UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 29, 2000
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 No. 0-20234
TODAY'S MAN, INC.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-1743137
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
835 Lancer Drive
Moorestown, New Jersey 08057
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (609) 235-5656
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value 27,040,725
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(Title of Class) (Number of Shares Outstanding
as of April 28, 2000)
Common Stock Purchase Warrants 5,427,777
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(Title of Class) (Number of Warrants Outstanding
as of April 28, 2000)
Indicate by check mark whether the Registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
The aggregate market value of voting and non-voting common equity held by
non-affiliates of the Registrant is $10,464,566 (1).
Documents incorporated by reference are listed in the Exhibit Index.
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(1) The aggregate dollar amount of the voting and non-voting common equity set
forth equals the number of shares of and warrants for the Company's Common
Stock outstanding, reduced by the amount of shares of and warrants for
Common Stock held by officers, directors and shareholders owning 10% or
more of the Company's Common Stock and Warrants for Common Stock,
multiplied by $.5625 and $.125, the last reported sale price for the
Company's Common Stock and Warrants on April 19, 2000. The information
provided shall in no way be construed as an admission that any officer,
director or 10% shareholder in the Company may be deemed an affiliate of
the Company or that such person is the beneficial owner of the shares
reported as being held by such person, and any such inference is hereby
disclaimed. The information provided herein is included solely for
recordkeeping purposes of the Securities and Exchange Commission.
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TABLE OF CONTENTS
PAGE
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PART I
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Item 1. Business...........................................................................1
Item 2. Properties.........................................................................9
Item 3. Legal Proceedings..................................................................10
Item 4. Submission of Matters to a Vote of Security Holders................................10
Item 4.1 Certain Executive Officers of the Registrant.......................................10
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder
Matters............................................................................11
Item 6. Selected Financial Data............................................................12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................................13
Item 7a. Quantitative and Qualitative Disclosures About Market Risk.........................19
Item 8. Financial Statements and Supplementary Data........................................19
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................................19
PART III
Item 10. Directors and Executive Officers of the Registrant.................................19
Item 11. Executive Compensation.............................................................19
Item 12. Security Ownership of Certain Beneficial Owners and Management.....................19
Item 13. Certain Relationships and Related Transactions.....................................19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................20-22
Signatures.........................................................................23
Index to Consolidated Financial Statements.........................................F-1
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As used in this Report on Form 10-K, "fiscal 1991," "fiscal 1992," "fiscal
1993," "fiscal 1994," "fiscal 1995," "fiscal 1996," "fiscal 1997," "fiscal
1998," "fiscal 1999," "fiscal 2000," and "fiscal 2001," refer to the Company's
fiscal years ended or ending February 1, 1992, January 30, 1993, January 29,
1994, January 28, 1995, February 3, 1996, February 1, 1997, January 31, 1998,
January 30, 1999, January 29, 2000, February 3, 2001 and February 2, 2002
respectively.
Today's Man(R) is a registered trademark of the Company.
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PART I
ITEM 1. BUSINESS.
GENERAL
Today's Man, Inc. is a leading operator of menswear superstores
specializing in tailored clothing, furnishings sportswear and shoes. The Company
operates a chain of 29 superstores ranging in size from approximately 18,000 to
34,000 gross square feet in the Greater Philadelphia, Washington, D.C.,
Baltimore and New York markets. The Company seeks to be the leading menswear
retailer in each of its markets by providing a broad and deep assortment of
moderate to better, current-season, private label merchandise at everyday low
prices which the Company believes represents the greatest value at a given price
point. The Company provides these everyday low prices to its customers through
economies provided by its large volumes of preplanned inventory purchases. The
Company generated net sales of $402 per square foot of selling space in its
superstores in fiscal 1999.
In May 2000, the Company announced that it plans to close the Center City,
Philadelphia, Pennsylvania store, the Manhasset, New York store, and the
Norwalk, Connecticut store by the third quarter of fiscal 2000.
In March 2000, the Company announced that it had retained investment
banker Wasserstein Perella & Co., Inc. to explore opportunities for raising
additional capital and enhancing shareholder value.
In October and November 1999, the Company opened four new superstores in
the Greater Washington D.C. market in Germantown, Maryland, Towson, Maryland,
Springfield, Virginia and Sterling, Virginia.
In November 1999, the Company announced the launch of Todaysman.com, the
Company's online virtual superstore.
Messrs. Ira Brind and Randall Lambert resigned as directors in the first
quarter of fiscal 2000 and Mr. Bernard J. Korman resigned as a director in the
fourth quarter of fiscal 1999. Additionally, Leonard Wasserman, Executive Vice
President, Office of the President, retired in January, 2000 but continues to
serve on the Board of Directors.
In July 1999, Mr. David Mangini, joined the company as Executive Vice
President and Chief Merchandising Officer.
The Company was incorporated in Pennsylvania in 1971 as Feld & Sons, Inc.
and changed its name to Today's Man, Inc. in March 1992. The Company's executive
and administrative offices are located at 835 Lancer Drive, Moorestown West
Corporate Center, Moorestown, New Jersey 08057 and its telephone number is (856)
235-5656.
INVESTMENT CONSIDERATIONS
The information contained in this Annual Report on Form 10-K contains
forward looking statements (as such term is defined in the Securities Exchange
Act of 1934 and regulations thereunder), including without limitation,
statements as to trends or management's beliefs, expectations or opinions. Such
forward looking statements are subject to risks and uncertainties and may be
affected by various factors which may cause actual results to differ materially
from those in the forward looking statements. Certain of these risks,
uncertainties and other factors are discussed below and elsewhere in this Annual
Report on Form 10-K. In addition to the other information contained in this
Annual Report on Form 10-K, the following factors should be considered carefully
in evaluating an investment in the Company's Common Stock and Warrants.
Growth Strategy. The Company opened four stores and its Internet electronic
commerce site in 1999. The Company cannot assure you that new stores will
generate sales volumes comparable to
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those of its existing stores. Also, the opening of additional stores in existing
markets and the Company's Internet site may have the effect of attracting
customers from the Company's existing stores. The Company cannot assure you that
the Internet site will be profitable. The Company plans to close three
under-performing stores in fiscal 2000 and does not expect to open any new
stores in fiscal 2000. The Company's growth over the next several years depends
principally on establishing and maintaining profitability in existing sites and
the availability of appropriate financing for expansion.
Small Store Base; Geographic Concentrations. The Company currently operates
a chain of 29 superstores, which are located in the Greater Philadelphia,
Washington, D.C., Baltimore and New York markets. Due to the Company's
relatively small store base, one or more unsuccessful new stores, or a decline
in sales at an existing store, would have a more significant effect on the
Company's results of operations than would be the case if the Company had a
larger store base. Because the Company's superstores currently are located in
only four markets, the effect on the Company of adverse events in any of those
markets may be greater than if the Company's stores were more geographically
dispersed.
Declining Unit Sales of Men's Tailored Clothing. On a national basis, unit
sales of men's tailored clothing have been declining over many years. The
Company believes that this decline can be attributed to men allocating a lower
portion of their disposable income to tailored clothing as a result of less
frequent changes in tailored clothing fashions, relaxation of dress codes by
many employers and a more casual lifestyle. The Company also believes that this
decline has contributed to a consolidation among retailers of men's tailored
clothing. There can be no assurance that the Company will continue to be able to
maintain or increase its sales volume or attain profitability as further
consolidation of the industry occurs as the unit sales of men's tailored
clothing continues to decline.
Control by Majority Shareholder. Mr. David Feld beneficially owns
approximately 36% of the outstanding Common Stock and together with the other
directors and executive officers of the Company, collectively beneficially own
or owns approximately 40% of the outstanding Common Stock. Accordingly, Mr.
David Feld, together with the other directors and executive officers of the
Company, will likely be able to effectively control most matters requiring
approval by the Company's shareholders, including the election of directors. In
addition, Mr. David Feld has pledged 5,439,578 shares of Common Stock to secure
loans. In the event of default by Mr. David Feld, the sale of all or a large
block of the pledged shares by a lender to one purchaser or a group of
purchasers acting in concert would result in such purchaser or group owning a
substantial block of the outstanding Common Stock of the Company and being able
to significantly affect the outcome of the election of directors and of all
votes which require shareholder approval. See Item 12. "Security Ownership of
Certain Beneficial Owners and Management."
Relationship with Suppliers; Foreign Currency Fluctuations. The Company's
business is dependent upon its ability to purchase both brand name and private
label merchandise in large quantities and at attractive prices. During fiscal
1999, approximately 45% of the dollar volume of all merchandise purchased by the
Company was purchased from ten vendors, and approximately 43% of the dollar
volume of all merchandise was purchased from overseas vendors. While the Company
believes that alternative sources of supply are available, any disruption in the
Company's sources of supply could have a material adverse effect on its
business. Moreover, although the Company historically has hedged its exposure to
fluctuations in the relationship between the dollar and various foreign
currencies, the Company currently is not engaging in hedging transactions and
could incur additional expense in the event of currency fluctuations. See
"Business--Purchasing." See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Dependence on Senior Management. The success of the Company's business will
continue to be dependent upon David Feld and the other members of senior
management. The Company's continued
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growth also will depend upon its ability to attract and retain additional
skilled management personnel and store managers. The Company does not maintain
key-man life insurance for Mr. David Feld or any other senior member of
management. See Item 4.1 "Certain Executive Officers of the Registrant" and Item
10. "Directors and Executive Officers."
Seasonality and General Economic Conditions. The Company's business is
affected by the pattern of seasonality common to most apparel retailers.
Historically, the Company has generated a significant portion of its net sales
and the majority of its profits during its fourth fiscal quarter, which includes
the Christmas selling season, and has experienced losses or nominal earnings in
its first and third fiscal quarters. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Seasonality and
Quarterly Results." The Company's operating results may be adversely affected by
unfavorable local, regional or national economic conditions, especially those
affecting the Mid-Atlantic Region where the Company's 29 stores are currently
located. During recessionary periods, consumers can be expected to reduce their
spending on discretionary items such as menswear.
Competition. The retail menswear business is highly competitive with
respect to price, quality and style of merchandise and store location. The
Company faces competition for customers and store locations from large national
and regional department stores, various menswear chains, a number of off-price
specialty retailers as well as local department stores, catalog retailers and
local menswear stores. Many of these competitors have significantly greater
financial and other resources than the Company. The retailing business is
affected by changes in consumer tastes, demographic trends and the type, number
and location of competing stores.
Restrictions on Cash Dividends. Since its inception as a public company in
1992, the Company has not paid any cash dividends. The Company's loan agreement
prohibits the payment of cash dividends. See Item 5. "Market for the
Registrant's Common Stock and Related Shareholder Matters."
Market for Common Stock and Warrants. The Common Stock and Warrants are
traded on the Nasdaq National Market. Numerous factors, including announcements
of fluctuations in the Company's or its competitors' operating results, market
conditions for stocks in general, or fluctuations in the Company's quarterly
operating results, could have a significant impact on the future price of the
Common Stock and Warrants. In addition, the stock market in recent years has
experienced significant price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies. These
broad fluctuations may adversely affect the market price of the Common Stock and
Warrants.
Each Warrant is exercisable for one share of Common Stock at an exercise
price of $2.70 per share. Accordingly, the market price of the Warrants is
directly affected by the market price of the Common Stock. In the event that the
market price of the Common Stock is less than $2.70, the Warrants may have
little or no market value. During fiscal 1999, the expiration date of the
Warrants was extended to January 2, 2001 and the Warrants will not be
exercisable after such time.
Shares Eligible for Future Sale. Sales of the Company's Common Stock and
Warrants in the public market could adversely affect the market price of the
Company's Common Stock and Warrants and could impair the Company's future
ability to raise capital through the sale of equity securities. As of April 19,
2000, the Company has 27,040,725 shares of Common Stock and 5,427,777 Warrants
outstanding, all of which are available for resale in the public market without
restrictions, except for any such shares held by persons who may be deemed to be
"affiliates" of the Company. In addition, the Company has registered under the
Securities Act all of the 2,450,000 shares authorized for issuance under the
Company's Management Stock Option Plan.
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Anti-Takeover Provisions. The Amended and Restated Articles and Amended and
Restated Bylaws contain provisions which may be deemed to be "anti-takeover" in
nature in that such provisions may deter, discourage or make more difficult the
assumption of control of the Company by another corporation or person through a
tender offer, merger, proxy contest or similar transaction. The Amended Articles
permit the Board of Directors to establish the rights, preferences, privileges
and restrictions of, and to issue, up to 5,000,000 shares of Preferred Stock
without shareholder approval. The Amended Bylaws also provide for the staggered
election of directors to serve for four-year terms, subject to removal by
shareholders only for cause upon the vote of not less than 65% of the shares of
Common Stock cast at a shareholders meeting and provide that the vote of at
least 60% of the votes entitled to be cast by all shareholders is required to
call special meetings of shareholders. Certain provisions of the Amended
Articles and Amended Bylaws may not be amended except by a similar 65% vote. For
more information, see the Amended and Restated Articles of Incorporation and the
Amended and Restated Bylaws of the Company which are filed as Exhibits 2.1 and
2.2, respectively, to the Company's Form 8-A Report, filed with the Commission
on December 29, 1997. In addition, the Company is subject to certain
anti-takeover provisions of the Pennsylvania Business Corporation Law.
CHAPTER 11 PROCEEDINGS.
On December 12, 1997, the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court") entered an order confirming the Company's
Second Amended Joint Plan of Reorganization (the "Reorganization Plan") proposed
by Today's Man, Inc. ("the Company") and certain of its subsidiaries. On
December 31, 1997, the Reorganization Plan became effective and the Company
emerged from bankruptcy reorganization proceedings. Those proceedings had begun
on February 2, 1996 when the Company and certain of its subsidiaries filed
voluntary petitions seeking to reorganize under Chapter 11 of the U.S.
Bankruptcy Code.
Pursuant to the Plan of Reorganization, the Company paid an aggregate of
$51.0 million and issued 9,656,269 shares of Common Stock to its creditors in
settlement of $73.3 million of outstanding indebtedness, including post-petition
interest. Under the Plan of Reorganization, holders of the Company's Common
Stock received for each share of old Common Stock: (1) one share of new Common
Stock and (2) 0.5 of a Common Stock Purchase Warrant ("Warrant"). Each whole
Warrant entitles the holder to purchase one share of new Common Stock at an
exercise price of $2.70 per share at any time on or before January 2, 2001. A
total of 5,430,503 Warrants were issued to the Company's shareholders of record
as of October 14, 1997.
MERCHANDISING
Today's Man seeks to offer a larger selection and variety of menswear, in
terms of styles, sizes and price points, than its competitors. The Company's
merchandise assortment consists principally of tailored clothing (suits,
sportcoats, slacks, formal wear and outerwear), furnishings and accessories
(dress shirts, ties, belts, suspenders, underwear, socks, scarves and gloves)
and sportswear (casual pants, sportshirts, sweaters and jackets) and shoes. A
25,000 square foot superstore typically offers 52,000 items, including
approximately 4,000 suits in American and European styles, 1,800 sportcoats,
11,000 dress shirts, 7,500 ties, 6,000 pairs of dress and casual pants and 4,000
pairs of shoes. The core of the Company's merchandise offering is primarily
Today's Man private label suits (featuring the Company's private labels, Made in
Italy and Made in England) at prices typically ranging from $150 to $400. In
fiscal 1999, nearly 48% of the Company's net sales were tailored clothing, with
approximately 47% divided between furnishings and sportswear and 5% of net sales
from licensed shoe department sales.
In July 1995, the Company entered into a License Agreement with Shoe
Corporation of America ("SCOA"), pursuant to which SCOA installed and operates
licensed shoe departments in the
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Company's stores. Under the terms of the license agreement, SCOA is responsible
for the operations of the department including inventory purchases,
presentation, staffing and management. The Company remits, on a weekly basis,
the net proceeds due to SCOA. SCOA filed for Chapter 11 under the U. S.
Bankruptcy Code in June, 1999 and was subsequently acquired by Morse Shoe, Inc.
in February, 2000. Today's Man then amended its shoe license agreement with
Morse Shoe, Inc. The provisions of the contract generally remain the same. Morse
Shoe, Inc. is responsible for the operations of the shoe department including
inventory purchases, presentation, staffing and management. Today's Man remits,
on a weekly basis, the net proceeds due to Morse Shoe, Inc. This license
agreement expires January 31, 2006. The Company recorded sales of $12,642,600,
$12,208,100 and $10,357,600 from licensed shoe department sales for fiscal 1997,
1998 and 1999, respectively.
The Company has product offerings in all of its merchandise categories
under the Company's private labels. Today's Man's private label programs are
focused on high volume merchandise classifications and include products which
can differentiate the Company from other retailers on the basis of price and
quality.
MARKETING AND PROMOTION
The Company has identified as its core customers men between the ages of 25
and 54 with average household incomes between $40,000 and $75,000 per year who
routinely wear a suit to work. The Company seeks to be the first choice among
its target customers when they decide to shop for clothes by using local
television and radio advertising. In addition, the Company uses direct mail
advertising to customers on its mailing list, including holders of Today's Man
credit cards. The Company uses newspaper advertising primarily during its
bi-annual clearance periods. The Company uses outside agencies as well as its
own marketing department to prepare its advertising materials.
TODAY'S MAN SUPERSTORES
The Company's superstores average approximately 25,000 gross square feet.
Approximately three quarters of the area of each store is devoted to selling
space, with the remaining portion used for tailoring, check-out, storage and
administrative and employee areas. Today's Man superstores are usually located
in a shopping center or freestanding building near a major shopping mall.
The Company places great emphasis on providing an attractive, brightly lit
and well-organized shopping environment. The Company's stores have similar
layouts, emphasizing efficient traffic flow, separation of distinct departments,
merchandise presentation and ease of merchandise selection. Use of a similar
store design facilitates the operational integration of new stores into the
Company's centralized merchandising, distribution, management and accounting
systems. The Company attempts to arrange its merchandise to provide a logical
flow from department to department and regularly monitors its product layouts in
an attempt to make shopping easier and to maximize sales per square foot.
The Company believes that a courteous and knowledgeable staff and efficient
cashiers are important factors in attracting and retaining customers. The
Company staffs each store with trained personnel, supported by an efficient
check-out system and a full-function tailoring facility. The Company emphasizes
to its employees the importance of customer service, courtesy and product
knowledge through its training programs. The Company also believes that its
typical customer prefers to shop without aggressive sales help and seeks
assistance primarily to locate sizes or to coordinate styles and colors.
Accordingly, Today's Man sales associates are paid on a salaried rather than a
commission basis. In addition, sales associates are eligible to earn incentive
payments based on the performance of that associate and the performance of the
store relative to the planned performance.
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Each store is managed by a store manager who is compensated by a base
salary and a bonus based on the store's sales performance, shrinkage and other
factors. Store managers have an average of 15 years of retail experience. Store
managers report to one of four regional managers. All stores have one or more
assistant managers, two to three clothing department heads (including the head
of the tailoring department) and an average of 24 full-time and 13 part-time
associates (including sales associates, tailors and cashiers). Most of the
Company's tailored clothing associates have prior retail experience. Additional
training is provided on the job by the store's assistant managers and department
heads.
Full-function tailoring facilities are located at each store and are
typically staffed by one fitter, four full-time and one part-time tailors and
one presser under the supervision of the head of the tailoring department and an
assistant. As part of the Today's Man efficient shopping experience, the Company
seeks to provide professional alterations within one week. Because the Company
views efficient and competitively priced tailoring as a means of attracting and
retaining its core customers, the Company's tailoring services generally are
priced at cost.
The Company maintains an appropriate level of security in each store based
on local conditions.
PURCHASING
The Company purchases most of its merchandise in large volumes through
preplanned buying programs, which allow it to consistently offer a broad and
deep selection of current-season, moderate to better private label menswear at
substantial savings to its customers. The Company typically does not purchase
manufacturers' production overruns and does not seek advertising allowances from
its vendors.
The Company purchased merchandise from approximately 107 domestic and
overseas manufacturers and suppliers during fiscal 1999. During that year, the
top ten vendors by dollar volume accounted for approximately 45% of total
purchases, but no vendor accounted for more than 10% of the Company's purchases.
Of the Company's purchases by dollar volume in fiscal 1999, approximately 43%
were from overseas vendors, primarily in U.S. dollars. Moreover, although the
Company historically has hedged its exposure to fluctuations in the relationship
between the dollar and various foreign currencies, the Company is not engaging
in hedging transactions and could incur additional expense in the event of
currency fluctuations. Many of the Company's overseas purchases are financed by
letters of credit. Understanding the importance of the vendors to the Company's
business, management has focused on developing good relationships over the years
with many of its vendors. As a result, the Company experienced positive vendor
support from its pre-petition supplier base during the Bankruptcy proceedings
and was also able to add new key national vendors while in Chapter 11. The
Company's vendor base has continued its support since the Company's emergence
from Chapter 11.
The Company purchased approximately 5.7 million units of merchandise in
fiscal 1999. This merchandise is made by manufacturers based upon the Company's
quality and size specifications, often using materials that the Company has
purchased from other suppliers. The Company uses quality control inspectors to
oversee the manufacture of its merchandise to maintain its quality standards.
The Company believes that by overseeing the design of its own private label
merchandise and by dealing directly with manufacturers, it is able to offer
fashionable merchandise at substantial savings to its customers. The Company
does not own or operate any manufacturing facilities.
DISTRIBUTION
The Company's distribution center is adjacent to the Company's executive
and administrative offices in an office park in Moorestown, New Jersey. The
distribution center is a modern 116,000 square foot facility constructed in 1987
that was expanded by the landlord in fiscal 1992. The
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expansion doubled the Company's merchandise processing potential to ten million
units per year, increasing the number of superstores it is capable of serving
using a single shift to approximately 30. The Company believes that the
distribution facility is capable of supporting an additional 29 superstores by
using two shifts. Merchandise is generally shipped directly by common carriers
to the distribution center or to ports or airports for pick up by the Company's
trucks. Merchandise from local manufacturers is often picked up by the Company's
trucks directly from the manufacturer. At the distribution center, merchandise
is received, counted, ticketed with the Company's bar coded labels and sorted
for distribution to the Company's stores. Whenever possible, merchandise is
preticketed with the Company's bar coded labels by the Company's vendors prior
to delivery to reduce processing time and expense. Deliveries are made from the
distribution center to each store typically twice a week by the Company's
trucks. Merchandise is usually shipped to the stores ready for immediate
placement on the selling floor.
MANAGEMENT INFORMATION AND CONTROL SYSTEMS
The Company has placed substantial emphasis on upgrading and integrating
its management information and financial control systems. The Company believes
its management information and control systems are an important factor in
enabling it to achieve its goal of superior execution of all aspects of the
Company's operations.
The Company employs a fifteen-person MIS group, including three
programmers. Control of the Company's merchandising activities is maintained by
a fully integrated point-of-sale (POS) inventory and management information
system which permits management to monitor inventory and store operations on a
daily basis and to determine weekly operating results by store. Each store
communicates with the Company's central IBM RS/6000 computer system via IBM 4680
POS registers. Merchandise sales and inventories are automatically maintained by
scanning bar-coded merchandise as customers check-out.
In 1999, the Company implemented a new retail information system. This
state-of-the-art database system tracks merchandise from order through sale,
comparing actual to planned results and highlighting areas requiring management
attention. The new system enables the Company to work on improving its
management of merchandising inventories, in-store stock replenishment, and
financial reporting.
