, and Executive shall deliver to Clothiers the certificate representing the Shares for cancellation of the number of Shares sold to Clothiers pursuant to the provisions of this subparagraph (b) and reissuance of a certificate representing the balance of the Shares; (c) Clothiers will grant to Executive a non-qualified stock option in form and substance as annexed to this Amendment as an exhibit to purchase the number of Shares sold by Executive to Clothiers pursuant to subparagraph (b) above, plus the number of Withheld Shares. 2. The second sentence of Section 13 of the Employment Agreement is amended by deleting the portion thereof which reads "Except as provided in Section 6(e) hereof, neither" and replacing such portion with "Neither". 3. Except as expressly amended hereby, the Employment Agreement shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. ____________________________ TIMOTHY F. FINLEY JOS. A. BANK CLOTHIERS, INC. By:_________________________ Name: Title: EX-10 4 EXHIBIT 10.6(A) EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of March 31, 1994, between HENRY C. SCHWARTZ ("Executive") and JOS A. BANK CLOTHIERS, INC. ("Employer"). WHEREAS, the parties hereto are parties to an Employment Agreement, dated as of May 10, 1991, as amended from time to time (the "Previous Agreement") pursuant to which Executive is currently serving as the President and Chief Merchandising Officer of Employer. WHEREAS, the parties wish by this Employment Agreement to provide for the terms of the continued employment of Executive and to terminate the Previous Agreement, except with respect to Section 6 thereof which was the subject of an amendment to the Previous Agreement, dated as of January 29, 1994, a copy of which is attached hereto ("Section 6 of the Previous Agreement, as amended"). NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment of Executive; Termination of Previous Agreement Employer hereby agrees to employ Executive, and Executive hereby agrees to be and remain in the employ of Employer, upon the terms and conditions hereinafter set forth. Employer and Executive hereby agree that upon the execution hereof, the Previous Agreement shall be deemed terminated except with respect to Section 6 of the Previous Agreement, as amended, which shall continue in full force and effect and be deemed a part of this Agreement. This Agreement is a contract for personal services of Executive and services pursuant hereto may only be performed by Executive. 2. Employment Period The term of Executive's employment under this Agreement (the "Employment Period") shall commence as of the date hereof and shall, subject to earlier termination as provided in Section 5, continue for a period of three years after commencement and be automatically renewed thereafter for successive one-year periods unless, at least 180 days before the end of the initial three-year period or any subsequent one-year period, either party gives notice to the other of his or its desire to terminate the Employment Period, in which case the Employment Period shall terminate as of the end of such period. 3. Duties and Responsibilities 3.1 General. During the Employment Period, Executive (i) shall have the title of President and Chief Merchandising Officer and (ii) shall devote substantially all of his business time and expend his best efforts, energies and skills to the business of the Company. The preceding sentence shall not be construed to prohibit Executive from continuing to devote more than an insignificant amount of time, in accordance with his past practice, to management of his investments, serving on boards of directors, serving as and participation in civic and philanthropic activities. Executive shall perform such duties, consistent with his status as President and Chief Merchandising Officer of Employer, as he may be assigned from time to time by Employer's Chief Executive Officer or the Board of Directors. Executive shall have such authority, discretion, power and responsibility, and shall be entitled to office, secretarial and administrative and other facilities and conditions of employment, as are customary or appropriate to his position and those currently exercised by and afforded to him. Executive shall also serve without additional compensation as a director of the Company and, if he should so desire, any of its subsidiaries. For all purposes of this Agreement, the term "Company" means Employer and all corporations, associations, companies, partnerships, firms and other enterprises controlled by or under common control with Employer. 3.2 Location of Executive Offices. The Company will maintain its principal executive offices at a location in any state on the eastern coast of the United States from and including South Carolina to and including New York. Executive shall not be required to perform services for the Company at any other location, except for services rendered in connection with required travel on the Company's business to an extent not substantially in excess of Executive's past travel commitments for the Company. 4. Compensation and Related Matters 4.1 Base Salary. Employer shall pay to Executive during the Employment Period an annual base salary (the "Base Salary") equal to the sum of (a) $335,000, subject to such raises as the Compensation Committee (the "Committee") of the Board of Directors of the Company or the Board of Directors may from time to time determine in their sole discretion (the "Salary") and (b) the "cost of living adjustment" (as determined below). The "cost of living adjustment" shall be determined on each January 1 (or as soon as practicable thereafter) of the Employment Period, commencing January 1, 1995, and shall be an amount that equals the greater of (x) $0 or (y) the difference between (i) the Salary multiplied by a fraction, (A) the numerator of which shall be the Consumer Price Index for Urban Wage Earners and Clerical Workers (1967 = 100) (the "Index"), published by the Bureau of Labor Statistics of the United States Department of Labor in the column for the Baltimore, Maryland area entitled "All Items" for the month of January for the calendar year for which the cost of living adjustment is to be determined and (B) the denominator of which shall be such Index number for the month in which the date of this Agreement falls and (ii) the Salary. Any portion of increased Base Salary which is retroactively due to Executive hereunder shall be payable within 15 days after the computation thereof has been made. Appropriate adjustment shall be promptly made following receipt of notice from Executive in the event there is a published amendment of the Index figures upon which the computation is based. If publication of the Index is discontinued, the parties shall accept comparable statistics on the cost of living for the Baltimore, Maryland area as computed and published by any recognized authority acceptable to the parties. The Base Salary for each calendar year shall be payable in installments in accordance with the Company's policy on payment of executives in effect from time to time. 4.2 Annual Bonus. For fiscal year 1995 (ending January 28, 1995) and for each fiscal year that begins during the Employment Period (each such fiscal year, a "Bonus Year"), Executive shall be entitled to receive a bonus of 50% of Base Salary (each, a "Bonus") based upon attainment of annual quantitative and qualitative performance goals established by the Committee for such Bonus Year in consultation with Executive, such performance goals to be established as soon as possible following the beginning of each Bonus Year. The relationship between the size of each Bonus and degree of attainment of performance objectives shall be discretionary with the Committee. Bonus earned for any Bonus Year shall be payable promptly following the determination thereof, but in no event later than 90 days following the end of each Bonus Year. The Bonus payable for the Bonus Year in which the Employment Period terminates shall equal the Bonus that would have been paid had the Employment Period not so terminated, multiplied by a fraction, the numerator of which shall be the number of days of the Employment Period within the Bonus Year and the denominator of which shall be 365. 4.3 Life Insurance. Employer shall maintain in effect at all times during the Employment Period, at Employer's expense, a policy of term life insurance, or such other type of policy as Executive shall request provided that the cost to Employer thereof is approximately the same as the cost of such term policy, on the life of Executive in the amount of not less than $1,000,000 naming such person as Executive shall designate from time to time as the owner and beneficiary thereof. Executive agrees that Employer shall have the right to obtain other life insurance on Executive's life, at Employer's sole expense and with Employer or an affiliate thereof as the sole beneficiary thereof. Executive shall (i) cooperate fully with Employer in obtaining all such insurance, (ii) sign any necessary consents, applications and other related forms or documents, and (iii) take any required medical examinations. 4.4 Automobile. Throughout the Employment Period, Employer shall provide to Executive, at Employer's expense, a top-of-the-line Cadillac, Lincoln, Lexus or comparable luxury automobile selected by Executive on a biannual basis and equipped to Executive's satisfaction. Employer shall also be responsible for all expenses of use and operation thereof. 4.5 Other Benefits. During the Employment Period, subject to, and to the extent Executive is eligible under their respective terms, Executive shall be entitled to receive such fringe benefits as are, or are from time to time hereafter, generally provided by Employer to Employer's senior management employees or other employees (other than those provided under or pursuant to separately negotiated individual employment agreements or arrangements) under any pension or retirement plan, disability plan or insurance, group life insurance, medical and dental insurance, travel accident insurance, stock option, phantom stock or other similar plan or program of Employer. Executive's Base Salary shall (where applicable) constitute the compensation on the basis of which the amount of Executive's benefits under any such plan or program shall be fixed and determined. If, during the Employment Period, any plan or program in which Executive participates (including those in which Executive currently participates) shall be amended so as to result in an overall reduction of Executive's benefits, or shall be terminated without being replaced by a new plan or program providing for benefits equivalent overall to those provided for Executive prior thereto, the Company shall make arrangements, in addition to any such amended or terminated plan or program, for Executive to participate in a plan or program so as to provide benefits to Executive at least equivalent overall to those provided to Executive prior to such amendment or termination, such benefits to be provided through a plan or program of insurance if commercially available. 4.6 Expense Reimbursement. Employer shall reimburse Executive for all business expenses reasonably incurred by him in the performance of his duties under this Agreement and consistent with past practice upon his presentation, not less frequently than monthly, of signed, itemized accounts of such expenditures, all in accordance with Employer's procedures and policies as adopted and in effect from time to time and applicable to its senior management employees. Without limiting the generality of the foregoing, Employer shall continue to pay for all of Executive's reasonable travel expenses incurred in traveling from and to his permanent residence in New York and his reasonable living expenses while the Executive is residing in the Baltimore, Maryland area, including, without limitation, hotel or other residential accommodation expenses and meals, all such amounts to be treated as additional salary for all securities acts reporting purposes. 4.7 Vacations. Executive shall be entitled to 20 days of vacation during each calendar year, which shall accrue in accordance with the Company's vacation policy in effect from time to time for its senior executive officers, with reasonable carry-over allowances, which vacations shall be taken at such time or times as shall not unreasonably interfere with Executive's performance of his duties under this Agreement. Upon termination of Executive's employment pursuant to Section 5 herein or non-renewal of the Employment Period as provided for under Section 2 herein, for any reason whatsoever, Employer shall pay Executive, in addition to any termination compensation provided for under Section 6 herein, all unused vacation benefits, including any carry-over, due Executive as of the date of termination, to be computed at the Executive's then current Base Salary rate. 4.8 Tax Gross-up. In the event that any payments made by Employer to or on behalf of Executive pursuant to the provisions of Section 4.3 through 4.6 hereof result in the payment of additional federal, state or local income taxes by Executive, Employer shall pay to Executive the amount of such additional taxes plus such additional amount as shall be necessary to hold harmless Executive, as nearly as can be, from the obligation to pay such taxes in respect of amounts payable pursuant to this Section 4.8. 5. Termination of Employment Period 5.1 Termination Without Cause. Employer or Executive may, by delivery of not less than 60 days' notice to the other at any time during the Employment Period, terminate the Employment Period without cause. 5.2 By Employer for Cause. Employer may, at any time during the Employment Period by notice to Executive in accordance with and only after full compliance with the procedure set forth herein terminate the Employment Period "for cause" effective immediately. For the purposes hereof, "for cause" means: (i) the conviction of Executive in a court of competent jurisdiction of a crime constituting a felony in such jurisdiction involving money or other property of Employer or any of its affiliates or any other felony involving moral turpitude; or (ii) the willful (a) commission of an act not approved of or ratified by the Board of Directors involving a serious and material conflict of interest or self-dealing relating to any material aspects of Employer or any such subsidiary or affiliate thereof; or (b) commission of an act of fraud or misrepresentation (including the omission of material facts), provided that such acts relate to the business of Employer and would materially and negatively impact upon Employer and its business; or (c) material failure of Executive to obey directions of the Board of Directors that are consistent with Executive's status of Chief Executive Officer; however, for the purposes of this subsection (ii), the refusal of Executive to comply with an order or directive of anyone other than the majority of the Board of Directors, or the refusal of Executive to perform an act which is contrary to his duties, responsibilities and/or authority as Chief Executive Officer or is unlawful shall not constitute "for cause". In the event of an act or omission as provided for in this subsection 5.2(ii), Employer shall provide Executive with a written notice of intent to terminate the Employment Period "for cause", setting forth, with reasonable particularity, the reasons and acts or omissions constituting "cause" under this subsection, and shall provide Executive with at least thirty (30) calendar days after such notice to cure or eliminate the problem or violation giving rise to such cause or any longer period as reasonably needed by Executive, provided that it is susceptible to cure or elimination and Executive is proceeding diligently and in good faith to cure such violation. In the event and only after the Executive fails to cure the problem or violation within the period provided for herein, Employer may exercise its right to terminate the Employment Period in accordance with the procedure set forth below. Termination "for cause" shall be effected only if (A) Employer has delivered to Executive a copy of a written notice of termination "for cause", setting forth, with reasonable particularity, the reasons for such "for cause" termination, and (B) has provided Executive with, on at least ten (10) business days' prior written notice, in the case of a termination pursuant to subsection 5.2(ii) the opportunity, together with Executive's counsel, to be heard before Employer's Board of Directors, said hearing to occur at such reasonable time and place that is mutually convenient to Executive, his counsel, and Employer, and (C) Employer's Board of Directors (after such notice and opportunity to be heard has been provided to Executive in the case of a termination pursuant to subsection 5.2(ii), adopts a resolution concurred in by not less than majority of all of the directors of Employer then in office, including at least two-thirds of all of the directors who are not officers of Employer, that Executive was guilty of conduct constituting "for cause" hereunder, which conduct has not been cured (if applicable), and specifying the particulars thereof in detail. 5.3 By Executive for Good Reason. Executive may, at any time during the Employment Period by notice to Employer, terminate the Employment Period under this Agreement "for good reason" effective immediately. For the purposes hereof, "good reason" means (i) any material breach by Employer of any provision of this Agreement which , if susceptible of being cured, is not cured within 30 days of delivery of notice thereof to Employer by Executive or (ii) the occurrence of a change in control (as hereinafter defined) of Employer provided that not more than 90 days shall have elapsed subsequent to Executive's becoming aware of the occurrence of the change in control. Without limitation of the generality of the foregoing, each of the following shall be deemed to be a material breach of this Agreement by Employer: (x) any failure timely to pay (or any reduction in) compensation (including benefits) paid or payable to Executive pursuant to the provisions of Section 4 hereof; (y) any reduction in the duties, responsibilities or perquisites of Executive as provided in Section 3.1 hereof and (z) any transfer of the Company's principal executive offices outside the geographic area described in Section 3.2 hereof or requirement that Executive principally perform his duties outside such geographic area. For purposes of this Agreement, a "change in control" of the Company shall be deemed to have occurred if, as a result of a single transaction or a series of transactions, (A) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the Company's then outstanding securities; or (B) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities and there are at least a majority of directors serving on the Board of Directors who were not serving in such capacity as of the date hereof or who were not elected with the consent of the Executive; or (C) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; provided, however, the change in ownership of the Company securities resulting from the initial public offering thereof shall not be deemed a "change in control" for purposes of this Agreement. 5.4 Disability. During the Employment Period, if, as a result of physical or mental incapacity or infirmity (including alcoholism or drug addiction), Executive shall be unable to perform his material duties under this Agreement for (i) a continuous period of at least 180 days, or (ii) periods aggregating at least 270 days during any period of 12 consecutive months (each a "Disability Period"), and at the end of the Disability Period there is no reasonable probability that Executive can promptly resume his material duties hereunder pursuant hereto, Executive shall be deemed disabled ("the Disability") and Employer, by notice to Executive, shall have the right to terminate the Employment Period for Disability at, as of or after the end of the Disability Period. The existence of the Disability shall be determined by a reputable, licensed physician mutually selected by Employer and Executive, whose determination shall be final and binding on the parties, provided, that if Employer and Executive cannot agree upon such physician, such physician shall be designated by the then acting President of the Baltimore City Medical Society, and if for any reason such President shall fail or refuse to designate such physician, such physician shall, at the request of either party, be designated by the American Arbitration Association. Executive shall cooperate in all reasonable respects to enable an examination to be made by such physician. 5.5 Death. The Employment Period shall end on the date of Executive's death. 6. Termination Compensation; Non-Compete 6.1 Termination Without Cause by Employer or for Good Reason by Executive. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3 hereof, Employer will pay to Executive (i) the greater of (a) the Base Salary for the balance of the Employment Period, or (b) Base Salary for one (1) year, calculated in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of Employment Period, assuming no termination, payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated; and (ii) on the date due pursuant to the provisions of Section 4.2 hereof, the Bonus for the then current Bonus Year prorated as provided in Section 4.2; provided, however, in the event the Employment Period is terminated by Executive because of a "change in control" pursuant to Section 5.3 (ii), then clause (i) of this sentence shall be modified to read: "the Base Salary for the period which is the greater of (a) eighteen (18) months or (b) the balance of the Employment Period not to exceed twenty-four (24) months (calculated, in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of the Employment Period, assuming no termination) payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated." All other benefits provided for in Sections 4.3, 4.4, 4.5 and 4.8 shall be continued at the expense of Employer for the period that payments are required to be made pursuant to the preceding provisions of this Section 6.1. 6.2 Certain Other Terminations. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.2, by Executive pursuant to Section 5.1, or by death, pursuant to the provisions of Section 5.5, Employer shall pay to Executive (i) Base Salary (calculated at its then current rate per year) through the date of termination and (ii) in the case of termination by death pursuant to the provisions of Section 5.5, when due pursuant to provisions of Section 4.2 the Bonus for the Bonus Year in which the date of termination occurred prorated as provided in said Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.3 Termination for Disability. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.4, Employer shall make all payments and continue all benefits provided for in Section 6.1 for the balance of the Employment Period (assuming no termination), provided, however, that such payments shall be reduced by any amounts actually paid to Executive pursuant to any disability insurance or other such similar program maintained by Employer. 6.4 Tax Grossup. In the event that any amounts paid to Executive pursuant to the provisions of this Section 6 (including benefits continued and payments deemed received by reason of changes in stock options provided for therein, all such amounts, collectively, the "Severance Payments") shall be deemed to be subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Excise Tax"), an additional amount (the "Grossup Amount") shall be paid by Employer to Executive such that the net amount retained by Executive, after deduction of any Excise Tax on the Severance Payments and any federal, state and local income tax and Excise Tax upon the payment provided for by this sentence, shall be equal to the Severance Payments. The provisions of this Section 6.4 shall survive the expiration of the Employment Period and shall continue in effect until expiration of the statute of limitations for tax returns filed that include the period in which any Severance Payments are made or, if earlier, final determination of tax liability relating thereto. Payment of the Grossup Amount shall be made in accordance with the computation thereof by the accountant to Executive in connection with preparation of Executive's tax return for the relevant tax year, and shall be adjusted upon final determination of tax liability, with any increase therein being paid by the Employer to Executive or decrease therein being paid by Executive to Employer within 30 days following the date of final determination of tax liability. 6.5 No Other Termination Compensation. Executive shall not, except as set forth in this Section 6 and in Section 4.7, be entitled to any compensation following termination of the Employment Period, except as otherwise provided in any stock options granted by Employer to Executive. 6.6 Mitigation. Executive shall not be required to mitigate the amount of any payments or benefits provided for hereunder upon termination of the Employment Period by seeking employment with any other person, or otherwise, nor shall the amount of any such payments or benefits be reduced by any compensation, benefit or other amount earned by, accrued for or paid to Executive as the result of Executive's employment by or consultancy or other association with any other person, provided, that any medical, dental or hospitalization insurance or benefits provided to Executive with his employment by or consultancy with an unaffiliated person during such period shall be primary to the benefits to be provided to Executive pursuant to this Agreement for the purposes of coordination of benefits. 6.7 Non-Compete. For the 6 month period following the termination of the Employment Period for any reason whatsoever, including termination pursuant to Section 6.4 (other than a termination by Executive pursuant to Section 5.1, in which case the applicable period shall be one year) and for so long as Employer is making and Executive is accepting the payments required to be made to Executive pursuant to Section 6.1 hereof, Executive shall not, directly or indirectly, (i) engage in any activities that are in competition with the Company in any geographic area where the Company is engaged in business, (ii) solicit any customer of the Company or (iii) solicit any person who is then employed by the Company or was employed by the Company within one year of such solicitation to (a) terminate his or her employment with the Company, (b) accept employment with anyone other than the Company, or (c) in any manner interfere with the business of the Company; provided, however, in the event Executive violates any of the provisions of the foregoing at any time after the expiration of 6 months (one year, in the case of a termination by Executive pursuant to Section 5.1) following the termination of the Employment period, Employer's sole remedy under this Agreement shall be the right to terminate any and all severance payments required under Section 6.1 hereof. Executive acknowledges and agrees that in the event of any violation or threatened violation by Executive of his obligations under the preceding sentence during the six month (or, in the case of a termination pursuant to Section 5.1, the one year) period following the termination of the Employment Period, Employer shall be entitled to injunctive relief without any necessity to post bond. 7. Indemnification The Company shall indemnify and hold Executive harmless from and against any expenses (including attorneys' fees of the attorneys selected by Executive to represent him, which shall be advanced as incurred), judgements, fines and amounts paid in settlement incurred by him by reason of his being made a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of any act or omission to act by Executive during or before the Employment Period or otherwise by reason of the fact that he is or was a director or officer of Employer or any subsidiary or affiliate included as a part of the Company, to the fullest extent and in the manner set forth and permitted by the General Corporation Law of the State of Delaware and any other applicable law as from time to time in effect. The provisions of this Section 7 shall survive any termination of the Employment Period or any deemed termination of this Agreement. 8. Miscellaneous. 8.1 Notices. Any notice, consent or authorization required or permitted to be given pursuant to this Agreement shall be in writing and sent to the party for or to whom intended, at the address of such party set forth below, by registered or certified mail, postage paid (deemed given five days after deposit in the U.S. mails) or personally or by facsimile transmission (deemed given upon receipt), or at such other address as either party shall designate by notice given to the other in the manner provided herein. If to Employer: Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, MD 21074-2095 Attn: Secretary With copy to: Ralph J Sutcliffe, Esq. Kronish, Lieb, Weiner & Hellman 1114 Avenue of the Americas New York, NY 10036 If to Executive: Mr. Henry C. Schwartz Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, MD 21074-2095 8.2 Legal Fees. The Company shall pay the reasonable legal fees and expenses incurred by Executive in connection with preparation, negotiation, execution and delivery of this Agreement, as well as such fees and expenses incurred in connection with any amendment or modification hereof or enforcement of Executive's rights hereunder. 8.3 Taxes. Employer is authorized to withhold (from any compensation or benefits payable hereunder to Executive) such amounts for income tax, social security, unemployment compensation and other taxes as shall be necessary or appropriate in the reasonable judgment of Employer to comply with applicable laws and regulations. 8.4 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed therein. 8.5 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Baltimore, Maryland in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until expiration of the Employment Period during the pendency of any arbitration. 8.6 Headings. All descriptive headings in this Agreement are inserted for convenience only and shall be disregarded in construing or applying any provision of this Agreement. 8.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 8.8 Severability. If any provision of this Agreement, or any part thereof, is held to be unenforceable, the remainder of such provision and this Agreement, as the case may be, shall nevertheless remain in full force and effect. 8.9 Entire Agreement and Representation. This Agreement contains the entire agreement and understanding between Employer and Executive with respect to the subject matter hereof. No representations or warranties of any kind or nature relating to the Company or its several businesses, or relating to the Company's assets, liabilities, operations, future plans or prospects have been made by or on behalf of Employer to Executive. This Agreement supersedes any prior agreement between the parties relating to the subject matter hereof. 8.10 Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors, heirs (in the case of Executive) and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By:_________________________ Name:_______________________ Title:______________________ ____________________________ Henry C. Schwartz EX-10 5 EXHIBIT 10.6(B) AMENDMENT TO SCHWARTZ EMPLOYMENT AGREEMENT AMENDMENT TO SCHWARTZ EMPLOYMENT AGREEMENT,udated as of January 29, 1994, between HENRY C. SCHWARTZ ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Clothiers"). WHEREAS, Executive and Clothiers are parties to an Employment Agreement dated as of May 10, 1991 (the "Employment Agreement"), under which Executive has been and continues to be employed by Clothiers; WHEREAS, the Employment Agreement provides, in Section 6 thereof, that the Executive is entitled to receive certain payments upon the occurrence of certain events described in such Section 6; WHEREAS, Clothiers proposes to enter into a Merger and Exchange Agreement, of even date herewith, with JAB Holdings, Inc. ("Holdings") and each of the Preferred Shareholders listed therein (the "Merger and Exchange Agreement"), whereby, among other things, Holdings shall be merged (the "Merger") into Clothiers; WHEREAS, Executive and Clothiers deem it desirable that, in connection with the Merger, Executive shall surrender his rights under Section 6 of the Employment Agreement, in exchange for shares of common stock of Clothiers ("Common Stock"), upon the terms and conditions of this Amendment; WHEREAS, it is a condition precedent to the Merger that Executive and Clothiers enter into this Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 6 of the Employment Agreement is deleted in its entirety, and replaced with the following: 6. Issuance of Stock and Option. Concurrently with consummation of the Merger: (a) Clothiers shall issue to Executive 163,409 shares of Common Stock (the "Shares"), and shall deliver to Executive a stock certificate, registered in the name of Executive, representing the Shares (net of 56,294 Shares being withheld by Clothiers for payment of related payroll and withholding taxes by Clothiers (the "Withheld Shares"). The surrender of Executive's rights under Section 6 of the Employment Agreement as heretofore in effect, accomplished by the execution of this Amendment, shall constitute full and complete payment for the Shares; (b) Immediately following the issuance of the Shares, Executive shall sell to Clothiers, and Clothiers shall purchase, 39,665 of the Shares for an aggregate cash purchase price equal to $363,728, and Executive shall deliver to Clothiers the certificate representing the Shares for cancellation of the number of Shares sold to Clothiers pursuant to the provisions of this subparagraph (b) and reissuance of a certificate representing the balance of the Shares; (c) Clothiers will grant to Executive a non-qualified stock option in form and substance as annexed to this Amendment as an exhibit to purchase the number of Shares sold by Executive to Clothiers pursuant to subparagraph (b) above, plus the number of Withheld Shares. 2. The second sentence of Section 13 of the Employment Agreement is amended by deleting the portion thereof which reads "Except as provided in Section 6(e) hereof, neither" and replacing such portion with "Neither". 3. Except as expressly amended hereby, the Employment Agreement shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. ____________________________ HENRY C. SCHWARTZ JOS. A. BANK CLOTHIERS, INC. By:_________________________ Name: Title: EX-10 6 EXHIBIT 10.6(C) AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- THIS AMENDMENT, dated as of February 3, 1996, by and between Henry C. Schwartz ("Executive") and Jos. A. Bank Clothiers, Inc. ("Employer"), is made to that certain Employment Agreement, dated March 31, 1994, between Executive and Employer (the "Employment Agreement"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Executive and Employer hereby amend the Employment Agreement and agree as follows: 1. Employment of Executive; Termination of Previous Agreement No change is hereby made to Section 1 of the Employment Agreement. 2. Employment Period Section 2 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "The term of Executive's employment under this Agreement (the "Employment Period") shall commence March 31, 1994 and shall, subject to earlier termination as provided in Section 5, terminate on December 31, 1997." 3. Duties and Responsibilities 3.1 General. Section 3.1 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "During the Employment Period, Executive shall serve as Vice Chairman of the Company and shall perform such duties, consistent with his status as Vice Chairman, as he may be assigned from time to time by Employer's Chief Executive Officer or Board of Directors. Executive shall have the use of an office at Employer's Manhattan store, and the facilities located therein, for the conduct of Company business. Upon request of the Board of Directors, during the Employment Period, Executive shall also serve without additional compensation as a director of the Company and any of its subsidiaries." 