United States Securities and Exchange Commission
Washington, DC 20549
FORM 10 - Q
x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 30, 1999
--------------------
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number 0-23874
-------------
Jos. A. Bank Clothiers, Inc.
Delaware 5611 36-3189198
-------- ---- ----------
(State incorporation) (Primary Standard (I.R.S. Employer
Industrial Identification
Classification Number)
Code Number)
500 Hanover Pike, Hampstead, MD 21074-2095
------------------------------- ----------
none
------------------
(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class Outstanding as of December 7, 1999
---------------------------- ----------------------------------
Common stock. $.01 par value 6,830,027
<PAGE>
Jos. A. Bank Clothiers, Inc.
Index
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------------------- --------
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements 3
of Operations - Three and Nine Months
ended October 30, 1999 and
October 31, 1998
Condensed Consolidated Balance 4
Sheets - as of October 30, 1999 and
January 30, 1999
Condensed Consolidated Statements 5
of Cash Flows -Nine Months
ended October 30, 1999 and
October 31, 1998
Notes to Condensed Consolidated 6-10
Financial Statements
Item 2. Management's Discussion and Analysis 10-15
of Results of Operations and
Financial Condition
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 16
(a) Exhibits - Exhibit 27-Financial Data
Schedule (EDGAR filing only)
Signatures 17
- ---------- --
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
1999 1998 1999 1998
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 43,739 $ 44,584 $ 131,549 $ 129,914
Costs and expenses:
Cost of goods sold 22,177 22,268 66,603 66,176
General and administrative 4,866 4,618 13,506 13,424
Sales and marketing 16,596 15,552 49,066 44,598
Store opening costs 77 180 139 541
One-time charge:
Executive payout and other costs -- -- 2,177 --
---------- ----------- ---------- -----------
43,716 42,618 131,491 124,739
---------- ----------- ---------- -----------
Operating income 23 1,966 58 5,175
Interest expense, net 409 535 984 1,409
---------- ----------- ---------- -----------
Income (loss) from continuing operations
before provision for income taxes (386) 1,431 (926) 3,766
Provision (benefit) for income taxes (150) (807) (361) 103
---------- ----------- ---------- -----------
Income (loss) from continuing operations (236) 2,238 (565) 3,663
Loss from discontinued operations (net of tax) -- -- -- (51)
---------- ----------- ---------- -----------
Net income (loss) $ (236) $ 2,238 $ (565) $ 3,612
========== =========== ========== ===========
Earnings per share:
Income (loss) from continuing operations:
Basic $ (0.03) $ 0.33 $ (0.08) $ 0.54
Diluted $ (0.03) $ 0.32 $ (0.08) $ 0.53
Discontinued operations (net of tax):
Basic $ -- $ -- $ -- $ (.01)
Diluted $ -- $ -- $ -- $ (.01)
Net income (loss):
Basic $ (0.03) $ 0.33 $ (0.08) $ 0.53
Diluted $ (0.03) $ 0.32 $ (0.08) $ 0.52
Weighted average shares outstanding:
Basic 6,792 6,791 6,792 6,791
Diluted 6,792 6,946 6,792 6,958
</TABLE>
See accompanying notes.