The Company also uses ARTHUR, a merchandise planning system which
facilitates seasonal planning by department and by store and provides data for
financial planning.
CUSTOMER CREDIT
Today's Man customers may pay for their purchases with the Today's Man
proprietary credit card, Visa, MasterCard, American Express, Discover, cash or
check. Approximately 80% of all purchases are paid for by credit card.
Today's Man credit cards are issued by a national bank, using the bank's
credit standards, on a non-recourse basis to the Company. As of January 29,
2000, approximately 459,000 Today's Man credit cards were outstanding. The
Company believes that its credit card is a particularly productive tool for
targeted marketing and presents an excellent opportunity to analyze and better
understand its customers' shopping patterns and needs.
COMPETITION
The retail menswear business is highly competitive with respect to price,
quality and style of merchandise and store location. The Company faces
competition for customers and store locations from large national and regional
department stores, various full-price menswear chains, a number of
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off-price specialty retailers as well as local department stores, catalog
retailers and local menswear stores. Many of these competitors have
significantly greater financial and other resources than the Company. The
retailing business is affected by changes in consumer tastes, demographic trends
and the type, number and location of competing stores. In the future, the
Company may experience increased competition from menswear retailers attempting
to imitate the Company's strategy. The Company believes that it generally
compares favorably with its competitors with respect to the quality, depth and
range of sizes and styles of merchandise, prices for comparable quality
merchandise, customer service and store environment.
ASSOCIATES
Today's Man places great importance on recruiting, training and motivating
quality store level associates by such methods as promoting associates from
within and offering bonuses for associates who recommend successful job
applicants. As of January 29, 2000, the Company had 830 full-time and 550
part-time associates. The Company also employs additional part-time clerks and
cashiers during peak periods. None of the Company's associates is represented by
a labor union. The Company believes that its relationship with its associates is
good.
TRADEMARKS
The Company owns all rights to the trademarks it believes are necessary to
conduct its business as currently operated. The Company believes that no
individual trademark or trade name, other than the Today's Man trademark, is
material to the Company's competitive position in the industry.
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ITEM 2. PROPERTIES
The Company's executive offices and distribution center are housed in a
140,000 square foot building located in an office park in Moorestown, New
Jersey. The Company leases the building and certain adjacent land for expansion
from Mr. David Feld, pursuant to a lease expiring in 2010. See Item 13.
"Certain Relationships and Related Transactions."
The following table provides information regarding the Company's existing
and proposed stores under lease:
<TABLE>
<CAPTION>
Approximate
Gross Square Year of
Store Location Feet Opening
- -------------- -----------------------------
<S> <C> <C>
GREATER PHILADELPHIA MARKET:
Center City Philadelphia, PA (1),(2) 25,600 1980
Broomall, PA 17,800 1984
Deptford, NJ (1) 19,600 1985
Allentown, PA 22,700 1986
Montgomeryville, PA 22,100 1986
Northeast Philadelphia, PA 22,500 1987
King of Prussia, PA 25,000 1988
Langhorne, PA (1) 25,000 1988
Cherry Hill, NJ 25,800 1990
GREATER WASHINGTON, D.C. AND BALTIMORE MARKET:
Bailey's Crossroads, VA 26,000 1987
Rockville, MD 26,100 1988
Fairfax, VA 25,900 1992
Greenbelt, MD 21,100 1995
Springfield, VA 17,500 1999
Sterling, VA 17,500 1999
Germantown, MD 18,000 1999
Towson, MD 25,700 1999
GREATER NEW YORK MARKET:
Paramus, NJ 30,000 1991
Carle Place, NY 33,500 1991
Wayne, NJ 33,400 1992
Stony Brook, NY 25,900 1992
Huntington, NY 29,300 1993
East Hanover, NJ 30,000 1993
Manhassett, NY (2) 25,000 1993
Woodbridge, NJ 27,100 1993
Manhattan (Sixth Avenue), NY 28,100 1994
Hartsdale, NY 26,600 1994
Manhattan (Fifth Avenue), NY 27,200 1995
Norwalk, CT (2) 24,000 1995
</TABLE>
(1) Leased from Mr. David Feld. See Item 13. "Certain Relationships and Related
Transactions."
(2) To be closed by the third quarter of fiscal 2000. See Note 11. "Subsequent
Events."
The Company leases all of its stores and anticipates that it will continue
to do so. Unexpired lease terms range from one to thirty years assuming the
exercise of options to renew in certain cases, and no lease is scheduled to
expire prior to fiscal 2001. Approximately one-half of the leases have
percentage rent clauses, although none of the leases with Mr. David Feld has a
percentage rent clause.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in routine legal proceedings incidental to the
conduct of its business. Management believes that none of these routine legal
proceedings will have a materially adverse effect on the financial condition or
results of operations of the Company. The Company maintains general liability
insurance coverage in amounts deemed adequate by management.
In January 1999 the Company brought suit against NationsBank N.A., The Bank
of New York, N.A., and Fleet Financial Corp., (formerly Shawmut Bank, N.A.)
seeking unspecified damages resulting from the pre-petition lender group's
alleged non-performance under the Amended and Restated Loan and Security
Agreement dated November 1995. The Company has alleged that the lender group's
actions in January 1996 constituted a breach of contract under the loan
agreement. As of January 29, 2000 this suit is pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4.1. CERTAIN EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information concerning the executive officers of
the Company who are also not directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
David Mangini 55 Executive Vice President and Chief Merchandising
Officer
Frank E. Johnson 50 Executive Vice President and Chief Financial Officer
Barry S. Pine 45 Vice President, Controller, and Chief Accounting
Officer
</TABLE>
Mr. Mangini joined the company in July 1999 as Executive Vice President and
Chief Merchandising Officer. Prior to joining the Company, Mr. Mangini served as
the President of Gadzooks, Inc., a specialty retailer of teen fashions and
accessories from August 1998 to April 1999. Prior to that, from 1989 to 1998,
Mr. Mangini served as President of the Limited's Structure Division.
Mr. Johnson joined the Company in 1986 as Controller and was promoted to
Chief Financial Officer in November 1995 and Executive Vice President in April
1997. Prior to joining the Company, Mr. Johnson served as Corporate Controller
of Nan Duskin, Inc., a women's apparel retailer, from 1984 to 1986.
Mr. Pine joined the Company in 1990 as Assistant Controller and was
promoted to Controller in November 1995. In April 1997, Mr. Pine was promoted to
Vice President. Prior to joining the Company, Mr. Pine served as Manager of
Merchandise Control of Charming Shoppes, Inc., a woman's apparel retailer, from
1987 to 1990.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
The Company's Common Stock and Warrants are traded on the Nasdaq National
Market System under the symbol "TMAN" and "TMANW," respectively. The following
table sets forth, for the fiscal quarters indicated, the high and low closing
sale prices for the Common Stock, as reported by Nasdaq:
HIGH LOW
1998
First Quarter $3.63 $2.88
Second Quarter 3.03 1.69
Third Quarter 1.94 1.13
Fourth Quarter 3.25 1.28
1999
First Quarter $2.03 $1.13
Second Quarter 1.56 1.09
Third Quarter 1.16 0.66
Fourth Quarter 0.94 0.53
2000
First Quarter (through April 28, 2000) $1.31 $0.53
The Warrants were issued on January 2, 1998. The following table sets
forth, for the fiscal quarters indicated, the high and low closing sale price
for the Warrants, as reported by Nasdaq:
1998
First Quarter $1.69 $1.13
Second Quarter 1.13 0.31
Third Quarter 0.56 0.13
Fourth Quarter 0.97 0.09
1999
First Quarter $0.47 $0.13
Second Quarter 0.28 0.16
Third Quarter 0.22 0.06
Fourth Quarter 0.22 0.03
2000
First Quarter (through April 28, 2000) $0.31 $0.09
As of April 19, 2000, the Company's Common Stock was held by
approximately 1,581 holders of record.
The Company does not anticipate paying any cash dividends in the
foreseeable future because it intends to use or otherwise retain its earnings to
finance the operations and expansion of its business and to service its debt.
The Company's loan agreement prohibits the payment of cash dividends without
prior consent of the lender.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data and operating data)
The following selected financial data have been derived from the Company's
consolidated financial statements. The information set forth below should be
read in conjunction with Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of the Company and notes thereto beginning on page F-1.
- ----------------------------
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------------------------
1995 (7) 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 263,256 $ 204,042 $ 214,148 $ 213,608 $ 194,546
Cost of goods sold 180,928 134,524 138,075 135,784 128,444
--------- --------- --------- --------- ---------
Gross profit 82,328 69,518 76,073 77,824 66,102
Selling, general and administrative
expenses (1) 100,753 65,982 65,820 66,760 77,831
Restructuring charges 19,249 -- -- -- --
--------- --------- --------- --------- ---------
Income (loss) from operations (37,674) 3,536 10,253 11,064 (11,729)
Reorganization items, net -- 8,848 6,769 -- --
Interest expense and other income, net 4,211 499 7,786 3,280 1,627
--------- --------- --------- --------- ---------
Income (loss) before income taxes and (41,885) (5,811) (4,302) 7,784 (13,356)
extraordinary item
Income tax provision (benefit) (6,201) -- -- 2,883 --
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item (35,684) (5,811) (4,302) 4,901 (13,356)
Extraordinary item, net of income tax
benefit -- -- -- 658 --
--------- --------- --------- --------- ---------
Net income (loss) $ (35,684) $ (5,811) $ (4,302) $ 4,243 (13,356)
========= ========= ========= ========= =========
Earnings (loss) per share:
Income (loss) before extraordinary item $ (3.29) $ (0.54) $ (0.39) $ 0.18 $ (0.49)
Extraordinary item, net -- -- -- (0.02) --
--------- --------- --------- --------- ---------
Earnings (loss) per share (8) $ (3.29) $ (0.54) $ (0.39) $ 0.16 $ (0.49)
========= ========= ========= ========= =========
Weighted average shares outstanding 10,847 10,861 11,063 27,013 27,041
Earnings (loss) per share assuming dilution:
Income (loss) before extraordinary item $ (3.29) $ (0.54) $ (0.39) $ 0.18 $ (0.49)
Extraordinary item, net -- -- -- (0.02) --
--------- --------- --------- --------- ---------
Earnings (loss) per share assuming dilution (8) $ (3.29) $ (0.54) $ (0.39) $ 0.16 $ (0.49)
========= ========= ========= ========= =========
Weighted average shares assuming dilution 10,847 10,861 11,063 27,013 27,041
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital $ 44,784 $ 49,528 $ 26,292 $ 31,927 $ 29,714
Total assets 98,203 95,397 87,164 78,974 81,867
Long-term debt and capitalized leases 5,478 3,661 14,432 9,983 22,483
Liabilities subject to settlement 61,887 63,368 8,988 -- --
Shareholders' equity 21,066 15,255 46,800 52,694 39,401
OPERATING DATA:
Net sales per square foot of selling space (2) $ 421 $ 421 $ 451 $ 450 $ 402
Increase (decrease) in comparable store
sales (3) (1.5)% (7.8)% 7.0% (0.3)% (10.7)%
Average sales per store (in thousands) (4) $ 8,110 $ 8,008 $ 8,566 $ 8,544 $ 7,633
NUMBER OF SUPERSTORES (5):
Open at beginning of period 28 35 25 25 25
Opened during period 7 -- -- -- 4
Closed during period -- 10 -- -- --
Open at end of period 35 25 25 25 29
</TABLE>
- ----------
12
<PAGE>
(1) Includes buying and occupancy expenses.
(2) Calculated using net sales generated from superstores open for the entire
fiscal year divided by the square feet of selling space of such stores.
Selling space does not include tailoring, check-out and administrative
areas or stockrooms.
(3) Superstores are included in the comparable store sales calculation
beginning in their fourteenth full month of operation. Accordingly, the
calculation does not include a store's first full month of operation, which
typically has an abnormally high volume of sales resulting from the store's
grand opening promotion. Stores relocated to a larger facility are not
included in the comparable store sales calculation until the beginning of
their fourteenth full month of operation at their new locations.
(4) Average sales per store include sales from comparable superstores open for
the entire year divided by the number of stores open for the entire period.
(5) Relocations of older, smaller stores to larger facilities do not constitute
new store openings. There were no remodeled stores in the years presented.
(6) Does not include an outlet store in Sawgrass Mills, Florida which was
opened in April 1995 and closed in the first quarter of 1996. In the first
quarter of 1996, the Company also closed a total of ten underperforming
stores in the Greater Chicago, New York and Washington, D.C. markets.
(7) Fiscal year 1995 included fifty-three weeks.
(8) Earnings (loss) per share have been calculated in accordance with FASB
Statement No. 128, Earnings per Share for all periods presented.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentages
which the items in the Company's Statements of Operations bear to net sales.
<TABLE>
<CAPTION>
Fiscal Year
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 64.5 63.6 66.0
----- ----- -----
Gross profit 35.5 36.4 34.0
Selling, general and administrative expenses 30.7 31.3 40.0
----- ----- -----
Income (loss) from operations 4.8 5.1 (6.0)
Reorganization items, net 3.2 -- --
Interest expense and other (income) expense, net 3.6 1.5 .8
----- ----- -----
Income (loss) before income taxes and extraordinary item (2.0) 3.6 (6.8)
Income tax provision -- 1.3 --
----- ----- -----
Income (loss) before extraordinary item (2.0)% 2.3 (6.8)%
Extraordinary item, net of income tax benefit -- 0.3 --
----- ----- -----
Net income (loss) (2.0)% 2.0% (6.8)%
===== ===== =====
</TABLE>
13
<PAGE>
FISCAL YEARS 1999 AND 1998
Net Sales. Net sales were $194,545,700 in fiscal 1999, a decrease of
$19,062,900 or 8.9% from net sales of $213,608,600 in fiscal 1998. The decrease
in net sales was a result of the overall decline in foot traffic the Company
experienced in fiscal 1999. Additionally, the Company shortened the first
quarter fiscal 1999 clearance period as well as delayed the promotion of the
semi-annual event in the second quarter of fiscal 1999 in order to emphasize the
Today's Man brand and everyday low price philosophy. The Company operated 25 and
29 superstores at January 30, 1999, and January 29, 2000, respectively.
Gross Profit. Gross profit as a percentage of net sales decreased to 34.0%
in fiscal 1999 from 36.4% in fiscal 1998. As a result of the decline in foot
traffic, the Company was forced to take more markdowns in fiscal 1999 as
compared to fiscal 1998 in order to cleanse seasonal inventories. These
additional markdowns contributed to the decrease in the gross profit percentage
in fiscal 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses which include pre-opening expenses of new stores,
increased 16.6% or $11,070,300 from $66,760,300 in fiscal 1998 to $77,830,600 in
fiscal 1999. As a percentage of net sales, selling, general and administrative
expenses increased from 31.3% in fiscal 1998 to 40.0% in fiscal 1999. The
increase in expenses was primarily due to an additional $5,426,000 in planned
advertising costs associated with the Company's branding and on-line website
campaign and accrued severance of $883,000 related to employee terminations in
January 2000. The Company incurred an additional $518,000 in depreciation and
amortization expenses in fiscal 1999 related to the increase in capital
expenditures for data processing systems. Additionally, the Company incurred
$408,600 of new store expenses attributable to the opening of four new stores in
the Baltimore, Maryland and Washington D.C. markets. Store payroll, occupancy,
and advertising costs increased by $6,795,300 in fiscal 1999 as compared to the
same period in fiscal 1998, and represented 24.9% of net sales in fiscal 1999 as
compared to 19.5% of net sales in fiscal 1998.
Interest Expense, Interest Income and Other (Income) Expense, Net. Interest
expense, interest income and other (income) expense, net, decreased by
$1,653,600 in fiscal 1999 from fiscal 1998. The decrease in interest expense was
attributable to the lower interest rate obtained by the refinancing of the
Company's revolving credit facility with Mellon bank on December 4, 1998 which
bore interest at prime (8.50% at January 29, 2000). The Mellon Bank facility
permitted the Company to have one or more portions of the outstanding balance of
its loan accrue interest at LIBOR rate plus applicable margin. On December 2,
1999, the Company elected to have $12,500,000 accrue interest at LIBOR plus
applicable margin (8.66%) for a period of 60 days. In fiscal 1998, the Company
recognized $1,045,000 in charges for the early termination of its revolving
credit facility and term loan with Foothill Capital Corporation, which the
Company recorded as an extraordinary item.
Income Tax Expense. The Company had a net loss in fiscal 1999 and therefore
recorded no tax provision. In fiscal 1998 the Company recorded a provision for
income taxes of $2,495,900. This provision was fully offset by the Company's net
operating loss carryforwards.
Extraordinary Item. In December 1998, the Company refinanced its revolving
credit facility and term loan from Foothill Capital with a new revolving credit
facility with Mellon Bank, N.A. As a result of this refinancing, the company
incurred a prepayment penalty of approximately $720,000 and wrote off
approximately $640,000 of unamortized debt issuance costs. These amounts were
offset by approximately $315,000 in accrued debt discount and related
liabilities and approximately $387,000 in income tax benefits related to this
extraordinary item.
14
<PAGE>
FISCAL YEARS 1998 AND 1997
Net Sales. Net sales were $213,608,600 in fiscal 1998, a decrease of
$539,400 or 0.3% from net sales of $214,148,000 in fiscal 1997. The sales
decrease was due in part to a $434,500 decrease in sales from licensed shoe
departments. Additionally, the Company reduced its semi-annual clearance event.
In fiscal 1998, the Company shortened its fall clearance event by two weeks as
compared to fiscal 1997. The Company operated 25 superstores at January 31,
1998, and January 30, 1999, respectively.
Gross Profit. Gross profit as a percentage of net sales increased to 36.4%
in fiscal 1998 from 35.5% in fiscal 1997. The increase in gross profit was
attributable to a reduction in the promotional activities and markdowns from
those used in fiscal 1997 related to the marketing of the Today's Man
proprietary card. Additionally, the Company moved a significant portion of its
inventory to a replenishment program which allows for more timely receipt of
merchandise and therefore fewer markdowns. In fiscal 1998, approximately 48% of
sales were made through replenishment programs as compared to 35% in fiscal
1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 1.4% or $940,500 from $65,819,800 in fiscal
1997 to $66,760,300 in fiscal 1998. As a percentage of net sales, selling,
general and administrative expenses increased from 30.7% in fiscal 1997 to 31.3%
in fiscal 1998. The increase in expenses was primarily due to an additional
$1,100,000 in planned advertising costs associated with the relationship
marketing campaign. In addition to the relationship marketing, the cost of
administering the Today's Man Rewards Program increased by approximately
$450,000 due to increased utilization of the card and a higher number of payouts
under the program. Offsetting these increases was a decrease in amortization
expense of approximately $500,000 related to the decrease in assets under
capital leases and bank issuance costs. Store payroll, occupancy, and
advertising costs increased by $847,100 in fiscal 1998 as compared to the same
period in fiscal 1997, and represented 19.5% of net sales in fiscal 1998 as
compared to 19.1% of net sales in fiscal 1997.
Reorganization Items, Net. Reorganization items in fiscal 1997 consisted of
legal and accounting fees incurred in the administration of the Chapter 11
proceedings offset by interest income earned during the period. No
reorganization items were incurred in fiscal 1998.
Interest Expense, Interest Income and Other (Income) Expense, Net. Interest
expense, interest income and other (income) expense, net, decreased by
$4,505,700 in fiscal 1998 from fiscal 1997. This decrease was a result of the
charge taken in the third quarter of fiscal 1997 of $7,264,000 related to the
Company's Plan of Reorganization. In fiscal 1998, the Company recognized
$1,045,000 in charges for the early termination of its revolving credit facility
and term loan with Foothill Capital Corporation, which the Company recorded as
an extraordinary item.
Income Tax Expense. In fiscal 1998 the Company recorded a provision for
income taxes of $2,495,900. This provision was fully offset by the Company's net
operating loss carryforwards. The Company had a net loss in fiscal 1997 and
therefore recorded no tax provision.
Extraordinary Item. In December 1998, the Company refinanced its revolving
credit facility and term loan from Foothill Capital with a new revolving credit
facility with Mellon Bank, N.A. As a result of this refinancing, the Company
incurred a prepayment penalty of approximately $720,000 and wrote off
approximately $640,000 of unamortized debt issuance costs. These amounts were
offset by approximately $315,000 in accrued debt discount and related
liabilities and approximately $387,000 in income tax benefits related to this
extraordinary item.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are cash flow from
operations and borrowings under the revolving credit facility. The Company had
working capital of $26,291,900, $31,927,200 and $29,714,300 at the end of fiscal
1997, 1998 and 1999, respectively. The Company measures its inventory turnover
by dividing net sales by the retail value of the inventory averaged over 12
months. Inventory turnover was 3.05 times, 2.81 times and 2.52 times in fiscal
1997, 1998 and 1999, respectively.
Net cash provided by (used in) operating activities amounted to
($45,080,000), $11,330,300 and ($7,441,200) in fiscal 1997, 1998 and 1999,
respectively. These amounts primarily represent net income (loss) plus
depreciation, amortization and other changes in operating assets and
liabilities.
Net cash used in investing activities amounted to $1,326,600, $4,521,400
and $5,909,700 in fiscal 1997, 1998 and 1999, respectively. The increase in
fiscal 1999 from 1998 was primarily due to the capital expenditures related to
the opening of four new stores and the Company's new merchandising system.
Net cash provided by (used in) financing activities amounted to
$23,700,100, ($5,847,300) and $12,562,500 in fiscal 1997, 1998 and 1999,
respectively, and in fiscal 1999 consisted primarily of additional borrowings,
net of repayments, under the Company's revolving credit facility.
On December 4, 1998, the Company entered into a Loan and Security Agreement
with Mellon Bank, N.A., ("Mellon") individually and as agent. The Loan and
Security Agreement provided for a $45.0 million revolving credit facility with a
$20.0 million sublimit for letters of credit. The Mellon Loan and Security
Agreement contains financial covenants including tangible net worth,
indebtedness to tangible net worth and fixed charge coverage ratios, and
limitations on new store openings and capital expenditures as well as
restrictions on the payment of dividends. The Company granted Mellon a lien on
its tangible and intangible assets to secure this revolving credit facility.
Proceeds from this loan were used to refinance the Company's previous revolving
credit facility and term loan from Foothill Capital Corporation. In accordance
with the early termination provisions of the Foothill Capital Corporation loan
document, the Company paid an early termination fee of $720,000 to Foothill.
The Mellon revolving credit facility bore interest at the option of the
Company at prime (8.50% at January 29, 2000) or LIBOR plus a margin ranging from
1.75% to 3.25% depending upon the Company's EBITDA. Availability under the
revolver is determined by a formula based on inventory and credit card
receivables, less applicable reserves.
In April 1999, the Company and Mellon amended the Loan Agreement to allow
for the inclusion of participant lenders and to modify certain other provisions
including the tangible net worth and fixed charge coverage ratio covenants.