3.2. Location of Executive Offices. Section 3.2 of the Employment Agreement is hereby deleted. 4. Compensation and Related Matters 4.1. Base Salary. Section 4.1 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "From February 4, 1996 through March 31, 1997 (the "Initial Period"), Employer shall owe to Executive a base salary (the "Base Salary") of $405,589. The Base Salary shall be payable in equal (or nearly equal) installments from February 3, 1996 through December 31, 1997, in accordance with the Employer's policy on payment of executives in effect from time to time. That portion of the Employment Period occurring after the Initial Period is herein referred to the "Deferral Period" and that portion of the Base Salary payable during the Deferral Period (i.e. $161,408) is hereinafter referred to as the "Deferred Portion". Notwithstanding the agreement of the parties to defer payment of the Deferred Portion of the Base Salary, $383.39 of the Base Salary shall be deemed earned for each day elapse during the Initial Period, such that the entire Base Salary shall be deemed earned by March 31, 1997. In the event this Agreement shall be rejected in any bankruptcy proceeding involving Employer, Executive shall have a priority wage claim for that portion of the Base Salary earned but unpaid. No salary other than the Deferred Portion shall be payable during the Deferral Period." No change is hereby made to any compensation paid or payable to Executive prior to the date hereof. 4.2. Annual Bonus. Section 4.2 of the Employment Agreement is hereby deleted. 4.3. Life Insurance. No change is hereby made to Section 4.3 of the Employment Agreement. 4.4 Automobile. Section 4.4 of the Employment Agreement is hereby deleted. 4.5 Other Benefits. Section 4.5 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "During the Employment Period, subject to, and to the extent Executive is eligible under their respective terms, Executive shall be entitled to medical, dental, long term disability and supplemental life insurance coverages (not less than $250,000) as are, or are from time to time hereafter, generally provided by Employer to Employer's senior management employees. Executive's annualized Base Salary shall (where applicable) constitute the compensation on the basis of which the amount of Executive's benefits under any such plan or program shall be fixed and determined." 4.6 Expense Reimbursement. Section 4.6 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "Employer shall reimburse Executive for all business expenses reasonably incurred by him directly in the performance of his duties under this Amendment, upon his presentation, not less frequently then monthly, of signed, itemized accounts of such expenditures, all in accordance with Employer's procedures and policies as adopted and in effect from time to time and applicable to its senior employees." 4.7 Vacations. Section 4.7 of the Employment Agreement is hereby deleted. 4.8 Tax Gross-up. No change is hereby made to Section 4.8 of the Employment Agreement. 5. Termination of Employment Period 5.1. Termination Without Cause. Section 5.1 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "Employer or Executive may, by delivery of notice to the other at any time during the Employment Period, terminate the Employment Period without cause." 5.2 By Employer for Cause. No change is hereby made to Section 5.2 of the Employment Agreement. 5.3 By Executive for Good Reason. Section 5.3 of the Employment Agreement is hereby deleted. 5.4 Disability. No change is hereby made to Section 5.4 of the Employment Agreement. 5.5 Death. No change is hereby made to Section 5.5 of the Employment Agreement. 6. Termination Compensation; Non-Compete. 6.1. Termination Without Cause by Employer. Section 6.1 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.1 hereof, Employer shall continue to make payments to Executive as and when such payments otherwise would have been due pursuant to Section 4.1, assuming no termination. All other benefits provided for in Sections 4.5, 4.6 and 4.8 shall be continued at the expense of Employer for the period that payments are required to be made pursuant to the preceding provisions of this Section 6.1." 6.2. Certain Other Terminations. Section 6.2 of the Employment Agreement is hereby deleted and the following is hereby inserted in lieu thereof: "If the Employment Period is terminated by Employer pursuant to Section 5.2, by Executive pursuant to Section 5.1 or by the death of Executive pursuant to Section 5.5, amounts which otherwise would have been payable through the date of termination pursuant to this Agreement shall be paid and all other amounts (including earned but unpaid Base Salary) shall be forefeited. In the event of termination by death pursuant to the provisions of Section 5.5, Employer shall pay to Sandy Schwartz (or such other payee as may be designated by Executive in his Last Will and Testiment, or any codicil thereto, or by notice to Employer) that amount of the Base Salary earned but unpaid, as calculated pursuant to Section 4.1, through the date of such termination. If Executive shall terminate this Agreement with not less than six months remaining in the Employment Period, Executive shall be relieved of the non-competition restrictions set forth in Section 6.7." 6.3. Termination for Disability. No change is hereby made to Section 6.3 of the Employment Agreement. 6.4. Tax Gross-up. No change is hereby made to Section 6.4 of the Employment Agreement. 6.5. No Other Termination Compensation. No change is hereby made to Section 6.5 of the Employment Agreement. 6.6 Mitigation. No change is hereby made to Section 6.6 of the Employment Agreement. 6.7 Non-Compete. No change is hereby made to Section 6.7 of the Employment Agreement; provided, however, that during the remainder of the Employment Period Employer shall not unreasonably withhold its consent to any request by Executive that he be permitted to provide consulting services to one or more companies that are not in competition with Company. 7. Indemnification No change is hereby made to Section 7 of the Employment Agreement. 8. Miscellaneous 8.1 Notice. Any notice, consent or authorization required or permitted to be given pursuant to the Employment Agreement shall be addressed as follows, or to such other address as either party shall give the other: If to Employer: Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, Maryland 21074-2095 Attn: General Counsel If to Executive: Mr. Henry C. Schwartz 50 Sutton Place South Apt. 17A New York, New York 10022 8.2 Legal Fees. Section 8.2 of the Employment Agreement is hereby deleted. 8.3 Taxes. No change is hereby made to Section 8.3 of the Employment Agreement. 8.4 Governing Law. No change is hereby made to Section 8.4 of the Employment Agreement. 8.5 Arbitration. No change is hereby made to Section 8.5 of the Employment Agreement. 8.6 Headings. No change is hereby made to Section 8.6 of the Employment Agreement. 8.7 Counterparts. No change is hereby made to Section 8.7 of the Employment Agreement. 8.8 Severability. No change is hereby made to Section 8.8 of the Employment Agreement. 8.9 Entire Agreement and Representation. No change is hereby made to Section 8.9 of the Employment Agreement. 8.10 Successor and Assigns. No change is hereby made to Section 8.10 of the Employment Agreement. 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 Employment Agreement, the terms of this Amendment shall control and prevail. Mention in any provision of the Employment Agreement which is not deleted hereby of any other provision of the Employment Agreement which is deleted hereby shall be disregarded in the reading and interpretation of the Employment Agreement, amended hereby. Terms used but not defined herein shall have those respective meaning 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 Agreement as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By:_____________________________________ Timothy F. Finley, Chairman, Chief Executive Officer and President ________________________________________ HENRY C. SCHWARTZ EX-10 7 EXHIBIT 10.7 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of February 5, 1996, between FRANK TWORECKE ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Employment of Executive Employer hereby agrees to employ Executive, and Executive hereby agrees to be and remain in the employ of Employer, upon the terms and conditions hereinafter set forth. The Agreement is a contract for personal services of Executive and services pursuant hereto may only be performed by Executive. 2. Employment Period The term of Executive's employment under this Agreement (the "Employment Period") shall commence as of February 5, 1996 and shall, subject to earlier termination as provided in Section 5, continue for a period of three years after commencement and be automatically renewed thereafter for successive one-year periods unless, at least 180 days before the end of the initial three-year period or any subsequent one-year period, either party gives notice to the other of his or its desire to terminate the Employment Period, in which case the Employment Period shall terminate as of the end of such period. 3. Duties and Responsibilities 3.1 General. During the Employment Period, Executive (i) shall have the title of Executive Vice President and Chief Merchandising Officer and (ii) shall devote substantially all of his business time and expend his best efforts, energies and skills to the business of the Company. The preceding sentence shall not be construed to prohibit Executive from continuing to devote more than an insignificant amount of time, in accordance with his past practice, to management of his investments, serving on Boards of Directors and participation in civic and philanthropic activities. Executive shall perform such duties, consistent with his status as Executive Vice President and Chief Merchandising Officer of Employer, as he may be assigned from time to time by Employer's Chief Executive Officer (the "Chief Executive Officer") or Board of Directors (the "Board of Directors"). Executive shall have such authority, discretion, power and responsibility, and shall be entitled to such secretarial and administrative assistance and other facilities and conditions of employment, as are customary or appropriate to his position. Upon request of the Board of Directors, Executive shall also serve without additional compensation as a director of the Company and any of its subsidiaries. For all purposes of this Agreement, the term "Company" means Employer and all corporations, associations, companies, partnership, firms and other enterprises controlled by or under common control with Employer. 3.2 Location of Executive Offices. The Company will maintain its principal executive offices at a location in any state on the eastern coast of the United States from and including South Carolina to and including New York. Executive shall not be required to perform services for the Company at any other location, except for services rendered in connection with required travel on the Company's business. 4. Compensation and Related Matters 4.1 Base Salary. Employer shall pay to Executive during the Employment Period an annual base salary (the "Base Salary") of $200,000 for the first year of the Employment Period ("Year 1"); $400,000 for the second year of the Employment Period; and $400,000 for the third year of the Employment Period. The Base Salary for each year shall be payable in installments in accordance with the Company's policy on payment of executives in effect from time to time. 4.2 Annual Bonus. For fiscal year 1996 (ending February 4, 1997) and for each fiscal year that begins during the Employment Period (each such fiscal year, a "Bonus Year"), Executive shall be entitled to receive a bonus (each, a "Bonus") as hereinafter set forth. The Bonus for Bonus Year 1996 shall be $175,000, payable on or before February 1, 1997. For Bonus Year 1997 (ending January 31, 1998), Executive shall be entitled to receive a Bonus of up to 50% of Base Salary based upon the attainment of quantitative and qualitative performance goals established by the Compensation Committee of the Board of Directors (the "Committee") for such Bonus Year in consultation with Executive, such performance goals (the "Performance Goals"). For Bonus Year 1998 (ending January 30, 1999), and for each Bonus Year thereinafter, Executive shall be entitled to receive a Bonus of up to 75% of Base Salary based upon attainment of the Performance Goals for such Bonus Year. The relationship between the size of each Bonus and degree of attainment of performance objectives shall be discretionary with the Committee. The Performance Goals for each Bonus Year shall be established as soon as possible following the beginning of such Bonus Year. The Bonus earned for any Bonus Year shall be payable promptly following the determination thereof, but in no event later than 90 days following the end of each Bonus Year. The Bonus payable for the Bonus Year in which the Employment Period terminates shall equal the Bonus that would have been paid had the Employment Period not so terminate, multiplied by a fraction, the numerator of which shall be the number of days of the Employment Period within the Bonus Year and the denominator of which shall be 365. 4.3 Housing - The Ohio House. Executive is the owner of a house located in Cincinnati, Ohio (the "Ohio House"). Executive shall use reasonable efforts to sell the Ohio House for the fair market value thereof. Executive shall not accept an offer to purchase the Ohio House for less than the fair market value thereof without the consent of the Company, which consent shall not be unreasonably withheld. Upon settlement of the Ohio House, the Company shall reimburse Executive for (a) the Deficiency (as hereinafter defined), but not more than $100,000 and (b) the reasonable costs and expenses incurred by Executive in connection with the sale and settlement of the Ohio House, but not more than $30,000. For the purposes hereof, the "Deficiency" shall mean the difference (but not less than zero) obtained by subtracting the gross selling price of the Ohio House from $550,000.00 (the purchase price paid by Executive for the Ohio House plus the cost of capital improvements). 4.4 Housing - The Mortgage Loan. The Company shall loan to Executive the sum of $200,000 (the "Mortgage Loan"), repayable over ten years (or less) as hereinafter set forth, to assist with the purchase of a house to be selected or built by Executive (the "New House"). The Mortgage Loan shall be evidenced by a promissory note (the "Note") and secured by, at Employer's option, a mortgage or deed of trust (the "Mortgage"). The Mortgage Loan shall be funded (a) at settlement of the New House or (b) if Executive shall elect to build the New House and purchase the land therefor separately, at settlement of said land; provided, however, that Employer shall not be responsible for funding more than 80% of the cost of said land. The difference between $200,000 and the amount funded for said land shall be funded as mutually agreed upon by Employer and Executive, but not later than settlement on the completed New House. The Mortgage shall secure no less than a second lien on the New House. The Mortgage Loan shall bear interest at the applicable "Federal Rate" (as hereinafter defined) in effect on the date of the Mortgage Loan. For the purposes hereof, the "Federal Rate" shall mean that rate of interest, determined by Employer's auditors in accordance with Internal Revenue Service regulations, necessary to prevent interest on the Mortgage Loan from being imputed to Executive as income and to Employer as expense. Interest only shall be due and payable on the Mortgage Loan for the first five years thereof. Thereafter, the Mortgage Loan shall be repayable in sixty, equal payments of principal, plus accrued and unpaid interest. All payments shall be due on the first of each month, with interest payable in arrears. Notwithstanding anything to the contrary contained herein or in the Note or Mortgage, Executive shall not be required to make the principal and/or interest payments otherwise due during the Employment Period and the Employer shall credit the Mortgage Loan account as if such payments had been timely made. Amounts so credited shall be deemed forgiven and Executive shall not be liable for repayment thereof. In the event (a) Executive shall remain in the employ of Employer for at least 10 consecutive years; (b) Employer shall terminate this Agreement without cause (Section 5.1); (c) Executive shall terminate this Agreement for good reason (Section 5.3); (d) this Agreement shall terminate or be terminated as a result of the death (Section 5.5) or disability (Section 5.4) of Executive; (e) Employer (or any trustee of Employer) shall reject this Agreement pursuant to powers granted under the United States Bankruptcy Code (11 U.S.C. ss.ss. 101 et seq.), or any successor statute thereto, and either (i) Employer and Executive, each acting in his/its sole and absolute subjective discretion, shall fail to agree upon terms and conditions for Executive's continued employment with Employer or (ii) Executive, in his sole and absolute subjective discretion, shall fail to accept, and thereafter Employer shall fail to withdraw its demand for, any proposed revision in the terms and conditions of the Mortgage Loan; or (f) Employer shall give notice of termination pursuant to Section 2 of this Agreement, then, and in any of such events, the Mortgage Loan, and all interest due thereon, shall be deemed paid in full. In the event (x) Executive shall terminate this Agreement without cause (Section 5.1); (y) Executive shall give notice of termination pursuant to Section 2; or (z) Employer shall terminate this Agreement for cause (Section 5.2), Executive shall pay to Employer the unpaid principal balance and all accrued interest on the Mortgage Loan. Upon payment or deemed payment of the Mortgage Loan, and all interest due thereon, the Note shall be canceled and returned to Executive and the Mortgage shall be released of record. In addition to the Mortgage Loan, Employer shall reimburse Executive for the reasonable costs and expenses incurred by Executive in connection with the settlement of the New House, but not more than $30,000. 4.5 Life Insurance. Employer shall maintain in effect at all times during the Employment Period, at Employer's expense, a policy of term life insurance, or such other type of policy as Executive shall request provided that the cost to Employer thereof is approximately the same as the cost of such term policy, on the life of Executive in the amount of not less than $1,000,000 naming such person as Executive shall designate from time to time as the owner and beneficiary thereof. Executive agrees that Employer shall have the right to obtain other life insurance on Executive's life, at Employer's sole expense and with Employer or an affiliate thereof as the sole beneficiary thereof. Employer shall also have the right, at its sole cost, to increase the amount of the aforesaid $1,000,000 policy and Executive shall execute such assignments or other documents necessary or desirable to assign to Employer the proceeds of the policy in excess of $1,000,000 . Executive shall (i) cooperate fully with Employer in obtaining all such insurance, (ii) sign any necessary consents, applications and other related forms or documents, and (iii) take any required medical examinations. If such examination(s) shall disclose that Executive is not eligible for "standard, non-smoking risk" pricing for term life insurance, the amount of such insurance shall be reduced to an amount which is available for a premium equal to the premium which would have been charged for $1,000,000 of term life insurance had Executive been so eligible. At Executive's option and expense, any policy maintained by Employer under this Section 4.5 shall be transferred to Executive upon the expiration or termination of the Employment Period, unless such transfer is otherwise prohibited. After such transfer, Employer shall have no further responsibility with respect to said policy. 4.6 Automobile. Throughout the Employment Period, Employer shall provide to Executive, at Employer's expense, an automobile in accordance with Employer's policy in effect from time to time for the leasing of automobiles for use by Employer's senior management. Employer shall also be responsible for all expenses of use and operation of such automobile. At Executive's option, Employer shall assume responsibility for Executive's existing car lease payments, provided that such payments shall not exceed $800 per month. Upon termination or expiration of the Employment Period, or upon expiration of any automobile lease entered into by Employer in satisfaction of its obligations under this Section 4.6, Executive shall have the right and option to assume the lease on his then-current car and to exercise any buy-out option contained in such lease. 4.7 Other Benefits. During the Employment Period, subject to, and to the extent Executive is eligible under their respective terms, Executive shall be entitled to receive such fringe benefits as are, or are from time to time hereafter, generally provided by Employer to Employer's senior management employees or other employees (other than those provided under or pursuant to separately negotiated individual employment agreement or arrangements) under any pension or retirement plan, disability plan or insurance, group life insurance, medical and dental insurance, travel accident insurance, stock option, phantom stock or other similar plan or program of Employer. Executive's Base Salary shall (where applicable) constitute the compensation on the basis of which the amount of Executive's benefits under any such plan or program shall be fixed and determined. The first $200,000 (or such lesser amount as may be necessary) of benefits under any life insurance policy provided hereunder (but not the $1,000,000 policy under Section 4.5) shall be assigned to Employer to pay the remaining principal balance of the Mortgage Loan upon the death of Executive. 4.8 Expense Reimbursement. Employer shall reimburse Executive for all business expenses reasonably incurred by him in the performance of his duties under this Agreement upon his presentation, not less frequently than monthly, of signed, itemized accounts of such expenditures, all in accordance with Employer's procedures and policies as adopted and in effect from time to time and applicable to its senior management employees. Without limiting the generality of the foregoing, Employer shall pay for all of Executive's reasonable travel expenses incurred in traveling from and to the Ohio House and, prior to the earlier of settlement upon the New House or September 30, 1996, his reasonable living expenses (not to exceed $5,000 per month) while the Executive is residing in the Baltimore, Maryland area, including, without limitation, hotel or other residential accommodation expenses and meals, all such amounts to be treated as additional salary for all securities acts reporting purposes. 4.9 Tax Gross-up. In the event that any payments made by Employer to or on behalf of Executive pursuant to the provisions of Section 4.3 through 4.8 hereof (other than the Mortgage Loan or principal and interest forgiveness in connection therewith) result in the payment of additional federal, state or local income taxes by Executive, Employer shall pay to Executive the amount of such additional taxes plus such additional amount as shall be necessary to hold harmless Executive, as nearly as can be, from the obligation to pay such taxes in respect of amounts payable pursuant to this Section 4.9. 4.10 Stock Options. On the date hereof, the Company shall grant to Executive the right and option to purchase an aggregate of 60,000 shares (the "Option Shares") of the Company's common stock, $.01 par value per share, which option is intended, to the fullest extent permitted by law, to qualify as an incentive stock option, as defined to Section 422 of the Internal Revenue Code of 1986. The option to purchase one-half of the Option Shares shall be granted pursuant to each of the Company's two option plans pursuant to the standard agreements therefor, copies of which are attached hereto as Exhibits A and B, respectively. The "Purchase Price" and "Closing Price" shall be determined with reference to the date hereof in accordance with such agreements. 4.11 Vacations. Executive shall be entitled to 20 days of vacation during each calendar year, which shall accrue in accordance with the Company's vacation policy in effect from time to time for its senior executive officers, which vacations shall be taken at such time or times as shall not unreasonably interfere with Executive's performance of his duties under this Agreement. The number of vacation days shall be prorated for any calendar year not wholly within the Employment Period. Upon termination of Executive's employment pursuant to Section 5 or non-renewal of the Employment Period pursuant to Section 2, for any reason whatsoever, Employer shall pay Executive, in addition to any termination compensation provided for under Section 6, all unused vacation benefits, including any carry-over, due Executive as of the date of termination, to be computed at the Executive's then current Base Salary rate. 5. Termination of Employment Period 5.1 Termination Without Cause. Employer or Executive may, by delivery of not less than 60 days' notice to the other at any time during the Employment Period, terminate the Employment Period without cause. 5.2 By Employer for Cause. Employer may, at any time during the Employment Period by notice to Executive in accordance with and only after full compliance with the procedure set forth herein terminate the Employment Period "for cause" effective immediately. For the purposes hereof, "for cause" means: (i) the conviction of Executive in a court of competent jurisdiction of a crime constituting a felony in such jurisdiction involving money or other property of Employer or any of its affiliates or any other felony involving moral turpitude; or (ii) the willful (a) commission of an act not approved of or ratified by the Board of Directors involving a series and material conflict of interest or self-dealing relating to any material aspects of Employer or any such subsidiary or affiliate thereof; or (b) commission of an act of fraud or misrepresentation (including the omission of material facts), provided that such acts relate to the business of Employer and would materially and negatively impact upon Employer and its business; or (c) material failure of Executive to obey directions of the Board of Directors that are consistent with Executive's status of Chief Merchandising Officer; however, for the purposes of this subsection (ii), the refusal of Executive to comply with an order or directive of anyone other than the majority of the Board of Directors, or the refusal of Executive to perform an act which is contrary to his duties, responsibilities and/or authority as Chief Merchandising Officer or is unlawful shall not constitute "for cause". In the event of an act or omission as provided for in this subsection 5.2(ii), Employer shall provide Executive with a written notice of intent to terminate the Employment Period "for cause", setting forth, with reasonable particularity, the reasons and acts or omissions constituting "cause" under this subsection, and shall provide Executive with at least thirty (30) calendar days after such notice to cure or eliminate the problem or violation giving rise to such cause or any longer period as reasonably needed by Executive, provided that it is susceptible to cure or elimination and Executive is proceeding diligently and in good faith to cure such violation. In the event and only after the Executive fails to cure the problem or violation within the period provided for herein, Employer may exercise its right to terminate the Employment Period in accordance with the procedure set forth below. Termination "for cause" shall be effected only if (A) Employer has delivered to Executive a written notice of termination "for cause", setting forth, with reasonable particularity, the reasons for such "for cause" termination, and (B) has provided Executive with, on at least ten (10) business days' prior written notice, in the case of a termination pursuant to subsection 5.2(ii) the opportunity, together with Executive's counsel, to be heard before Employer's Board of Directors, said hearing to occur at such reasonable time and place that is mutually convenient to Executive, his counsel, and Employer, and (C) Employer's Board of Directors [after such notice and opportunity to be heard has been provided to Executive in the case of a termination pursuant to subsection 5.2(ii)], adopts a resolution concurred in by not less than majority of all of the directors of Employer then in office, including at least two-thirds of all of the directors who are not officers of Employer, that Executive was guilty of conduct constituting "for cause" hereunder, which conduct has not been cured (if applicable), and specifying the particulars thereof in detail. 5.3 By Executive for Good Reason. Executive may, at any time during the Employment Period by notice to Employer, terminate the Employment Period under this Agreement "for good reason" effective immediately. For the purposes hereof, "good reason" means (i) any material breach by Employer of any provision of this Agreement which, if susceptible of being cured, is not cured within 30 days of delivery of notice thereof to Employer by Executive or (ii) the occurrence of a change in control (as hereinafter defined) of Employer provided that not more than 90 days shall have elapsed subsequent to Executive's becoming aware of the occurrence of the change in control. Without limitation of the generality of the foregoing, each of the following shall be deemed to be a material breach of this Agreement by Employer: (x) any failure timely to pay (or any reduction in) compensation (including benefits) paid or payable to Executive pursuant to the provisions of Section 4 hereof; (y) any reduction in the duties, responsibilities or perquisites of Executive as provided in Section 3.1 hereof and (z) any transfer of the Company's principal executive offices outside the geographic area described in Section 3.2 hereof or requirement that Executive principally perform his duties outside such geographic area. For purposes of this Agreement, a "change in control" of the Company shall be deemed to have occurred if, as a result of a single transaction or a series of transactions, (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company ( including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the Company's then outstanding securities; or (B) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities and there are at least a majority of directors serving on the Board of Directors who were not serving in such capacity as of the date hereof or who were not elected with the consent of the Executive; or (C) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; provided, however, the change in ownership of the Company's securities resulting from the initial public offering thereof shall not be deemed a "change in control" for purposes of this Agreement. 5.4 Disability. During the Employment Period, if, as a result of physical or mental incapacity or infirmity (excluding alcoholism or drug addiction), Executive shall be unable to perform his material duties under this Agreement for (i) a continuous period of at least 180 days, or (ii) periods aggregating at least 270 days during any period of 12 consecutive months (each a "Disability Period"), and at the end of the Disability Period there is no reasonable probability that Executive can promptly resume his material duties hereunder pursuant hereto, Executive shall be deemed disabled ("the Disability") and Employer, by notice to Executive, shall have the right to terminate the Employment Period for Disability at, as of or after the end of the Disability Period. The existence of the Disability shall be determined by a reputable, licensed physician mutually selected by Employer and Executive, whose determination shall be final and binding on the parties, provided, that if Employer and Executive cannot agree upon such physician, such physician shall be designated by the then acting President of the Baltimore City Medical Society, and if for any reason such President shall fail or refuse to designate such physician, such physician shall, at the request of either party, be designated by the American Arbitration Association. Executive shall cooperate in all reasonable respects to enable an examination to be made by such physician. 5.5 Death. The Employment Period shall end on the date of Executive's death. 6. Termination Compensation; Non-Compete 6.1 Termination Without Cause by Employer or for Good Reason by Executive. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3 hereof, Employer will pay to Executive (i) the greater of (a) the Base Salary for the balance of the Employment Period, or (b) Base Salary for one (1) year, calculated in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of Employment Period, assuming no termination, payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated; and (ii) on the date due pursuant to the provisions of Section 4.2 hereof, the Bonus for the then current Bonus Year prorated as provided in Section 4.2; provided, however, in the event the Employment Period is terminated by Executive because of a "change in control" pursuant to Section 5.3 (ii), then clause (i) of this sentence shall be modified to read: "the Base Salary for the period which is the greater of (a) eighteen (18) months or (b) the balance of the Employment Period not to exceed twenty-four (24) months (calculated, in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of the Employment Period, assuming no termination) payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated." All other benefits provided for in Sections 4.5, 4.6, 4.7, 4.8, 4.9 and 4.11 shall be continued at the expense of Employer for the period that payments are required to be made pursuant to the preceding provisions of this Section 6.1. 6.2 Certain Other Terminations. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.2, by Executive pursuant to Section 5.1 or by death pursuant to the provisions of Section 5.5, Employer shall pay to Executive (i) Base Salary (calculated at its then current rate per year) through the date of termination and (ii) in the case of termination by death pursuant to the provisions of Section 5.5, when due pursuant to provisions of Section 4.2 the Bonus for the Bonus Year in which the date of termination occurred prorated as provided in said Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.3 Termination for Disability. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.4, Employer shall make all payments and continue all benefits provided for in Section 6.1 for the balance of the Employment Period (assuming no termination), provided, however, that such payments shall be reduced by any amounts actually paid to Executive pursuant to any disability insurance or other such similar program maintained by Employer. 6.4 Termination by Non-Renewal. In the event the Employment Period expires because of an election by Employer to allow the Employment Period to expire at the end of its then stated term as provided in Section 2 hereof, Employer shall pay to Executive (i) Base Salary for the one year period following the date of termination (calculated at its then current rate per year), payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated and (ii) when due pursuant to the provisions of Section 4.2 the Bonus for the Bonus Year in which the Employment Period expired prorated as provided in said Section 4.2. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.5 Tax Grossup. [INTENTIONALLY DELETED.] 6.6 No Other Termination Compensation. Executive shall not, except as set forth in this Section 6 and in Section 4.7, be entitled to any compensation following termination of the Employment Period, except as otherwise provided in any stock options granted by Employer to Executive. 