3
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
October 30, January 30,
1999 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 765 $ 748
Accounts receivable 3,918 2,808
Inventories:
Raw materials 4,646 5,178
Finished goods 53,080 39,650
------------ ------------
Total inventories 57,726 44,828
------------ ------------
Prepaid expenses and other
current assets 5,854 4,189
Deferred income taxes 3,660 2,883
------------ ------------
Total current assets 71,923 55,456
------------ ------------
Property, plant and equipment,
at cost 55,707 51,779
Accumulated depreciation and
amortization (29,253) (27,232)
------------ ------------
Net property, plant and equipment 26,454 24,547
------------ ------------
Deferred income taxes 1,970 2,000
Other assets 328 512
------------ ------------
TOTAL ASSETS $ 100,675 $ 82,515
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 15,588 $ 14,012
Accrued expenses 13,976 12,504
Current portion of long-term debt 1,016 1,111
Net current liabilities of
discontinued operations 759 767
------------ ------------
Total current liabilities 31,339 28,394
Long-term liabilities 27,463 11,808
------------ ------------
TOTAL LIABILITIES 58,802 40,202
------------ ------------
Shareholders' equity:
Common stock 70 70
Additional paid-in capital 56,518 56,393
Accumulated deficit (12,795) (12,230)
------------ ------------
43,793 44,233
Less treasury stock (1,920) (1,920)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 41,873 42,313
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 100,675 $ 82,515
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------
October 30, October 31,
1999 1998
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (565) $ 3,612
Loss from discontinued operations -- 51
------------- -------------
Income (loss) from continuing operations (565) 3,663
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Increase in deferred taxes (747) (299)
Depreciation and amortization 2,917 2,854
Stock based compensation 63 44
Net increase in operating working capital (12,463) (9,646)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES
OF CONTINUING OPERATIONS (10,795) (3,384)
------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment (4,824) (5,012)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES
OF CONTINUING OPERATIONS (4,824) (5,012)
------------- -------------
Cash flows from financing activities:
Borrowings under long-term Credit Agreement 49,319 33,416
Repayment under long-term Credit Agreement (33,496) (24,540)
Borrowings of other long-term debt -- 277
Repayment of other long-term debt (241) (241)
Sale of Common Stock 62 --
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES
OF CONTINUING OPERATIONS 15,644 8,912
------------- -------------
Net cash used in discontinued operations (8) (191)
------------- -------------
Net increase in cash and cash equivalents 17 325
Cash and cash equivalents - beginning of period 748 564
------------- -------------
Cash and cash equivalents - end of period $ 765 $ 889
============= =============
</TABLE>
See accompanying notes.
5
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 10/30/99
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
Jos. A. Bank Clothiers, Inc. (the Company) is a nationwide retailer of
classic men's clothing through conventional retail stores and catalog and
internet direct marketing. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
The results of operations for the interim periods shown in this report are
not necessarily indicative of results to be expected for the fiscal year.
In the opinion of management, the information contained herein reflects all
adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations. These adjustments are of a
normal recurring nature.
Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form
10-Q. Therefore, these financial statements should be read in conjunction
with the Company's January 30, 1999 Annual Report on Form 10-K.
2. SIGNIFICANT ACCOUNTING POLICIES
Inventories are stated at the lower of first-in, first-out, cost or market.
The Company capitalizes into inventories certain warehousing and delivery
costs associated with getting its inventory to the point of sale.
Costs related to mail order catalogs and promotional materials are included
in prepaid expenses and other current assets. These costs are amortized
over the expected periods of benefit, not to exceed six months.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 - Accounting for Income Taxes (SFAS
109). This standard requires, among other things, recognition of future tax
benefits, measured by enacted tax rates attributable to deductible
temporary differences between financial statement and income tax basis of
assets and liabilities and to tax net operating loss carryforwards, to the
extent that realization of such benefits is more likely than not.
Reclassifications - Certain reclassifications have been made to the October
31, 1998 financial statements in order to conform with the October 30, 1999
presentation.
6
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 10/30/99
3. WORKING CAPITAL
The net change in operating working capital is composed of the following:
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
Oct. 30, Oct. 31,
1999 1998
----------- -----------
<S> <C> <C>
Increase in accounts receivable $ (1,110) $ (1,462)
Increase in inventories (12,898) (11,748)
Increase in prepaids and other assets (1,481) (1,395)
Increase in accounts payable 1,576 1,434
Increase in accrued expenses and
other liabilities 1,450 3,525
----------- -----------
Net increase in operating working capital $ (12,463) $ (9,646)
=========== ===========
</TABLE>
4. EARNINGS PER SHARE
Earnings Per Share - Statement of Financial Accounting Standards (SFAS) No.
128 requires presentation of basic earnings per share and diluted earnings
per share. The weighted average shares used to calculate basic and diluted
earnings per share in accordance with SFAS No. 128 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -------------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Weighted average shares
outstanding for basic EPS 6,792 6,791 6,792 6,791
Diluted EPS:
Dilutive effect of
common stock equivalents -- 155 -- 167
----- ----- ----- -----
Weighted average shares
outstanding for diluted EPS 6,792 6,946 6,792 6,958
===== ===== ===== =====
</TABLE>
Weighted average shares outstanding for calculating dilutive EPS include
basic shares outstanding, plus shares issuable upon the exercise of stock
options, using the treasury stock method.