During the fourth quarter of fiscal 1999, the Company was projecting a
liquidity shortfall in early fiscal 2000 under its revolving credit facility. To
address the liquidity shortfall, the Company obtained a temporary over-advance
of $4.5 million above its calculated borrowing base from Mellon on February 11,
2000. In addition, the Company and Mellon agreed to recast certain financial
covenants to reflect the year-end operating results. On March 15, 2000, the
Company and Mellon entered into amendment No. 3 to the Loan and Security
Agreement. The revolving credit facility was reduced to $35.0 million with a
$15.0 million sublimit for letters of credit. Within the credit facility is an
over-advance facility of $4.5 million above the calculated borrowing base which
is reduced to $3.4 million on May 16, 2000 and $2.5 million on June 16, 2000 and
expires on June 30, 2000. The revolving credit facility expires on March 15,
2002 and bears interest at 0.75% per annum above Mellon Bank's prime rate. The
amended Agreement recast all of the Company's financial coverage as of and for
the year ended January 29, 2000 and for the remaining term of the loan
agreement. The Agreement contains financial covenants related to tangible net
worth, indebtedness to tangible net worth, fixed charge coverage ratios, maximum
net loss per month, and limitations on new store openings and capital
expenditures as well as restrictions on the payments of dividends. Additionally,
Mr. David Feld, the Chairman and CEO agreed to provide additional collateral to
secure the credit facility. The Company was in compliance with all coverage
under the amended Agreement as of January 29, 2000. The amended bank agreement
also includes a termination fee of $1.0 million if the Company terminates the
facility before March 15, 2001, and $700,000 if termination occurs from March
16, 2001 through March 14, 2002.
The Company announced on March 15, 2000 that it had engaged Wasserstein
Perella & Co., Inc. an investment-banking firm, to enhance the Company's
shareholder value. This may take the form of an equity investment in the Company
or debt.
16
<PAGE>
On May 1, 2000 the Company and Mellon entered into Amendment 4 to include
Todaysman.com, a subsidiary of the Company, into the revolving credit facility.
In April 2000, the Company decided to close three under-performing stores,
including one store located in a building owned by Mr. David Feld the Company's
CEO. The closing of the three stores will result in a charge to operations in
the first quarter of fiscal 2000 of approximately $4.0 million for the write-off
of furniture and fixtures and lease termination costs. The three stores which
generated sales of $13,192,000 in fiscal 1999 are expected to be closed by
September 2000.
On May 11, 2000, the Company and Mellon entered into Amendment 5 to the
revolving credit facility. The agreement amends the credit facility to extend
the over-advance facility of $2,500,000 which previously expired on June 30,
2000 to August 15, 2000. The over-advance is reduced to $2,250,000 on August 16,
2000, $1,250,000 on September 16, 2000, $1,000,000 on October 16, 2000 and
expires on November 30, 2000. Amendment 5 also revised certain financial
covenants to provide a waiver for the $4.0 million charge to operations caused
by the store closings discussed above. The amendment also provided for a
reduction in the credit facility from $35 million to $30 million effective on
November 30, 2000. The termination fee was also increased to $1,050,000 if the
facility is terminated on or before March 14, 2002.
The Company has been substantially dependent upon borrowings under its
credit facility to finance its operations and received an amended credit
facility from Mellon in May 2000, which allows the Company additional liquidity
through an over-advance facility through November 30, 2000 as discussed above.
Additionally, the Company is in the process of implementing a plan to reverse
the trend of losses noted above. Management's plans implemented thus far, as
well as actions initiated that will continue into fiscal 2000 include, the
execution of the amended credit facility, a layoff of non-operating personnel in
January 2000, the reduction in advertising spending and focus on their
traditional advertising approach, and the closing of three under-performing
stores in April 2000.
Management believes the cash requirements in 2000 will be generated by
operations and borrowings on the Company's credit facility. Management also
believes that the actions initiated and its 2000 plans will result in the
successful funding of its working capital and cash requirements while enabling
them to meet their financial covenants under their credit facility.
RECENT ACCOUNTING PRONOUNCEMENTS
Included in net sales are gross sales from our licensed shoe department of
$12,642,600, $12,208,100, and $10,357,600 for 1997, 1998 and 1999, respectively.
In December 1999 the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements",
which effectively changes previous guidance related to the recording of licensed
business revenues for retail companies. In fiscal 2000, the Company will change
its method of recording licensed shoe department sales. This change will reduce
reported sales and reported expenses, but have no impact on operating or net
income.
YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become year 2000 compliant. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the year 2000 date change.
The Company incurred costs of approximately $127,200 during 1999 in connection
with remediating its systems, and additional costs of $1,454,900 to replace its
existing merchandise and financial accounting systems. The Company is not aware
of any material problems resulting from year 2000 issues, either with its
internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent
year 2000 matters that may arise are addressed promptly.
QUASI-REORGANIZATION
As of January 31, 1998, the Company effected a quasi-reorganization through
the application of $27,316,200 of its $74,115,700 Common Stock account to
eliminate its retained deficit. The Company's Board of Directors authorized a
quasi-reorganization given that the Company had completed its restructuring,
obtained long-term financing and successfully emerged from bankruptcy. The
Company's retained deficit was related to operations that resulted in the
restructuring of the Company and losses incurred during the Chapter 11
proceeding and was not, in management's view, reflective of the Company's
financial condition.
INFLATION
The Company does not believe that inflation has had a material effect on
the results of operations during the past three years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
SEASONALITY AND QUARTERLY RESULTS
The Company's business, like that of most retailers, is subject to seasonal
influences. A significant portion of the Company's net sales and profits are
realized during the fourth fiscal quarter (which includes the Christmas selling
season) and, to a lesser extent, during the second fiscal quarter. In addition,
because the Company's cost of goods sold includes net alteration expense, the
Company's gross profit as a percentage of net sales has historically been lower
in the first and third fiscal quarters primarily as the result of a lower level
of net sales being spread over fixed (primarily payroll) expenses related to
tailoring operations. In addition, quarterly results can be affected by the
timing of the opening of new stores. Because of the seasonality of the Company's
business, results for any quarter are not necessarily indicative of the results
that may be achieved for a full fiscal year.
The following table sets forth certain unaudited quarterly results of
operations for fiscal 1999 and 1998.
17
<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Ended
----------------------------------------------
May 1, July 31, October 30, January 29,
FISCAL 1999: 1999 1999 1999 2000(2)
-------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 44,884 $ 47,518 $ 42,091 $ 60,053
Cost of goods sold 28,635 31,160 26,178 42,471
-------- -------- -------- --------
Gross profit 16,249 16,358 15,913 17,582
Selling, general and administrative
expenses 16,710 17,591 18,080 25,451
-------- -------- -------- --------
Income (loss) from operations (461) (1,233) (2,167) (7,869)
Interest expense and other income,
net 247 288 364 728
-------- -------- -------- --------
Income (loss) before income taxes (708) (1,521) (2,531) (8,597)
Income tax provision (benefit) (204) (559) (937) 1,699
-------- -------- -------- --------
Net income (loss) $ (504) $ (962) $ (1,594) $(10,296)
======== ======== ======== ========
Earnings (loss) per share: $ (0.02) $ (0.04) $ (0.06) $ (0.38)
======== ======== ======== ========
Weighted average shares outstanding 27,015 27,015 27,015 27,041
-------- -------- -------- --------
Earnings (loss) per share assuming
dilution $ (0.02) $ (0.04) $ (0.06) $ (0.38)
======== ======== ======== ========
Weighted average shares outstanding
assuming dilution 27,015 27,015 27,015 27,041
<CAPTION>
Fiscal Quarter Ended
---------------------------------------------
May 2, August 1, October 31, January 30,
FISCAL 1998: 1998 1998 1998 (1) 1999
-------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 46,253 $ 51,580 $ 48,270 $ 67,505
Cost of goods sold 29,455 33,685 29,335 43,309
-------- -------- -------- --------
Gross profit 16,798 17,895 18,935 24,196
Selling, general and administrative
expenses 15,340 16,016 16,293 19,111
-------- -------- -------- --------
Income from operations 1,458 1,879 2,642 5,085
Interest expense and other income, net 757 775 768 980
-------- -------- -------- --------
Income before income taxes and
extraordinary item 701 1,104 1,874 4,105
Income tax provision (benefit) 260 409 693 1,521
-------- -------- -------- --------
Income before extraordinary item 441 695 1,181 2,584
Extraordinary item, net of income tax
benefit -- -- 658 --
-------- -------- -------- --------
Net income $ 441 $ 695 $ 523 $ 2,584
======== ======== ======== ========
Earnings per share:
Before extraordinary item $ 0.02 $ 0.03 $ 0.04 $ 0.10
Extraordinary item -- -- (0.02) --
-------- -------- -------- --------
Earnings per share $ 0.02 $ 0.03 $ 0.02 $ 0.10
======== ======== ======== ========
Weighted average shares outstanding 26,911 26,915 26,915 27,014
Earnings per share assuming dilution:
Before extraordinary item $ 0.02 $ 0.03 $ 0.04 $ 0.10
Extraordinary item -- -- (0.02) --
-------- -------- -------- --------
Earnings per share assuming dilution $ 0.02 $ 0.03 $ 0.02 $ 0.10
======== ======== ======== ========
Weighted average shares
outstanding assuming dilution 28,169 26,945 26,915 27,014
</TABLE>
18
<PAGE>
(1) Third quarter 1998 restated to reflect the reclassification of the
extraordinary item related to the early termination of the Company's
revolving credit facility.
(2) Fourth quarter 1999 reflects an income tax adjustment of $1,699 to
eliminate the tax benefit recorded in the prior quarters because the
Company did not achieve its expected operating results.
There is no difference between earnings per share and earnings per share
assuming dilution in fiscal 1999 because the impact of common share equivalents
is anti-dilutive.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is a retail company doing business within the United States.
Its primary market risk is exposure to interest rates fluctuations on its debt
instruments. The Company's bank revolving credit facility bears interest at
variable rates. The variable interest rate is the rate in effect at the end of
fiscal 1999, and it fluctuates with the lending bank's prime rate. The change in
fair value of the Company's bank revolving credit facility resulting from a
hypothectical 2% increase in interest rates would not be material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and related documents that are filed with this
Report are listed in Item 14 (a) of this Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference from the Company's Proxy Statement relating to
the 2000 Annual Meeting of Shareholders to be filed pursuant to General
Instruction G(3) to Form 10-K, except for information concerning certain
executive officers of the Company which is set forth in Item 4.1 hereof.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from the Company's Proxy Statement relating to
the 2000 Annual Meeting of Shareholders to be filed pursuant to General
Instruction G(3) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from the Company's Proxy Statement relating to
the 2000 Annual Meeting of Shareholders to be filed pursuant to General
Instruction G(3) to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from the Company's Proxy Statement relating to
the 2000 Annual Meeting of Shareholders to be filed pursuant to General
Instruction G(3) to Form 10-K.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
1. List of Consolidated Financial Statements. The following consolidated
financial statements and the notes thereto of Today's Man, Inc., which
are attached hereto beginning on page F-1, have been incorporated by
reference into Item 8 of this Report on Form 10-K.
Consolidated Balance Sheets as of January 30, 1999 and January 29,
2000
Consolidated Statements of Operations for the fiscal years ended
January 31, 1998, January 30, 1999 and January 29, 2000
Consolidated Statements of Shareholders' Equity for the fiscal years
ended January 31, 1998, January 30, 1999 and January 29, 2000
Consolidated Statements of Cash Flows for the fiscal years ended
January 31, 1998, January 30, 1999 and January 29, 2000
Notes to Consolidated Financial Statements
The Report of Independent Auditors, which covers the Company's
consolidated financial statements appears on page F-2 of this Report
on Form 10-K.
2. List of Exhibits filed pursuant to Item 601 of Regulation S-K. The
following exhibits are incorporated by reference in, or filed with,
this Report on Form 10-K. Management contracts and compensatory plans,
contracts and arrangements are indicated by "*".
3. No financial statement schedules have been included because there is
either no respective financial statement caption or there is full
disclosure in the Notes to the Consolidated Financial Statements.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1(1) Debtors' Second Amended Joint Plan of Reorganization as modified on
December 12, 1997
3.1(2) The Company's Amended and Restated Articles of Incorporation
3.2(2) The Company's Amended and Restated Bylaws
4.2(2) Warrant Agreement, dated as of December 31, 1997, between Today's Man,
Inc. and Stocktrans, Inc. as warrant agent
4.3(2) Form of Common Stock Purchase Warrant (incorporated by reference to
the form of Common Stock Purchase Warrant attached as exhibit A to the
Warrant Agreement filed as Exhibit 4.2)
10.1(3) Lease between Mr. David Feld and the Company relating to the Company's
central headquarters and distribution center
10.2(3) Lease, as amended, between Mr. David Feld and the Company relating to
the Center City Philadelphia store
20
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.3(3) Lease between Mr. David Feld and the Company relating to the Deptford
store
10.4(3) Lease, as amended, between Mr. David Feld and the Company relating to
the Langhorne store
10.5(3) Lease between Mr. David Feld and the Company relating to the lease of
a parking lot adjacent to the Montgomeryville store
*10.6 Management Stock Option Plan
*10.7(3) 401(k) Profit-Sharing Plan, as amended, and related Trust Agreement
10.8(3) Tax Indemnification Agreement between the Company and Mr. David Feld
10.9(5) Amendment No. 1 to Tax Indemnification Agreement between the Company
and Mr. David Feld
10.10(6) Amended and Restated License Agreement between the Company and D&L,
Inc.
*10.11(4) Form of Note and Stock Pledge Agreement for Executive Equity Plan tax
loans
10.13(8) Order of the U.S. Bankruptcy Court dated May 22, 1996 approving the
Employee Retention Plan.
10.14(8) Order of the U.S. Bankruptcy Court dated July 25, 1996 approving the
remaining provisions of the Employee Retention Plan.
10.15(9) Loan and Security Agreement with Foothill Capital Corporation
10.16(10) Loan and Security Agreement with Mellon Bank, N.A.
10.17 First Amendment to Loan and Security Agreement with Mellon Bank, N.A.
10.18 Second Amendment to Loan and Security Agreement with Mellon Bank,
N.A.
10.19 Third Amendment to Loan and Security Agreement with Mellon Bank, N.A.
10.20 Fourth Amendment to Loan and Security Agreement with Mellon Bank,
N.A.
10.21 Fifth Amendment to Loan and Security Agreement with Mellon Bank, N.A.
10.22 License Agreement between the Company and Morse Shoe, Inc.
21.1(5) Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
- ----------
21
<PAGE>
(1) Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 29, 1997.
(Commission File No. 0-20234).
(2) Incorporated by reference to the Company's Registration Statement on Form
8-A filed with the Securities and Exchange Commission on December 29,
1997. (Commission File No. 0-20234).
(3) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 33-46755) filed with the Securities and Exchange
Commission on March 26, 1992.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 33-60798) filed with the Securities and Exchange
Commission on April 9, 1993.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1992 (Commission File No. 0-20234).
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended January 29, 1994 (Commission File No. 0-20234).
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended January 28, 1995 (Commission File No. 0-20234).
(8) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended February 1, 1997 (Commission File No. 0-20234).
(9) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended January 31, 1998 (Commission File No. 0-20234).
(10) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended January 30, 1999 (Commission File No. 0-20234).
22
<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 on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on May 15,
2000.
TODAY'S MAN, INC.
By: /s/DAVID FELD
------------------------------------------
David Feld
Chairman of the Board, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf of
the Registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ DAVID FELD Chairman of the Board, President and Chief May 15, 2000
- ---------------------------------- Executive Officer (principal executive officer)
David Feld
/s/ LARRY FELD Vice President, Secretary and Director May 15, 2000
- ----------------------------------
Larry Feld
/s/ FRANK E. JOHNSON Executive Vice President, Treasurer and May 15, 2000
- ---------------------------------- Chief Financial Officer
Frank E. Johnson
/s/ BARRY S. PINE Vice President, Controller and Chief May 15, 2000
- ---------------------------------- Accounting Officer
Barry S. Pine
/s/ LEONARD WASSERMAN Director May 15, 2000
- ----------------------------------
Leonard Wasserman
/s/ VERNA K. GIBSON Director May 15, 2000
- ----------------------------------
Verna K. Gibson
</TABLE>
23
<PAGE>
TODAY'S MAN, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors...............................................F-2
Consolidated Balance Sheets as of January 30, 1999 and January 29, 2000......F-3
Consolidated Statements of Operations for the fiscal years ended
January 31, 1998, January 30, 1999 and January 29, 2000................F-4
Consolidated Statements of Shareholders' Equity for the fiscal years ended
January 31, 1998, January 30, 1999 and January 29, 2000................F-5
Consolidated Statements of Cash Flows for the fiscal years ended
January 31, 1998, January 30, 1999 and January 29, 2000................F-6
Notes to Consolidated Financial Statements...................................F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Today's Man, Inc.
We have audited the Consolidated Balance Sheets of Today's Man, Inc. as of
January 29, 2000 and January 30, 1999, and the related Consolidated Statements
of Operations, Shareholders' Equity and Cash Flows for each of the three fiscal
years in the period ended January 29, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Today's Man, Inc.
at January 29, 2000 and January 30, 1999, and the consolidated results of its
operations and its cash flows for each of the three fiscal years in the period
ended January 29, 2000, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
March 16, 2000, except for
Notes 5 and 11 as to
which the date is
May 11, 2000
F-2
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 30, January 29,
1999 2000
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,181,100 $ 392,700
Due from credit card companies and other receivables, net of
allowance for uncollectible accounts of $61,500 and $27,200 1,535,300 1,692,900
Inventory 34,636,600 39,334,700
Prepaid expenses and other current assets 3,903,800 2,270,700
Prepaid inventory purchases 3,038,600 1,847,900
------------ ------------
Total current assets 44,295,400 45,538,900
Property and equipment, less accumulated depreciation and
amortization 32,664,900 34,235,300
Loans to shareholders 228,400 228,400
Rental deposits and other noncurrent assets 1,785,500 1,864,600
------------ ------------
$ 78,974,200 $ 81,867,200
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,719,400 9,014,700
Accrued expenses and other current liabilities 5,827,200 6,408,300
Current maturities of capital lease obligations 821,600 401,600
------------ ------------
Total current liabilities 12,368,200 15,824,600
Capital lease obligations, less current maturities 216,000 936,600
Deferred rent and other 4,750,000 4,559,800
Obligation under revolving credit facility 8,945,700 21,145,100
------------ ------------
26,279,900 42,466,100
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, none
issued -- --
Common stock, no par value, 100,000,000 shares authorized,
27,014,485 and 27,040,725 shares issued and outstanding at
January 30, 1999 and January 29, 2000 respectively 48,451,200 48,513,700
Retained earnings (accumulated deficit) 4,243,100 (9,112,600)
------------ ------------
Total shareholders' equity 52,694,300 39,401,100
------------ ------------
$ 78,974,200 $ 81,867,200
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Fiscal Years Ended
-----------------------------------------------
January 31, January 30, January 29,
1998 1999 2000
------------- ------------- -------------
(52 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C>
Net sales $ 214,148,000 $ 213,608,600 $ 194,545,700
Cost of goods sold 138,075,100 135,784,100 128,444,200
------------- ------------- -------------
Gross profit 76,072,900 77,824,500 66,101,500
Selling, general and administrative expenses 65,819,800 66,760,300 77,830,600
------------- ------------- -------------
Income (loss) from operations 10,253,100 11,064,200 (11,729,100)
Reorganization items:
Professional fees and other 7,865,000 -- --
Interest income (1,096,000) -- --
------------- ------------- -------------
Net reorganization items 6,769,000 -- --
Interest expense 7,759,900 3,200,600 1,606,400
Other expense, net 26,000 79,600 20,200
------------- ------------- -------------
Income (loss) before income taxes
and extraordinary item (4,301,800) 7,784,000 (13,355,700)
Provision for income taxes -- 2,882,500 --
------------- ------------- -------------
Income (loss) before extraordinary item (4,301,800) 4,901,500 (13,355,700)
Extraordinary item, net of income tax
benefit of $386,600 -- 658,400 --
------------- ------------- -------------
Net income (loss) $ (4,301,800) $ 4,243,100 $ (13,355,700)
============= ============= =============
Basic and diluted earnings per share
before extraordinary item $ (0.39) $ 0.18 $ (0.49)
Basic and diluted earnings per share
from extraordinary item -- (0.02) --
------------- ------------- -------------
Basic and diluted earnings per share $ (0.39) $ 0.16 $ (0.49)
============= ============= =============
Weighted average shares outstanding 11,063,275 27,013,125 27,040,628
</TABLE>
See accompanying notes.
F-4
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------
NUMBER RETAINED
OF EARNINGS
SHARES AMOUNT (DEFICIT)
------------ ------------ ------------
<S> <C> <C> <C>
Balances at February 1, 1997 10,861,005 $ 38,269,100 $(23,014,400)
Issuance of shares pursuant to rights
offering 8,145,753 16,291,500 --
Issuance of shares in settlement of pre-
petition claims 8,257,280 19,524,800 --
Issuance of shares to employees 10,550 30,300 --
Net loss -- -- (4,301,800)
Quasi-reorganization as of January 31,
1998 -- (27,316,200) 27,316,200
------------ ------------ ------------
Balances at January 31, 1998 27,274,588 46,799,500 --
Exercise of stock options 800 1,900 --
Issuance of shares to employees 820 2,400 --
Benefit of net operating loss
carryforwards -- 2,495,900 --
Exercise of stock purchase warrants 2,576 7,000 --
Adjustment of shares due to settlement of
pre-petition claims (264,299) (855,500) --
Net income -- -- 4,243,100
------------ ------------ ------------
Balances at January 30, 1999 27,014,485 $ 48,451,200 $ 4,243,100
Exercise of stock purchase warrants 150 400 --
Adjustment of shares due to settlement of pre-
petition claims 26,090 62,100 --
Net loss -- -- (13,355,700)
------------ ------------ ------------
Balances at January 29, 2000 27,040,725 $ 48,513,700 $ (9,112,600)
============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
TODAY'S MAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Fiscal Years Ended
-----------------------------------------------
January 31, January 30, January 29,
1998 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (4,301,800) $ 4,243,100 $ (13,355,700)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation expense 2,215,000 2,548,800 3,537,900
Amortization expense 1,575,400 881,900 949,000
Provision for uncollectible accounts
receivable 142,300 183,700 (34,300)
Accretion of debt discount 36,500 -- --
Deferred rent and other (91,300) (567,200) (190,200)
Extraordinary item -- 1,045,000 --
Charge in lieu of income taxes -- 2,882,500 --
Changes in operating assets and liabilities:
Restricted cash (11,005,500) 11,005,500 --
Decrease (increase) in receivables 20,700 417,400 (123,300)
Decrease (increase) in inventory (6,015,500) 15,500 (4,698,100)
Decrease (increase) in prepaid expenses 230,400 (749,200) 2,823,800
(Decrease) increase in payables, accrued
expenses and liabilities subject to
settlement 12,085,500 (909,100) 3,876,400
(Increase) decrease in other noncurrent
assets (310,000) (431,600) (226,700)
Payment of liabilities subject to settlement (42,329,700) (9,236,000) --
Charges due to reorganization activities:
Reorganization costs 6,769,000 -- --
Payment of reorganization costs (4,101,000) -- --
------------- ------------- -------------
Total adjustments (40,778,200) 7,087,200 5,914,500
------------- ------------- -------------
Net cash provided by (used in) operating activities (45,080,000) 11,330,300 (7,441,200)
Investing activities:
Capital expenditures (1,306,100) (3,871,600) (5,841,500)
Fixtures and equipment in process (20,500) (649,800) (68,200)
------------- ------------- -------------
Net cash used in investing activities (1,326,600) (4,521,400) (5,909,700)
Financing activities:
Repayment of capital leases (1,396,700) (1,226,200) 300,600
Proceeds from exercise of stock options and
common stock purchase warrants -- 11,300 62,500
Proceeds from sale of common stock 12,964,900 -- --
Proceeds from term loan 12,500,000 -- --
Borrowings under revolving credit facility 3,972,000 97,837,100 180,809,800
Repayment of term loan and revolving credit facility (4,340,100) (102,469,500) (168,610,400)
------------- ------------- -------------
Net cash provided by (used in) financing
Activities 23,700,100 (5,847,300) 12,562,500
Net increase (decrease) in cash and cash equivalents (22,706,500) 961,600 (788,400)
Cash and cash equivalents at beginning of year 22,926,000 219,500 1,181,100
------------- ------------- -------------
Cash and cash equivalents at end of year $ 219,500 $ 1,181,100 $ 392,700
============= ============= =============
</TABLE>
See accompanying notes.
