SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number 0-14681
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)
(781) 828-9300
(Registrant's telephone number, including area code)
The registrant (1) has filed all reports to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such
period that the registrant was required to file such reports), and (2) has been
subject to filing such reports for the past 90 days.
YES [X] NO
The number of shares outstanding of the registrant's common stock as of August
2, 1997, was 13,914,300.
1
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
August 2, 1997 (unaudited) and February 1, 1997
<TABLE>
<S> <C> <C>
August 2, February 1,
Assets 1997 1997
------ -------- -------
Current assets:
Cash and cash equivalents $ 1,711,896 $ 3,969,116
Accounts receivable:
Trade, net 14,459,203 14,771,734
Other 1,532,264 1,737,786
---------- ----------
15,991,467 16,509,520
---------- ----------
Merchandise inventories 164,268,910 146,045,496
Prepaid expenses 9,649,621 6,031,033
Deferred income taxes 36,159,000 37,548,000
Assets held for sale - 62,255,582
------------ -----------
Total current assets 227,780,894 272,358,747
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 19,340,925 19,340,925
Furniture, fixtures and equipment 77,245,839 74,244,548
Leasehold improvements 24,280,284 23,100,973
----------- -----------
120,867,048 116,686,446
Less accumulated depreciation and amortization 45,734,247 40,032,801
----------- -----------
Net property, plant and equipment 75,132,801 76,653,645
----------- -----------
Deferred income taxes 26,199,000 26,199,000
Other assets, at cost, less accumulated amortization 12,367,151 7,309,411
----------- -----------
$341,479,846 $382,520,803
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 2,035,817 $ 2,012,327
Accounts payable 48,720,653 57,006,085
Accrued expenses 11,365,859 29,837,310
Income taxes payable 1,198,881 1,380,664
----------- -----------
Total current liabilities 63,321,210 90,236,386
----------- -----------
Other liabilities 3,180,149 6,203,073
Long-term debt, net of current portion 129,225,814 140,787,673
Senior subordinated debt 1,470,761 2,951,411
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity 73,928,912 71,989,260
----------- -----------
$341,479,846 $382,520,803
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the quarters ended August 2, 1997 and August 3, 1996
(Unaudited)
<TABLE>
<S> <C> <C>
Quarter Quarter
Ended Ended
August 2, 1997 August 3, 1996
-------------- --------------
Sales $143,929,357 $231,805,391
Cost of sales 80,139,384 130,378,579
----------- -----------
Gross profit 63,789,973 101,426,812
Selling, administrative and general expenses 53,926,913 88,310,932
Depreciation and amortization 3,500,451 7,454,120
---------- ----------
Operating income 6,362,609 5,661,760
Net interest expense 3,242,501 3,224,038
----------- -----------
Earnings before income taxes 3,120,108 2,437,722
Income tax expense 1,216,000 952,000
----------- -----------
Net earnings $ 1,904,108 $ 1,485,722
=========== ===========
Net earnings per common share:
Primary $ 0.14 $ 0.11
============ ============
Fully diluted $ 0.14 $ 0.11
============ ============
Number of shares used to compute net earnings per common share:
Primary 13,912,934 13,891,265
=========== ===========
Fully diluted 13,970,527 13,928,732
=========== ===========
Dividends declared per share $ 0.015 $ 0.015
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
For the six months ended August 2, 1997 and August 3, 1996
(Unaudited)
<TABLE>
<S> <C> <C>
August 2, 1997 August 3, 1996
-------------- --------------
Sales $281,279,618 $427,335,600
Cost of sales 155,491,836 235,287,939
----------- -----------
Gross profit 125,787,782 192,047,661
Selling, administrative and general expenses 109,621,742 167,595,023
Depreciation and amortization 6,153,844 14,662,623
---------- ----------
Operating income 10,012,196 9,790,015
Net interest expense 6,450,077 6,001,733
----------- -----------
Earnings before income taxes 3,562,119 3,788,282
Income tax expense 1,389,000 1,477,000
----------- -----------
Net earnings $ 2,173,119 $ 2,311,282
=========== ===========
Net earnings per common share:
Primary $ 0.16 $ 0.17
============ ============
Fully diluted $ 0.16 $ 0.17
============ ============
Number of shares used to compute net earnings per common share:
Primary 13,902,952 13,882,729
=========== ===========
Fully diluted 13,959,598 13,903,376
=========== ===========
Dividends declared per share $ 0.030 $ 0.030
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended August 2, 1997 and August 3, 1996
(Unaudited)
<TABLE>
<S> <C> <C>
August 2, 1997 August 3, 1996
-------------- --------------
Cash flows from operating activities:
Net earnings $ 2,173,119 $ 2,311,282
Adjustments to reconcile net earnings to cash
used in operating activities:
Depreciation and amortization:
Fixed assets 5,701,470 10,054,455
Deferred charges, intangible assets and
deferred financing costs 471,724 4,627,518
Deferred income taxes 1,389,000 1,520,370
Change in:
Accounts receivable (931,947) (5,443,623)
Merchandise inventories (25,112,428) (24,276,016)
Prepaid expenses (3,618,588) (4,035,130)
Accounts payable (8,285,432) (9,293,968)
Accrued expenses (16,671,451) (10,856,406)
Income taxes payable/receivable (181,783) 7,236,732
Other liabilities 36,908 111,558
------------ -----------
Net cash used in operating
activities (45,029,408) (28,043,228)
------------ -----------
Cash flows from investing activities: Capital expenditures for:
Property, plant and equipment (4,180,626) (10,450,045)
Other assets (1,313,109) (15,660)
Payments received on notes receivable 1,450,000 2,438,000
----------- -----------
Net cash used in investing activities (4,043,735) (8,027,705)
----------- -----------
Cash flows from financing activities:
Repayment of senior debt (1,500,000) (1,500,000)
Proceeds (repayment) of other long-term debt (11,287,947) 37,000,000
Repayment of mortgage payable (250,422) -
Payment of mortgage escrow, net (47,076) -
Proceeds from sales of footwear businesses 60,134,835 -
Proceeds from issuance of common stock 183,646 210,887
Payment of dividends (417,113) (416,566)
----------- -----------
Net cash provided by financing activities 46,815,923 35,294,321
----------- -----------
Net decrease in cash (2,257,220) (776,612)
Cash and cash equivalents at beginning of year 3,969,116 3,287,141
----------- -----------
Cash and cash equivalents at end of period $ 1,711,896 $ 2,510,529
========== ==========
Supplemental disclosure of cash flow information Cash paid (received) for:
Interest $ 3,342,945 $5,888,750
Income taxes 181,783 2,997,370
Income taxes refunded - (8,315,483)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
NOTES
1] The accompanying unaudited consolidated financial statements, in the opinion
of management, include all adjustments necessary for a fair presentation of the
Company's financial position and results of operations. The results for the
interim periods are not necessarily indicative of results that may be expected
for the entire fiscal year.
