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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JANUARY 29, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 0-14681
J. BAKER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2866591
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
555 TURNPIKE STREET, CANTON, MASSACHUSETTS 02021
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(617) 828-9300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.50 PER SHARE
7% CONVERTIBLE SUBORDINATED NOTES DUE 2002
(TITLE OF CLASS)
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 of this Form 10-K or any
amendment to this Form 10-K. / X /
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
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The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $261,990,920 as of March 31, 1994 (based on the
last reported sales price of the registrant's stock in the over-the-counter
market on such date).
The number of shares outstanding of the registrant's common stock as of March
31, 1994 was 13,819,710.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive proxy statement for the 1994 Annual Meeting
of Stockholders are incorporated by reference in Part III.
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J. BAKER, INC.
FORM 10-K REPORT
YEAR ENDED JANUARY 29, 1994
PART I
DESCRIPTION OF BUSINESS
GENERAL
J. Baker, Inc. ("J. Baker" or the "Company", which term shall include
all subsidiaries of the Company) is engaged in the retail sale of footwear and
apparel. The Company sells footwear through self-service licensed shoe
departments in mass merchandising department stores, through full and
semi-service licensed shoe departments in department and specialty stores, on a
wholesale basis and through its Fayva chain of self-selection family shoe
stores and its Parade of Shoes chain of "one price" women's shoe stores. The
Company is engaged in the retail sale of apparel through its chain of Casual
Male Big & Tall men's stores and through its chain of Work'n Gear work
clothing stores.
On November 19, 1993, the Company acquired 83% of the outstanding
common stock and all of the outstanding preferred stock of Tishkoff
Enterprises, Inc. of Columbus, Ohio ("TEI"), an operator of full-service,
semi-service and self-service licensed shoe departments in department stores,
specialty stores and discount stores. The 83% interest in the outstanding
common stock was acquired from certain TEI stockholders in exchange for 68,197
shares of the Company's common stock (16,769 of which shares are being withheld
from TEI stockholders for up to two years and are available as a set-off to
satisfy any claims of the Company for indemnification that may arise) and the
right to receive payments equal in the aggregate to 8.3% of the consolidated
pre-tax earnings of TEI over a six year period commencing January 29, 1994,
with a maximum aggregate payment of $4,980,000. The acquisition of all of the
outstanding preferred stock of TEI was made for a payment of $650,000 in cash.
On December 13, 1993, the stockholders of TEI approved the merger of JBAK
Acquisition Corp., an Ohio corporation and a wholly owned subsidiary of the
Company, with and into TEI (the "Merger") and TEI became a wholly owned
subsidiary of the Company. In connection with the Merger, the Company paid
cash consideration to the remaining TEI stockholders in the amount of $442,000,
in payment for the remaining 17% interest in TEI common stock. Subsequent to
the Merger, the corporate name of TEI was changed to Shoe Corporation of
America, Inc. ("SCOA"). At January 29, 1994, SCOA operated 188 licensed
footwear departments.
On January 30, 1993, Morse Acquisition, Inc., a wholly-owned
subsidiary of the Company ("Acquisition"), merged with and into Morse Shoe,
Inc. ("Morse") pursuant to an Amended and Restated Agreement and Plan of
Reorganization dated as of October 22, 1992 (the "Merger Agreement") by and
among the Company, Acquisition and Morse, whereby Morse became a wholly-owned
subsidiary of the Company. Pursuant to the acquisition of Morse, each share of
Morse common stock was exchanged for .17091 of a share of J. Baker common
stock. In connection with the acquisition, approximately 2,767,377 shares of
J. Baker common stock were issuable to Morse stockholders, including holders of
approximately $47 million, or 94%, of Morse convertible debentures which had
been converted into Morse common stock prior to January 30, 1993. During the
year ended January 29, 1994, holders of an additional $2.7 million of Morse
convertible debentures converted their debt into 49,820 shares of J. Baker
common stock. Approximately 6,500 additional shares of J. Baker common stock
are reserved for future issuance upon conversions of the remaining outstanding
Morse convertible debentures. As of January 29, 1994, the Company operated 501
licensed shoe departments and 395 Fayva shoe stores in its Morse subsidiary.
For additional information on the acquisition of Morse, See Note 3 to the
Consolidated Financial Statements.
On December 2, 1992, the Company received a notice of termination from
WearGuard Corporation ("WearGuard") terminating the License and Supply
Agreement dated as of September 25, 1991 by WGS Corporation (a wholly owned
subsidiary of the Company) and WearGuard. On September 25, 1991, the Company
had purchased from WearGuard assets consisting primarily of the inventory and
fixed assets of WearGuard's then existing 29 retail stores. The Company had
also assumed the leases to the 29 retail stores and acquired a license to
operate retail stores under the WearGuard name. Following the termination of
the agreement with WearGuard, the Company's 38
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WearGuard stores changed their name to Work'n Gear stores. On January 29,
1993, WGS Corporation executed an agreement with Todd Uniform Company ("Todd")
of St. Louis, Missouri with respect to the provision by Todd of personalized
uniforms and other work clothing to customers of the Work'n Gear retail
stores. The agreement with Todd was subsequently terminated on July 29, 1993,
subject to certain ongoing purchase commitments, and a new supply agreement
dated as of August 1, 1993 was entered into by WGS Corporation and WearGuard.
Located in eleven states throughout the northeastern United States, the 52 Work
'n Gear stores specialize in providing utility workwear, uniforms and
personalized work clothes, as well as uniforms for laboratory and medical
purposes.
On April 26, 1990, Ames Department Stores, Inc., and related entities
("Ames"), a significant licensor of the Company, filed for protection under
Chapter 11 of the United States Bankruptcy Code. On December 18, 1992, the
Company and Ames executed Amendment No. 2 to the Ames license agreement and the
Company and Ames executed a certain Stipulation which was filed with the United
States Bankruptcy Court for the Southern District of New York and approved on
January 6, 1993, the consummation date of Ames' Plan of Reorganization. The
Stipulation provided that the license agreement between Ames and the Company
shall be modified and amended and the license agreement assumed by Ames.
Further, pursuant to the Stipulation, the Company settled its $13.7 million
pre- petition claim with Ames and, in return, the Company received $5 million
in cash and a promissory note issued by Ames in the amount of $8.7 million
bearing interest at the rate of 6.0% per annum and having a final maturity on
February 1, 1998, subject to repayment in the amounts and on the dates set
forth in such promissory note. The Stipulation further provided for a mortgage
lien on and security interest in the real property and buildings in Rocky Hill,
Connecticut comprising the executive offices of Ames, which mortgage lien and
security interest shall be used as security in repayment of the promissory
note, and which shall be senior to all other liens and security interests
except those granted in favor of certain banks under a credit agreement with
such banks.
INDUSTRY SEGMENTS
The Company is engaged in the sale of footwear and apparel
manufactured by others. Financial information with respect to the Company's
industry segments can be found in Note 14 to the Consolidated Financial
Statements.
PRINCIPAL ACTIVITIES OF THE COMPANY
As previously indicated, the Company is an operator of licensed shoe
departments in mass merchandising and conventional full service department and
specialty stores, a supplier of shoes at wholesale and an operator of "one
price" women's shoe stores in the Company's Parade of Shoes chain and of
self-selection family footwear stores through its Fayva chain. In all of these
operations, the Company emphasizes the sale of quality footwear at
comparatively low prices. The Company operates the Casual Male Big & Tall
chain of stores which sells sportswear to the larger size man and also operates
Work'n Gear retail stores providing rugged, durable work clothing as well as
uniforms for laboratory and medical purposes.
Sales of shoes in the United States are made through various channels
of distribution, including conventional department stores, mass merchandising
department stores and specialty stores. The Company's footwear business is
based in mass merchandising department stores, conventional department and
specialty stores (served by the Company's licensed department and wholesale
operations and its SCOA subsidiary), "one price" specialty stores (the Parade
of Shoes chain), and self-selection family shoe stores (the Fayva chain).
The Company's sales of apparel in the United States are made through
the Casual Male Big & Tall and Work'n Gear retail stores. None of the
Company's sales, whether footwear or apparel, are made directly to customers
located outside of the United States.
The Company's businesses are seasonal, with its largest footwear
volume generated in the Easter, back to school and Christmas seasons. The
Casual Male Big & Tall division does its largest sales volumes in June
(Father's Day) and the Christmas season, and the Work'n Gear stores generate
their largest sales volume during the second half of the fiscal year. Sales
during the second half of each fiscal year have consistently exceeded those
during the first half of the year. Unseasonable weather may affect sales of
shoes and boots as well as of work clothing, especially during the traditional
high-volume periods.
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The Company is required to carry a substantial inventory in order to
provide prompt deliveries to its licensed shoe departments, wholesale
customers, Parade of Shoes, Fayva, Casual Male Big & Tall, and Work'n Gear
stores. Order backlogs, however, are not material to the Company's business.
The inventories needed in the operation of the Company's footwear and apparel
businesses are currently available from a number of domestic and overseas
sources, none of which provide more than eight percent of the Company's
merchandise.
The Company benefits by "most favored nation" provisions in trade
agreements between the United States and certain countries in which the
Company's suppliers are located. From time to time, the United States Congress
has proposed legislation which could result in such provisions being struck
from particular trade agreements, which could, in turn, result in higher costs
to the Company. There has been extensive Congressional debate with respect to
the "most favored nation" provision of the trade agreement between the United
States and China which was renewed for one year in July, 1992 and has since
been extended through July 3, 1994. The failure of this provision to be
renewed will likely result in substantially increased costs to the Company in
the purchase of footwear from China. However, the Company believes that all of
its competitors in the footwear industry will be similarly affected.
FOOTWEAR
Licensed Shoe Department Operations
In a licensed shoe department operation, the store and the Company
enter into a license agreement under which the Company has the exclusive right
to operate a shoe department in the store for a period of years. The
department is operated under the store name in space supplied by the store, and
the store collects payments from customers and credits the Company. The
Company pays the store a license fee, generally a percentage of net sales, for
the right to operate the department and for the use of the space. The license
fee ordinarily covers utilities, janitorial service, cash collection and
handling, packaging and advertising.
In its licensed shoe department operations, the Company sells a wide
variety of family footwear, including men's, women's and children's dress,
casual, athletic and work shoes and slippers. Most of the shoes offered by the
Company in its licensed departments are sold under the Company's trademarks or
on an unbranded basis, although the Company also sells name brand merchandise
at discounted prices in its mass merchandising licensed accounts. Merchandise
sold by the Company's SCOA subsidiary is predominantly in conventional, full
service department stores and includes a strong representation of national
brands complemented by private label merchandise. A small portion of the
licensed department business conducted by SCOA is in mass merchandising and
specialty apparel accounts. The Company's licensed shoe departments in mass
merchandising department stores are operated on a self- service basis, but
those departments operated by SCOA in conventional department and specialty
stores are on a semi-service or full service basis. The Company's personnel
employed in particular departments are responsible for stocking and layout of
shelves, responding to customer inquiries and related administrative tasks.
The Company and its predecessors have operated licensed shoe
departments in mass merchandising department stores for more than thirty years.
The Company's SCOA subsidiary has operated licensed shoe departments in mass
merchandising and conventional department and specialty stores for
approximately eight years. Sales in licensed departments accounted for 46.5%,
49.9% and 58.9% of the Company's total revenue in the years ended January 29,
1994, January 30, 1993 and February 1, 1992, respectively. At January 29,
1994, the Company operated a total of 1,530 licensed shoe departments
(including the 501 departments added in the Morse acquisition and the 188
departments added in the SCOA acquisition) under license agreements with 38
different department and specialty store operators. During fiscal 1994, the
Company opened 200 departments (including the 188 departments added in the SCOA
acquisition) and closed 124, representing a net increase of 76 units for the
year. The Company's licensed departments are located in forty states and in
the District of Columbia.
The Company conducts its licensed department operations under written
agreements for fixed terms. Of the 1,530 licensed shoe departments which the
Company operated at January 29, 1994, 1,174, or 77% are covered by agreements
with terms expiring in less than five years, 49 or 3% are covered by agreements
with terms expiring in five to ten years, and 307, or 20% are covered by
agreements with terms expiring in more than ten years.
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Of the Company's licensed departments at January 29, 1994, 307 were
operated under license with Ames, a major mass merchandising retailer in the
eastern United States. For the fiscal year ended January 29, 1994, Ames
accounted for 11.5% of the Company's total revenues.
At January 29, 1994 the Company also operated 54 departments under
license from Fishers Big Wheel, Inc. ("Fishers"), a discount department store
chain concentrated in Michigan, Ohio and Pennsylvania, 108 departments under
license in the Jamesway discount department store chain ("Jamesway"), which is
concentrated in the mid-Atlantic region of the United States, and 212 licensed
departments in the Rose's Stores, Inc. chain ("Rose's"), which stores are
concentrated in the southeastern region of the United States. Operations under
the agreements with Rose's, Jamesway and Fishers accounted for a total of 10.1%
of the Company's net sales in the year ended January 29, 1994.
On July 8, 1993, July 19, 1993 and September 6, 1993 Fishers, Jamesway
and Rose's, respectively, filed for protection under Chapter 11 of the
Bankruptcy Code. At the time of the bankruptcy filings, the Company had
outstanding accounts receivable of $6.0 million in the aggregate due from
Fishers, Jamesway and Rose's. At January 29, 1994, carried on the balance
sheet in Other Assets are deferred lease acquisition costs of $3.1 million
attributable to the Rose's license agreement. The Company intends to continue
to amortize the deferred lease acquisition costs of the Rose's license
agreement through the license termination date of July 30, 1997, since the
Company believes, based on its assessment of the likelihood and level of
ongoing business with Rose's, that the value of the license agreement supports
the historical carrying cost at January 29, 1994. During the first half of
fiscal 1995, Jamesway and Rose's will close approximately 113 stores. On
January 5, 1994, Fishers received bankruptcy court approval to conduct
liquidation sales in all 54 of its stores. At the completion of the
liquidation sales in the first quarter of fiscal 1995, Fishers ceased business
operations. The Company does not expect these filings under the Bankruptcy
Code, or the aforementioned store closings, to have a material adverse effect
on future earnings. Combined sales in Jamesway and Rose's totaled $77.0
million for the year ended January 29, 1994. Sales in Fishers for the year
ended January 29, 1994 were $15.6 million.
Under bankruptcy law, each licensor has the option of continuing
(assuming) the existing license agreement with the Company or terminating
(rejecting) that agreement. If the license agreement is assumed, the licensor
must cure all defaults under the agreement and the Company is entitled to
collect in full the outstanding past due receivable. Since the respective
commencement dates of the Jamesway and Rose's Chapter 11 cases, the Company has
continued to operate as licensee and has been paid the amounts due to it from
such operations. The Company has no assurance that either agreement will be
assumed or that Jamesway or Rose's will continue in business. Although the
Company believes that rejection of either license agreement or cessation of
Jamesway's or Rose's business is not probable, in the event that either
agreement is rejected, the Company believes that it will have a substantial
claim for damages. If such a claim is necessary, the amount realized by the
Company, relative to the carrying values of Jamesway and/or Rose's related
assets, will be based on the facts and circumstances at such time.
At January 29, 1994, the Company's Morse subsidiary operated 151
departments under license in the Hills Department Store Company chain
("Hills"), which is concentrated in the Pennsylvania, Ohio and New York
regions, 126 departments under license from Bradlees, Inc. ("Bradlees"), a
chain located primarily in the northeast region of the United States and 117
departments under license from ShopKo Stores ("ShopKo"), a chain located
primarily in the upper mid-west region of the United States. Operations under
the agreements with Hills , Bradlees and ShopKo accounted for a total of 17.8%
of the Company's net sales in the year ended January 29, 1994.
On February 4, 1991, Hills filed for protection under Chapter 11 of
the United States Bankruptcy Code. As of the date of the Hills Chapter 11
filing, Hills owed the Company approximately $4.0 million in outstanding
accounts receivable due under the license agreement. On September 10, 1993,
Hills' First Amended Consolidated Plan of Reorganization ("Hills Plan") was
confirmed by the bankruptcy court. On September 9, 1993, the Company and Hills
filed a joint motion with the bankruptcy court seeking an order rejecting the
license agreement between the parties, approving a revised unsecured claim of
$5.6 million and authorizing the execution of a new license agreement between
Hills and the Company on substantially the same terms as had existed
previously. On October 19, 1993, the
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bankruptcy court approved the order, pursuant to the which the Company
received, during the fourth quarter of fiscal 1994, the following amounts with
respect to its claim: $708,000 in cash, 46,400 shares of Hills common stock,
40,200 shares of Hills preferred stock and a promissory note from Hills in the
amount of $846,000 bearing interest at 10.25% and maturing in 2003. These
amounts represent 85% of the Company's expected distribution under the Hills
Plan. The Company expects Hills to distribute the balance of the expected
distribution during fiscal 1995.
As a result of the SCOA acquisition, 188 licensed footwear departments
have been added to the Company's licensed departments. At January 29, 1994,
SCOA's licensed shoe departments were operating in four major chains: Uptons
Department Stores, Inc. ("Uptons") (with headquarters in Norcross, Georgia),
Younkers, Inc. ("Younkers") (with headquarters in Des Moines, Iowa), Rich's
Department Stores, Inc. ("Rich's") (with headquarters in Salem, Massachusetts)
and Goody's Family Clothing, Inc. ("Goody's") (with headquarters in Knoxville,
Tennessee). SCOA currently manages shoe departments located in twenty-six
states east of the Rocky Mountains and Washington, DC. For the period from
November 20, 1993 through January 29, 1994, SCOA generated sales of $10.0
million.
In January, 1994, Wohl Shoe Company ("Wohl"), a subsidiary of Brown
Group Retail, Inc., and a competitor of SCOA, publicly announced its intention
to discontinue its licensed footwear department operations. Since the Wohl
announcement, the Company has been in active negotiations with several of
Wohl's licensors concerning the operation of footwear departments in their
respective department and specialty store chains. As of the date of this
report, the Company has signed license agreements with two such store chains,
Winkelman's, a women's specialty apparel chain headquartered in Plymouth,
Michigan and Gottschalks, a full service department store chain headquartered
in Fresno, California.
The Company faces competition in the shoe department business at two
levels: (1) for sales to retail customers and (2) for the business of the
department store chains which are its shoe licensors and wholesale customers.
The Company's retail shoe businesses compete with the shoe departments of
department store chains, conventional shoe chains, specialty stores and
independent retailers. The Company's success in its licensed department
operations is substantially dependent upon the success of the department store
chains in which the Company operates licensed departments. Within the
particular market that is served by the mass merchandising department store
chains, the Company believes that the primary competitive factors are the price
and the breadth and suitability of the selection of footwear that is offered.
The Company faces competition from other established shoe department
operators for licenses or wholesale arrangements with mass merchandising and
conventional department store chains. The Company also faces potential
competition from the in-house operational capabilities of its licensors and
wholesale customers. Because of the large scale of many licensing arrangements
and years of commitment that are involved, the Company has observed that
changes in these arrangements do not frequently occur and are more often
initiated by external factors such as mergers or acquisitions involving the
licensors or business terminations by the licensees, rather than by competition
among licensees for the business of a licensor. To the extent that there is
active competition for new business in this area, the Company believes that the
principal factors weighed by a potential licensor or wholesale customer are the
quality of the licensee's operations, as reflected by sales results, and the
price paid to the licensor in the form of the license fee.
The loss of one or more of the foregoing licensors could have a
material adverse effect on the Company.
Due to a general contraction in the retail industry and the filing for
protection under Chapter 11 of the United States Bankruptcy Code by certain of
the Company's licensors, the Company may experience declines in the number of
licensed departments that it operates.
Wholesale Operations
The Company performs the same services for its wholesale customers
that it does for its licensed departments, except that the wholesale customer
operates its shoe departments with personnel which it hires and owns the
footwear inventory which it sells at retail for its own account. The Company
supplies each of its wholesale customers under an exclusive agreement which is
subject to extension or renewal after a period of years specified in the
respective agreements. Shoes are sold to a wholesale customer when shipped
from the Company's distribution center, generally at a fixed percentage of the
retail selling price.
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The Company has been notified by its principal wholesale customer,
Caldor, Inc. ("Caldor") that Caldor is exercising its right to terminate the
agreement between it and the Company. Based upon this notification, the
Company will cease supplying shoes on a wholesale basis to Caldor by the middle
of fiscal 1995. Sales to Caldor in fiscal 1994 were $40.6 million. The
Company believes that the reduction in wholesale revenues in fiscal 1995 and
thereafter will not have a material impact on the Company's future earnings.
In the year ended January 29, 1994, sales to Caldor accounted for 4.4% of the
Company's total revenues.
At January 29, 1994, the Company supplied 149 shoe departments on a
wholesale basis. Sales to wholesale customers accounted for 4.4%, 7.1% and
7.2% of the Company's total revenues in the years ended January 29, 1994,
January 30, 1993 and February 1, 1992, respectively.
Parade of Shoes Operations
The Company's Parade of Shoes chain emphasizes the retail sale of
quality, primarily leather women's shoes on a "one price" basis. The stores
generally occupy 2,000 to 3,000 square feet of retail space located primarily
in suburban strip shopping centers which are typically anchored by a major
supermarket, a regional department store chain or a mass merchandising
retailer. In addition, the Company has also begun a program of opening Parade
of Shoes stores in major metropolitan areas. The stores generally feature from
7,000 to 9,000 items available for selection in a casual, self-service
atmosphere. The stores emphasize items that appeal to women between 18 and 44
years of age and also offer extensive selections oriented toward pre-teens,
teenagers and senior citizens. About 90% of all footwear items are sold at a
single price, currently $19.98, with the balance (except women's boots and
brand name athletic footwear) sold at lower prices.
Sales from Parade of Shoes stores accounted for 9.6%, 14.4% and 12.3%
of the Company's total revenues in the years ended January 29, 1994, January
30, 1993 and February 1, 1992, respectively.
A total of 162 Parade of Shoes stores were in operation in twelve
states in the eastern and midwestern United States and the District of Columbia
on January 29, 1994. During the year, the Company opened thirty stores and
closed four stores. The Company believes that the same competitive factors
that affect its licensed department operations, as well as the availability of
leather and brand name shoes and the general style and quality of merchandise,
are present in the market that is served by the Company's Parade of Shoes
chain. In the case of the Parade of Shoes chain, the Company has had the
advantage of being one of the first established retailers to promote
aggressively the "one price" concept in New England and other regions of the
United States. The Company may experience increased direct competition with
Parade of Shoes based on comparable merchandising approaches in the future.
Fayva Operations
The Fayva shoe chain operates self-selection retail stores which offer
popularly-priced footwear for the entire family. The Fayva stores are located
in major downtown areas, neighborhood locations, strip shopping centers,
suburban shopping centers and malls. The major markets for the Fayva stores
are in the northeastern portion of the United States, Florida, Los Angeles,
Houston and Chicago. The Company operated 395 Fayva stores at January 29,
1994, located in a total of seventeen states.
The retail stores, which average 3,200 square feet, emphasize
convenient self-selection, popular pricing and a broad selection of fashionable
footwear, including men's, women's and children's dress, casual, athletic and
work shoes, slippers and accessories. Although branded athletic footwear is
offered in the Fayva stores, most of the footwear offered by Fayva stores is
sold under Company brand names. Sales in the Fayva chain amounted to 19.5% of
the Company's revenue during the fiscal year ended January 29, 1994.
The principal competition of the Fayva stores includes conventional
shoe chains, the shoe departments of department store chains, specialty stores
and independent retailers. Among such competitors is Payless Shoe Source, a
subsidiary of The May Department Stores Company ("Payless"). With the
announced intention of Payless to expand its operations in the northeastern
portion of the United States and the similar expansion of other competitors,
the Fayva stores will face increased competition for sales to retail customers.
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APPAREL
Casual Male Big & Tall
According to retailer and manufacturer estimates, big (42" waist or
larger) and tall (6'3" or taller) men represent an estimated 10% to 13% of the
adult male population in the United States. The Company believes the clothing
demands of these customers have not been met. The big and tall customer
frequently has difficulty finding an adequate selection of apparel in his size
at department and men's specialty stores. Furthermore, only a limited number
of big and tall specialty stores exist, and these typically have a narrow
selection of current sportswear fashion. The majority of big and tall
specialty stores are operated by companies with less than five units.