7
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C. Form 10-Q, 10/30/99
5. DISCONTINUED OPERATIONS
Summarized financial information for the discontinued operations is as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- -----------------------
<S> <C> <C> <C> <C>
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
1999 1998 1999 1998
---- ---- ---- ----
Loss before income taxes $ -- $ -- $ -- $(84)
Net loss $ -- $ -- $ -- $(51)
</TABLE>
As of As of
Oct. 30, Jan. 30,
1999 1999
---------- -----------
Current assets $ 456 $ 1,159
Less current liabilities 1,215 1,926
---------- -----------
Net current (liabilities) $ (759) $ (767)
========== ===========
Noncurrent assets $ 241 $ 241
Noncurrent liabilities 241 241
---------- -----------
Net noncurrent assets $ -- $ --
========== ===========
Revenues of the manufacturing operations primarily represent intercompany sales
which have been eliminated in consolidation.
Net current and noncurrent assets/liabilities of discontinued operations noted
above includes receivables, plant and equipment, pension termination and other
transaction costs associated with the discontinued manufacturing operations.
6. SEGMENT REPORTING
The Company has two reportable segments: full line stores and catalog direct
marketing (including internet). While each segment offers a similar mix of men's
clothing to the retail customer, the full line stores also provide alterations.
The accounting policies of the segments are the same as those described in the
Company's January 30, 1999 Annual report on Form 10K. The Company evaluates
performance of the segments based on "four wall" contribution which excludes any
allocation of "management company" costs, distribution center costs (except
order fulfillment costs which are allocated to catalog), interest and income
taxes. Certain segment data is presented in the following table:
8
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 30, 1999 Full line Catalog Direct
(in thousands) Stores Marketing Other Total
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales $ 36,700 $ 4,923 $ 2,116 (a) $ 43,739
Depreciation and amortization 793 4 201 998
Operating income (b) 4,945 475 (5,397) 23
THREE MONTHS ENDED OCTOBER 31, 1998
(in thousands)
Net sales $ 37,629 $ 4,938 $ 2,017 (a) $ 44,584
Depreciation and amortization 725 4 263 992
Operating income (b) 6,097 693 (4,824) 1,966
NINE MONTHS ENDED OCTOBER 30, 1999 Full line Catalog Direct
(in thousands) Stores Marketing Other Total
------------- ------------- ------------ -------------
Net sales $ 110,316 $ 15,815 $ 5,418 (a) $ 131,549
Depreciation and amortization 2,299 11 604 2,914
Operating income (b) 14,950 1,624 (16,516) 58
NINE MONTHS ENDED OCTOBER 31, 1998
(in thousands)
Net sales $ 108,879 $ 15,557 $ 5,478 (a) $ 129,914
Depreciation and amortization 2,074 11 769 2,854
Operating income (b) 16,808 2,324 (13,957) 5,175
</TABLE>
(a) Revenue from segments below the quantitative thresholds are attributable
primarily to four operating segments of the Company. Those segments include
outlet stores, franchise and regional tailor shops. None of these segments
has ever met any of the quantitative thresholds for determining reportable
segments.
(b) Operating income for the reported segments represents profit before
allocations of overhead from corporate office and the distribution center,
interest and income taxes.
7. EXECUTIVE PAYOUT AND OTHER COSTS
During the second quarter of 1999, the Company's Chairman/CEO retired and the
Company recorded a one-time charge of approximately $2.2 million associated with
that event. The one-time charge includes a payout to the former Chairman/CEO of
approximately $1.8 million and professional fees -- primarily recruiting and
related expenses -- that were incurred in the second quarter of 1999. This
charge reduced basic earnings per share by $.20, net of tax, in the second
quarter of 1999.
The Company will also incur a charge of up to $.9 million in the fourth quarter
of 1999 related to a) the payout to its former President who left the Company in
November, 1999 (approximately $.4
9
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
million), b) the discontinuation of its Corporate Decorated business
(approximately $.2 million) and c) relocation costs for several new officers
($.3 million). The charge for the President includes a cash payment as well as
the write-off of notes receivable. The relocation costs will be expensed as
incurred, with substantially all expenses expected in the fourth quarter of
1999. These charges would reduce basic earnings per share by approximately $.08,
principally in the fourth quarter of 1999.