2] 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 is based on the weighted average number
of shares of Common Stock outstanding during such period. Included in this
calculation is the dilutive effect of stock options and warrants. The Common
Stock issuable under the 7% convertible subordinated notes was not included in
the calculation for the quarters and six months ended August 2, 1997 and August
3, 1996 because its effect would be antidilutive.
3] During the fourth quarter of fiscal 1997, the Company recorded a
restructuring charge related to its footwear operations. In connection with the
restructuring, the Company has reduced its investment in its Licensed Discount
footwear division, and, in March, 1997, the Company completed the sales of its
Shoe Corporation of America ("SCOA") and Parade of Shoes businesses.
On March 5, 1997, the Company announced that it had sold its SCOA division
to an entity formed by CHB Capital Partners of Denver, Colorado along with
Dennis B. Tishkoff, President of SCOA, and certain members of SCOA management.
Net cash proceeds from the transaction of approximately $40.1 million were used
to pay down the Company's bank debt. Sales in the Company's SCOA division
totaled $0 and $44.5 million for the quarters ended August 2, 1997 and August 3,
1996, respectively, and $9.5 million and $89.2 million for the six months ended
August 2, 1997 and August 3, 1996, respectively.
On March 10, 1997, the Company completed the sale of its Parade of Shoes
division to Payless ShoeSource, Inc. of Topeka, Kansas. Net cash proceeds from
the transaction of approximately $20 million were used to pay down the Company's
bank debt. Sales in the Company's Parade of Shoes division totaled $0 and $38.1
million for the quarters ended August 2, 1997 and August 3, 1996, respectively,
and $8.2 million and $65.8 million for the six months ended August 2, 1997 and
August 3, 1996, respectively.
4] On May 30, 1997, the Company replaced its $145 million credit facility by
obtaining two separate revolving credit facilities, both of which are guaranteed
by J. Baker, Inc. One facility, which finances the Company's apparel businesses,
is a $100 million revolving credit facility with Fleet National Bank,
BankBoston, N.A., The Chase Manhattan Bank, Imperial Bank, USTrust, Wainwright
Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel Credit
Facility"). The Apparel Credit Facility is secured by all of the capital stock
of The Casual Male, Inc. and three other subsidiaries of the Company. The
aggregate commitment under the Apparel Credit Facility will be automatically
reduced by $10 million, $12.5 million and $12.5 million on December 31, 1997,
December 31, 1998 and December 31, 1999, respectively. Borrowings under the
Apparel Credit Facility bear interest at variable rates and can be in the form
of loans, bankers' acceptances and letters of credit. This facility expires on
May 31, 2000.
To finance its Licensed Discount footwear business, the Company obtained a
$55 million revolving credit facility, secured by substantially all of the
assets of the Licensed Discount division, with GBFC, Inc. and Fleet National
Bank (the "Footwear Credit Facility"). The aggregate commitment under the
Footwear Credit Facility was reduced by $5 million on June 30, 1997. Aggregate
borrowings under the Footwear Credit Facility are limited to an amount
determined by a formula based on various percentages of eligible inventory and
accounts receivable. Borrowings under the Footwear Credit Facility bear interest
at variable rates and can be in the form of loans or letters of credit. This
facility expires on May 31, 2000.
6
<PAGE>
5] On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the
Company, filed for protection under Chapter 11 of the United States Bankruptcy
Code. At the time of the bankruptcy filing, the Company had outstanding accounts
receivable of approximately $1.8 million due from Bradlees. Under bankruptcy
law, Bradlees has the option of assuming the existing license agreement with the
Company or rejecting that agreement. If the license agreement is assumed,
Bradlees must cure all defaults under the agreement and the Company will collect
in full the outstanding past due receivable. The Company has no assurance that
the agreement will be assumed or that Bradlees will continue in business.
Although the Company believes that the rejection of the license agreement or the
cessation of Bradlees' business is not probable, in the event that the agreement
is rejected or Bradlees does not continue in business, the Company believes 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 the Company's
Bradlees-related assets, will be based on the relevant facts and circumstances.
The Company does not expect this filing under the Bankruptcy Code to have a
material adverse effect on future earnings. The Company's sales in the Bradlees
chain for the quarter and six months ended August 2, 1997 were $14.1 million and
$23.5 million, respectively.
6] On October 18, 1995, Jamesway Corporation ("Jamesway"), then a licensor of
the Company, filed for protection under Chapter 11 of the United States
Bankruptcy Code. Jamesway liquidated its inventory, fixed assets and real estate
and ceased operation of its business in all of its 90 stores. The Company
participated in Jamesway's going out of business sales and liquidated
substantially all of its footwear inventory in the 90 Jamesway stores during the
going out of business sales. At the time of the bankruptcy filing, the Company
had outstanding accounts receivable of approximately $1.4 million due from
Jamesway. Because Jamesway ceased operation of its business, the Company's
license agreement was rejected. The Company has negotiated a settlement of the
amount of its claim with Jamesway, which has been approved by the Bankruptcy
Court. The Jamesway plan of liquidation was confirmed on June 6, 1997, and the
Company received a partial distribution of the amount owed to the Company under
the settlement during the second quarter of fiscal 1998. In August, 1997, the
Company received a fee from a third party by assigning its rights to any future
distributions from Jamesway.
7] On November 10, 1993, the United States District Court for the District of
Minnesota returned a jury verdict assessing royalty damages 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 patent for a system used to
connect pairs of shoes. The jury verdict was based on a finding that three
different shoe connection systems used by the Company infringed Ms. Maxwell's
patent. Post trial motions for treble damages, attorney's fees and injunctive
relief were granted on March 10, 1995. The Company appealed the judgment. On
June 11, 1996, the United States Court of Appeals for the Federal Circuit
reversed in part and affirmed in part and vacated the award of treble damages,
attorney's fees and injunctive relief. The appellate court's ruling was based on
its holding that as a matter of law two of the three shoe connection systems
used by the Company did not infringe the patent. A request by Ms. Maxwell for a
rehearing en banc was denied by an order dated August 28, 1996. Ms. Maxwell
petitioned the United States Supreme Court for a writ of certiorari, which
petition was denied on March 17, 1997. The case has been remanded to the trial
court for a redetermination of damages consistent with the opinion of the
appellate court. The issues for trial on remand include a determination of what,
if anything, is a reasonable royalty for the one shoe connection system that was
not subject to the reversal by the Court of Appeals, how many pairs of shoes
having the patented system did the Company sell, and whether the Company's sale
of shoes having the patented system, after actual notice of the patent and while
the Company was changing to the two systems found to be non-infringing,
constitutes willful infringement in which event damages payable by the Company
may at the discretion of the Court be doubled or trebled. The trial on remand
commenced on September 8, 1997 and is expected to conclude by the end of
September, 1997.