Casual Male Big & Tall stores offer brand name and private label
sportswear in a wider variety of styles, colors and fabrics than most other big
and tall retailers. Merchandise is generally priced lower than department
stores and other traditional retailers of big and tall apparel. The Company
started fiscal 1994 with 214 stores and ended the year with 254 stores, having
opened 40 stores. The 254 stores are located in 36 states, predominantly in
the eastern half of the United States.
Beginning with the acquisition of Casual Male on February 3, 1991, the
results of its operations were consolidated with those of the Company. Sales
in the Casual Male Big & Tall stores accounted for 16.1%, 23.0% and 18.7% of
the Company's total revenues for the years ended January 29, 1994, January 30,
1993 and February 1, 1992, respectively.
The Company's Casual Male Big & Tall stores face competition from
department stores, specialty stores, discount stores, mail order companies,
off-price and other retailers who sell big and tall merchandise. There can be
no assurance that other retailers will not adopt purchasing and marketing
concepts similar to those of the Casual Male Big & Tall chain. The Company
believes the fashion and selection of its merchandise, its favorable prices and
its ability to obtain desirable store locations are important factors in
enabling it to compete effectively.
Work'n Gear
Currently located in eleven states throughout the northeastern United
States, the Work'n Gear stores sell utility workwear and footwear which is
generally used by persons engaged in outdoor labor activities. The Work'n
Gear stores also sell laboratory and medical uniforms as well as personalized
uniforms for maintenance and other uses.
Traditional competition for utility workwear has existed in certain
large, full-service department stores, which, increasingly, are discontinuing
this line of apparel. Competition also exists from local Army and Navy stores
but, to the Company's knowledge, no specific specialty store of the Work'n
Gear variety exists on a national basis. Competition in the medical uniform
business of Work'n Gear is found in small storefront vendors of medical and
laboratory uniforms as well as in several larger companies, such as Life
Uniform Stores, Z & H Uniforms and WearGuard Corporation, which sells primarily
through its catalog.
Neither the utility workwear nor the uniform businesses of the Work'n
Gear stores are dependent upon any one supplier for its inventory. The
customer base is the diverse population of working men and women in the United
States, and no specific customer accounts for any substantial portion of the
business.
Sales in the Work'n Gear stores accounted for 3.9%, 5.6% and 2.8% of
the Company's total revenues for the years ended January 29, 1994, January 30,
1993 and February 1, 1992, respectively.
TRADEMARKS
The Company has no patents, franchises or concessions, except for
agreements granting it the right to operate licensed departments. The Company
owns certain trademarks which it uses in its business. The Company does not
consider these trademarks to be materially important to its business.
8
<PAGE> 9
RESEARCH AND DEVELOPMENT
The Company does not engage in any Company-sponsored research or
customer-sponsored research.
ENVIRONMENT
The Company has not been required to make any material capital
equipment expenditures, or suffered any material effect on its earnings or
competitive position, as a result of compliance with federal, state or local
environmental regulations.
EMPLOYEES
As of January 29, 1994, the Company employed approximately 6,318
persons full-time and 6,950 persons part-time, of whom approximately 4,923
full-time and 6,924 part-time employees were engaged in retail operations at
the store level. Approximately 520 of the Company's full-time and part-time
employees are covered by collective bargaining agreements. The Company
believes that its employee relations are good.
<TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Sherman N. Baker 74 Chairman of the Board
Jerry M. Socol 52 President and Chief Executive Officer
Alan I. Weinstein 51 Senior Executive Vice President, Chief Financial Officer, Chief
Administrative Officer and Secretary
Linda B. Kanner 49 Senior Executive Vice President and Director of Shoe Merchandising and
Operations
Joseph Gajda 46 Executive Vice President and President of the Licensed Department
Division
Donald G. Hall 50 Executive Vice President and President of Parade of Shoes Division
Larry I. Kelley 51 Executive Vice President and President and Chief Executive Officer of The
Casual Male, Inc.
John E. Lattanzio 54 Executive Vice President and President of Fayva
Stuart M. Needleman 46 Executive Vice President and President of Work'n Gear
Dennis B. Tishkoff 51 Executive Vice President and President and Chief Executive Officer of
Shoe Corporation of America, Inc.
</TABLE>
Mr. Baker has been the Chairman of the Board of the Company since
March, 1990. From 1970 until March, 1990, Mr. Baker served as Chief Executive
Officer of the Company and its predecessor.
Mr. Socol has been President of the Company since September, 1988 and
Chief Executive Officer of the Company since March, 1990. Prior to joining the
Company in 1988, Mr. Socol was President and Chief Executive Officer of
Filene's Department Stores, a division of the May Department Stores Company,
from May to June, 1988. Mr. Socol was Chairman and Chief Executive Officer of
Filene's Department Stores, a division of Federated Department Stores, Inc.,
from August, 1987 to May, 1988. From January, 1984 to August, 1987, Mr. Socol
was President of Filene's Department Stores.
Mr. Weinstein has held the positions of Senior Executive Vice
President, Chief Financial Officer and Secretary of the Company since July,
1985. He was also appointed Chief Administrative Officer in 1988. Mr.
Weinstein joined the Company's predecessor in 1968 as Assistant Controller and
has held a variety of positions of increasing responsibility in finance and
administration since that time.
9
<PAGE> 10
Ms. Kanner has held the positions of Senior Executive Vice President
and Director of Shoe Merchandising and Operations for the Company since April,
1991. Before joining the Company, Ms. Kanner was Executive Vice President of
the Bank of New England from May, 1989 to April, 1991 serving as chief
marketing officer for advertising, sales support and product management
throughout the bank. Ms. Kanner was employed by the Bank of Boston from
November, 1984 to May, 1989, where she was a division executive in charge of
credit card consumer loan and retail product management. Ms. Kanner was also a
member of MasterCard's national marketing strategic advisory committee. Ms.
Kanner is the daughter of Mr. Baker.
Mr. Gajda has held the positions of Executive Vice President of the
Company and President of the Company's Licensed Division since February, 1993.
Prior to its acquisition by the Company, Mr. Gajda held the position of Senior
Vice President of the Morse Leased Division. Mr. Gajda joined Morse in 1986.
Mr. Hall has held the positions of Executive Vice President of the
Company and President of the Company's Parade of Shoes division since October,
1993. Before joining the Company, Mr. Hall was employed by Wohl Shoe Company
from 1966 to September, 1993, where he last held the position of Senior Vice
President.
Mr. Kelley has held the positions of Executive Vice President of the
Company and President and Chief Executive Officer of The Casual Male, Inc.
since June, 1991. Before joining the Company, Mr. Kelley was President of
Weathervane Stores from September, 1988 to May, 1991. From June 1987 to
September, 1988, Mr. Kelley was the President of Brauns Fashion. In November,
1990, Mr. Kelley filed for protection under the United States Bankruptcy Code
as a result of adverse personal real estate investments made prior to his
becoming an executive officer of the Company. In December, 1993, Mr. Kelley
was discharged from all pre-petition debts and obligations and has emerged from
bankruptcy.
Mr. Lattanzio has held the positions of Executive Vice President of
the Company and President of the Company's Fayva division since June, 1993.
Before joining the Company, Mr. Lattanzio was Senior Vice President at Kobacker
Company from 1990 to 1993. Mr. Lattanzio joined Kobacker Company in 1960 and
held a variety of positions including President of the Fashion Division, and
President of Picway Shoes and Patrini Shoes.
Mr. Needleman has held the positions of Executive Vice President of
the Company and President of the Company's Work'n Gear division since October,
1993. From 1989 through October, 1993, Mr Needleman held the position of
Senior Vice President and Director of Operations of The Casual Male, Inc.
Mr. Tishkoff has held the positions of Executive Vice President of the
Company and President of the Company's Shoe Corporation of America, Inc.
subsidiary since November, 1993, when the subsidiary was acquired by the
Company. Before joining the Company, Mr. Tishkoff was Chairman, President and
Chief Executive Officer of Tishkoff Enterprises, Inc. d/b/a Shoe Corporation of
America.
PROPERTIES
The Company's executive, buying and general offices and one of its
footwear distribution centers ("home office") are located in Canton,
Massachusetts. This facility is located at 555 Turnpike Street, Canton,
Massachusetts on 37 acres of land and is owned by the Company. The home office
contains approximately 750,000 square feet of space, including approximately
150,000 square feet of office space.
The Company leases a building at 65 Sprague Street, Readville,
Massachusetts that serves as the administrative offices for Casual Male and
Work'n Gear, and as distribution center for the Casual Male Big & Tall and
Work'n Gear stores. The building contains approximately 75,000 square feet of
office space and approximately 375,000 square feet of warehouse/distribution
space. The lease on this facility expires on May 31, 1999. The Company has
two consecutive five year options to renew the lease.
The Company also leased a facility in Shrewsbury, Massachusetts that
served as the administrative offices for Casual Male and distribution center
for the Casual Male Big & Tall and Work'n Gear stores prior to the
consolidation
10
<PAGE> 11
of these operations into the Readville, Massachusetts facility in December,
1993. The lease on this facility expired on March 31, 1994.
The headquarters for the Company's SCOA subsidiary and SCOA's footwear
distribution center is located at 2035 Innis Road, Columbus, Ohio. The
facility is on 17.4 acres of land and is owned by the Company. The building
contains approximately 355,000 square feet, including approximately 18,000
square feet of office space and 337,000 square feet of warehouse/distribution
space.
As of January 29, 1994, the Company had 162 Parade of Shoes stores,
all operating in leased premises ranging from 1,250 to 11,900 square feet, with
average space of approximately 2,400 square feet per store and total space of
approximately 389,000 square feet. The leases run for initial terms of between
three and ten years and average approximately seven years. A majority of the
leases are renewable at the option of the Company for terms of three to five
years.
As of January 29, 1994, the Company operated 254 Casual Male Big &
Tall stores, all in leased premises ranging from 1,875 to 6,900 square feet,
with total space of approximately 854,000 square feet. A majority of the
leases run for initial terms of five years. Most are renewable at the option
of the Company for one or more five year terms.
As of January 29, 1994, the Company operated 52 Work'n Gear stores,
all in leased premises ranging from 3,200 square feet to 6,200 square feet,
with total space of approximately 230,000 square feet. A majority of the
leases run for initial terms of five years. Most are renewable at the option
of the Company for one or more five year terms.
As of January 29, 1994, the Company operated 395 Fayva stores, all in
leased premises ranging from 1,645 to 6,800 square feet, with total space of
approximately 1,252,000 square feet. The leases run for initial terms of
between five and ten years. Approximately one-third are renewable at the
option of the Company for terms of five to ten years.
See "DESCRIPTION OF BUSINESS - Industry Segments, Footwear, Licensed
Shoe Department Operations", for information regarding the Company's licenses
to operate shoe departments in retail stores of its licensors.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings although
the Company is engaged in the following significant litigation:
On November 10, 1993, a federal jury in Minneapolis, MN returned a
verdict assessing royalties of $1,550,000, and additional damages of $1,500,000
against the Company in a patent infringement suit brought by Susan Maxwell with
respect to a device used to connect pairs of shoes. Certain post trial motions
have been filed by the Company seeking to vacate all or part of the verdict
and, subsequent to the entry of judgment, an appeal of certain legal issues is
anticipated.
A complaint was also filed by Susan Maxwell in November, 1992 against
Morse alleging infringement of the patent referred to above. The case is
currently in the discovery phase, and a trial date has not yet been set. The
Company believes that Ms. Maxwell's recovery against Morse, if any, will be
less than her recovery against the Company because the number of allegedly
infringing pairs of shoes is substantially less than those involved in the
Company's case. Further, the Company believes that any recovery may be limited
to the number of pairs allegedly infringing the patent during the time period
after the confirmation of Morse's Chapter 11 Plan of Reorganization on December
20, 1991.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
11
<PAGE> 12
PART II
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock is traded in the over-the-counter market
and is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") under the symbol "JBAK".
<TABLE>
The following table sets forth the high and low last reported sales
prices, as reported by NASDAQ, for the Company's Common Stock for each
quarterly period during the years ended January 29, 1994 and January 30, 1993.
The prices set forth below do not include retail mark-ups, mark-downs or
commissions.
<CAPTION>
YEAR ENDED JANUARY 29, 1994 HIGH LOW
- - --------------------------- ------- -------
<S> <C> <C>
First Quarter $22 1/4 $17 1/8
Second Quarter 23 3/4 19 5/8
Third Quarter 25 3/4 17 3/8
Fourth Quarter 19 1/8 16
YEAR ENDED JANUARY 30, 1993 HIGH LOW
- - --------------------------- ------- -------
First Quarter $15 $12 1/8
Second Quarter 15 1/2 10 5/8
Third Quarter 17 1/2 13 1/2
Fourth Quarter 22 3/4 16 3/4
</TABLE>
HOLDERS
The approximate number of holders of record of the Company's Common
Stock as of March 31, 1994 was 535. The Company believes that the actual
number of beneficial owners of the Company's Common Stock is substantially
greater than the stated number of holders of record, because a portion of the
Common Stock outstanding is held in "street name".
DIVIDENDS
On March 2, 1987, the Board of Directors of the Company adopted a
policy of paying quarterly dividends. For each quarter thereafter, the Company
has paid a 1 1/2 cents per share dividend.
The Company's unsecured revolving credit agreement and its senior
subordinated notes agreement limit the amount of cash dividends that may be
paid to stockholders. For additional information see Note 7 of the Notes to
Consolidated Financial Statements.
12
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the Company are
derived from the financial statements that have been audited and reported on by
KPMG Peat Marwick, independent certified public accountants, and are qualified
in their entirety by reference to the more detailed consolidated financial
statements and the independent auditors' report thereon appearing elsewhere on
Form 10-K. J. Baker has acquired a number of specialty retail businesses in
recent years. These acquisitions affect the comparability of the financial
information herein. For further discussions of these acquisitions, see
"DESCRIPTION OF BUSINESS" and Notes 2, 3 and 5 to the Consolidated Financial
Statements.
<TABLE>
J. BAKER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED
---------------------------------------------------------------
1/29/94 1/30/93 2/01/92 2/02/91 2/03/90
------- ------- ------- ------- -------
INCOME STATEMENT DATA: (53 WEEKS)
- - ---------------------
<S> <C> <C> <C> <C> <C>
Net sales $918,878 $532,256 $493,542 $421,442 $399,230
Cost of sales 516,855 313,703 291,945 254,699 238,877
-------- -------- -------- -------- --------
Gross profit 402,023 218,553 201,597 166,743 160,353
Selling, administrative and
general expenses 336,283 174,658 165,711 134,049 123,545
Depreciation and amortization 21,874 14,688 12,709 11,114 7,978
-------- -------- -------- -------- --------
Operating income 43,866 29,207 23,177 21,580 28,830
Interest income 704 80 73 132 165
Interest expense (8,146) (8,211) (10,352) (10,405) (8,930)
-------- -------- -------- -------- --------
Earnings before taxes and
extraordinary item 36,424 21,076 12,898 11,307 20,065
Taxes on earnings 13,113 7,798 4,874 3,916 6,916
-------- -------- -------- -------- --------
Earnings before extraordinary item 23,311 13,278 8,024 7,391 13,149
Extraordinary item, net of income tax benefit - (2,444) - - -
-------- -------- -------- -------- --------
Net earnings $ 23,311 $ 10,834 $ 8,024 $ 7,391 $ 13,149
======== ======== ======== ======== ========
Earnings per common share:
Primary:
Earnings before extraordinary item $ 1.70 $ 1.25 $ .78 $ .73 $ 1.46
Extraordinary item - (.23) - - -
-------- -------- -------- -------- --------
$ 1.70 $ 1.02 $ .78 $ .73 $ 1.46
======== ======== ======== ======== ========
Fully diluted:
Earnings before extraordinary item $ 1.45 $ 1.11 $ .78 $ .73 $ 1.46
Extraordinary item - (.18) - - -
-------- -------- -------- -------- --------
$ 1.45 $ .93 $ .78 $ .73 $ 1.46
======== ======== ======== ======== ========
AS AT
-------------------------------------------------------------
1/29/94 1/30/93 2/01/92 2/02/91 2/03/90
------- ------- ------- ------- -------
BALANCE SHEET DATA:
- - ------------------
Working capital $187,095 $138,385 $ 99,110 $109,582 $ 73,090
Total assets 502,496 431,798 296,704 284,926 237,281
Long-term debt and obligations under
capital leases 154,665 95,864 79,515 97,544 58,395
Stockholders' equity 200,086 172,610 105,012 92,210 85,249
======== ======== ======== ======== ========
Cash dividends declared
per common share $ .06 $ .06 $ .06 $ .06 $ .06
======== ======== ======== ======== ========
</TABLE>
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
All references herein to fiscal 1994, fiscal 1993 and fiscal 1992
relate to the years ended January 29, 1994, January 30, 1993 and February 1,
1992, respectively. To the extent that the Company may have incurred increased
costs resulting from inflation, the Company believes that it has been able to
offset these costs through higher revenues. Accordingly, the Company believes
that inflation has had no significant impact on the operations of the Company.
Results of Operations
FISCAL 1994 VERSUS FISCAL 1993
In fiscal 1994, net sales increased by $386.6 million or 72.6% over
net sales in fiscal 1993. This increase was primarily attributable to the
acquisition of Morse Shoe, Inc. on January 30, 1993, which included the
addition of 493 licensed shoe departments (501 at January 29, 1994) and 425
Fayva shoe stores (395 at January 29, 1994), and the acquisition of Shoe
Corporation of America, Inc. on November 19, 1993, which included the addition
of 158 licensed departments (188 at January 29, 1994). Fiscal 1994 sales in
the Morse and SCOA footwear operations were $352.5 million and $10.0 million,
respectively. Sales in the remainder of the Company's footwear operations
decreased by $7.8 million as a result of a decrease in the average number of
retail locations operated during the period, partially offset by an increase in
wholesale footwear sales and a 0.1% increase in comparable retail footwear
store sales. (Comparable retail footwear store sales increases/decreases are
based upon comparisons of weekly sales volume in licensed departments and
Parade of Shoes stores which were open in corresponding weeks of the two
comparison periods.) Sales in the Company's specialty apparel operations
increased by $32.0 million as a result of an increase of 54 in the number of
Casual Male Big & Tall stores and Work'n Gear stores in operation at the end
of fiscal 1994 over fiscal 1993, and a 3.8% increase in comparable specialty
apparel store sales. (Comparable specialty apparel store sales
increases/decreases are based upon comparisons of weekly sales volume in Casual
Male Big & Tall stores and Work'n Gear stores which were open in corresponding
weeks of the two comparison periods.)
Cost of sales constituted 56.2% of sales in fiscal 1994 as compared to
58.9% in fiscal 1993. This decrease was attributable primarily to a relative
increase in sales in divisions which have lower costs of sales. Cost of sales
in the Company's footwear operations was 57.5% of sales in fiscal 1994 as
compared to 61.7% of sales in fiscal 1993. The decrease in such percentage was
primarily attributable to a lower cost of sales in the newly acquired Fayva
shoe store division as compared to the Company's other shoe divisions, coupled
with an increase in initial markup on merchandise purchases and a decrease in
markdowns as a percentage of sales. Cost of sales in the Company's apparel
operations was 51.3% of sales in fiscal 1994 as compared to 52.1% of sales in
fiscal 1993. An increase in markdowns as a percentage of sales in apparel
operations was offset by an increase in initial markup on merchandise
purchases.
Selling, administrative and general expenses increased $161.6 million
or 92.5% over fiscal 1993, primarily as a result of the acquisition of Morse
Shoe, Inc. on January 30, 1993. As a percentage of sales, selling,
administrative and general expenses were 36.6% in fiscal 1994 as compared to
32.8% in fiscal 1993. This percentage increase was primarily due to a relative
increase in sales in apparel and shoe stores, which have higher selling,
administrative and general expenses as compared to licensed shoe department and
wholesale sales. Selling, administrative and general expenses in the Company's
footwear operations were 36.6% as compared to 32.1% of sales in fiscal 1993.
The increase in such percentage was primarily due to a relative increase in
sales in the Company's shoe stores (primarily from the newly acquired Fayva
shoe store division) versus sales in the Company's licensed/wholesale
departments. Selling, administrative and general expenses in the Company's
apparel operations were 36.6% of sales in fiscal 1994 as compared to 34.5% of
sales in fiscal 1993. The increase in such percentage is primarily due to an
increase in store level expenses. In the above analyses of selling,
administrative and general expenses in the Company's footwear and apparel
operations, fiscal 1993 percentage to sales figures in each of the footwear and
apparel segments were restated to allocate corporate overhead consistent with
the allocation method used in fiscal 1994.
Depreciation and amortization expense increased by $7.2 million in
fiscal 1994 over fiscal 1993 due to an increase in depreciable and amortizable
assets.
14
<PAGE> 15
As a result of the above described effects, the Company's operating
income increased 50.2% to $43.9 million from $29.2 million in fiscal 1993. As
a percentage of sales, operating income was 4.8% in fiscal 1994 as compared to
5.5% in fiscal 1993.
Net interest expense was $7.4 million in fiscal 1994 as compared to
$8.1 million in fiscal 1993. The Company had higher average levels of
borrowings in fiscal 1994 as compared to fiscal 1993. The interest expense
attributable to the higher levels of borrowings was offset by lower interest
rates on the borrowings and higher interest income, principally earned on the
$8.7 million, 6.0% note receivable due from Ames, which was issued in December,
1992.
Taxes on earnings for fiscal 1994 were $13.1 million, yielding an
effective tax rate of 36.0%, as compared to taxes on earnings before
extraordinary item of $7.8 million, yielding an effective rate of 37.0% in
fiscal 1993.
Net earnings for fiscal 1994 were $23.3 million as compared to
earnings before extraordinary item of $13.3 million in fiscal 1993, an increase
of 75.6%.
The Company does not provide post-retirement benefits other than
pensions as defined under SFAS #106.
FISCAL 1993 VERSUS FISCAL 1992
In fiscal 1993, net sales increased by $38.7 million or 7.8% over net
sales in fiscal 1992. This increase was attributable to an increase of $45.6
million in sales in the Company's specialty apparel operations, partially
offset by a decrease of $6.9 million in sales in the Company's footwear
operations. The increase in sales in the specialty apparel operations was
primarily attributable to having the Work 'n Gear (formerly WearGuard) chain,
which was acquired on September 25, 1991, open for the entire year in fiscal
1993, an increase of 43 in the number of Casual Male Big & Tall stores and Work
'n Gear stores in operation at the end of fiscal 1993 over fiscal 1992, and a
13.9% increase in comparable specialty apparel store sales. The decrease in
sales in the Company's footwear operations was primarily due to a decrease in
the average number of retail licensed shoe department locations operated during
the period. This decrease was partially offset by a 3.4% increase in
comparable retail footwear store sales and an increase in wholesale footwear
sales.
Cost of sales constituted 58.9% of sales in fiscal 1993 as compared to
59.2% in fiscal 1992. This decrease was attributable primarily to an increase
in apparel sales which have a lower cost of sales as compared to footwear
sales, partially offset by an increase in markdowns. The cost of sales for the
footwear and apparel operations was 61.7% and 52.1% in fiscal 1993 as compared
to 61.3% and 51.5% in fiscal 1992, respectively. The increase in cost of sales
in the footwear and apparel divisions is primarily attributable to an increase
in markdowns as a percentage of sales. In the apparel operations, cost of
sales also increased as a result of a relative increase in Work'n Gear sales,
which have a higher cost of sales than Casual Male Big & Tall sales.
Selling, administrative and general expenses increased $8.9 million or
5.4% over fiscal 1992. The increase was primarily due to the newly acquired
specialty apparel operations. As a percentage of sales, selling,
administrative and general expenses were 32.8% in fiscal 1993 as compared to
33.6% in fiscal 1992. The decrease in such percentage was primarily due to a
comparable retail store sales increase which caused fixed selling,
administrative and general expenses to be a lower percentage of sales as
compared to the prior year. As a percentage of sales, selling, administrative
and general expenses were 32.9% and 32.7% in fiscal 1993 as compared to 32.9%
and 35.9% in fiscal 1992 for the footwear and apparel operations, respectively.