F-6
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BANKRUPTCY REORGANIZATION
Reorganization Proceedings. On December 12, 1997, the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") entered
an order dated December 12, 1997 confirming the Company's Second Amended Joint
Plan of Reorganization (the "Reorganization Plan") proposed by Today's Man, Inc.
("the Company") and certain of its subsidiaries. On December 31, 1997, the
Reorganization Plan became effective and the Company emerged from bankruptcy
reorganization proceedings. Those proceedings had begun on February 2, 1996 when
the Company and certain of its subsidiaries filed voluntary petitions in seeking
to reorganize under Chapter 11 of the U.S. Bankruptcy Code.
Pursuant to the Reorganization Plan, the Company paid an aggregate of $51.0
million and issued 9,656,269 shares of Common Stock to its creditors in
settlement of $73.3 million of outstanding indebtedness, including post-petition
interest. Under the Reorganization Plan, holders of the Company's Common Stock
received for each share of old Common Stock: (1) one share of new Common Stock
and (2) 0.5 of a Common Stock Purchase Warrant ("Warrant"). Each whole Warrant
entitles the holder to purchase one share of New Common Stock at an exercise
price of $2.70 per share at any time on or before the expiration date of
December 31, 1999. During fiscal 1999, the expiration date of the Warrants was
extended to January 2, 2001. At January 30, 1999 approximately $1,100,000
remained to be distributed; these amounts were distributed in April 1999. A
total of 5,430,503 Warrants were issued to the Company's pre-reorganization
shareholders.
2. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company operates menswear superstores specializing in tailored
clothing, furnishings and accessories and sportswear. The Company also offers
footwear through licensed shoe departments. The superstores are located in the
Greater Philadelphia, Washington, D.C., Baltimore and New York Markets.
QUASI-REORGANIZATION
As of January 30, 1998, the Company effected a quasi-reorganization through
the application of $27,316,200 of its $74,115,700 Common Stock account to
eliminate its retained deficit. The Company's Board of Directors decided to
effect a quasi-reorganization given that the Company had completed its
restructuring, obtained long-term financing and successfully emerged from
bankruptcy. The Company's retained deficit was related to operations that
resulted in the restructuring of the Company and losses incurred during the
Chapter 11 proceeding and was not, in management's view, reflective of the
Company's financial condition.
FINANCIAL REPORTING FOR BANKRUPTCY PROCEEDINGS
The American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), provides guidance for financial reporting by
entities that have filed petitions with the Bankruptcy Court and expect to
reorganize under Chapter 11 of the Bankruptcy Code.
F-7
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Under SOP 90-7, the financial statements of an entity in a Chapter 11
reorganization proceeding should distinguish transactions and events that are
directly associated with the reorganization from those of the operations of the
ongoing business as it evolves. Accordingly, SOP 90-7 requires the following
financial reporting/accounting treatments with respect to each of the financial
statements.
Consolidated Statement of Operations
Pursuant to SOP-90-7, revenues and expenses, realized gains and losses, and
provisions for losses resulting from the reorganization of the business are
reported in the Consolidated Statement of Operations separately as
reorganization items. Professional fees are expensed as incurred. Interest
expense of $7,264,000, in fiscal 1997, was recorded as part of the settlement
negotiated with the Official Committee of the Unsecured Creditors.
Consolidated Statement of Cash Flows
Reorganization items are reported separately within the operating,
investing and financing categories of the Consolidated Statement of Cash Flows.
CREDIT CARD RECEIVABLES
The Company sells through third-party credit cards and collects related
receivables, generally within four days.
INVENTORY
Inventory consisting of merchandise held for sale is valued at cost, using
the retail method, which is not in excess of market.
PREPAID INVENTORY PURCHASES
Prepaid inventory purchases includes costs associated with merchandise
acquired which has not been received as of the Consolidated Balance Sheet date.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization is
computed using the straight-line method for financial reporting purposes and
accelerated methods for tax purposes over the estimated useful lives of the
assets, ranging from 3-22 years, or the terms of applicable leases, if shorter
and accelerated methods for tax purposes.
CASH AND CASH EQUIVALENTS
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments purchased with an initial maturity of
three months or less to be cash equivalents. The Company held no such
investments as of January 30, 1999 and January 29, 2000.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions are eliminated. The Company operates on a
52-53 week with fiscal year end being the Saturday closest to January 31.
F-8
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS (LOSS) PER COMMON SHARE
Earnings per share is calculated following Financial Accounting Standards
Board issued Statement No. 128 Earnings per Share. Statement 128 requires
companies to present basic and diluted earnings per share. Basic earnings per
share excludes any dilutive effect of outstanding stock options whereas diluted
earnings per share include the effect of such items. There is no difference
between basic and diluted earnings per share because the effect of the Company's
common share equivalents would not be dilutive.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform with the
current year presentation.
PREOPENING COSTS
Non-capital costs associated with the opening of new locations are expensed
in the year of opening.
ADVERTISING
The Company utilizes both broadcast and print advertising and expenses
related costs as incurred. Advertising expense was $11,198,500, $12,246,000 and
$17,671,500 for the fiscal years 1997, 1998 and 1999, respectively.
REVENUE RECOGNITION
The Company recognizes revenue at the point of sale.
COMPANY OPERATIONS
The Company's financial statements have been presented on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. In fiscal 1999, the Company
incurred a net loss of $13,355,700 and its operations required a net use of cash
of $7,441,200. The net loss was caused mainly by a significant shortfall in
revenues, a decline in gross profit and advertising spending on a branding
campaign that was not effective.
The Company has been substantially dependent upon borrowings under its
credit facility to finance its operations and received an amended credit
facility from Mellon in May 2000, which allows the Company additional liquidity
through an over-advance facility through November 30, 2000 as further discussed
in Note 5. Additionally, the Company is in the process of implementing a plan to
reverse the trend of losses noted above. Management's plans implemented thus
far, as well as actions initiated that will continue into fiscal 2000 include,
the execution of the amended credit facility, a layoff of non-operating
personnel in January 2000, the reduction in advertising spending and focus on
their traditional advertising approach, and the closing of three
under-performing stores in April 2000.
Management believes the cash requirements in 2000 will be generated by
operations and borrowings on the Company's credit facility. Management also
believes that the actions initiated and its 2000 plans will result in the
successful funding of its working capital and cash requirements while enabling
them to meet their financial covenants under their credit facility.
RECENT ACCOUNTING PRONOUNCEMENTS
Included in net sales are gross sales from our licensed shoe department of
$12,642,600, $12,208,100, and $10,357,600 for 1997, 1998 and 1999, respectively.
In December 1999 the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements",
which effectively changes previous guidance related to the recording of licensed
business revenues for retail companies. In fiscal 2000, the Company will change
its method of recording licensed shoe department sales. This change will reduce
reported sales and reported expenses, but have no impact on operating or net
income.
3. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
January 30, January 29,
1999 2000
------------ ------------
Furniture, fixtures and signs $ 5,083,400 $ 6,741,900
Leasehold improvements 32,765,500 33,099,600
Data processing equipment 5,048,200 7,934,200
Fixtures and equipment under capital leases 5,963,600 7,119,800
Fixtures and equipment in process 649,800 68,200
------------ ------------
Gross property and equipment 49,510,500 54,963,700
Accumulated depreciation (13,443,600) (16,525,000)
Accumulated amortization of equipment under
capital leases (3,402,000) (4,203,400)
------------ ------------
Net property and equipment $ 32,664,900 $ 34,235,300
============ ============
F-9
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property and equipment accounts and their associated accumulated
depreciation accounts are reduced to "0" when the asset's useful life has
expired. Depreciation and amortization expense related to property and equipment
was $3,258,500, $3,441,700 and $4,339,400 for fiscal years 1997, 1998 and 1999,
respectively. Fixtures and equipment in process includes items for new systems,
equipment, and stores which as of the respective financial statement date have
not been placed into service.
4. RELATED PARTY TRANSACTIONS
Certain of the Company's superstores and its executive offices and
distribution center are leased from the Company's Chairman, President and Chief
Executive Officer (CEO). Rent expense on these locations was $1,702,400,
$1,789,400 and $1,817,300 for the fiscal years ended January 31, 1998, January
30, 1999 and January 29, 2000, respectively. Pursuant to the Company's Plan of
Reorganization, the Company's CEO was paid approximately $900,000 in settlement
of pre-petition obligations arising from leases with the Company. In addition,
the CEO received a $3.3 million credit to be used towards the purchase of stock
in the equity offering and 938,190 additional shares of common stock in
satisfaction of his $5.0 million subordinated loan and accrued interest.
Included in the schedule of operating lease commitments in Note 7 are
required payments on leases with the Company's CEO for its principal offices and
distribution center as well as certain stores, totaling $1,728,300 for each of
the next five years and $10,699,200 thereafter.
Certain of the leases require increasing payments based upon changes in the
Consumer Price Index.
5. DEBT
As more completely described in Note 1, all amounts outstanding under the
Company's pre-petition debt facilities were satisfied pursuant to the Company's
Plan of Reorganization, including claims for post-petition interest. Upon
satisfaction of the obligations, any and all liens were removed by the
pre-petition debt holders.
On December 31, 1997, the Company entered into a Loan and Security
Agreement with Foothill Capital Corporation ("Foothill"), individually and as
agent. The Loan and Security Agreement provided for a $12.5 million term loan
and a $30.0 million revolving credit facility. The Company granted Foothill
Capital Corporation a lien on its tangible and intangible assets to secure this
term loan and revolving credit facility. Proceeds from these loans were used to
fund a portion of the Company's Plan of Reorganization.
On December 4, 1998, the Company entered into a Loan and Security Agreement
with Mellon Bank, N.A., ("Mellon") individually and as agent. The Loan and
Security Agreement provided for a $45.0 million revolving credit facility with a
$20.0 million sublimit for letters of credit. The Mellon Loan and Security
Agreement contains financial covenants including tangible net worth,
indebtedness to tangible net worth and fixed charge coverage ratios, and
limitations on new store openings and capital expenditures as well as
restrictions on the payment of dividends. The Company granted Mellon a lien on
its tangible and intangible assets to secure this revolving credit facility.
F-10
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Proceeds from this loan were used to refinance the Company's previous revolving
credit facility and term loan from Foothill Capital Corporation. As a result of
this refinancing, the Company incurred a prepayment penalty of approximately
$720,000 and wrote off approximately $640,000 of unamortized debt issuance
costs. These amounts were offset by approximately $315,000 in accrued debt
discount and related liabilities and approximately $387,000 in income tax
benefits related to this extraordinary item.
The Mellon revolving credit facility bore interest at the option of the
Company at prime (8.50% at January 29, 2000) or LIBOR plus a margin ranging from
1.75% to 3.25% depending upon the Company's EBITDA. Availability under the
revolver is determined by a formula based on inventory and credit card
receivables, less applicable reserves.
In April 1999, the Company and Mellon amended the Loan Agreement to allow
for the inclusion of participant lenders and to modify certain other provisions
including the tangible net work and fixed charge coverage ratio covenant.
During the fourth quarter of fiscal 1999, the Company was projecting a
liquidity shoftfall in early fiscal 2000 under its revolving credit facility. To
address the liquidity shortfall, the Company obtained a temporary over-advance
of $4.5 million above its calculated borrowing base from Mellon on February 11,
2000. In addition, the Company and Mellon agreed to recast certain financial
covenants to reflect the year-end operating results. On March 15, 2000, the
Company and Mellon entered into amendment No. 3 to the Loan and Security
Agreement. The revolving credit facility was reduced to $35.0 million with a
$15.0 million sublimit for letters of credit. Within the credit facility is an
over-advance facility of $4.5 million above the calculated borrowing base which
is reduced to $3.4 million on May 15, 2000 and $2.5 million on June 16, 2000 and
expires on June 30, 2000. The revolving credit facility expires on March 15,
2002 and bears interest at 0.75% per annum above Mellon Bank's prime rate. The
amended Agreement recast all of the Company's financial covenants as of and for
the year ended January 29, 2000 and for the remaining term of the loan
agreement. The Agreement contains financial covenants related to tangible net
worth, indebtedness to tangible net worth, fixed charge coverage ratios, maximum
net loss per month, and limitations on new store openings and capital
expenditures as well as restrictions on the payments of dividends. Additionally,
Mr. David Feld, the Chairman and CEO agreed to provide additional collateral to
secure the credit facility. The Company was in compliance with all covenants
under the amended Agreement as of January 29, 2000. The amended bank Agreement
also includes a termination fee of $1.0 million if the Company terminates the
facility before March 15, 2001, and $700,000 if termination occurs from March
16, 2001 through March 14, 2002.
On May 1, 2000 the Company and Mellon entered into Amendment 4 to
include Todaysman.com, a subsidiary of the Company, into the revolving
credit facility.
On May 11, 2000, the Company and Mellon entered into Amendment 5 to the
revolving credit facility. The agreement amends the credit facility to extend
the over-advance facility of $2,500,000 which previously expired on June 30,
2000 to August 15, 2000. The over-advance is reduced to $2,250,000 on August 16,
2000, $1,250,000 on September 16, 2000, $1,000,000 on October 16, 2000 and
expires on November 30, 2000. Amendment 5 also revised certain financial
covenants to provide a waiver for the $4.0 million charge to operations caused
by the store closings dicussed in Note 11. The amendment also provided for a
reduction in the credit facility from $35 million to $30 million effective on
November 30, 2000. The termination fee was also increased to $1,050,000 if the
facility is terminated on or before March 14, 2002.
6. COMMITMENTS AND CONTINGENCIES
The Company leases its stores and distribution center under non-cancelable
operating leases. Several stores and the Company's distribution center are
leased from the Company's Chairman and CEO. (See Note 4) In addition, certain
equipment leases are classified as capital leases. The following is a schedule
by year of the future minimum lease payments for leases with initial terms in
excess of one year at January 29, 2000:
Capital Operating
Leases Leases
----------- -----------
2000 $ 540,500 $13,984,400
2001 331,900 13,089,200
2002 330,600 11,967,100
2003 313,200 10,789,800
2004 203,100 8,155,200
Thereafter 100 38,328,600
----------- -----------
Total minimum lease payments 1,719,400 $96,314,300
===========
Less:
Amounts representing interest 381,200
-----------
Present value of net minimum lease payments $ 1,338,200
===========
F-11
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total rent expense for the fiscal years ended January 31, 1998, January 30,
1999 and January 29, 2000 was, $11,825,000, $12,087,100, and $12,963,600
respectively.
The distribution center lease provides for payment of direct operating
costs including real estate taxes. Certain store leases provide for increases in
rentals when sales exceed specified levels. To date, no such payments have been
required.
Certain store leases provide for predetermined escalations in future
minimum annual rentals. The pro rata portion of future minimum rent escalations,
amounting to $3,135,400 and $2,945,200 at January 30, 1999 and January 29, 2000
respectively, has been included in Deferred rent and other in the accompanying
Consolidated Balance Sheet.
The Company is involved in routine legal proceedings incidental to the
conduct of its business. Management believes that none of these routine legal
proceedings will have a material adverse effect on the financial condition or
results of operations of the Company. The Company maintains general liability
insurance coverage in amounts deemed adequate by management.
7. PROFIT SHARING PLAN
The Company has a profit sharing plan under Section 401(k) of the Internal
Revenue Code. The plan allows all eligible employees to defer up to 6% of their
income on a pretax basis through contributions to the plan. Under the provisions
of the plan, the Company matches 40% of the employees' contributions subject to
a maximum limit.
The charge to operations for Company contributions was $279,000, $287,600
and $327,200 for the years ended, January 31, 1998, January 30, 1999 and January
29, 2000, respectively.
On the termination of the Company's Executive Equity Plan in fiscal 1991,
the Company provided loans to the Plan's participants to fund any federal and
state income taxes relating to the issuance of the shares. The loans bear
interest at 1% above the prime lending rate as established by the Company's
principal lender. All principal and accrued interest was due on April 14, 1996.
Loans are collateralized by the participants' shares of Common Stock. At this
time, the Company has made no decision relative to the collection of these
loans.
8. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
For the Fiscal Years Ended
--------------------------------------------------
January 31, January 30, January 29,
1998 1999 2000
------------- ---------- ----------
<S> <C> <C> <C>
Interest paid $ 7,723,400 $3,367,600 $1,741,800
Noncash investing and financing activities:
Settlement of pre-petition obligations
through issuance of shares of Common
stock and Credit for stock rights $ 22,845,900 $ -- $ --
</TABLE>
F-12
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
A reconciliation of the effective tax rate with the statutory federal
income tax rate follows:
For the Fiscal Years Ended
-----------------------------------
January 31, January 30, January 29,
1998 1999 2000
------ ----- ------
Statutory federal income tax rate 34.0% 34.0% 34.0%
State income tax, net of federal income tax
effects -- -- --
Effect of permanent differences (18.3) 0.5 (0.3)
Income tax valuation allowance (15.7) -- (33.7)
Other -- -- --
Quasi reorganization equity accounting -- 2.5 --
------ ----- ------
--% 37.0% --%
------ ----- ------
The components of the deferred tax assets and liabilities are as follows:
January 30, January 29,
1999 2000
------------ ------------
Deferred tax assets:
Accrued liabilities $ 88,100 $ 313,300
Inventory 434,500 486,600
Net operating loss carryforward 9,220,100 13,172,100
AMT credit carryforward 394,300 394,300
Leases 1,273,000 1,180,700
Bad debts 25,000 5,100
Other 49,700 49,700
------------ ------------
Total deferred tax assets 11,484,700 15,601,800
Less: deferred tax valuation allowance (10,270,100) (14,903,100)
------------ ------------
Net deferred tax assets 1,214,600 698,700
------------ ------------
Deferred tax liabilities:
Property and equipment, including
capital leases 678,200 281,500
Other 936,400 817,200
------------ ------------
1,614,600 1,098,700
------------ ------------
Net deferred tax liability $ 400,000 $ 400,000
============ ============
The valuation allowance against deferred tax assets increased by $4,633,000
in fiscal 1999 due to the increase in net operating loss carryforwards.
F-13
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As a result of the Company's quasi-reorganization (see Note 2), the Company
is required to record a charge in lieu of income taxes for federal and state
taxes that are eliminated by the utilization of tax benefits existing at the
quasi-reorganization date, and result in an increase to contributed capital. At
January 29, 2000, there is no charge in lieu of income taxes being reflected due
to the post quasi-reorganization loss. As of January 29, 2000, the Company has
remaining $10,588,000 of tax attributes that will be credited to additional paid
in capital when realized.
At January 29, 2000, the Company had available for carryforward net
operating losses (for federal tax purposes) of $28,627,600 and a minimum tax
credit carryover of $394,000. The NOL carryforwards expire in 2012 through 2019;
the minimum tax credits can be carried forward indefinitely. Additionally, at
January 29, 2000, the Company had available carryforward losses for state tax
purposes in the states in which the Company does business. These deferred tax
assets are fully offset by the valuation allowance.
10. STOCK OPTION PLANS
Pursuant to the Plan of Reorganization: (i) the existing employee and
director stock option plan and all existing options thereunder were canceled and
(ii) the Management Stock Option Plan ("Management Plan") was adopted. At
January 29, 2000, the Company had outstanding options to purchase an aggregate
of 1,911,900 shares of Common Stock under the Management Stock Option Plan. The
following tables summarize activity in fiscal 1997, fiscal 1998 and fiscal 1999.
MANAGEMENT STOCK OPTION PLAN
Number of
Shares Under Exercise Price Per
Option Share
---------- -------------
Outstanding at February 1, 1997 -- --
Options issued December 31, 1997 2,247,500 $2.38
Exercised -- --
---------- -------------
Outstanding at January 31, 1998 2,247,500 $2.38
Options issued 44,000 $1.31 - $2.38
Options cancelled (293,200) $2.38
Exercised (800) $2.38
---------- -------------
Outstanding at January 30, 1999 1,997,500 $1.31 - $2.38
Options issued 362,500 $1.28 - $2.38
Options cancelled (448,100) $2.38
---------- -------------
Outstanding at January 29, 2000 1,911,900 $1.28 - $2.38
========== =============
Exercisable at January 29, 2000 1,323,200 $1.28 - $2.38
========== =============
F-14
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Options to purchase an aggregate of 2,450,000 shares of Common Stock may be
granted pursuant to the Management Stock Option Plan. Options are granted at the
fair market value at the date of grant. At January 29, 2000, 537,300 shares were
available for grant. The unexercisable options issued vest over three years. All
options issued expire ten years from the date of grant.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
because the market price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro-forma information regarding net income and earnings per share is
required using the alternative fair value accounting provided for under FASB
Statement No. 123. The fair value for these options was estimated at the date of
the grant using a Black-Scholes option pricing model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Risk-free interest rate 6.0% 6.0%
Dividend yield 0% 0%
Volatility factor of the expected market price of the Company's
common stock 0.702 0.626
Weighted average expected life of the options 5 5
</TABLE>
Fair Value of options issued in which the exercise price equals fair value was
$1.52, $1.36 and $0.86 as of January 31, 1998 January 30, 1999 and January 29,
2000, respectively. The fair value of options issued in which the exercise price
is greater than fair value was $0.23 as of January 29, 2000.
For purposes of pro-forma disclosure, the estimated fair value of the
options issued as part of the Management Plan is amortized to expense in
accordance with the options vesting period. The Company's pro-forma information
is as follows:
1998 1999
---- ----
Pro-Forma net income (loss) $3,672,600 $(13,810,200)
Pro-Forma earnings per share:
Basic and diluted $0.14 $(0.51)
===== =======
F-15
<PAGE>
TODAY'S MAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENT
In April 2000, the Company decided to close three under-performing stores,
including one store located in a building owned by the Company's CEO. The
closing of the three stores will result in a charge to operations in the first
equarter of fiscal 2000 of approximately $4 million for the write-off of
furniture and fixtures and lease termination costs. The three stores which
generated sales of $13,192,000 of sales in fiscal 1999 are expected to be closed
by September, 2000.
F-16
<PAGE>
<TABLE>
<S> <C>
DIRECTORS CORPORATE OFFICES
DAVID FELD 835 Lancer Drive
Chairman of the Board, President and Chief Executive Officer Moorestown, New Jersey 08057
Today's Man, Inc Telephone: (856) 235-5656
INDEPENDENT AUDITORS
LEONARD WASSERMAN Ernst & Young LLP
Two Commerce Square
LARRY FELD 2001 Market Street
Vice President, Store Development and Secretary Philadelphia, Pennsylvania 19103
Today's Man, Inc.
COUNSEL
VERNA GIBSON Blank Rome Comisky & McCauley LLP
Partner, Retail Options, Inc. One Logan Square
Philadelphia, Pennsylvania 19103-6998
EXECUTIVE OFFICERS TRANSFER AGENT AND REGISTRAR
StockTrans, Inc.