A complaint was also filed by Ms. Maxwell in November, 1992 against Morse
Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging infringement of the
patent referred to above. The trial has been stayed pending the outcome of the
aforementioned trial.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
All references herein to fiscal 1998 and fiscal 1997 relate to the years ending
January 31, 1998 and February 1, 1997, respectively.
Results of Operations
FIRST SIX MONTHS OF FISCAL 1998 VERSUS FIRST SIX MONTHS OF FISCAL 1997
The Company's net sales decreased by $146.0 million to $281.3 million in
the first six months of fiscal 1998 from $427.3 million in the first six months
of fiscal 1997, primarily due to the disposition of the Company's SCOA and
Parade of Shoes businesses in March, 1997. Sales in the Company's apparel
operations increased by $8.0 million primarily due to an increase in the number
of Casual Male Big & Tall stores in operation during the first six months of
fiscal 1998 as compared to the first six months of fiscal 1997 and a 1.0%
increase in comparable apparel store sales. (Comparable 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 relevant comparison periods.) Excluding net sales produced by the
Company's SCOA and Parade of Shoes businesses of $17.7 million in the first six
months of fiscal 1998 and $155.0 million in the first six months of fiscal 1997,
sales produced by the Company's Licensed Discount shoe department operations
decreased by $16.8 million to $128.2 million in the first six months of fiscal
1998 from $145.0 million in the first six months of fiscal 1997. This decrease
was primarily due to a reduction in the number of Licensed Discount shoe
departments in operation during the first six months of fiscal 1998 as compared
to the first six months of fiscal 1997 and a 3.0% decrease in comparable retail
footwear store sales. (Comparable retail footwear store sales
increases/decreases are based upon comparisons of weekly sales volume in
Licensed Discount shoe departments which were open in corresponding weeks of the
relevant comparison periods.)
The Company's cost of sales constituted 55.3% of sales in the first six
months of fiscal 1998 as compared to 55.1% of sales in the first six months of
fiscal 1997. Cost of sales in the Company's apparel operations was 52.4% of
sales in the first six months of fiscal 1998 as compared to 50.8% of sales in
the first six months of fiscal 1997. The increase in such percentage was
primarily attributable to higher markdowns as a percentage of sales and a lower
initial markup on merchandise purchases. Cost of sales in the Company's footwear
operations was 57.9% of sales in the first six months of fiscal 1998 as compared
to 56.9% of sales in the first six months of fiscal 1997. The increase in such
percentage, which was partially offset by a change in the Company's method of
financing its foreign merchandise purchases with bank borrowings in the first
six months of fiscal 1998 versus the use of bankers' acceptances in the first
six months of fiscal 1997, was primarily due to the increased proportion of
Licensed Discount shoe department sales to total footwear sales in the first six
months of fiscal 1998 versus the first six months of fiscal 1997. As a
percentage of sales, Licensed Discount shoe department sales have a higher cost
of sales than the aggregate cost of sales in the divested SCOA and Parade of
Shoes businesses.
Selling, administrative and general expenses decreased $58.0 million, or
34.6%, to $109.6 million in the first six months of fiscal 1998 from $167.6
million in the first six months of fiscal 1997 primarily due to the disposition
of the Company's SCOA and Parade of Shoes businesses in March, 1997 and the
downsizing of the Company's Licensed Discount shoe division and its
administrative areas and facilities, coupled with the benefit realized from the
curtailment of the Company's defined benefit pension plan in the first six
months of fiscal 1998. As a percentage of sales, selling, administrative and
general expenses were 39.0% of sales in the first six months of fiscal 1998 as
compared to 39.2% of sales in the first six months of fiscal 1997. Selling,
administrative and general expenses in the Company's apparel operations were
41.3% of sales in the first six months of fiscal 1998 as compared to 43.5% of
sales in the first six months of fiscal 1997. This decrease was primarily due to
a lower corporate overhead allocation, resulting from a portion of corporate
overhead costs for the first six months of fiscal 1998 being allocated to the
Company's divested SCOA and Parade of Shoes businesses. Selling, administrative
and general expenses in the Company's footwear operations were 36.8% of sales in
the first six months of fiscal 1998 as compared to 37.4% of sales in the first
six months of fiscal 1997. This decrease was primarily due to the increased
proportion of Licensed Discount shoe department sales to total footwear sales in
the first six months of
8
<PAGE>
fiscal 1998 versus the first six months of fiscal 1997. The Company's Licensed
Discount shoe division has lower selling, administrative and general expenses as
a percentage of sales than the aggregate selling, administrative and general
expenses as a percentage of sales in the divested SCOA and Parade of Shoes
businesses.
Depreciation and amortization expense decreased by $8.5 million in the
first six months of fiscal 1998 as compared to the first six months of fiscal
1997 primarily due to the write-off of certain fixed and intangible assets in
the fourth quarter of fiscal 1997 related to the overall restructuring of the
Company's footwear businesses. This decrease was partially offset by capital
expenditures for depreciable and amortizable assets.
As a result of the above described effects, the Company's operating income
increased by 2.3% to $10.0 million in the first six months of fiscal 1998 from
$9.8 million in the first six months of fiscal 1997. As a percentage of sales,
operating income was 3.6% in the first six months of fiscal 1998 as compared to
2.3% in the first six months of fiscal 1997.
Net interest expense increased $448,000 to $6.5 million in the first six
months of fiscal 1998 from $6.0 million in the first six months of fiscal 1997
primarily due to a change in the Company's method of financing foreign
merchandise purchases with bank borrowings in the first six months of fiscal
1998 versus the use of bankers' acceptances in the first six months of fiscal
1997, partially offset by lower levels of bank borrowings in the first six
months of fiscal 1998.
Taxes on earnings for the first six months of fiscal 1998 were $1.4
million as compared to taxes of $1.5 million in the first six months of fiscal
1997, yielding an effective tax rate of 39.0% in each case.
Net earnings for the first six months of fiscal 1998 were $2.2 million, as
compared to net earnings of $2.3 million in the first six months of fiscal 1997,
a decrease of 6.0%.