As a result of Ames' October 30, 1992 announced closing of 60 stores after
Christmas 1992, the selling, administrative and general expenses for fiscal
1993 include a charge of approximately $3.5 million arising from the write-down
of the carrying value of deferred lease acquisition costs related to the Ames
license agreement. During fiscal 1993, the Company reduced selling,
administrative and general expenses by approximately $3.5 million arising from
the release of rights of software technology which J. Baker had previously
developed for use in its operations.
Depreciation and amortization expense increased by $2.0 million in
fiscal 1993 over fiscal 1992 due to an increase in depreciable and amortizable
assets.
15
<PAGE> 16
As a result of the above described effects, the Company's operating
income increased 26.0% to $29.2 million from $23.2 million in fiscal 1992. As
a percentage of sales, operating income was 5.5% in fiscal 1993 as compared to
4.7% in fiscal 1992.
Net interest expense was $8.1 million in fiscal 1993 as compared to
$10.3 million in fiscal 1992. The Company had higher average levels of
borrowings in fiscal 1993 as compared to fiscal 1992. The interest expense
attributable to the higher levels of borrowings was offset by lower interest
rates on the borrowings. In June 1992, the Company issued $70 million of 7%
convertible subordinated notes due 2002 and retired the $20 million outstanding
principal amount of its 10.53% senior notes, $27.5 million principal amount of
its 11.21% senior subordinated notes, and a portion of the outstanding bank
indebtedness under its revolving credit facility. As a result of this
transaction, interest expense was reduced by approximately $1.0 million for
fiscal 1993. The Company estimates that its annual interest expense will be
reduced by approximately $1.6 million as a result of this transaction.
Taxes on earnings before extraordinary item for fiscal 1993 were $7.8
million, yielding an effective tax rate of 37.0%, as compared to taxes of $4.9
million, yielding an effective rate of 37.8% in fiscal 1992. The Company
adopted Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, as of February 2, 1992. The impact of adopting Statement 109 was
not material and accordingly, there is no cumulative effect of a change in
accounting method presented in the consolidated statement of earnings for
fiscal 1993.
Earnings before extraordinary item for fiscal 1993 were $13.3 million
as compared to earnings of $8.0 million in fiscal 1992, an increase of 65.5%.
Financial Condition
JANUARY 29, 1994 VERSUS JANUARY 30, 1993
Merchandise inventories at January 29, 1994 were higher than at
January 30, 1993 primarily due to an increase in merchandise inventory in the
Morse footwear operations. At January 30, 1993, Morse's merchandise inventory
levels were unusually low due to buying limitations caused by its
pre-acquisition financial condition and to purchase accounting adjustments to
record inventory at net realizable value. The increase is also due to the
newly acquired SCOA footwear operations and an increase in the number of Parade
of Shoes, Casual Male Big & Tall and Work'n Gear locations in operation at the
end of the fiscal 1994 over fiscal 1993, partially offset by a decrease in the
number of licensed departments (excluding SCOA) and Fayva stores in operation
during the period.
The increase in property, plant and equipment principally consists of
$10.0 million in fixed assets added as a result of the SCOA acquisition. In
addition, increases in fixed assets resulted from the Company incurring capital
expenditures of approximately $24.1 million in fiscal 1994 primarily for the
opening of new stores and the renovation of existing units.
The ratios of accounts payable to merchandise inventory were 38.9% and
47.1% at January 29, 1994 and January 30, 1993, respectively. This decrease is
primarily a result of the Company's decision to reduce the average financing
terms of its foreign purchases, coupled with a return to normal merchandise
inventory levels at January 29, 1994 for the Morse footwear operations from an
unusually low level at January 30, 1993.
Accrued expenses at January 29, 1994 decreased to $24.1 million from
$29.8 million at January 30, 1993, primarily due to the payment of accruals set
up for Morse acquisition-related costs and expenses.
Other liabilities at January 29, 1994 decreased to $12.8 million from
$20.9 million at January 30, 1993, primarily due to certain long-term
liabilities becoming current at January 29, 1994. In addition, other
liabilities decreased due to a $2.4 million payment to former shareholders of
The Casual Male Corporation in satisfaction of the contingent payment
obligation under Casual Male's Plan of Reorganization.
Debt at January 29, 1994 increased to $154.7 million from $95.9
million at January 30, 1993, primarily due to additional borrowings under the
Company's revolving line of credit to fund capital expenditures, merchandise
inventory needs and costs related to the acquisitions of Morse on January 30,
1993 and SCOA on November 19, 1993.
16
<PAGE> 17
Liquidity and Capital Resources
The Company has a $215 million revolving credit facility on an
unsecured basis with Shawmut Bank, N.A., The First National Bank of Boston,
Fleet Bank of Massachusetts, N.A., Citizens Savings Bank, National Westminster
Bank USA, The Yasuda Trust and Banking Company, LTD., Fuji Bank, Limited and
Standard Chartered Bank (the "Banks"). The aggregate commitment amount will be
reduced by $10 million on each December 29th of 1994 and 1995. Borrowings
under the revolving credit facility bear interest at variable rates and, at the
discretion of the Company, can be in the form of loans, bankers' acceptances
and letters of credit. This credit facility became effective on November 19,
1993, replacing a $200 million revolving credit facility, and was established
to handle the Company's increased financial needs created by the acquisition of
SCOA. This facility expires in June, 1996. As of January 29, 1994, the
Company had outstanding obligations under the revolving credit facility of
$164.7 million, consisting of loans, obligations under bankers' acceptances and
letters of credit.
In June, 1992 the Company issued $70 million of 7% convertible
subordinated notes due 2002. The notes are convertible at a conversion price
of $16.125 per share, subject to adjustment in certain events. The Company
used the net proceeds to repay all of the $20 million outstanding principal
amount of its 10.53% senior term notes, $27.5 million principal amount of its
11.21% senior subordinated notes, and a portion of outstanding bank
indebtedness under its unsecured revolving credit facility. In connection with
repayment of the senior term notes and senior subordinated notes, the Company
paid redemption premiums totalling approximately $2.0 million.
The Company expects to open approximately 50 Casual Male Big & Tall
stores, 50 Parade of Shoes stores and 10 Work'n Gear stores in fiscal 1995.
The Company believes that amounts available under its revolving credit
facility, along with internally generated funds, will be sufficient to meets
its current operating and capital requirements under ordinary circumstances
through the end of the current fiscal year.
The Company is currently in negotiation with several department and
specialty store chains concerning the operation, by the Company's SCOA
subsidiary, of licensed footwear departments in their respective chains. These
business opportunities arose as a result of Wohl Shoe Company's January 1994
announcement of its intent to discontinue its licensed footwear operations.
The Company will be able to finance, with its current credit facility, the
operations and acquisition costs of inventory and fixtures in the two store
chains it has signed agreements with as of the date of this report. The
Company expects that it will need, and consequently is negotiating with the
Banks, to increase the amount available under the Company's revolving credit
facility in order to finance the operations and acquisition costs of the
anticipated additional business opportunities created by Wohl Shoe Company's
aforementioned announcement.
17
<PAGE> 18
<TABLE>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
J. BAKER, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
----
<S> <C>
Independent Auditors' Report 19
Consolidated balance sheets as of January 29, 1994 and January 30, 1993 20
Consolidated statements of earnings for the years ended January 29, 1994, 21
January 30, 1993 and February 1, 1992
Consolidated statements of stockholders' equity for the years ended 22
January 29, 1994, January 30, 1993 and February 1, 1992
Consolidated statements of cash flows for the years ended January 29, 1994, 23
January 30, 1993 and February 1, 1992
Notes to consolidated financial statements 24
</TABLE>
All schedules have been omitted as they are inapplicable or not required, or the
information has been included in the consolidated financial statements or in the
notes thereto.
18
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
J. Baker, Inc.:
We have audited the accompanying consolidated balance sheets of J. Baker, Inc.
and subsidiaries as of January 29, 1994 and January 30, 1993, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended January 29, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of J. Baker, Inc. and
subsidiaries at January 29, 1994 and January 30, 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended January 29, 1994 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick
Boston, Massachusetts
March 11, 1994
19
<PAGE> 20
<TABLE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1994 AND JANUARY 30, 1993
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,584,032 $ 6,385,467
Accounts receivable:
Trade 27,984,534 25,148,030
Other 3,919,156 4,871,725
------------ ------------
31,903,690 30,019,755
------------ ------------
Merchandise inventories 278,220,413 227,244,088
Prepaid expenses 6,672,008 5,291,168
Deferred income taxes 1,664,475 9,821,336
------------ ------------
Total current assets 322,044,618 278,761,814
------------ ------------
Property, plant and equipment, at cost:
Land and buildings 24,114,820 17,313,600
Furniture, fixtures and equipment 87,993,608 74,762,354
Leasehold improvements 32,715,145 21,228,496
------------ ------------
144,823,573 113,304,450
Less accumulated depreciation and amortization 39,256,180 30,179,795
------------ ------------
Net property, plant and equipment 105,567,393 83,124,655
------------ ------------
Deferred income taxes 1,210,000 -
Other assets 73,674,470 69,911,719
------------ ------------
$502,496,481 $431,798,188
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,636,300 $ 2,530,000
Accounts payable 108,262,923 106,931,079
Accrued expenses 24,050,766 29,812,430
Income taxes payable - 1,103,628
------------ ------------
Total current liabilities 134,949,989 140,377,137
------------ ------------
Deferred income taxes - 2,079,970
Other liabilities 12,794,652 20,866,336
Long-term debt, net of current portion 77,000,000 15,538,600
Senior subordinated debt 7,312,366 7,265,830
Convertible subordinated debt 70,353,000 73,060,000
Stockholders' equity:
Common stock, par value $.50 per share, authorized 40,000,000 shares,
13,792,647 shares issued and outstanding in 1994 (13,474,165 in 1993) 6,896,324 6,737,083
Preferred stock, par value $1.00 per share, authorized 2,000,000 shares
(none issued and outstanding) - -
Additional paid-in capital 114,654,417 109,827,161
Retained earnings 78,535,733 56,046,071
------------ ------------
Total stockholders' equity 200,086,474 172,610,315
------------ ------------
$502,496,481 $431,798,188
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
<TABLE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $918,877,733 $532,255,720 $493,542,243
Cost of sales 516,854,748 313,703,053 291,945,409
------------ ------------ ------------
Gross profit 402,022,985 218,552,667 201,596,834
Selling, administrative and general expenses 336,283,342 174,658,273 165,711,095
Depreciation and amortization 21,873,610 14,687,737 12,708,790
------------ ------------ ------------
Operating income 43,866,033 29,206,657 23,176,949
Interest income 703,778 80,291 72,724
Interest expense (8,145,769) (8,211,336) (10,351,782)
------------ ------------ ------------
Earnings before taxes and extraordinary item 36,424,042 21,075,612 12,897,891
Taxes on earnings 13,113,000 7,798,000 4,874,000
------------ ------------ ------------
Earnings before extraordinary item 23,311,042 13,277,612 8,023,891
Extraordinary item, net of income tax benefit - (2,443,953) -
------------ ------------ ------------
Net earnings $ 23,311,042 $ 10,833,659 $ 8,023,891
============ ============ ============
Earnings per common share:
Primary:
Earnings before extraordinary item $ 1.70 $ 1.25 $ .78
Extraordinary item - (.23) -
------------ ------------ ------------
$ 1.70 $ 1.02 $ .78
============ ============ ============
Fully diluted:
Earnings before extraordinary item $ 1.45 $ 1.11 $ .78
Extraordinary item - (.18) -
------------ ------------ ------------
$ 1.45 $ .93 $ .78
============ ============ ============
Number of shares used to compute
earnings per common share:
Primary 13,674,553 10,655,498 10,345,361
============ ============ ============
Fully diluted 18,286,267 13,774,071 10,345,361
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
<TABLE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ --------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balance, February 2, 1991 10,189,311 $5,094,656 $48,662,456 $38,452,887 $92,209,999
Net income for the year ended
February 1, 1992 - - - 8,023,891 8,023,891
Shares issued in connection with
acquisition of Work 'n Gear Stores 415,723 207,862 5,047,007 - 5,254,869
Exercise of stock options 21,039 10,519 137,666 - 148,185
Dividends paid ($.06 per share) - - - (624,511) (624,511)
---------- ----------- ------------ ----------- ------------
Balance, February 1, 1992 10,626,073 5,313,037 53,847,129 45,852,267 105,012,433
Net income for the year ended
January 30, 1993 - - - 10,833,659 10,833,659
Shares issued in connection with
acquisition of Morse Shoe, Inc. 2,767,377 1,383,688 55,458,236 - 56,841,924
Exercise of stock options 80,823 40,412 522,821 - 563,233
Retirement of stock (108) (54) (1,025) - (1,079)
Dividends paid ($.06 per share) - - - (639,855) (639,855)
---------- ----------- ------------ ----------- ------------
Balance, January 30, 1993 13,474,165 6,737,083 109,827,161 56,046,071 172,610,315
---------- ----------- ------------ ----------- ------------
Net income for the year ended
January 29, 1994 - - - 23,311,042 23,311,042
Shares issued in connection with
acquisition of Shoe Corporation
of America, Inc. 51,428 25,714 944,990 - 970,704
Exercise of stock options 129,232 64,616 1,089,955 - 1,154,571
Shares purchased by former Casual
Male stockholders 88,044 44,022 1,793,922 - 1,837,944
Conversion of convertible debt 49,820 24,910 998,392 - 1,023,302
Retirement of stock (42) (21) (3) - (24)
Dividends paid ($.06 per share) - - - (821,380) (821,380)
---------- ----------- ------------ ----------- ------------
Balance, January 29, 1994 13,792,647 $6,896,324 $114,654,417 $78,535,733 $200,086,474
========== ========== ============ =========== ============
</TABLE>
See accompanying notes to consolidated financial statements
22
<PAGE> 23
<TABLE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 23,311,042 $ 10,833,659 $ 8,023,891
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization:
Fixed assets 14,161,472 9,363,699 8,813,554
Deferred charges, intangible assets and
deferred financing costs 7,758,674 5,365,311 4,066,060
Deferred income taxes 9,886,000 581,634 2,223,000
Write-down of other assets - 3,470,355 -
Extraordinary item not utilizing cash - 1,734,953 -
Change in:
Accounts receivable (427,878) 685,966 (2,397,730)
Merchandise inventories (52,930,182) (8,162,842) (2,380,033)
Prepaid expenses (2,109,595) (489,190) 46,437
Accounts payable (5,463,796) 5,313,770 19,071,025
Accrued expenses (12,878,976) 250,119 (602,627)
Income taxes payable (1,796,559) 1,235,562 (257,910)
Other liabilities (7,451,093) (44,369) (10,336)
------------ ------------ ------------
Net cash provided by (used in)
operating activities (27,940,891) 30,138,627 36,595,331
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures for:
Furniture and fixtures (24,115,405) (11,197,966) (5,475,494)
Other assets (2,480,695) (7,782,742) (12,781,632)
Net cash paid in acquisition of Shoe Corp. of America (2,698,507) - -
Net cash paid in acquisition of Casual Male - (300,000) (1,070,825)
Additional amount paid in connection with
acquisition of Work 'n Gear stores - (230,987) -
Net cash acquired in acquisition of Morse Shoe, Inc. - 1,596,487 -
------------ ------------ ------------
Net cash used in investing activities (29,294,607) (17,915,208) (19,327,951)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of convertible subordinated debt - 70,000,000 -
Repayment of senior debt - (25,000,000) -
Repayment of senior subordinated debt - (27,500,000) -
Proceeds from (repayment of) other long term debt 52,262,950 (25,800,000) (20,200,000)
Proceeds from issuance of common stock, net of retirements 2,992,493 562,154 148,186
Payment of dividends (821,380) (639,855) (624,511)
------------ ------------ ------------
Net cash provided by (used in)
financing activities 54,434,063 (8,377,701) (20,676,325)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (2,801,435) 3,845,718 (3,408,945)
Cash and cash equivalents at beginning of year 6,385,467 2,539,749 5,948,694
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,584,032 $ 6,385,467 $ 2,539,749
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
23
<PAGE> 24
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 29, 1994, JANUARY 30, 1993 AND FEBRUARY 1, 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Fiscal Year
The Company follows a 52 - 53 week fiscal year ending on the Saturday
nearest January 31.
Fair Value of Financial Instruments
The carrying amount of cash, cash equivalents, trade receivables and trade
payables approximate fair value because of the short maturity of these
financial instruments. The fair value of the Company's long-term
instruments is estimated based on market values for similar instruments.
At January 29, 1994, the difference between the carrying value of long-term
instruments and their estimated fair value is not material.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid instruments with maturities of
three months or less and are stated at cost which approximates market. The
Company's cash management program utilizes zero balance accounts.
Accordingly, all book overdraft balances have been reclassified to accounts
payable.
Merchandise Inventories
Merchandise inventories, which consist entirely of finished goods, are
valued at the lower of cost or market, principally by the retail inventory
method.
Depreciation and Amortization of Property, Plant and Equipment
Depreciation and amortization of the Company's property, plant an equipment
are provided on the straight-line method over the following periods:
Furniture and fixtures 7 years
Machinery and equipment 7 years
Leasehold improvements 10 years
Building, building improvements and
land improvements 40 years
Maintenance and repairs are charged to expense as incurred. Major renewals
or replacements are capitalized. When properties are retired or otherwise
disposed of, the asset and related reserve account are relieved and the
resulting gain or loss, if any, is credited or charged to earnings.
Earnings Per Common Share
Earnings per common share of the Company is based on the weighted average
number of shares of common stock outstanding during the applicable period.
Primary earnings per share is based on the weighted average number of shares
of common stock outstanding during such period. Stock options and warrants
are excluded from the calculation since they have less than a 3% dilutive
effect.
Fully diluted earnings per share for the periods ended January 29, 1994 and
January 30, 1993 is based on the weighted average number of shares of common
stock outstanding during such periods. Included in this calculation is the
dilutive effect of common stock issuable under the 7% convertible
subordinated notes due 2002, stock options and warrants.
Revenue Recognition
The Company recognizes revenue at the time of sale in its retail stores and
at the time of shipment in its wholesale division.
24
<PAGE> 25
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
Commencing on February 2, 1992, deferred taxes are provided for using the
asset and liability method for temporary differences between financial and
tax reporting.
(2) ACQUISITION OF SHOE CORPORATION OF AMERICA, INC.
On November 19, 1993, the Company acquired 83% of the outstanding common stock
and all of the outstanding preferred stock of Tishkoff Enterprises, Inc. of
Columbus, Ohio ("TEI"), an operator of full-service, semi-service and self-
service licensed shoe departments in department stores, specialty stores and
discount stores. The 83% interest in the outstanding common stock was acquired
from certain TEI stockholders in exchange for 68,197 shares of the Company's
common stock (16,769 of which shares are being withheld from TEI stockholders
for up to two years and are available as a set-off to satisfy any claims of the
Company for indemnification that may arise) and the right to receive payments
equal in the aggregate to 8.3% of the consolidated pre-tax earnings of TEI over
a six year period commencing January 29, 1994, with a maximum aggregate payment
of $4,980,000. The acquisition of all of the outstanding preferred stock of
TEI was made for a payment of $650,000 in cash. On December 13, 1993, the
stockholders of TEI approved the merger of JBAK Acquisition Corp., an Ohio
corporation and a wholly owned subsidiary of the Company, with and into TEI
(the "Merger") and TEI became a wholly owned subsidiary of the Company. In
connection with the Merger, the Company paid cash consideration to the
remaining TEI stockholders in the amount of $442,000, in payment for the
remaining 17% interest in TEI common stock. Subsequent to the Merger, the
corporate name of TEI was changed to Shoe Corporation of America, Inc. ("SCOA").
<TABLE>
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations of SCOA are included in the consolidated
statements of earnings since the date of acquisition. The purchase price of
$3,822,000, which includes $500,000 of direct costs associated with the Merger,
was allocated to the assets and liabilities of SCOA based on their respective
fair values at November 19, 1993, as set forth below:
<S> <C> <C>
Total purchase price $3,822,000
Less:
Book value of SCOA at November 19, 1993 $ (914,000)
Adjustments to reflect fair value of net assets:
Merchandise inventories (3,500,000)
Property, plant and equipment 7,760,000
Deferred income taxes 800,000
Other assets (245,000)
Other liabilities (1,037,000) (2,864,000)
---------- ----------
Excess of cost over net assets acquired $ 958,000
==========
</TABLE>
The excess of cost over net assets acquired is included in other assets and is
being amortized on a straight line basis over twenty years.
For the period from November 20, 1993 through January 29, 1994, SCOA generated
sales of $10 million. At January 29, 1994, SCOA operated 188 licensed footwear
departments.
(3) ACQUISITION OF MORSE SHOE, INC.
On January 30, 1993, Morse Acquisition, Inc., a wholly-owned subsidiary of the
Company ("Acquisition"), merged with and into Morse Shoe, Inc. ("Morse")
pursuant to an Amended and Restated Agreement and Plan of Reorganization dated
as of October 22, 1992 (the "Merger Agreement") by and
25
<PAGE> 26
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
among the Company, Acquisition and Morse, whereby Morse became a wholly-owned
subsidiary of the Company. Pursuant to the acquisition of Morse, each share of
Morse common stock was exchanged for .17091 of a share of J. Baker common
stock. In connection with the acquisition, approximately 2,767,377 shares of
J. Baker common stock were issuable to Morse stockholders, including holders of
approximately $47 million, or 94%, of Morse convertible debentures which had
been converted into Morse common stock prior to January 30, 1993. During the
year ended January 29, 1994, holders of an additional $2.7 million of Morse
convertible debentures converted their debt into 49,820 shares of J. Baker
common stock. Approximately 6,500 additional shares of J. Baker common stock
are reserved for future issuance upon conversions of the remaining outstanding
Morse convertible debentures.
As of January 29, 1994, the Company operated 501 licensed shoe departments and
395 Fayva shoe stores in its Morse subsidiary.
<TABLE>
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations are included in the consolidated
statements of earnings since the date of acquisition. At January 30, 1993, the
purchase price of $58,942,000, which includes $2,100,000 of direct costs
associated with the acquisition, was allocated to the assets and liabilities of
Morse based on their respective fair values. During the current fiscal year,
the Company completed its analysis of the allocation of the purchase price and
adjusted downward the preliminary estimate of the fair value of the acquired
net assets by $6,500,000 as follows:
<S> <C>
Adjustments to reflect fair value of net assets:
Merchandise inventories $(9,309,000)
Accrued expenses (4,300,000)
Deferred income taxes 4,220,000
Other assets 2,389,000
Other liabilities 500,000
-----------
Excess of cost over net assets acquired $(6,500,000)
===========
</TABLE>
As a result, the excess of cost over net assets acquired is included in Other
Assets and is being amortized on a straight line basis over twenty years.
Morse has filed a breach of contract lawsuit against a former wholesale
customer. There can be no assurance of what amount the Company will realize as
a result of this lawsuit.
<TABLE>
The following unaudited pro forma operating results assume the Morse
acquisition occurred as of the beginning of the respective years presented
after giving effect to certain pro forma adjustments. In addition, for
comparability purposes, the pro forma operating results for the years ended
January 30, 1993 and February 1, 1992 exclude Morse's reorganization costs.
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 30, 1993 FEBRUARY 1, 1992
----------------------------------------------------------- ----------------
<S> <C> <C>
Net sales $894,723,000 $892,664,000
Operating income 42,031,000 35,193,000
Earnings before extraordinary item 19,852,000 12,721,000
Net earnings 17,408,000 12,721,000
Earnings per common share:
Primary:
Earnings before extraordinary item $1.48 $0.97
Net earnings $1.30 $0.97
Fully diluted:
Earnings before extraordinary item $1.32 $0.97
Net earnings $1.17 $0.97
</TABLE>
26
<PAGE> 27
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually would
have resulted had the combination been in effect on the dates indicated, or
which may result in the future.