DAVID FELD Seven East Lancaster Avenue
Chairman of the Board, President and Chief Executive Ardmore, Pennsylvania 19003
Officer
FRANK E. JOHNSON
Executive Vice President, Chief Financial Officer and Treasurer
DAVID MANGINI
Executive Vice President, Chief Merchandising Officer
LARRY FELD
Vice President, Store Development and Secretary
BARRY PINE
Vice President and Controller
</TABLE>
EXHIBIT 10.18
SECOND AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AGREEMENT") is made effective as of October 13, 1999 by and among TODAY'S MAN,
INC., a Pennsylvania corporation ("BORROWER"); each of the Subsidiaries of the
Borrower identified under the caption "Guarantor" on the signature pages of this
Agreement (individually, a "GUARANTOR" and, collectively, the "GUARANTORS");
each of the financial institutions identified under the caption "Lenders" on the
signature pages of this Agreement (including without limitation Mellon in such
capacity) (individually, a "LENDER" and, collectively, the "LENDERS"); and
MELLON BANK, N.A., a national banking association, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the "AGENT").
BACKGROUND
A. Borrower, Guarantors, Lenders and Agent previously entered into a
certain Loan and Security Agreement dated December 4, 1998, as amended by that
certain First Amendment and Modification to Loan and Security Agreement dated
April 28, 1999 (as amended, the "LOAN AGREEMENT"), pursuant to which, inter
alia, Lenders agreed to extend to Borrower a revolving credit facility up to a
maximum outstanding principal amount of Forty Five Million Dollars
($45,000,000.00).
B. Borrower and Guarantors have requested and Lenders and Agent have agreed
to amend the terms of the Loan Agreement in accordance with the terms and
conditions hereof.
C. Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth for such terms in the Loan Agreement.
D. NOW, THEREFORE, in consideration of foregoing premises and intending to
be legally bound hereby, the parties hereto agree as follows:
1. EXPANSION STORE SUBLIMIT. SECTION 3.7 of the Loan Agreement shall be and
is hereby amended to read, in its entirety, as follows:
"3.7 EXPANSION STORE SUBLIMIT . Notwithstanding anything herein
or elsewhere to the contrary, Agent may permit Out-of-Formula
Advances under the Revolving Credit Facility in an amount up to
$500,000.00 outstanding at any time (the "EXPANSION STORE
SUBLIMIT"), which Advances may only be used by Borrower to
finance the cost of acquiring finished goods inventory to be sold
from and at new retail store locations opened by Borrower after
the date of this Agreement.
<PAGE>
No more than five (5) Advances under the Expansion Store Sublimit
shall be permitted in any Loan Year. Each Advance under the
Expansion Store Sublimit must be in increments of $100,000.00.
Each Advance under the Expansion Store Sublimit shall be repaid
in twelve (12) equal and consecutive monthly installments on the
first day of each calendar month commencing on the first day of
the calendar month after such Advance is made. To the extent not
previously repaid all of such Advances shall be repaid in full on
the expiration date of the Contract Period. Borrower may not
prepay such Advances. All payments required to be made by
Borrower in connection with Advances under the Expansion Store
Sublimit may be made, at Agent's option, by Agent debiting the
Borrower's operating account maintained by Borrower with Agent.
The Expansion Store Sublimit shall only be available to Borrower
at the option of Agent. On or before December 1 of each year
Agent will notify Borrower whether the Expansion Store Sublimit
will continue to be made available to Borrower for the next
twelve-month period. In the absence of such notice, the Expansion
Store Sublimit will be available to Borrower for the next
twelve-month period.
Notwithstanding anything herein or elsewhere to the contrary: (a)
the outstanding principal of all Advances under the Revolving
Credit Facility, including without limitation Advances under the
Expansion Store Sublimit, but excluding Advances to pay interest,
fees and Lender Group Expenses, shall not exceed the Maximum
Revolving Credit Facility; (b) upon the occurrence of a Default,
at the option of Agent, Borrower shall not be entitled to receive
any further Advances under the Expansion Store Sublimit; and (c)
Borrower may only use Advances under the Expansion Store Sublimit
to finance the cost of acquiring finished goods inventory to be
sold from and at new retail store locations opened by Borrower
after the date of this Agreement."
2. APPLICABLE MARGIN. SECTION 6.4 of the Loan Agreement shall be and is
hereby amended to read, in its entirety, as follows:
"6.4 The "APPLICABLE MARGIN" is equal to the percent per annum in
excess of the Base Rate or LIBOR Rate as set forth in the
following pricing matrix:
2
<PAGE>
<TABLE>
<CAPTION>
REVOLVING CREDIT
REVOLVING FACILITY
CREDIT FACILITY [NON-EXPANSION EXPANSION STORE
[ALL ADVANCES] STORE SUBLIMIT] SUBLIMIT
Level Borrower's Annual Base Rate LIBOR Rate LIBOR Rate
EBITDA + + +
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Level I < $9,000,000 .50% 3.00% 3.50%
Level II > $9,000,000 < $10,000,000 .25% 2.75% 3.25%
-
Level II > $10,000,000 < $15,000,000 .125% 2.50% 3.00%
-
Level IV > $15,000,000 < $25,000,000 .00% 2.25% 2.75%
-
Level V > $25,000,000 < $30,000,000 .00% 2.00% 2.50%
-
Level VI > $30,000,000 .00% 1.75% 2.25%
-
</TABLE>
From September 30, 1999 through the date of receipt of the
Borrower's fiscal year-end January 31, 2000 audited financial
statements, the Applicable Margin for Advances under the
Revolving Credit Facility shall be the Applicable Margin set
forth on Level II in the above-described pricing matrix.
Thereafter, the Applicable Margin will be based upon Borrower's
EBITDA on an annual basis as reflected on Borrower's year-end
audited financial statements delivered to Agent pursuant to
SECTION and absent an Event of Default, provided, however, if the
Borrower's year end financial statements are not delivered at the
time specified in SECTION below, then the Applicable Margin for
any given kind of Loan shall, in the event that such statements
are not delivered within two (2) Business Days of receipt of
notice from the Agent, be the highest Applicable Margin set forth
above for such kind of Loan during any period that the Borrower
is delinquent in the delivery of such financial statements,
provided further, that if such financial statements are not
delivered within thirty (30) days after the original due date,
then interest shall accrue, at the option of Agent, at the
Default Rate."
3. NEW STORE LOCATIONS. SECTION 12.24 of the Loan Agreement shall be and is
hereby amended to read, in its entirety, as follows:
"12.24 NEW STORE LOCATIONS.
(a) Borrower will not open any more than four (4) new stores
during its fiscal year ending January 31, 2000. Borrower will not
open any more than three (3) new stores during its
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fiscal year ending January 31, 2001. Borrower will not open any
more than six (6) new stores in any fiscal year after its fiscal
year ending January 31, 2001 without the consent of Agent. If
Borrower opens less than six (6) new stores in any fiscal year
after its fiscal year ending January 31, 2001 ("UNOPENED
STORES"), the number of new stores which may be opened in the
next fiscal year may be increased by the number of such Unopened
Stores, provided that, in no event may Borrower open more than
eight (8) new stores in any one fiscal year without the consent
of Agent. As a condition of opening each new location, Borrower
will (i) deliver to Agent at least ninety (90) days prior written
notice of its intent to open a new store; (ii) use its best
efforts to provide to Agent (for the pro rata benefit of the
Lenders) a first priority perfected Mortgage, a Landlord's
Consent and a recorded Memorandum of Lease for each new store
location in form and content acceptable to Agent; (iii) deliver
to Agent any UCC-1 financing statements required by Agent to
perfect Agent's first priority Lien in assets of Borrower located
on such premises; (iv) deliver to Agent search reports in form
and content acceptable to Agent indicating that there are no
Liens encumbering Borrower's assets at such new location except
the Lien in favor of Agent (for the pro rata benefit of Lenders);
and (v) deliver to Agent such legal opinions regarding the
Mortgage and related documents as Agent may require.
(b) In the event that Borrower receives proceeds as a result
of the payment of the exercise price of the existing Warrants
currently issued by Borrower (collectively, "WARRANT PROCEEDS"),
Borrower may utilize such Warrant Proceeds to open additional new
stores in excess of the number permitted under SECTION, provided
that (i) Borrower complies with the requirements set forth in
subsection SECTION (I) THROUGH (V) for such additional new
stores; (ii) the funds paid from the Warrant Proceeds to open
such additional new stores must be spent within twenty-four (24)
months of the termination date for the exercise of the Warrants;
(iii) no more than three (3) additional new stores may be opened
in the fiscal year ending January 31, 2001 or in the fiscal year
ending January 31, 2002; and (iv) no more than fifteen (15) new
stores, including new stores opened pursuant to SECTION and this
SECTION, may be opened between February 1, 2000 and January 31,
2002.
(C) Notwithstanding anything herein or elsewhere to the
contrary, if an Event of Default has occurred, Borrower may
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not open any new stores thereafter without the prior consent of
Agent."
4. TANGIBLE NET WORTH. SECTION 13.1 of the Loan Agreement shall be and is
hereby amended to read, in its entirety, as follows:
"13.1 TANGIBLE NET WORTH. Borrower will maintain Tangible
Net Worth of not less than (a) $49,500,000 as of February 1, 1999
and at all times thereafter until January 30, 2000; (b)
$55,500,000 as of January 31, 2000; (c) $54,500,000 as of
February 1, 2000 and at all times thereafter until January 30,
2001; (d) $61,000,000 as of January 31, 2001 and at all times
thereafter until January 30, 2002; and (e) $66,400,000 as of
January 31, 2002 and at all times thereafter."
5. CAPITAL EXPENDITURES. SECTION 13.3 of the Loan Agreement shall be and is
hereby amended to read, in its entirety, as follows:
"13.3 CAPITAL EXPENDITURES. Borrower will not cause, suffer
or permit Borrower's aggregate annual Capital Expenditures to
exceed (a) $4,000,000 for the fiscal year ending January 31,
1999; (b) $6,500,000 for the fiscal year ending January 31, 2000;
and (c) $7,500,000 for the fiscal year ending January 31, 2001
and for each fiscal year thereafter. To the extent that the
permitted amount of Capital Expenditures are not used in any one
fiscal year, the unused portion not to exceed fifty percent (50%)
of permitted Capital Expenditures for such year may be utilized
in the following fiscal year. The limitations on permitted
Capital Expenditures set forth above shall not apply to Capital
Expenditures funded with Warrant Proceeds as permitted under
SECTION or to Capital Expenditures made by Borrower to repair or
replace items damaged by a casualty loss."
6. FIXED CHARGE COVERAGE RATIO. SECTION 13.4 of the Loan Agreement shall be
and is hereby amended to read, in its entirety, as follows:
"13.4 FIXED CHARGE COVERAGE RATIO. Borrower will maintain a
Fixed Charge Coverage Ratio tested quarterly on a rolling four
(4) quarters basis of not less than (a) 1.1 to 1.0 for the fiscal
quarters ending January 31, 1999, April 30, 1999 and July 31,
1999, respectively; (b) .80 to 1.0 for the fiscal quarter ending
October 31, 1999; (c) 1.0 to 1.0 for the fiscal quarters ending
January 31, 2000, April 30, 2000, July 31, 2000 and October 31,
2000, respectively; and (d) 1.5 to 1.0 for the fiscal
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quarter ending January 31, 2001 and for each fiscal quarter end
thereafter."
7. WARRANTS. Borrower has requested that Bank agree to the amendment of
certain outstanding Warrant Agreements issued by Borrower. Notwithstanding
SECTION 12.29 of the Loan Agreement. Bank consents to the amendment of the terms
of such outstanding Warrants Agreements, provided that, no other material
amendments will be made to such Warrant Agreements except for the extension of
the termination of the exercise date of such Warrants from December 31, 1999 to
a date no later than June 30, 2001. Borrower agrees to deliver to Bank a copy of
the amended Warrant Agreement at such time that it is circulated to the Warrant
Holders for execution. The copy of the Warrant Agreement attached as EXHIBIT L
to the Loan Agreement will be replaced and superceded by such amended copy of
the Warrant Agreement. Borrower represents and warrants that such amended
Warrant Agreement will be a true and complete copy of the form of amended
Warrant Agreement utilized for all outstanding Warrants ("WARRANTS") issued by
Borrower and that there will have been no other modifications or amendments
thereto. Borrower represents and warrants that Borrower has not entered into any
agreements with the holders of any such Warrants modifying or amending the terms
thereof, including without limitation, any agreement requiring Borrower to
purchase or repurchase any Warrants or stock issued pursuant to such Warrants.
8. AMENDMENT FEE. Borrower shall pay to Bank an amount equal to Fifty
Thousand Dollars ($50,000.00) (the "AMENDMENT FEE"), which Amendment Fee is
fully earned and shall be due and payable upon the execution of this Agreement.
9. REPRESENTATION WARRANTIES. Borrowers and Guarantors hereby represent and
warrant, which representations and warranties shall survive until all
Obligations are paid and satisfied in full, as follows:
(a) All representations and warranties of Borrower and Guarantors set
forth in the Loan Documents are true and complete as of the date hereof.
(b) No condition or event exists or has occurred which would
constitute an event of default under the Loan Documents or under any other
agreement between Borrower, any Guarantor and any other third party (or
would, upon the giving of notice or the passage of time, or both constitute
an event of default).
(c) Borrower has not received any notice of default or event of
default from any other lender, trustee or lessor with respect to any other
loan, financing or lease agreement.
(d) The execution and delivery of this Agreement by Borrower and
Guarantors and all documents and agreements to be executed and delivered
pursuant to the terms hereof:
(i) have been duly authorized by all requisite corporate action
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by Borrower and by each Guarantor;
(ii) will not conflict with or result in the breach of or
constitute a default (upon the passage of time, delivery of notice or
both) under Borrower's or any Guarantor's Articles of Incorporation,
By-Laws or any applicable statute, law, rule, regulation or ordinance
or any indenture, mortgage, loan or other document or agreement to
which Borrower or any Guarantor is a party or by which any of them is
bound or affected; and
(iii) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
property or assets of Borrower or any Guarantor, except liens in favor
of the Agent or as permitted hereunder or under the Loan Documents.*
10. CERTAIN FEES, COSTS, EXPENSES AND EXPENDITURES. Borrower will pay all
of the Agent's expenses in connection with the review, preparation, negotiation,
documentation and closing of this Agreement and the consummation of the
transactions contemplated hereunder, including without limitation, costs and
fees and expenses of counsel retained by Agent and all fees related to filings,
recording of documents and searches, whether or not the transactions
contemplated hereunder are consummated. Nothing contained herein shall limit in
any manner whatsoever any Lender's or Agent's right to reimbursement under any
of the Loan Documents.
11. COMMUNICATIONS AND NOTICES. All notices, requests and other
communications made or given in connection with this Agreement shall be made in
accordance with the provisions of the Loan Agreement.
12. TIME OF ESSENCE. Time is of the essence of this Agreement.
13. INCONSISTENCIES. To the extent of any inconsistencies between the terms
and conditions of this Agreement and the terms and conditions of the Loan
Documents, the terms and conditions of this Agreement shall prevail. All terms
and conditions of the Loan Documents not inconsistent herewith shall remain in
full force and effect and are hereby ratified and confirmed by Borrower and
Guarantors.
14. BINDING EFFECT. This Agreement and all rights and powers granted hereby
will bind and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
15. SEVERABILITY. The provisions of this Agreement and all other Loan
Documents are deemed to be severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.
16. NO THIRD PARTY BENEFICIARIES. The rights and benefits of this Agreement
and the Loan Documents shall not inure to the benefit of any third party.
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17. MODIFICATIONS. No modifications of this Agreement or any of the Loan
Documents shall be binding or enforceable unless in writing and signed by or on
behalf of the party against whom enforcement is sought.
18. HOLIDAYS. If the day provided herein for the payment of any amount or
the taking of any action falls on a Saturday, Sunday or public holiday at the
place for payment or action, then the due date for such payment or action will
be the next succeeding Business Day.
19. LAW GOVERNING. This Agreement has been made, executed and delivered in
the Commonwealth of Pennsylvania and will be construed in accordance with and
governed by the laws of such Commonwealth, without regard to any rules or
principles regarding conflicts of law or any rule or canon of construction which
interprets agreements against the draftsman.
20. HEADINGS. The headings of the Articles, Sections, paragraphs and
clauses of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
E. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the parties hereto concerning the subject matter set forth herein and supersedes
all prior or contemporaneous oral and/or written agreements and representations
not contained herein concerning the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BORROWER:
TODAY'S MAN, INC., a Pennsylvania corporation
By: ____________________________________
[CORPORATE SEAL] Frank E. Johnson, Executive Vice President
8
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GUARANTORS:
BENMOL, INC., a Delaware corporation
[CORPORATE SEAL]
By: ____________________________________
Frank E. Johnson, President
D&L, INC., a Delaware corporation
By: ____________________________________
Frank E. Johnson, President
[CORPORATE SEAL]
FELD & FELD, INC., a Delaware corporation
By: ____________________________________
Frank E. Johnson, President
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
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<PAGE>
(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
LENDERS:
MELLON BANK, N.A.
By: ____________________________________
Daniel K. Clancy, Vice President
AGENT:
MELLON BANK, N.A.
By: ____________________________________
Daniel K. Clancy, Vice President
10
EXHIBIT 10.19
THIRD AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AMENDMENT") is made effective as of March 15, 2000 by and among TODAY'S MAN,
INC., a Pennsylvania corporation ("BORROWER"); each of the Subsidiaries of the
Borrower identified under the caption "Guarantor" on the signature pages of this
Amendment (individually, a "GUARANTOR" and, collectively, the "GUARANTORS");
each of the financial institutions identified under the caption "Lenders" on the
signature pages of this Amendment (including without limitation Mellon in such
capacity) (individually, a "LENDER" and, collectively, the "LENDERS"); and
MELLON BANK, N.A., a national banking association, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the "AGENT").
BACKGROUND
Borrower, Guarantors, Lender and Agent previously entered into a certain Loan
and Security Agreement dated December 4, 1998, as amended by (i) that certain
First Amendment and Modification to Loan and Security Agreement dated April 28,
1999, and (ii) that certain Second Amendment and Modification to Loan and
Security Agreement dated October 13, 1999 (as amended, the "LOAN AGREEMENT"),
pursuant to which, inter alia, Lender agreed to extend to Borrower a revolving
credit facility up to a maximum outstanding principal amount of Forty-Five
Million Dollars ($45,000,000.00).
Borrower, Guarantors, Lender and Agent have also entered into certain interim
letter agreements pending completion of this Amendment.
Borrowers, Guarantors, Lender and Agent are entering into this Amendment to
amend certain terms and conditions of the Loan Agreement, including without
limitation, the following:
Establishing the Contract Period for the Revolving Credit Facility for a full
two (2) periods after the date of this Amendment; and
Providing for permitted Out-of-Formula Advances for a period of time.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth for such terms in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and intending to be
legally bound hereby, the parties hereto agree as follows:
CONTRACT PERIOD. The Contract Period is reset for a full two (2) year period
commencing on the date of this Agreement and expiring on March 15, 2002.
Accordingly, the definition of "Contract
<PAGE>
Period" in SECTION 1.1 of the Loan Agreement is amended to read in its entirety
as follows:
"CONTRACT PERIOD means a period of time commencing on the date of this
Agreement and expiring on March 15, 2002."
MAXIMUM REVOLVING CREDIT FACILITY AMOUNT. The Maximum Revolving Credit Facility
Amount is reset at $35,000,000. Accordingly the definition of "Maximum Revolving
Credit Facility" in SECTION 1.1 of the Loan Agreement is amended in its entirety
to read as follows:
"MAXIMUM REVOLVING CREDIT FACILITY AMOUNT means $35,000,000."
Borrower agrees to execute and deliver to Agent on or before March 22, 2000
replacement Notes in the aggregate amount of the revised Maximum Revolving
Credit Facility Amount, which replacement Notes are given in substitution and
replacement for the existing Notes and not in payment or satisfaction of such
existing Notes. Such replacement Notes shall be in form and content acceptable
to Agent. All references to Notes in the Loan Documents shall be deemed to be
references to the replacement Notes. Upon receipt of the original signed
replacement Notes by the Lenders, the Lenders will return to Borrower the prior
Notes marked "Replaced" or "Substituted".
INTEREST RATE. (A) GENERAL. Notwithstanding anything to the contrary contained
in the Loan Agreement or the Notes, effective as of the date hereof and at all
times hereafter, the "Base Rate plus Applicable Margin" as such term is used in
the Loan Agreement shall equal at all times three-quarter percent (3/4%) in
excess of the Base Rate in effect from time to time, each change to take effect
simultaneously with a corresponding change in the Base Rate without notice to
Borrower. Agent and Lender agree that ninety (90) days after Borrower receives
New Capital Funds in an amount at least equal to $12,000,000 (net of customary
transaction costs) as further described in SECTION 11 below and absent a Default
or an Event of Default, the "Base Rate plus Applicable Margin" as such term is
used in the Loan Agreement shall equal at all times one-quarter percent (1/4%)
in excess of the Base Rate in effect from time to time, each change to take
effect simultaneously with a corresponding change in the Base Rate without
notice to Borrower. Interest will be charged monthly in arrears and calculated
on the basis of a 360 day year.
(b) LIBOR RATE OPTION. Notwithstanding anything to the contrary contained
in the Loan Agreement, Borrower agrees that Borrower shall have no further right
to elect that any sums outstanding under the Notes may accrue interest at the
LIBOR Rate plus Applicable Margin. Notwithstanding the foregoing, Agent and
Lender agree that ninety (90) days after Borrower receives New Capital Funds in
an amount at least equal to $12,000,000 (net of customary transaction costs) and
absent a Default or an Event of Default, Borrower shall have the right to elect
that sums outstanding under the Notes accrue interest at the LIBOR Rate plus
Applicable Margin, provided that the Applicable Margin for such LIBOR Rate Loans
shall equal three percent (3%) per annum in excess of the LIBOR Rate. All other
limitations and requirements set forth in the Loan Agreement for LIBOR Rate
Loans shall continue for any new permitted LIBOR Rate Loans under this Section.
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<PAGE>
(c) BASE RATE DEFINITION. The definition of "Base Rate" in SECTION 1.1 of
the Loan Agreement is amended to read in its entirely as follows:
"BASE RATE the rate per annum which is the higher of (i) the Agent's Prime
Rate, or (ii) the Federal Funds Rate plus 1/2%, in effect from time to time
(such interest rate to change immediately upon any change in the Prime Rate
or Federal Funds Rate)."LETTERS OF CREDIT. In conjunction with the
resetting of the Maximum Revolving Credit Facility Amount, the sublimit for
Letters of Credit is reset. Accordingly, SECTION 4.4 of the Loan Agreement
is amended to read in its entirety as follows:
"SUBLIMITS. Agent shall have no obligation (a) to issue any Letter of
Credit, if the aggregate outstanding undrawn amount of all Letters of
Credit would exceed $15,000,000.00; (b) to issue any Standby Letters of
Credit, if the aggregate outstanding undrawn amount of all Standby Letters
of Credit would exceed $2,000,000.00; (c) to issue any Letter of Credit, if
a Default or Event of Default has occurred; or (d) to issue any Letter of
Credit if the Revolving Credit Facility Usage plus the amount of such new
Letter of Credit to be issued exceeds (i) the Borrowing Base plus permitted
Out-Of-Formula Advances under SECTION 9 of the Third Amendment and
Modification to this Agreement (as reduced by all Reserves), or (ii) the
Maximum Revolving Credit Facility Amount."