6.7 Mitigation. Executive shall not be required to mitigate the amount of any payments or benefits provided for hereunder upon termination of the Employment Period by seeking employment with any other person, or otherwise, nor shall the amount of any such payments or benefits be reduced by any compensation, benefit or other amount earned by, accrued for or paid to Executive as the result of Executive's employment by or consultancy or other association with any other person, provided, that any medical, dental or hospitalization insurance or benefits provided to Executive with his employment by or consultancy with an unaffiliated person during such period shall be primary to the benefits to be provided to Executive pursuant to this Agreement for the purposes of coordination of benefits. 6.8 Non-Compete. For the 6 month period following the termination of the Employment Period for any reason whatsoever, including termination by non-renewal as described in to Section 6.4 (other than a termination by Executive pursuant to Section 5.1, in which case the applicable period shall be one year) and for so long as Employer is making and the Executive is accepting the payments required to be made to Executive pursuant to either Section 6.1 or 6.4 hereof, Executive shall not, directly or indirectly, (i) engage in any activities that are in competition with the Company in any geographic area where the Company is engaged in business, (ii) solicit any customer of the Company or (iii) solicit any person who is then employed by the Company or was employed by the Company within one year of such solicitation to (a) terminate his or her employment with the Company, (b) accept employment with anyone other than the Company, or (c) in any manner interfere with the business of the Company; provided, however, in the event Executive violates any of the provisions of the foregoing at any time after the expiration of 6 months (one year, in the case of a termination by Executive pursuant to Section 5.1) following the termination of the Employment Period, Employer's sole remedy under this Agreement shall be the right to terminate any and all severance payments required under Sections 6.1 or 6.4 hereof. Executive acknowledges and agrees that in the event of any violation or threatened violation by Executive of his obligations under the preceding sentence during the six month (or, in the case of a termination pursuant to Section 5.1, the one year) period following the termination of the Employment Period, Employer shall be entitled to injunctive relief without any necessity to post bond. 7. Indemnification The Company shall indemnify and hold Executive harmless from and against any expenses (including attorneys' fees of the attorneys selected by Executive to represent him, which shall be advanced as incurred), judgements, fines and amounts paid in settlement incurred by him by reason of his being made a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of any act or omission to act by Executive during the Employment Period or otherwise by reason of the fact that he is or was a director or officer of Employer or any subsidiary or affiliate included as a part of the Company, to the fullest extent and in the manner set forth and permitted by the General Corporation Law of the State of Delaware and any other applicable law as from time to time in effect. The provisions of this Section 7 shall survive any termination of the Employment Period or any deemed termination of this Agreement. 8. Miscellaneous 8.1 Notices. Any notice, consent or authorization required or permitted to be given pursuant to this Agreement shall be in writing and sent to the party for or to whom intended, at the address of such party set forth below, be registered or certified mail, postage paid (deemed given five days after deposit in the U.S. mails) or personally or by facsimile transmission (deemed given upon receipt), or at such other address as either party shall designate by notice given to the other in the manner provided herein. If to Employer: Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, Maryland 21074-2095 Attn: Secretary If to Executive: Mr. Frank Tworecke Jos. A. Bank Clothiers, Inc. 500 Hanover Pike Hampstead, Maryland 21074-2095 8.2 Legal Fees. [INTENTIONALLY DELETED.] 8.3 Taxes. Employer is authorized to withhold (from any compensation or benefits payable hereunder to Executive) such amounts for income tax, social security, unemployment compensation and other taxes as shall be necessary or appropriate in the reasonable judgement of Employer to comply with applicable laws and regulations. 8.4 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland applicable to agreements made and to be performed therein. 8.5 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Baltimore, Maryland in accordance with the rules of the American Arbitration Association then in effect. Judgement may be entered on the arbitration award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until expiration of the Employment Period during the pendency of any arbitration. 8.6 Headings. All descriptive headings in this Agreement are inserted for convenience only and shall be disregarded in construing or applying any provision of this Agreement. 8.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 8.8 Severability. If any provision of this Agreement, or any part thereof, is held to be unenforceable, the remainder of such provision and this Agreement, as the case may be, shall nevertheless remain in full force and effect. 8.9 Entire Agreement and Representation. This Agreement contains the entire agreement and understanding between Employer and Executive with respect to the subject matter hereof. No representations or warranties of any kind or nature relating to the Company or its several businesses, or relating to the Company's assets, liabilities, operations, future plans or prospects have been made by or on behalf of Employer to Executive. This Agreement supersedes any prior agreement between the parties relating to the subject matter hereof. 8.10 Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors, heirs (in the case of Executive) and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By: ____________________________________ Timothy F. Finley, Chairman, Chief Executive Officer and President ________________________________________ FRANK TWORECKE EX-10 8 EXHIBIT 10.8 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT, dated as of February 5, 1996, between DAVID E. ULLMAN ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Employment of Executive Employer hereby agrees to employ Executive, and Executive hereby agrees to be and remain in the employ of Employer, upon the terms and conditions hereinafter set forth. This Agreement is a contract for the personal services of Executive and services pursuant hereto may only be performed by Executive. 2. Employment Period The term of Executive's employment under this Agreement (the "Employment Period") shall commence as of the date hereof and shall, subject to earlier termination as provided in Section 5, continue through February 4, 1998 and shall continue thereafter for successive one-year periods if, at least 180 days before the end of the initial two year period or any subsequent one-year period, Employer gives notice to Executive of its desire to continue the Employment Period, in which case the Employment Period shall continue for one year beyond the then-current term. Notwithstanding the foregoing, the Employment Period shall not continue beyond its then-current term as a result of said notice from Employer if, within thirty (30) days after receipt of such notice, Executive shall notify Employer of Executive's intent to terminate this Agreement as of the end of the then-current term. 3. Duties and Responsibilities During the Employment Period, Executive (i) shall have the title of Executive Vice President - Chief Financial Officer and (ii) shall devote substantially all of his business time and expend his best efforts, energies and skills to the business of the Company. Executive shall perform such duties, consistent with his status as Executive Vice President - Chief Financial Officer, as he may be assigned from time to time by Employer's Chief Executive Officer (the "Chief Executive Officer"). 4. Compensation and Related Matters 4.1 Base Salary. Employer shall pay to Executive during the Employment Period an annual base salary (the "Base Salary") of $170,000 for each year of the Employment Period. The Base Salary for each year shall be payable in installments in accordance with the Company's policy on payment to executives in effect from time to time. 4.2 Annual Bonus. For fiscal year 1996 and for each fiscal year that begins during the Employment Period (each such fiscal year, a "Bonus Year"), Executive shall be eligible to receive a bonus (each, a "Bonus") of up to 40% of Base Salary pursuant to the terms and conditions of Employer's Bonus Plan in effect from time to time. 4.3 Other Benefits. During the Employment Period, subject to, and to the extent Executive is eligible under their respective terms, Executive shall be entitled to receive such fringe benefits as are, or are from time to time hereafter, generally provided by Employer to Employer's senior management employees (other than those provided under or pursuant to separately negotiated individual employment agreements or arrangements). 5. Termination of Employment Period 5.1 Termination Without Cause or Good Reason. Employer may terminate the Employment Period at any time without cause. Executive may, by delivery of not less than 60 days' notice to Employer at any time during the Employment Period, terminate the Employment Period without good reason. 5.2 By Employer for Cause. Employer may, at any time during the Employment Period by notice to Executive, terminate the Employment Period "for cause" effective immediately. For the purposes hereof, "for cause" means any misconduct, including, but not limited to (a) conviction of Executive in a court of competent jurisdiction of a crime constituting a felony or other serious offense; or (b) the commission of an act not approved of or ratified by the Board of Directors involving a conflict of interest or self-dealing relating to Employer or any subsidiary or affiliate thereof; or (c) commission of an act of fraud or misrepresentation (including the omission of material facts); or (d) failure of Executive to obey any order or directive of the Board of Directors of the Company or the Chief Executive Officer, provided such order or directive is lawful and not contrary to Executive's duties, responsibilities and authority as an Executive Vice President of the Company and is consistent with Executive's status as an Executive Vice President of the Company; or (e) violation by Executive of any rule, regulation or policy of Employer generally applicable to other employees of the Company. 5.3 By Executive for Good Reason. Executive may, at any time during the Employment Period by notice to Employer, terminate the Employment Period under this Agreement "for good reason" effective immediately. For the purposes hereof, "for good reason" means (i) any material breach by Employer of any provision of this Agreement which, if susceptible of being cured, is not cured within 30 days of delivery of notice thereof to Employer by Executive or (ii) the occurrence of a change in control (as hereinafter defined) of Employer provided that not more than 90 days shall have elapsed subsequent to Executive's becoming aware of the occurrence of the change in control. Without limitation of the generality of the foregoing, each of the following shall be deemed to be a material breach of this Agreement by Employer: (y) any failure timely to pay (or any reduction in) compensation paid or payable to Executive pursuant to the provisions of Section 4 hereof; and (z) any reduction in the duties, responsibilities or perquisites of Executive as provided in Section 3.1 hereof. For purposes of this Agreement, a "change in control" of the Company shall be deemed to have occurred if, as a result of a single transaction or a series of transactions, (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company ( including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the Company's then outstanding securities; or (B) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under any employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company (including any nominee corporation that holds shares of the Company on behalf of the beneficial owners of such corporation), in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities and there are at least a majority of directors serving on the Board of Directors who were not serving in such capacity as of the date hereof or who were not elected with the consent of the Executive; or (C) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 5.4 Death. The Employment Period shall end on the date of Executive's death. 6. Termination Compensation; Non-Compete 6.1 Termination Without Cause by Employer or for Good Reason by Executive. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3 hereof, Employer will pay to Executive the greater of (a) Base Salary for the balance of the Employment Period, or (b) Base Salary for one (1) year, calculated in each case, at the applicable Base Salary rate which would have been in effect for each year during the balance of Employment Period, assuming no termination, payable in equal installments at the times Base Salary would have been paid had the Employment Period not been terminated. All other benefits provided for in Section 4.3 shall be continued at the expense of Employer for the period that payments are required to be made pursuant to the preceding provisions of this Section 6.1. 6.2 Certain Other Terminations. If the Employment Period is terminated by Employer pursuant to the provisions of Section 5.2, by Executive pursuant to Section 5.1 or as a result of the death of Executive pursuant to the provisions of Section 5.4, Employer shall pay to Executive Base Salary (calculated at its then current rate per year) through the date of termination. Employer shall have no obligation to continue any other benefits provided for in Section 4 past the date of termination. 6.3 No Other Termination Compensation. Executive shall not, except as set forth in this Section 6, be entitled to any compensation following termination of the Employment Period, except as otherwise provided in any stock options granted by Employer to Executive. 6.4 Mitigation. Executive shall not be required to mitigate the amount of any payments or benefits provided for hereunder upon termination of the Employment Period by seeking employment with any other person, or otherwise, nor shall the amount of any such payments or benefits be reduced by any compensation, benefit or other amount earned by, accrued for or paid to Executive as the result of Executive's employment by or consultancy or other association with any other person, provided, that any medical, dental or hospitalization insurance or benefits provided to Executive with his employment by or consultancy with an unaffiliated person during such period shall be primary to the benefits to be provided to Executive pursuant to this Agreement for the purposes of coordination of benefits. 6.5 Non-Compete. For so long as any termination compensation is being paid to Executive pursuant to this Section 6 or, in the event of termination of this Agreement by Employer for cause or by Executive without good reason, for the balance of what would have been the current Employment Period assuming no such termination, Executive shall not, directly or indirectly, (i) engage in any activities that are in competition with the Company in any geographic area where the Company is engaged in business, (ii) solicit any customer of the Company or (iii) solicit any person who is then employed by the Company or was employed by the Company within one year of such solicitation to (a) terminate his or her employment with the Company, (b) accept employment with anyone other than the Company, or (c) in any manner interfere with the business of the Company. Executive acknowledges and agrees that in the event of any violation or threatened violation by Executive of his obligations under the preceding sentence, Employer shall be entitled to injunctive relief without any necessity to post bond. 7. Indemnification The Company shall indemnify and hold Executive harmless from and against any expenses (including attorneys' fees of the attorneys selected by Executive to represent him, which shall be advanced as incurred), judgements, fines and amounts paid in settlement incurred by him by reason of his being made a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of any act or omission to act by Executive during the Employment Period or otherwise by reason of the fact that he is or was a director or officer of Employer or any subsidiary or affiliate included as a part of the Company, to the fullest extent and in the manner set forth and permitted by the General Corporation Law of the State of Delaware and any other applicable law as from time to time in effect. The provisions of this Section 7 shall survive any termination of the Employment Period or any deemed termination of this Agreement. 8. Miscellaneous 8.1 Notices. Any notice, consent or authorization required or permitted to be given pursuant to this Agreement shall be in writing and sent to the party for or to whom intended, at the address of such party set forth below, by registered or certified mail, postage paid (deemed given five days after deposit in the U.S. mails) or personally or by facsimile transmission (deemed given upon receipt), or at such other address as either party shall designate by notice given to the other in the manner provided herein. Notices to Employer shall be sent to: Jos. A. Bank Clothiers, Inc., 500 Hanover Pike, Hampstead, Maryland 21074-2095, Attn: Secretary. Notices to Executive shall be sent to: Mr. David Ullman, Jos. A. Bank Clothiers, Inc., 500 Hanover Pike, Hampstead, Maryland 21074-2095. 8.2 Taxes. Employer is authorized to withhold (from any compensation or benefits payable hereunder to Executive) such amounts for income tax, social security, unemployment compensation and other taxes as shall be necessary or appropriate in the reasonable judgement of Employer to comply with applicable laws and regulations. 8.3 Interpretation. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland applicable to agreements made and to be performed therein. All descriptive headings in this Agreement are inserted for convenience only and shall be disregarded in construing or applying any provision of this Agreement. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. If any provision of this Agreement, or any part thereof, is held to be unenforceable, the remainder of such provision and this Agreement, as the case may be, shall nevertheless remain in full force and effect. 8.4 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Baltimore, Maryland in accordance with the rules of the American Arbitration Association then in effect. Judgement may be entered on the arbitration award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until expiration of the Employment Period during the pendency of any arbitration. 8.8 Entire Agreement and Representation. This Agreement contains the entire agreement and understanding between Employer and Executive with respect to the subject matter hereof. No representations or warranties of any kind or nature relating to the Company or its several businesses, or relating to the Company's assets, liabilities, operations, future plans or prospects have been made by or on behalf of Employer to Executive. This Agreement supersedes any prior agreement between the parties relating to the subject matter hereof. 8.9 Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors, heirs (in the case of Executive) and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. JOS. A. BANK CLOTHIERS, INC. By:_____________________________________ Timothy F. Finley, Chairman, Chief Executive Officer and President ________________________________________ DAVID E. ULLMAN EX-10 9 EXHIBIT 10.9 JOS. A. BANK CLOTHIERS, INC. RETIREMENT & SAVINGS PLAN Plan and Trust Agreement As Amended and Restated Effective April 1, 1994 Jos. A. Bank Clothiers, Inc. Retirement & Savings Plan and Trust As Amended and Restated Effective April 1, 1994 Jos. A. Bank Clothiers, Inc. previously established the Jos. A. Bank Clothiers, Inc. Retirement & Savings Plan for the benefit of eligible employees of the Company and its participating affiliates. The Plan is intended to constitute a qualified profit sharing plan, as described in Code section 401(a), which includes a qualified cash or deferred arrangement, as described in Code section 401(k). The provisions of this Plan and Trust relating to the Trustee constitute the trust agreement which is entered into by and between Jos. A. Bank Clothiers, Inc. and Wells Fargo Bank, National Association. The Trust is intended to be tax exempt as described under Code section 501(a). The Plan constitutes an amendment and restatement of the Jos. A. Bank Clothiers, Inc. Retirement & Savings Plan which was originally established effective as of February 1, 1976, and its related trust agreement. The Jos. A. Bank Clothiers, Inc. Retirement & Savings Plan and Trust, as set forth in this document, is hereby amended and restated effective as of April 1, 1994. Date: ____________________, 19___ Jos. A. Bank Clothiers, Inc. By: ____________________________ Title: The trust agreement set forth in those provisions of this Plan and Trust which relate to the Trustee is hereby executed. Date: _____________________, 19___ Wells Fargo Bank, National Association By: ____________________________ Title: Date: _____________________, 19___ Wells Fargo Bank, National Association By: ____________________________ Title: - -------------------------------------------------------------------------------- TABLE OF CONTENTS 1. DEFINITIONS....................................................... 1 ----------- 2 ELIGIBILITY....................................................... 8 ----------- 2.1 Eligibility............................................. 8 2.2 Ineligible Employees.................................... 8 2.3 Ineligible or Former Participants....................... 8 3 PARTICIPANT CONTRIBUTIONS......................................... 9 ------------------------- 3.1 Pre-Tax Contribution Election........................... 9 3.2 Changing a Contribution Election........................ 9 3.3 Revoking and Resuming a Contribution Election........... 9 3.4 Contribution Percentage Limits.......................... 9 3.5 Refunds When Contribution Dollar Limit Exceeded......... 10 3.6 Timing, Posting and Tax Considerations.................. 10 4 ROLLOVERS & TRUST-TO-TRUST TRANSFERS.............................. 11 ------------------------------------ 4.1 Rollovers............................................... 11 4.2 Transfers From Other Qualified Plans.................... 11 5 EMPLOYER CONTRIBUTIONS............................................ 12 ---------------------- 5.1 Company Match Contributions............................. 12 5.2 Company Discretionary Contributions..................... 12 5.3 Company Additional Contributions........................ 13 6 ACCOUNTING........................................................ 15 ---------- 6.1 Individual Participant Accounting....................... 15 6.2 Sweep Account is Transaction Account.................... 15 6.3 Trade Date Accounting and Investment Cycle.............. 15 6.4 Accounting for Investment Funds......................... 15 6.5 Payment of Fees and Expenses............................ 15 6.6 Accounting for Participant Loans........................ 16 6.7 Error Correction........................................ 16 6.8 Participant Statements.................................. 17 6.9 Special Accounting During Conversion Period............. 17 6.10 Accounts for QDRO Beneficiaries......................... 17 7 INVESTMENT FUNDS AND ELECTIONS.................................... 18 ------------------------------ 7.1 Investment Funds........................................ 18 7.2 Investment Fund Elections............................... 18 7.3 Responsibility for Investment Choice.................... 18 7.4 Default if No Election.................................. 18 7.5 Timing.................................................. 19 7.6 Investment Fund Election Change Fees.................... 19 8 VESTING & FORFEITURES............................................. 20 --------------------- 8.1 Fully Vested Contribution Accounts...................... 20 8.2 Full Vesting upon Certain Events........................ 20 8.3 Vesting Schedule........................................ 20 8.4 Forfeitures............................................. 20 8.5 Rehired Employees....................................... 21 9 PARTICIPANT LOANS................................................. 22 ----------------- 9.1 Participant Loans Permitted............................. 22 9.2 Limitations on Purpose of Participant Loan.............. 22 9.3 Loan Application, Note and Security..................... 22 9.4 Spousal Consent......................................... 22 9.5 Loan Approval........................................... 22 9.6 Loan Funding Limits..................................... 22 9.7 Maximum Number of Loans................................. 23 9.8 Source and Timing of Loan Funding....................... 23 9.9 Interest Rate........................................... 23 9.10 Repayment............................................... 23 9.11 Repayment Hierarchy..................................... 24 9.12 Repayment Suspension.................................... 24 9.13 Loan Default............................................ 24 9.14 Call Feature............................................ 24 10 IN-SERVICE WITHDRAWALS............................................ 25 ---------------------- 10.1 In-Service Withdrawals Permitted........................ 25 10.2 In-Service Withdrawal Application and Notice............ 25 10.3 Spousal Consent......................................... 25 10.4 In-Service Withdrawal Approval.......................... 25 10.5 Minimum Amount, Payment Form and Medium................. 25 10.6 Source and Timing of In-Service Withdrawal Funding............................................... 26 10.7 Hardship Withdrawals.................................... 26 10.8 Rollover Account Withdrawals............................ 27 10.9 Over Age 59 1/2Withdrawals.............................. 28 11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW ......... 29 --------------------------------------------------------- 11.1 Benefit Information, Notices and Election............... 29 11.2 Spousal Consent......................................... 29 11.3 Payment Form and Medium................................. 29 11.4 Small Amounts Paid Immediately.......................... 30 11.5 Source and Timing of Distribution Funding............... 30 11.6 Deemed Distribution..................................... 30 11.7 Latest Commencement Permitted........................... 31 11.8 Payment Within Life Expectancy.......................... 31 11.9 Incidental Benefit Rule................................. 31 11.10 Payment to Beneficiary.................................. 31 11.11 Beneficiary Designation................................. 32 11.12 QJSA and QPSA Information and Elections ................ 32 12 ADP AND ACP TESTS................................................. 35 ----------------- 12.1 Contribution Limitation Definitions..................... 35 12.2 ADP and ACP Tests....................................... 38 12.3 Correction of ADP and ACP Tests......................... 38 12.4 Multiple Use Test....................................... 39 12.5 Correction of Multiple Use Test......................... 39 12.6 Adjustment for Investment Gain or Loss.................. 39 12.7 Testing Responsibilities and Required Records........... 39 12.8 Separate Testing........................................ 40 13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS...................... 41 -------------------------------------------- 13.1 "Annual Addition" Defined............................... 41 13.2 Maximum Annual Addition................................. 41 13.3 Avoiding an Excess Annual Addition...................... 41 13.4 Correcting an Excess Annual Addition.................... 41 13.5 Correcting a Multiple Plan Excess....................... 42 13.6 "Defined Benefit Fraction" Defined...................... 42 13.7 "Defined Contribution Fraction" Defined................. 42 13.8 Combined Plan Limits and Correction..................... 42 14 TOP HEAVY RULES................................................... 43 --------------- 14.1 Top Heavy Definitions................................... 43 14.2 Special Contributions................................... 44 14.3 Adjustment to Combined Limits for Different Plans................................................. 45 15 PLAN ADMINISTRATION............................................... 46 ------------------- 15.1 Plan Delineates Authority and Responsibility............ 46 15.2 Fiduciary Standards..................................... 46 15.3 Company is ERISA Plan Administrator..................... 46 15.4 Administrator Duties.................................... 47 15.5 Advisors May be Retained................................ 47 15.6 Delegation of Administrator Duties...................... 48 15.7 Committee Operating Rules............................... 48 16 MANAGEMENT OF INVESTMENTS......................................... 49 ------------------------- 16.1 Trust Agreement......................................... 49 16.2 Investment Funds........................................ 49 16.3 Authority to Hold Cash.................................. 49 16.4 Trustee to Act Upon Instructions........................ 50 16.5 Administrator Has Right to Vote Registered Investment Company Shares............. 50 16.6 Custom Fund Investment Management ...................... 50 16.7 Authority to Segregate Assets........................... 51 17 TRUST ADMINISTRATION.............................................. 52 -------------------- 17.1 Trustee to Construe Trust............................... 52 17.2 Trustee To Act As Owner of Trust Assets................. 52 17.3 United States Indicia of Ownership...................... 52 17.4 Tax Withholding and Payment............................. 53 17.5 Trustee Duties and Limitations.......................... 53 17.6 Trust Accounting........................................ 53 17.7 Valuation of Certain Assets............................. 54 17.8 Legal Counsel........................................... 54 17.9 Fees and Expenses....................................... 54 18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION................. 55 ------------------------------------------------- 18.1 Plan Does Not Affect Employment Rights.................. 55 18.2 Limited Return of Contributions......................... 55 18.3 Assignment and Alienation............................... 55 18.4 Facility of Payment..................................... 56 18.5 Reallocation of Lost Participant's Accounts............. 56 18.6 Claims Procedure........................................ 56 18.7 Construction............................................ 57 18.8 Jurisdiction and Severability........................... 57 18.9 Indemnification by Employer............................. 57 19 AMENDMENT, MERGER AND TERMINATION................................. 58 --------------------------------- 19.1 Amendment............................................... 58 19.2 Merger.................................................. 58 19.3 Plan Termination........................................ 58 19.4 Termination of Employer's Participation................. 59 19.5 Replacement of the Trustee.............................. 59 19.6 Final Settlement and Accounting of Trustee.............. 59 APPENDIX A - INVESTMENT FUNDS.............................................. 61 APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES............................. 62 APPENDIX C - LOAN INTEREST RATE............................................ 63 1 DEFINITIONS When capitalized, the words and phrases below have the following meanings unless different meanings are clearly required by the context: 1.1 "Account". The records maintained for purposes of accounting for a Participant's interest in the Plan. "Account" may refer to one or all of the following accounts which have been created on behalf of a Participant to hold specific types of Contributions under the Plan: (a) "Pre-Tax Account". An account created to hold Pre-Tax Contributions. (b) "Rollover Account". An account created to hold Rollover Contributions. (c) "Company Match Account". An account created to hold Company Match Contributions. (d) "Company Discretionary Account". An account created to hold Company Discretionary Contributions. (e) "Company Additional Account". An account created to hold Company Additional Contributions. 1.2 "ACP" or "Average Contribution Percentage". The percentage calculated in accordance with Section 12.1. 1.3 "Administrator". The Company, which may delegate all or a portion of the duties of the Administrator under the Plan to a Committee in accordance with Section 15.6. 1.4 "ADP" or "Average Deferral Percentage". The percentage calculated in accordance with Section 12.1. 1.5 "Beneficiary". The person or persons who is to receive benefits after the death of the Participant pursuant to the "Beneficiary Designation" paragraph in Section 11, or as a result of a QDRO. 1.6 "Break in Service". The end of five consecutive Plan Years (or six consecutive Plan Years if absence from employment was due to a Parental Leave) for which a Participant is credited with no Hours of Service. 1.7 "Code". The Internal Revenue Code of 1986, as amended. Reference to any specific Code section shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section. 1.8 "Committee". If applicable, the committee which has been appointed by the Company to administer the Plan in accordance with Section 15.6. 1.9 "Company". Jos. A. Bank Clothiers, Inc. or any successor by merger, purchase or otherwise. 1.10 "Compensation". The sum of a Participant's Taxable Income and salary reductions, if any, pursuant to Code sections 125, 402(e)(3), 402(h), 403(b), 414(h)(2) or 457. For purposes of determining benefits under this Plan, Compensation is limited to $200,000 (as indexed for the cost of living pursuant to Code sections 401(a)(17) and 415(d)) per Plan Year. For purposes of determining benefits under this Plan for Plan Years beginning after December 31, 1993, Compensation is limited to $150,000 (as indexed for the cost of living pursuant to Code sections 401(a)(17) and 415(d)) per Plan Year. For purposes of the preceding sentences, in the case of an HCE who is a 5% Owner or one of the 10 most highly compensated Employees, (i) such HCE and such HCE's family group (as defined below) shall be treated as a single employee and the Compensation of each family group member shall be aggregated with the Compensation of such HCE, and (ii) the limitation on Compensation shall be allocated among such HCE and his or her family group members in proportion to each individual's Compensation before the application of this sentence. For purposes of this Section, the term "family group" shall mean an Employee's spouse and lineal descendants who have not attained age 19 before the close of the year in question. For the purpose of determining HCEs and key employees, Compensation for the entire Plan Year shall be used. For the purpose of determining ADP and ACP, Compensation shall be limited to amounts paid to an Eligible Employee while a Participant. 