(4) BANKRUPTCY FILING OF LICENSORS
On April 26, 1990, Ames Department Stores, Inc., and related entities ("Ames"),
a significant licensor of the Company (see Notes 6 and 13), filed for
protection under Chapter 11 of the United States Bankruptcy Code. On December
18, 1992, the Company and Ames executed Amendment No. 2 to the Ames license
agreement and the Company and Ames executed a certain Stipulation which was
filed with the United States Bankruptcy Court for the Southern District of New
York and approved on January 6, 1993, the consummation date of Ames' Plan of
Reorganization. The Stipulation provided that the license agreement between
Ames and the Company shall be modified and amended and the license agreement
assumed by Ames. Further, pursuant to the Stipulation, the Company settled its
$13.7 million pre-petition claim with Ames and, in return, the Company received
$5 million in cash and a promissory note issued by Ames in the amount of $8.7
million bearing interest at the rate of 6.0% per annum and having a final
maturity on February 1, 1998, subject to repayment in the amounts and on the
dates set forth in such promissory note. The Stipulation further provided for
a mortgage lien on and security interest in the real property and buildings in
Rocky Hill, Connecticut comprising the executive offices of Ames, which
mortgage lien and security interest shall be used as security in repayment of
the promissory note, and which shall be senior to all other liens and security
interests except those granted in favor of certain banks under a credit
agreement with such banks.
Carried on the balance sheet at January 29, 1994 in Other Assets (see Note 6)
are deferred lease acquisition costs of $22.2 million attributable to the Ames
license agreement, which expires in 2009, subject to earlier termination upon
failure to meet certain operating requirements. This balance reflects a
non-cash write-down during the third quarter of fiscal 1993 resulting in a
pre-tax charge to earnings of approximately $3.5 million as a result of Ames'
October 30, 1992 announcement to close 60 additional stores. The Company
intends to continue to amortize the deferred lease acquisition costs of the
Ames license agreement over the remaining term of the license agreement, since
the Company believes, based on its assessment of the likelihood and level of
ongoing business with Ames, that the value of the license agreement supports
the historical carrying cost at January 29, 1994. Any closing by Ames of
additional stores will likely reduce the value of the Ames license agreement to
a level below the current carrying value of the deferred lease acquisition
costs. This would result in a further non-cash write-down of the asset, which
would be reflected in the Company's earnings. The amount of the write-down
would depend on the Company's historical sales volume in the closed stores.
On July 8, 1993, July 19, 1993 and September 6, 1993 Fishers Big Wheel
Department Stores ("Fishers"), Jamesway Corporation ("Jamesway") and Rose's
Stores, Inc. ("Rose's"), respectively, licensors of the Company, filed for
protection under Chapter 11 of the Bankruptcy Code. At the time of the
bankruptcy filings, the Company had outstanding accounts receivable of $6.0
million in the aggregate due from Fishers, Jamesway and Rose's. At January 29,
1994, carried on the balance sheet in Other Assets are deferred lease
acquisition costs of $3.1 million attributable to the Rose's license agreement.
The Company intends to continue to amortize the deferred lease acquisition
costs of the Rose's license agreement through the license termination date of
July 30, 1997, since the Company believes, based on its assessment of the
likelihood and level of ongoing business with Rose's, that the value of the
license agreement supports the historical carrying cost at January 29, 1994.
Jamesway and Rose's have announced that they will close approximately 113
stores during the first half of fiscal 1995. On January 5, 1994, Fishers
received bankruptcy court approval to conduct liquidation sales in all 54 of
its stores and
27
<PAGE> 28
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to cease business operations at the completion of the liquidation sales. The
Company does not expect these filings under the Bankruptcy Code, or the
aforementioned store closings, to have a material adverse effect on
future earnings. Combined sales in Jamesway and Rose's totaled $77.0 million
for the year ended January 29, 1994. Sales in Fishers for the year ended
January 29, 1994 were $15.6 million.
Under bankruptcy law, each licensor has the option of continuing (assuming) the
existing license agreement with the Company or terminating (rejecting) that
agreement. If the license agreement is assumed, the licensor must cure all
defaults under the agreement and the Company is entitled to collect in full the
outstanding past due receivable. Since the respective commencement dates of
the Jamesway and Rose's Chapter 11 cases, the Company has continued to operate
as licensee and has been paid the amounts due to it from such operations. The
Company has no assurance that either agreement will be assumed or that Jamesway
or Rose's will continue in business. Although the Company believes that
rejection of either license agreement or cessation of Jamesway's or Rose's
business is not probable, in the event that either agreement is rejected, the
Company believes that it will have a substantial claim for damages. If such a
claim is necessary, the amount realized by the Company, relative to the
carrying values of Jamesway and/or Rose's related assets, will be based on the
facts and circumstances at such time.
(5) ACQUISITIONS OF APPAREL BUSINESSES
The Casual Male
On February 2, 1991, the Company acquired Casual Male pursuant to Casual
Male's Plan of Reorganization under Chapter 11 of the United States Bankruptcy
Code. At January 29, 1994, Casual Male operated 254 Big & Tall men's specialty
stores located predominantly in the eastern half of the United States.
Former Casual Male stockholders who elected to receive a contingent payment
right in lieu of $.25 per common share, up to a maximum of $1,000 per
stockholder, were entitled to receive a percentage of the net earnings of
Casual Male for the seven year period ending January 30, 1998, with a maximum
aggregate payment of $5.0 million (the "Contingent Payment"). On April 12,
1993 the Contingent Payment Agreement was amended to provide that participants
in the Contingent Payment would instead receive an aggregate of $2.4 million
immediately in satisfaction of the obligation of the Company to make the
Contingent Payment. The excess of net assets over the cost of the acquired
business has been reduced by the $2.4 million Contingent Payment, and the
balance is being amortized on a straight line basis over fifteen years.
Work'n Gear Stores
On September 25, 1991, the Company purchased from WearGuard Corporation
approximately $5.3 million in assets for 415,723 shares of the Company's common
stock. During the fiscal year ended January 30, 1993, pursuant to the terms of
the transaction, the Company was required to pay additional cash consideration
of $230,987 to WearGuard Corporation as the amount by which the average price
at which WearGuard Corporation sold its acquired shares during a 90 day period
ended February 25, 1992 was less than $12.64 per share. The acquired assets
consisted primarily of the inventory and fixed assets of WearGuard's then
existing 29 retail stores. The Company also assumed the leases to the 29
retail stores and acquired a license to operate retail stores under the
WearGuard name.
On December 2, 1992, the Company received a notice of termination from
WearGuard terminating the License and Supply Agreement dated as of September
25, 1991 by and between WGS Corporation (a wholly owned subsidiary of the
Company) and WearGuard. Following the termination of this License and Supply
Agreement, the Company's then 38 WearGuard stores changed their name to Work'n
Gear stores. Subsequently, in August, 1993, the Company executed a new supply
agreement with WearGuard, but continues to use the Work'n Gear name for its
stores.
28
<PAGE> 29
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Located in eleven states throughout the northeastern United States, the Work'n
Gear stores specialize in providing utility workwear, uniforms and personalized
work clothes. At January 29, 1994, the Company operated 52 Work'n Gear stores.
<TABLE>
(6) OTHER ASSETS
Other assets at January 29, 1994 and January 30, 1993 were comprised of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred lease acquisition costs $ 42,976,198 $ 42,759,610
Systems development costs 20,847,605 20,847,605
Notes receivable 9,546,000 8,700,000
Excess of cost over net assets acquired 7,457,561 -
Restricted cash 3,455,357 3,646,900
Leasehold interests 1,255,000 1,255,000
Cash surrender value of officers' life insurance, net 474,128 579,208
Other intangible assets and deferred charges 8,790,493 5,726,387
------------ ------------
94,802,342 83,514,710
Less accumulated amortization 21,127,872 13,602,991
------------ ------------
$ 73,674,470 $ 69,911,719
============ ============
</TABLE>
Deferred lease acquisition costs consist primarily of payments made in
connection with the acquisition of license agreements and are being amortized
over the terms of the respective license agreements (see Note 4). Systems
development costs are being amortized on a straight line basis over eight
years. The notes receivable consists of an $8.7 million, 6.0% note from Ames
maturing on February 1, 1998 (see Note 4), and an $846,000, 10.25% note
maturing on September 30, 2003. The excess of cost over net assets acquired is
a result of the acquisitions of Morse (see Note 3) and SCOA (see Note 2) and is
being amortized over twenty years. Restricted cash represents amounts held in a
trust account for the benefit of current and future Trade Note holders (see
Note 7). The leasehold interests are being amortized over the terms of the
related leases. Other intangible assets and deferred charges consist primarily
of costs incurred for store openings and the issuance of debt and are being
amortized over periods of three to ten years.
During fiscal 1993, the Company released rights of software technology which the
Company had previously developed for use in its operations, reducing selling,
administrative and general expenses by $3.5 million.
29
<PAGE> 30
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) DEBT
<TABLE>
Long-Term Debt
Long-term debt at January 29, 1994 and January 30, 1993 was comprised of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Loans under revolving credit facility $77,000,000 $12,975,600
Trade notes 2,636,300 5,093,000
----------- -----------
79,636,300 18,068,600
Less current portion 2,636,300 2,530,000
----------- -----------
$77,000,000 $15,538,600
=========== ===========
</TABLE>
The Company has a $215 million revolving credit facility on an secured basis
with Shawmut Bank, N.A., The First National Bank of Boston, Fleet Bank of
Massachusetts, N.A., Citizens Savings Bank, National Westminster Bank USA, The
Yasuda Trust and Banking Company, LTD., Fuji Bank, Limited and Standard
Chartered Bank (the "Banks"). The aggregate commitment amount will be reduced
by $10 million on each December 29th of 1994 and 1995. Borrowings under the
revolving credit facility can, at the discretion of the Company, be in the form
of any combination of loans, bankers' acceptances and letters of credit. Loans
under the revolving credit facility bear interest, at the Company's discretion,
at Shawmut Bank, N.A.'s corporate base rate plus one-half percent (6.5% at
January 29, 1994) or at the London Interbank Offered Rate (LIBOR) plus three
percent. This facility expires in June, 1996. At January 29, 1994, the
Company had $50.3 million available for borrowing under this facility.
The trade notes represent Series B and C Trade Notes issued by Morse to
unsecured pre-petition trade creditors of Morse. Series B Trade Notes matured
on January 3, 1994. Series C Trade Notes mature beginning in 1994. The
Company is disputing certain unsecured pre-petition trade claims filed and
estimates that its liability with respect to such disputed claims will not
exceed $2.6 million. Such amount is included in accrued expenses and other
liabilities in the consolidated balance sheets. The Company has deposited cash
in a restricted bank account controlled by the Trade Note trustee (see Note 6).
When disputed claims are settled, the restricted cash will be used to pay
amounts due pursuant to Morse's Plan of Reorganization.
Senior Subordinated Debt
In June 1989, the Company issued $35 million of senior subordinated notes with
detachable warrants which enable the holders to purchase 600,000 shares of the
Company's common stock at a price of $20 per share, subject to adjustments. At
January 29, 1994, the detachable warrants enable holders to purchase
approximately 640,000 shares at $18.80 per share. Subject to certain
conditions, the Company may repurchase all, but not less than all, of the
outstanding warrants for 150% of the then per share warrant exercise price.
The amount of the senior subordinated notes of $7,312,366 at January 29, 1994
($7,265,830 at January 30, 1993) are presented net of $187,634 ($234,170 at
January 30, 1993), which reflects the unaccreted portion of the $1,710,000
value originally assigned to the detachable warrants. The value of the warrants
was recorded as additional paid-in capital and is being accreted using the
effective interest method. The senior subordinated debt was reduced by $27.5
million in June 1992 with proceeds from the $70 million 7% convertible
subordinated notes referred to below. The senior subordinated notes are due in
installments of $1.5 million per year beginning in May 1995 with a final
payment in May 1999. Interest, at 11.21%, is payable semiannually.
30
<PAGE> 31
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible Subordinated Debt
<TABLE>
Convertible subordinated debt at January 29, 1994 and January 30, 1993 was
comprised of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
7% convertible subordinated notes $70,000,000 $70,000,000
Convertible debentures 353,000 3,060,000
----------- -----------
$70,353,000 $73,060,000
=========== ===========
</TABLE>
In June 1992, the Company issued $70 million of 7% convertible subordinated
notes due 2002. The notes are convertible into common stock at a conversion
price of $16.125 per share, subject to adjustment in certain events. The
Company used the net proceeds to repay all of the $20 million outstanding
principal amount of its senior term notes, $27.5 million principal amount of its
senior subordinated notes, and a portion of outstanding bank indebtedness under
its unsecured revolving credit facility. As a result of the early payment of
the senior notes and the senior subordinated notes, the Company had an
extraordinary charge against earnings of $2,444,000, net of income tax benefits
of $1,262,000, in the fiscal year ended January 30, 1993. This charge reflects
the write-off of the unaccreted portion of the value assigned to certain
detachable warrants issued in connection with the senior subordinated notes, the
write-off of deferred debt issuance costs and the payment of redemption
premiums.
Prior to the acquisition of Morse, 94% of the Morse convertible debentures
converted into Morse common stock. During the year ended January 29, 1994,
holders of $2.7 million of additional Morse convertible debentures converted
their debt into 49,820 shares of J. Baker common stock. The remaining balance
of $353,000 convertible debentures accrue no interest until January 15, 1997,
at which time the rate will be 8%, and no principal will be payable until
January 15, 2002. The debt is subject, under certain circumstances, to
mandatory conversion. Approximately 6,500 shares of J. Baker common stock are
reserved for any future conversions of the remaining Morse convertible
debentures.
The Company's revolving credit facility and senior subordinated notes contain
various covenants and restrictive provisions, including restrictions on the
incurrence of additional indebtedness and liens, the payment of dividends and
the maintenance of specified financial ratios, minimum levels of working capital
and other financial criteria. At January 29, 1994, the Company was in
compliance with such covenants.
The Company is restricted, under various debt agreements, from paying cash
dividends unless tangible net worth exceeds certain required levels. As defined
by the most restrictive of those agreements, minimum tangible net worth,
as so defined, was $187 million at January 29, 1994. At January 29, 1994, the
Company's tangible net worth, as so defined, was approximately $217 million.
<TABLE>
Scheduled principal repayments of long-term debt, senior subordinated notes and
convertible subordinated debt for the next five fiscal years and thereafter are
as follows:
<CAPTION>
FISCAL YEAR
ENDING JANUARY
- - --------------
<S> <C>
1995 $2,636,300
1996 1,500,000
1997 78,500,000
1998 1,500,000
1999 1,500,000
Thereafter 71,853,000
</TABLE>
31
<PAGE> 32
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) TAXES ON EARNINGS
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement
109 a change from the deferred method of accounting for income taxes.
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
The Company adopted Statement 109 as of February 2, 1992. The impact of
adopting Statement 109 was not material, and accordingly, there is no
cumulative effect of a change in accounting method presented in the consolidated
statement of earnings for the year ended January 30, 1993.
<TABLE>
Total income tax expense (benefit) for the years ended January 9, 1994, January
30, 1993 and February 1, 1992 was allocated as follows:
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Income from continuing operations $13,113,000 $ 7,798,000 $ 4,874,000
Extraordinary item - (1,262,000) -
----------- ----------- -----------
$13,113,000 $ 6,536,000 $ 4,874,000
=========== =========== ===========
</TABLE>
<TABLE>
Income tax expense attributable to income from continuing operations consists
of:
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year ended January 29, 1994:
Federal $ 1,773,000 $ 9,827,000 $11,600,000
State and city 1,454,000 59,000 1,513,000
----------- ----------- -----------
$ 3,227,000 $ 9,886,000 $13,113,000
=========== =========== ===========
Year ended January 30, 1993:
Federal $ 4,869,000 $ 1,621,000 $ 6,490,000
State and city 1,487,000 (179,000) 1,308,000
----------- ----------- -----------
$ 6,356,000 $ 1,442,000 $ 7,798,000
=========== =========== ===========
Year ended February 1, 1992:
Federal $ 1,636,000 $ 2,223,000 $ 3,859,000
State and city 1,015,000 - 1,015,000
----------- ----------- -----------
$ 2,651,000 $ 2,223,000 $ 4,874,000
=========== =========== ===========
</TABLE>
<TABLE>
The following is a reconciliation between the statutory federal income tax
rate and the Company's effective rate for the years ended January 29, 1994,
January 30, 1993 and February 1, 1992:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of federal
income tax benefit 1.5% 4.1% 5.2%
Jobs tax credits (1.4%) (0.3%) (0.9%)
Increase in beginning of year
balance of the valuation
allowance for deferred tax assets 5.7% - -
Change in Federal tax rate (1.2%) - -
Other (3.6%) (0.8%) (0.5%)
------- ------- -------
36.0% 37.0% 37.8%
======= ======= =======
</TABLE>
32
<PAGE> 33
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
For the year ended February 1, 1992, deferred tax expense results from timing
differences in the recognition of income and expense for income tax and
financial reporting purposes. The sources and tax effects of those timing
differences are presented below:
<CAPTION>
1992
----
<S> <C>
Difference between book and tax
depreciation and amortization $ 597,491
Differences in book and tax costs
of acquired businesses 3,400,075
Difference between statutory tax
rate and alternative minimum tax rate (1,771,670)
Other (2,896)
-----------
$ 2,223,000
===========
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at January 29, 1994 and
January 30, 1993 are presented below:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to greater
acquired tax bases $ 1,146,330 $ 1,070,446
Inventory, principally due to additional costs
capitalized for tax purposes and greater
acquired tax bases 6,326,527 5,603,390
Intangible assets 96,827 7,180
Other assets 2,437,061 332,437
Nondeductible accruals and reserves 10,535,696 7,441,313
Other liabilities - 739,941
Operating loss and credit carryforwards 21,818,686 25,257,900
---------- ----------
Total gross deferred tax assets 42,361,127 40,452,607
Less valuation allowance (15,914,000) (12,300,000)
----------- -----------
Net deferred tax assets 26,447,127 28,152,607
----------- -----------
Deferred tax liabilities:
Fixed assets, principally due to accelerated tax
depreciation and lesser acquired tax bases (12,727,639) (7,538,737)
Intangible assets, principally due to
lesser acquired tax bases (7,226,244) (7,085,334)
Other liabilities (3,618,769) (5,787,170)
----------- -----------
Total gross deferred tax liabilities (23,572,652) (20,411,241)
----------- -----------
Net deferred tax asset $ 2,874,475 $ 7,741,366
=========== ===========
</TABLE>
33
<PAGE> 34
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
At January 29, 1994 and January 30, 1993, the net deferred tax asset consisted
of the following:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax asset - current $ 1,664,475 $ 9,821,336
Deferred tax asset - noncurrent 1,210,000 -
Deferred tax liability - noncurrent - (2,079,970)
------------ ------------
$ 2,874,475 $ 7,741,366
============ ============
</TABLE>
The valuation allowance for deferred tax assets as of January 30, 1993 was
$12.3 million. The net change in the total valuation allowance for the year
ended January 29, 1994 was an increase of $3.6 million.
At January 29, 1994, the Company has net operating loss arryforwards for
federal income tax purposes of approximately $50.5 million, which are
principally the net operating loss carryforwards acquired in the merger with
Morse. Under federal income tax rules, Morse's net operating loss
carryforwards may only be utilized to offset its own future taxable income and
are subject also to an annual limitation of approximately $3.4 million. The
Company also has alternative minimum tax credit carryforwards of approximately
$4.1 million available to reduce future regular federal income taxes, if any,
over an indefinite period.
(9) PENSION AND PROFIT SHARING PLANS
The Company has a noncontributory pension plan which covers substantially all
non-union employees and is administered by Trustees who are officers of the
Company. As of January 1, 1994, SCOA employees are eligible to participate in
the Company's pension plan.
<TABLE>
The following table sets forth the Plan's funded status at January 29, 1994 and
January 30, 1993:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 6,397,000 $ 5,534,000
Nonvested 392,000 261,000
----------- -----------
Total accumulated benefit obligations $ 6,789,000 $ 5,795,000
=========== ===========
Plan assets at fair value $ 9,251,000 $ 8,592,000
Actuarial present value of projected benefit
obligations (11,207,000) (9,053,000)
----------- -----------
Deficiency of plan assets over
projected benefit obligations (1,956,000) (461,000)
Unrecognized prior service cost (benefit) (98,000) 522,000
Unrecognized net transitional liability 1,342,000 1,463,000
Unrecognized net actuarial gain (683,000) (2,082,000)
----------- -----------
Accrued pension cost $(1,395,000) $ (558,000)
=========== ===========
</TABLE>
Assumptions used to develop the Plan's funded status were discount rate (7.5%
in 1994, 8.5% in 1993) and increase in compensation levels (5% in 1994, 6% in
1993).
34
<PAGE> 35
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Net pension cost for the years ended January 29, 1994, January 30, 1993 and
February 1, 1992 included the following components:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 767,000 $ 657,000 $ 541,000
Interest cost on projected
benefit obligation 869,000 730,000 664,000
Actual return on plan assets (763,000) (623,000) (1,212,000)
Net amortization and deferral 234,000 104,000 719,000
---------- ---------- ----------
Net pension cost $1,107,000 $ 868,000 $ 712,000
========== ========== ==========
</TABLE>
Assumptions used to develop the net periodic pension cost were discount rate
(8.5%), expected long-term return on assets (8.5%) and increase in compensation
levels (6.0%).
In December 1993, the Board of Directors of the Company established a
Supplemental Retirement plan to provide benefits attributable to compensation in
excess of $150,000, but less than $242,280. The Supplemental Retirement plan is
not effective until fiscal 1995.
In January 1992, the Company implemented a qualified 401(k) profit sharing plan
available to full-time employees who meet the plan's eligibility requirements.
Under the 401(k) plan, the Company matches 50% of the qualified employee's
contribution up to 3% of the employee's salary. The total cost of the matching
contribution was $1,033,000 and $448,000 for the years ended January 29, 1994
and January 30, 1993, respectively. In connection with the acquisition of
Morse, on January 30, 1993 the Company merged Morse's 401(k) plan into the
Company's 401(k) plan.
The Company has established incentive bonus plans for certain executives and
employees. The bonus calculations are based on the achievement of certain
profit levels, as defined in the plans. For the years ended January 29, 1994,
January 30, 1993, February 1, 1992, $1,025,000, $1,643,000 and $0, respectively,
was provided for bonuses under the plans.
The Company does not provide post-retirement benefits other than pensions as
defined under SFAS #106.
(10) STOCK OPTIONS
The Amended and Restated 1985 Stock Option Plan provides for the issuance of
incentive and non-qualified stock options to key employees at an option
price of not less than 100% of the fair market value of a share on the date of
grant of the option. Under this plan, there are 289,570 shares of common stock
available for grant at January 29, 1994. In addition, the Company has granted
stock options which are not part of the plan. Options become exercisable either
ratably over four years or upon grant, at the discretion of the Board of
Directors, and expire ten years from the date of grant.
The 1992 Directors' Stock Option Plan provides for the automatic grant of an
option to purchase 2,500 shares of the Company's common stock upon initial
election to the Board of Directors and, in addition, at the close of business on
the fifth business day following the Company's annual meeting of stockholders.
Options under the Directors Plan are granted at a price equal to the closing
price of the Company's common stock on the date of grant. They are exercisable
in full as of the date of grant and expire ten years from the date of grant.
Under this plan, there are 70,000 shares of common stock available for grant at
January 29, 1994.
35
<PAGE> 36
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Data with respect to stock options granted is as follows:
<CAPTION>
1985 PLAN AND DIRECTORS' STOCK
OPTION PLAN NON-PLAN
--------------------------- -----------------------
SHARES PRICE RANGE SHARES PRICE RANGE
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
February 2, 1991, options outstanding 239,534 $ .95 - 17.00 38,750 $ .01 - 16.63
Granted 316,200 4.88 - 9.50 50,000 6.75
Exercised (8,539) .95 - 10.17 (12,500) .01 - 5.00
Cancelled (50,295) .95 - 17.00 (3,750) 6.00
------- ------------- -------- ------------
February 1, 1992, options outstanding 496,900 .95 - 17.00 72,500 .01 - 16.63
Granted 150,300 10.88 - 17.38 2,500 12.00
Exercised (68,323) .95 - 17.00 (12,500) .01 - 5.00
Cancelled (8,700) 4.88 - 16.63 - -
------- ------------- --------- --------------
January 30, 1993, options outstanding 570,177 .95 - 17.38 62,500 6.75 - 16.63
Granted 452,500 16.50 - 23.75 - -
Exercised (129,232) .95 - 17.00 - -
Cancelled (71,025) 4.88 - 21.75 - -
------- ------------- --------- --------------
January 29, 1994, options outstanding 822,420 $ .95 - 23.75 62,500 $6.75 - 16.63
======= ============= ======= ============
Exercisable at January 29, 1994 239,295 $ .95 - 22.38 62,500 $6.75 - 16.63
======= ============= ======= ============
</TABLE>
(11) COMMITMENTS AND CONTINGENT LIABILITIES
Leases
The Company operates mainly from leased premises under license agreements
generally requiring payment of annual rentals contingent upon sales. The
Company leases its computers, vehicles and certain of its offices and warehouse
facilities, in addition to its retail stores.