8. ISSUANCE OF OPTIONS
Effective November, 1999, the Company hired a new CEO. The new CEO's contract
terms include, among other provisions, a stock option grant (the "Options") to
purchase up to 600,000 shares (the "Option Shares") of the Company's stock at
the average per share closing price of the Company's Common Stock for the 30 day
trading period commencing ten trading days prior to the CEO's start date. The
actual exercise price was determined to be $3.4032 per share. The option shares
and price are subject to adjustment in the event that the outstanding shares of
Common Stock of the Company are subsequently changed by reason of
reorganization, merger, consolidations, recapitalization, or other similar
equity transaction. The options shall vest and become exercisable as follows: a)
200,000 of the options are currently vested, b) an additional 200,000 become
vested on November 1, 2000 and c) 200,000 become vested on the earlier of
September 30, 2009 and the first date after which the average closing price of
the Common Shares for any consecutive 90-day period equals or exceeds $8.00 per
share and will not be exercisable after November 1, 2009. Upon the occurrence of
a change in control (as defined in the new CEO's employment agreement), any then
invested installments of the Option shall vest and become immediately
exercisable.
In addition, the Company hired an executive in December, 1999 whose contract
terms include a stock option grant (the "Options") to purchase up to 50,000
shares (the "Option Shares") of the Company's stock at $3.00 per share.
Currently 25,000 options are vested and the remaining 25,000 become vested on
December 6, 2000 and will not be exercisable after December 6, 2009.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto and with the
Company's audited financial statements and notes thereto for the fiscal year
ended January 30, 1999.
OVERVIEW - For the third quarter ended October 30, 1999, the Company recorded a
net loss of $236,000 ($.03 per share) compared to net income of $2,238,000 ($.32
per share) in the same period in 1998. The results noted above for 1998 include
a one-time tax benefit of $.20 per share. The results for the third quarter of
1999 were negatively impacted by weak sales in September as there was softness
in suit sales and more than half of the Company's stores were affected by severe
hurricane conditions along the east coast. The Company had projected a decline
in suit sales in 1999 as it continued its transition to expand its merchandise
offering; however, the decline was greater than projected.
For the nine months ended October 30, 1999, the Company had a net loss of
$565,000 ($.08 per share) compared to net income of $3,612,000 ($.52 per share)
for the same period in 1998. These results include a one-time charge of
approximately $1.3 million net of tax ($.20 per share) in 1999 for costs
incurred for the retirement of its former Chairman and a benefit of $1.4 million
($.20 per
10
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
share) in 1998 related to income taxes. Excluding one-time items, the Company's
net income from recurring operations was $763,000 ($.11 per share) for the nine
months ended October 30, 1999 compared to net income of $2.298,000 ($.33 per
share) in the same period in 1998.
The decreased nine month earnings in 1999 compared to 1998 relate principally to
the results from the first and third quarters of 1999. The first quarter of 1999
was negatively impacted by a new promotion that was run in March 1999 and failed
to increase traffic in the stores. The promotion was discontinued in late March
and the Company reversed the negative sales trend in the second quarter.
While the results for the first nine months of 1999 were below 1998, the fourth
quarter of 1999 has started strongly with a comparable store sales increase of
5.7 percent in November and solid catalog and internet sales.
The Company's availability under its Credit Agreement was $23.4 million as of
October 30, 1999, which was $.9 million lower that the same time last year. The
slight decrease in availability compared to 1998 relates to investments in new
stores and a new $2.1 million point-of-sale system.
The Company has opened 35 new stores since late 1996, including five new stores
in 1999. The Company has 108 stores as of October, 1999.