1.11 "Contribution". An amount contributed to the Plan by the Employer or an Eligible Employee, and allocated by contribution type to Participants' Accounts, as described in Section 1.1. Specific types of contribution include: (a) "Pre-Tax Contribution". An amount contributed by the Employer on an eligible Participant's behalf in conjunction with a Participant's Code section 401(k) salary deferral election. (b) "Rollover Contribution". An amount contributed by an Eligible Employee which originated from another employer's qualified plan. (c) "Company Match Contribution". An amount contributed by the Employer on an eligible Participant's behalf based upon the amount contributed by the eligible Participant. (d) "Company Discretionary Contribution". An amount contributed by the Employer on an eligible Participant's behalf and allocated on a pay based formula to the Participant. (e) "Company Additional Contribution". An amount contributed by the Employer on an eligible Participant's behalf which is fully vested. 1.12 "Contribution Dollar Limit". The annual limit placed on each Participant's Pre- Tax Contributions, which shall be $7,000 per calendar year (as indexed for the cost of living pursuant to Code section 402(g)(5) and 415(d)). For purposes of this Section, a Participant's Pre-Tax Contributions shall include (i) any Employer contribution made under any qualified cash or deferred arrangement as defined in Code section 401(k) to the extent not includible in gross income for the taxable year under Code section 402(e)(3) or 402(h)(1)(B) (determined without regard to Code section 402(g)), and (ii) any Employer contribution to purchase an annuity contract under Code section 403(b) under a salary reduction agreement (within the meaning of Code section 3121(a)(5)(D)). 1.13 "Direct Rollover". A payment from the Plan to an Eligible Retirement Plan specified by a Distributee. 1.14 "Disability". A Participant's total and permanent, mental or physical disability resulting in termination of employment as evidenced by presentation of medical evidence satisfactory to the Administrator. 1.15 "Distributee". An Employee or former Employee, the surviving spouse of an Employee or former Employee and a spouse or former spouse of an Employee or former Employee determined to be an alternate payee under a QDRO. 1.16 "Effective Date". April 1, 1994, unless stated otherwise. The date upon which the provisions of this document become effective. In general, the provisions of this document only apply to Participants who are Employees on or after the Effective Date. However, investment and distribution provisions apply to all Participants with Account balances to be invested or distributed after the Effective Date. 1.17 "Eligible Employee". An Employee of an Employer, except any Employee: (a) whose compensation and conditions of employment are covered by a collective bargaining agreement to which an Employer is a party unless the agreement calls for the Employee's participation in the Plan; or (b) who is treated as an Employee because he or she is a Leased Employee. 1.18 "Eligible Retirement Plan". An individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a), that accepts a Distributee's Eligible Rollover Distribution, except that with regard to an Eligible Rollover Distribution to a surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. 1.19 "Eligible Rollover Distribution". A distribution of all or any portion of the balance to the credit of a Distributee, excluding a distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of a Distributee or the joint lives (or joint life expectancies) of a Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; a distribution to the extent such distribution is required under Code section 401(a)(9); and the portion of a distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). 1.20 "Employee". An individual who is: (a) directly employed by any Related Company and for whom any income for such employment is subject to withholding of income or social security taxes, or (b) a Leased Employee. 1.21 "Employer". The Company and any Subsidiary or other Related Company of either the Company or a Subsidiary which adopts this Plan with the approval of the Company. 1.22 "ERISA". The Employee Retirement Income Security Act of 1974, as amended. Reference to any specific section shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section. 1.23 "Forfeiture Account". An account holding amounts forfeited by Participants who have left the Employer, invested in interest bearing deposits of the Trustee, pending disposition as provided in this Plan and Trust and as directed by the Administrator. 1.24 "HCE" or "Highly Compensated Employee". An Employee described as a Highly Compensated Employee in Section 12. 1.25 "Hour of Service". Each hour for which an Employee is entitled to: (a) payment for the performance of duties for any Related Company; (b) payment from any Related Company for any period during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, sickness, incapacity (including disability), layoff, leave of absence, jury duty or military service; (c) back pay, irrespective of mitigation of damages, by award or agreement with any Related Company (and these hours shall be credited to the period to which the agreement pertains); or (d) no payment, but is on a Leave of Absence (and these hours shall be based upon his or her normally scheduled hours per week or a 40 hour week if there is no regular schedule). The crediting of hours for which no duties are performed shall be in accordance with Department of Labor regulation sections 2530.200b-2(b) and (c). Actual hours shall be used whenever an accurate record of hours are maintained for an Employee. Otherwise, an equivalent number of hours shall be credited for each payroll period in which the Employee would be credited with at least 1 hour. The payroll period equivalencies are 45 hours weekly, 90 hours biweekly, 95 hours semimonthly and 190 hours monthly. Hours credited prior to a Break in Service are included. An Employee's service with a predecessor or acquired company shall only be counted in the determination of his or her Hours of Service for eligibility and/or vesting purposes if (1) the Company directs that credit for such service be granted, or (2) a qualified plan of the predecessor or acquired company is subsequently maintained by any Employer or Related Company. 1.26 "Ineligible". The Plan status of an individual during the period in which he or she is (1) an Employee of a Related Company which is not then an Employer, (2) an Employee, but not an Eligible Employee, or (3) not an Employee. 1.27 "Investment Fund" or "Fund". An investment fund as described in Section 16.2. The Investment Funds authorized by the Administrator to be offered as of the Effective Date to Participants and Beneficiaries are as set forth in Appendix A. 1.28 "Leased Employee". An individual who is deemed to be an employee of any Related Company as provided in Code section 414(n) or (o). 1.29 "Leave of Absence". A period during which an individual is deemed to be an Employee, but is absent from active employment, provided that the absence: (a) was authorized by a Related Company; or (b) was due to military service in the United States armed forces and the individual returns to active employment within the period during which he or she retains employment rights under federal law. 1.30 "NHCE" or "Non-Highly Compensated Employee". An Employee described as a Non-Highly Compensated Employee in Section 12. 1.31 "Normal Retirement Date". The later of the date on which a Participant attains age 65 or completes five Years of Vesting Service. 1.32 "Owner". A person with an ownership interest in the capital, profits, outstanding stock or voting power of a Related Company within the meaning of Code section 318 or 416 (which exclude indirect ownership through a qualified plan). 1.33 "Parental Leave". The period of absence from work by reason of pregnancy, the birth of an Employee's child, the placement of a child with the Employee in connection with the child's adoption, or caring for such child immediately after birth or placement as described in Code section 410(a)(5)(E). 1.34 "Participant". An Eligible Employee who begins to participate in the Plan after completing the eligibility requirements as described in Section 2.1. A Participant's participation continues until his or her employment with all Related Companies ends and his or her Account is distributed or forfeited. 1.35 "Pay". All cash compensation paid to an Eligible Employee by an Employer while a Participant during the current period. Pay is neither increased nor decreased by any salary credit or reduction pursuant to Code sections 125 or 402(e)(3). Pay is limited to $200,000 (as indexed for the cost of living pursuant to Code sections 401(a)(17) and 415(d)) per Plan Year. Pay is limited to $150,000 (as indexed for the cost of living pursuant to Code sections 401(a)(17) and 415(d)) per Plan Year effective for Plan Years beginning after December 31, 1993. 1.36 "Plan". The Jos. A. Bank Clothiers, Inc. Retirement & Savings Plan set forth in this document, as from time to time amended. 1.37 "Plan Year". The annual accounting period of the Plan and Trust which ends on each June 30. 1.38 "QDRO". A domestic relations order which the Administrator has determined to be a qualified domestic relations order within the meaning of Code section 414(p). 1.39 "Related Company". With respect to any Employer, that Employer and any corporation, trade or business which is, together with that Employer, a member of the same controlled group of corporations, a trade or business under common control, or an affiliated service group within the meaning of Code section 414(b), (c), (m) or (o). 1.40 "Settlement Date". For each Trade Date, the Trustee's next business day. 1.41 "Spousal Consent". The written consent given by a spouse to a Participant's election or waiver of a specified form of benefit, including a loan or in-service withdrawal, or Beneficiary designation. The spouse's consent must acknowledge the effect on the spouse of the Participant's election, waiver or designation and be duly witnessed by a Plan representative or notary public. Spousal Consent shall be valid only with respect to the spouse who signs the Spousal Consent and only for the particular choice made by the Participant which requires Spousal Consent. A Participant may revoke (without Spousal Consent) a prior election, waiver or designation that required Spousal Consent at any time before payments begin. Spousal Consent also means a determination by the Administrator that there is no spouse, the spouse cannot be located, or such other circumstances as may be established by applicable law. 1.42 "Subsidiary". A company which is 50% or more owned, directly or indirectly, by the Company. 1.43 "Sweep Account". The subsidiary Account for each Participant through which all transactions are processed, which is invested in interest bearing deposits of the Trustee. 1.44 "Sweep Date". The cut off date and time for receiving instructions for transactions to be processed on the next Trade Date. 1.45 "Taxable Income". Compensation in the amount reported by the Employer as "Wages, tips, other compensation" on Form W-2, or any successor method of reporting under Code section 6041(d). 1.46 "Trade Date". Each day the Investment Funds are valued, which is normally every day the assets of such Funds are traded. 1.47 "Trust". The legal entity created by those provisions of this document which relate to the Trustee. The Trust is part of the Plan and holds the Plan assets which are comprised of the aggregate of Participants' Accounts and the Forfeiture Account. 1.48 "Trustee". Wells Fargo Bank, National Association. 1.49 "Year of Vesting Service". A 12 consecutive month period ending on the last day of a Plan Year in which an Employee is credited with at least 1,000 Hours of Service. Years of Vesting Service shall include service credited prior to February 1, 1976. 2 ELIGIBILITY 2.1 Eligibility All Participants as of April 1, 1994 shall continue their eligibility to participate. Each other Eligible Employee shall become a Participant on the first July 1, October 1, January 1 or April 1 after the date he or she completes a 12 month eligibility period in which he or she is credited with at least 1,000 Hours of Service. The initial eligibility period begins on the date an Employee first performs an Hour of Service. Subsequent eligibility periods begin with the start of each Plan Year beginning after the first Hour of Service is performed. 2.2 Ineligible Employees If an Employee completes the above eligibility requirements, but is Ineligible at the time participation would otherwise begin (if he or she were not Ineligible), he or she shall become a Participant on the first subsequent date on which he or she is an Eligible Employee. 2.3 Ineligible or Former Participants A Participant may not make or share in Plan Contributions, nor generally be eligible for a new Plan loan, during the period he or she is Ineligible, but he or she shall continue to participate for all other purposes. An Ineligible Participant or former Participant shall automatically become an active Participant on the date he or she again becomes an Eligible Employee. 3 PARTICIPANT CONTRIBUTIONS 3.1 Pre-Tax Contribution Election Upon becoming a Participant, an Eligible Employee may elect to reduce his or her Pay by an amount which does not exceed the Contribution Dollar Limit, within the limits described in the Contribution Percentage Limits paragraph of this Section 3, and have such amount contributed to the Plan by the Employer as a Pre-Tax Contribution. The election shall be made as a whole percentage of Pay in such manner and with such advance notice as prescribed by the Administrator. In no event shall an Employee's Pre-Tax Contributions under the Plan and all other plans, contracts or arrangements of all Related Companies exceed the Contribution Dollar Limit for the Employee's taxable year beginning in the Plan Year. 3.2 Changing a Contribution Election A Participant who is an Eligible Employee may change his or her Pre-Tax Contribution election as of any July 1, October 1, January 1 or April 1 in such manner and with such advance notice as prescribed by the Administrator. The changed percentage shall become effective with the first payroll paid after such date. Participants' Contribution election percentages shall automatically apply to Pay increases or decreases. 3.3 Revoking and Resuming a Contribution Election A Participant may revoke his or her Contribution election at any time in such manner and with such advance notice as prescribed by the Administrator, and such election shall be effective with the first payroll paid after such date. A Participant may resume Contributions by making a new Contribution election at the same time in which a Participant may change his or her election, but no earlier than six months after the date he or she revoked his or her Contribution election,in such manner and with such advance notice as prescribed by the Administrator, and such election shall be effective with the first payroll paid after such date. 3.4 Contribution Percentage Limits The Administrator may establish and change from time to time, without the necessity of amending this Plan and Trust document, the minimum, if applicable, and maximum Pre-Tax Contribution percentages, prospectively or retrospectively (for the current Plan Year), for all Participants. In addition, the Administrator may establish any lower percentage limits for Highly Compensated Employees as it deems necessary. As of the Effective Date, the Pre-Tax Contribution maximum percentage is 15%. Irrespective of the limits that may be established by the Administrator in accordance with this paragraph, in no event shall the contributions made by or on behalf of a Participant for a Plan Year exceed the maximum allowable under Code section 415. 3.5 Refunds When Contribution Dollar Limit Exceeded A Participant who makes Pre-Tax Contributions for a calendar year to this and any other qualified defined contribution plan in excess of the Contribution Dollar Limit may notify the Administrator in writing by the following March 1 (or as late as April 14 if allowed by the Administrator) that an excess has occurred. In this event, the amount of the excess specified by the Participant, adjusted for investment gain or loss, shall be refunded to him or her by April 15 and shall not be included as an Annual Addition under Code section 415 for the year contributed. Refunds shall not include investment gain or loss for the period between the end of the applicable Plan Year and the date of distribution. Any Company Match Contributions attributable to refunded excess Pre-Tax Contributions as described in this Section shall be deemed a Contribution made by reason of a mistake of fact and removed from the Participant's Account. 3.6 Timing, Posting and Tax Considerations Participants' Contributions, other than Rollover Contributions, may only be made through payroll deduction. Such amounts shall be paid to the Trustee in cash and posted to each Participant's Account(s) as soon as such amounts can reasonably be separated from the Employer's general assets and balanced against the specific amount made on behalf of each Participant. In no event, however, shall such amounts be paid to the Trustee more than 90 days after the date amounts are deducted from a Participant's Pay. Pre-Tax Contributions shall be treated as employer contributions in determining tax deductions under Code section 404(a). 4 ROLLOVERS & TRUST-TO-TRUST TRANSFERS 4.1 Rollovers The Administrator may authorize the Trustee to accept a rollover contribution in cash, within the meaning of Code section 402(c) or 408(d)(3)(A)(ii), directly from an Eligible Employee or as a Direct Rollover from another qualified plan on behalf of the Eligible Employee, if he or she is a Participant. The Employee shall be responsible for furnishing satisfactory evidence, in such manner as prescribed by the Administrator, that the amount is eligible for rollover treatment. A rollover contribution received directly from an Eligible Employee must be paid to the Trustee in cash within 60 days after the date received by the Eligible Employee from a qualified plan or conduit individual retirement account. Contributions described in this paragraph shall be posted to the applicable Employee's Rollover Account as of the date received by the Trustee. If it is later determined that an amount contributed pursuant to the above paragraph did not in fact qualify as a rollover contribution under Code section 402(c) or 408(d)(3)(A)(ii), the balance credited to the Employee's Rollover Account shall immediately be (1) segregated from all other Plan assets, (2) treated as a nonqualified trust established by and for the benefit of the Employee, and (3) distributed to the Employee. Any such nonqualifying rollover shall be deemed never to have been a part of the Plan. 4.2 Transfers From Other Qualified Plans The Administrator may instruct the Trustee to receive assets in cash or in kind directly from another qualified plan. The Trustee may refuse the receipt of any transfer if: (a) the Trustee finds the in-kind assets unacceptable; (b) instructions for posting amounts to Participants' Accounts are incomplete; (c) any amounts are not exempted by Code section 401(a)(11)(B) from the annuity requirements of Code section 417; or (d) any amounts include benefits protected by Code section 411(d)(6) which would not be preserved under applicable Plan provisions. Such amounts shall be posted to the appropriate Accounts of Participants as of the date received by the Trustee. 5 EMPLOYER CONTRIBUTIONS 5.1 Company Match Contributions (a) Frequency and Eligibility. For each quarter of the Plan Year, the Employer shall make Company Match Contributions as described in the following Allocation Method paragraph on behalf of each Participant who contributed during the period. (b) Allocation Method. The Company Match Contributions (including any Forfeiture Account amounts applied as Company Match Contributions in accordance with Section 8.4) for each period shall total 50% of each eligible Participant's Pre-Tax Contributions for the period, provided that no Company Match Contributions (and Forfeiture Account amounts) shall be made based upon a Participant's Contributions in excess of 3% of his or her Pay. The Employer may change the 50% matching rate or the 3% of considered Pay to any other percentages, including 0%, generally by notifying eligible Participants in sufficient time to adjust their Contribution elections prior to the start of the period for which the new percentages apply. (c) Timing, Medium and Posting. The Employer shall make each period's Company Match Contribution in cash as soon as is feasible, and not later than the Employer's federal tax filing date, including extensions, for deducting such Contribution. The Trustee shall post such amount to each Participant's Company Match Account once the total Contribution received has been balanced against the specific amount to be credited to each Participant's Company Match Account. 5.2 Company Discretionary Contributions (a) Frequency and Eligibility. For each Plan Year, the Employer may make a Company Discretionary Contribution on behalf of each Participant who: (1) was an Eligible Employee on the last day of the period, and (2) was credited with at least 1,000 Hours of Service for the Plan Year. In addition, such Contributions shall be made on behalf of each Participant who met the requirements of (2) but who ceased being an Employee during the period after having attained his or her Normal Retirement Date, or by reason of his or her Disability or death. (b) Allocation Method. The Company Discretionary Contribution for each period, shall be in an amount up to the greater of (i) the percentage equal to the tax rate under Code section 3111(a) for the calendar year which includes the first day of the Plan Year and which is attributable to old-age insurance or (ii) 5.7%, as determined by the Employer and allocated among eligible Participants in direct proportion to their Pay and an identical percentage of each eligible Participant's Excess Pay. The remaining amount, if any, shall be allocated in direct proportion to each eligible Participant's Pay. Excess Pay for this purpose shall mean Pay in excess of the Social Security Taxable Wage Base for the calendar year which includes the first day of the Plan Year. (c) Timing, Medium and Posting. The Employer shall make each period's Company Discretionary Contribution in cash as soon as is feasible, and not later than the Employer's federal tax filing date, including extensions, for deducting such Contribution. The Trustee shall post such amount to each Participant's Company Discretionary Account once the total Contribution received has been balanced against the specific amount to be credited to each Participant's Company Discretionary Account. 5.3 Company Additional Contributions (a) Frequency and Eligibility. For each Plan Year, the Employer may make a Company Additional Contribution on behalf of each Non-Highly Compensated Employee Participant who contributed during the period and was an Eligible Employee on the last day of the period. In addition, such Contributions shall be made on behalf of each Non- Highly Compensated Employee Participant who contributed during the period and who ceased being an Employee during the period after having attained his or her Normal Retirement Date, or by reason of his or her Disability or death. (b) Allocation Method. The Company Additional Contribution for each period shall be in an amount determined by the Employer and allocated among eligible Participants as follows: (1) to the extent the Company Additional Contributions are treated as Deferrals, as such term is defined in Section 12.1, in direct proportion to each eligible Participant's Pay, subject to a maximum dollar amount which may be contributed on behalf of any Participant as determined by the Administrator, and (2) to the extent the Company Additional Contributions are treated as Contributions, as such term is defined in Section 12.1, as a percentage of each eligible Participant's Pre-Tax Contributions, subject to a maximum dollar amount which may be contributed on behalf of any Participant as determined by the Administrator. (c) Timing, Medium and Posting. The Employer shall make each period's Company Additional Contribution in cash as soon as is feasible, and not later than the Employer's federal tax filing date, including extensions, for deducting such contribution. Notwithstanding, for purposes of satisfying the tests described in Sections 12.2 and 12.4 Company Additional Contributions must be made before the end of the Plan Year following the Plan Year being tested. The Trustee shall post such amount to each Participant's Company Additional Contribution Account once the total Contribution received has been balanced against the specific amount to be credited to each Participant's Company Additional Contribution Account. 6 ACCOUNTING 6.1 Individual Participant Accounting The Administrator shall maintain an individual set of Accounts for each Participant in order to reflect transactions both by type of Contribution and investment medium. Financial transactions shall be accounted for at the individual Account level by posting each transaction to the appropriate Account of each affected Participant. Participant Account values shall be maintained in shares for the Investment Funds and in dollars for their Sweep and Participant loan Accounts. At any point in time, the Account value shall be determined using the most recent Trade Date values provided by the Trustee. 6.2 Sweep Account is Transaction Account All transactions related to amounts being contributed to or distributed from the Trust shall be posted to each affected Participant's Sweep Account. Any amount held in the Sweep Account will be credited with interest up until the date on which it is removed from the Sweep Account. 6.3 Trade Date Accounting and Investment Cycle Participant Account values shall be determined as of each Trade Date. For any transaction to be processed as of a Trade Date, the Trustee must receive instructions for the transaction by the Sweep Date. Such instructions shall apply to amounts held in the Account on that Sweep Date. Financial transactions of the Investment Funds shall be posted to Participants' Accounts as of the Trade Date, based upon the Trade Date values provided by the Trustee, and settled on the Settlement Date. 6.4 Accounting for Investment Funds Investments in each Investment Fund shall be maintained in shares. The Trustee is responsible for determining the share values of each Investment Fund as of each Trade Date. To the extent an Investment Fund is comprised of collective investment funds of the Trustee, or any other fiduciary to the Plan, the share values shall be determined in accordance with the rules governing such collective investment funds, which are incorporated herein by reference. All other share values shall be determined by the Trustee. The share value of each Investment Fund shall be based on the fair market value of its underlying assets. 6.5 Payment of Fees and Expenses Except to the extent Plan fees and expenses related to Account maintenance, transaction and Investment Fund management and maintenance, as set forth below, are paid by the Employer directly, or indirectly, through the Forfeiture Account as directed by the Administrator, such fees and expenses shall be paid as set forth below. The Employer may pay a lower portion of the fees and expenses allocable to the Accounts of Participants who are no longer Employees. (a) Account Maintenance: Account maintenance fees and expenses, may include but are not limited to, administrative, Trustee, government annual report preparation, audit, legal, nondiscrimination testing, and fees for any other special services. Account maintenance fees shall be charged to Participants on a per Participant basis provided that no fee shall reduce a Participant's Account balance below zero. (b) Transaction: Transaction fees and expenses, may include but are not limited to, recurring payment, Investment Fund election change and loan fees. Transaction fees shall be charged to the Participant's Account involved in the transaction provided that no fee shall reduce a Participant's Account balance below zero. (c) Investment Fund Management and Maintenance: Management and maintenance fees and expenses related to the Investment Funds shall be charged at the Investment Fund level and reflected in the net gain or loss of each Fund. As of the Effective Date, a breakdown of which Plan fees and expenses shall generally be borne by the Trust (and charged to individual Participants' Accounts) and those that shall be paid by the Employer, directly or indirectly, is set forth in Appendix B and may be changed from time to time, without the necessity of amending this Plan and Trust Document. The Trustee shall have the authority to pay any such fees and expenses, which remain unpaid by the Employer for 60 days, from the Trust. 6.6 Accounting for Participant Loans Participant loans shall be held in a separate Account of the Participant and accounted for in dollars as an earmarked asset of the borrowing Participant's Account. 6.7 Error Correction The Administrator may correct any errors or omissions in the administration of the Plan by restoring any Participant's Account balance with the amount that would be credited to the Account had no error or omission been made. Funds necessary for any such restoration shall be provided through payment made by the Employer, or by the Trustee to the extent the error or omission is attributable to actions or inactions of the Trustee, or if the restoration involves an employer contribution account, the Administrator may direct the Trustee to use amounts from the Forfeiture Account. 6.8 Participant Statements The Administrator shall provide Participants with statements of their Accounts as soon after the end of each quarter of the Plan Year as is administratively feasible. 6.9 Special Accounting During Conversion Period The Administrator and Trustee may use any reasonable accounting methods in performing their respective duties during the period of converting the prior accounting system of the Plan and Trust to conform to the individual Participant accounting system described in this Section. This includes, but is not limited to, the method for allocating net investment gains or losses and the extent, if any, to which contributions received by and distributions paid from the Trust during this period share in such allocation. 6.10 Accounts for QDRO Beneficiaries A separate Account shall be established for an alternate payee entitled to any portion of a Participant's Account under a QDRO as of the date and in accordance with the directions specified in the QDRO. In addition, a separate Account may be established during the period of time the Administrator, a court of competent jurisdiction or other appropriate person is determining whether a domestic relations order qualifies as a QDRO. Such a separate Account shall be valued and accounted for in the same manner as any other Account. (a) Distributions Pursuant to QDROs. If a QDRO so provides, the portion of a Participant's Account payable to an alternate payee may be distributed, in a form as permissible under the Distribution Once Employment Ends Section and Code section 414(p), to the alternate payee at the time specified in the QDRO, regardless of whether the Participant is entitled to a distribution from the Plan at such time. (b) Participant Loans. Except to the extent required by law, an alternate payee, on whose behalf a separate Account has been established, shall not be entitled to borrow from such Account. If a QDRO specifies that the alternate payee is entitled to any portion of the Account of a Participant who has an outstanding loan balance, all outstanding loans shall generally continue to be held in the Participant's Account and shall not be divided between the Participant's and alternate payee's Accounts. (c) Investment Direction. Where a separate Account has been established on behalf of an alternate payee and has not yet been distributed, the alternate payee may direct the investment of such Account in the same manner as if he or she were a Participant. 7 INVESTMENT FUNDS AND ELECTIONS 7.1 Investment Funds Except for Participants' Sweep and loan Accounts, the Trust shall be maintained in various Investment Funds. The Administrator shall select the Investment Funds offered to Participants and may change the number or composition of the Investment Funds, subject to the terms and conditions agreed to with the Trustee. As of the Effective Date, a list of the Investment Funds offered to Participants is set forth in Appendix A, and may be changed from time to time, without the necessity of amending this Plan and Trust document. 7.2 Investment Fund Elections Each Participant shall direct the investment of all of his or her Contribution Accounts. A Participant shall make his or her investment election in any combination of one or any number of the Investment Funds offered in accordance with the procedures established by the Administrator and Trustee. However, during the period of converting the prior accounting system of the Plan and Trust to conform to the individual Participant accounting system described in Section 6, Trust assets may be held in any investment vehicle permitted by the Plan, as directed by the Administrator, irrespective of Participant investment elections. The Administrator may set a maximum percentage of the total election that a Participant may direct into any specific Investment Fund, which maximum, if any, is set forth in Appendix A, and may be changed from time to time, without the necessity of amending this Plan and Trust document. 7.3 Responsibility for Investment Choice Each Participant shall be solely responsible for the selection of his or her Investment Fund choices. No fiduciary with respect to the Plan is empowered to advise a Participant as to the manner in which his or her Accounts are to be invested, and the fact that an Investment Fund is offered shall not be construed to be a recommendation for investment. 7.4 Default if No Election The Administrator shall specify an Investment Fund for the investment of that portion of a Participant's Account which is not yet held in an Investment Fund and for which no valid investment election is on file. The Investment Fund specified as of the Effective Date is as set forth in Appendix A, and may be changed from time to time, without the necessity of amending this Plan and Trust document. 7.5 Timing A Participant shall make his or her initial investment election upon becoming a Participant and may change his or her election at any time in accordance with the procedures established by the Administrator and Trustee. Investment elections received by the Trustee by the Sweep Date will be effective on the following Trade Date. 7.6 Investment Fund Election Change Fees A reasonable processing fee may be charged directly to a Participant's Account for Investment Fund election changes in excess of a specified number per year as determined by the Administrator. 8 VESTING & FORFEITURES 8.1 Fully Vested Contribution Accounts A Participant shall be fully vested in these Accounts at all times: Pre-Tax Account Rollover Account Company Match Account Company Additional Account 8.2 Full Vesting upon Certain Events A Participant's entire Account shall become fully vested once he or she has attained his or her Normal Retirement Date as an Employee or upon his or her leaving the Employer due to his or her Disability or death. 8.3 Vesting Schedule In addition to the vesting provided above, a Participant's Company Discretionary Account shall become vested in accordance with the following schedule: Years of Vesting Vested Service Percentage ------- ---------- Less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 but less than 6 80% 6 or more 100% If this vesting schedule is changed, the vested percentage for each Participant shall not be less than his or her vested percentage determined as of the last day prior to this change, and for any Participant with at least three Years of Vesting Service when the schedule is changed, vesting shall be determined using the more favorable vesting schedule. 