<TABLE>
At January 29, 1994, minimum rental commitments under operating leases are as
follows:
<CAPTION>
FISCAL YEAR
ENDING JANUARY NET MINIMUM RENTALS MINIMUM SUB-RENTALS
-------------- ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
1995 $ 47,743 $ 356
1996 41,244 338
1997 34,400 89
1998 27,541 88
1999 19,850 81
Thereafter 36,141 190
------- ------
$206,919 $1,142
======= =====
</TABLE>
36
<PAGE> 37
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Rent expense for the years ended January 29, 1994, January 30, 1993 and
February 1, 1992 was as follows:
<CAPTION>
1994 1993 1992
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Minimum rentals $ 46,012 $ 19,984 $ 16,649
Contingent rentals 78,694 49,107 53,742
------- ------- -------
124,706 69,091 70,391
Less sublease rentals 332 293 273
-------- -------- --------
Net rentals $124,374 $ 68,798 $ 70,118
======= ======= =======
</TABLE>
Other Commitments and Contingent Liabilities
The Company has employment agreements with certain of its officers under which
it is committed to pay an aggregate of approximately $3.3 million through
November 1995.
The Company also has consulting agreements under which it is required to pay
an aggregate of approximately $1.8 million through 2001.
The Company was contingently liable under letters of credit amounting to
approximately $35.0 million at January 29, 1994.
On November 10, 1993, a federal jury in Minneapolis, MN returned a verdict
assessing royalties of $1,550,000, and additional damages of $1,500,000 against
the Company in a patent infringement suit brought by Susan Maxwell with respect
to a device used to connect pairs of shoes. Certain post trial motions have
been filed by the Company seeking to vacate all or part of the verdict and,
subsequent to the entry of judgment, an appeal of certain legal issues is
anticipated.
(12) STOCKHOLDERS' EQUITY
The Board of Directors of the Company is authorized by vote or votes, from time
to time adopted, to provide for the issuance of referred Stock in one or more
series and to fix and state the voting powers, designations, preferences and
relative participating, optional or other special rights of the shares of each
series and the qualifications, limitations and restrictions thereof.
(13) PRINCIPAL LICENSOR
Sales in licensed departments operated under the Ames Agreement accounted for
11.5%, 22.9% and 29.3% of the Company's net sales in the years ended January
29, 1994, January 30, 1993 and February 1, 1992, respectively.
37
<PAGE> 38
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) SEGMENT INFORMATION
<TABLE>
The Company is a specialty retailer conducting business through tores in two
business segments; footwear and apparel. Information about operations for each
of these segments is summarized as follows:
<CAPTION>
YEAR ENDED
--------------------------------------------------------
JANUARY 29, 1994 JANUARY 30, 1993 FEBRUARY 1, 1992
---------------- ---------------- ----------------
($ in thousands)
<S> <C> <C> <C>
FOOTWEAR
Net sales $734,827 $380,243 $387,104
Operating profit 43,382 17,460 16,514
Identifiable assets 396,958 341,407 245,656
Depreciation and amortization 15,075 10,951 11,005
Additions to property, equipment and
leasehold improvements 13,814 2,786 1,610
APPAREL
Net sales $184,051 $152,013 $106,438
Operating profit 23,802 22,438 16,060
Identifiable assets 65,842 48,844 28,014
Depreciation and amortization 2,373 714 (85)
Additions to property, equipment and
leasehold improvements 8,654 6,832 3,634
CONSOLIDATED
Net sales $918,878 $532,256 $493,542
Operating profit before general
corporate expense 67,184 39,898 32,574
General corporate expense (23,318) (10,691) (9,397)
Interest expense, net (7,442) (8,131) (10,279)
Earnings before income taxes $ 36,424 $ 21,076 $ 12,898
Identifiable assets $462,800 $390,251 $273,670
Corporate assets 39,696 41,547 23,034
Total assets $502,496 $431,798 $296,704
Depreciation and amortization $ 21,874 $ 14,688 $ 12,709
Additions to property, equipment and
leasehold improvements $ 24,115 $ 11,198 $ 5,475
</TABLE>
38
<PAGE> 39
J. BAKER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Year ended January 29, 1994
Net sales $ 193,388 $ 232,529 $ 224,421 $ 268,540 $ 918,878
Gross profit 87,765 100,850 100,057 113,351 402,023
Net earnings $ 2,483 $ 6,385 $ 6,486 $ 7,957 $ 23,311
========== ========== ========== ========== ==========
Earnings per common share:
Primary $ .18 $ .47 $ .48 $ .57 $ 1.70
========== ========== ========= ========= ==========
Fully diluted $ .18 $ .39 $ .40 $ .48 $ 1.45
========== ========== ========= ========= ==========
Year ended January 30, 1993
Net sales $ 109,383 $ 133,479 $ 137,129 $ 152,265 $ 532,256
Gross profit 45,867 54,737 55,962 61,987 218,553
Earnings before extraordinary item 1,551 3,192 3,620 4,914 13,278
Net earnings $ 1,551 $ 748 $ 3,620 $ 4,914 $ 10,834
========== ========== ========== ========== ==========
Earnings per common share:
Primary:
Earnings before extraordinary item $ .15 $ .30 $ .34 $ .46 $ 1.25
Extraordinary item - (.23) - - (.23)
---------- ---------- ---------- ---------- ----------
$ .15 $ .07 $ .34 $ .46 $ 1.02
========== ========== ========== ========== ==========
Fully diluted:
Earnings before extraordinary item $ .15 $ .28 $ .30 $ .38 $ 1.11
Extraordinary item - (.18) - - (.18)
---------- ---------- ---------- ---------- ----------
$ .15 $ .10 $ .30 $ .38 $ .93
========== ========== ========== ========== ==========
</TABLE>
(16) ADVERTISING COSTS
The Company incurred advertising costs of $16.5 million, $5.1 million and $5.0
million in the years ended January 29, 1994, January 30, 1993 and February 1,
1992, respectively.
<TABLE>
(17) SUPPLEMENTAL SCHEDULES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest $ 6,799,091 $ 8,884,947 $ 10,211,349
Cash paid for income taxes $ 5,022,668 $ 4,718,757 $ 5,368,560
============ ============= =============
Non-cash investing activities:
Common stock issued for certain
assets of Work'n Gear Stores
(see Note 5) $ 5,254,869
=============
Common stock issued in connection
with the acquisition of Morse
Shoe, Inc. (see Note 3) $ 56,841,924
=============
Common stock issued in connection
with the acquisition of Shoe
Corporation of America (see Note 2) $ 970,704
============
Non-cash financing activities:
Conversion of subordinated debt (see Note 3) $ 2,707,000
============
Note receivable (see Notes 4 and 6) $ 846,000 $ 8,700,000
============ =============
</TABLE>
39
<PAGE> 40
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing in the Proxy Statement under the captions
"ELECTION OF DIRECTORS", "Information About Board of Directors and Committees",
"Executive Compensation" and "Employment Arrangements" is incorporated herein
by this reference.
EXECUTIVE COMPENSATION
The information appearing in the Proxy Statement under the caption
"Executive Compensation", "Employment Arrangements" and "Information About
Board of Directors and Committees" is incorporated herein by this reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the Proxy Statement under the caption
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" is
incorporated herein by this reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing in the Proxy Statement under the caption "Certain
Relationships and Related Transactions" is incorporated herein by this
reference.
PART IV
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1,2. The financial statements, notes thereto, and independent auditors'
report listed in the Index to Consolidated Financial Statements
set forth in Item 8.
3. The Exhibits listed in the Exhibit Index.
(b) None.
40
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
J. Baker, Inc.
--------------
(Registrant)
By /s/Sherman N. Baker By /s/Jerry M. Socol
---------------------- ---------------------------------
Sherman N. Baker Jerry M. Socol
Chairman of the Board President and Chief
Executive Officer
By /s/Philip G. Rosenberg By /s/Alan I. Weinstein
---------------------- ---------------------------------
Philip G. Rosenberg Alan I. Weinstein
Executive Vice President Senior Executive Vice President
and Principal Accounting Officer and Principal Financial Officer
April 27, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/Sherman N. Baker /s/Ervin Cruce
- - --------------------------------- ------------------------------
Sherman N. Baker, Director Ervin Cruce, Director
/s/J. Christopher Clifford /s/Thomas H. Lee
- - --------------------------------- ------------------------------
J. Christopher Clifford, Director Thomas H. Lee, Director
/s/David Pulver /s/Melvin M. Rosenblatt
- - --------------------------------- ------------------------------
David Pulver, Director Melvin M. Rosenblatt, Director
/s/Stanley Simon /s/Jerry M. Socol
- - --------------------------------- ------------------------------
Stanley Simon, Director Jerry M. Socol, Director
All as of April 27, 1994
41
<PAGE> 42
EXHIBITS
Filed with
Annual Report on Form 10-K
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Year Ended January 29, 1994
42
<PAGE> 43
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT PAGE NO.
<S> <C>
3. ARTICLES OF ORGANIZATION AND BY-LAWS
(.01) Amended and Restated Articles of Organization of the Company, as filed with the *
Secretary of the Commonwealth of Massachusetts on September 26, 1990 (filed as
Exhibit 3.01 to the Company's Form 10-K Report for the year ended February 2,
1991).
(.02) By-Laws of the Company, as amended by the Board of Directors on *
September 11, 1990 (filed as Exhibit 19.01 to the Company's Form 10-Q
Report for the quarter ended November 3, 1990).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
(.01) Senior Notes and Senior Subordinated Notes with Stock Purchase Warrants *
dated May 1, 1989 (filed as Exhibit 4.01 to the Company's Form 10-Q Report
for the quarter ended July 29, 1989).
(.02) Indenture dated as of June 12, 1992 by and between J. Baker, Inc. and The First *
National Bank of Boston as Trustee with respect to 7% Convertible Subordinated
Notes due 2002 (filed as Exhibit 4.08 to the Company's Form 10-Q Report
for the quarter ended August 1, 1992).
(.03) Revolving Credit and Loan Agreement by and among JBI, Inc., et al., *
and Shawmut Bank, et al., dated as of February 1, 1993 (filed as Exhibit 4.03
to the Company's Form 10-K Report for the year ended January 30, 1993).
(.04) Guarantee Agreement dated as of February 1, 1993, between J. Baker, Inc., *
Shawmut Bank, N.A., and subsidiaries of J. Baker, Inc. (filed as Exhibit
4.09 to the Company's Form 10-K Report for the year ended January 30, 1993).
(.05) Security Agreement dated as of February 1, 1993, between JBI, Inc., J. Baker, *
Inc., and Shawmut Bank, N.A. (filed as Exhibit 4.10 to the Company's Form 10-K
Report for the year ended January 30, 1993).
(.06) Stock Pledge Agreement dated as of February 1, 1993 by and between JBI, Inc., *
J. Baker, Inc., Shawmut Bank, N.A., and subsidiaries of J. Baker, Inc.
(filed as Exhibit 4.11 to the Company's Form 10-K Report for the year ended
January 30, 1993).
(.07) Indenture dated as of January 15, 1992 by and between Morse Shoe, Inc. and *
State Street Bank and Trust Company as Trustee with respect to
Convertible Subordinated Debentures due 2002 (filed as Exhibit 4.12 to the
Company's Form 10-K Report for the year ended January 30, 1993).
(.08) Indenture dated as of January 15, 1992 by and between Morse Shoe, Inc. and *
Bankers Trust Company as Trustee with respect to Subordinated Notes (filed as
Exhibit 4.13 to the Company's Form 10-K Report for the year ended January 30, 1993).
<FN>
* Incorporated herein by reference
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT PAGE NO.
<S> <C>
(.09) First Supplemental Indenture (dated as of January 28, 1993) to the Indenture *
(dated January 15, 1992) under which Convertible Subordinated Debentures Due 2002
were issued by Morse Shoe, Inc. (filed as Exhibit 4.01 to the Company's Form 10-Q
Report for the quarter ended May 1, 1993).
(.10) First Supplemental Indenture (dated as of July 26, 1993) to the Indenture (dated *
January 15, 1992) under which Subordinated Notes were issued by Morse Shoe, Inc.
(filed as Exhibit 4.01 to the Company's Form 10-Q Report for the quarter ended
July 31, 1993).
(.11) First Amendment and Waiver Agreement by and among JBI, Inc., J. Baker, Inc, and *
Shawmut Bank, N.A., et al, dated as of November 19, 1993 (filed as Exhibit 4.01 to
the Company's Form 10-Q Report for the quarter ended October 30, 1993).
(.12) Assumption Agreement by Tishkoff Enterprises, Inc. dated as of November 19, 1993 *
(filed as Exhibit 4.02 to the Company's Form 10-Q Report for the quarter ended
October 30, 1993).
(.13) First Amendment to Pledge Agreement by and among JBI, Inc., J. Baker, Inc. and *
Shawmut Bank, N.A., et al, dated as of November 19, 1993 (filed as Exhibit 4.03 to
the Company's Form 10-Q Report for the quarter ended October 30, 1993).
(.14) Second Amendment to Pledge Agreement by and among JBI, Inc., J. Baker, Inc. and **
Shawmut Bank, N.A., et al, dated as of December 30, 1993, attached.
(.15) Assumption Agreement by Shoe Corporation of America, Inc. dated as of **
December 30, 1993, attached.
10. MATERIAL CONTRACTS
(.01) License Agreement between Ames Department Stores, Inc., et al and JBI Holding *
Company, Inc. (filed as Exhibit 10.01 to the Company's Form 10-K Report
for the year ended January 30, 1988).
(.02) Agreement between JBI Holding Company, Inc. and JBI, Inc. re: Assignment of *
Ames License Agreement (filed as Exhibit 10.02 to the Company's Form 10-K
Report for the year ended January 30, 1988).
(.03) Amendment No. 1 dated April 29, 1989 to Agreement between Ames Department *
Stores, Inc. and JBI Holding Company, Inc. (filed as Exhibit 10.04 to the
Company's Form 10-Q Report for the quarter ended April 29, 1989).
(.04) Amendment No. 2 dated December 18, 1992, to Agreement between Ames *
Department Stores, Inc. and JBI Holding Company, Inc. (filed as Exhibit 10.04
to the Company's Form 10-K Report for the year ended January 30, 1993).
(.05) Guaranty and Indemnity Agreement dated April 28, 1989 between J. Baker, Inc. and *
Ames Department Stores, Inc. (filed as Exhibit 10.05 to the Company's Form 10-Q
Report for the quarter ended April 29, 1989).
(.06) Amended Cash Incentive Compensation Plan (filed as Exhibit 19.01 to the Company's *
Form 10-Q Report for the quarter ended August 3, 1991).
<FN>
*Incorporated herein by reference
**Included herein
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT PAGE NO.
<S> <C>
(.07) J. Baker Senior Executive Performance Stock Incentive Plan (filed as Exhibit 10.10 *
to the Company's Form 10-K Report for the year ended February 3, 1990).
(.08) Plan of Reorganization of The Casual Male Corporation dated November 1, 1990 *
as revised November 20, 1990 (filed as Exhibit 2.01 to the Company's Form 10-Q
Report for the quarter ended November 3, 1990).
(.09) Executive Employment Agreement dated March 25, 1993 between Sherman N. *
Baker and J. Baker, Inc. (filed as Exhibit 10.01 to the Company's Form
10-Q Report for the quarter ended July 31, 1993).
(.10) Executive Employment Agreement dated March 25, 1993 between Alan I. *
Weinstein and J. Baker, Inc. (filed as Exhibit 10.04 to the Company's
Form 10-Q Report for the quarter ended July 31, 1993).
(.11) Executive Employment Agreement dated March 25, 1993 between Jerry M. **
Socol and J. Baker, Inc., attached.
(.12) Executive Employment Agreement dated March 25, 1993 between Linda B. Kanner *
and J. Baker, Inc. (filed as Exhibit 10.05 to the Company's Form 10-Q Report
for the quarter ended July 31, 1993).
(.13) Executive Employment Agreement dated March 25, 1993 between Larry I. Kelley *
and J. Baker, Inc. (filed as Exhibit 10.06 to the Company's Form 10-Q Report
for the quarter ended July 31, 1993).
(.14) Promissory Note of Larry I. Kelley dated June 3, 1991 (filed as Exhibit *
10.33 to the Company's Form 10-K Report for the year ended February 1, 1992).
(.15) Promissory Note of Larry I. Kelley dated February 2, 1993, attached. **
(.16) Promissory Note of Larry I. Kelley dated April 30, 1993, attached. **
(.17) Executive Employment Agreement dated as of March 25, 1993 between Joseph Gajda *
and J. Baker, Inc. (filed as Exhibit 10.07 to the Company's Form 10-Q Report for
the quarter ended July 31, 1993).
(.18) Executive Employment Agreement dated as of June 1, 1993 between John E. Lattanzio *
and J. Baker, Inc, (filed as Exhibit 10.01 to the Company's Form 10-Q report for the
quarter ended October 30, 1993).
(.19) Executive Employment Agreement dated as of October 18, 1993 between *
Donald G. Hall and J. Baker, Inc. (filed as Exhibit 10.02 to the Company's
Form 10-Q Report for the quarter ended October 30, 1993).
(.20) Executive Employment Agreement dated as of November 1, 1993 between Stuart M. *
Needleman and J. Baker, Inc. (filed as Exhibit 10.03 to the Company's Form 10-Q
Report for the quarter ended October 30, 1993).
<FN>
*Incorporated herein by reference
**Included herein
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT PAGE NO.
<S> <C>
(.21) Executive Employment Agreement dated as of November 19, 1993 between Dennis B. *
Tishkoff and J. Baker, Inc. (filed as Exhibit 10.04 to the Company's Form 10-Q
Report for the quarter ended October 30, 1993).
(.22) J. Baker, Inc. Amended and Restated 1985 Stock Option Plan (filed as Exhibit 19.02 *
to the Company's Form 10-Q Report for the quarter ended August 1, 1992).
(.23) J. Baker, Inc. 1994 Equity Incentive Plan dated as of March 29, 1994, attached. **
(.24) J. Baker, Inc. 1992 Directors Stock Option Plan dated as of April 13, 1992 (filed as *
Exhibit 19.03 to the Company's Form 10-Q Report for the quarter ended August 1, 1992).
(.25) Stock Option Agreements between Jerry M. Socol and J. Baker, Inc. (filed as *
Exhibit 10.12 to the Company's Form 10-K Report for the year ended
January 28, 1989).
(.26) Mortgage and Security Agreement dated as of December 30, 1992 by and *
between JBI Holding Company, Inc. and Ames Department Stores, Inc., (filed
as Exhibit 10.22 to the Company's Form 10-K Report for the year ended
January 30, 1993).
(.27) Promissory Note dated as of December 30, 1992 made by Ames Department Stores, *
Inc. in favor of JBI Holding Company, Inc. (filed as Exhibit 4.14 to the Company's
Form 10-K Report for the year ended January 30, 1993).
(.28) Stock Purchase Agreement by and among J. Baker, Inc. and Tishkoff Enterprises, Inc. *
and certain stockholders of Tishkoff Enterprises, Inc. dated November 19, 1993 (filed
as Exhibit 2.01 to the Company's Form 10-Q Report dated October 30, 1993).
(.29) Agreement and Plan of Reorganization by and among J. Baker, Inc., Morse *
Acquisition, Inc. and Morse Shoe, Inc. dated October 22, 1992, as amended by Letter
Amendments dated December 7, 1992 and December 10, 1992 (filed as Exhibits 2.01-2.03
to the Company's Form 10-Q Report dated October 31, 1992).
(.30) Agreement of Merger among J. Baker, Inc., JBAK Acquisition Corp. and Tishkoff **
Enterprises, Inc. dated December 3, 1993, attached.
11. STATEMENT RE: COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE, attached. **
12. STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES, attached. **
21. SUBSIDIARIES OF THE REGISTRANT, attached. **
23. CONSENT OF KPMG PEAT MARWICK, attached. **
<FN>
*Incorporated herein by reference
**Included herein
</TABLE>
<PAGE> 1
EXHIBIT 4.14
SECOND AMENDMENT TO PLEDGE AGREEMENT
SECOND AMENDMENT dated as of December 30, 1993, among JBI, INC., a
Massachusetts corporation (the "Borrower"); J. BAKER, INC., a Massachusetts
corporation ("Baker"); each of the Subsidiary Guarantors that is a signatory
hereto (individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors"); and SHAWMUT BANK, N.A., a national banking
association, as agent for the Banks party to the Credit Agreement referred to
below (in such capacity, together with its successors in such capacity, the
"Agent").
The Borrower, Baker, the Banks and the Agent are parties to a
Revolving Credit and Loan Agreement dated as of February 1, 1993 (as amended by
the First Amendment and Waiver Agreement referred to below and as otherwise
modified and supplemented and in effect from time to time, the "Credit
Agreement").
The Borrower, Baker, the Subsidiary Guarantors and the Agent are
parties to a Pledge Agreement dated as of February 1, 1993 (as amended by the
First Amendment thereto referred to below and in effect on the date hereof, the
"Pledge Agreement").
The Borrower, Baker, the Banks and the Agent have entered into a First
Amendment and Waiver Agreement (the "First Amendment and Waiver Agreement")
dated as of November 19, 1993 relating to the Credit Agreement.
Tishkoff Enterprises, Inc., an Ohio corporation ("Tishkoff"), became a
Subsidiary of Baker after the date of the Credit Agreement as a result of the
Acquisition described in the First Amendment and Waiver Agreement. As a
condition precedent to the effectiveness of the First Amendment and Waiver
Agreement, the parties hereto have executed and delivered a First Amendment
dated as of November 19, 1993 (the "First Amendment to the Pledge Agreement")
to the Pledge Agreement, under which Baker has pledged, as required under
Section 7.04 of the Credit Agreement, to the Agent for the benefit of the Banks
and the Agent, as collateral security for the Secured Obligations (as defined
in the Pledge Agreement), all of the issued and outstanding shares of capital
stock of all classes of Tishkoff owned by Baker.
As a result of the Second Step of the Acquisition (as defined in the
First Amendment and Waiver Agreement), JBAK Acquisition Corp., an Ohio
corporation and a wholly-owned subsidiary of Baker, has merged (the "Merger")
into Tishkoff with Tishkoff being the surviving corporation of the Merger and
being renamed "Shoe Corporation of America, Inc.", an Ohio corporation ("Shoe
Corporation").
<PAGE> 2
-2-
Concurrently with the Merger, Baker and Shoe Corporation have
exchanged the certificates evidencing all of the shares of capital stock of
Tishkoff for the certificates evidencing all of the shares of capital stock of
Shoe Corporation.
In consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
recognizing that the continuation of credit to the Borrower under the Credit
Agreement is expected to be of financial benefit to Baker and the Subsidiary
Guarantors, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Agreement, terms defined in the Pledge Agreement are used herein as defined
therein.
Section 2. Amendments. Effective as of the date hereof, the Pledge
Agreement and other Operative Documents and Financing Agreements shall be
amended as follows:
A. Shoe Corporation shall be deemed to be an "Issuer" for all
purposes of the Pledge Agreement.
<TABLE>
B. Annex 1 to the Pledge Agreement shall be amended by inserting
beneath the name of Baker the following:
<CAPTION>
Certificate Registered Description
Issuer Nos. Owner of Shares
- - ------ ----------- ---------- -----------
<S> <C> <C> <C>
Shoe No. C1 J. Baker, Inc. 100 shares of
Corporation common stock, no par
of America, value
Inc.
No. P1 J. Baker, Inc. 40,000 shares of
Class A preferred
stock, par value
$1.00".
</TABLE>
C. References in each of the Credit Agreement and the other Operative
Documents and Financing Agreements to the Pledge Agreement or words of like
import (including indirect references thereto) shall be deemed to be references
to the Pledge Agreement as amended hereby.