TERMINATION OF REVOLVING CREDIT FACILITY AND TERMINATION FEE. In conjunction
with the resetting of the Contract Period and the Maximum Revolving Credit
Facility Amount, the early termination fees are reset. Accordingly, SECTION 7.10
of the Loan Agreement is hereby amended to read in its entirety as follows:
"7.10 TERMINATION OF REVOLVING CREDIT FACILITY AND TERMINATION FEE .
Borrower may terminate the Revolving Credit Facility only upon at least
thirty (30) days' prior written notice to Agent and payment to Agent (for
the pro rata benefit of the Lenders) of a termination fee as set forth
below.
Such termination fee shall be payable if the Revolving Credit Facility is
terminated regardless of the source of funds used to repay in full the
Obligations, including without limitation financing provided by another
Person, financing provided by
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one or more of the Lenders, the proceeds of a debt or equity offering by
Borrower, a sale of any of the assets of Borrower or a "securitization" of
any assets of Borrower. The following termination fees shall be payable:
(i) If the termination occurs on or before March 15, 2001, the
termination fee will be equal $1,050,000.00.
(ii) If the termination occurs after March 15, 2001, but on or
before March 14, 2002, the termination fee will be equal to
$700,000.00.
In the event the Revolving Credit Facility is terminated as a result of an
Event of Default, Agent (for the pro rata benefit of the Lenders) shall be
entitled to receive the termination fee required to be paid under the prior
paragraphs. In the event that Agent, Requisite Lenders or all Lenders, as
required under this Agreement, agree to waive any Event of Default but
require as a condition of such waiver that the Contract Period be reduced
or the Revolving Credit Facility be terminated within a finite time period
after such waiver, Agent (for the pro rata benefit of the Lenders) shall be
entitled to receive the termination fee required to be paid under the prior
paragraphs.
The termination fee shall be presumed to be the amount of damages sustained
by Lenders as a result of such early termination and Borrower agrees that
it is reasonable under the circumstances currently existing. The early
termination fee provided for in this Section shall be deemed included in
the Obligations."
FINANCIAL COVENANTS. ARTICLE 13 of the Loan Agreement is hereby amended to
read in its entirety as follows:
"13.1. TANGIBLE NET WORTH. Borrower will maintain Tangible Net Worth
of not less than the following amounts for the following periods:
Amount Periods
------ -------
$48,809,000.00 as of November 30, 1999 and at all times thereafter
until January 28, 2000;
$39,340,000.00 as of January 29, 2000 $36,500,000.00 as of January
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30, 2000 and at all times thereafter until
April 28, 2000;
$37,000,000.00 as of April 29, 2000 and at all times thereafter
until June 30, 2000;
$37,500,000.00 as of July 1, 2000 and at all times thereafter until
August 25, 2000;
$37,000,000.00 as of August 26, 2000 and at all times thereafter
until September 29, 2000;
$36,500,000.00 as of September 30, 2000 and at all times
thereafter until October 27, 2000;
$37,250,000.00 as of October 28, 2000 and at all times
thereafter until November 24, 2000;
$38,000,000.00 as of November 25, 2000 and at all times thereafter
until December 29, 2000; and
$39,500,000.00 as of December 30, 2000 and at all times thereafter.
13.2. INDEBTEDNESS TO TANGIBLE NET WORTH RATIO. Borrower will maintain
a ratio of Indebtedness (excluding any Subordinated Indebtedness) to
Tangible Net Worth of not more than the following ratios for the following
periods.
Maximum Permitted Ratio Periods
- ----------------------- -------
1.08 to 1.0 as of January 29,2000;1.45 to 1.0 as of January
30, 2000 and at all times through February 2,
2001; and
1.15 to 1.0 as of February 3, 2001 and at all times thereafter.
13.3. CAPITAL EXPENDITURES. Borrower will not cause, suffer or permit
Borrower's aggregate annual Capital Expenditures to exceed the following
amounts for the following periods:
Amount Periods
------ -------
$7,000,000.00 for the Fiscal Year ending January, 2000; and
$7,500,000.00 for the Fiscal Year ending January, 2001 and for
each fiscal year-end thereafter.
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<PAGE>
To the extent that the permitted amount of Capital Expenditures are not
used in any one fiscal year, the unused portion not to exceed fifty percent
(50%) of permitted Capital Expenditures for such year may be utilized in
the following fiscal year. The limitations on permitted Capital
Expenditures set forth above shall not apply to Capital Expenditures funded
with Warrant Proceeds as permitted under SECTION or to Capital Expenditures
made by Borrower to repair or replace items damaged by a casualty loss.
13.4. FIXED CHARGE COVERAGE RATIO. Borrower will maintain a Fixed
Charge Coverage Ratio tested quarterly on a rolling four (4) quarters basis
of not less than following ratio for the following periods:
Ratio Periods
----- -------
1.10 to 1.0 as of the fiscal quarter ending January 31, 2001 and as
of the end of each fiscal quarter end thereafter.
13.5. NET INCOME/NET LOSS. Borrower will maintain a level of Net
Income for each fiscal month, commencing with the fiscal month ending March
31, 2000, so that its loss for each such fiscal month is not greater than
$1,000,000.00. Compliance with this covenant will be calculated on a
month-by-month basis without carrying forward or carrying back any income
or loss from any other periods.
13.6. MOST FAVORED LENDER. Borrower agrees promptly to notify Agent of
any agreement for borrowed money to which Borrower is a party or under
which it is obligated and to provide Agent with a copy of such agreement.
If such agreement contains or at any time is amended to contain financial
covenants more restrictive than those contained in this SECTION, upon
Agent's request, Borrower agrees to amend this Agreement accordingly so
that the covenants contained herein are substantially the same as those
contained in such other agreements for borrowed money."
DELETION OF CERTAIN SECTIONS. SECTIONS 3.7, 6.4 AND 12.24 of the Loan Agreement
are hereby deleted and shall be of no further force and effect.
NEW STORE LOCATIONS. Borrower agrees that Borrower will not open any new store
locations after the date hereof without the prior written consent of Agent which
consent may be withheld
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by Agent at its sole discretion.
PERMITTED OUT-OF-FORMULA ADVANCES AND USAGE. Notwithstanding anything contained
in the Loan Agreement, the Loan Documents or any other document to the contrary,
the Revolving Credit Facility Usage may exceed the formula availability
calculated pursuant to SECTIONS 2.1 AND 2.3 of the Loan Agreement by an amount
not to exceed (i) $4,500,000.00 for a period commencing on the date hereof and
ending on May 15, 2000, (ii) $3,400,000.00 for a period commencing on May 16,
2000 and ending on June 15, 2000, and (iii) $2,500,000.00 for a period
commencing on June 16, 2000 and ending on June 30, 2000. On June 30, 2000, all
Out-Of-Formula Advances must be repaid in full. In no event shall the
outstanding Revolving Credit Facility Usage (including the permitted
Out-Of-Formula Advances described above) exceed $35,000,000.00. The provisions
in that certain letter agreement among the Borrower, Guarantors, Lender and
Agent dated February 11, 2000 regarding permitted Out-Of-Formula Advances is
hereby terminated and shall be of no further force or effect. For purposes of
this Amendment and the Loan Agreement "Out-Of-Formula Advances" shall be
redefined to mean the amount by which the then existing Revolving Credit
Facility Usage exceeds the then applicable Borrowing Base.
Upon the occurrence of a Default or an Event of Default under the Loan
Documents, at the Agent's option, Borrower will repay all Out-Of-Formula
Advances.
ADDITIONAL GUARANTOR. On or before March 22, 2000 Borrower will comply with and
will cause Todaysman.com, Inc., its newly formed Subsidiary to comply with the
provisions of SECTION 11.23 of the Loan Agreement regarding the addition of
Todaysman.com, Inc. as an additional Guarantor.
NEW CAPITAL FUNDS. Borrower has represented to Lender and Agent that Borrower is
seeking to raise additional equity funds or subordinated debt financing ("NEW
CAPITAL FUNDS") from various sources. Borrower acknowledges and agrees that the
issuance of stock in connection with Borrower obtaining new equity, the
incurrence of new subordinated indebtedness and matters related to obtaining
such New Capital Funds will require the prior written consent of Lender and
Agent. Borrower agrees to provide Agent with weekly up-dates regarding its
current and future efforts to obtain New Capital Funds and agrees to provide
Agent with copies of all material undertakings, commitments or similar proposals
or agreements to provide New Capital Funds promptly upon receipt of such items
by Borrower, together with a description of how Borrower intends to respond to
such proposals, the timetable for such transactions and such information as
Agent may reasonably require regarding the source and terms of such New Capital
Funds.
MORTGAGE. On or before March 22, 2000, Borrower will execute or cause the owner
to execute and deliver to Agent for the benefit of the Lenders a mortgage to be
recorded by Agent, in form and content acceptable to Agent and Lender,
encumbering the premises owned by David Feld located in Moorestown, New Jersey
and all improvements thereon and all rents, leases, rights, licenses and
approvals related thereto, together with such collateral documents and due
diligence
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items as Agent may require. Such mortgage lien shall be subject only to such
prior mortgage liens as may be acceptable to Agent.
FINANCIAL PLAN. On or before March 24, 2000, Borrower shall provide to Agent a
written financial plan for Borrower's fiscal year 2000, in form and content
acceptable to Agent, setting forth the operations, financial condition, balance
sheet, cash flows and availability schedules, and any other matter or thing
related thereto as requested by Agent.
CONSULTANT. Borrower has represented to Lender and Agent that Borrower is in the
process of engaging a consultant to assist Borrower in obtaining the New Capital
Funds; in preparing, completing and implementing a business plan for fiscal year
2000; and in general business operations. Borrower agrees to provide Agent with
weekly updates regarding its efforts to engage such consultant and to provide
Agent promptly with background information regarding each proposed consultant.
VENDORS AND FACTORS. On or before March 31, 2000, Borrower shall deliver to
Agent written evidence, in form and content acceptable to Agent in its sole
discretion, that unsecured trade credit lines in amounts and on terms acceptable
to Agent in its sole discretion are available to Borrower from its key vendors
and factors.
FEES. Borrower agrees to pay to Agent (for the benefit of Lender) the fees set
forth in that certain fee letter between Borrower and Agent of even date
herewith.
CONFIRMATION OF COLLATERAL. Nothing contained herein shall be deemed to be a
compromise, satisfaction, accord and satisfaction, novation or release of any of
the Loan Documents, or any rights or obligations thereunder, or a waiver by
Agent or any Lender of any of its rights under the Loan Documents or at law or
in equity. All liens, security interest, rights and remedies granted to Agent or
Lenders in Loan Documents are hereby ratified, confirmed and continued.
CHALLENGE TO ENFORCEMENT. Borrower and Guarantors acknowledge and agree that
they do not have any defense, set-off, counterclaim or challenge against the
payment of any sums owing under the Loan Documents, or the enforcement of any of
the terms or conditions thereof.
REPRESENTATION WARRANTIES. Borrower and Guarantors hereby represent and warrant,
which representations and warranties shall survive until all Obligations are
paid and satisfied in full, as follows:
(a) All representations and warranties of Borrower and Guarantors set
forth in the Loan Documents are true and complete in all material respects
as of the date hereof. Borrower and Guarantors will certify and deliver to
Agent revised Schedules to the Loan Documents on or before March 22, 2000
reflecting any new or revised facts or circumstances. Borrower and
Guarantors represent and warrant to Lenders that all of such revised facts
and circumstances have been previously disclosed to Lenders verbally by
Borrower and in no way are
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likely to result in any Material Adverse Change.
(b) Upon the execution of this Amendment, no condition or event exists
or has occurred which would constitute an event of default under the Loan
Documents or under any other agreement between Borrower, any Guarantor and
any other third party (or would, upon the giving of notice or the passage
of time, or both constitute an event of default).
(c) Borrower has not received any notice of default or event of
default from any other lender, trustee or lessor with respect to any other
loan, financing or lease agreement.
(d) The execution and delivery of this Amendment by Borrower and
Guarantors and all documents and agreements to be executed and delivered
pursuant to the terms hereof:
(1) have been duly authorized by all requisite corporate action
by Borrower and by each Guarantor;
(2) will not conflict with or result in the breach of or
constitute a default (upon the passage of time, delivery of notice or
both) under Borrower's or any Guarantor's Articles of Incorporation,
By-Laws or any applicable statute, law, rule, regulation or ordinance
or any indenture, mortgage, loan or other document or agreement to
which Borrower or any Guarantor is a party or by which any of them is
bound or affected; and
(3) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
property or assets of Borrower or any Guarantor, except liens in favor
of the Agent or as permitted hereunder or under the Loan Documents.
(4) DEFAULT. Any default by Borrower or Guarantors of any of the
terms, conditions or covenants set forth in this Amendment shall
constitute an Event of Default under the Loan Agreement.
(5) CONDITIONS. The obligation of Agent and Lender to enter into
this Amendment is subject to the following conditions (any of which
may be waived by Agent):
(6) LOAN DOCUMENTS. Borrower and Guarantors and all other
required persons and entities will have executed and
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delivered to Agent this Amendment and such other documents as Agent
may require.
(6) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Borrower and Guarantors set forth in the Loan Documents,
as amended hereby and as qualified by SECTION 19(A) of this Amendment,
will be true at and as of the date hereof.
(7) NO DEFAULT. No condition or event shall exist or have
occurred which would constitute a Default or an Event of Default
hereunder.
(8) OTHER DOCUMENTS. Such other documents as may be required to
be submitted to Agent by the terms hereof or any of the Loan Documents
shall have been delivered by or on behalf of Borrower and Guarantors
to Agent.
(9) ADDITIONAL DOCUMENTS; FURTHER ASSURANCES. Borrower covenants
and agrees to execute and deliver to Agent, or to cause to be executed
and delivered to Agent contemporaneously herewith, at the sole cost
and expense of Borrower, any and all other documents, agreements,
statements, resolutions, certificates, consents and information as
Agent may require in connection with the matters or actions described
herein. Borrower further covenants and agrees to execute and deliver
to Agent or to cause to be executed and delivered at the sole cost and
expense of Borrower, from time to time, any and all other documents,
agreements, statements, certificates and information as Agent shall
reasonably request to evidence or effect the terms hereof, the Loan
Agreement, as amended, or any of the other Loan Documents, or to
enforce or to protect Agent's interest in the Collateral. All such
documents, agreements, statements, certificates and information shall
be in form and content acceptable to Agent in its sole discretion.
(10) CERTAIN FEES, COSTS, EXPENSES AND EXPENDITURES. Borrower
will pay all of the Agent's expenses in connection with the review,
preparation, negotiation, documentation and closing of this Amendment
and the consummation of the transactions contemplated hereunder,
including without limitation, costs and fees and expenses of counsel
retained by Agent and all fees related to filings, recording of
documents and searches, whether or not the transactions contemplated
hereunder are consummated. Nothing contained herein shall limit in any
manner whatsoever any Lender's or Agent's right to reimbursement under
any of the Loan Documents.
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(11) COMMUNICATIONS AND NOTICES. All notices, requests and other
communications made or given in connection with this Amendment shall
be made in accordance with the provisions of the Loan Agreement.
(12) TIME OF ESSENCE. Time is of the essence of this Amendment.
(13) NO WAIVER. Except as otherwise provided herein, nothing
contained and no actions taken by Agent in connection herewith shall
constitute nor shall they be deemed to be a waiver, release or
amendment of or to any rights, remedies, or privileges afforded to
Agent under the Loan Documents or under the UCC. Nothing herein shall
constitute a waiver by Agent of Borrower's or any Guarantor's
compliance with the terms of the Loan Documents, nor shall anything
contained herein constitute an agreement by Agent to enter into any
further amendments with Borrower and Guarantors.
(14) INCONSISTENCIES. To the extent of any inconsistencies
between the terms and conditions of this Amendment and the terms and
conditions of the Loan Documents, the terms and conditions of this
Amendment shall prevail. All terms and conditions of the Loan
Documents not inconsistent herewith shall remain in full force and
effect and are hereby ratified and confirmed by Borrower and
Guarantors.
(15) BINDING EFFECT. This Amendment and all rights and powers
granted hereby will bind and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
(16) SEVERABILITY. The provisions of this Amendment and all other
Loan Documents are deemed to be severable, and the invalidity or
unenforceability of any provision shall not affect or impair the
remaining provisions which shall continue in full force and effect.
(17) NO THIRD PARTY BENEFICIARIES. The rights and benefits of
this Amendment and the Loan Documents shall not inure to the benefit
of any third party.
(18) MODIFICATIONS. No modifications of this Amendment or any of
the Loan Documents shall be binding or
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enforceable unless in writing and signed by or on behalf of the party
against whom enforcement is sought.
(18) HOLIDAYS. If the day provided herein for the payment of any
amount or the taking of any action falls on a Saturday, Sunday or
public holiday at the place for payment or action, then the due date
for such payment or action will be the next succeeding Business Day.
(19) LAW GOVERNING. This Amendment has been made, executed and
delivered in the Commonwealth of Pennsylvania and will be construed in
accordance with and governed by the laws of such Commonwealth, without
regard to any rules or principles regarding conflicts of law or any
rule or canon of construction which interprets agreements against the
draftsman.
(20) HEADINGS. The headings of the Articles, Sections, paragraphs
and clauses of this Amendment are inserted for convenience only and
shall not be deemed to constitute a part of this Amendment.
(21) COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be
executed in any number of counterparts, all of which taken together
constitute one and the same instrument, and any of the parties hereto
may execute this Amendment by signing any such counterpart. Any
signature delivered via facsimile shall be deemed an original
signature hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending to be legally bound hereby.
BORROWER:
TODAY'S MAN, INC., a Pennsylvania corporation
By: ____________________________________
Frank E. Johnson, Executive Vice President
[CORPORATE SEAL]
GUARANTORS:
BENMOL, INC., a Delaware corporation
By: ____________________________________
Frank E. Johnson, President
[CORPORATE SEAL]
D & L, INC., a Delaware corporation
By: ____________________________________
Frank E. Johnson, President
[CORPORATE SEAL]
FELD & FELD, INC., a Delaware corporation
By: ____________________________________
Frank E. Johnson, President
[CORPORATE SEAL]
TODAYSMAN.COM, INC., a Delaware corporation
By: ____________________________________
Frank E. Johnson, President
[CORPORATE SEAL]
(SIGNATURES CONTINUED ON NEXT PAGE)
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(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
LENDERS:
MELLON BANK, N.A.
By: ____________________________________
Name/Title: _____________________________
AGENT:
MELLON BANK, N.A.
By: ____________________________________
Name/Title: _____________________________
14
FOURTH AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"AMENDMENT") is made effective as of May 1, 2000 by and among TODAY'S MAN, INC.,
a Pennsylvania corporation ("BORROWER"); each of the Subsidiaries of the
Borrower identified under the caption "Guarantor" on the signature pages of this
Amendment (individually, a "GUARANTOR" and, collectively, the "GUARANTORS");
each of the financial institutions identified under the caption "Lenders" on the
signature pages of this Amendment (including without limitation Mellon in such
capacity) (individually, a "LENDER" and, collectively, the "LENDERS"); and
MELLON BANK, N.A., a national banking association, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the "AGENT").
BACKGROUND
A. Borrower, Guarantors, Lender and Agent previously entered into a certain
Loan and Security Agreement dated December 4, 1998, as amended by (i) that
certain First Amendment and Modification to Loan and Security Agreement dated
April 28, 1999, (ii) that certain Second Amendment and Modification to Loan and
Security Agreement dated October 13, 1999, and (iii) that certain Third
Amendment and Modification to Loan and Security Agreement dated March 15,
2000(the "THIRD AMENDMENT") (collectively, the "LOAN AGREEMENT"), pursuant to
which, INTER ALIA, Lender agreed to extend to Borrower a revolving credit
facility up to a maximum outstanding principal amount of Thirty-Five Million
Dollars ($35,000,000.00).
B. Borrowers, Guarantors, Lender and Agent are entering into this Amendment
to amend certain terms and conditions of the Loan Agreement.
C. Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth for such terms in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound hereby, the parties hereto agree as follows:
1. DEFINITIONS. SECTION 1.1 of the Loan Agreement shall be and is
hereby amended to add the following additional definition:
"TMCI means Todaysman.com Inc., a Delaware corporation."
2. ELIGIBLE LANDED INVENTORY. The term "ELIGIBLE LANDED INVENTORY" as
defined in SECTION 1.1 of the Loan Agreement shall be and is hereby amended to
read, in its entirety, as follows:
<PAGE>
"ELIGIBLE LANDED INVENTORY means Borrower's and TMCI's inventory
consisting of first quality finished goods held for sale in the ordinary course
of Borrower's and TMCI's business, that are located at or in-transit between an
Eligible Inventory Location, that strictly comply with each and all of the
representations and warranties respecting inventory made by Borrower and TMCI in
the Loan Documents, and that are and at all times continue to be acceptable to
the Agent in all respects; PROVIDED, HOWEVER, that standards of eligibility may
be fixed and revised from time to time by Agent on behalf of the Lender Group in
its discretion. An item of inventory shall not be included in Eligible Landed
Inventory if:
(A) it is held by Borrower or TMCI on consignment, is not owned
solely by Borrower or TMCI, as applicable, or Borrower or TMCI, as applicable,
does not have good, valid, and marketable title thereto;
(B) it is not located at an Eligible Inventory Location, or
in-transit between two (2) Eligible Inventory Locations;
(C) it is not (i) located on property owned or leased by Borrower
or TMCI, or (ii) in a contract warehouse, in each case, segregated or otherwise
separately identifiable from goods of others, if any, stored on the premises;
(D) it is not subject to a valid and perfected first priority
security interest in favor of the Agent on behalf of the Lender Group;
(E) it consists of damaged goods or goods classified as "return
to vendor";
(F) it is obsolete, a restricted or custom item, or constitutes
stores, packaging and shipping materials or supplies used or consumed in
Borrower's or TMCI's business;
(G) it is subject to a Lien in favor of any third Person;
(H) it consists of bill-and-hold goods;
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(I) it consists of goods classified as "seconds," or goods
acquired on consignment;
(J) it is slow-moving, as determined by Agent based in the
reasonable judgment of Agent;
(K) it consists of raw materials;
(L) it consists of work-in-process;
(M) it consists of finished goods which do not meet the
specifications of the purchase order for which they were manufactured;
(N) it consists of goods produced in violation of the Fair Labor
Standards Act and subject to the so-called "hot goods" provision in Title 29
U.S.C. Section 215(a); or
(O) it consists of goods for which Agent would need a license,
permit or consent to sell or dispose of.
For the purposes of determining Eligible Landed Inventory, there shall
be a reduction for outstanding gift certificates valued at cost and shrinkage
and unreconcilable variances, if any, between the general ledger and the monthly
inventory ledger. Such reduction shall be separately accounted for by Borrower
and TMCI."
3. APPRAISED INVENTORY LIQUIDATION VALUE. The term "APPRAISED INVENTORY
LIQUIDATION VALUE" as defined in SECTION 1.1 of the Loan Agreement shall be and
is hereby amended to read, in its entirety, as follows:
"APPRAISED INVENTORY LIQUIDATION VALUE" means the appraised
liquidation value of Borrower's or TMCI's inventory, as applicable (based on the
most recent appraisal obtained by Agent, such appraisal by appraisers, and
performed at the times, specified in SECTION 11.19)."