RESULTS OF OPERATIONS - The following table is derived from the Company's
condensed consolidated statements of operations and sets forth, for the periods
indicated, the items included in the condensed consolidated statements of
operations, expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Nine Months Ended
------------------------- -------------------------
Oct. 30, Oct. 31, Oct. 30, Oct. 31,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net Sales................................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................................ 50.7 49.9 50.6 50.9
----- ----- ----- -----
Gross profit.............................................. 49.3 50.1 49.4 49.1
General and administrative expenses....................... 11.1 10.4 10.3 10.3
Sales and marketing expenses.............................. 37.9 34.9 37.3 34.3
Store opening costs....................................... 0.2 0.4 0.1 0.4
Executive payout and other costs.......................... -- -- 1.7 --
----- ----- ----- -----
Operating income.......................................... 0.1 4.4 0.0 4.0
Interest expense, net..................................... 0.9 1.2 0.7 1.1
----- ----- ----- -----
Income from continuing operations
before income taxes.................................... (0.8) 3.2 (0.7) 2.9
Provision (benefit) for income taxes ..................... (0.3) (1.8) (0.3) --
----- ----- ----- -----
Income from continuing operations......................... (0.5) 5.0 (0.4) 2.9
Loss from discontinued operations, net.................... -- -- -- (0.1)
----- ----- ----- -----
Net income (loss)......................................... (0.5)% 5.0% (0.4)% 2.8%
===== ===== ===== =====
</TABLE>
11
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
NET SALES - Total sales in the third quarter of 1999 decreased 1.9% to $43.7
million compared to $44.6 million in 1998. This reduction in sales was due
primarily to a comparable store decrease of 6.2% for the quarter. The lower
store sales were primarily impacted by poor sales in September whereas October
sales increased. Total sales in the nine months ended October 30, 1999 increased
1.3 % to $131.5 million compared to $129.9 million in 1998. Comparable store
sales decreased 4.6% during the same period compared to 1998.
Catalog/internet sales in the third quarter decreased slightly (.3%) due to a
shift of certain catalog mailings into the fourth quarter of 1999. For the nine
months ended October 30, 1999, catalog/internet sales increased 1.7% with
internet sales continuing to achieve strong increases.
COST OF GOODS SOLD - Gross profit percent fell .8% in the third quarter to 49.3%
from 50.1% in 1998. This decrease was due to lower margins in tailored clothing
and shoes. Most other categories, including sportswear, shirts and ties
generated gross profit percent gains in the third quarter. Gross profit percent
decreased as the Company became more aggressive in its pricing in response to
the September sales shortfall.
GENERAL AND ADMINISTRATIVE EXPENSES - Generally and administrative expenses in
the third quarter increased slightly as a percent of sales to 11.1% from 10.4%
in 1998, principally as a result of less leverage on the lower sales volume.
Total expenditures increased in 1999 primarily for overhead for the Corporate
Decorated business and professional fees. During the nine months ended October
30, 1999, general and administrative expenses remained unchanged as a percent of
sales compared to the same period in 1998.
SALES AND MARKETING EXPENSES - Sales and marketing expenses increased in the
third quarter and nine months ended October 30, 1999 compared to last year due
primarily to an increase in marketing expense and additional store occupancy and
payroll costs in new stores. The higher marketing expense was primarily
attributable to increased radio and newspaper advertising needed to increase
customer traffic in the stores. The higher store occupancy and payroll costs
relate to additional stores opened since the second quarter of 1998. These costs
were not adequately levered as the new stores have not fully matured.
STORE OPENING COSTS - Store opening costs decreased in the third quarter and
nine months ended October 30, 1999 as the Company opened five stores during the
first nine months of 1999 compared to fourteen in the same period in 1998.
ONE-TIME CHARGES - During the second quarter of 1999, the Company's Chairman and
CEO retired and the Company recorded a one-time charge of approximately $2.2
million associated with that event. The one-time charge includes a payout to the
former Chairman/CEO of approximately $1.8 million and professional fees --
primarily recruiting and related expenses -- that were incurred in the second
quarter of 1999.
The Company will also incur a charge of up to $.9 million in the fourth quarter
of 1999 related to a) the payout to its former President who left the Company in
November, 1999 (approximately $.4 million), b) the discontinuance of its
Corporate Decorated business (approximately $.2 million) and c) relocation costs
for several new officers ($.3 million). The charge for the President includes a
cash payment as well as the write-off of notes receivable. The relocation costs
will be expensed as incurred, with substantially all expenses expected in the
fourth quarter of 1999. These charges would reduce basic earnings per share by
approximately $.08, principally in the fourth quarter of 1999.
12
<PAGE>
Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
INTEREST EXPENSE - Interest expense was lower during the third quarter and nine
months ended October 30, 1999 compared to the same period in 1998. This
improvement was due primarily to a reduction in average total debt outstanding
during 1999 compared to the same period in 1998.