8.4 Forfeitures A Participant's non-vested Account balance shall be forfeited as of the Settlement Date following the Sweep Date on which the Administrator has reported to the Trustee that the Participant's employment has terminated with all Related Companies. Forfeitures from all Employer Contribution Accounts shall be transferred to and maintained in a single Forfeiture Account, which shall be invested in interest bearing deposits of the Trustee. Forfeiture Account amounts shall be utilized to restore Accounts, to pay Plan fees and expenses and to reduce Company Match Contributions as directed by the Administrator. 8.5 Rehired Employees (a) Service. If a former Employee is rehired, all Years of Vesting Service credited prior to his or her termination of employment shall be counted in determining his or her vested interest. (b) Account Restoration. If a former Employee is rehired before he or she has a Break in Service, the amount forfeited when his or her employment last terminated shall be restored to his or her Account. The restoration shall include the interest which would have been credited had such forfeiture been invested in the Sweep Account from the date forfeited until the date the restoration amount is determined. The amount shall come from the Forfeiture Account to the extent possible, and any additional amount needed shall be contributed by the Employer. The vested interest in his or her restored Account shall then be equal to: V% times (AB + D) - D where: V% = current vested percentage AB = current account balance D = amount previously distributed 9 PARTICIPANT LOANS 9.1 Participant Loans Permitted Loans to Participants are permitted pursuant to the terms and conditions set forth in this Section. 9.2 Limitations on Purpose of Participant Loan A Participant may only borrow to satisfy a financial need determined to be a hardship. Hardship for this purpose shall have the meaning set forth in Section 10.7(b). 9.3 Loan Application, Note and Security A Participant shall apply for any loan in such manner and with such advance notice as prescribed by the Administrator. All loans shall be evidenced by a promissory note, secured only by the portion of the Participant's Account from which the loan is made, and the Plan shall have a lien on this portion of his or her Account. 9.4 Spousal Consent A Participant is required to obtain Spousal Consent in order to take out a loan under the Plan. 9.5 Loan Approval The Administrator, or the Trustee if otherwise authorized by the Administrator and expressly agreed to by the Trustee, is responsible for determining that an loan request conforms to the requirements described in this Section and granting such request. 9.6 Loan Funding Limits The loan amount must meet all of the following limits as determined as of the Sweep Date the loan is processed: (a) Plan Minimum Limit. The minimum amount for any loan is $1,000. (b) Plan Maximum Limit. Subject to the legal limit described in (c) below, the maximum a Participant may borrow, including the outstanding balance of existing Plan loans, is 100% of the following Accounts which are fully vested: Pre-Tax Account Company Match Account Rollover Account (c) Legal Maximum Limit. The maximum a Participant may borrow, including the outstanding balance of existing Plan loans, is 50% of his or her vested Account balance, not to exceed $50,000. However, the $50,000 maximum is reduced by the Participant's highest outstanding loan balance during the 12 month period ending on the day before the Sweep Date as of which the loan is made. For purposes of this paragraph, the qualified plans of all Related Companies shall be treated as though they are part of this Plan to the extent it would decrease the maximum loan amount. 9.7 Maximum Number of Loans A Participant may have only one loan outstanding at any given time. 9.8 Source and Timing of Loan Funding A loan to a Participant shall be made solely from the assets of his or her own Accounts. The available assets shall be determined first by Account type and then by investment type within each type of Account. The hierarchy for loan funding by type of Account shall be the order listed in the preceding Plan Maximum Limit paragraph. Within each Account used for funding a loan, amounts shall first be taken from the Sweep Account and then taken by type of investment in direct proportion to the market value of the Participant's interest in each Investment Fund as of the Trade Date on which the loan is processed. Loans will be funded on the Settlement Date following the Trade Date as of which the loan is processed. The Trustee shall make payment to the Participant as soon thereafter as administratively feasible. 9.9 Interest Rate The interest rate charged on Participant loans shall be a fixed reasonable rate of interest, determined from time to time by the Administrator, which provides the Plan with a return commensurate with the prevailing interest rate charged by persons in the business of lending money for loans which would be made under similar circumstances. As of the Effective Date, the interest rate is determined as set forth in Appendix C, and may be changed from time to time, without the necessity of amending this Plan and Trust document. 9.10 Repayment Substantially level amortization shall be required of each loan with payments made at least monthly, generally through payroll deduction. Loans may be prepaid in full or in part at any time. The Participant may choose the loan repayment period, not to exceed 5 years. 9.11 Repayment Hierarchy Loan principal repayments shall be credited to the Participant's Accounts in the inverse of the order used to fund the loan. Loan interest shall be credited to the Participant's Accounts in direct proportion to the principal payment. Loan payments are credited by investment type based upon the Participant's current investment election for new Contributions. 9.12 Repayment Suspension The Administrator may agree to a suspension of loan payments for up to 6 months for a Participant who is on a Leave of Absence. During the suspension period interest shall continue to accrue on the outstanding loan balance. At the expiration of the suspension period all outstanding loan payments and accrued interest thereon shall be due unless otherwise agreed upon by the Administrator. 9.13 Loan Default A loan is treated as a default if scheduled loan payments are more than 90 days late. A Participant shall then have 30 days from the time he or she receives written notice of the default and a demand for past due amounts to cure the default before it becomes final. In the event of default, the Administrator may direct the Trustee to report the default as a taxable distribution. As soon as a Plan withdrawal or distribution to such Participant would otherwise be permitted, the Administrator may instruct the Trustee to execute upon its security interest in the Participant's Account by distributing the note to the Participant. 9.14 Call Feature The Administrator shall have the right to call any Participant loan once a Participant's employment with all Related Companies has terminated or if the Plan is terminated. 10 IN-SERVICE WITHDRAWALS 10.1 In-Service Withdrawals Permitted In-service withdrawals to a Participant who is an Employee are permitted pursuant to the terms and conditions set forth in this Section and as required by law as set forth in Section 11.7. 10.2 In-Service Withdrawal Application and Notice A Participant shall apply for any in-service withdrawal in such manner and with such advance notice as prescribed by the Administrator. The Participant shall be provided the notice prescribed by Code section 402(f). If an in-service withdrawal is one to which Code sections 401(a)(11) and 417 do not apply, such in-service withdrawal may commence less than 30 days after the aforementioned notice is provided, if: (a) the Participant is clearly informed that he or she has the right to a period of at least 30 days after receipt of such notice to consider his or her option to elect or not elect a Direct Rollover for the portion, if any, of his or her in-service withdrawal which will constitute an Eligible Rollover Distribution; and (b) the Participant after receiving such notice, affirmatively elects a Direct Rollover for the portion, if any, of his or her in-service withdrawal which will constitute an Eligible Rollover Distribution or alternatively elects to have such portion made payable directly to him or her, thereby not electing a Direct Rollover. 10.3 Spousal Consent A Participant is required to obtain Spousal Consent in order to make an in- service withdrawal under the Plan. 10.4 In-Service Withdrawal Approval The Administrator, or the Trustee if otherwise authorized by the Administrator and expressly agreed to by the Trustee, is responsible for determining that an in-service withdrawal request conforms to the requirements described in this Section and granting such request. 10.5 Minimum Amount, Payment Form and Medium There is no minimum amount for any type of withdrawal. With regard to the portion of a withdrawal representing an Eligible Rollover Distribution, a Participant may elect a Direct Rollover. The form of payment for an in-service withdrawal shall be a single lump sum and payment shall be made in cash. 10.6 Source and Timing of In-Service Withdrawal Funding An in-service withdrawal to a Participant shall be made solely from the assets of his or her own Accounts and will be based on the Account values as of the Trade Date the in-service withdrawal is processed. The available assets shall be determined first by Account type and then by investment type within each type of Account. Within each Account used for funding an in-service withdrawal, amounts shall first be taken from the Sweep Account and then taken by type of investment in direct proportion to the market value of the Participant's interest in each Investment Fund (which excludes Participant loans) as of the Trade Date on which the in-service withdrawal is processed. In-Service withdrawals will be funded on the Settlement Date following the Trade Date as of which the in-service withdrawal is processed. The Trustee shall make payment as soon thereafter as administratively feasible. 10.7 Hardship Withdrawals (a) Requirements. A Participant who is an Employee may request the withdrawal of up to the amount necessary to satisfy a financial need including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the withdrawal. Only requests for withdrawals (1) on account of a Participant's "Deemed Financial Need", and (2) which are "Deemed Necessary" to satisfy the financial need will be approved. (b) "Deemed Financial Need". Financial commitments relating to: (1) the payment of unreimbursable medical expenses described under Code section 213(d) incurred (or to be incurred) by the Employee, his or her spouse or dependents; (2) the purchase (excluding mortgage payments) of the Employee's principal residence; (3) the payment of unreimbursable tuition and related educational fees for up to the next 12 months of post-secondary education for the Employee, his or her spouse or dependents; (4) the payment of funeral expenses of an Employee's family member; (5) the payment of amounts necessary for the Employee to prevent losing his or her principal residence through eviction or foreclosure on the mortgage; or (6) any other circumstance specifically permitted under Code section 401(k)(2)(B)(i)(IV). (c) "Deemed Necessary". A withdrawal is "deemed necessary" to satisfy the financial need only if the withdrawal amount does not exceed the financial need and all of these conditions are met: (1) the Employee has obtained all other possible withdrawals and nontaxable loans available from all plans maintained by Related Companies; (2) the Administrator shall suspend the Employee from making any contributions to this Plan, all other qualified and nonqualified plans of deferred compensation and all stock option or stock purchase plans maintained by Related Companies for 12 months from the date the withdrawal payment is made; and (3) the Administrator shall reduce the Contribution Dollar Limit for the Employee for the calendar year next following the calendar year of the withdrawal by the amount of the Employee's Pre- Tax Contributions for the calendar year of the withdrawal. (d) Account Sources for Withdrawal. The withdrawal amount shall come only from the Participant's fully vested Accounts, in the following priority order: Rollover Account Company Match Account Pre-Tax Account The amount that may be withdrawn from a Participant's Pre-Tax Account shall not include any earnings credited to his or her Pre-Tax Contribution Account after December 31, 1988. (e) Permitted Frequency. There is no restriction on the number of Hardship withdrawals permitted to a Participant. 10.8 Rollover Account Withdrawals No in-service withdrawals are permitted from a Participant's Rollover Account except as provided elsewhere in this Section. 10.9 Over Age 59 1/2 Withdrawals (a) Requirements. A Participant who is an Employee and over age 59 1/2 may withdraw from the Accounts listed in paragraph (b) below. (b) Account Sources for Withdrawal. The withdrawal amount shall come only from the Participant's fully vested Accounts, in the following priority order: Rollover Account Pre-Tax Account Company Additional Account Company Match Account Company Discretionary Account (c) Permitted Frequency. There is no restriction on the number of Over Age 59 1/2 withdrawals permitted to a Participant. (d) Suspension from Further Contributions. An Over Age 59 1/2 withdrawal shall not affect a Participant's ability to make or be eligible to receive further Contributions. 11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW 11.1 Benefit Information, Notices and Election A Participant, or his or her Beneficiary in the case of his or her death, shall be provided with information regarding all optional times and forms of distribution available, to include the notices prescribed by Code section 402(f) and Code section 411(a)-11. Subject to the other requirements of this Section, a Participant, or his or her Beneficiary in the case of his or her death, may elect, in such manner and with such advance notice as prescribed by the Administrator, to have his or her vested Account balance paid to him or her beginning upon any Settlement Date following the Participant's termination of employment with all Related Companies, or if earlier, at the time required by law as set forth in Section 11.7. If a distribution is one to which Code sections 401(a)(11) and 417 do not apply, such distribution may commence less than 30 days after the aforementioned notices are provided, if: (a) the Participant is clearly informed that he or she has the right to a period of at least 30 days after receipt of such notices to consider the decision as to whether to elect a distribution and if so to elect a particular form of distribution and to elect or not elect a Direct Rollover for all or a portion, if any, of his or her distribution which will constitute an Eligible Rollover Distribution; and (b) the Participant after receiving such notice, affirmatively elects a distribution and a Direct Rollover for all or a portion, if any, of his or her distribution which will constitute an Eligible Rollover Distribution or alternatively elects to have all or a portion made payable directly to him or her, thereby not electing a Direct Rollover for all or a portion thereof. 11.2 Spousal Consent A Participant is required to obtain Spousal Consent in order to receive a distribution under the Plan. 11.3 Payment Form and Medium A Participant may elect to be paid in any of these forms, except that the form described in (d) is only available for a Participant who entered the Plan prior to April 1, 1994: (a) a single lump sum, or (b) a portion paid in a lump sum, and the remainder paid later, or (c) periodic installments over a period not to exceed the life expectancy of the Participant and his or her Beneficiary, or (d) for a single Participant, a single life annuity and for a married Participant, a single life annuity or a joint and 50% survivor annuity with the Participant's spouse as the joint annuitant. Any annuity option permitted will be provided through the purchase of a non-transferable single premium contract from an insurance company which must conform to the terms of the Plan and which will be distributed to the Participant or Beneficiary in complete satisfaction of the benefit due. Distributions other than annuity contracts shall generally be made in cash. With regard to the portion of a distribution representing an Eligible Rollover Distribution, a Distributee may elect a Direct Rollover for all or a portion of such amount. 11.4 Small Amounts Paid Immediately If, at the time a Participant's employment with all Related Companies ends, the Participant's vested Account balance is $3,500 or less, the Participant's benefit shall be paid as a single lump sum as soon as administratively feasible after his or her employment with all Related Companies ends in accordance with procedures prescribed by the Administrator. 11.5 Source and Timing of Distribution Funding A distribution to a Participant shall be made solely from the assets of his or her own Accounts and will be based on the Account values as of the Trade Date the distribution is processed. The available assets shall be determined first by Account type and then by investment type within each type of Account. Within each Account used for funding a distribution, amounts shall first be taken from the Sweep Account and then taken by type of investment in direct proportion to the market value of the Participant's interest in each Investment Fund as of the Trade Date on which the distribution is processed. Distributions will be funded on the Settlement Date following the Trade Date as of which the distribution is processed. The Trustee shall make payment as soon thereafter as administratively feasible. 11.6 Deemed Distribution For purposes of Section 8.4, vested Account balances will be deemed distributed as of the Settlement Date following the Sweep Date on which the Administrator has reported to the Trustee that the Participant's employment with all Related Companies has terminated. 11.7 Latest Commencement Permitted In addition to any other Plan requirements and unless a Participant elects otherwise, his or her benefit payments will begin not later than 60 days after the end of the Plan Year in which he or she attains his or her Normal Retirement Date or retires, whichever is later. However, if the amount of the payment or the location of the Participant (after a reasonable search) cannot be ascertained by that deadline, payment shall be made no later than 60 days after the earliest date on which such amount or location is ascertained but in no event later than as described below. Benefit payments shall begin by the April 1 immediately following the end of the calendar year in which the Participant attains age 70 1/2 (whether or not he or she is an Employee). 11.8 Payment Within Life Expectancy The Participant's payment election must be consistent with the requirement of Code section 401(a)(9) that all payments are to be completed within a period not to exceed the lives or the joint and last survivor life expectancy of the Participant and his or her Beneficiary. The life expectancies of a Participant and his or her Beneficiary, if such Beneficiary is his or her spouse, may be recomputed annually. 11.9 Incidental Benefit Rule The Participant's payment election must be consistent with the requirement that, if the Participant's spouse is not his or her sole primary Beneficiary, the minimum annual distribution for each calendar year, beginning with the year in which he or she attains age 70 1/2, shall not be less than the quotient obtained by dividing (a) the Participant's vested Account balance as of the last Trade Date of the preceding year by (b) the applicable divisor as determined under the incidental benefit requirements of Code section 401(a)(9). 11.10 Payment to Beneficiary Payment to a Beneficiary must either: (1) be completed by the end of the calendar year that contains the fifth anniversary of the Participant's death or (2) begin by the end of the calendar year that contains the first anniversary of the Participant's death and be completed within the period of the Beneficiary's life or life expectancy, except that: (a) If the Participant dies after the April 1 immediately following the end of the calendar year in which he or she attains age 70 1/2, payment to his or her Beneficiary must be made at least as rapidly as provided in the Participant's distribution election; (b) If the surviving spouse is the Beneficiary, payments need not begin until the end of the calendar year in which the Participant would have attained age 70 1/2 and must be completed within the spouse's life or life expectancy; and (c) If the Participant and the surviving spouse who is the Beneficiary die (1) before the April 1 immediately following the end of the calendar year in which the Participant would have attained age 70 1/2 and (2) before payments have begun to the spouse, the spouse will be treated as the Participant in applying these rules. 11.11 Beneficiary Designation Each Participant may complete a beneficiary designation form indicating the Beneficiary who is to receive the Participant's remaining Plan interest at the time of his or her death. The designation may be changed at any time. However, a Participant's spouse shall be the sole primary Beneficiary unless the designation includes Spousal Consent for another Beneficiary. If no proper designation is in effect at the time of a Participant's death or if the Beneficiary does not survive the Participant, the Beneficiary shall be, in the order listed, the: (a) Participant's surviving spouse, (b) Participant's children, in equal shares, per stirpes (by right of representation), or (c) Participant's estate. 11.12 QJSA and QPSA Information and Elections The following definitions, information and election rules shall apply to any Participant who entered the Plan prior to April 1, 1994 and who elects a life annuity option: (a) Annuity Starting Date. The first day of the first period for which an amount is payable as an annuity, or, in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred which entitle the Participant to such benefit. (b) "QJSA". A qualified joint and 50% survivor annuity, meaning a form of benefit payment which is the actuarial equivalent of the Participant's vested Account balances at the Annuity Starting Date, payable to the Participant in monthly payments for life and providing that, if the Participant's spouse survives him or her, monthly payments equal to 50% of the amount payable to the Participant during his or her lifetime will be paid to the spouse for the remainder of such person's lifetime. (c) "QPSA". A qualified pre-retirement survivor annuity, meaning that upon the death of a Participant before the Annuity Starting Date, the vested portion of the Participant's Account becomes payable to the surviving spouse as a life annuity (except to the extent of any outstanding Participant loan balance), unless Spousal Consent has been given to a different Beneficiary or the surviving spouse chooses a different form of payment. (d) QJSA Information to a Participant. No less than 30 and no more than 90 days before the Annuity Starting Date, each Participant who requests a life annuity form of payment shall be given a written explanation of (1) the terms and conditions of the QJSA, (2) the right to make an election to waive this form of payment and choose an optional form of payment and the effect of this election, (3) the right to revoke this election and the effect of this revocation, and (4) the need for Spousal Consent. (e) QJSA Election. A Participant may elect (and such election shall include Spousal Consent if married), at any time within the 90 day period ending on the Annuity Starting Date, to (1) waive the right to receive the QJSA and elect an optional form of payment, or (2) revoke or change any such election. (f) QPSA Beneficiary Information to Participant. Upon becoming a Participant (and with updates as needed to insure such information is accurate and readily available to each Participant who is between the ages of 32 and 35), each married Participant shall be given written information stating that (1) his or her death benefit is payable to his or her surviving spouse, (2) his or her ability to choose that the benefit be paid to a different Beneficiary, (3) the right to revoke or change a prior designation and the effects of such revocation or change, and (4) the need for Spousal Consent. (g) QPSA Beneficiary Designation by Participant. A married Participant may designate (with Spousal Consent) a non-spouse Beneficiary at any time after the Participant has been given the information in the QPSA Beneficiary Information to Participant paragraph above and upon the earlier of (1) the date the Participant has terminated employment, or (2) the beginning of the Plan Year in which that Participant attains age 35. (h) QPSA Information to a Surviving Spouse. Each surviving spouse who requests a life annuity form of payment shall be given a written explanation of (1) the terms and conditions of being paid his or her Account balance in the form of a single life annuity, (2) the right to make an election to waive this form of payment and choose an optional form of payment and the effect of making this election, and (3) the right to revoke this election and the effect of this revocation. (i) QPSA Election by Surviving Spouse. A surviving spouse may elect, at any time up to the Annuity Starting Date, to (1) waive the single life annuity and elect an optional form of payment, or (2) revoke or change any such election. 12 ADP AND ACP TESTS 12.1 Contribution Limitation Definitions The following definitions are applicable to this Section 12 (where a definition is contained in both Sections 1 and 12, for purposes of Section 12 the Section 12 definition shall be controlling): (a) "ACP" or "Average Contribution Percentage". The Average Percentage calculated using Contributions allocated to Participants as of a date within the Plan Year. (b) "ACP Test". The determination of whether the ACP is in compliance with the Basic or Alternative Limitation for a Plan Year (as defined in Section 12.2). (c) "ADP" or "Average Deferral Percentage". The Average Percentage calculated using Deferrals allocated to Participants as of a date within the Plan Year. (d) "ADP Test". The determination of whether the ADP is in compliance with the Basic or Alternative Limitation for a Plan Year (as defined in Section 12.2). (e) "Average Percentage". The average of the calculated percentages for Participants within the specified group. The calculated percentage refers to either the "Deferrals" or "Contributions" (as defined in this Section) made on each Participant's behalf for the Plan Year, divided by his or her Compensation for the portion of the Plan Year in which he or she was an Eligible Employee while a Participant. (Pre-Tax Contributions which will be refunded solely because they exceed the Contribution Dollar Limit are included in the percentage for the HCE Group but not for the NHCE Group if such excess Pre-Tax Contributions were made to plans of Related Companies.) (f) "Contributions" shall include Company Match Contributions. In addition, Contributions may include Pre-Tax and Company Additional Contributions, but only to the extent that (1) the Employer elects to use them, (2) they are not used or counted in the ADP Test, (3) Company Additional Contributions are fully vested when made and not withdrawable by an Employee before he or she attains age 59 1/2, and (4) Pre-Tax Contributions are necessary to meet the ACP Test Alternative Limitation (defined in Section 12.2 (b)) or the Multiple Use Test. (g) "Deferrals" shall include Pre-Tax Contributions. In addition, Deferrals may include Company Additional Contributions, but only to the extent that (1) the Employer elects to use them, (2) they are not used or counted in the ACP Test, and (3) such Contributions are fully vested when made and not withdrawable by an Employee before he or she attains age 59 1/2. (h) "Family Member". An Employee who is, at any time during the Plan Year or Lookback Year, a spouse, lineal ascendant or descendant, or spouse of a lineal ascendant or descendant of (1) an active or former Employee who at any time during Plan Year or Lookback Year is a more than 5% Owner (within the meaning of Code section 414(q)(3)), or (2) an HCE who is among the 10 Employees with the highest Compensation for such Year. (i) "HCE" or "Highly Compensated Employee". With respect to each Employer and its Related Companies, an Employee during the Plan Year or Lookback Year who (in accordance with Code section 414(q)): (1) Was a more than 5% Owner at any time during the Lookback Year or Plan Year; (2) Received Compensation during the Lookback Year (or in the Plan Year if among the 100 Employees with the highest Compensation for such Year) in excess of (i) $75,000 (as adjusted for such Year pursuant to Code sections 414(q)(1) and 415(d)), or (ii) $50,000 (as adjusted for such Year pursuant to Code sections 414(q)(1) and 415(d)) in the case of a member of the "top-paid group" (within the meaning of Code section 414(q)(4)) for such Year), provided, however, that if the conditions of Code section 414(q)(12)(B)(ii) are met, the Company may elect for any Plan Year to apply clause (i) by substituting $50,000 for $75,000 and not to apply clause (ii); (3) Was an officer of a Related Company and received Compensation during the Lookback Year (or in the Plan Year if among the 100 Employees with the highest Compensation for such Year) that is greater than 50% of the dollar limitation in effect under Code section 415(b)(1)(A) and (d) for such Year (or if no officer has Compensation in excess of the threshold, the officer with the highest Compensation), provided that the number of officers shall be limited to 50 Employees (or, if less, the greater of three Employees or 10% of the Employees); or (4) Was a Family Member at any time during the Lookback Year or Plan Year, in which case the Contributions and Compensation of the HCE and his or her Family Members shall be aggregated and they shall be treated as a single HCE. A former Employee shall be treated as an HCE if (1) such former Employee was an HCE when he separated from service, or (2) such former Employee was an HCE in service at any time after attaining age 55. The determination of who is an HCE, including the determinations of the number and identity of Employees in the top-paid group, the top 100 Employees and the number of Employees treated as officers shall be made in accordance with Code section 414(q). (j) "HCE Group" and "NHCE Group". With respect to each Employer and its Related Companies, the respective group of HCEs and NHCEs who are eligible to have amounts contributed on their behalf for the Plan Year, including Employees who would be eligible but for their election not to participate or to contribute, or because their Pay is greater than zero but does not exceed a stated minimum. (1) If the Related Companies maintain two or more plans which are subject to the ADP or ACP Test and are considered as one plan for purposes of Code sections 401(a)(4) or 410(b), all such plans shall be aggregated and treated as one plan for purposes of meeting the ADP and ACP Tests, provided that, for Plan Years beginning after December 31, 1989, plans may only be aggregated if they have the same Plan Year. (2) If an HCE, who is one of the top 10 paid Employees or a more than 5% Owner, has any Family Members, the Deferrals, Contributions and Compensation of such HCE and his or her Family Members shall be combined and treated as a single HCE. Such amounts for all other Family Members shall be removed from the NHCE Group percentage calculation and be combined with the HCE's. (3) If an HCE is covered by more than one cash or deferred arrangement maintained by the Related Companies, all such plans shall be aggregated and treated as one plan for purposes of calculating the separate percentage for the HCE which is used in the determination of the Average Percentage. (k) "Lookback Year". Pursuant to Code section 414(q), the Company elects as the Lookback Year the 12 months ending immediately prior to the start of the Plan Year. (l) "Multiple Use Test". The test described in Section 12.4 which a Plan must meet where the Alternative Limitation (described in Section 12.2(b)) is used to meet both the ADP and ACP Tests. (m) "NHCE" or "Non-Highly Compensated Employee". An Employee who is not an HCE. 12.2 ADP and ACP Tests For each Plan Year, the ADP and ACP for the HCE Group must meet either the Basic or Alternative Limitation when compared to the respective ADP and ACP for the NHCE Group, defined as follows: (a) Basic Limitation. The HCE Group Average Percentage may not exceed 1.25 times the NHCE Group Average Percentage. (b) Alternative Limitation. The HCE Group Average Percentage is limited by reference to the NHCE Group Average Percentage as follows: If the NHCE Group Then the Maximum HCE Average Percentage is: Group Average Percentage is: ---------------------- ---------------------------- Less than 2% 2 times NHCE Group Average % 2% to 8% NHCE Group Average % plus 2% More than 8% NA - Basic Limitation applies 12.3 Correction of ADP and ACP Tests If the ADP or ACP Tests are not met, the Administrator shall determine, no later than the end of the next Plan Year, a maximum percentage to be used in place of the calculated percentage for all HCEs that would reduce the ADP and/or ACP for the HCE group by a sufficient amount to meet the ADP and ACP Tests. (a) ADP Correction. Pre-Tax Contributions shall, by the end of the next Plan Year, be refunded (including amounts previously refunded because they exceeded the Contribution Dollar Limit) to the Participant in an amount equal to the actual Deferrals minus the product of the maximum percentage and the HCE's Compensation. Any Company Match Contributions attributable to refunded excess Pre-Tax Contributions as described in this Section 12.3(a) shall be deemed a Contribution made by reason of a mistake of fact and removed from the Participant's Account. (b) ACP Correction. Company Match Contributions shall, by the end of the next Plan Year, be refunded to the Participant in an amount equal to the actual Contributions minus the product of the maximum percentage and the HCE's Compensation. (c) Investment Fund Sources. Once the amount of excess Deferrals and/or Contributions is determined amounts shall then be taken by type of investment in direct proportion to the market value of the Participant's interest in each Investment Fund (which excludes Participant loans) at the time the correction is made. (d) Family Member Correction. To the extent any reduction is necessary with respect to an HCE and his or her Family Members that have been combined and treated for testing purposes as a single Employee, the excess Deferrals and Contributions from the ADP and/or ACP Test shall be prorated among each such Participant in direct proportion to his or her Deferrals or Contributions included in each Test. 12.4 Multiple Use Test If the Alternative Limitation (defined in Section 12.2) is used to meet both the ADP and ACP Tests, the ADP and ACP for the HCE Group must also comply with the requirements of Code section 401(m)(9). Such Code section requires that the sum of the ADP and ACP for the HCE Group (as determined after any corrections needed to meet the ADP and ACP Tests have been made) not exceed the sum (which produces the most favorable result) of: (a) the Basic Limitation (defined in Section 12.2) applied to either the ADP or ACP for the NHCE Group, and (b) the Alternative Limitation applied to the other NHCE Group percentage. 12.5 Correction of Multiple Use Test If the multiple use limit is exceeded, the Administrator shall determine a maximum percentage to be used in place of the calculated percentage for all HCEs that would reduce either or both the ADP or ACP for the HCE Group by a sufficient amount to meet the multiple use limit. Any excess shall be handled in the same manner that the distribution of excess Deferrals or Contributions are handled. 