Section 3. Representations and Warranties. Baker represents and
warrants to the Agent that, as of the date hereof, after giving effect to this
Second Amendment: (a) the representations and warranties set forth in Section 2
of the Pledge Agreement are true and complete on the date hereof as if made on
and as of the date hereof and as if each reference in said Section 2 to "this
Agreement" included reference to this
<PAGE> 3
-3-
Second Amendment and (b) the certificates described in Section 2.B hereof
evidence all of the issued and outstanding shares of capital stock of all
classes of Shoe Corporation and all these shares are owned beneficially or of
record by Baker (and the foregoing shall be deemed to be representations and
warranties made in an Operative Document for purposes of Section 11.01(d) of the
Credit Agreement).
Section 4. Miscellaneous. Except as herein provided, the Pledge
Agreement shall remain unchanged and in full force and effect. This Amendment
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment by signing any such counterpart. This
Amendment shall be governed by, and construed in accordance with, the law of
the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year first above written.
JBI, INC.
By
--------------------------------
Title:
J. BAKER, INC.
By
--------------------------------
Title:
SHAWMUT BANK, N.A.,
as Agent
By /s/ Roger A. Stone
--------------------------------
Title: Vice President
<PAGE> 4
-3-
Second Amendment and (b) the certificates described in Section 2.B hereof
evidence all of the issued and outstanding shares of capital stock of all
classes of Shoe Corporation and all these shares are owned beneficially or of
record by Baker (and the foregoing shall be deemed to be representations and
warranties made in an Operative Document for purposes of Section 11.01(d) of the
Credit Agreement).
Section 4. Miscellaneous. Except as herein provided, the Pledge
Agreement shall remain unchanged and in full force and effect. This Amendment
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment by signing any such counterpart. This
Amendment shall be governed by, and construed in accordance with, the law of
the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year first above written.
JBI, INC.
By /s/ Alan I. Weinstein
--------------------------------
Title: Senior Executive
Vice President
J. BAKER, INC.
By /s/ Alan I. Weinstein
--------------------------------
Title: Senior Executive
Vice President
SHAWMUT BANK, N.A.,
as Agent
By
--------------------------------
Title: Vice President
<PAGE> 5
-4-
We hereby acknowledge, consent and agreed to the terms of the foregoing Second
Amendment to Pledge Agreement and confirm that our obligations under the Pledge
Agreement shall remain unchanged and in full force and effect.
Dated: December 30, 1993
SPENCER COMPANIES, INC.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
SPENCER NO. 301 CORP.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
JBI HOLDING CO., INC.
By /s/ Alan I. Weinstein
------------------------------
Title: President
THE CASUAL MALE, INC.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
WGS CORP.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
TCM HOLDING COMPANY, INC.
By /s/ Alan I. Weinstein
------------------------------
Title: President
<PAGE> 6
-5-
MORSE SHOE INC.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
BUCKMIN, INC.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
ELM EQUIPMENT CORP.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
JARED CORPORATION
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
MORSE SHOE (CANADA) LTD.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
MORSE SHOE INTERNATIONAL, INC.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
ISAB, INC
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
<PAGE> 7
-6-
WHITE CAP FOOTWEAR, INC.
By /s/ Alan I. Weinstein
------------------------------
Title: Senior Executive
Vice President
<PAGE> 1
EXHIBIT 4.15
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated as of December 30, 1993 by SHOE CORPORATION
OF AMERICA, INC., an Ohio corporation ("Shoe Corporation").
WHEREAS, J. Baker, Inc., a Massachusetts corporation ("Baker"),
entered into a Revolving Credit and Loan Agreement dated as of February 1, 1993
(as amended by the First Amendment referred to below and as otherwise modified
and supplemented and in effect from time to time, the "Credit Agreement") with
JBI, Inc., a Massachusetts corporation (the "Borrower"), the Banks party
thereto, and Shawmut Bank, N.A., as agent for the Banks (in such capacity,
together with its successors in such capacity, the "Agent") (except as
otherwise defined in this Agreement, terms defined in the Credit Agreement
referred to below are used herein as defined therein);
WHEREAS, to induce the Banks to enter into the Credit Agreement and to
extend credit thereunder, Baker and certain subsidiaries of Baker and the
Borrower (the "Subsidiary Guarantors") entered into a Guarantee Agreement (as
from time to time amended, the "Guarantee") dated as of February 1, 1993 with
the Agent;
WHEREAS, Baker, the Borrower and each of the Subsidiary Guarantors
also entered into a Pledge Agreement (the "Pledge Agreement") dated as of
February 1, 1993 with the Agent;
WHEREAS, Baker, the Borrower, the Banks and the Agent have entered
into a First Amendment and Waiver Agreement (the "First Amendment") dated as of
November 19, 1993 relating to the Credit Agreement;
WHEREAS, Tishkoff Enterprises, Inc., an Ohio corporation ("Tishkoff"),
became a Subsidiary of Baker after the date of the Credit Agreement as a result
of the first step of the Acquisition described in the First Amendment, and, as
a condition to the effectiveness of the First Amendment, Tishkoff executed and
delivered to the Agent an Assumption Agreement dated as of November 19, 1993,
providing for the incurrence by Tishkoff of all the obligations of a Subsidiary
Guarantor under the Guarantee;
WHEREAS, as a result of the Second Step (as defined in the First
Amendment) of the Acquisition, JBAK Acquisition Corp., an Ohio corporation and
a wholly-owned subsidiary of Baker, has merged (the "Merger") into Tishkoff
with Tishkoff being the surviving corporation of the merger and being renamed
"Shoe Corporation of America, Inc.";
<PAGE> 2
-2-
WHEREAS, Baker has agreed under Section 4B(ii) of the First Amendment
to cause Shoe Corporation to execute and deliver to the Agent an Assumption
Agreement in substantially the form hereof;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and recognizing that the continuation of credit to the Borrower
under the Credit Agreement is expected to be of financial benefit to Shoe
Corporation, effective as of the date hereof Shoe Corporation hereby:
(1) unconditionally and irrevocably assumes, and confirms the
assumption on the date of the Merger of, the obligations of Tishkoff under the
Guarantee, adheres to the Guarantee, and agrees to be bound by and comply with
the terms and provisions thereof and to perform all obligations of Tishkoff
thereunder as fully as if it had originally executed the Guarantee in the
capacity of Tishkoff;
(2) represents and warrants to the Agent that, on the date hereof,
after giving effect to the Merger:
(i) the representations and warranties contained in Section 8 of
the Guarantee are true and complete as if made on and as of the date
hereof, and as if made in reference to Shoe Corporation;
(ii) the Merger has become effective and Shoe Corporation has
validly assumed all of the assets and liabilities of Tishkoff
including without limitation the obligations of Tishkoff under the
Guarantee; and
(iii) no Event of Default with respect to Shoe Corporation has
occurred and is continuing;
(3) agrees that nothing in this Agreement shall release, alter or in
any way affect any of the obligations of any of the other Subsidiary Guarantors
under the Guarantee, nor any of the obligations of any other party to the
Credit Agreement or any other Operative Document or Financing Agreement; and
(4) agrees that this Agreement shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts.
<PAGE> 3
-3-
IN WITNESS WHEREOF, Tishkoff has caused this Agreement to be executed
and delivered as of the day and year first above written.
SHOE CORPORATION OF AMERICA, INC.
By /s/ Alan I. Weinstein
-----------------------------------
Title: Senior Executive
Vice President
SHAWMUT BANK, N.A., as Agent
By
-----------------------------------
Title:
<PAGE> 4
-3-
IN WITNESS WHEREOF, Tishkoff has caused this Agreement to be executed
and delivered as of the day and year first above written.
SHOE CORPORATION OF AMERICA, INC.
By
-----------------------------------
Title:
SHAWMUT BANK, N.A., as Agent
By /s/ Roger A. Stone
-----------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.11
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is dated as of March 25, 1993 by and between Jerry M. Socol
(the "Employee") and J. BAKER, INC., a Massachusetts corporation (the
"Company").
WHEREAS, the Employee and the Company desire to set forth in writing the
terms and conditions of the Employee's employment agreement with the Company
from the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Under and subject to the terms and conditions set forth
herein, the Company hereby agrees to employ, or to continue to employ, the
Employee during the Term (as defined in Section 6 hereof) as its President and
Chief Executive Officer and/or in such other senior executive management
position(s) with the Company, or any parent or subsidiary of the Company, as the
Board of Directors of the Company (the "Board") may determine from time to
time, and the Employee hereby accepts such employment.
2. Duties. The Employee agrees, during the Term and any extension of
the Term, faithfully to perform for the Company, and any subsidiary or parent
of the Company, the duties presently being performed by the Employee for the
Company, and/or such other duties as may be assigned to him from time to time
by the Company; to devote his entire business time, attention and energies
exclusively to such employment; and to conform to the rules, regulations,
instructions, personnel practices and policies of the Company and its
subsidiaries, as existing and amended from time to time. The Employee may be
required to relocate his principal residence only to an area in which the
Company or a subsidiary of the Company has or determines to have significant
operations.
3. Compensation.
(a) Base Compensation. The Company shall pay the Employee during
the Term an annual base salary of not less than $425,000, payable no less often
than monthly, in equal installments.
(b) Incentive Compensation. In addition to payments of his annual
base salary made pursuant to Section 3 (a) hereof, during the term hereof, the
Employee shall also participate in the Company's Cash Incentive Compensation
Plan (the "Incentive Plan") with a target incentive award of fifty-four percent
(54%) of the annual base salary. The target award amount shall be payable upon
achievement of the corporate pre-tax profit plan approved by the Board for the
applicable fiscal year and the satisfaction of such
<PAGE> 2
other conditions as may be established by the Board under the terms of the
Incentive Plan. The actual incentive award may be above or below the target
amount based on relative achievement of the corporate pre-tax profit plan, with
a threshold award of thirteen and one-half percent (13.5%) of base salary
corresponding to eighty percent (80%) achievement of the profit plan and a
maximum award of ninety-four and one-half percent (94.5%) of base salary
corresponding to one hundred twenty percent (120%) or higher achievement of the
profit.
(c) Stock Options. On August 29, 1988, the Board determined to grant
to the Employee, effective upon the commencement of his employment with the
Company, the following options to purchase shares of the Company's Common
Stock, par value $.50 per share (the "Common Stock"):
(1) a non-qualified option to purchase up to 25,000 shares of the
Common Stock for a consideration of $.O1 per share plus
services to be rendered by the Employee pursuant hereto;
(2) a non-qualified option to purchase up to 25,000 shares of the
Common Stock for a consideration of $5.00 per share;
(3) an incentive stock option under the Company's Amended and
Restated 1985 Stock option Plan (the "Plan") to purchase up to
25,000 shares of the common Stock for a consideration per
share equal to the closing sale price of the Common Stock on
the NASDAQ national market system on the date immediately
preceding the date of the commencement of the Employee's
employment; and
(4) an incentive stock option under the plan to purchase up to
25,000 shares of the Common Stock for a consideration per
share equal to the closing sale price of the Common Stock on
the NASDAQ national market system on the date immediately
preceding the date of the commencement of the Employee's
employment.
Each of the options described above in subparagraphs (1) through (3),
inclusive, expires ten (10) years from the date of grant and provides for
vesting in equal installments over a four-year period from the date of grant
(i.e., 25 % of the shares subject to each such option vested after each of the
first and second anniversaries of the date of grant, another 25% will vest
after the third anniversary and so on). The option described in subparagraph
(4) expires ten (10) years from the date of grant and
2
<PAGE> 3
provides for vesting in equal installments over a four-year period from the
date the Board elects the Employee to the office of Chief Executive Officer of
the Company (i.e., 25% of the shares subject to such option vested after the
first anniversary of such date, another 25% will vest after the second
anniversary and so on). The parties hereto hereby agree and acknowledge that
such election occurred on March 22, 1990.
The Company will reimburse (the "Reimbursement") the Employee for federal
and state income taxes, if any, payable by the Employee with respect to the
exercise of the options described above in subparagraphs (1) and (2), whether
the Employee elects under Section 83(b) of the Internal Revenue Code of 1986,
as amended, to have the shares of the Common Stock subject to the exercised
option valued (for purposes of determining the income received by the Employee
upon the exercise of such option) on the date of such exercise or chooses not
to make such election (in which case such shares will be valued, for such
purposes, on the date on which the restrictions on transfer of such shares
under Section 16(b) of the Securities Exchange Act of 1934 lapse). The
Reimbursement shall be paid to the Employee no later than April 15 of the year
following the year in which the Employee recognizes such income for tax
purposes and shall be computed on the basis of the marginal tax rates paid by
the Employee on such income. The Company shall not, however, have any
obligation to reimburse the Employee for the federal and state income tax
payable by the Employee with respect to income received by the Employee
pursuant to the Reimbursement.
4. Other Benefits.
(a) Fringe Benefits. The Employee shall be entitled to participate in
all benefit programs that the Company establishes and makes available to
management generally and in any event shall be entitled to receive benefits at
least substantially comparable to those provided pursuant to the present
practices of the Company and its subsidiaries.
(b) Paid Vacations. The Employee shall be entitled to paid vacation
of such duration and at such time or times as deemed reasonable by the Board.
5. Expenses. The Company shall reimburse the Employee for all reasonable
travel, entertainment and other business expenses incurred or paid by the
Employee in performing his duties under this Agreement upon presentation by the
Employee of expense statements or vouchers and such other supporting
information as the Company may from time to time request, provided, however,
that the amount available for such expenses may be fixed in advance by the
Board after consultation with the Employee. The Company shall also pay or
reimburse the reasonable relocation expenses of the Employee (consistent with
the present policy of the Company) in connection
3
<PAGE> 4
with a relocation of the Employee's principal residence outside of the greater
Boston area required by the Company pursuant to Section 2 hereof.
6. Effective Date and Term. This Agreement shall become effective as of
the date hereof and the Employee's employment under this Agreement shall
commence on such date and, unless sooner terminated as provided herein or
extended, shall continue for a term (the "Term") ending on April 1, 1995. The
Employee and the Company have obligations hereunder extending past the Term.
7. Noncompetition.
(a) During the Employee's employment under this Agreement or otherwise
and for a period of two years after the date of termination of such employment
(the "Termination Date") , the Employee will not, without the express written
consent of the Company, anywhere in the United States or any territory or
possession thereof or in any foreign country in which the Company was active as
of the Termination Date: (i) compete with the Company or any other entity
directly or indirectly controlled by the Company (each an "Affiliate"), in the
Company's Business (as defined in Section 7 (c) hereof); or (ii) otherwise
interfere with, disrupt or attempt to interfere with or disrupt the
relationship between the Company or an Affiliate and any person or business
that was a customer, supplier, lessor, licensor, manufacturer, contractor,
designer or employee of the Company or such Affiliate on the Termination Date
or within two years prior to the Termination Date.
(b) The term "compete" as used in this Section 7 means directly or
indirectly, or by association with any entity or business, either as a
proprietor, partner, employee, agent, consultant, director, officer,
shareholder (provided that the Employee may make passive investments in
competitive enterprises the shares of which are listed on a national securities
exchange if the Employee at no time owns directly or indirectly more than 2% of
the outstanding equity ownership of such enterprise) or in any other capacity
or manner (i) to solicit, hire, purchase from, sell to, rent from, or otherwise
conduct business related to the Company's Business with any party that is a
customer or supplier of the Company or an Affiliate or (ii) operate any retail
store or leased footwear department ("Leased Department") which sells products
related to the Company's Business (as defined in Section 7(c) hereof).
(c) The term "Company's Business" as used in this Section 7 means the
operation of any of the following specialty retail businesses, as a principal
business unit, either alone or in combination: (i) Leased Departments in
discount or mass
4
<PAGE> 5
merchandising department stores; (ii) retail stores offering discount or "off
price" women's footwear; (iii) retail stores offering discount or "off price"
family footwear; (iv) retail stores offering casual clothing for "Big and Tall"
men; or (v) retail stores offering primarily work related clothing and uniforms
for medical and laboratory purposes or the mail order catalog sales thereof.
The term shall also include any additional specialty retail businesses which
the Company may acquire subsequent to the date hereof and which are operated as
principal business units of the Company on the Termination Date.
(d) The term "supplier" as used in this Section 7 shall mean any party
or affiliate of a party from which, on the Termination Date or within two years
prior to the Termination Date, the Company or an Affiliate purchased products
sold by the Company or an Affiliate or was in contact or actively planning to
contact in connection with the purchase of products sold by the Company or an
Affiliate on or before the Termination Date or which the Company or an
Affiliate was contemplating the sale of at some time after the Termination
Date.
(e) The term "customer" as used in this Section 7 shall mean any party
or affiliate of a party, that on the Termination Date or within two years prior
to the Termination Date, was a wholesale vendee or prospective wholesale vendee
of the Company or an Affiliate or in connection with whose business the Company
or an Affiliate operated a Leased Department, a retail store for the sale of
discount or "off price" women's footwear, discount or "off price" family
footwear, casual clothing for "Big and Tall" men, work related clothing and
uniforms for medical and laboratory purposes or any other specialty retail
business which the Company operated as a principal business unit on the
Termination Date, had contacted in connection with the potential operation of
such businesses within two years prior to the Termination Date or which the
Company or an Affiliate was actively planning to contact in connection with the
potential operation of any such businesses on the Termination Date.
8. Confidential Information. The Employee will never use for his own
advantage or disclose any proprietary or confidential information relating to
the business operations or properties of the Company, any Affiliate or any of
their respective customers, suppliers, landlords, licensors or licensees. Upon
termination of the Employee's employment, the Employee will surrender and
deliver to the Company all documents and information of every kind relating to
or connected with the Company and Affiliates and their respective businesses,
customers, suppliers, landlords, licensors and licensees.
5
<PAGE> 6
9. Termination.
(a) Death. In any event of the death of the Employee during the Term,
his employment shall terminate and the Company shall pay to the Employee's
surviving spouse, or to the Employee's estate if there is no surviving spouse,
(i) the Employee's base salary until the end of the fiscal year in which his
death occurs, and (ii) amounts under the Incentive Plan, if any, payable with
respect to the fiscal year in which his death occurs which otherwise would have
been paid to the Employee on the basis of the results for such fiscal year,
prorated to the date of his death. Upon the death of the Employee, the rights
of the Employee's surviving spouse or estate hereunder, as the case may be,
shall be limited solely to the benefits set forth in this Section 9(a).
(b) Disability. In the event that the Employee shall become
disabled (as hereinafter defined) during the Term, the Company shall have the
right to terminate the Employee's employment upon written notice, provided,
however, that in such event the Company shall (i) continue to pay the
Employee's base salary until the end of the fiscal year in which such
termination occurs, and (ii) pay to the Employee amounts under the Incentive
Plan, if any, which otherwise would have been paid to the Employee on the basis
of the results for the fiscal year in which such termination occurs, prorated
to the date of such termination. For purposes of this Agreement, the Employee
shall be considered disabled on the date when any physical or mental illness or
other incapacity shall, in the judgment of a majority of the members (other
than the Employee) of the Board, after consulting with or being advised by one
or more physicians (it being understood that one of such physicians may be the
Employee's physician but that the Board shall not be bound by his views), have
prevented the performance in a manner reasonably satisfactory to the Company of
the Employee's duties under this Agreement for a period of six consecutive
months.
(c) For Cause. The Company may by notice terminate the Employee's
employment at any time for cause, which shall mean (i) failure by the Employee
to cure a material breach of this Agreement within 15 days after written notice
thereof by the Company, (ii) the continuation after notice by the Company of
willful misconduct by the Employee in the performance of the Employee's duties
hereunder or (iii) the commission by the Employee of an act constituting a
felony. In such event all obligations of the Company hereunder shall
thereupon terminate, including the obligation to pay any amounts under the
Incentive Plan with respect to the fiscal year in which such termination
occurs, but the Employee shall be entitled to receive any accrued salary and
other amounts under the Incentive Plan accrued with respect to any prior fiscal
years.
6
<PAGE> 7
10. Approval of Board. The Company represents that this Agreement has
been duly approved by the Board and is in all respects valid and binding upon
the Company.
11. Key Person Insurance. The Employee agrees to take such actions as may
be reasonably required to permit the Company to maintain key person life
insurance on the Employee's life in such amounts and for such periods of time,
if any, as the Company deems appropriate, with all benefits being payable to
the Company. Upon payment by the Employee of the cash surrender value, if any,
of any such policy and any paid but unearned premiums for such policy, the
Company will assign such policy to the Employee upon termination (other than
because of the Employee's death) of the Employee's employment with the Company,
provided, however, that, in the event the Employee's employment is terminated
by reason of the disability of the Employee and the death of the Employee may
reasonably be expected within one year after such termination as a result of
such disability, the Company shall not be required to assign any such policy.
12. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been given
and received when actually delivered, one business day after dispatch by
telegraphic means, two business days after dispatch by recognized overnight
delivery service, or five days after mailing by certified or registered mail
with proper postage affixed, return receipt requested and addressed as follows
(or to such other address as a party entitled to receive notice hereunder may
have designated by notice pursuant to this Section 12):
(a) If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention: Chairman of the
Board of Directors
(b) If to the Employee:
Jerry M. Socol
190 Marlborough Street
Boston, Massachusetts 02116
13. Severability. If any provision of this Agreement or its application
to any person or circumstances is invalid or unenforceable, then the remainder
of this Agreement or the application of such provision to other persons or
circumstances
7
<PAGE> 8
shall not be affected thereby. Further, if any provision or application hereof
is invalid or unenforceable, then a suitable and equitable provision shall be
substituted therefor in order to carry out so far as may be valid or
enforceable the intent and purposes of the invalid and unenforceable provision.
14. Applicable Law. This Agreement shall be interpreted and construed in
accordance with, and shall be governed by, the laws of the Commonwealth of
Massachusetts without giving effect to the conflict of law provisions thereof.
15. Assignment. Neither of the parties hereto shall, without the written
consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, provided, however, that in the event that the Company
sells all or substantially all of its assets the Company may assign its rights
and transfer its obligations hereunder to the purchaser of such assets. A
merger of the Company with or into another corporation shall be deemed not to
be an assignment of this Agreement, and, in any such event, this Agreement
shall inure to the benefit of and be binding upon the surviving corporation and
the Employee. Subject to the foregoing, this Agreement shall be binding upon,
and shall inure to the benefit of, the parties and their respective successors,
heirs, administrators, executors, personal representatives and assigns.
16. Headings. This section and paragraph headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
17. Remedies. It is specifically understood and agreed that any breach of
the provisions of Section 7 or 8 of this Agreement is likely to result in
irreparable injury to the Company, that damages at law will be inadequate
remedy for such breach, and that in addition to any other remedy it may have,
the Company shall be entitled to enforce the specific performance of said
Sections and to seek both temporary and permanent injunctive relief therefor
without the necessity of proving actual damages.
18. Waiver of Breach. Any waiver by either the Company or the Employee of
a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
19. Amendment of Agreement. This Agreement may be altered, amended or
modified, in whole or in part, only by a writing signed by both the Employee
and the Company.
8
<PAGE> 9
20. Integration. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter thereof and supersedes all prior
agreements with respect to such subject matter between the parties including
without limitation the Executive Employment Agreements dated as of September
26, 1988, March 22, 1990 and March 27, 1991 by and between the Employee and J.
Baker, Inc., a Massachusetts corporation as amended by an amendment dated March
27, 1992.
Intending to be legally bound, the Company and the Employee have signed
this Agreement as if under seal as of the date set forth at the head of the
first page.
J. BAKER, INC.
/s/ Sherman N. Baker
----------------------------------
Sherman N. Baker
Chairman of the Board
/s/ Jerry M. Socol
----------------------------------
Jerry M. Socol
9
<PAGE> 1
EXHIBIT 10.15
J. BAKER INC. AND SUBSIDIARIES (LOGO)
PROMISSORY NOTE
Amount: $15,000.00*** Date: February 2 , 1993
For value received, the undersigned LARRY I. KELLEY (the "Payor") promises to
pay to JBI, Inc/J. Baker Inc., FIFTEEN THOUSAND DOLLARS with interest at SIX
(6) per cent per annum from THE DATE HEREOF to be repaid as follows:
/ / A) Cash payment of $__________ by __________, or within 5 days
of sale of the employee's home, whichever is earlier. Interest will be paid
(monthly, annually, on date principal is due, etc) _________________________.