SECOND QUARTER OF FISCAL 1998 VERSUS SECOND QUARTER OF FISCAL 1997
The Company's net sales decreased by $87.9 million to $143.9 million in
the second quarter of fiscal 1998 from $231.8 million in the second quarter of
fiscal 1997. Sales in the Company's apparel operations increased by $4.3 million
primarily due to an increase in the number of Casual Male Big & Tall stores in
operation during the second quarter of fiscal 1998 as compared to the second
quarter of fiscal 1997 and a 1.6% increase in comparable apparel store sales.
Excluding net sales produced by the Company's SCOA and Parade of Shoes
businesses of $82.6 million in the second quarter of fiscal 1997, sales produced
by the Company's Licensed Discount shoe department operations decreased by $9.6
million to $74.6 million in the second quarter of fiscal 1998 from $84.2 million
in the second quarter of fiscal 1997. This decrease was primarily due to a
reduction in the number of Licensed Discount shoe departments in operation
during the second quarter of fiscal 1998 as compared to the second quarter of
fiscal 1997 and a 3.0% decrease in comparable retail footwear store sales.
The Company's cost of sales constituted 55.7% of sales in the second
quarter of fiscal 1998 as compared to 56.2% of sales in the second quarter of
fiscal 1997. Cost of sales in the Company's apparel operations was 52.1% of
sales in the second quarter of fiscal 1998 as compared to 51.0% of sales in the
second quarter of fiscal 1997. The increase in such percentage was primarily
attributable to higher markdowns as a percentage of sales and a lower initial
markup on merchandise purchases. Cost of sales in the Company's footwear
operations was 59.0% of sales in the second quarter of fiscal 1998 as compared
to 58.3% of sales in the second quarter of fiscal 1997. The increase in such
percentage, which was partially offset by a change in the Company's method of
financing its foreign merchandise purchases with bank borrowings in the second
quarter of fiscal 1998 versus the use of bankers' acceptances in the second
quarter of fiscal 1997, was primarily due to higher markdowns as a percentage of
sales and a lower initial markup on merchandise purchases in the Company's
Licensed Discount shoe division, coupled with an increased proportion of
Licensed Discount shoe department sales to total footwear sales in the second
quarter of fiscal 1998 versus the second quarter of fiscal 1997. As a percentage
of sales, Licensed Discount shoe department sales have a higher cost of sales
than the aggregate cost of sales in the divested SCOA and Parade of Shoes
businesses.
9
<PAGE>
Selling, administrative and general expenses decreased $34.4 million, or
38.9%, to $53.9 million in the second quarter of fiscal 1998 from $88.3 million
in the second quarter of fiscal 1997 primarily due to the disposition of the
Company's SCOA and Parade of Shoes businesses in March, 1997 and the downsizing
of the Company's Licensed Discount shoe division and its administrative areas
and facilities. As a percentage of sales, selling, administrative and general
expenses were 37.5% of sales in the second quarter of fiscal 1998 as compared to
38.1% of sales in the second quarter of fiscal 1997. Selling, administrative and
general expenses in the Company's apparel operations were 41.4% of sales in the
second quarter of fiscal 1998 as compared to 44.2% of sales in the second
quarter of fiscal 1997. This decrease was primarily due to a lower corporate
overhead allocation and the increase in comparable apparel store sales. Selling,
administrative and general expenses in the Company's footwear operations were
33.8% of sales in the second quarter of fiscal 1998 as compared to 35.7% of
sales in the second quarter of fiscal 1997. This decrease was primarily due to
the increased proportion of Licensed Discount shoe department sales to total
footwear sales in the second quarter of fiscal 1998 versus the second quarter of
fiscal 1997. The Company's Licensed Discount shoe division has lower selling,
administrative and general expenses as a percentage of sales than the aggregate
selling, administrative and general expenses as a percentage of sales in the
divested SCOA and Parade of Shoes businesses.
Depreciation and amortization expense decreased by $4.0 million in the
second quarter of fiscal 1998 as compared to the second quarter of fiscal 1997
primarily due to the write-off of certain fixed and intangible assets in the
fourth quarter of fiscal 1997 related to the overall restructuring of the
Company's footwear businesses. This decrease was partially offset by capital
expenditures for depreciable and amortizable assets.
As a result of the above described effects, the Company's operating income
increased by 12.4% to $6.4 million in the second quarter of fiscal 1998 from
$5.7 million in the second quarter of fiscal 1997. As a percentage of sales,
operating income was 4.4% in the second quarter of fiscal 1998 as compared to
2.4% in the second quarter of fiscal 1997.
Net interest expense increased $18,000 to $3.2 million in the second
quarter of fiscal 1998 from $3.2 million in the second quarter of fiscal 1997
primarily due to a change in the Company's method of financing foreign
merchandise purchases with bank borrowings in the second quarter of fiscal 1998
versus the use of bankers' acceptances in the second quarter of fiscal 1997,
partially offset by lower levels of bank borrowings in the second quarter of
fiscal 1998.
Taxes on earnings for the second quarter of fiscal 1998 were $1.2 million,
yielding an effective tax rate of 39.0%, as compared to taxes of $952,000,
yielding an effective tax rate of 39.1%, in the second quarter of fiscal 1997.
Net earnings for the second quarter of fiscal 1998 were $1.9 million, as
compared to net earnings of $1.5 million in the second quarter of fiscal 1997,
an increase of 28.2%.
Financial Condition
AUGUST 2, 1997 VERSUS FEBRUARY 1, 1997
The increase in merchandise inventories at August 2, 1997 from February 1,
1997 was primarily due to a seasonal increase in the average inventory level per
location.
The decrease in assets held for sale at August 2, 1997 from February 1,
1997 was due to the receipt of the cash proceeds from the divestitures of the
Company's SCOA and Parade of Shoes businesses in March, 1997.
The increase in other assets at August 2, 1997 from February 1, 1997 was
primarily the result of the establishment of escrow accounts related to the
divestitures of the Company's SCOA and Parade of Shoes businesses.
The decrease in accounts payable at August 2, 1997 from February 1, 1997
was primarily due to an increase in direct import merchandise purchases, which
are paid for sooner than domestic merchandise purchases, coupled
10
<PAGE>
with the Company's decision to eliminate bankers' acceptance financing of
foreign merchandise purchases in its footwear operations. The ratio of accounts
payable to merchandise inventory was 29.7% at August 2, 1997, as compared to
39.0% at February 1, 1997.
The decrease in accrued expenses at August 2, 1997 from February 1, 1997
was primarily due to payments of costs related to the restructuring of the
Company's footwear operations, including the sales of the Company's SCOA and
Parade of Shoes businesses, and the downsizing and restructuring of its Licensed
Discount shoe division and the Company's administrative areas and facilities.