12.6 Adjustment for Investment Gain or Loss Any excess Deferrals or Contributions to be refunded to a Participant or forfeited in accordance with Section 12.3 or 12.5 shall be adjusted for investment gain or loss. Refunds shall not include investment gain or loss for the period between the end of the applicable Plan Year and the date of distribution. 12.7 Testing Responsibilities and Required Records The Administrator shall be responsible for ensuring that the Plan meets the ADP, ACP and Multiple Use Tests and that the Contribution Dollar Limit is not exceeded. In carrying out its responsibilities, the Administrator shall have sole discretion to limit or reduce Deferrals or Contributions at any time. The Administrator shall maintain records which are sufficient to demonstrate that the ADP, ACP and Multiple Use Tests have been met for each Plan Year for at least as long as the Employer's corresponding tax year is open to audit. 12.8 Separate Testing (a) Multiple Employers: The determination of HCEs, NHCEs, and the performance of the ADP, ACP and Multiple Use Tests and any corrective action resulting therefrom shall be made separately with regard to the Employees of each Employer (and its Related Companies) that is not a Related Company with the other Employer(s). (b) Collective Bargaining Units: The performance of the testing and any corrective action resulting therefrom shall be applied separately to Employees who are eligible to participate in the Plan as a result of a collective bargaining agreement. In addition, separate testing may be applied, at the discretion of the Administrator and to the extent permitted under Treasury regulations, to any group of Employees for whom separate testing is permissible. 13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS 13.1 "Annual Addition" Defined The sum of all amounts allocated to the Participant's Account for a Plan Year. Amounts include contributions (except for rollovers or transfers from another qualified plan), forfeitures and, if the Participant is a Key Employee (pursuant to Section 14) for the applicable or any prior Plan Year, medical benefits provided pursuant to Code section 419A(d)(1). For purposes of this Section 13.1, "Account" also includes a Participant's account in all other defined contribution plans currently or previously maintained by any Related Company. The Plan Year refers to the year to which the allocation pertains, regardless of when it was allocated. The Plan Year shall be the Code section 415 limitation year. 13.2 Maximum Annual Addition The Annual Addition to a Participant's accounts under this Plan and any other defined contribution plan maintained by any Related Company for any Plan Year shall not exceed the lesser of (1) 25% of his or her Taxable Income or (2) the greater of $30,000 or one-quarter of the dollar limitation in effect under Code section 415(b)(1)(A). 13.3 Avoiding an Excess Annual Addition If, at any time during a Plan Year, the allocation of any additional Contributions would produce an excess Annual Addition for such year, Contributions to be made for the remainder of the Plan Year shall be limited to the amount needed for each affected Participant to receive the maximum Annual Addition. 13.4 Correcting an Excess Annual Addition Upon the discovery of an excess Annual Addition to a Participant's Account (resulting from forfeitures, allocations, reasonable error in determining Participant compensation or the amount of elective contributions, or other facts and circumstances acceptable to the Internal Revenue Service) the excess amount (adjusted to reflect investment gains) shall first be returned to the Participant to the extent of his or her Pre-Tax Contributions (however to the extent Pre-Tax Contributions were matched, the applicable Company Match Contributions shall be forfeited in proportion to the returned matched Pre-Tax Contributions) and the remaining excess, if any, plus returned Company Match Contributions, shall be forfeited by the Participant and used to reduce subsequent Contributions as soon as is administratively feasible. 13.5 Correcting a Multiple Plan Excess If a Participant, whose Account is credited with an excess Annual Addition, received allocations to more than one defined contribution plan, the excess shall be corrected by reducing the Annual Addition to this Plan only after all possible reductions have been made to the other defined contribution plans. 13.6 "Defined Benefit Fraction" Defined The fraction, for any Plan Year, where the numerator is the "projected annual benefit" and the denominator is the greater of 125% of the "protected current accrued benefit" or the normal limit which is the lesser of (1) 125% of the maximum dollar limitation provided under Code section 415(b)(1)(A) for the Plan Year or (2) 140% of the amount which may be taken into account under Code section 415(b)(1)(B) for the Plan Year, where a Participant's: (a) "projected annual benefit" is the annual benefit provided by the Plan determined pursuant to Code section 415(e)(2)(A), and (b) "protected current accrued benefit" in a defined benefit plan in existence on (1) July 1, 1982, shall be the accrued annual benefit provided for under Public Law 97-248, section 235(g)(4), as amended, or (2) on May 6, 1986, shall be the accrued annual benefit provided for under Public Law 99-514, section 1106(i)(3). 13.7 "Defined Contribution Fraction" Defined The fraction where the numerator is the sum of the Participant's Annual Addition for each Plan Year to date and the denominator is the sum of the "annual amounts" for each year in which the Participant has performed service with a Related Company. The "annual amount" for any Plan Year is the lesser of (1) 125% of the Code section 415(c)(1)(A) dollar limitation (determined without regard to subsection (c)(6)) in effect for the Plan Year and (2) 140% of the Code section 415(c)(1)(B) amount in effect for the Plan Year, where: (a) each Annual Addition is determined pursuant to the Code section 415(c) rules in effect for such Plan Year, and (b) the numerator is adjusted pursuant to Public Law 97-248, section 235(g)(3), as amended, or Public Law 99-514, section 1106(i)(4). 13.8 Combined Plan Limits and Correction If a Participant has also participated in a defined benefit plan maintained by a Related Company, the sum of the Defined Benefit Fraction and the Defined Contribution Fraction for any Plan Year may not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan Year, the Participant's benefit under any defined benefit plan (to the extent it has not been distributed or used to purchase an annuity contract) shall be limited so that the combined fraction does not exceed 1.0 before any defined contribution limits will be enforced. 14 TOP HEAVY RULES 14.1 Top Heavy Definitions When capitalized, the following words and phrases have the following meanings when used in this Section: (a) "Aggregation Group". The group consisting of each qualified plan of an Employer (and its Related Companies) (1) in which a Key Employee is a participant or was a participant during the determination period (regardless of whether such plan has terminated), or (2) which enables another plan in the group to meet the requirements of Code sections 401(a)(4) and 410(b). The Employer may also treat any other qualified plan as part of the group if the group would continue to meet the requirements of Code sections 401(a)(4) and 410(b) with such plan being taken into account. (b) "Determination Date". The last Trade Date of the preceding Plan Year or, in the case of the Plan's first year, the last Trade Date of the first Plan Year. (c) "Key Employee". A current or former Employee (or his or her Beneficiary) who at any time during the five year period ending on the Determination Date was: (1) an officer of a Related Company whose Compensation (i) exceeds 50% of the amount in effect under Code section 415(b)(1)(A) and (ii) places him within the following highest paid group of officers: Number of Employees Number of not Excluded Under Code Highest Paid Section 414(q)(8) Officers Included ----------------- ----------------- Less than 30 3 30 to 500 10% of the number of Employees not excluded under Code section 414(q)(8) More than 500 50 (2) a more than 5% Owner, (3) a more than 1% Owner whose Compensation exceeds $150,000, or (4) a more than 0.5% Owner who is among the 10 Employees owning the largest interest in a Related Company and whose Compensation exceeds the amount in effect under Code section 415(c)(1)(A). (d) "Plan Benefit". The sum as of the Determination Date of (1) an Employee's Account, (2) the present value of his or her other accrued benefits provided by all qualified plans within the Aggregation Group, and (3) the aggregate distributions made within the five year period ending on such date. Plan Benefits shall exclude rollover contributions and plan to plan transfers made after December 31, 1983 which are both employee initiated and from a plan maintained by a non-related employer. (e) "Top Heavy". The Plan's status when the Plan Benefits of Key Employees account for more than 60% of the Plan Benefits of all Employees who have performed services at any time during the five year period ending on the Determination Date. The Plan Benefits of Employees who were, but are no longer, Key Employees (because they have not been an officer or Owner during the five year period), are excluded in the determination. 14.2 Special Contributions (a) Minimum Contribution Requirement. For each Plan Year in which the Plan is Top Heavy, the Employer shall not allow any contributions (other than a Rollover Contribution) to be made by or on behalf of any Key Employee unless the Employer makes a contribution (other than Pre-Tax and Company Match Contributions) on behalf of all Participants who were Eligible Employees as of the last day of the Plan Year in an amount equal to at least 3% of each such Participant's Taxable Income. The Administrator shall remove any such contributions (including applicable investment gain or loss) credited to a Key Employee's Account in violation of the foregoing rule and return them to the Employer or Employee to the extent permitted by the Limited Return of Contributions paragraph of Section 18. (b) Overriding Minimum Benefit. Notwithstanding, contributions shall be permitted on behalf of Key Employees if the Employer also maintains a defined benefit plan which automatically provides a benefit which satisfies the Code section 416(c)(1) minimum benefit requirements, including the adjustment provided in Code section 416(h)(2)(A), if applicable. If this Plan is part of an aggregation group in which a Key Employee is receiving a benefit and no minimum is provided in any other plan, a minimum contribution of at least 3% of Taxable Income shall be provided to the Employees specified in the preceding paragraph of this plan. In addition, the Employer may offset a defined benefit minimum by contributions (other than Pre-Tax and Company Match Contributions) made to this Plan. 14.3 Adjustment to Combined Limits for Different Plans For each Plan Year in which the Plan is Top Heavy, 100% shall be substituted for 125% in determining the Defined Benefit Fraction and the Defined Contribution Fraction. 15 PLAN ADMINISTRATION 15.1 Plan Delineates Authority and Responsibility Plan fiduciaries include the Company, the Administrator, the Committee and/or the Trustee, as applicable, whose specific duties are delineated in this Plan and Trust. In addition, Plan fiduciaries also include any other person to whom fiduciary duties or responsibility is delegated with respect to the Plan. Any person or group may serve in more than one fiduciary capacity with respect to the Plan. To the extent permitted under ERISA section 405, no fiduciary shall be liable for a breach by another fiduciary. 15.2 Fiduciary Standards Each fiduciary shall: (a) discharge his or her duties in accordance with this Plan and Trust to the extent they are consistent with ERISA; (b) use that degree of care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (c) act with the exclusive purpose of providing benefits to Participants and their Beneficiaries, and defraying reasonable expenses of administering the Plan; (d) diversify Plan investments, to the extent such fiduciary is responsible for directing the investment of Plan assets, so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (e) treat similarly situated Participants and Beneficiaries in a uniform and nondiscriminatory manner. 15.3 Company is ERISA Plan Administrator The Company is the plan administrator, within the meaning of ERISA section 3(16), which is responsible for compliance with all reporting and disclosure requirements, except those that are explicitly the responsibility of the Trustee under applicable law. The Administrator and/or Committee shall have any necessary authority to carry out such functions through the actions of the Administrator, duly appointed officers of the Company, and/or the Committee. 15.4 Administrator Duties The Administrator shall have the discretionary authority to construe this Plan and Trust, other than the provisions which relate to the Trustee, and to do all things necessary or convenient to effect the intent and purposes of the Plan, whether or not such powers are specifically set forth in this Plan and Trust. Actions taken in good faith by the Administrator shall be conclusive and binding on all interested parties, and shall be given the maximum possible deference allowed by law. In addition to the duties listed elsewhere in this Plan and Trust, the Administrator's authority shall include, but not be limited to, the discretionary authority to: (a) determine who is eligible to participate, if a contribution qualifies as a rollover contribution, the allocation of Contributions, and the eligibility for loans, withdrawals and distributions; (b) provide each Participant with a summary plan description no later than 90 days after he or she has become a Participant (or such other period permitted under ERISA section 104(b)(1)), as well as informing each Participant of any material modification to the Plan in a timely manner; (c) make a copy of the following documents available to Participants during normal work hours: this Plan and Trust (including subsequent amendments), all annual and interim reports of the Trustee related to the entire Plan, the latest annual report and the summary plan description; (d) determine the fact of a Participant's death and of any Beneficiary's right to receive the deceased Participant's interest based upon such proof and evidence as it deems necessary; (e) establish and review at least annually a funding policy bearing in mind both the short-run and long-run needs and goals of the Plan. To the extent Participants may direct their own investments, the funding policy shall focus on which Investment Funds are available for Participants to use; and (f) adjudicate claims pursuant to the claims procedure described in Section 18. 15.5 Advisors May be Retained The Administrator may retain such agents and advisors (including attorneys, accountants, actuaries, consultants, record keepers, investment counsel and administrative assistants) as it considers necessary to assist it in the performance of its duties. The Administrator shall also comply with the bonding requirements of ERISA section 412. 15.6 Delegation of Administrator Duties The Company, as Administrator of the Plan, has appointed a Committee to administer the Plan on its behalf. The Company shall provide the Trustee with the names and specimen signatures of any persons authorized to serve as Committee members and act as or on its behalf. Any Committee member appointed by the Company shall serve at the pleasure of the Company, but may resign by written notice to the Company. Committee members shall serve without compensation from the Plan for such services. Except to the extent that the Company otherwise provides, any delegation of duties to a Committee shall carry with it the full discretionary authority of the Administrator to complete such duties. 15.7 Committee Operating Rules (a) Actions of Majority. Any act delegated by the Company to the Committee may be done by a majority of its members. The majority may be expressed by a vote at a meeting or in writing without a meeting, and a majority action shall be equivalent to an action of all Committee members. (b) Meetings. The Committee shall hold meetings upon such notice, place and times as it determines necessary to conduct its functions properly. (c) Reliance by Trustee. The Committee may authorize one or more of its members to execute documents on its behalf and may authorize one or more of its members or other individuals who are not members to give written direction to the Trustee in the performance of its duties. The Committee shall provide such authorization in writing to the Trustee with the name and specimen signatures of any person authorized to act on its behalf. The Trustee shall accept such direction and rely upon it until notified in writing that the Committee has revoked the authorization to give such direction. The Trustee shall not be deemed to be on notice of any change in the membership of the Committee, parties authorized to direct the Trustee in the performance of its duties, or the duties delegated to and by the Committee until notified in writing. 16 MANAGEMENT OF INVESTMENTS 16.1 Trust Agreement All Plan assets shall be held by the Trustee in trust, in accordance with those provisions of this Plan and Trust which relate to the Trustee, for use in providing Plan benefits and paying Plan expenses not paid directly by the Employer. Plan benefits will be drawn solely from the Trust and paid by the Trustee as directed by the Administrator. Notwithstanding, the Administrator may appoint, with the approval of the Trustee, another trustee to hold and administer Plan assets which do not meet the requirements of Section 16.2. 16.2 Investment Funds The Administrator is hereby granted authority to direct the Trustee to invest Trust assets in one or more Investment Funds. The number and composition of Investment Funds may be changed from time to time, without the necessity of amending this Plan and Trust document. The Trustee may establish reasonable limits on the number of Investment Funds as well as the acceptable assets for any such Investment Fund. Each of the Investment Funds may be comprised of any of the following: (a) shares of a registered investment company, whether or not the Trustee or any of its affiliates is an advisor to, or other service provider to, such company; (b) collective investment funds maintained by the Trustee, or any other fiduciary to the Plan, which are available for investment by trusts which are qualified under Code sections 401(a) and 501(a); (c) individual equity and fixed income securities which are readily tradeable on the open market; (d) guaranteed investment contracts issued by a bank or insurance company; and (e) interest bearing deposits of the Trustee. Any Investment Fund assets invested in a collective investment fund, shall be subject to all the provisions of the instruments establishing and governing such fund. These instruments, including any subsequent amendments, are incorporated herein by reference. 16.3 Authority to Hold Cash The Trustee shall have the authority to cause the investment manager of each Investment Fund to maintain sufficient deposit or money market type assets in each Investment Fund to handle the Fund's liquidity and disbursement needs. Each Participant's and Beneficiary's Sweep Account, which is used to hold assets pending investment or disbursement, shall consist of interest bearing deposits of the Trustee. 16.4 Trustee to Act Upon Instructions The Trustee shall carry out instructions to invest assets in the Investment Funds as soon as practicable after such instructions are received from the Administrator, Participants, or Beneficiaries. Such instructions shall remain in effect until changed by the Administrator, Participants or Beneficiaries. 16.5 Administrator Has Right to Vote Registered Investment Company Shares The Administrator shall be entitled to vote proxies or exercise any shareholder rights relating to shares held on behalf of the Plan in a registered investment company. Notwithstanding, the authority to vote proxies and exercise shareholder rights related to such shares held in a Custom Fund is vested as provided otherwise in Section 16. 16.6 Custom Fund Investment Management The Administrator may designate, with the consent of the Trustee, an investment manager for any Investment Fund established by the Trustee solely for Participants of this Plan (a "Custom Fund"). The investment manager may be the Administrator, Trustee or an investment manager pursuant to ERISA section 3(38). The Administrator shall advise the Trustee in writing of the appointment of an investment manager and shall cause the investment manager to acknowledge to the Trustee in writing that the investment manager is a fiduciary to the Plan. A Custom Fund shall be subject to the following: (a) Guidelines. Written guidelines, acceptable to the Trustee, shall be established for a Custom Fund. If a Custom Fund consists solely of collective investment funds or shares of a registered investment company (and sufficient deposit or money market type assets to handle the Fund's liquidity and disbursement needs), its' underlying instruments shall constitute the guidelines. (b) Authority of Investment Manager. The investment manager of a Custom Fund shall have the authority to vote or execute proxies, exercise shareholder rights, manage, acquire, and dispose of Trust assets. (c) Custody and Trade Settlement. Unless otherwise expressly agreed to by the Trustee, the Trustee shall maintain custody of all Custom Fund assets and be responsible for the settlement of all Custom Fund trades. For purposes of this section, shares of a collective investment fund, shares of a registered investment company and guaranteed investment contracts issued by a bank or insurance company, shall be regarded as the Custom Fund assets instead of the underlying assets of such instruments. (d) Limited Liability of Co-Fiduciaries. Neither the Administrator nor the Trustee shall be obligated to invest or otherwise manage any Custom Fund assets for which the Trustee or Administrator is not the investment manager nor shall the Administrator or Trustee be liable for acts or omissions with regard to the investment of such assets except to the extent required by ERISA. 16.7 Authority to Segregate Assets The Company may direct the Trustee to split an Investment Fund into two or more funds in the event any assets in the Fund are illiquid or the value is not readily determinable. In the event of such segregation, the Company shall give instructions to the Trustee on what value to use for the split-off assets, and the Trustee shall not be responsible for confirming such value. 17 TRUST ADMINISTRATION 17.1 Trustee to Construe Trust The Trustee shall have the discretionary authority to construe those provisions of this Plan and Trust which relate to the Trustee and to do all things necessary or convenient to the administration of the Trust, whether or not such powers are specifically set forth in this Plan and Trust. Actions taken in good faith by the Trustee shall be conclusive and binding on all interested parties, and shall be given the maximum possible deference allowed by law. 17.2 Trustee To Act As Owner of Trust Assets Subject to the specific conditions and limitations set forth in this Plan and Trust, the Trustee shall have all the power, authority, rights and privileges of an absolute owner of the Trust assets and, not in limitation but in amplification of the foregoing, may: (a) receive, hold, manage, invest and reinvest, sell, tender, exchange, dispose of, encumber, hypothecate, pledge, mortgage, lease, grant options respecting, repair, alter, insure, or distribute any and all property in the Trust; (b) borrow money, participate in reorganizations, pay calls and assessments, vote or execute proxies, exercise subscription or conversion privileges, exercise options and register any securities in the Trust in the name of the nominee, in federal book entry form or in any other form as will permit title thereto to pass by delivery; (c) renew, extend the due date, compromise, arbitrate, adjust, settle, enforce or foreclose, by judicial proceedings or otherwise, or defend against the same, any obligations or claims in favor of or against the Trust; and (d) lend, through a collective investment fund, any securities held in such collective investment fund to brokers, dealers or other borrowers and to permit such securities to be transferred into the name and custody and be voted by the borrower or others. 17.3 United States Indicia of Ownership The Trustee shall not maintain the indicia of ownership of any Trust assets outside the jurisdiction of the United States, except as authorized by ERISA section 404(b). 17.4 Tax Withholding and Payment (a) Withholding. The Trustee shall calculate and withhold federal (and, if applicable, state) income taxes with regard to any Eligible Rollover Distribution that is not paid as a Direct Rollover. With regard to any taxable distribution that is not an Eligible Rollover Distribution, the Trustee shall calculate and withhold federal (and, if applicable, state) income taxes in accordance with the Participant's withholding election. (b) Taxes Due From Investment Funds. The Trustee shall pay from the Investment Fund any taxes or assessments imposed by any taxing or governmental authority on such Fund or its income, including related interest and penalties. 17.5 Trustee Duties and Limitations Unless otherwise agreed to by the Trustee, the Trustee's duties shall be confined to construing the terms of the Plan and Trust as they relate to the Trustee, receiving funds on behalf of and making payments from the Trust, safeguarding and valuing Trust assets, and investing and reinvesting Trust assets in the Investment Funds as directed by the Administrator or Participants. The Trustee shall have no duty or authority to ascertain whether Contributions are in compliance with the Plan, to enforce collection or to compute or verify the accuracy or adequacy or any amount to be paid to it by the Employer. The Trustee shall not be liable for the proper application of any part of the Trust with respect to any disbursement made at the direction of the Administrator. 17.6 Trust Accounting (a) Annual Report. Within 60 days (or other reasonable period) following the close of the Plan Year, the Trustee shall provide the Administrator with an annual accounting of Trust assets and information to assist the Administrator in meeting ERISA's annual reporting and audit requirements. (b) Periodic Reports. The Trustee shall maintain records and provide sufficient reporting to allow the Administrator to properly monitor the Trust's assets and activity. (c) Administrator Approval. Approval of any Trustee accounting will automatically occur 90 days after such accounting has been received by the Administrator, unless the Administrator files a written objection with the Trustee within such time period. Such approval shall be final as to all matters and transactions stated or shown therein and binding upon the Administrator. 17.7 Valuation of Certain Assets If the Trustee determines the Trust holds any asset which is not readily tradable and listed on a national securities exchange registered under the Securities Exchange Act of 1934, as amended, the Trustee may engage a qualified independent appraiser to determine the fair market value of such property, and the appraisal fees shall be paid from the Investment Fund containing the asset. 17.8 Legal Counsel The Trustee may consult with legal counsel of its choice, including counsel for the Employer or counsel of the Trustee, upon any question or matter arising under this Plan and Trust. When relied upon by the Trustee, the opinion of such counsel shall be evidence that the Trustee has acted in good faith. 17.9 Fees and Expenses The Trustee's fees for its services as Trustee shall be such as may be mutually agreed upon by the Company and the Trustee. Trustee fees and all reasonable expenses of counsel and advisors retained by the Trustee shall be paid in accordance with Section 6. 18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION 18.1 Plan Does Not Affect Employment Rights The Plan does not provide any employment rights to any Employee. The Employer expressly reserves the right to discharge an Employee at any time, with or without cause, without regard to the effect such discharge would have upon the Employee's interest in the Plan. 18.2 Limited Return of Contributions Except as provided in this paragraph, (1) Plan assets shall not revert to the Employer nor be diverted for any purpose other than the exclusive benefit of Participants or their Beneficiaries; and (2) a Participant's vested interest shall not be subject to divestment. As provided in ERISA section 403(c)(2), the actual amount of a Contribution made by the Employer (or the current value of the Contribution if a net loss has occurred) may revert to the Employer if: (a) such Contribution is made by reason of a mistake of fact; (b) initial qualification of the Plan under Code section 401(a) is not received and a request for such qualification is made within the time prescribed under Code section 401(b) (the existence of and Contributions under the Plan are hereby conditioned upon such qualification); or (c) such Contribution is not deductible under Code section 404 (such Contributions are hereby conditioned upon such deductibility) in the taxable year of the Employer for which the Contribution is made. The reversion to the Employer must be made (if at all) within one year of the mistaken payment of the Contribution, the date of denial of qualification, or the date of disallowance of deduction, as the case may be. A Participant shall have no rights under the Plan with respect to any such reversion. 18.3 Assignment and Alienation As provided by Code section 401(a)(13) and to the extent not otherwise required by law, no benefit provided by the Plan may be anticipated, assigned or alienated, except: (a) to create, assign or recognize a right to any benefit with respect to a Participant pursuant to a QDRO, or (b) to use a Participant's vested Account balance as security for a loan from the Plan which is permitted pursuant to Code section 4975. 18.4 Facility of Payment If a Plan benefit is due to be paid to a minor or if the Administrator reasonably believes that any payee is legally incapable of giving a valid receipt and discharge for any payment due him or her, the Administrator shall have the payment of the benefit, or any part thereof, made to the person (or persons or institution) whom it reasonably believes is caring for or supporting the payee, unless it has received due notice of claim therefor from a duly appointed guardian or conservator of the payee. Any payment shall to the extent thereof, be a complete discharge of any liability under the Plan to the payee. 18.5 Reallocation of Lost Participant's Accounts If the Administrator cannot locate a person entitled to payment of a Plan benefit after a reasonable search, the Administrator may at any time thereafter treat such person's Account as forfeited and use such amount to offset any Employer Contributions or as otherwise provided in Section 8. If such person subsequently presents the Administrator with a valid claim for the benefit, such person shall be paid the amount treated as forfeited, plus the interest that would have been earned in the Sweep Account to the date of determination. The Administrator shall pay the amount through an additional Employer Contribution or direct the Trustee to pay the amount from the Forfeiture Account. 18.6 Claims Procedure (a) Right to Make Claim. An interested party who disagrees with the Administrator's determination of his or her right to Plan benefits must submit a written claim and exhaust this claim procedure before legal recourse of any type is sought. The claim must include the important issues the interested party believes support the claim. The Administrator, pursuant to the authority provided in this Plan, shall either approve or deny the claim. (b) Process for Denying a Claim. The Administrator's partial or complete denial of an initial claim must include an understandable, written response covering (1) the specific reasons why the claim is being denied (with reference to the pertinent Plan provisions) and (2) the steps necessary to perfect the claim and obtain a final review. (c) Appeal of Denial and Final Review. The interested party may make a written appeal of the Administrator's initial decision, and the Administrator shall respond in the same manner and form as prescribed for denying a claim initially. (d) Time Frame. The initial claim, its review, appeal and final review shall be made in a timely fashion, subject to the following time table: Days to Respond Action From Last Action ------ ---------------- Administrator determines benefit NA Interested party files initial request 60 days Administrator's initial decision 90 days Interested party requests final review 60 days Administrator's final decision 60 days However, the Administrator may take up to twice the maximum response time for its initial and final review if it provides an explanation within the normal period of why an extension is needed and when its decision will be forthcoming. 18.7 Construction Headings are included for reading convenience. The text shall control if any ambiguity or inconsistency exists between the headings and the text. The singular and plural shall be interchanged wherever appropriate. References to Participant shall include Beneficiary when appropriate and even if not otherwise already expressly stated. 18.8 Jurisdiction and Severability The Plan and Trust shall be construed, regulated and administered under ERISA and other applicable federal laws and, where not otherwise preempted, by the laws of the State of California. If any provision of this Plan and Trust shall become invalid or unenforceable, that fact shall not affect the validity or enforceability of any other provision of this Plan and Trust. All provisions of this Plan and Trust shall be so construed as to render them valid and enforceable in accordance with their intent. 18.9 Indemnification by Employer The Employers hereby agree to indemnify all Plan fiduciaries against any and all liabilities resulting from any action or inaction, (including a Plan termination in which the Company fails to apply for a favorable determination from the Internal Revenue Service with respect to the qualification of the Plan upon its termination), in relation to the Plan or Trust (1) including (without limitation) expenses reasonably incurred in the defense of any claim relating to the Plan or its assets, and amounts paid in any settlement relating to the Plan or its assets, but (2) excluding liability resulting from actions or inactions made in bad faith, or resulting from the negligence or willful misconduct of the Trustee. The Company shall have the right, but not the obligation, to conduct the defense of any action to which this Section applies. The Plan fiduciaries are not entitled to indemnity from the Plan assets relating to any such action. 19 AMENDMENT, MERGER AND TERMINATION 19.1 Amendment The Company reserves the right to amend this Plan and Trust at any time, to any extent and in any manner it may deem necessary or appropriate. The Company (and not the Trustee) shall be responsible for adopting any amendments necessary to maintain the qualified status of this Plan and Trust under Code sections 401(a) and 501(a). The Administrator shall have the authority to adopt Plan and Trust amendments which have no substantial adverse financial impact upon an Employer or the Plan. All interested parties shall be bound by any amendment, provided that no amendment shall: (a) become effective until it is accepted in writing by the Trustee (which acceptance shall not unreasonably be withheld); (b) except to the extent permissible under ERISA and the Code, make it possible for any portion of the Trust assets to revert to an Employer or to be used for, or diverted to, any purpose other than for the exclusive benefit of Participants and Beneficiaries entitled to Plan benefits and to defray reasonable expenses of administering the Plan; (c) decrease the rights of any Employee to benefits accrued (including the elimination of optional forms of benefits) to the date on which the amendment is adopted, or if later, the date upon which the amendment becomes effective, except to the extent permitted under ERISA and the Code; nor (d) permit an Employee to be paid the balance of his or her Pre-Tax Account unless the payment would otherwise be permitted under Code section 401(k). 