OR
/X/ B) Monthly payments of $1,500 until the total amount of
$15,464 (loan plus interest) has been repaid. Payments to begin 5/1/94.
******************************
ADJUSTMENTS TO PAYMENT
This note may be prepaid in whole of in part at any time without premium or
penalty.
DEFAULT
a. The entire unpaid balance of this Note shall become immediately due and
payable at the option of the Holder upon the happening of any of the following
events, (a "Default"):
(i) in the event that any of the terms, conditions, covenants or
provisions of this Note are not fully performed;
(ii) in the event, not withstanding anything to the contrary
herein, that the Holder has not received any of the payments in full by the
tenth day after they are due;
(iii) upon the appointment of a receiver for any part of or all of
the property of the Payor, or assignment for the benefits of creditors of the
undersigned, or any proceedings begun or instituted involuntarily or by the
undersigned in bankruptcy or insolvency;
(iv) if employment with JBI, Inc./J. Baker Inc. is terminated for
any reason whatsoever.
<PAGE> 2
b. In the event of any Default hereunder, interest accrues on the entire unpaid
balance of this note at the annual simple interest rate of eighteen percent
(18%) from the date of default thereof.
c. If the Holder has required the undersigned to pay immediately in full as
described in the Promissory Note, the Holder will have the right to be paid
back by us for all its reasonable costs and expenses in enforcing this Note to
the extent not prohibited by applicable law. Those expenses included, for
example, reasonable attorney's fees.
d. Except as expressly provided herein, the undersigned waives all notices of
default, protest, presentment and notice of dishonor. In the event of a
default hereunder nothing in the way of an act or omission of the part of the
Holder shall be deemed to be a waiver of, or prejudice any of the rights of the
Holder.
SECURITY
This Note, and all other financial indebtedness and obligations of the
undersigned to the Holder are secured personally by the undersigned.
MASSACHUSETTS CONTRACT
This Note is a Massachusetts contract, and the rights and obligations of the
parties shall be governed by the laws of the Commonwealth of Massachusetts. In
the event that any provision or clause of the Note conflicts with applicable
law, such conflict shall not affect the other provisions of this Note which can
be given effect without the conflicting provision. The undersigned agrees to
submit to jurisdiction in a court in the Commonwealth of Massachusetts.
EXECUTED AS A SEALED INSTRUMENT THIS 3rd DAY OF Feb., 1993
Signature of Debtor /s/ Larry I. Kelley
-------------------------
Signature of Co-Debtor
-------------------------
Witness to Signature
-------------------------
<PAGE> 1
EXHIBIT 10.16
J. BAKER INC. AND SUBSIDIARIES (LOGO)
PROMISSORY NOTE
Amount: $15,000.00** Date: April 30, 1993
For value received, the undersigned Larry I. Kelley SS# ###-##-#### (the
"Payor") promises to pay to JBI, Inc/J.Baker Inc., **Fifteen Thousand Dollars**
(six and one-half)
dollars with interest at 6 1/2 per cent per annum from THE DATE HEREOF to
be repaid as follows:
/ / A] Cash payment of $____________ by ______________, or within 5 days of
sale of the employee's home, whichever is earlier. Interest will be paid
(monthly, annually, on date principal is due, etc)__________________________.
OR
/x/ B] Monthly payments of $1,500.00 until the total amount of
$15,464.00 (loan plus interest) has been repaid.
*******************************************
ADJUSTMENTS TO PAYMENT
This note may be prepaid in whole of in part at any time without premium or
penalty.
DEFAULT
a. The entire unpaid balance of this Note shall become immediately due and
payable at the option of the Holder upon the happening of any of the following
events, [a "Default"]:
[i] in the event that any of the terms, conditions, covenants or
provisions of this Note are not fully performed;
[ii] in the event, not withstanding anything to the contrary
herein, that the Holder has not received any of the payments in full by the
tenth day after they are due;
[iii] upon the appointment of a receiver for any part of or all of
the property of the Payor, or assignment for the benefits of creditors of the
undersigned, or any proceedings begun or instituted involuntarily or by the
undersigned in bankruptcy or insolvency;
[iv] if employment with JBI, Inc./J. Baker Inc. is terminated for
any reason whatsoever.
<PAGE> 2
b. In the event of any Default hereunder, interest accrues on the entire
unpaid balance of this note at the annual simple interest rate of eighteen
percent (18%) from the date of default thereof.
c. If the Holder has required the undersigned to pay immediately in full as
described in the Promissory Note, the Holder will have the right to be paid
back by us for all its reasonable costs and expenses in enforcing this Note to
the extent not prohibited by applicable law. Those expenses included, for
example, reasonable attorney's fees.
d. Except as expressly provided herein, the undersigned waives all notices of
default, protest, presentment and notice of dishonor. In the event of a
default hereunder nothing in the way of an act or omission of the part of the
Holder shall be deemed to be a waiver of, or prejudice any of the rights of the
Holder.
SECURITY
This Note, and all other financial indebtedness and obligations of the
undersigned to the Holder are secured personally by the undersigned.
MASSACHUSETTS CONTRACT
This Note is a Massachusetts contract, and the rights and obligations of the
parties shall be governed by the laws of the Commonwealth of Massachusetts. In
the event that any provision or clause of the Note conflicts with applicable
law, such conflict shall not affect the other provisions of this Note which can
be given effect without the conflicting provision. The undersigned agrees to
submit to jurisdiction in a court in the Commonwealth of Massachusetts.
EXECUTED AS A SEALED INSTRUMENT THIS 30th DAY OF APRIL, 1993
Signature of Debtor /s/ Larry I. Kelley
----------------------------------------------
Signature of Co-Debtor
--------------------------------------------
Witness to Signature
---------------------------------------------
<PAGE> 1
EXHIBIT 10.23
J. BAKER, INC.
1994 EQUITY INCENTIVE PLAN
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the J. Baker, Inc. 1994 Equity Incentive Plan (the
"Plan"). The purpose of the Plan is to encourage and enable the officers and
other key employees of J. Baker, Inc. (the "Company") and its Subsidiaries upon
whose judgment, initiative and efforts the Company largely depends for the
successful conduct of its business to acquire a proprietary interest in the
Company. It is anticipated that providing such persons with a direct stake in
the Company's welfare will assure a closer identification of their interests
with those of the Company, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock
Awards and Performance Share Awards.
"Board" means the Board of Directors of the Company.
"Cause" means the occurrence of one or more of the following: (i)
employee is convicted of, pleads guilty to, or confesses to any felony or
any act of fraud, misappropriation or embezzlement which has an immediate
and materially adverse effect on the Company or any Subsidiary, as
determined by the Board in good faith in its sole discretion, (ii) employee
engages in a fraudulent act to the material damage or prejudice of the
Company or any Subsidiary or in conduct or activities materially damaging
to the property, business or reputation of the Company or any Subsidiary,
all as determined by the Board in good faith in its sole discretion, (iii)
any material act or omission by employee involving malfeasance or
negligence in the performance of employee's duties to the Company or any
Subsidiary to the material detriment of the Company or any Subsidiary, as
determined by the Board in good faith in its sole discretion, which has not
been corrected by employee within 30 days after written notice from the
Company of any such act or omission, (iv) failure by employee to comply in
any material respect with the terms of his employment agreement, if any, or
any written policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been corrected by
employee within 30 days after written notice from the Company of such
failure, or (v) material breach by employee of his noncompetition agreement
with the Company, if any, as determined by the Board in good faith in its
sole discretion.
"Change of Control" is defined in Section 13.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
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"Disability" means an employee's inability to perform his normal
required services for the Company and its Subsidiaries for a period of six
consecutive months by reason of the employee's mental or physical
disability, as determined by the Committee in good faith in its sole
discretion.
"Disinterested Person" means a member of the Board who qualifies as
such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under said Rule.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 15.
"Fair Market Value" on any given date means the closing price per
share of Stock on the NASDAQ National Market Systems, or the principal
exchange on which the Stock is traded, on such date (or if no such price is
reported on such date, such price as reported on the nearest preceding date
on which such price is reported).
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Outside Director" means a member of the Board who qualifies as such
under Section 162(m) of the Code and the regulations promulgated
thereunder.
"Performance Share Award" means Awards granted pursuant to Section 8.
"Restricted Stock Award" means Awards granted pursuant to Section 6.
"Retirement" means the employee's termination of employment with the
Company and its Subsidiaries after attainment of the age and/or service
requirements to qualify for early or normal retirement under the Company's
qualified retirement plan.
"Stock" means the Common Stock, par value $0.50 per share, of the
Company, subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning
with the Company if each of the corporations or entities (other than the
last corporation or entity in the unbroken chain) owns stock or other
interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of
the other corporations or entities in the chain.
"Unrestricted Stock Award" means Awards granted pursuant to Section 7.
SECTION 2. Administration of Plan; Committee Authority to Select Participants
and Determine Awards
(a) Committee. The Plan shall be administered by two or more Outside
Directors appointed from time to time to serve as the Compensation Committee of
the Board. Each member of the Committee shall also be a Disinterested Person. No
member of the Board shall be liable for any action or determination under the
Plan made in good faith.
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
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(i) to select the officers and other employees of the Company and its
Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Unrestricted Stock Awards and Performance Share Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;
(v) to accelerate the exercisability or vesting of all or any portion
of any Award, with or without conditions;
(vi) subject to the provisions of Section 5(a)(ii), to extend the
period in which Stock Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as it
shall deem advisable; to interpret the terms and provisions of the Plan and
any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise
supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
SECTION 3. Stock Issuable Under the Plan; Recapitalizations; Mergers; Substitute
Awards
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 1,000,000 shares, of which no
more than 150,000 shares shall be available for issuance in the form of
Restricted Stock Awards, Unrestricted Stock Awards or Performance Share Awards,
counted cumulatively, during the term of the Plan. For purposes of the foregoing
limitations, the shares of Stock underlying any Awards which are forfeited,
cancelled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan so long as the participants to
whom such Awards had been previously granted received no benefits of ownership
of the underlying shares of Stock to which the Award related. No more than
100,000 Stock Options may be granted to any one individual participant during
any calendar year period. The shares available for issuance under the Plan may
be authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.
(b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, the
Committee shall make an appropriate or proportionate
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adjustment in (i) the maximum number and kind of shares reserved for issuance
under the Plan and in the form of Restricted Stock Awards, Unrestricted Stock
Awards or Performance Share Awards, (ii) the maximum number of Stock Options
that can be granted to any one individual participant; (iii) the number and kind
of shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Stock
Options under the Plan, without changing the aggregate exercise price as to
which such Stock Options remain exercisable. The adjustment by the Committee
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan resulting from any such adjustment, but the Committee in
its discretion may make a cash payment in lieu of fractional shares.
(c) Mergers. In the event a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board, or the board of directors of any corporation assuming the obligations
of the Company, may, in its discretion, take any one or more of the following
actions, as to outstanding Stock Options: (i) provide that such Stock Options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof), (ii) upon written notice to
the optionees, provide that all unexercised Stock Options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, and/or
(iii) in the event of a business combination under the terms of which holders of
the Stock of the Company will receive upon consummation thereof a cash payment
for each share surrendered in the business combination (the "Merger Price"),
make or provide for a cash payment to the optionees equal to the difference
between (A) the Merger Price times the number of shares of Stock subject to such
outstanding Stock Options (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
outstanding options in exchange for the termination of such options.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 4. Eligibility
Participants in the Plan will be such full or part-time officers and other
employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion.
SECTION 5. Stock Options
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. To the extent that any Option does not qualify
as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after March 28,
2004.
(a) Stock Options Granted to Employees. The Committee in its discretion
may grant Stock Options to eligible employees of the Company or any Subsidiary.
Stock Options granted to employees pursuant to this
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Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less than
100% of the Fair Market Value on the date of grant. If an employee owns or
is deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting power of
all classes of stock of the Company or any Subsidiary or parent corporation
and an Incentive Stock Option is granted to such employee, the option price
of such Incentive Stock Option shall be not less than 110% of the Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. The Committee may at any time accelerate the exercisability of all or
any portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held by the
optionee for at least six months, if permitted by the Committee in its
discretion. Such surrendered shares shall be valued at Fair Market Value
on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall
prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(v) Non-transferability of Options. Except as otherwise permitted by
the Committee, no Stock Option shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution and all
Stock Options shall be exercisable, during the optionee's lifetime, only by
the optionee.
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(vi) Termination by Reason of Death. Any Stock Option held by an
optionee whose employment by the Company and its Subsidiaries is terminated
by reason of death shall become fully exercisable and may thereafter be
exercised by the legal representative or legatee of the optionee, for a
period of twelve months (or such longer period as the Committee shall
specify at any time) from the date of death, or until the expiration of the
stated term of the Option, if earlier.
(vii) Termination by Reason of Disability.
(A) Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries is terminated by reason of Disability shall
become fully exercisable and may thereafter be exercised, for a period
of twelve months (or such longer period as the Committee shall specify
at any time) from the date of such termination of employment, or until
the expiration of the stated term of the Option, if earlier.
(B) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability.
(C) Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during the period provided in this
Section 5(a)(vii) for the exercise of a Stock Option shall extend such
period for twelve months from the date of death, subject to termination
on the expiration of the stated term of the Option, if earlier.
(viii) Termination by Reason of Retirement.
(A) Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries is terminated by reason of Retirement may
thereafter be exercised, to the extent it was exercisable at the time of
such termination, for a period of twenty-four months (or such other
period as the Committee shall specify at any time) from the date of such
termination of employment, or until the expiration of the stated term of
the Option, if earlier.
(B) Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during a period provided in this Section
5(a)(viii) for the exercise of a Stock Option shall extend such period
for twelve months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(ix) Termination for Cause. If any optionee's employment by the
Company and its Subsidiaries is terminated for Cause, any Stock Option held
by such optionee, including any Stock Option that is immediately
exercisable at the time of such termination, shall immediately terminate
and be of no further force and effect; provided, however, that the
Committee may, in its sole discretion, provide that such Stock Option can
be exercised for a period of up to 30 days from the date of termination of
employment or until the expiration of the stated term of the Option, if
earlier.
(x) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment by the Company and its Subsidiaries terminates
for any reason other than death, Disability, Retirement, or for Cause, any
Stock Option held by such optionee may thereafter be exercised, to the
extent it was exercisable on the date of termination of employment, for
three months (or such longer period as the Committee shall specify at any
time) from the date of termination of employment or until the expiration of
the stated term of the Option, if earlier.
(xi) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee
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during any calendar year shall not exceed $100,000. To the extent that any
Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(xii) Form of Settlement. Shares of Stock issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
SECTION 6. Restricted Stock Awards
(a) Nature of Restricted Stock Awards. The Committee may grant Restricted
Stock Awards to any employee of the Company or any Subsidiary. A Restricted
Stock Award is an Award entitling the recipient to acquire, at no cost or for a
purchase price determined by the Committee, shares of Stock subject to such
restrictions and conditions as the Committee may determine at the time of grant
("Restricted Stock"). Conditions may be based on continuing employment and/or
achievement of pre-established performance goals and objectives.
(b) Acceptance of Award. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 30 days (or such shorter date as the
Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Stock Award in such form as the Committee shall
determine.
(c) Rights as a Stockholder. Upon complying with Section 6(b) above, a
participant shall have the rights of a stockholder with respect to the voting of
the Restricted Stock, subject to such conditions contained in the written
instrument evidencing the Restricted Stock Award. Unless the Committee shall
otherwise determine, certificates evidencing the Restricted Stock shall remain
in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(e) below.
(d) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the written instrument evidencing the Restricted Stock Award. In
the event of termination of employment by the Company and its Subsidiaries for
any reason other than death or Disability, the Company shall have the right, at
the discretion of the Committee, to repurchase Restricted Stock with respect to
which conditions have not lapsed at their purchase price, or to require
forfeiture of such shares to the Company if acquired at no cost, from the
participant or the participant's legal representative. The Company must exercise
such right of repurchase or forfeiture not later than the 90th day following
such termination of employment (unless otherwise specified in the written
instrument evidencing the Restricted Stock Award).
(e) Vesting of Restricted Stock. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have lapsed shall no longer be Restricted Stock and
shall be deemed "vested." A participant whose employment is terminated for
reason of death or Disability shall become fully vested in his Restricted Stock
on his termination date to the extent such vesting is otherwise contingent only
on continued service with the Company. Where vesting is contingent on attainment
of pre-established performance goals, the vesting of Restricted Stock in the
case of death or Disability shall remain dependent on the attainment of such
goals and shall be determined as of such date or dates specified by the
Committee.
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(f) Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
SECTION 7. Unrestricted Stock Awards
The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Committee) an Unrestricted Stock Award to any employee
of the Company or any Subsidiary pursuant to which such employee may receive
shares of Stock free of any restrictions under the Plan in lieu of any cash
compensation to such employee.
SECTION 8. Performance Share Awards
(a) Nature of Performance Share Awards. A Performance Share Award is an
award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any employees of
the Company or any Subsidiary, including those who qualify for awards under
other performance plans of the Company. The Committee in its sole discretion
shall determine whether and to whom Performance Share Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Shares; provided, however, that the
Committee may rely on the performance goals and other standards applicable to
other performance unit plans of the Company in setting the standards for
Performance Share Awards under the Plan.
(b) Restrictions on Transfer. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) Rights as a Shareholder. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
any time prior to termination of employment, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment by the Company and its Subsidiaries for any reason.
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment by the Company and its Subsidiaries, the Committee may
in its sole discretion accelerate, waive or, subject to Section 11, amend any or
all of the goals, restrictions or conditions imposed under any Performance Share
Award.
SECTION 9. Tax Withholding
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be
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withheld with respect to such income. The Company and its Subsidiaries shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(b) Payment in Stock. A participant may elect to have such tax withholding
obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from shares of Stock to be issued pursuant to any Award a number of
shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring to
the Company shares of Stock owned by the participant with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy the
withholding amount due. With respect to any participant who is subject to
Section 16 of the Act, the following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations relating to an
Award in the manner permitted by this Section 9(b) shall be made either (1)
during the period beginning on the third business day following the date of
release of quarterly or annual summary statements of sales and earnings of
the Company and ending on the twelfth business day following such date, or
(2) at least six months prior to the date as of which the receipt of such
an Award first becomes a taxable event for Federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or disapproval of
the Committee; and
(D) the Stock withheld to satisfy tax withholding must pertain to an
Award which has been held by the participant for at least six months from
the date of grant of the Award.
SECTION 10. Transfer, Leave of Absence, Etc
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
SECTION 11. Amendments and Termination
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. If and to the extent required by
the Act to ensure that Awards granted under the Plan are exempt under Rule 16b-3
promulgated under the Act, Plan amendments shall be subject to approval by the
Company's stockholders.
SECTION 12. Status of Plan
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with
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any Award or Awards. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the Company's obligations to
deliver Stock or make payments with respect to Awards hereunder, provided that
the existence of such trusts or other arrangements is consistent with the
foregoing sentence.
SECTION 13. Change of Control Provisions
Upon the occurrence of a Change of Control as defined in this Section 13:
(a) Each outstanding Stock Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.
(b) Each Restricted Stock Award and Performance Share Award shall be
subject to such terms, if any, with respect to a Change of Control as have
been provided by the Committee in connection with such Award.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Act (other than the Company, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 30% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Company's Board of Directors ("Voting Securities") or
(B) the then outstanding shares of Stock of the Company (in either such
case other than as a result of acquisition of securities directly from
the Company); or
(ii) persons who, as of the Effective Date, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of
the Company subsequent to the Effective Date whose election or
nomination for election was approved by a vote of at least a majority of
the Incumbent Directors shall, for purposes of this Plan, be considered
an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80% or more
of the voting shares of the corporation issuing cash or securities in
the consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the
Company or (C) any plan or proposal for the liquidation or dissolution
of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as
the result of an acquisition of securities by the Company which, by
reducing the number of shares of Stock or other Voting Securities
outstanding, increases (x) the proportionate number of shares of Stock
beneficially owned by any person to 30% or more of the shares of Stock then
outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 30% or more of the combined
voting power of all then
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outstanding Voting Securities; provided, however, that if any person
referred to in clause (x) or (y) of this sentence shall thereafter become
the beneficial owner of any additional shares of Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend, or
similar transaction), then a "Change of Control" shall be deemed to have
occurred for purposes of the foregoing clause (i).
SECTION 14. General Provisions
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
SECTION 15. Effective Date of Plan
This Plan shall become effective upon approval by the holders of a majority
of the shares of Stock of the Company present or represented and entitled to
vote at a meeting of stockholders. Subject to such approval by the stockholders
and to the requirement that no Stock may be issued hereunder prior to such
approval, Stock Options and other Awards may be granted hereunder on and after
adoption of this Plan by the Board.
SECTION 16. Governing Law
This Plan shall be governed by the law of the Commonwealth of Massachusetts
except to the extent such law is preempted by federal law.
A-11
<PAGE> 1
EXHIBIT 10.30
AGREEMENT OF MERGER
AMONG
J. BAKER, INC.,
JBAK ACQUISITION CORP.
AND
TISHKOFF ENTERPRISES, INC.
<PAGE> 2
AGREEMENT OF MERGER, dated as of December 3, 1993, by and among J.
Baker, Inc., a Massachusetts corporation ("Acquiror"), JBAK Acquisition Corp.,
an Ohio corporation and a wholly owned subsidiary of Acquiror ("Sub"), and
Tishkoff Enterprises, Inc., an Ohio corporation ("Seller").
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises
and mutual covenants and agreements contained herein and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Acquiror, Sub and Seller hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Merger; Effective Time of the Merger. Subject to the terms and
conditions of this Agreement, Sub will be merged into Seller (the "Merger") in
accordance with the Ohio General Corporation Law (the "OGCL").
The Merger shall become effective upon the filing of a Certificate of
Merger (the "Certificate of Merger"), along with any other documents required
to be filed to consummate the Merger, with the Secretary of State of the State
of Ohio in accordance with Section 1701.81 of the OGCL (the date of such filing
or, if applicable, the effective date specified in such filing being
hereinafter referred to as the "Effective Date of the Merger" and the time of
such filing being hereinafter referred to as the "Effective Time of the
Merger). The Certificate of Merger and any other documents required to
consummate the Merger shall be filed with the Secretary of State of the State
of Ohio on the Closing Date (as defined in Section 1.3) or as soon thereafter
as practicable.
1.2 Seller Stockholders' Approvals. Seller shall hold a meeting of
its stockholders to consider and vote upon the approval of this Agreement and
the Merger contemplated hereby, all in accordance with the provisions of the
OGCL (the "Seller Stockholders' Meeting"), as soon as practicable after the
date hereof.
1.3 Closing. The closing of the Merger (the "Closing") will take
place on the first business day after satisfaction or waiver of all of the
conditions to the Merger set forth in this Agreement (the date of such closing
is hereinafter referred to as the "Closing Date"), at the offices of Goodwin,
Procter & Hoar, Exchange Place, Boston, Massachusetts 02109, unless a different
date or place is agreed to by the parties hereto.
1.4 Effects of the Merger. At the Effective Time of the Merger, (i)
the separate existence of Sub shall cease and Sub shall be merged with and into
Seller (Seller after the Merger is sometimes referred to herein as the
"Surviving Corporation"); (ii) the Articles of Incorporation of Seller shall be
the Articles of Incorporation of the Surviving Corporation, except that such
Articles of Incorporation shall be amended to provide that (x) the authorized
common stock of the Surviving Corporation shall be 1,000 shares of Common
Stock, with no par value, and (z) the name of the Surviving Corporation shall
be Shoe Corporation of America, Inc., (iii) the Code of Regulations of Seller
shall be the Code of Regulations of the
<PAGE> 3
Surviving Corporation, (iv) the directors and officers of the Surviving
Corporation shall remain as the directors and officers of the Surviving
Corporation, respectively, and (v) the Merger shall, from and after the
Effective Time of the Merger, have all the effects provided by applicable law.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES
2.1 Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the
holder of any shares of capital stock of Seller or Sub:
2.1.1 Capital Stock of Sub. Each issued and outstanding
share of capital stock of Sub shall continue to be issued and shall be
converted into one share of common stock of the Surviving Corporation. Each
stock certificate of Sub evidencing ownership of a number of shares of the
capital stock of Sub shall thereafter evidence ownership of such number of
shares of common stock of the Surviving Corporation.