INCOME TAXES - At October 30, 1999, the Company had approximately $6 million of
tax net operating loss carryforwards (NOLs) which expire through 2010. SFAS No.
109 requires that the tax benefit of such NOLs be recorded as an asset to the
extent that management assesses the utilization of such NOLs to be "more likely
than not". Realization of the future tax benefits is dependent on the Company's
ability to generate taxable income within the carryforward period. Future levels
of operating income are dependent upon general economic conditions, including
interest rates and general levels of economic activity, competitive pressures on
sales and margins and other factors beyond the Company's control. Therefore no
assurance can be given that sufficient taxable income will be generated for full
utilization of the NOLs. During the third quarter of 1998, the Company
eliminated the $1.4 million valuation reserve reflecting the Company's
expectation that all of the NOL's will be utilized prior to expiration.
LIQUIDITY AND CAPITAL RESOURCES - At October 30, 1999 the Company had
outstanding borrowings of $19.7 million with $23.4 million of availability under
its Credit Agreement compared to borrowings of $17.3 million and availability of
$24.3 million at the same time last year. The decrease in availability relates
to investments in new stores and a new $2.1 million point-of-sale system.
The following table summarizes the Company's sources and uses of funds as
reflected in the condensed consolidated statements of cash flows:
Nine Months Ended
-----------------------------
Oct. 30, Oct. 31,
Cash provided by (used in): 1999 1998
------------- -----------
Operating activities $ (10,795) $ (3,384)
Investing activities (4,824) (5,012)
Financing activities 15,644 8,912
Discontinued operations (8) (191)
------------- -----------
Net increase in cash and cash equivalents $ 17 $ 325
============= ===========
Cash used by operating activities increased primarily due to higher inventory
levels to support new stores and as a result of lower-than-expected sales. Cash
used in investing activities relates primarily to a) build-out costs for new
stores, b) renovation and relocation of existing stores and c) initial payments
on the Company's new $2.1 million Point-of-Sale (POS) system which became
operational in all stores in the fourth quarter of 1999. Cash provided by
financing activities represents primarily borrowings on the revolving portion of
the Credit Agreement. The net cash provided by discontinued operations was due
primarily to a reduction in the trade receivable partially offset by payments
for severance and vacation.
The Company expects to spend between $6.0 million and $6.5 million on capital
expenditures in 1999, primarily to open 5 new stores in 1999, to relocate or
renovate 6 existing stores and install the new $2.1 million POS system. The
Company expects that the new POS system will significantly enhance customer
service and will ultimately improve the Company's ability to target direct
mailing and other advertising to its customers.
The capital expenditures are being financed through operations, the Credit
Agreement and fixture leasing arrangements. The Company believes that its
current liquidity and its Credit Agreement will be adequate to support its
current working capital and investment needs.
13
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Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
YEAR 2000 COMPLIANCE - The Company has devoted significant efforts for the past
year and one-half to ensure that its business-critical systems are "Year 2000
compliant". The Year 2000 ("Y2K") issue is the result of computer programs using
a two-digit format, as opposed to four digits, to indicate the year. Such
computer systems will be unable to accurately interpret dates beyond the year
1999, which could cause a system failure or other computer errors, leading to
disruptions in operations.
In 1998 the Company performed an assessment of its systems in order to identify
Y2K issues and identified its business-critical areas of exposure to be: (a)
merchandising and financial, (b) point-of-sale, (c) cash management, (d)
catalog, (e) warehouse management, and (f) third party relationships. Most of
the Company's applications operate on two IBM AS/400 hardware configurations and
are "off-the-shelf" packages with modifications and interfaces made by the
Company. The Company also relies on personal computers to prepare detailed
analysis. The
Company believes that by installing the vendor-developed upgrades to the latest
versions of its existing systems and re-working its modifications and
interfaces, most of the Y2K issues should be corrected. The vendors for the
merchandising, general ledger and catalog applications have certified that the
updated versions of their systems are Y2K compliant.
The Company completed the installation of the latest versions of its systems in
June 1999. In accordance with this plan, in August, 1998, the Company installed
and implemented the latest version of its merchandising, warehouse, sales audit,
accounts payable and general ledger system (which included many upgrades in
addition to Y2K compliance). In May 1999, the Company installed the latest
version of its Catalog system and the system is operating well. The payroll and
human resources system has also been upgraded to a Y2K compliant version. While
the prior POS system was believed to be Y2K compliant, the Company installed the
new POS system in 1999 to obtain the additional features of the new system. The
Company is finalizing the related Y2K testing for all applications.