The decrease in other liabilities at August 2, 1997 from February 1, 1997
was due to payment of $3.0 million to former stockholders of SCOA in order to
satisfy a contractual contingent payment obligation, based on earnings, to such
former SCOA stockholders.
The decrease in long-term debt, net of current portion, at August 2, 1997
from February 1, 1997 was due to the repayment of the Company's bank debt with
the net cash proceeds from the sales of the Company's SCOA and Parade of Shoes
businesses. The decrease was partially offset by additional borrowings to meet
seasonal working capital needs and to fund capital expenditures.
Liquidity and Capital Resources
In the first six months of fiscal 1998, the Company's primary sources of
capital to finance its cash needs were the proceeds received on the sales of the
Company's SCOA and Parade of Shoes businesses, and borrowings under bank credit
facilities.
On May 30, 1997, the Company replaced its $145 million credit facility by
obtaining two separate revolving credit facilities, both of which are guaranteed
by J. Baker, Inc. One facility, which finances the Company's apparel businesses,
is a $100 million revolving credit facility with Fleet National Bank,
BankBoston, N.A., The Chase Manhattan Bank, Imperial Bank, USTrust, Wainwright
Bank & Trust Company and Bank Polska Kasa Opieki S.A. (the "Apparel Credit
Facility"). The Apparel Credit Facility is secured by all of the capital stock
of The Casual Male, Inc. and three other subsidiaries of the Company. The
aggregate commitment under the Apparel Credit Facility will be automatically
reduced by $10 million, $12.5 million and $12.5 million on December 31, 1997,
December 31, 1998 and December 31, 1999, respectively. Borrowings under the
Apparel Credit Facility bear interest at variable rates and can be in the form
of loans, bankers' acceptances and letters of credit. This facility expires on
May 31, 2000.
To finance its Licensed Discount footwear business, the Company obtained a
$55 million revolving credit facility, secured by substantially all of the
assets of the Licensed Discount division, with GBFC, Inc. and Fleet National
Bank (the "Footwear Credit Facility"). The aggregate commitment under the
Footwear Credit Facility was reduced by $5 million on June 30, 1997. Aggregate
borrowings under the Footwear Credit Facility are limited to an amount
determined by a formula based on various percentages of eligible inventory and
accounts receivable. Borrowings under the Footwear Credit Facility bear interest
at variable rates and can be in the form of loans or letters of credit. This
facility expires on May 31, 2000.
As of August 2, 1997, the Company had aggregate borrowings outstanding
under its Apparel Credit Facility and its Footwear Credit Facility totaling
$84.1 million and $42.0 million, respectively, consisting of loans and
obligations under letters of credit.
Net cash used in operating activities for the first six months of fiscal
1998 was $45.0 million compared to $28.0 million for the first six months of
fiscal 1997. The $17.0 million increase was due primarily to expenditures
related to the footwear restructuring and the receipt of an $8.3 million federal
income tax refund in the first six months of fiscal 1997.
Net cash provided by financing activities for the first six months of
fiscal 1998 was $46.8 million compared to $35.3 million for the first six months
of fiscal 1997. The $11.5 million increase was primarily attributable to the
receipt of $60.1 million in proceeds from the sales of the Company's SCOA and
Parade of Shoes businesses, offset by repayments of debt of $13.0 million in the
first six months of fiscal 1998, as compared to the receipt of
11
<PAGE>
$35.5 million in net proceeds of debt in the first six months of fiscal 1997.
The Company invested $4.2 million and $10.5 million in capital
expenditures during the first six months of fiscal years 1998 and 1997,
respectively, which generally related to new store and licensed shoe department
openings and the remodeling of existing stores and departments, coupled with
expenditures for general corporate purposes. The Company expects to spend
approximately an additional $4.0 million to $6.0 million in capital expenditures
in the last six months of fiscal 1998, and expects that its total budgeted
capital expenditures for fiscal 1999 will be approximately $10.0 million to
$12.0 million. Such estimates of future expenditures reflect costs expected to
be incurred for new and remodeled stores and licensed shoe departments, and for
general corporate purposes.
Following is a table showing actual and planned store openings by division
for fiscal 1998:
<TABLE>
<S> <C> <C> <C>
Actual Openings Planned Openings Total
First - Second Third - Fourth Actual/Planned
Division Quarters of Fiscal 1998 Quarters of Fiscal 1998 Openings
-------- ----------------------- ----------------------- --------
Casual Male 20 15 35
Work 'n Gear 0 2 2
Licensed Discount 9 2 11
</TABLE>
Offsetting the above actual and planned store openings, the Company closed
4 Casual Male stores, 1 Work 'n Gear store and 83 Licensed Discount shoe
departments during the first six months of fiscal 1998. The Company has plans to
close approximately an additional 2 Casual Male stores, 1 Work 'n Gear store and
4 Licensed Discount shoe departments during the second half of fiscal 1998.
The Company believes that amounts available under its revolving credit
facilities, along with other potential sources of funds and cash flows from
operations, will be sufficient to meet its foreseeable operating and capital
requirements through the end of the current fiscal year. From time to time, the
Company evaluates potential acquisition candidates in pursuit of strategic
initiatives and growth goals in its niche apparel markets. Financing of
potential acquisitions will be determined based on the financial condition of
the Company at the time of such acquisitions, and may include borrowings under
current or new commercial credit facilities or the issuance of publicly issued
or privately placed debt or equity securities.
This Form 10-Q contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements and may fluctuate between
operating periods. The information on store openings and closings reflects
management's current plans and should not be interpreted as an assurance of
actual future developments. The actual number of store openings and closings
will depend on the availability of attractively priced sites for openings of
apparel stores, the ability of the Company to negotiate leases on favorable
terms, operating results of each site and the actions of the Company's
licensors.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
-----------------
On November 10, 1993, the United States District Court for the District
of Minnesota returned a jury verdict assessing royalty damages 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
patent for a system used to connect pairs of shoes. The jury verdict
was based on a finding that three different shoe connection systems
used by the Company infringed Ms. Maxwell's patent. Post trial motions
for treble damages, attorney's fees and injunctive relief were granted
on March 10, 1995. The Company appealed the judgment. On June 11, 1996,
the United States Court of Appeals for the Federal Circuit reversed in
part and affirmed in part and vacated the award of treble damages,
attorney's fees and injunctive relief. The appellate court's ruling was
based on its holding that as a matter of law two of the three shoe
connection systems used by the Company did not infringe the patent. A
request by Ms. Maxwell for a rehearing en banc was denied by an order
dated August 28, 1996. Ms. Maxwell petitioned the United States Supreme
Court for a writ of certiorari, which petition was denied on March 17,
1997. The case has been remanded to the trial court for a
redetermination of damages consistent with the opinion of the appellate
court. The issues for trial on remand include a determination of what,
if anything, is a reasonable royalty for the one shoe connection system
that was not subject to the reversal by the Court of Appeals, how many
pairs of shoes having the patented system did the Company sell, and
whether the Company's sale of shoes having the patented system, after
actual notice of the patent and while the Company was changing to the
two systems found to be non-infringing, constitutes willful
infringement in which event damages payable by the Company may at the
discretion of the Court be doubled or trebled. The trial on remand
commenced on September 8, 1997 and is expected to conclude by the end
of September, 1997.