19.2 Merger This Plan and Trust may not be merged or consolidated with, nor may its assets or liabilities be transferred to, another plan unless each Participant and Beneficiary would, if the resulting plan were then terminated, receive a benefit just after the merger, consolidation or transfer which is at least equal to the benefit which would be received if either plan had terminated just before such event. 19.3 Plan Termination The Company may, at any time and for any reason, terminate the Plan, or completely discontinue contributions. Upon either of these events, or in the event of a partial termination of the Plan within the meaning of Code section 411(d)(3), the Accounts of each affected Employee who has not yet incurred a Break in Service shall be fully vested. Distributions or withdrawals will be made in accordance with the terms of the Plan as in effect at the time of the Plan's termination or as thereafter amended provided that a post-termination amendment will not be effective to the extent that it violates Section 19.1 unless it is required in order to maintain the qualified status of the Plan upon its termination. The Trustee's and Employer's authority shall continue beyond the Plan's termination date until all Trust assets have been liquidated and distributed. 19.4 Termination of Employer's Participation Any Employer may terminate its Plan participation upon written notice executed by the Employer and delivered to the Company. Upon the Employer's request, the Company may instruct the Trustee and Administrator to spin off all affected Accounts and underlying assets into a separate qualified plan under which the Employer shall assume the powers and duties of the Company. Alternatively, the Company may treat the event as a partial termination described above or continue to maintain the Accounts under the Plan. 19.5 Replacement of the Trustee The Trustee may resign as Trustee under this Plan and Trust or may be removed by the Company at any time upon at least 90 days written notice (or less if agreed to by both parties). In such event, the Company shall appoint a successor trustee by the end of the notice period. The successor trustee shall then succeed to all the powers and duties of the Trustee under this Plan and Trust. If no successor trustee has been named by the end of the notice period, the Company's chief executive officer shall become the trustee, or if he or she declines, the Trustee may petition the court for the appointment of a successor trustee. 19.6 Final Settlement and Accounting of Trustee (a) Final Settlement. As soon as is administratively feasible after its resignation or removal as Trustee, the Trustee shall transfer to the successor trustee all property currently held by the Trust. However, the Trustee is authorized to reserve such sum of money as it may deem advisable for payment of its accounts and expenses in connection with the settlement of its accounts or other fees or expenses payable by the Trust. Any balance remaining after payment of such fees and expenses shall be paid to the successor trustee. (b) Final Accounting. The Trustee shall provide a final accounting to the Administrator within 90 days of the date Trust assets are transferred to the successor trustee. (c) Administrator Approval. Approval of the final accounting will automatically occur 90 days after such accounting has been received by the Administrator, unless the Administrator files a written objection with the Trustee within such time period. Such approval shall be final as to all matters and transactions stated or shown therein and binding upon the Administrator. APPENDIX A - INVESTMENT FUNDS I. Investment Funds Available The Investment Funds offered to Participants and Beneficiaries as of the Effective Date include this set of daily valued funds: Category Funds -------- ----- Money Market Money Market Income U.S. Treasury Allocation Balanced Asset Allocation Equity Growth Stock Fidelity Contra Combination LifePath II. Default Investment Fund The default Investment Fund as of the Effective Date is the Money Market Fund. III. Maximum Percentage Restrictions Applicable to Certain Investment Funds As of the Effective Date, there are no maximum percentage restrictions applicable to any Investment Funds. APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES As of the Effective Date, payment of Plan fees and expenses shall be as follows: 1) Investment Management Fees: These are paid by Participants in that management fees reduce the investment return reported and credited to Participants. 2) Special Fund Maintenance Fees: These are paid by the Employer on a quarterly basis. 3) Recordkeeping Fees: These are paid by Participants and are assessed monthly and billed/collected from Accounts quarterly. 4) Loan Fees: A $3.50 per month fee is assessed and billed/collected quarterly from the Account of each Participant who has an outstanding loan balance for loans entered into on or after April 1, 1994. For loans entered into prior to April 1, 1994, these are paid by the Employer on a quarterly basis. 5) Investment Fund Election Changes: For each Investment Fund election change by a Participant, in excess of 4 changes per year, a $10 fee will be assessed and billed/collected quarterly from the Participant's Account. 6) Recurring Payment Fees: A $3.00 per check fee will be assessed and billed/collected quarterly from the Participant's Account. 7) Additional Fees Paid by Employer: All other Plan related fees and expenses shall be paid by the Employer. To the extent that the Administrator later elects that any such fees shall be borne by Participants, the fees shall be added to the recordkeeping fees and assessed against Participants' Accounts, per 3) above and estimates of the fees shall be determined and reconciled, at least annually. APPENDIX C - LOAN INTEREST RATE As of the Effective Date, the interest rate charged on Participant loans shall be equal to the Trustee's prime rate, plus 2%. EX-10 10 EXHIBIT 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. February 1, 1995 to April 30, 1997 THIS AGREEMENT made as of the 1st day of February by and between the Retail Employees Union, Local 340, Amalgamated Clothing and Textile Workers Union of America, AFL-CIO, hereinafter referred to as the "UNION" for and in behalf of the employees covered by this Agreement and Jos. A. Bank Clothiers, Inc., hereinafter referred to as the "EMPLOYER". ARTICLE I: RECOGNITION (A) The Employer recognizes the Union as the sole and exclusive bargaining agent for all of its employees in the following appropriate unit: Included: All salespeople, non-selling employees, tailors, fitter-tailors, and pressers employed by the Employer at its store located at Madison Avenue and 46th Street in New York City, and any and all other heretofore included selling and non-selling employees employed by the Employer in any store which shall be hereafter operated or controlled by the Employer in New York City, Nassau, Suffolk, Rockland and Westchester Counties, excluding any factory outlet stores operated or controlled by the Employer. Excluded: Office clerical employees, professional employees, guards and supervisors as defined in the Act, including Store Manager, Assistant Store Manager, Department Managers, Operations Managers, Tailor Shop Manager. (B) The Union agrees that its members who are employees of the Employer will work upon the terms and conditions set forth in this Agreement. (C) 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 the premises of the Employer at reasonable times during working hours. Such Union representatives shall, where practicable, notify the Employer in advance of their arrival at the Employer's premises and such visits shall not unduly interfere with the Employer's operations. (D) In the event of a dispute over the compensation of any bargaining unit member, the Employer will make available such bargaining unit payroll data as the Union may reasonably require as the collective bargaining agent for such unit employees. (E) The Union shall have the right to post notices concerning the internal administration of the Union on a bulletin board or boards to be located on the premises of the Employer at mutually agreeable places. ARTICLE II: UNION SECURITY (A) In the manner and to the extent permitted by law, membership in the Union on or after the 30th day following the date this contract is executed, or the 30th day following the date of employment of each employee, whichever is later, shall be required as a condition of employment; all employees who are now members or thereafter become members of the Union, shall as a condition of continued employment, remain members in good standing during the term of this contract. For the purposes of this Article, employees shall be considered members in good standing if they tender to the Union uniformly required periodic dues and assessments. ARTICLE III - CHECK-OFF The Employer shall deduct from the wages of members of the bargaining unit upon voluntary written authorization of said members, union dues, initiation fees and assessments. The amounts deducted pursuant to such authorization shall be transmitted promptly each month to the properly-designated official of the Union, together with a list of names of the employees from whom the deductions were made. The Union agrees to indemnify and hold the Employer harmless for any and all liabilities that may be incurred by the Employer by reason of any deduction provided for herein. The voluntary written authorization of any member of the bargaining unit shall be provided on the standard Union checkoff authorization form attached hereto and made a part hereof as Appendix A. ARTICLE IV: MANAGEMENT RIGHTS The Employer retains and shall continue to retain the right to operate and manage its business and to exercise all of the customary rights and powers of management, except as such rights and powers are expressly limited by the terms of this Agreement. Without limitation of the foregoing this shall include the Employer's right to establish or modify job requirements, work rules and procedures, and performance standards, provided that the exercise of this right shall not be unreasonable. ARTICLE V: SENIORITY (A) For benefit accrual, vacation and personal day selection purposes, seniority shall be defined as the length of time an employee has been in continuous employment in a bargaining unit position with the Employer since the employee's most recent date of hire. Seniority shall be applicable or relevant only in those provisions' which expressly so state. (B) All newly hired non-selling employees will be regarded as probationary employees for the first ninety (90) calendar days from the date of their hire. Newly hired salespersons shall be regarded as probationary employees for the first 120 calendar days from the date of their hire. The aforesaid probationary periods may be extended by the Employer upon notice to the Union for an additional sixty (60) calendar days. The Employer must give counseling concerning any performance issue to any employee whose probationary period has been extended at the end of 90 and 120 days of employment in the case of non-selling employees and at the end of 120 and 150 days in the case of sales employees. During the probationary period, employees will not have seniority status and may be laid off, terminated, transferred or demoted entirely at the discretion of the Employer. The grievance and arbitration procedures of this contract shall not be applicable to these actions. At the completion of the probationary period, employees shall have seniority from the most recent date of hire. (C) The Employer shall furnish the Union with a current seniority list on or about January 30th of each year. (D) Seniority rights shall be lost for all purposes, including layoff and recall, in the event of termination of employment. (E) The Employer shall have the right to transfer selling personnel on a temporary basis from one floor to another and non-selling personnel from one department to any other department in the store at any time, provided that the Employer shall not transfer an employee for disciplinary reasons (other than job performance-related reasons), and further provided that there shall be no involuntary transfers of selling employees to non-selling positions. However, selling personnel may be temporarily assigned for purposes of coverage on an equitable rotating basis among all store selling personnel. Temporary assignments shall not exceed seven (7) consecutive working days. ARTICLE V: LAYOFFS (A) For purposes of this Article there shall be such department groups as specified in Appendix B attached hereto and made a part hereof. A department group shall be defined as that department or grouping of departments within which seniority rights may be exercised in the event of layoff or recall. (B) Seniority shall be defined for purposes of this Article as the total length of bargaining unit seniority with the Employer, whether or not interrupted by employment with the Employer in a non-bargaining unit position, since the last date of hire. (C) All layoffs shall be in reverse order of seniority from the appropriate seniority list, i.e., the last person hired shall be the first person laid off. (D) Within each department group, seasonal and probationary employees shall be laid off before regular employees, but without regard to seniority among and between such seasonal and probationary employees. The Shop Steward shall be accorded the most senior position of the appropriate seniority list, for layoff and recall only. (E) A laid off employee with one (1) or more years continuous service with the Employer shall retain recall rights for twelve (12) months from the date of layoff. Laid off employees with less than one years continuous service with the Employer shall retain recall rights for six (6) months from the date of lay off. Recalls shall be in reverse order of layoff. ARTICLE VII: WAGES (A) Non-Selling Employees The minimum hourly wage rates for non-selling employees shall be as follows: Job Classification February 1, 1995 4/1/96 ------------------ ---------------- ------ Cashier ................ $ 7.50 $ 8.00 Shipping/Receiving Clerk $ 7.50 $ 8.00 Porter ................. $ 7.00 $ 7.50 Tailor ................. $11.00 $11.50 Fitter/Tailor .......... $14.43 $14.93 Presser ................ $11.00 $11.50 (B) Selling Employees The base hourly wage rates for selling employees shall be as follows: Regular Assignment February 1, 1995 4/1/96 ------------------ ---------------- ------ First Floor $ 7.70 $ 8.20 Second Floor $ 9.62 $ 9.62 (C) Commission on net personal sales shall be calculated on a fiscal month basis using a graduated commission percentage. Net sales is defined as individual merchandise sales reduced by identified returns and the employee's share of unidentified returns plus the employee's share of any unidentified or management sales. (D) Base commission percentage for selling employees is 4% of net sales. If net sales during a fiscal month exceed the predetermined sales levels set forth below, additional commission is paid, as shown. Monthly Pre-determined Sales Levels - -------------------------------------------------------------------------------- MEN'S CLOTHING Commission % February March April May - -------------------------------------------------------------------------------- (2ND FLOOR) % - -------------------------------------------------------------------------------- ALL SALES BELOW 1ST LEVEL 4.0 - -------------------------------------------------------------------------------- ALL SALES IN FIRST LEVEL 5.0 $15,000 $30,000 $28,000 $26,000 - -------------------------------------------------------------------------------- ALL SALES IN SECOND LEVEL 6.0 $21,000 $41,000 $38,000 $36,000 - -------------------------------------------------------------------------------- ALL SALES IN THIRD LEVEL 7.0 $27,000 $53,000 $50,000 $47,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MEN'S CLOTHING (2ND FLOOR) Commission % JUNE JULY AUGUST SEPTEMBER - -------------------------------------------------------------------------------- ALL SALES BELOW 1ST LEVEL 4.0 - -------------------------------------------------------------------------------- ALL SALES IN FIRST LEVEL 5.0 $28,000 $16,000 $16,000 $31,000 - -------------------------------------------------------------------------------- ALL SALES IN SECOND LEVEL 6.0 $39,000 $23,000 $23,000 $43,000 - -------------------------------------------------------------------------------- ALL SALES IN THIRD LEVEL 7.0 $51,000 $30,000 $30,000 $56,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MEN'S CLOTHING (2ND FLOOR) Commission % OCTOBER NOVEMBER DECEMBER JANUARY - -------------------------------------------------------------------------------- ALL SALES BELOW 1ST LEVEL 4.0 - -------------------------------------------------------------------------------- ALL SALES IN FIRST LEVEL 5.0 $30,000 $28,000 $40,000 $17,000 - -------------------------------------------------------------------------------- ALL SALES IN SECOND LEVEL 6.0 $41,000 $38,000 $55,000 $24,000 - -------------------------------------------------------------------------------- ALL SALES IN THIRD LEVEL 7.0 $53,000 $50,000 $72,000 $31,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MEN'S FURNISHINGS/SPORTSWEAR Commission % February March April May (1ST FLOOR) - -------------------------------------------------------------------------------- ALL SALES BELOW 1ST LEVEL 4.0 - -------------------------------------------------------------------------------- ALL SALES IN FIRST LEVEL 5.0 $10,000 $22,000 $20,000 $19,000 - -------------------------------------------------------------------------------- ALL SALES IN SECOND LEVEL 6.0 $14,000 $29,000 $27,000 $25,000 - -------------------------------------------------------------------------------- ALL SALES IN THIRD LEVEL 7.0 $19,000 $37,000 $36,000 $33,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MEN'S FURNISHINGS/SPORTSWEAR Commission % JUNE JULY AUGUST SEPTEMBER (1ST FLOOR) - -------------------------------------------------------------------------------- ALL SALES BELOW 1ST LEVEL 4.0 - -------------------------------------------------------------------------------- ALL SALES IN FIRST LEVEL 5.0 $20,000 $11,000 $11,000 $22,000 - -------------------------------------------------------------------------------- ALL SALES IN SECOND LEVEL 6.0 $27,000 $15,000 $15,000 $29,000 - -------------------------------------------------------------------------------- ALL SALES IN THIRD LEVEL 7.0 $36,000 $21,000 $21,000 $37,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MEN'S FURNISHINGS/SPORTSWEAR Commission % OCTOBER NOVEMBER DECEMBER JANUARY (1ST FLOOR) - -------------------------------------------------------------------------------- ALL SALES BELOW 1ST LEVEL 4.0 - -------------------------------------------------------------------------------- ALL SALES IN FIRST LEVEL 5.0 $22,000 $20,000 $29,000 $12,000 - -------------------------------------------------------------------------------- ALL SALES IN SECOND LEVEL 6.0 $29,000 $27,000 $38,000 $16,000 - -------------------------------------------------------------------------------- ALL SALES IN THIRD LEVEL 7.0 $37,000 $36,000 $50,000 $22,000 - -------------------------------------------------------------------------------- Example: During the month of February, a sales associate on the second floor would be paid 4% commission on net sales up to $15,000 during the month. He or she would receive 5% commission on net sales between $15,000 and $21,000, 6% on net sales between $21,000 and $27,000 and 7% on those net sales in excess of $27,000. Net sales of $32,000 would reflect the following: Sales % Paid Commission ----- ------ ---------- $15,000 4% $ 600.00 $6,000 5% $ 300.00 $6,000 6% $ 360.00 $5,000 7% $ 350.00 - ------- --------- $32,000 $1,610.00 (E) Holiday, vacation and bereavement pay for selling employees will be based on the employee's average earnings, determined semi-annually. However, new selling employees are paid for holiday, vacations and bereavement leave at their hourly base rate until they have worked a sufficient amount of time (at least six (6) months) to determine their average earnings. Sick pay is paid at the selling employee's hourly base rate. ARTICLE VIII: HOURS OF WORK (A) The normal hours of work for all full-time employees shall be forty (40) hours, five (5) days per week, with one (1) meal period. The regular work week shall be from Sunday through Saturday. (B) All bargaining unit members shall receive overtime pay at the rate of time and one half for hours worked in excess of forty (40) hours in any one work week. (C) Selection for overtime shall be on an equitable rotating basis. (D) Each selling employee shall be required to devote a reasonable amount of time to complete a sale or other duties if such employee is working on a sale or project at the close of the day. No employee shall receive overtime pay unless such overtime work shall have been previously authorized by the employee's manager or such overtime work is reasonably necessary to complete a sale or project. All regular full time employees scheduled to work on Sunday shall be paid no less than 8 times their straight time hourly rate of pay if hourly paid and no less than 8 times their base hourly rate of pay if commissioned sales persons, provided they work all of the Sunday hours for which they are scheduled, and when they are paid for 8 hours on Sunday those hours shall also be counted as time worked for purposes of computing their weekly overtime during the work week in which that Sunday fell. Part-time employees shall be paid for Sunday work on the basis of their hourly rate of pay times hours actually worked. ARTICLE IX: VACATION The Employer's vacation policies applicable to the bargaining unit shall remain unchanged during the term of this collective bargaining agreement. ARTICLE X: HOLIDAYS AND PERSONAL DAYS (A) All full time employees covered by this Agreement who are otherwise eligible, shall receive a day's pay for the following regular holidays: New Year's Day, Easter, Memorial Day, July Fourth, Labor Day, Thanksgiving Day and Christmas Day, plus four (4) personal days making a total of eleven (11) paid holidays per calendar year. (B) To be eligible for holiday pay full time employees (1) must be employed for thirty (30) days or more prior to each of the seven (7) holidays specified in paragraph (A) of this Article and ninety (90) days or more prior to each personal holiday; and (2) must work their scheduled day before and their scheduled day after the holiday, unless excused for bona fide illness attested by a physician's certificate, or for other good cause acceptable to the Employer. (C) In the event a paid holiday falls during an employee's vacation period, the employee shall receive an extra day's pay. (D) If it is necessary for a department or the store to remain open on one of the listed holidays, employees who work on that holiday shall be granted a "floating" holiday to be taken at a time mutually convenient to the employee's Department Manager or the Store Manager. (E) If a paid holiday falls on an employee's regularly scheduled day off during the work week, the employee shall be entitled to receive a paid day off at a time mutually convenient to the employee's Department Manager or the Store Manager. (F) All "floating" holidays must be taken within one (1) year from the date on which the holiday for which they are substituting occurs. (G) Vacation or holiday time will not be accrued during any leave of absence, including sick leave, disability or workers compensation leave. ARTICLE XI: BEREAVEMENT LEAVE (A) Each employee shall have three (3) working days off with pay in the event of the death of a parent, child, brother, sister, spouse or registered domestic partner, grandparent or grandchild. One (1) day off with pay shall be granted in the event of the death of a parent-in-law or brother or sister-in-law. ARTICLE XII: JOB BIDDING AND POSTING (A) The Employer shall post permanent vacancies in bargaining unit jobs on the bulletin board for three (3) working days together with location and title of vacancy. Employees who bid for such jobs shall do so in writing. The Employer shall give fair and reasonable consideration to all such applications. However, the Employer's determination as to the filling of such vacancies shall be final and not subject to the arbitration provisions hereof. Vacancies shall not be filled during the posting period. (B) If a bargaining unit employee shall successfully bid on, or transfer into a new bargaining unit position or from a non-selling to a selling position, such employee may be required to serve a trial period not to exceed the normal probationary period for his or her new position. During the aforementioned trial period such employee may be returned to his or her old position at the discretion of the Employer with no loss of seniority and without reference to the grievance and arbitration provisions of this contract. ARTICLE XIII: LEAVES OF ABSENCE (A) The Employer shall give good faith consideration to requests for leaves of absence for good cause. Such leaves shall not exceed thirty (30) days and the Employer shall not unreasonably withhold its consent. The Employer may consider seasonal staffing requirements when evaluating leave requests. An employee shall not lose seniority rights during such a leave. Extensions to an approved leave shall require the mutual agreement of the Employer and the employee. Written confirmation of approval of any leave request or extension shall be provided to the employee, stating the reason for the leave and its duration. A copy of said confirmation shall be provided to the Union. (B) To be eligible for a leave of absence an employee must have six (6) months continuous service. (C) Family & Medical Leaves of Absence Under the Family and Medical Leave 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. The Amalgamated Retain Insurance Fund currently provides health care coverage for an employee on Family Leave to the extent required by the FMLA. (D) Leaves of absence shall not be granted for the purpose of taking outside employment without permission from the Employer. Any employee on leave of absence who accepts outside employment without the Employer's permission shall have his or her services with the Company terminated for cause. (E) Failure to report for work upon expiration of the leave of absence shall be considered a voluntary resignation of the employee's position with loss of all seniority rights. (F) Union shop stewards will be granted up to two (2) days off annually, without pay, to attend Union training sessions relating to grievance processing. Such days off shall be scheduled at least two (2) weeks in advance, taking into account the seasonal staffing needs of the Employer. ARTICLE XIV: SICK LEAVE All regular full-time employees are eligible for sick leave. New employees become eligible on the first day of the month following 60 days of continuous employment. (A) Eligible employees can use sick leave to continue income when they are absent from work due to illness or injury, or when they have an appointment with a doctor and have made prior arrangements with their Manager. (B) All eligible employees will be credited with six (6) days of sick leave on January 1st of each year (pro-rated for new employees who start during the year). (C) There is no carryover of sick leave from one year to the next. Commencing in January 1996 all full-time employees will be paid 50% of the value of any sick days not used as of the immediately preceding December 31st. ARTICLE XV: JURY SERVICE (A) Employees shall be paid the difference between their regular straight time pay for days spent on jury service and the per diem amount received for such service. Such jury duty pay shall be paid for no more than two (2) weeks or such lesser period as may be served. (B) Employees called to jury duty who are released from such duty before 2:00 p.m. on any day served shall call their manager at the store to see if their services are desired for the remainder of that work day, and, if so, employees shall report to work promptly. ARTICLE XVI: SAFETY AND HEALTH (A) The Employer agrees to provide a safe and healthful working environment for all employees, in keeping with the nature of the work. (B) The Employer agrees to maintain adequate first aid equipment and supplies to meet the needs of employees in case of minor accidents. (C) All accidents or illnesses arising at the worksite or in connection with work processes or procedures shall be reported immediately to the supervisor. (D) Store management and the Union Shop Steward shall work together in the interests of maintaining a safe and healthy work place. ARTICLE XVII: NON-DISCRIMINATION (A) There shall be no discrimination for Union activities or discrimination based upon race, creed, national origin, age, disability, sex or sexual preference in accordance with applicable law. ARTICLE XVIII: SEVERANCE PAY (A) Severance pay shall be provided in the event of the store or a department thereof closing permanently and the employee not having been afforded other bargaining unit employment by the Employer. The amount of severance pay shall be one week's pay for each two full years of service, to a maximum of eight weeks pay. ARTICLE XIX: GRIEVANCE AND ARBITRATION (A) All complaints, disputes or grievances arising between the parties hereto, involving questions of interpretation or application of any provision of this Agreement (including whether discipline or discharge is for just cause) shall be subject to the grievance procedure as provided hereafter. (B) All cases of discharge shall immediately be taken up at the second step of the grievance procedure as outlined below. (C) The first step shall be between the Department Manager and the employee, who may be accompanied by the shop steward. The second step meeting, which shall be preceded by the grievance having been reduced to writing and provided to the other party, shall be between the Union Business Agent, who may be accompanied by the Chief Steward, and a Company designee. Within a reasonable period, ordinarily not to exceed two weeks, after the second step is completed, the grieving party may refer the matter to arbitration. (D) The following shall be the Arbitrators under this Agreement: Roger Maher Barbara Deinhardt Elliot Shriftman Richard Adelman Milton Rubin The parties shall communicate with the first Arbitrator on the list and request the case be scheduled for hearing. If the first arbitrator does not offer a date within 30 days, the parties shall communicate with the second arbitrator, etc. In subsequent cases, the parties shall first communicate with the Arbitrator named immediately following the arbitrator who heard the last prior case. In the event of the unavailability within a reasonable time of all of the above-named Arbitrators, the dispute shall be submitted to arbitration under the voluntary Labor Rules of the American Arbitration Association. (E) The authority of any arbitrator shall be limited to the interpretation and application of the terms and conditions of this Agreement. The arbitrator may not modify, amend or add to the terms of this Agreement. The decision of the Arbitrator shall be final and binding upon the Union, the aggrieved employee(s) and the Employer. The oath required by law of the arbitrator is expressly waived by the parties. Costs of arbitration shall be shared equally by the Union and the Employer. ARTICLE XX: STRIKES AND LOCKOUTS (A) Under no circumstances shall strikes, sympathy strikes, stoppages of work, or other concerted activity against the Employer be ordered, sanctioned or engaged in by the Union, its officials, or agents or engaged in by the employees; nor shall lockouts be engaged in by the Employer, its officials, or agents during the term of this Agreement. (B) In the event of any concerted activity against the Employer proscribed under (A) above, the Union, acting through its officers, shall promptly and publicly state that such activity is not authorized by the Union. (C) Any employee who engages in such activity shall be subject to such discipline as the Employer may see fit to impose, including termination of employment. Any such action by the Employer shall be subject, on an individual-by-individual basis, to the grievance and arbitration provision herein. ARTICLE XXI: INSURANCE FUND The Employer agrees to pay 11 percent of gross earnings of all of its employees who come under the scope of this Agreement to the Amalgamated Retail Insurance Fund to provide certain health and welfare benefits to its employees. The Union and the Employer further agree to sign any and all instruments necessary to effectuate the provisions of this Article. ARTICLE XXII: 401(K) PROGRAM All regular employees will become eligible to participate in the Jos. A. Bank Clothiers, Inc., Retirement and Savings Plan on July 1, October 1, January 1, or April 1, whichever is appropriate following one year of service (i.e., the 12-month period after date of hire in which the employee worked at least 1,000 hours). For every dollar contribution the employee makes (up to 3% of salary) the Employer contributes an additional fifty cents. ARTICLE XXIII: DURATION OF AGREEMENT AND MISCELLANEOUS (A) This collective bargaining agreement between the parties shall be effective as of the date hereof and shall remain in full force and effect until April 30, 1997 (with no reopenings or adjustments of any kind or nature during the term hereof except as provided herein) and shall continue from year to year thereafter unless written notification to the contrary is given by either party to the other by certified or registered mail at least sixty (60) days prior to the expiration date. (B) All of the terms and conditions of this Agreement shall apply to all employees of the Employer who are in the bargaining unit regardless of whether such employees are members of the Union. (C) If any clause of this contract is ruled invalid by operation of law, or by any constituted legal authority, the remainder of the contract shall remain in full force and effect. (D) Sales made by non-bargaining unit personnel shall be turned over to the bargaining unit personnel on an equitable basis. (E) All employees in the bargaining unit shall be entitled to two (2) paid fifteen (15) minute breaks per shift, one to be taken in the first half of the shift and one in the second half of the shift. On pay day, employees shall be entitled to use one of their fifteen (15) minute breaks to extend their lunch period by that amount. In witnesses whereof, we set our hands and seals this ____ day of ________________, 1995. FOR THE UNION FOR THE COMPANY _____________________(SEAL) ______________________(SEAL) _____________________(SEAL) ______________________(SEAL) _____________________(SEAL) ______________________(SEAL) _____________________(SEAL) ______________________(SEAL) _____________________(SEAL) ______________________(SEAL) APPENDIX A Facsimile of Union Check-Off Authorization Card. APPENDIX B For the purposes set forth in Article V, LAYOFFS, the bargaining unit is divided into the following department groups: a. First Floor Selling b. Second Floor Selling c. Porters d. Other non-Selling e. Tailors f. Fitter-tailors g. Pressers EX-10 11 EXHIBIT 10.11 AGREEMENT dated May 1, 1995 by and between Joseph A. Bank Mfg. Co., Inc. (North Ave. Coat Shop, Hampstead Coat Shop, Brookhill Road Cutting Floor, Rubin Bldg. Pants Division & Hampstead Distribution Center) (hereinafter referred to as the "Employer" or "Manufacturer" and the BALTIMORE REGIONAL JOINT BOARD, AMALGAMATED CLOTHING AND TEXTILE WORKERS UNION, an unincorporated association, for and in behalf of itself and the employees now employed, or hereafter to be employed by the Employer (hereinafter collectively referred to as the "Union"). WHEREAS, the employer and the Union are parties to a collective bargaining agreement dated as of October 1, 1993 and the parties have requested modification of certain of the provisions of said agreement, and WHEREAS, the parties have reached agreement, and NOW THEREFORE, 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 except executive, administrative, office clericals, supervisory and guards as defined in the National Labor Relations Act. 