4. BORROWING BASE. SECTION 2.3 of the Loan Agreement shall be and is hereby
amended to read, in its entirety, as follows:
"2.3. BORROWING BASE. The "BORROWING BASE" as of the applicable date of
determination shall be determined based upon the following advance rates
and calculations:
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(I) An advance rate of up to 85% of Borrower's and TMCI's Eligible
Credit Card Accounts; PLUS
(II) An advance rate of up to the lesser of (i) 65% of the Value of
Borrower's Eligible Landed Inventory, or (ii) 85% of the Appraised Inventory
Liquidation Value of Borrower's Eligible Landed Inventory; PLUS
(III) An advance rate of up to the lesser of (i) 65% of the Value of
TMCI's Eligible Landed Inventory, or (ii) 85% of the Appraised Inventory
Liquidation Value of TMCI's Eligible Landed Inventory; PLUS
(IV) An advance rate of up to 65% of the Value of Borrower's Eligible
In-Transit Inventory; PLUS
(V) An advance rate of up to 65% of the outstanding, undrawn amount of
Merchandise Letters of Credit issued by Agent in connection with the purchase by
Borrower of finished goods inventory or cut, make and trim inventory (but not in
connection with the purchase of raw materials); MINUS
(VI) All Reserves."
5. COLLATERAL. Borrower and Guarantors agree that the term "Collateral" as
defined in SECTION 8.5 of the Loan Agreement shall mean the collateral described
in SECTION 8.1, 8.2 AND 8.3 of the Loan Agreement and the "Collateral" pledged
to Agent by TMCI as defined in that certain Security Agreement from TMCI in
favor of Agent dated March 22, 2000 (the "SECURITY AGREEMENT). Borrower and
Guarantors agree that any and all references to "Collateral" in the Loan
Agreement shall include the "Collateral" as defined in the Security Agreement.
6. COLLECTION OF ACCOUNTS; PROCEEDS OF COLLATERAL.
(A) COLLECTION. TMCI will collect its accounts only in the ordinary
course of its business.
(B) PROCEEDS. TMCI agrees that any proceeds of the Collateral shall be
paid, held and/or applied in the same manner and extent as monies received by
Borrower which are proceeds of the Collateral in accordance with SECTIONS 8.6(A)
THROUGH 8.6(G) of the Loan Agreement.
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(C) POWER OF ATTORNEY. Agent (and Agent's officers, employees and
agents) are granted a power of attorney by TMCI with full power of substitution
to execute on behalf of Borrower and in TMCI's name or to endorse TMCI's name on
any check, draft, instrument, note or other item of payment or to take any other
action or sign any document in order to effectuate the foregoing. Such power of
attorney being coupled with an interest is irrevocable.
7. INVENTORY LOCATIONS. SECTION 9.27 of the Loan Agreement shall be and is
hereby amended to read, in its entirety, as follows:
"9.27 INVENTORY LOCATIONS.
(A) ALL INVENTORY. All of Borrower's and TMCI's inventory in the
United States is currently located at or in transit between one of the locations
set forth on SCHEDULE 9.27(A). SCHEDULE 9.27(A) sets forth the street address
and the name of the owner/lessor/warehouseman, as applicable, for such location.
(B) ELIGIBLE INVENTORY LOCATIONS. SCHEDULE 9.27(B) sets forth all
Eligible Inventory Locations of Borrower and TMCI. Each Eligible Inventory
Location is and will be owned by Borrower or TMCI, as applicable, or leased by
Borrower or TMCI, as applicable, or is or will be a contract public warehouse.
(C) ADDITIONS TO ELIGIBLE INVENTORY LOCATIONS. Borrower and TMCI and
Agent may modify SCHEDULE 9.27(B) to add new Eligible Inventory Locations by
executing a written amendment to this Agreement in form and content acceptable
to Agent, PROVIDED THAT Borrower and TMCI comply with all of the following
conditions:
(I) Borrower or TMCI, as applicable, executes and delivers to
Agent such UCC-1 financing statements covering all inventory and related assets
of Borrower or TMCI, as applicable, to be located at such new location(s) as may
be required by Agent to perfect Agent's Lien in such inventory and related
assets.
(II) Agent receives written confirmation that such new UCC-1
financing statements have been filed in the appropriate offices required to
perfect Agent's Lien (for the pro rata benefit of the Lenders) at such new
location(s).
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(III) Agent receives a search report from a reputable search
company confirming that there are no other Liens encumbering any of Borrower's
or TMCI's assets at such new location(s), except the Lien in favor of Agent (for
the pro rata benefit of the Lenders).
(IV) Agent receives a copy of the lease, sub-lease, warehouse
agreement or similar agreement entered into by Borrower or TMCI, as applicable,
with the owner, lessor or operator of the new location(s).
(V) Agent receives evidence satisfactory to Agent that all assets
of Borrower or TMCI, as applicable, at such new location(s) are covered by the
insurance coverage required under SECTION 11.6(A).
(VI) Borrower or TMCI uses its best efforts to provide to Agent
(for the pro rata benefit of Lenders) a Mortgage securing the Obligations and
encumbering Borrower's of TMCI's leasehold interest in such new location,
together with a Landlord's Consent from the owner/lessor, title insurance,
evidence of compliance with applicable environmental laws, evidence of insurance
coverage, flood zone certifications and such other items as Agent may require,
all of which must be in form, content and amount (if applicable) acceptable to
Agent.
(VII) Agent receives a Collateral Access Agreement from the
owner/lessor of the new location in form and content acceptable to Agent."
8. CREDIT CARDS. SECTION 9.32 of the Loan Agreement shall be and is hereby
amended to read, in its entirety, as follows:
"9.32. CREDIT CARDS. SCHEDULE 9.32 sets forth an accurate and complete list
of all agreements between Borrower or TMCI and any issuers of credit cards
or credit card processors and all amendments and modifications thereto
(collectively, the "CREDIT CARD AGREEMENTS"). Borrower and TMCI are not in
default of any of their obligations under the Credit Card Agreements."
9. INVENTORY APPRAISALS. SECTION 11.19 of the Loan Agreement shall be and
is hereby amended to read, in its entirety, as follows:
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<PAGE>
"11.19. INVENTORY APPRAISALS. Borrower and TMCI, at Borrower's sole cost
and expense, will provide to Agent a new current appraisal of Borrower's
and TMCI's inventory based upon an appraised liquidation value acceptable
to Agent and in form and content acceptable to Agent, on or before March
31, 2000 and annually thereafter on or before March 31st of each calendar
year."
10. CREDIT CARD COVENANTS. SECTION 11.25 of the Loan Agreement shall be and
is hereby amended to read, in its entirety, as follows:
"11.25. CREDIT CARDS. Borrower and TMCI will (a) comply in all material
respects with the terms and conditions of the Credit Card Agreements, (b)
submit all credit card charges resulting from the sale of inventory by
Borrower or TMCI to the issuing credit card company or the credit card
processor, (c) request that the issuing credit card company or credit card
processor remit payment for the credit card charges submitted by Borrower
or TMCI by ACH remittance to the Cash Collateral Account as soon as
possible under the terms of the Credit Card Agreements after such credit
card charges are submitted for processing by Borrower or TMCI, and comply
with all requirements and conditions in the Credit Card Agreements to
enable such remittances to be made within such time period, and (d) not
take any actions which will increase any full recourse or charge back
liabilities of Borrower or TMCI under the Credit Card Agreements."
11. BORROWING BASE CERTIFICATIONS AND RELATED DOCUMENTS. SECTION 14.5 of
the Loan Agreement shall be and is hereby amended to read, in its entirety, as
follows:
"14.5. BORROWING BASE CERTIFICATIONS AND RELATED DOCUMENTS. At least once
every calendar week and otherwise as requested by Agent, a Borrowing Base
Certificate in the form of EXHIBIT H attached hereto together with such
additional information as may be requested by Agent, certified as to
accuracy by the chief financial officer, controller, director of corporate
reporting, or president of Borrower and TMCI."
12. INVENTORY BORROWING BASE INFORMATION AND RELATED DOCUMENTS. SECTION
14.7 of the Loan Agreement shall be and is hereby amended to read, in its
entirety, as follows:
"14.7. INVENTORY BORROWING BASE INFORMATION AND RELATED DOCUMENTS. At least
once every calendar week and otherwise as requested by Agent, an inventory
certification in the form of
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EXHIBIT I attached hereto, together with such additional information and
details as may be requested by Agent, including without limitation
identification of all Eligible Inventory and identification of ineligible
items including gift certificates, shrinkage and unreconcilable variances,
all certified as to accuracy by the chief financial officer, controller,
director of corporate reporting, or president of Borrower and TMCI."
13. OTHER AGREEMENTS.
(A) TMCI agrees to join in and be bound by the grant of a first
priority security interest in the assets of TMCI as set forth in SECTION 8.1 of
the Loan Agreement.
(B) TMCI agrees acknowledges and confirms all representations and
warranties made by Guarantor under the Loan Documents, including without
limitation, TMCI acknowledges and confirms that the Eligible Inventory
Warranties made by Borrower in SECTION 9.19 of the Loan Agreement shall be
deemed to be representations and warranties made by TMCI with respect to the
Collateral pledged by TMCI to Agent under the Security Agreement.
(C) TMCI agrees to join in and be bound by all covenants and
agreements applicable to a Guarantor under SECTIONS 11 AND 12 of the Loan
Agreement.
(D) TMCI agrees to be subject to all remedies exercisable by Agent or
any Lender under SECTION 17.2 of the Loan Agreement.
(E) TMCI agrees to join in and be bound by all waivers made by
Borrower and Guarantors under the Loan Agreement, including without limitation,
the waivers set forth in SECTIONS 19.2, 19.3, 24.17 AND 24.18 of the Loan
Agreement.
(F) TMCI agrees that if Borrower ceases to own directly or indirectly
through a Subsidiary who is a Guarantor, 100% of the ownership interests in or
assets of TMCI, the occurrence of such event shall constitute an Event of
Default under the Loan Agreement and Agent and Lender may exercise any rights or
remedies available to Agent or Lender under the Loan Documents, at law or in
equity.
14. CONFIRMATION OF COLLATERAL. Nothing contained herein shall be deemed to
be a compromise, satisfaction, accord and satisfaction, novation or release of
any of the Loan Documents, or any rights or obligations thereunder, or a waiver
by Agent or any Lender of any of its rights under the Loan Documents or at law
or in equity. All liens, security interest, rights and remedies granted to Agent
or Lenders in Loan Documents are hereby ratified, confirmed and continued.
Borrowers and Guarantors acknowledge and agree that the term "Loan Documents" as
used in the Loan Agreement and any other documents executed in connection
therewith shall
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include, without limitation, this Amendment, the Third Amendment and any and all
other documents executed in connection therewith.
15. CHALLENGE TO ENFORCEMENT. Borrower and Guarantors acknowledge and agree
that they do not have any defense, set-off, counterclaim or challenge against
the payment of any sums owing under the Loan Documents, or the enforcement of
any of the terms or conditions thereof.
16. REPRESENTATION WARRANTIES. Borrower and Guarantors (including TMCI)
hereby represent and warrant, which representations and warranties shall survive
until all Obligations are paid and satisfied in full, as follows:
(A) All representations and warranties of Borrower and Guarantors set
forth in the Loan Documents are true and complete in all material respects as of
the date hereof. Borrower and Guarantors will certify and deliver to Agent
revised Schedules to the Loan Documents on or before May 5, 2000 reflecting any
new or revised facts or circumstances. Borrower and Guarantors represent and
warrant to Lenders that all of such revised facts and circumstances have been
previously disclosed to Lenders verbally by Borrower and in no way are likely to
result in any Material Adverse Change.
(B) Upon the execution of this Amendment, no condition or event exists
or has occurred which would constitute an event of default under the Loan
Documents or under any other agreement between Borrower, any Guarantor and any
other third party (or would, upon the giving of notice or the passage of time,
or both constitute an event of default).
(C) Borrower has not received any notice of default or event of
default from any other lender, trustee or lessor with respect to any other loan,
financing or lease agreement.
(D) The execution and delivery of this Amendment by Borrower and
Guarantors and all documents and agreements to be executed and delivered
pursuant to the terms hereof:
(I) have been duly authorized by all requisite corporate action
by Borrower and by each Guarantor;
(II) will not conflict with or result in the breach of or
constitute a default (upon the passage of time, delivery of notice or both)
under Borrower's or any Guarantor's Articles of Incorporation, By-Laws or any
applicable statute, law, rule, regulation or ordinance or any indenture,
mortgage, loan or other document or agreement to which Borrower or any Guarantor
is a party or by which any of them is bound or affected; and
(III) will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the property or
assets of Borrower or any
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<PAGE>
Guarantor, except liens in favor of the Agent or as permitted hereunder or under
the Loan Documents.
17. CONDITIONS. The obligation of Agent and Lender to enter into this
Amendment is subject to the following conditions (any of which may be waived by
Agent):
(A) LOAN DOCUMENTS. Borrower and Guarantors and all other required
persons and entities will have executed and delivered to Agent this Amendment
and such other documents as Agent may require.
(B) REPRESENTATIONS AND WARRANTIES. All representations and warranties
of Borrower and Guarantors set forth in the Loan Documents, as amended hereby
and as qualified by SECTION 16(A) of this Amendment, will be true at and as of
the date hereof.
(C) NO DEFAULT. No condition or event shall exist or have occurred
which would constitute a Default or an Event of Default hereunder.
(D) OTHER DOCUMENTS. Such other documents as may be required to be
submitted to Agent by the terms hereof or any of the Loan Documents shall have
been delivered by or on behalf of Borrower and Guarantors to Agent.
18. ADDITIONAL DOCUMENTS; FURTHER ASSURANCES. Borrower covenants and agrees
to execute and deliver to Agent, or to cause to be executed and delivered to
Agent contemporaneously herewith, at the sole cost and expense of Borrower, any
and all other documents, agreements, statements, resolutions, certificates,
consents and information as Agent may require in connection with the matters or
actions described herein. Borrower further covenants and agrees to execute and
deliver to Agent or to cause to be executed and delivered at the sole cost and
expense of Borrower, from time to time, any and all other documents, agreements,
statements, certificates and information as Agent shall reasonably request to
evidence or effect the terms hereof, the Loan Agreement, as amended, or any of
the other Loan Documents, or to enforce or to protect Agent's interest in the
Collateral. All such documents, agreements, statements, certificates and
information shall be in form and content acceptable to Agent in its sole
discretion.
19. CERTAIN FEES, COSTS, EXPENSES AND EXPENDITURES. Borrower will pay all
of the Agent's expenses in connection with the review, preparation, negotiation,
documentation and closing of this Amendment and the consummation of the
transactions contemplated hereunder, including without limitation, costs and
fees and expenses of counsel retained by Agent and all fees related to filings,
recording of documents and searches, whether or not the transactions
contemplated hereunder are consummated. Nothing contained herein shall limit in
any manner whatsoever any Lender's or Agent's right to reimbursement under any
of the Loan Documents.
10
<PAGE>
20. COMMUNICATIONS AND NOTICES. All notices, requests and other
communications made or given in connection with this Amendment shall be made in
accordance with the provisions of the Loan Agreement.
21. TIME OF ESSENCE. Time is of the essence of this Amendment.
22. NO WAIVER. Except as otherwise provided herein, nothing contained and
no actions taken by Agent in connection herewith shall constitute nor shall they
be deemed to be a waiver, release or amendment of or to any rights, remedies, or
privileges afforded to Agent under the Loan Documents or under the UCC. Nothing
herein shall constitute a waiver by Agent of Borrower's or any Guarantor's
compliance with the terms of the Loan Documents, nor shall anything contained
herein constitute an agreement by Agent to enter into any further amendments
with Borrower and Guarantors.
23. INCONSISTENCIES. To the extent of any inconsistencies between the terms
and conditions of this Amendment and the terms and conditions of the Loan
Documents, the terms and conditions of this Amendment shall prevail. All terms
and conditions of the Loan Documents not inconsistent herewith shall remain in
full force and effect and are hereby ratified and confirmed by Borrower and
Guarantors.
24. BINDING EFFECT. This Amendment and all rights and powers granted hereby
will bind and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
25. SEVERABILITY. The provisions of this Amendment and all other Loan
Documents are deemed to be severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.
26. NO THIRD PARTY BENEFICIARIES. The rights and benefits of this Amendment
and the Loan Documents shall not inure to the benefit of any third party.
27. MODIFICATIONS. No modifications of this Amendment or any of the Loan
Documents shall be binding or enforceable unless in writing and signed by or on
behalf of the party against whom enforcement is sought.
28. HOLIDAYS. If the day provided herein for the payment of any amount or
the taking of any action falls on a Saturday, Sunday or public holiday at the
place for payment or action, then the due date for such payment or action will
be the next succeeding Business Day.
29. LAW GOVERNING. This Amendment has been made, executed and delivered in
the Commonwealth of Pennsylvania and will be construed in accordance with and
governed by the laws of such Commonwealth, without regard to any rules or
principles regarding conflicts of law or any rule or canon of construction which
interprets agreements against the draftsman.
11
<PAGE>
30. HEADINGS. The headings of the Articles, Sections, paragraphs and
clauses of this Amendment are inserted for convenience only and shall not be
deemed to constitute a part of this Amendment.
31. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be executed in
any number of counterparts, all of which taken together constitute one and the
same instrument, and any of the parties hereto may execute this Amendment by
signing any such counterpart. Any signature delivered via facsimile shall be
deemed an original signature hereto.
32. JOINT AND SEVERAL. The obligations of Borrower and Guarantors under
this Amendment shall be joint and several obligations.
33. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER, GUARANTORS AND THE LENDER
GROUP WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AMENDMENT, (B) ARISING UNDER ANY OF THE OTHER LOAN
DOCUMENTS OR (C) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF BORROWER, GUARANTORS OR ANY MEMBER OF THE LENDER GROUP WITH RESPECT
TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. BORROWER, GUARANTORS AND THE LENDER GROUP AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AMENDMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF BORROWER, GUARANTORS AND THE LENDER GROUP TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY. BORROWER AND GUARANTORS ACKNOWLEDGE THAT THEY HAVE HAD
THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION, THAT THEY FULLY
UNDERSTAND ITS TERMS, CONTENT AND EFFECT, AND THAT THEY VOLUNTARILY AND
KNOWINGLY AGREE TO THE TERMS OF THIS SECTION.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending to be legally bound hereby. BORROWER:
TODAY'S MAN, INC., a Pennsylvania
corporation
[CORPORATE SEAL] By:
-------------------------------------
Frank E. Johnson, Executive Vice
President
GUARANTORS:
BENMOL, INC., a Delaware corporation
By:
-------------------------------------
[CORPORATE SEAL] Frank E. Johnson, President
D & L, INC., a Delaware corporation
By:
-------------------------------------
[CORPORATE SEAL] Frank E. Johnson, President
FELD & FELD, INC., a Delaware corporation
By:
-------------------------------------
[CORPORATE SEAL] Frank E. Johnson, President
TODAYSMAN.COM INC., a Delaware
corporation
By:
-------------------------------------
[CORPORATE SEAL] Frank E. Johnson, President
(SIGNATURES CONTINUED ON NEXT PAGE)
13
<PAGE>
(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
LENDERS:
MELLON BANK, N.A.
By:
-------------------------------------
Name/Title:
-------------------------------------
AGENT:
MELLON BANK, N.A.
By:
-------------------------------------
Name/Title:
-------------------------------------
14
FIFTH AMENDMENT AND MODIFICATION
TO LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT
(the "AMENDMENT") is made effective as of May 11, 2000 by and among TODAY'S MAN,
INC., a Pennsylvania corporation ("BORROWER"); each of the Subsidiaries of the
Borrower identified under the caption "Guarantor" on the signature pages of this
Amendment (individually, a "GUARANTOR" and, collectively, the "GUARANTORS");
each of the financial institutions identified under the caption "Lenders" on the
signature pages of this Amendment (including without limitation Mellon in such
capacity) (individually, a "LENDER" and, collectively, the "LENDERS"); and
MELLON BANK, N.A., a national banking association, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the "AGENT").
BACKGROUND
A. Borrower, Guarantors, Lender and Agent previously entered into a certain
Loan and Security Agreement dated December 4, 1998, as amended by (i) that
certain First Amendment and Modification to Loan and Security Agreement dated
April 28, 1999, (ii) that certain Second Amendment and Modification to Loan and
Security Agreement dated October 13, 1999, (iii) that certain Third Amendment
and Modification to Loan and Security Agreement dated March 15, 2000 (the "THIRD
AMENDMENT"), and (iv) that certain Fourth Amendment and Modification to Loan and
Security Agreement dated May 1, 2000 (collectively, the "LOAN AGREEMENT"),
pursuant to which, INTER ALIA, Lender agreed to extend to Borrower a revolving
credit facility up to a maximum outstanding principal amount of Thirty-Five
Million Dollars ($35,000,000.00).
B. Borrowers, Guarantors, Lender and Agent are entering into this Amendment
to amend certain terms and conditions of the Loan Agreement.
C. Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth for such terms in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
intending to be legally bound hereby, the parties hereto agree as follows:
1. TANGIBLE NET WORTH. SECTION 13.1 of the Loan Agreement shall be and
is hereby amended to read in its entirety as follows:
"13.1. TANGIBLE NET WORTH. Borrower will maintain Tangible Net
Worth of not less than the following amounts for the following periods:
<PAGE>
AMOUNT PERIODS
------ -------
$48,809,000.00 as of November 30, 1999 and at all
times thereafter until January 28, 2000;
$39,340,000.00 as of January 29, 2000;
$36,500,000.00 as of January 30, 2000 and at all times
thereafter until April 28, 2000;
$33,000,000.00 as of April 29, 2000 and at all times
thereafter until May 30, 2000;
$34,000,000.00 as of May 31, 2000 and at all times
thereafter until June 30, 2000;
$35,500,000.00 as of July 1, 2000 and at all times
thereafter until August 25, 2000;
$34,800,000.00 as of August 26, 2000 and at all times
thereafter until September 29, 2000;
$34,000,000.00 as of September 30, 2000 and at all
times thereafter until October 27, 2000;
$35,250,000.00 as of October 28, 2000 and at all times
thereafter until November 24, 2000;
$35,000,000.00 as of November 25, 2000 and at all
times thereafter until December 29,
2000; and
$38,000,000.00 as of December 30, 2000 and at all
times thereafter."
2. NET INCOME/NET LOSS. Agent agrees to waive Borrower's compliance
with the Net Income/Net Loss covenant set forth in SECTION 13.5 of the Loan
Agreement for the fiscal month ending April 29, 2000. Such waiver shall be
limited to Borrower's compliance with the Net Income/Net Loss covenant solely
for the fiscal month ending April 29, 2000 and for no other period and such
waiver shall not be construed to constitute a waiver of Borrower's or any
Guarantor's compliance with any other terms of the Loan Documents or an
agreement to enter into any future waivers with Borrower or any Guarantor.