A complaint was also filed by Ms. Maxwell in November, 1992 against
Morse Shoe, Inc. ("Morse"), a subsidiary of the Company, alleging
infringement of the patent referred to above. The trial has been
stayed pending the outcome of the aforementioned trial.
The Company is unable to predict the ultimate outcome of these cases or
the likely monetary exposure to the Company. However, a determination
adverse to the Company in such proceedings could have a material
adverse effect on the Company's business, financial condition and
results of operations.
The Company is also involved in various claims and lawsuits incidental
to its business. The Company does not believe that these claims and
lawsuits in the aggregate will have a material adverse effect on the
Company's business, financial condition and results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The registrant's annual meeting of stockholders was held on June 10,
1997 (the "Meeting").
(b) Ms. Nancy Ryan and Mr. Douglas J. Kahn were elected Class II directors
at the Meeting for a three year term. The term of office for the
following directors continued after the Meeting: Sherman N. Baker, J.
Christopher Clifford, Ervin D. Cruce, David Pulver, Melvin M.
Rosenblatt and Alan I. Weinstein.
(c) The stockholders voted on the ratification of the selection of KPMG
Peat Marwick LLP as independent auditors for the fiscal year ending
January 31, 1998.
13
<PAGE>
The following votes were cast at the Meeting with respect to each
nominee for Class II director:
<TABLE>
<S> <C> <C>
Total vote for Total vote withheld
each director from each director
--------------- -------------------
Douglas J. Kahn 12,338,346 109,625
Nancy Ryan 12,338,446 109,525
</TABLE>
The following votes were cast at the Meeting with respect to the
ratification of auditors:
For: 12,352,339
Against: 11,205
Abstain: 84,427
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) The Exhibits in the Exhibit Index are filed as part of this report.
(b) No reports on Form 8-K were filed by the registrant during the quarter
for which this report is filed.
14
<PAGE>
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.
By:/s/Alan I. Weinstein
Alan I. Weinstein
President and Chief Executive
Officer
Date: Canton, Massachusetts
September 15, 1997
By:/s/Philip Rosenberg
Philip Rosenberg
Executive Vice President, Chief
Financial Officer and Treasurer
Date: Canton, Massachusetts
September 15, 1997
15
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
EXHIBITS
Filed with
Quarterly Report on Form 10-Q
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Quarter ended August 2, 1997
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit Page No.
10. Material Contracts
(.01) Executive Employment Agreement dated as of April 1, 1997 *
between James D. Lee and J. Baker, Inc.
(.02) Executive Employment Agreement dated as of June 5, 1997 *
between Roger J. Osborne and J. Baker, Inc.
11. Computation of Primary and Fully Diluted Earnings Per Share, attached. *
27. Financial Data Schedule **
</TABLE>
* Included herein
** This exhibit has been filed with the Securities and Exchange
Commission as part of J. Baker, Inc.'s electronic submission of this
Form 10-Q under EDGAR filing requirements. It has not been included
herein.
EXHIBIT 10.01
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is dated as of April 1, 1997 by and between James D. Lee
(the "Employee") and J. BAKER, INC., a Massachusetts corporation together with
any subsidiaries of the Company (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 the Employee during the Term (as
defined in Section 6 hereof) as its Executive Vice President and President of
its Licensed Discount Footwear division 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, such duties as may be assigned
to him from time to time by the Company. The Employee further agrees 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 Salary. The Company shall pay the Employee during
the Term an annual base salary of not less than $275,000, payable no less often
than monthly, in equal installments.
(b) Cash Incentive Compensation. In addition to his annual base salary
as determined pursuant to Section 3(a), the Company shall pay to the Employee a
one time bonus payment equal to $65,000 on December 31, 1998 provided the
Employee is still employed by the Company on such date. During the Term, the
Employee shall also be paid such amounts, if any, to which the Employee is
entitled, as an officer of the Company, under the Company's Cash Incentive Plan
(the "Incentive Plan"), as from time to time such Incentive Plan may be
1
<PAGE>
amended, participating at award opportunity level C, with a "target" level of
incentive compensation of forty percent (40%) of base salary.
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 an
annual paid vacation of three weeks in each calendar year, to be taken at such
time or times as the Employee and the Company shall mutually agree, provided,
however, that no more than two weeks shall be taken during any three month
period unless otherwise agreed upon by the Company's Chief Executive Officer.
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
policies of the Company) in connection 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, 1999. 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
2
<PAGE>
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 merchandising department stores; (ii) retail stores offering
casual clothing for "Big and Tall" men; or (iii) 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 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.
3
<PAGE>
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.
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 their is no
surviving spouse, (i) the Employee's base salary for one year from the date of
death, 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 for one year from the date 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 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 Employees 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
4
<PAGE>
to receive any accrued salary and other amounts under the Incentive Plan accrued
with respect to any prior fiscal years.
(d) Without Cause. During the Term hereof and prior to any Change of
Control of the Company, the Company may terminate this Agreement at any time
without cause. In such event, the Company shall pay to the Employee, in
accordance with the Company's regular pay intervals for its senior executives,
(A) an amount equal to the greater of (i) the amount of Base Salary the Employee
would have received through the last day of the Term or (ii) one (1) year of
Base Salary, and (B) the amount, if any, of the bonus payment described in
Section 3(b) hereof, if such amount shall not have been paid as of the date of
the Employee's termination and (C) the amount of incentive compensation, if any,
which shall be subject to award to the Employee pursuant to the terms of the
Incentive Plan for a completed full fiscal year but which shall not have been
paid to the Employee as of the date of the Employee's termination.
(e) Change of Control/Change of Management. (i) In the event the
Employee's employment with the Company is terminated (A) by the Company or (B)
by the Employee for "good reason" within three (3) years after a Change in
Control of the Company occurring during the Term hereof (regardless of whether
such Employee's termination occurs after the expiration of the Term), or (ii) in
the event the Employee's employment is terminated (C) by the Company (except if
such termination is for "cause" as defined in subparagraph 9(c) hereof) or (D)
by the Employee for "good reason" within three (3) years after the employment of
Mr. Weinstein with the Company has terminated during the Term hereof for any
reason including, without limitation, dismissal, resignation, retirement, death
or termination for any other reason, then, in such event, the Company shall pay
to the Employee an amount, in cash, (the "Severance Payment") equal to (A) the
greater of (i) the amount of Base Salary the Employee would have received
through the last day of the Term or (ii) one (1) year of Base Salary, (B) the
amount, if any, of the bonus payment described in Section 3(b) hereof, if such
amount shall not have been paid as of the date of the Employee's termination.