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 plant 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 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 Coat Shop, Brookhill Road Cutting Floor, and Distribution Center and North Avenue Coats and Pants; 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 higher. This provision is not to substitute for or supersede locally negotiated higher time work and piece work minimum rates, if any exist. ARTICLE IV WAGES: 1. Time Rate Employees: (a) Effective October 2, 1995, the Employer shall grant a wage increase of twenty (20) cents per hour to all time rate employees. (b) Effective September 30, 1996, the Employer shall grant a wage increase of twenty (20) cents per hour to all time rate employees. (c) Effective September 29, 1997, the Employer shall grant a wage increase of twenty (20) cents per hour to all time rate employees. 2. Piece Rate Employees: (a) Effective October 2, 1995, the Employer shall incorporate into all existing piece rates the equivalent of the time rate wage increase of twenty (20) cents per hour. (b) Effective September 30, 1996, the Employer shall incorporate into all existing piece rates the equivalent of the time rate wage increase of twenty (20) cents per hour. (c) Effective September 29, 1997, the Employer shall incorporate into all existing piece rates the equivalent of the time rate increase of twenty (20) cents per hour. 3. In the event an employee is regularly and formally scheduled to work more or less than forty (40) hours per week, or more or less than thirty six (36) hours per week in the case of cutters, the payments in paragraph 1 and 2 above shall be adjusted pro rata. 4. During the term of this Agreement the Employer shall, by mutual agreement with the Union, have the option to incorporate all or any part of the on-the-clock payments into the piece rates of all piece workers except the June 3, 1968 increase of twenty-five cents (25(cent)) per hour. The 25(cent) per hour on-the-clock shall not apply to any employee hired after October 1, 1985. 5. Except as otherwise provided in sub-paragraph A hereof, in the event that any of the operations of the Employer are changed or new operations are added, piece rates for such operations shall be mutually agreed upon between the Union and the Employer and shall become effective as of the time that such operation is changed or new operation begun. The new piece rates shall maintain the average earnings of the employees prevailing at the time that the operation is changed or new operation begun. It is understood that the phrase maintain the average earnings of the employees' refers to maintaining the average earnings of the section, and not to individual employees within the section. A. Anything to the contrary herein notwithstanding the Employer shall recognize and abide by specifications and grades generally prevailing in the clothing industry. Any change in such specifications affecting grades shall be effective only when mutually agreed upon by the Employer and the Union. 6. If an employee is temporarily transferred from one job or operation to another at the request of the Employer, he shall, while working on the job or operation to which he has been transferred, be paid his average earnings prevailing at the time of the transfer. The conditions to apply upon permanent transfer shall be mutually agreed upon by the Employer and the Union at the time of such transfer. 7. Minima of Schedule "A" shall apply only to indicated operations and workers thereon. 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 established time or piece rate earnings 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. The thirty-six (36) hour week for all manufacturing operations in which it has been heretofore established shall be maintained. 2. Overtime: Time and one-half shall be paid for all work outside the regular daily hours. No work shall be performed on Saturday except by mutual agreement of the parties. Time and one-half shall be paid for all work performed on Saturdays irrespective of the number of hours worked during the week. 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 Paragraph dealing with holidays. 3. 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 MACHINE BREAKDOWN TIME AND WAITING TIME: An employee paid on piece rate basis who is required to wait for work due to machine breakdown beyond his control shall be compensated at the rate of the employee's average hourly earnings for all such waiting time in excess of fifteen (15) minutes per day. An employee paid on a piece rate basis who is required to wait for work due to cause beyond his control other than for machine breakdown shall be compensated at the rate of the employee's average hourly earnings for all such waiting time in excess of thirty (30) minutes per day. However, in no event will the combined unpaid machine 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 another machine during machine down time, on the same job, the employee will be paid piece rate earnings. ARTICLE VIII VACATIONS: A. Vacation Period. It is mutually agreed that there shall be the following vacation periods for the employees entitled to vacation pay as hereinafter provided. 1. The Summer Vacation Period shall be two consecutive weeks beginning with the last full week of July and the first week of August, unless the Employer and the Union shall mutually agree upon some other two consecutive weeks during the summer months. 2. The Christmas Vacation Period shall be between Christmas Day and New Year's Day of each year. 3. Fourth Week of Vacation: Any employee with 20 years, or more, of employment, with the Employer or predecessor employers 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 by section shall be fixed by mutual agreement with the Union in accordance with the needs of production. Individual employees may bid for an available week in order of section seniority or such other rotational system as mutually agreed to with the Union. If mutually agreed to with the Union at the local level, 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 vacation period, employees entitled to holiday pay shall be entitled to such holiday pay in addition to vacation pay hereinafter provided. B. Eligibility and Pay for Employees Employed Prior to October 1, 1985: 1. For the Summer Vacation Period: (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, 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 the Summer Vacation Period 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: In the case of hourly and weekly employees, one week's pay shall be the employee's current regular weekly rate. In the case of piece work employees, one week's pay shall be forty (40) times the individual employee's straight time average hourly earnings for the four (4) consecutive busiest weeks of the current vacation year beginning June 1st in the previous calendar year and ending May 31st in the current vacation year. If an employee did not work in each of the said four (4) weeks, his vacation pay shall be forty (40) times his straight time average hourly earnings for the four (4) busiest weeks of the vacation year in which he did work all four (4) weeks. The Company and the Union have agreed to use the first (1st) calendar quarter (January, February & March) of the year to compute vacation pay. The full amount of the wage increases scheduled to be paid on October 2, 1995, September 29, 1996 and September 27, 1997 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. For 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 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 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, (a) If an hourly or weekly employee, he shall receive his current rate less three-quarters of the wage increase scheduled to be paid on October 2, 1995, September 29, 1996 and September 27, 1997, as applicable. (b) If a piece work employee, he shall receive forty (40) times his straight time average hourly earnings for the four (4) busiest weeks of the current vacation year, beginning December 1st in the previous calendar year and ending November 30th in the current year, which average hourly earnings shall be adjusted by three-quarters of the wage increase scheduled to be paid on October 2, 1995, September 29, 1996 and September 27, 1997, as applicable. The Company and the Union have agreed to use the first (1st) calendar quarter (January, February & March) of the year to compute vacation pay. (ii) An employee who worked less than 1000 hours in the entire aforesaid twelve (12) months period shall receive two and one-half percent (2 1/2%) of his straight time 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 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. D. General Conditions: 1. In the event a paid holiday falls within the vacation period, employees entitled to holiday pay shall be entitled to such holiday pay in addition to vacation pay heretofore provided. 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 Impartial Chairman 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. 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 or the closing of a plant, 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 eligibility and vacation pay scheduled for such employee shall be adjusted pro-rata. The 1000 hours requirement contained in paragraph C above shall be similarly pro-rated. 6. Retired and Permanently Disabled Employees: Employees who, during any vacation year, retire under either an Amalgamated plan or a Company plan, whichever is in effect at the time of retirement, 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 the vacation year, measured from the commencement of the preceding vacation periods, summer, Christmas, and, where applicable, the fourth week, to the date last worked. 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 an 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 Union and the Employer is not reached the Impartial Chairman is expressly empowered to settle said matter. 8. For the purpose of Section B and C, an employee who has completed a probationary period with an employer in contractual relations 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. 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/she shall lose only one holiday's pay. B. In the case of hourly and weekly employees, the pay for each holiday shall be one-fifth (1/5) of the employee's current regular weekly rate plus any increase due at that time. In the case of piece workers the employee's pay for each holiday shall be eight (8) times the employee's straight time average hourly earnings as such earnings were computed for the purpose of determining the first week's vacation pay for the summer vacation period immediately preceding such holiday, plus any increase due at that time. C. Any employee who, without reasonable excuse, is absent from work or who does not work all his/her 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 Paragraph, it is understood that holiday pay shall not be paid any employees if the Employer's factory is shut down in all its manufacturing departments 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 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. Bereavement pay shall be based on the employee's daily time or piece rate earnings as established for the purpose of holiday pay. 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 and this interpretation has been reflected in local agreements. ARTICLE XII PAYMENT OF WAGES AND CHECKOFF: A. The Employer agrees that he shall pay its employees on a prescribed day in each week. B. The Employer shall deduct from the wages of his 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, A.C.T.W.U. immediately after it is collected at least once a month. ARTICLE XIII INSURANCE: The Employer agrees to contribute sums of money equal to a stated percentage of its payroll to the Amalgamated Insurance Fund (social insurance), and to the Amalgamated Cotton Garment and Allied Industries Fund (social insurance) as provided in Exhibits I and II annexed hereto, the terms and provisions of said Exhibits being specifically incorporated herein by reference. Contributions to the Clothing Fund are applicable to employees of Hampstead Coat Shop, North Avenue Coat Shop and Brookhill Road Cutting Floor. Contributions to the Cotton Fund are applicable to employees of the Rubin Building Pants Division and Hampstead Distribution Center. 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, Amalgamated Clothing and Textile Workers Union Health and Welfare Fund, to be used to provide health and welfare benefits to the members. The terms and provisions of Exhibit III being specifically incorporated herein by reference. ARTICLE XV UNION LABEL: The Employer agrees to affix copies of the label of the Amalgamated Clothing and Textile Workers Union to men's and boy's clothing including, without limitation, single pants manufactured by the Employer or by registered Union contractors on behalf of the Employer, all as provided in Exhibit IV annexed hereto, the terms and provisions of said Exhibit IV being specifically incorporated herein by reference. In addition thereto, the Employer agrees that the size ticket placed on each garment shall contain a legend to the effect that the same is manufactured by ACTWU Union labor. The exact wording to be affixed on the size ticket shall be set by mutual agreement between the Clothing Manufacturers Association of the USA and the International Union. ARTICLE XVI 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 XVII PART ONE, OTHER FACTORIES AND CONTRACTORS: A. During the term of this Agreement the Employer agrees that it shall not, without the consent of the Union, remove or cause to be removed its present plant or plants from the city or cities in which such plant or plants are located. B. Where the Employer has a surplus of work, or its present factories cannot meet manufacturing requirements, including anticipated quarterly production needs, because of model or make variations, cost, customer requirements or scheduling conflicts, the Employer shall inform the Baltimore Joint Board of the need to contract out, and the Baltimore Joint Board shall have the opportunity within the next ten (10) calendar days, to meet with the Employer and suggest alternatives to the subcontracting of the needed work. Where no alternative to subcontracting is acceptable to the Employer, the Baltimore Joint Board shall have one (1) calendar week after being so informed, to refer the Employer to plants in contractual relations with the ACTWU, and the Employer shall give preference to such plants, provided they are fully capable of meeting the Employer's scheduling, cost and quality requirements. In the event no ACTWU plant is able to meet the Employer's scheduling, cost and quality requirements, or is available to perform the needed work within the Employer's time requirements then the Employer shall have the right to determine the manufacturing facility or facilities in which the needed garments shall be made and shall notify the Baltimore Joint Board of its choice. C. It is agreed that imports other than corduroy clothing not made in Union shops, are within the scope of Article XVII. The Employer shall notify the Union of its intention as to such corduroy clothing, and the quantities involved and shall make available to the Union all pertinent documentation involved in such transaction. In the event corduroy clothing becomes an important production item in shops under contract with the Union, this exception to Article XVII shall be subject to renegotiation upon reasonable notice from the Union, then existing commitments shall not be interfered with. D. Subject to the provisions of Part 2 - Outsourcing of this Article, the Employer agrees that it shall not send out work for cut, make and trim. PART TWO - OUTSOURCING A. Permissible outsourcing. During the term of this agreement and subject to all of the conditions contained herein the Employer shall be permitted to outsource: 1. During the period between October 1, 1994 and September 30, 1995 the Employer may outsource no more than 10% of production; 2. During the period between October 1, 1995 and September 30, 1996 the Employer may outsource no more than 15% of production; 3. During the period between October 1, 1996 and September 30, 1997 the Employer may outsource no more than 20% of production; 4. During the period between October 1, 1997 and September 30, 1998 the Employer may outsource no more than 22% of production. Outward processing production (known as "807" or "807 A" production) will be defined as outsourced products. Further, outsourcing will not excuse the participating firm from making needed investment in its domestic facilities and equipment. Any Employer who outsources hereby commits to invest in improved physical plant, equipment and EDI systems in its own facilities. These "outsourcing" provisions do not apply to production sourced to domestic facilities within the United States. Such production is governed by the "Other factories and contractors" provisions contained in Part One of this Article XVII. B. Notification. The Employers must give the Union advance notification of its planned outsourcing. Said notification shall include: 1. The number and types of units the Employer plans to outsource; 2. The reasons why the outsourcing is planned; 3. Name and location of the source. The Union shall have the opportunity to find a suitable alternative source within one week of said notice. C. Guarantees. If, during the term of this agreement, an Employer outsources more than an experimental level of production it shall, for each contract year during which it outsources, guarantee that its current full time employees work at least 1470 hours, in addition to vacations and holidays during said contract year. An experimental level of production is defined as the greater of 1000 units or 2% of the domestic production in the preceding contract year to a maximum of 3000 units. For the purpose of this Agreement, a suit or overcoat/topcoat should count as 1 unit; a coat as 2/3 of a unit; a pair of pants as 1/3 of a unit and a vest as 1/6th of a unit. Such hours as are not worked (1) at the option of the employee or because the employee is not available for employment, (2) because of power failure, fire or other cause over which the firm has no control as defined in the Reporting Pay provision of the Collective Bargaining Agreement (but not including short time for lack of sales), and (3) hours otherwise compensated for pursuant to the firm's Collective Bargaining Agreement with the Union, shall be counted toward fulfilling the guarantees. For each unit outsourced pursuant to this Agreement up to 10%, the Employer shall pay $1.00 per unit divided among all of the employees of the Employer on the payroll as of the beginning and the end of the contract year, as a holiday bonus, not later than December 15 following the end of each contract year for which the employer is required to make such payments pursuant to the outsourcing agreement. This payment, if the employee so elects, may be made by the Employer to the National Plus 401(K) program which will make such arrangements as are necessary to receive said payments. Subject to the foregoing provisions, the Employer shall pay $1.50 per unit for units outsourced between 10% and 15% and $1.75 for outsourcing above 15%. An Employer electing to participate in an outsourcing program shall so notify the Joint Board Manager and the Union's International President, with respect to the planned outsourcing by certified mail, RRR. The Union's one week period to find a suitable alternative to the outsourcing shall begin to run upon earliest receipt of that notice. All reports and information required by the National Agreement with respect to the outsourcing program shall be made to the Joint Board Manager and to the Union's International President. D. Shipping. The Firm shall receive and ship all units subject to this Article only in facilities under contract with the Union. E. Records. The Union shall be provided such records as are required to monitor compliance with the terms of this Article, in addition to all other rights with respect to inspection of records guaranteed to it under the Collective Bargaining Agreement. The information shall be kept confidential. Any breach of such confidentiality shall terminate the right of the Union to examine such records upon the decision of an arbitrator that the Union did breach the confidentiality agreement. F. Continuation of Contracting. Unless the Employer brings work, that had been performed by its existing contractors, into its facilities covered by this Agreement , it shall during any contract year in which it outsources production continue to supply work to contractors at such levels as supplied in the previous year. Contractors shall include all contractors of shoulder pads, coats fronts, sponging and examining, to the extent now contracted. The measure of damages payable to the Union for failure to supply the amount of work required by the preceding sentence shall be that applied to other violations of this Article. G. Damages. Claims that any Employer is in violation of this Article shall be resolved through the grievance and arbitration provisions of this Agreement. If the Arbitrator finds that the Employer has violated this Article by outsourcing in excess of the limits set forth herein, the Arbitrator shall impose damages equal to one and one half times the unit labor cost of these outsourced units in excess of the limit. Said damages shall be paid to the Joint Board that is party to an Agreement with the Employer for distribution to the affected employees. STANDARDS: It is agreed that all Employers will comply with the following work standards in any outsourcing: Wages: Companies will only do business with partners, contractors or other sources who provide wages and benefits that comply with any applicable law and provide a living wage defined as a specified market-basket of consumerism priced in local currency and adjusted for inflation in the country from which the product is being sourced. Working Hours: Companies will only do business with partners, contractors, or other sources outside the United States that comply with all applicable laws and will not utilize a source who requires more than a 48 hour work week and does not provide at least one day off in each seven days. Forced or Compulsory Labor: In the manufacture of its products, Companies will not work with business partners that use forced or other compulsory labor, including labor that is required as a means of political coercion or as punishment for holding or for peacefully expressing political views. Companies will not purchase materials that were produced by forced prison of other compulsory labor and will terminate business relationships with any sources found to utilize such labor. Child Labor: Companies will not work with business partners that use child labor. The term "child" generally refers to a person who is less than 14 years of age, or younger than age for completing compulsory education if that age is higher than 14. In countries where the law defines "child" to include individuals who are older than 14, companies will apply that definition. Freedom of Association: Companies will use business partners that share a commitment to the right of Employees to establish and join organizations of their own choosing, and abide by international standards as specified by the ILO regarding freedom of association. Companies will assure that no employee is penalized because of his or her exercise of this right. Companies recognize and respect the right of all employees to organize and bargain collectively, and to strike. Discrimination: Companies will not use business partners who discriminate on the basis of personal characteristics rather than people's ability to do the job. They will not utilize partners who use corporal punishment or other forms of mental or physical coercion. Safe and Healthy Work Environment: Companies will have business partners that provide employees a safe and healthy workplace and that do not expose workers to hazardous conditions. Continued Violators: If the Union determines that countries or companies have repeatedly violated the foregoing work standards or are pervasive violators of human rights, it shall notify the Employer and give it 60 days to remedy the violations. If the union chooses it may take the alleged violations to binding expedited arbitration. If the union proves its case, the company shall cease to contract with that country or company. Monitoring: Employers and the ACTWU shall periodically monitor the compliance of their contractors/suppliers with the above standards and reports of this monitoring will be made available to the other party. H. The Employer agrees that none of its work will be performed in the homes of any employees. ARTICLE XVIII 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 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 ground for discharge, discipline or replacement for employees covered by this Agreement to refuse to cross a picket line or to refuse to perform work on the clothing of any other employer. ARTICLE XIX 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 a member of a panel or arbitrators herein designated, and his decision or award shall be final, conclusive and binding on all parties; and the parties hereby 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 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. In the event of any controversy, the Employer's manufacturing books, vouchers, papers and records shall be available for inspection by duly authorized representatives of the arbitrator herein designated to make such examination, for the purpose of determining the amount of goods cut or being cut, made or being made, by or for the Employer and for the purpose of ascertaining the names and addresses of the persons doing such work, and for the general purpose of determining whether the terms of this Agreement are being fully carried out. 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 XX 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. 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 Impartial Chairman shall fashion his award to grant any and all relief appropriate to effectuate this Article. ARTICLE XXI 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. Anything contained in subparagraph A to the contrary notwithstanding: 1. In the event that the Employer violates this Agreement by employing Union contractors who are not registered by it as required by this Agreement, the Union shall be free to order a stoppage of the Employer's work in the shop of such unregistered contractors. 2. Except to the extent that the employment of a non-union contractor is authorized expressly by Article XVII-Part Two, Outsourcing, in the event that the Employer violates this Agreement by employing a non-union contractor, the Union shall be free to take such action, including stoppages, as it deems appropriate to require the Employer to cease employing non-union contractors. 3. In the event that 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 immediately free to call a strike, stoppage or lockout as the case may be. ARTICLE XXII LEAVE OF ABSENCE: 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. 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. An employee who becomes a paid officer of the Union shall be entitled to a leave of absence for the term of his office. ARTICLE XXIII MORE FAVORABLE PRACTICES: Any custom or practice existing in the plant of the Employer 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, such as Paragraph D of Article XXIV. ARTICLE XXIV INTRODUCTION OF TECHNOLOGICAL CHANGES, ETC: A. The Union has long cooperated with Employers in the introduction of new machinery, changes in manufacturing techniques, and technological improvements in clothing plants. This policy has been established by mutual agreement, generally on a market level, between the Employer and the Union. Underlying such agreement has been the recognition of these basic conditions: (a) wages of the affected workers were not to be reduced, and (b) workers were not to be thrown out of employment. Such policy is reaffirmed and shall continue to be dependent, preferably by mutual agreement on a market level. B. If, however, in the event that the introduction of any such new machinery, changes in manufacturing techniques and technological improvements would not, in the opinion of either party be consistent with the maintenance of the aforesaid basic conditions, then the Employer and the Union shall each appoint a committee which jointly shall study and seek to resolve the problems attendant upon such change. C. Subject to the foregoing basic conditions (a) and (b) of paragraph A above, the scope of the general arbitration clause shall remain in full force and effect and applicable to all covered by this Agreement. D. To provide for reasonably comparable implementation of the basic conditions set forth in Article XXIV, including the definition of technological change, the Employer and the Union shall utilize the following guidelines in the absence of mutually satisfactory guidelines heretofore established on a market or local union level. Where the Employer contemplates such a technological change, the Employer shall give prior notice to the Union. Rates for such newly introduced or changed machinery shall be established by mutual agreement. While employed on the newly introduced or changed machinery, a worker shall be paid wages earned plus the difference, if any, between the expected earnings under the newly established rate and his prior earnings. Workers in the affected operation shall not be thrown out of employment, instead, if a job is available on a substantially equivalent operation, with the opportunity for substantially equivalent earnings, a worker may be transferred to such job, and during a period of retraining equal to the normal training period for similarly experienced workers, shall be guaranteed his former average hourly earnings. If such a job is not available, the worker shall have the option of (a) accepting another job with a guarantee, during a period of retraining equal to the normal training period for similarly experienced workers, of his former average hourly earnings, or (b) severance pay in such amounts as shall be mutually agreed to by the Employer and the Union. A worker electing to take a job which is not on a substantially equivalent operation with the opportunity for substantially equivalent earnings may subsequently elect to take severance pay, in which event such severance pay shall be reduced by any make-up pay paid pursuant to the normal training program applied. In the event the worker elects to take severance pay, such worker shall retain for one year his seniority and recall rights to his former job or section. ARTICLE XXV JURY DUTY: An employee called for involuntary trial jury duty will be paid the difference between the pay received for such jury duty and his straight time average weekly earnings (calculated for the eight (8) weeks immediately preceding such jury duty) for the period of such jury duty. 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 his 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. ARTICLE XXVI SUCCESSORS: In the event the Employer merges or consolidates with or its business is acquired by another person, firm or corporation, the Employer shall remain bound by all of the terms and provisions of this Agreement for the full term hereof. ARTICLE XXVII SEPARABILITY: 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 XXVIII 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 XXIX SAFETY AND HEALTH STUDY COMMITTEE: Whereas eliminating occupational safety and health hazards for employees in the men's and boys' tailored clothing industry is to the mutual benefit of the Employer and the Union, the parties to this Agreement shall form and maintain a joint Labor-Management Safety and Health Study Committee. The Committee shall be composed of equal numbers of representatives selected by the Employer and by the Union. The Committee shall hold meetings as often as necessary for the purpose of developing the means and structure to undertake joint safety and health studies to analyze occupational hazards in the industry and to suggest appropriate measures for control of such hazards. A Safety and Health Study Committee shall be established in each plant. It will meet regularly at dates, times, and place to be determined by local management after consultation with the Union. The employees shall be paid their established time rate or piece rate average by the Employer while attending such meetings. ARTICLE XXX FEDERAL FUNDS: The Union shall cooperate with the Employer to facilitate the availability of federal funds for training programs. ARTICLE XXXI A. FAMILY LEAVE: 1. An employees 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. B. Child Care Facilities: The Employer and the Union shall establish a local committee to study the availability of child care facilities. ARTICLE XXXII SUB PROGRAM: Should the employees agree to purchase additional insurance coverage provided by the Amalgamated 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 XXXIII 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. ARTICLE XXXIV NATIONAL HEALTH INSURANCE: The inflationary spiral affecting health care costs in the United States has caused the parties concern over the continued viability of their insurance program. Therefore, the parties agree that it would benefit the insurance program and the Employer if an appropriate National Health Insurance Program is enacted. It is further understood that the National Clothing Industry Labor-Management Committee shall meet to determine the best way to mount a joint campaign in support of the establishment of an appropriate National Health Insurance Program and to implement such a campaign. ARTICLE XXXV MORE FAVORABLE CONDITIONS If the Union enters into any agreement with any manufacturer of Mens or Boys tailored clothing that has resigned from the CMA, which provides any terms or conditions more favorable to that employer than any terms of conditions contained in this Agreement then upon written notice given by the Employer such terms and conditions shall automatically be extended to the Employer which shall have the right to make such terms or conditions retroactive to the effective date of such terms or conditions in the agreement containing such more favorable terms or conditions. ARTICLE XXXVI TERM OF AGREEMENT: This Agreement shall be effective upon the date hereof and shall remain in full force and effect until midnight April 30, 1998. It shall be automatically renewed from year to year thereafter unless on or before March 1, 1998, or March 1, 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 April 30th. IN WITNESS WHEREOF, the parties hereto have caused their signature to be affixed effective the day and year hereinabove first written. JOSEPH A BANK MFG. CO. --------------------------------- BALTIMORE REGIONAL JOINT BOARD, AMALGAMATED CLOTHING AND TEXTILE WORKERS UNION --------------------------------- Manager AGREEMENT dated May 1, 1995 by and between Joseph A. Bank Mfg. Co., Inc. (North Ave. Coat Shop, Brookhill Road Cutting Floor, Hampstead Coat Shop, Rubin Bldg. Pants Division & Hampstead Distribution Center) EX-27 12 EXHIBIT 27
5 YEAR FEB-01-1997 DEC-31-1996 719 0 3,300 0 40,883 52,976 48,078 25,238 81,410 24,345 0 0 0 70 35,629 81,410 155,058 155,058 84,866 67,836 0 0 1,946 410 159 251 0 0 0 251 0.04 0.04
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