2.1.2 Cancellation of Treasury and Similar Stock of Seller.
All shares of common stock of Seller, with no par value ("Seller Common
Stock"), that are owned, directly or indirectly, by Seller or by any Subsidiary
(as hereinafter defined) of Seller and any shares of capital stock of Seller
owned by Acquiror, Sub or any other Subsidiary of Acquiror shall be cancelled
and no consideration shall be delivered in exchange therefor. As used in this
Agreement, a "Subsidiary" of an entity shall mean any corporation or other
legal entity of which the specified entity (either acting alone or together
with its other Subsidiaries) owns, directly or indirectly, more than 50% of the
stock or other equity interest, the holders of which are, ordinarily or
generally, in the absence of contingencies or understandings, entitled to vote
for the election of a majority of the board of directors or to otherwise
control the governing body.
2.1.3 Conversion of Capital Stock. Each issued and
outstanding share of Seller Common Stock (other than (x) shares to be cancelled
pursuant to Section 2.1.2, and (y) shares, if any, held by persons who in
accordance with Section 1701.84 of the OGCL have not voted in favor of the
merger and have delivered to Seller within ten days of the date of the Seller
Stockholders' Meeting a written demand for appraisal of their shares
("Dissenting Shares")) shall be converted and exchange, without any action on
the part of the holders thereof, into the right to receive from Acquiror
$2.95759 in cash (the "Cash Consideration"). Each issued and outstanding share
of the preferred stock of Seller, $1.00 par value ("Seller Preferred Stock"),
shall remain outstanding.
2.1.4 Appraisal Rights. Except as otherwise provided in
the OGCL, any Dissenting Shares shall not be converted into the Cash
Consideration but shall be converted
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<PAGE> 4
into the right to receive such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to the OGCL. Seller shall give
Acquiror prompt written notice of any demand received by Seller from a
stockholder of Seller regarding the appraisal of his shares, and Acquiror shall
have the right to participate in all negotiations and proceedings with respect
to such demand. Seller agrees that, except with the prior written consent of
Acquiror, or as required under the OGCL, it will not voluntarily make any
payment with respect to, or settle or offer to settle, any such demand. Each
holder of Dissenting Shares (a "Dissenting Stockholder") who, pursuant to the
provisions of the OGCL, becomes entitled to payment of the value of shares of
Seller Common Stock shall receive payment therefor (but only after the value
therefor shall have been agreed upon or finally determined pursuant to such
provisions). In the event of a legal obligation, after the Effective Time of
the Merger, to deliver the Cash Consideration to any holder of shares of Seller
Common Stock who shall have failed to make a demand for appraisal or shall have
withdrawn or otherwise terminated his demand for appraisal, Acquiror shall,
upon surrender by such Dissenting Stockholder of his certificate or
certificates representing shares of Seller Common Stock, pay the Cash
Consideration to which such Dissenting Stockholder is then entitled under this
Section 2.1 and the Certificate of Merger.
2.2 Surrender of Certificates and Payment of Cash-out Consideration.
2.2.1 Exchange Agent. Acquiror shall act as exchange agent
(the "Exchange Agent") in the Merger or shall appoint its transfer agent to act
as Exchange Agent.
2.2.2 Acquiror to Arrange for Payment of Cash
Consideration. Promptly after the Effective Time of the Merger (but in no
event later than fifteen business days thereafter), Acquiror shall make
available to the Exchange Agent for payment in accordance with this Article II,
through such reasonable procedures as Acquiror may adopt, the total Cash
Consideration payable pursuant to Section 2.1.3, such payment to be made in
each case in exchange for certificates formerly representing outstanding shares
of Seller Common Stock.
2.2.3 Exchange Procedures. Within ten days after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time of the Merger represented outstanding shares of Seller Common
Stock (the "Certificates") whose shares are being converted into the Cash
Consideration pursuant to Section 2.1 hereof and the Certificate of Merger, (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Acquiror may reasonable specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for payment
of the Cash Consideration. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Acquiror, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to payment of the Cash Consideration,
pursuant to Section 2.1.3 hereof, in respect of the shares of Seller Common
Stock formerly represented by such
3
<PAGE> 5
Certificate. The Certificate so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of Seller Common Stock which is not
registered on the transfer records of Seller, the appropriate amount of Cash
Consideration may be delivered to a transferee if the Certificate representing
such Seller Common Stock is presented to the Exchange Agent and accompanied by
all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time of the Merger to represent only the right to receive
upon such surrender the Cash Consideration as provided by this Article II and
the provisions of the OGCL, except for Certificates for Dissenting Shares,
which shall have the rights set forth in Section 1701.84 of the OGCL.
2.2.4 No Further Ownership Rights in Capital Stock of
Seller. Cash Consideration delivered upon the surrender of Certificates in
accordance with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to the shares of Seller Common Stock
formerly represented by such Certificates. There shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Seller Common Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to the Surviving Corporation for
any reason (other than in connection with presentation by a dissenting
stockholder for purposes of placing a dissenter's legend thereon), they shall
be cancelled and exchanged as provided in this Article II.
2.2.5 No Interest. No interest shall be due or payable
with respect to any payment of Cash Consideration.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Acquiror and Sub that:
3.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted. Seller is duly qualified or licensed to do business as a
foreign corporation and is in good standing in all other jurisdictions that
require such qualification or licensing except where the failure to so qualify
would not, individually or in the aggregate, have a material adverse effect on
the present or future operations, business, properties, assets, liabilities,
results of operations or financial condition of Seller, taken as a whole (a
"Seller Material Adverse Effect"). Seller has made available or provided to
Acquiror complete and correct copies of the charter and bylaws of Seller, each
as amended to the date hereof.
4
<PAGE> 6
3.2 Power, Authorization and Validity.
3.2.1 Seller has the corporate right, power, legal capacity
and authority to enter into and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement has been duly and
validly approved and authorized by the Board of Directors of Seller, and no
other action on the part of Seller or its stockholders is required in
connection therewith, except as set forth in Section 3.2.2 below.
3.2.2 No filing, authorization, consent or approval is
necessary to enable Seller to enter into, or to perform its obligations under,
this Agreement or to carry out or make effective the Merger, except for (a) the
filing of the Certificate of Merger and any other required documents with the
Secretary of State of the State of Ohio and the filing of appropriate documents
with the relevant authorities of other states in which Seller is qualified to
do business, if any, (b) such filings as may be required to comply with federal
and state Blue Sky laws, and (c) the approval of this Agreement by the
stockholders of Seller.
3.2.3 This Agreement is the valid and binding obligations
of Seller enforceable in accordance with its terms. The Agreement and the
transactions contemplated herein will, when such transactions are consummated
as described herein, result in a valid merger of Sub into Seller with all the
effects of a merger described in OGCL section 1701.82.
3.3 Capitalization. The authorized capital stock of Seller consists
of (i) 1,500,000 shares of Common Stock, without par value, of which 917,125
shares are issued and outstanding, and (ii) 40,000 shares of Class A Preferred
Stock, $1.00 par value per share ("Seller Preferred Stock"), of which all
shares are issued and outstanding. All issued and outstanding shares of Seller
Common Stock and Seller Preferred Stock have been duly authorized and validly
issued, are fully paid and non-assessable and are not subject to any right of
rescission. There are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to issue,
sell, purchase or otherwise acquire any of Seller's authorized but unissued
capital stock or treasury stock or any other securities convertible into or
evidencing the right to subscribe for any such shares, and there is no
liability for dividends accrued but unpaid on the capital stock of Seller or
any of its Subsidiaries. There are no voting agreements, rights of first
refusal or other restrictions (other than normal restrictions on transfer under
applicable federal and state securities laws) applicable to Seller's
outstanding securities.
3.4 Agreement Will Not Cause Breach. Neither the execution and
delivery of, nor the consummation of the transactions contemplated by, this
Agreement will result in any of the following: (a) a default, breach or
violation of the charter, bylaws or other governing instruments of Seller, or
(b) a violation or breach of any statute, ordinance, rule or regulation
applicable to Seller, or any writ, injunction or decree of any court or
governmental instrumentality to which Seller is a party or by which it or any
of its properties are bound or subject.
5
<PAGE> 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB
Acquiror and Sub, jointly and severally, represent and warrant that:
4.1 Organization and Good Standing. Each of Acquiror and Sub and
each of Acquiror's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted.
Each of Acquiror and Sub is duly qualified or licensed to do business as a
foreign corporation and is in good standing in all other jurisdictions that
require such qualification or licensing except where the failure to so qualify
would not, individually or in the aggregate, have a material adverse effect on
the present or future operations, business, properties, assets, liabilities,
results of operations or financial condition of Acquiror and its Subsidiaries,
taken as a whole (an "Acquiror Material Adverse Effect"). Acquiror has made
available or provided to Seller complete and correct copies of the charters and
bylaws of Acquiror and Sub, each as amended to the date hereof.
4.2 Power, Authorization and Validity.
4.2.1 Each of Acquiror and Sub has the corporate right,
power, legal capacity and authority to enter into and perform its obligations
under this Agreement. The execution, delivery and performance of this
Agreement has been duly and validly approved and authorized by the Board of
Directors of Acquiror and Sub and not other action on the part of Acquiror, Sub
or their stockholders is required in connection therewith.
4.2.2 No filing, authorization, consent or approval,
governmental or otherwise, is necessary to enable Acquiror or Sub to enter
into, and to perform its obligations under, this Agreement, except for (a) the
filing of the Certificate of Merger and any other required documents with the
Secretary of State of the State of Ohio and the filing of appropriate documents
with the relevant authorities of other states in which Acquiror or Sub is
qualified to do business, if any, and (b) such filings as may be required to
comply with federal and state Blue Sky laws.
4.2.3 This Agreement is the valid and binding obligations
of Acquiror and Sub, enforceable in accordance with its respective terms.
6
<PAGE> 8
ARTICLE V
MUTUAL CONDITIONS PRECEDENT
The respective obligations of each party to consummate the transactions
contemplated herein are subject to the satisfaction or waiver, where
permissible, prior to or as of the Effective Time of the Merger, of the
following conditions precedent:
5.1 Seller Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite affirmative vote of the stockholders of
Seller in accordance with its Certificate of Incorporation and Code of
Regulations and in accordance with applicable law.
5.2 Approvals. All authorizations, consents, orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any court, administrative agency, commission, regulatory authority or other
governmental authority or instrumentality, domestic or foreign, necessary for
the consummation of the transactions contemplated by this Agreement, shall have
been filed, occurred or been obtained.
5.3 Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation
of any transaction contemplated by this Agreement shall have been issued by any
court, administrative agency, commission, regulatory authority or other
governmental authority or instrumentality, domestic or foreign, and remain in
effect, and not litigation seeking the issuance of such an order or injunction,
or seeking the imposition against Sub, Seller or Acquiror or any of their
respective directors or officers of damages if the Merger is consummated, shall
be pending or threatened. In the event any such order or injunction shall have
been issued, each party agrees to use reasonable efforts to have any such
injunction removed or terminated.
5.4 Statutes. No action shall have been taken, and no statute,
rule, regulation or order shall have been enacted, promulgated, issued or
deemed applicable to the Merger, by any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, which would make the consummation of the
Merger or the transactions contemplated hereby illegal or impermissible.
5.5 Absence of Termination. The obligations to consummate the
transactions contemplated hereby shall not have been terminated pursuant to
Article VIII hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR AND SUB
The obligations of Acquiror and Sub to consummate the transactions
contemplated herein are subject to the satisfaction or waiver, where
permissible, prior to or upon the Effective Time of the Merger, of the
following conditions precedent:
7
<PAGE> 9
6.1 Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) (i) as of the
date of this Agreement, (ii) as of the date of the Seller Stockholders' Meeting
and (iii) as of the Closing Date, as though made on and as of each such date,
and Acquiror shall have received a certificate signed by the President of
Seller to such effect on the Closing Date.
6.2 No Material Adverse Change. From and after the date hereof, no
event or circumstance shall have occurred and no fact or condition shall exist
which has caused or constitutes a Seller Material Adverse Effect, and Acquiror
shall have received a certificate signed by the President of Seller to such
effect on the Closing Date.
6.3 Opinion of Seller's Counsel. Acquiror shall have been furnished
with an opinion, in form and substance reasonably satisfactory to Acquiror, of
Schwartz, Kelm, Warren & Rubenstein, counsel for the Seller, substantially to
the effect that upon the filing of the Certificate of Merger with the Secretary
of State of the State of Ohio, at the Effective Time of the Merger Sub will be
merged into Seller in accordance with, and in the manner described in, Article
II hereof and such merger shall be duly authorized, valid and have all of the
effects set forth in Section 1701.82 of the OGCL.
ARTICLE VII
CONDITION PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
herein are subject to the satisfaction or waiver, where permissible, prior to
or upon the Effective Time of the Merger, of the following condition precedent:
7.1 Representations and Warranties. The representations and
warranties of Acquiror and Sub set forth in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties which are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects) (i) as of the date of this Agreement, (ii) as of the date of the
Seller Stockholders' Meeting and (iii) as of the Closing Date, as though made
on and as of each such date, and Seller shall have received a certificate
signed by the chief financial officer or Treasurer of Acquiror to such effect
on the Closing Date.
8
<PAGE> 10
ARTICLE VIII
TERMINATION OF AGREEMENT
8.1 Termination. At any time prior to the Closing Date, this
Agreement may be terminated (a) by mutual written consent of each of the
parties hereto, (b) by Acquiror if the conditions stated in Article VI hereof
have not been satisfied at or prior to the Closing Date or if it has become
reasonably, objectively certain that any conditions required to be satisfied
thereunder, other than a condition that is reasonably within Acquiror's or
Sub's control, will not be satisfied on or prior to the Closing Date, (c) by
Seller if the conditions stated in Article VII hereof have not been satisfied
at or prior to the Closing Date or if it has become reasonably, objectively
certain that any conditions required to be satisfied thereunder, other than a
condition that is reasonably within Seller's control, will not be satisfied on
or prior to the Closing Date, (d) by any party if the conditions stated in
Article V hereof have not been satisfied at or prior to the Closing Date or if
it has become reasonably, objectively certain that any conditions required to
be satisfied thereunder, other than a condition that is reasonably within the
control of the party seeking a termination, will not be satisfied on or prior
to the Closing Date or (e) by any party without the consent of the other
parties if the Effective Date of the Merger has not occurred on or prior to
December 31, 1993.
8.2 Extension of Time; Waivers. At any time prior to the Closing
Date:
8.2.1 Acquiror and Sub may (i) extend the time for the
performance of any of the obligations or other acts of Seller, and (ii) waive
compliance with any of the agreements or conditions contained herein to be
performed by Seller. Any agreement pursuant to this Section 8.2.1 shall be
valid only if set forth in an instrument in writing signed by each of the
parties hereto.
8.2.2 Seller may (i) extend time for the performance of any
of the obligations or other acts of Acquiror and/or Sub, and (ii) waive
compliance with any of the agreements or conditions contained herein to be
performed by Acquiror and/or Sub. Any agreement pursuant to this Section 8.2.2
shall be valid only if set forth in an instrument in writing signed by each of
the parties hereto.
ARTICLE IX
MISCELLANEOUS
9.1 Amendment. This Agreement may be amended with the approval of
the Boards of Directors of Acquiror, Sub and Seller at any time before or after
approval thereof by the stockholders of Seller or the stockholders of Sub but,
after any such approval, no amendment shall be made if under Section 1701.84 of
the OGCL such amendment must be approved by the stockholders of any party
hereto unless the requisite approval of such party's stockholders shall have
been obtained. This Agreement may not be amended except by an instrument in
writing signed on behalf of each parties hereto.
9.2 Costs and Expenses. Costs and expenses incurred in connection
with this Agreement will be paid by the party incurring such costs and
expenses.
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<PAGE> 11
9.3 Non-Survival of Warranties. Except for the obligation of
Acquiror to pay the Cash Consideration as provided in Article II and to
otherwise comply with its obligations under such Article, all representations,
warranties, agreements, covenants and obligations herein or in any schedule,
exhibit, or certificate or financial statement delivered by any party to any
other party incident to the transactions contemplated hereby shall not survive
the Closing.
9.4 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, (b) may be executed in several counterparts, one of
which will be deemed an original and all of which shall constitute one and the
same instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Ohio without giving
effect to the conflict of law provisions thereof.
9.5 Assignability. This Agreement shall be binding upon, and shall
be enforceable by and inure to the benefit of, the parties named herein and
their respective successors and assigns; provided, however, that this Agreement
may not be assigned by any party without the prior written consent of the other
parties, and any attempted assignment without such consent shall be void and of
no effect.
9.6 Notices. Any notice of demand which must or may be given under
this Agreement shall, except as otherwise provided, be in writing and shall be
deemed to have been given (i) when physically received by personal delivery
(which shall include the confirmed receipt of a telecopied facsimile
transmission), or (ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested, postage
prepaid, or (iii) one (1) business day after being deposited with a nationally
known commercial courier service providing next day delivery service (such as
Federal Express); addressed and delivered or telecopied to Acquiror, Sub or
Seller, as the case may be, as follows:
To Acquiror: With a copy to:
J. Baker, Inc. Goodwin, Procter & Hoar
555 Turnpike Street Exchange Place
Canton, MA 02021 Boston, MA 02109
Attn: Chief Financial Officer Attn: Thomas P. Storer, Esq.
To Sub: With a copy to:
JBAK Acquisition Corp. Goodwin, Procter & Hoar
555 Turnpike Street Exchange Place
Canton, MA 02021 Boston, MA 02109
Attn: President Attn: Thomas P. Storer, Esq.
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<PAGE> 12
To Seller: With a copy to:
Tishkoff Enterprises, Inc. Schwartz, Kelm,Warren & Rubenstein
2035 Innis Road 41 South High Street
Columbus, Ohio 43224 Suite 2350
Attn: President Columbus, OH 43215
Attn: Kenneth J. Warren, Esq.
or to such other address of which any party may by written notice given in
accordance with this Section 9.6 notify the other parties.
9.7 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
9.8 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity.
9.9 Mutual Drafting. This Agreement is the joint project of the
Acquiror and Seller, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Acquiror and Seller and shall not be
construed for or against either party.
9.10 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provision.
9.11 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in The Commonwealth of Massachusetts (as to which the parties agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which they are entitled at law or in equity.
11
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
J. BAKER, INC.
By: /s/ Philip G. Rosenberg
------------------------------
Name: Philip G. Rosenberg
Title: First Senior Vice President
ATTEST:
/s/ Alan I. Weinstein
- - ------------------------------
Name: Alan I. Weinstein
Title: Secretary
JBAK ACQUISITION CORP.
By: /s/ Alan I. Weinstein
------------------------------
Name: Alan I. Weinstein
Title: President
ATTEST:
/s/ Mark T. Beaudouin
- - ------------------------------
Name: Mark T. Beaudouin
Title: Secretary
TISHKOFF ENTERPRISES, INC.
By: /s/ Alan I. Weinstein
------------------------------
Name: Alan I. Weinstein
Title: Senior Executive Vice
President
ATTEST:
/s/ Philip G. Rosenberg
- - ------------------------------
Name: Philip G. Rosenberg
Title: Assistant Secretary
12
<PAGE> 1
<TABLE>
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE*
<CAPTION>
QUARTER ENDED YEAR ENDED
JAN. 29, JAN. 30, JAN. 29, JAN. 30,
1994 1993 1994 1993
-------- ------------ -------- ----------
<S> <C> <C> <C> <C>
PRIMARY:
Earnings Before Extraordinary Item $ 7,957,437 $ 4,914,152 $ 23,311,042 $ 13,277,612
Extraordinary Item, Net of
Income Tax Benefit - - - (2,443,953)
----------- ----------- ------------ ------------
Net Earnings $ 7,957,437 $ 4,914,152 $ 23,311,042 $ 10,833,659
=========== =========== ============ ============
Weighted average number of common
shares outstanding 13,769,260 10,683,894 13,674,553 10,655,498
=========== =========== ============ ============
Earnings Per Share
Earnings Before Extraordinary Item $ .578 $ .460 $ 1.704 $ 1.246
Extraordinary item - - - (.229)
----------- ----------- ------------ ------------
$ .578 $ .460 $ 1.704 $ 1.017
=========== =========== ============ ============
ASSUMING FULL DILUTION:
Earnings Before Extraordinary Item(1) $ 8,741,437 $ 5,613,759 $ 26,447,042 $ 15,253,631
Extraordinary Item, Net of
Income Tax Benefit - - - (2,443,953)
----------- ----------- ------------ ------------
Net Earnings $ 8,741,437 $ 5,613,759 $ 26,447,042 $ 12,809,678
=========== =========== ============ ============
Weighted average number of common
shares outstanding 13,769,260 10,683,894 13,674,553 10,655,498
Dilutive effect of outstanding stock options
and warrants 212,246 349,804 270,629 339,801
Dilutive effect of convertible subordinated debt 4,341,085 4,341,085 4,341,085 2,778,772
----------- ----------- ------------ ------------
Weighted average number of common
shares as adjusted 18,322,591 15,374,783 18,286,267 13,774,071
=========== =========== ============ ============
Earnings per share
Earnings Before Extraordinary Item $ .477 $ .365 $ 1.446 $ 1.107
Extraordinary Item - - - (.177)
----------- ----------- ------------ ------------
$ .477 $ .365 $ 1.446 $ .930
=========== =========== ============ ============
<FN>
(1) For the purpose of calculating fully diluted earnings per share the
conversion of the 7% convertible debt results in an after tax benefit
from reduced interest expense.
* This calculation is submitted in accordance with Item 601(b)(11) of
Regulation S-K.
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT 12
J. BAKER, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------------
FEBRUARY 3, FEBRUARY 2, FEBRUARY 1, JANUARY 30, JANUARY 29,
1990 1991 1992 1993 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
Earnings from continuing operations before
taxes and extraordinary item per
consolidated statements of earnings $20,065 $11,307 $12,898 $21,076 $36,424
Add:
Portion of rents representative of the
interest factor 2,096 2,973 5,459 6,564 15,227
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value 8,930 10,405 10,352 8,211 8,146
------- ------- ------- ------- -------
Earnings before fixed charges, as adjusted $31,091 $24,685 $28,709 $35,851 $59,797
======= ======= ======= ======= =======
Fixed charges
Interest on indebtedness including the
amortization of debt expense and
detachable warrant value(1) $ 8,930 $10,405 $10,352 $ 8,211 $ 8,146
------- ------- ------- ------- -------
Rents $ 6,289 $ 8,920 $16,376 $19,691 $45,680
Portion of rents representative of
the interest factor (2) $ 2,096 $ 2,973 $ 5,459 $ 6,564 $15,227
------- ------- ------- -------- -------
Fixed charges (1) + (2) $11,026 $13,378 $15,811 $14,775 $23,373
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.82x 1.85x 1.82x 2.43x 2.56x
======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
State or other
Jurisdiction Name under which
Name of Incorporation Business is done
- - ---------------------- ---------------- ----------------
<S> <C> <C>
JBI, Inc. Massachusetts JBI, Inc.
J. Baker, Inc.
Parade of Shoes
JBI Holding Company, Inc.* Delaware JBI Holding Company, Inc.
Morse Shoe, Inc.* Delaware Fayva
Morse Shoe, Inc.
Spencer Companies, Inc. Massachusetts Spencer Companies, Inc.
The Casual Male, Inc. Massachusetts Casual Male Big & Tall
WGS Corporation Massachusetts Work 'n Gear
Shoe Corporation of America, Inc. Ohio Shoe Corporation of America, Inc.
<FN>
* Subsidiaries of JBI, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
J. Baker, Inc.
We consent to the incorporation by reference in Registration Statements of J.
Baker, Inc. on Form S-8 no. 33-10385, No. 33-20302, No. 33-39425, No. 33-59786,
No. 33-59788 and No. 33-59790 and on Form S-3 No. 33-42830, No. 33-47825 and
33-51645 of our report dated March 11, 1994 appearing in the Annual Report on
Form 10-K of J. Baker, Inc. for the year ended January 29, 1994.
/s/ KPMG Peat Marwick
---------------------
KPMG PEAT MARWICK
Boston, Massachusetts
April 27, 1994