In the event the Employee's employment with the Company is terminated
as a result of the Company's decision, during the Term hereof, (regardless of
whether such Employee's termination occurs after the expiration of the Term) to
either sell the Licensed Discount Division in its entirety as a going concern,
or to discontinue operation of the Licensed Discount Division and to liquidate
the Division's licenses, inventory and fixed assets, then, in such event, the
Company shall pay to the Employee a single lump sum payment equal to (A) the
greater of (i) the amount of Base Salary the Employee would have received
through the last day of the Term or (ii) two (2) years Base Salary, and (B) the
amount, if any, of the bonus payment described in Section 3(b) hereof, if such
amount shall not have been paid as of the date of the Employee's termination and
(C) the amount of incentive compensation, if any, which shall be subject to
award to the Employee pursuant to the terms of the Incentive Plan for a
completed full fiscal year but which shall not have been paid to the Employee as
of the date of the Employee's termination.
5
<PAGE>
A termination for "good reason" shall be deemed to have occurred, and
the Employee shall be entitled to the benefits set forth in this paragraph 9, if
the Employee voluntarily terminates his employment after the occurrence of any
of the following events, if either the circumstances set forth in paragraphs
(e)(i) or (e)(ii) has occurred: (i) the assignment to the Employee of any duties
inconsistent with the highest position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities attained by the
Employee during the period of his employment by the Company; (ii) a relocation
of the Employee outside the metropolitan Boston area; or (iii) a decrease in the
Employee's compensation (including base salary, bonus or fringe benefits). For
purposes hereof, "Change of Control of the Company" shall have the meaning set
forth in the Company's 1994 Equity Incentive Plan, as approved by the
Stockholders of the Company on June 7, 1994 (and without regard to any
subsequent amendments thereto).
For purposes of this Agreement "Base Salary" shall mean the Employee's
Base Salary as set forth in subparagraph 3(a) of this Agreement, as such Base
Salary may be increased from time to time. If any of the termination events set
forth in this subparagraph (e) shall occur during the Term hereof or other
applicable time periods, the provisions of paragraph 7 hereof shall be null and
void and have no further force or effect.
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):
6
<PAGE>
(a) If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention: President
(b) If to the Employee:
James D. Lee
1148 High Street
Westwood, MA 02090
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 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.
7
<PAGE>
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.
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, that certain Executive Employment Agreement dated
as of January 26, 1996 as amended by a First Amendment dated November 6, 1995, a
Second Amendment dated September 21, 1996 and a Third Amendment dated March 31,
1997.
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/ Alan I. Weinstein
--------------------------
Alan I. Weinstein
President
/s/ James D. Lee
--------------------------
James D. Lee
8
EXHIBIT 10.02
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is dated as of June 5, 1997 by and between Roger J.
Osborne (the "Employee") and J. BAKER, INC., a Massachusetts corporation
together with any subsidiaries of the Company (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 Executive Vice
President and President of the Company's Work 'N Gear division 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 such duties as may be assigned
to him from time to time by the Company. The Employee further agrees 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) The Company shall pay the Employee during the Term an
annual base salary of not less than $220,000, payable no less often than
monthly, in equal installments in accordance with the Company's regular pay
intervals for its senior executives.
1
<PAGE>
(b) Cash Incentive Compensation. In addition to his annual
base salary as determined pursuant to Section 3(a), the Company shall pay to the
Employee a guaranteed bonus payment (the "Payment") equal to $30,000 for the
fiscal year ending January 31, 1998 payable no later than 90 days after the
Company's fiscal year end provided the Employee remains employed through the
Company's fiscal year end and is still employed on the payment date of the
guaranteed bonus Payment. During the Term, the Employee shall also be paid such
amounts, if any, to which the Employee is entitled, as an officer of the
Company, under the Company's Cash Incentive Compensation Plan (the "Incentive
Plan"), as from time to time such Incentive Plan may be amended; provided,
however, that any amounts to which the Employee is entitled under the Incentive
Plan with respect to the fiscal year ending January 31, 1998 shall not be
subject to pro-ration for such fiscal year based upon the Employee's date of
hire, but shall be reduced by the amount of the guaranteed bonus Payment
received by the Employee for such fiscal year.
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 an
annual paid vacation of three (3) weeks in each calendar year, to be taken at
such time or times as the Employee and the Company shall mutually agree,
provided, however, that no more than two (2) weeks shall be taken during any
three month period unless otherwise agreed upon by the Company's Chief Executive
Officer.
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
policies of the Company) in connection 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 June 5, 1999. The
Employee and the Company have obligations hereunder extending past the Term.
2
<PAGE>
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 merchandising department stores; (ii) retail stores offering
casual clothing for "Big and Tall" men; or (iii) 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.
3
<PAGE>
(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
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.
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 their is no
surviving spouse, (i) the Employee's base salary for one year from the date of
death, 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 for one year from the date such termination occurs, payable in
accordance with the Company's regular pay intervals for its senior executives
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 of the Board, after
consulting with or being advised by one or more physicians (it being understood
4
<PAGE>
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 Employees 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.
(d) Without Cause. During the Term hereof and prior to any
Change of Control of the Company, the Company may terminate this Agreement at
any time without cause. In such event, the Company shall pay to the Employee, in
accordance with the Company's regular pay intervals for its senior executives,
an amount equal to the greater of (i) the amount of Base Salary the Employee
would have received through the last day of the Term or (ii) one (1) year of
Base Salary.
(e) Change of Control/Change of Management. (i) In the event
the Employee's employment with the Company is terminated (A) by the Company or
(B) by the Employee for "good reason" within three (3) years after a Change in
Control of the Company occurring during the Term hereof (regardless of whether
such Employee's termination occurs after the expiration of the Term), or (ii) in
the event the Employee's employment is terminated (C) by the Company (except if
such termination is for "cause" as defined in subparagraph 9(c) hereof) or (D)
by the Employee for "good reason" within three (3) years after the employment of
Mr. Alan Weinstein as the Company's President and Chief Financial Officer has
terminated during the Term hereof for any reason including, without limitation,
dismissal, resignation, retirement, death or termination for any other reason,
then, in such event, the Company shall pay to the Employee an amount, in cash,
(the "Severance Payment") equal to the greater of (i) the amount of Base Salary
the Employee would have received through the last day of the Term or (ii) one
(1) year of Base Salary. For purposes of this Agreement "Base Salary" shall mean
the Employee's Base Salary as set forth in subparagraph 3(a) of this Agreement,
as such Base Salary may be increased form time to time. If any of the
termination events set forth in this subparagraph (e) shall occur during the
Term hereof or other applicable time periods, the provisions of paragraph 7
hereof shall be null and void and have no further force or effect.