3. EXTENSION OF PERMITTED OUT-OF-FORMULA ADVANCES AND USAGE.
Notwithstanding anything to the contrary contained in the Loan Agreement
(including the terms of SECTION 9 of the Third Amendment), Borrower may continue
to exceed the formula availability calculated pursuant to SECTIONS 2.1 AND 2.3
of the Loan Agreement by an amount not to exceed (i) $2,500,000.00 for a period
commencing on June 30, 2000 and ending on August 15, 2000, (ii) $2,250,000.00
for a period commencing on August 16, 2000 and ending on September 15, 2000,
(iii) $1,250,000.00 for a period commencing on September 16, 2000 and ending on
October 15, 2000, and (iv) $1,000,000.00 for a period commencing on October 16,
2000 and ending on November 30, 2000. On November 30, 2000, all Out-Of-Formula
Advances must be repaid in full. In no event shall the outstanding Revolving
Credit Facility Usage (including the permitted Out-Of-Formula
2
<PAGE>
Advances described above) exceed $35,000,000.00. For purposes of this Amendment
and the Loan Agreement "Out-Of-Formula Advances" shall be redefined to mean the
amount by which the then existing Revolving Credit Facility Usage exceeds the
then applicable Borrowing Base.
Upon the occurrence of a Default or an Event of Default under the Loan
Documents, at the Agent's option, Borrower will repay all Out-Of-Formula
Advances.
4. TERMINATION FEE. Notwithstanding anything to the contrary set forth
in SECTION 7.10 of the Loan Agreement, in the event that the Revolving Credit
Facility is terminated on or before March 14, 2002 the termination fee payable
by Borrower will be to equal $1,050,000.
5. MAXIMUM REVOLVING CREDIT FACILITY AMOUNT. Effective November 30,
2000, the Maximum Revolving Credit Facility Amount will be reduced and reset at
$30,000,000. Accordingly, effective on November 30, 2000, the definition of
"Maximum Revolving Credit Facility" in SECTION 1.1 of the Loan Agreement is
amended in its entirety to read as follows:
"MAXIMUM REVOLVING CREDIT FACILITY AMOUNT means $30,000,000."
Borrower agrees to execute and deliver to Agent on or before November
30, 2000 replacement Notes in the aggregate amount of the revised Maximum
Revolving Credit Facility Amount, which replacement Notes are given in
substitution and replacement for the existing Notes and not in payment or
satisfaction of such existing Notes. Such replacement Notes shall be in form and
content acceptable to Agent. All references to Notes in the Loan Documents shall
be deemed to be references to the replacement Notes. Upon receipt of the
original signed replacement Notes by the Lenders, the Lenders will return to
Borrower the prior Notes marked "Replaced" or "Substituted".
6. MAINTENANCE OF MINIMUM BORROWINGS. At all times, Borrower shall
maintain an aggregate outstanding balance under the Revolving Credit Facility of
at least Ten Million Dollars ($10,000,000.00). If such balance is not maintained
during any month, Borrower will pay to Agent (for the benefit of Lenders) a fee
equal to the difference between (a) the interest that would have accrued on the
Revolving Credit Facility if the balance had been Ten Million Dollars
($10,000,000.00) at all times during such month, and (b) the interest accrued on
the actual balance of the Revolving Credit Facility during such month.
7. NEW CAPITAL FUNDS. Borrower has represented to Lender and Agent
that Borrower is seeking to raise additional equity funds or subordinated debt
financing ("NEW CAPITAL FUNDS") from various sources. Borrower acknowledges and
agrees that the issuance of stock in connection with Borrower obtaining new
equity, the incurrence of new subordinated indebtedness and matters related to
obtaining such New Capital Funds will require the prior written consent of
Lender and Agent. Borrower agrees to provide Agent with weekly up-dates
regarding its current and future efforts to obtain New Capital Funds and agrees
to provide Agent with copies of all material
3
<PAGE>
undertakings, commitments or similar proposals or agreements to provide New
Capital Funds promptly upon receipt of such items by Borrower, together with a
description of how Borrower intends to respond to such proposals, the timetable
for such transactions and such information as Agent may reasonably require
regarding the source and terms of such New Capital Funds.
8. BUSINESS PLAN. Borrower has represented to Lender and Agent that
Borrower will continue to perform its business and operations consistent with
the business plan of Borrower previously delivered to Agent by Borrower.
9. CONSULTANT. Borrower has represented to Lender and Agent that on or
before May 31, 2000, Borrower will engage a consultant to assist Borrower in
obtaining the New Capital Funds; in preparing, completing and implementing
general business strategies; implementing the business plan; and in general
business operations. Borrower agrees to provide Agent with weekly updates
regarding its efforts to engage such consultant and to provide Agent promptly
with background information regarding each proposed consultant.
10. FEES. Borrower agrees to pay to Agent (for the benefit of Lender)
the fees set forth in that certain fee letter between Borrower and Agent of even
date herewith.
11. CONFIRMATION OF COLLATERAL. Nothing contained herein shall be
deemed to be a compromise, satisfaction, accord and satisfaction, novation or
release of any of the Loan Documents, or any rights or obligations thereunder,
or a waiver by Agent or any Lender of any of its rights under the Loan Documents
or at law or in equity. All liens, security interest, rights and remedies
granted to Agent or Lenders in Loan Documents are hereby ratified, confirmed and
continued. Borrowers and Guarantors acknowledge and agree that the term "Loan
Documents" as used in the Loan Agreement and any other documents executed in
connection therewith shall include, without limitation, this Amendment and any
and all other documents executed in connection herewith.
12. CHALLENGE TO ENFORCEMENT. Borrower and Guarantors acknowledge and
agree that they do not have any defense, set-off, counterclaim or challenge
against the payment of any sums owing under the Loan Documents, or the
enforcement of any of the terms or conditions thereof.
13. REPRESENTATION WARRANTIES. Borrower and Guarantors hereby
represent and warrant, which representations and warranties shall survive until
all Obligations are paid and satisfied in full, as follows:
(A) All representations and warranties of Borrower and Guarantors
set forth in the Loan Documents are true and complete in all material respects
as of the date hereof.
(B) Upon the execution of this Amendment, no condition or event
exists or has occurred which would constitute an event of default under the Loan
Documents or under any
4
<PAGE>
other agreement between Borrower, any Guarantor and any other third party (or
would, upon the giving of notice or the passage of time, or both constitute an
event of default).
(C) Borrower has not received any notice of default or event of
default from any other lender, trustee or lessor with respect to any other loan,
financing or lease agreement.
(D) The execution and delivery of this Amendment by Borrower and
Guarantors and all documents and agreements to be executed and delivered
pursuant to the terms hereof:
(I) have been duly authorized by all requisite corporate
action by Borrower and by each Guarantor;
(II) will not conflict with or result in the breach of or
constitute a default (upon the passage of time, delivery of notice or both)
under Borrower's or any Guarantor's Articles of Incorporation, By-Laws or any
applicable statute, law, rule, regulation or ordinance or any indenture,
mortgage, loan or other document or agreement to which Borrower or any Guarantor
is a party or by which any of them is bound or affected; and
(III) will not result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of Borrower or any Guarantor, except liens in favor of the Agent or as
permitted hereunder or under the Loan Documents.
14. CONDITIONS. The obligation of Agent and Lender to enter into this
Amendment is subject to the following conditions (any of which may be waived by
Agent):
(A) LOAN DOCUMENTS. Borrower and Guarantors and all other
required persons and entities will have executed and delivered to Agent this
Amendment and such other documents as Agent may require.
(B) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Borrower and Guarantors set forth in the Loan Documents are true
at and as of the date hereof.
(C) NO DEFAULT. No condition or event shall exist or have
occurred which would constitute a Default or an Event of Default hereunder.
(D) FEE LETTER. Borrower will execute and deliver to Agent that
certain fee letter dated May 11, 2000.
(D) SIDE LETTER. Borrower, Guarantors and David Feld will execute
and deliver to Agent that certain side letter between dated May 11, 2000.
5
<PAGE>
(E) OTHER DOCUMENTS. Such other documents as may be required to
be submitted to Agent by the terms hereof or any of the Loan Documents shall
have been delivered by or on behalf of Borrower and Guarantors to Agent.
15. ADDITIONAL DOCUMENTS; FURTHER ASSURANCES. Borrower covenants and
agrees to execute and deliver to Agent, or to cause to be executed and delivered
to Agent contemporaneously herewith, at the sole cost and expense of Borrower,
any and all other documents, agreements, statements, resolutions, certificates,
consents and information as Agent may require in connection with the matters or
actions described herein. Borrower further covenants and agrees to execute and
deliver to Agent or to cause to be executed and delivered at the sole cost and
expense of Borrower, from time to time, any and all other documents, agreements,
statements, certificates and information as Agent shall reasonably request to
evidence or effect the terms hereof, the Loan Agreement, as amended, or any of
the other Loan Documents, or to enforce or to protect Agent's interest in the
Collateral. All such documents, agreements, statements, certificates and
information shall be in form and content acceptable to Agent in its sole
discretion.
16. CERTAIN FEES, COSTS, EXPENSES AND EXPENDITURES. Borrower will pay
all of the Agent's expenses in connection with the review, preparation,
negotiation, documentation and closing of this Amendment and the consummation of
the transactions contemplated hereunder, including without limitation, costs and
fees and expenses of counsel retained by Agent and all fees related to filings,
recording of documents and searches, whether or not the transactions
contemplated hereunder are consummated. Nothing contained herein shall limit in
any manner whatsoever any Lender's or Agent's right to reimbursement under any
of the Loan Documents.
17. COMMUNICATIONS AND NOTICES. All notices, requests and other
communications made or given in connection with this Amendment shall be made in
accordance with the provisions of the Loan Agreement.
18. TIME OF ESSENCE. Time is of the essence of this Amendment.
19. NO WAIVER. Except as otherwise provided herein, nothing contained
and no actions taken by Agent in connection herewith shall constitute nor shall
they be deemed to be a waiver, release or amendment of or to any rights,
remedies, or privileges afforded to Agent under the Loan Documents or under the
UCC. Nothing herein shall constitute a waiver by Agent of Borrower's or any
Guarantor's compliance with the terms of the Loan Documents, nor shall anything
contained herein constitute an agreement by Agent to enter into any further
amendments with Borrower and Guarantors.
20. INCONSISTENCIES. To the extent of any inconsistencies between the
terms and conditions of this Amendment and the terms and conditions of the Loan
Documents, the terms and conditions of this Amendment shall prevail. All terms
and conditions of the Loan Documents not inconsistent herewith shall remain in
full force and effect and are hereby ratified and confirmed by Borrower and
Guarantors.
6
<PAGE>
21. BINDING EFFECT. This Amendment and all rights and powers granted
hereby will bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
22. SEVERABILITY. The provisions of this Amendment and all other Loan
Documents are deemed to be severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.
23. NO THIRD PARTY BENEFICIARIES. The rights and benefits of this
Amendment and the Loan Documents shall not inure to the benefit of any third
party.
24. MODIFICATIONS. No modifications of this Amendment or any of the
Loan Documents shall be binding or enforceable unless in writing and signed by
or on behalf of the party against whom enforcement is sought.
25. HOLIDAYS. If the day provided herein for the payment of any amount
or the taking of any action falls on a Saturday, Sunday or public holiday at the
place for payment or action, then the due date for such payment or action will
be the next succeeding Business Day.
26. LAW GOVERNING. This Amendment has been made, executed and
delivered in the Commonwealth of Pennsylvania and will be construed in
accordance with and governed by the laws of such Commonwealth, without regard to
any rules or principles regarding conflicts of law or any rule or canon of
construction which interprets agreements against the draftsman.
27. HEADINGS. The headings of the Articles, Sections, paragraphs and
clauses of this Amendment are inserted for convenience only and shall not be
deemed to constitute a part of this Amendment.
28. COUNTERPARTS; FACSIMILE SIGNATURES. This Amendment may be executed
in any number of counterparts, all of which taken together constitute one and
the same instrument, and any of the parties hereto may execute this Amendment by
signing any such counterpart. Any signature delivered via facsimile shall be
deemed an original signature hereto.
29. JOINT AND SEVERAL. The obligations of Borrower and Guarantors
under this Amendment shall be joint and several obligations.
30. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER, GUARANTORS AND THE
LENDER GROUP WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING UNDER THIS AMENDMENT, (B) ARISING UNDER ANY OF THE
OTHER LOAN DOCUMENTS OR (C) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF BORROWER, GUARANTORS OR ANY MEMBER OF THE LENDER GROUP WITH
7
<PAGE>
RESPECT TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. BORROWER, GUARANTORS AND THE LENDER GROUP AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AMENDMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF BORROWER, GUARANTORS AND THE LENDER GROUP TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY. BORROWER AND GUARANTORS ACKNOWLEDGE THAT THEY HAVE HAD
THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION, THAT THEY FULLY
UNDERSTAND ITS TERMS, CONTENT AND EFFECT, AND THAT THEY VOLUNTARILY AND
KNOWINGLY AGREE TO THE TERMS OF THIS SECTION.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending to be legally bound hereby. BORROWER:
TODAY'S MAN, INC., a Pennsylvania
corporation
[CORPORATE SEAL] By:
-------------------------------------
Name/Title:
-----------------------------
GUARANTORS:
BENMOL, INC., a Delaware corporation
By:
-------------------------------------
[CORPORATE SEAL] Name/Title:
-----------------------------
D & L, INC., a Delaware corporation
By:
-------------------------------------
[CORPORATE SEAL] Name/Title:
-----------------------------
FELD & FELD, INC., a Delaware corporation
By:
-------------------------------------
[CORPORATE SEAL] Name/Title:
-----------------------------
TODAYSMAN.COM INC., a Delaware
corporation
By:
-------------------------------------
[CORPORATE SEAL] Name/Title:
-----------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
9
<PAGE>
(SIGNATURES CONTINUED FROM PREVIOUS PAGE)
LENDERS:
MELLON BANK, N.A.
By:
-------------------------------------
Daniel K. Clancy, Vice President
AGENT:
MELLON BANK, N.A.
By:
-------------------------------------
Daniel K. Clancy, Vice President
10
FIRST AMENDMENT TO LICENSE AGREEMENT
This First Amendment to License Agreement ("Amendment") is entered into as
of this 10th day of February, 2000, by and between Today's Man, Inc. a
Pennsylvania corporation ("Today's Man") and Morse Shoe, Inc., a Delaware
corporation ("Morse").
R E C I T A L S:
WHEREAS, Today's Man and Shoe Corporation of America, Inc. ("SCOA"), are
parties to a License Agreement dated July 20, 1995 (the "License Agreement")
pursuant to which Today's Man granted SCOA the license to operate shoe
departments in certain of Today's Man stores; and
WHEREAS, pursuant to a voluntary petition filed with the U.S. Bankruptcy
Court, Southern District of Ohio (Eastern Division) ("Bankruptcy Court") on June
14, 1999, SCOA and certain affiliates sought protection under Chapter 11 of
Title 11, United States Code (the "Bankruptcy Code"); and
WHEREAS, pursuant to a certain Asset Purchase Agreement, dated as of
February __, 2000 ("Acquisition Agreement"), by and between SCOA, et al.,
debtors and debtors in possession, as sellers (collectively, "Sellers"), and J.
Baker, Inc., individually and/or through one or more "Permitted Designees" (as
such term is defined in the Acquisition Agreement) (hereinafter, "Purchaser"),
Morse Shoe, Inc. ("Morse"), an affiliate of Purchaser and a Permitted Designee
thereof under the terms of the Acquisition Agreement, has agreed to acquire
substantially all of the assets and business interests of the Sellers
(collectively, the "Acquired Assets"), subject to the terms and conditions
contained in the Acquisition Agreement; and
WHEREAS, subject to the terms and conditions contained in the Acquisition
Agreement, included among the Acquired Assets to be acquired by Purchaser at a
closing under the Acquisition Agreement is the License Agreement; and
WHEREAS, it is a condition to Purchaser's obligation to close and
consummate that transactions contemplated in the Acquisition Agreement that
Today's Man and Morse, as a Permitted Designee of Purchaser, enter into, execute
and deliver the within amendment, inter alia, amending and modifying the terms
and provisions of the License Agreement, with such amendments and modifications
becoming effective as of the occurrence of a closing under the Acquisition
Agreement and as otherwise provided herein; and
WHEREAS, pursuant to a motion dated February __, 2000 ("Sale
Motion"), Sellers have sought the issuance and entry of an order of the
Bankruptcy Court, inter alia, approving the Acquisition Agreement and the
transactions contemplated thereby; and
WHEREAS, Morse and Today's Man desire to amend and modify the terms and
provisions of the License Agreement upon the terms and conditions contained
herein.
1
<PAGE>
NOW, THEREFORE, premised upon the terms and provisions stated herein, the
parties hereto desiring to be bound hereby, do hereby covenant and agree as
follows:
1. The License Agreement shall be amended as follows:
(a) Section 1.1 License is hereby deleted in its entirety and the
following is hereby substituted in lieu thereof:
"1.1 License. Licensor hereby grants to Licensee represented by
the exclusive right and privilege described herein for the term herein
specified, to operate Shoe Departments for the retail sale of Footwear
in Licensor's Stores as follows: (a) all stores currently operated by
Licensor under the name "Today's Man" as listed on the attached
"Exhibit A" ("Existing Stores") and (b) all stores hereafter opened by
Licensor (or any division, subsidiary, parent or any other affiliated
entity) operated under the Today's Man name which are hereafter added
to Exhibit "A." The stores added to Exhibit "A" pursuant to the
preceding clause (b) are hereinafter referred to individually as an
"Additional Store" and collectively the "Additional Stores" and shall
be included within the definition of "Store" and "Stores"
respectively. Licensor may elect to remove any individual Store on
Exhibit "A" upon at least 180 days prior written notice in the case of
any Store in which Licensor will permanently cease the conduct of
business in which event this Agreement will terminate with respect to
such Store at the end of such 180 day period. It is the intent of both
parties that Licensee shall operate Shoe Departments during the term
of this License Agreement in all of Licensor's Today's Man stores,
provided that such stores operate in a manner consistent with the
Existing Stores. This License Agreement shall apply to all stores
identified in this Section 1.1 without the need for amendment or
future agreement. The parties shall from time to time amend Exhibit
"A" to reflect Additional Stores, and it is agreed that such
amendments shall be solely for convenience of reference and
confirmation of the rights and obligations of the parties hereto. The
absence of such a written amendment shall in no way alter or negate
the applicability of this License Agreement to such Additional Stores.
In each Existing Store the Shoe Department shall consist of the
selling, storage and one half of the contiguous aisle space ("Space")
as presently allocated to the Shoe Departments, as set forth on
Exhibit "A". The Space allocated to the Shoe Department in Additional
Stores shall be approximately 2,000 square feet. In all cases, the
Shoe Department shall be contiguous to softlines at the store. The
location of the Shoe Departments may, upon sixty (60) days written
notice to Licensee be relocated by Licensor, at Licensor's full
expense, provided, however, that such relocation is a comparable space
in the Store at least equal to the space provided for herein."
2
<PAGE>
(b) Section 2 Term is hereby deleted in its entirety and the following
is hereby substituted in lieu thereof:
"Section 2. TERM.
The initial term of this License Agreement shall commence on
September 1, 1995, and shall expire, unless earlier terminated as
hereinafter provided, on January 31, 2006 (the " Initial Term"). Each
fiscal year of Licensor commencing on February 2 and ending on the
Saturday closest to January 31 of each year thereafter shall
constitute and be referred to herein as an "Annual Period"."
(c) Section 3.2 Handling of Cash and Payment shall be amended by
deleting the words eighty percent (80%) in (ii) of the second
paragraph thereof and inserting the words "ninety percent (90%)" in
lieu thereof.
(d) Section 8.1 Staffing of Shoe Departments shall be amended by
deleting the second sentence thereof in its entirety.
(e) Section 25.4 Early Termination is hereby deleted in its entirety
and all references thereto elsewhere in the Agreement are of no
further force or effect.
(f) A new Section 25.4 shall be added as follows:
"25.4 Obligations Upon Store Closing. If Licensor closes a Store,
or elects to completely liquidate its business and assets and
closes all Stores and conducts a store liquidation or going out
of business sale (either on its own or through an independent
professional liquidator, hereinafter "Store Liquidation"), the
Licensee Fee shall be reduced to eight percent (8%) of Net Sales
during the period of such Store Liquidation."
(g) Section 25.5.1 Obligation to Purchase Fixtures shall be amended by
replacing the reference to Section 1.1(y) with "Section 1.1".
(h) Section 25.5.2 Option to Purchase Fixtures shall be amended by
deleting the parenthetical in (b) thereof.
3
<PAGE>
(i) As of the Effective Date (as hereinafter defined), notices to
Licensee shall be addressed as follows:
Morse Shoe, Inc.
555 Turnpike Street
Canton, MA 02021
Attention: Michael Fine
President, JBI Footwear
With a copy to: General Counsel
555 Turnpike Street
Canton, MA 02021
2. Effectiveness of Amendment. This Amendment shall be deemed automatically
effective on the date of occurrence of a Closing (as such term is defined
in the Acquisition Agreement) under the Acquisition Agreement (the
"Effective Date"); provided, however, in the event a Closing does not occur
under the Acquisition Agreement, then in such event this Amendment shall be
void ab initio and of no further force and effect.
3. Agreement In Full Force and Effect. Except as otherwise modified hereby,
the Agreement, and all of the terms and provisions thereof, shall remain in
full force and effect.
4. Counterparts. This Amendment may be executed in one or more counterparts
which taken together shall constitute one and the same agreement.
5. Binding Effect; Successors and Assigns. This Amendment shall be binding
upon the successors and assigns of each of the parties hereto.
6. Governing Law. This Amendment shall be governed by and interpreted in
accordance with the laws of the State of Pennsylvania.
7. Modification. This Amendment may only be modified by an agreement in
writing executed by each of the parties hereto.
IN WITNESS WHEROF, the parties have executed this Amendment as of the date
first written above.
MORSE SHOE, INC. TODAY'S MAN, INC.
As Licensee As Licensor
/s/Alan I. Weinstein /s/Frank E. Johnson
- ----------------------------------- ----------------------------------
By: Alan I. Weinstein, President By: Frank E. Johnson, EVP & CFO
4
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-56515) pertaining to the Employees' Saving Plan of Today's
Man, Inc. and in the Registration Statement (Form S-3 No. 333-57179) of Today's
Man, Inc. and in the related Prospectus of our report dated March 16, 2000,
except for Note 5 and Note 11 as to which the date is May 12, 2000, with
respect to the consolidated financial statements of Today's Man, Inc. included
in its Annual Report (Form 10-K) for the year then ended January 29, 2000.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheets at January 29, 2000 and the Condensed
Consolidated Statements of Operations for the fifty-two weeks ended January 29,
2000 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JAN-29-2000
<CASH> 392,700
<SECURITIES> 0
<RECEIVABLES> 1,720,100
<ALLOWANCES> (27,200)
<INVENTORY> 39,334,700
<CURRENT-ASSETS> 45,538,900
<PP&E> 54,538,900
<DEPRECIATION> (20,728,500)
<TOTAL-ASSETS> 81,867,200
<CURRENT-LIABILITIES> 15,824,600
<BONDS> 0
0
0
<COMMON> 48,513,700
<OTHER-SE> (9,112,600)
<TOTAL-LIABILITY-AND-EQUITY> 81,867,200
<SALES> 194,545,700
<TOTAL-REVENUES> 194,545,700
<CGS> 128,444,200
<TOTAL-COSTS> 128,444,200
<OTHER-EXPENSES> 77,830,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,606,400
<INCOME-PRETAX> (13,355,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,355,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,355,700)
<EPS-BASIC> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