5
<PAGE>
(f) A termination for "good reason" shall be deemed to have
occurred, and the Employee shall be entitled to the benefits set forth in this
paragraph 9, if the Employee voluntarily terminates his employment after the
occurrence of any of the following events, if either the circumstances set forth
in paragraphs (e)(i) or (e)(ii) has occurred: (i) the assignment to the Employee
of any duties inconsistent with the highest position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
attained by the Employee during the period of his employment by the Company;
(ii) a relocation of the Employee outside the metropolitan Boston area; or (iii)
a decrease in the Employee's compensation (including base salary, bonus or
fringe benefits). For purposes hereof, "Change of Control of the Company" shall
have the meaning set forth in the Company's 1994 Equity Incentive Plan, as
approved by the Stockholders of the Company on June 7, 1994 (and without regard
to any subsequent amendments thereto).
(g) In the event the Employees's employment is terminated as
described in Paragraph 9(e)(i) above, the Severance Payment shall be made to the
Employee in a single lump sum cash payment. In the event the Employees's
employment is terminated as described in Paragraph 9(e)(ii) above, the Severance
Payment shall be made to the Employee in accordance with the Company's regular
pay intervals for its senior executives beginning immediately following the
Employee's termination of employment with the Company.
(h) Severance Payment Limitation Upon Change of Control. If
all or part of the Severance Payment payable to the Employee pursuant to
subparagraph 9(e) hereof, when added to other payments payable to the Employee
as a result of a Change of Control, constitute Parachute Payments, the following
limitation shall apply. If the Parachute Payments, net of the sum of the Excise
Tax, Federal income and employment taxes and state and local income taxes on the
amount of the Parachute Payments in excess of the Threshold Amount, are greater
than the Threshold Amount, the Employee shall be entitled to the full Severance
Payment payable under subparagraph 9(e) of this Agreement. If the Threshold
Amount is greater than the Parachute Payments, net of the sum of the Excise Tax,
Federal income and employment taxes and state and local income taxes on the
amount of the Parachute Payments in excess of the Threshold Amount, then the
Severance Payment payable under subparagraph 9(e) of this Agreement shall be
reduced to the extent necessary so that the maximum Parachute Payments shall not
exceed the Threshold Amount. The Company shall select a firm of independent
certified public accountants to determine which of the foregoing alternative
provisions shall apply. For purposes of determining the amount of the Federal
income and employment taxes, and state and local income taxes on the amount of
the Parachute Payments in excess of the Threshold Amount, the Employee shall be
deemed to pay Federal income taxes at the highest marginal rate of Federal
income taxation applicable to individuals for the calendar year in which the
Severance Payments under subparagraph 9(e) of this Agreement are payable and
state and local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Employee's residence for the calendar
year in which the Severance Payments under Subparagraph 9(e) of this Agreement
are payable, net of the maximum reduction in Federal income taxes which could be
obtained from deduction of such state and local taxes.
6
<PAGE>
For purposes of this Agreement:
"Parachute Payments" shall mean any payment or provision by the Company
of any amount or benefit to and for the benefit of the Employee, whether paid or
payable or provided or to be provided under the terms of this Agreement or
otherwise, that would be considered "parachute payments" within the meaning of
Section 280G(B)(2)(A) of the Internal Revenue Code and the regulations
promulgated thereunder.
"Threshold Amount" shall mean three times the Employee's "base amount"
within the meaning of Section 280(G)(b)(3) of the Internal Revenue Code and the
regulations promulgated thereunder, less one dollar.
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the
Internal Revenue Code.
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):
7
<PAGE>
(a) If to the Company:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention: President
(b) If to the Employee:
Roger J. Osborne
25 Hidden Valley Road
Marshfield, Massachusetts 02052
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 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.
8
<PAGE>
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.
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.
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/ Alan I. Weinstein
--------------------------
Alan I. Weinstein
President
/s/ Roger J. Osborne
--------------------------
Roger J. Osborne
9
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
Computation of Primary and Fully Diluted Earnings Per Share*
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Quarter Ended Six Months Ended
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
-------- -------- -------- ------
PRIMARY:
Net Earnings $1,904,108 $1,485,722 $ 2,173,119 $ 2,311,282
========== ========== =========== ===========
Weighted average number of common
shares outstanding 13,912,934 13,891,265 13,902,952 13,882,729
========== ========== ========== ==========
Earnings Per Share $0.137 $0.110 $0.156 $0.166
========== ========== =========== ==========
ASSUMING FULL DILUTION:
Net Earnings $1,904,108 $1,485,722 $ 2,173,119 $ 2,311,282
========== ========== =========== ===========
Weighted average number of common
shares outstanding 13,912,934 13,891,265 13,902,952 13,882,729
Dilutive effect of outstanding stock options 57,593 37,467 56,646 20,647
---------- ---------- ---------- ----------
Weighted average number of common
shares as adjusted 13,970,527 13,928,732 13,959,598 13,903,376
========== ========== ========== ==========
Earnings Per Share $0.136 $0.110 $0.156 $0.166
========== ========== ========== ==========
</TABLE>
* This calculation is submitted in accordance with Item 601(b)(11) of Regulation
S-K.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF J. BAKER, INC. FOR THE QUARTER ENDED MAY 3, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-2-1997
<CASH> 1,711,896
<SECURITIES> 0
<RECEIVABLES> 21,659,334
<ALLOWANCES> 5,667,867
<INVENTORY> 164,268,910
<CURRENT-ASSETS> 227,780,894
<PP&E> 120,867,048
<DEPRECIATION> 45,734,247
<TOTAL-ASSETS> 341,479,846
<CURRENT-LIABILITIES> 63,321,210
<BONDS> 201,049,575
0
0
<COMMON> 6,958,614
<OTHER-SE> 66,970,298
<TOTAL-LIABILITY-AND-EQUITY> 341,479,846
<SALES> 281,279,618
<TOTAL-REVENUES> 281,279,618
<CGS> 155,491,836
<TOTAL-COSTS> 155,491,836
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,450,077
<INCOME-PRETAX> 3,562,119
<INCOME-TAX> 1,389,000
<INCOME-CONTINUING> 2,173,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,173,119
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