The Company has identified certain third parties who supply product to the
Company. These parties do not expect to have any significant disruptions to
deliveries as a result of Y2K issues. The Company believes that the projected
year end inventory should be sufficient to support the critical needs of the
business into early 2000.
The Company has also reviewed its less critical and non-Information Technology
areas such as security and phone systems, etc., and has determined that these
items are substantially Y2K compliant and does not anticipate any major
disruptions.
Should these efforts not be successful, the Y2K problems could have a material
impact on the operations of the Company. Although there is a high level of
confidence that these efforts will be successful, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated. The Company has developed a contingency plan should any of
its critical systems not operate in the Year 2000.
The Company estimates that it has spent approximately $1.0 million (representing
a combination of capital and expense) on these upgrades between 1998 and 1999,
although an exact amount related to Y2K compliance cannot be measured because
many of the upgrades include increased functionality as well as Y2K compliance.
The full year 1999 expense is estimated to be approximately $.3 million which is
about the same as in 1998.
14
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Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
The Company's plans and beliefs concerning future operations contained herein
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results may differ materially from those
forecast due to a variety of factors that can adversely affect the Company's
operating results, liquidity and financial condition such as risks associated
with economic, weather and other factors affecting consumer spending, the mix of
goods sold, pricing, availability of lease sites for new stores and other
competitive factors.
15
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PART II. OTHER INFORMATION
Item 6. Exhibit
Exhibit 10.16 - Employment Agreement, dated November 1, 1999 between
Robert N. Wildrick and Jos. A. Bank Clothiers, Inc.
Exhibit 10.17 - Employment Agreement, dated November 30, 1999 between
Robert Hensley and Jos. A. Bank Clothiers, Inc.
Exhibit 27 - Financial Data Schedule
16
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Jos. A. Bank Clothiers, Inc.
S.E.C.Form 10-Q 10/30/99
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 13, 1999 Jos. A. Bank Clothiers, Inc.
(Registrant)
/s/David E. Ullman
---------------------------
David E. Ullman
Executive Vice President,
Chief Financial Officer
17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of November 1, 1999, between ROBERT N.
WILDRICK ("Executive") and JOS. A. BANK CLOTHIERS, INC. ("Employer").
WHEREAS, the parties wish by this Employment Agreement to provide for the
terms of the employment of Executive.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto hereby agree as follows:
1. Employment of Executive
Employer hereby agrees to employ Executive, and Executive hereby agrees to
be in the employ of Employer, upon the terms and conditions hereinafter set
forth. This Agreement is a contract for personal services of Executive and
services pursuant hereto may only be performed by Executive.
2. Employment Period
The term of Executive's employment under this Agreement (the "Employment
Period") shall commence November 1, 1999 (the "Start Date") and shall, subject
to earlier termination as provided in Section 5, continue through February 2,
2002.
3. Duties and Responsibilities
3.1 General. During the Employment Period, Executive (i) shall have the
title of Chief Executive Officer and (ii) shall devote substantially all of his
business time and expend his best efforts, energies and skills to the business
of the Company. The preceding sentence shall not be construed to prohibit
Executive from continuing to devote more than an insignificant amount of time,
in accordance with his past practice, to management of his investments, serving
on boards of directors, performing consulting services on his own time (except
for retail department stores where the consulting services are focused on the
mens clothing business or for specialty mens stores) and participation in civic
and philanthropic activities.
Executive shall perform such duties, consistent with his status as Chief
Executive Officer of Employer, as he may be assigned from time to time by
Employer's Board of Directors (the "Board"). Executive shall have such
authority, discretion, power and responsibility, and shall be entitled to an
office, secretarial and administrative assistance (at least one secretary and/or
administrative assistant of his selection) and other facilities and conditions
of employment, as are customary or appropriate to his position. Without
limitation of the generality of the foregoing, Executive, within the general
guidelines adopted from time to time by the Board, shall have the power, without
further approval of the Board, to hire, fire and establish the terms of
employment (including all compensation and bonus arrangements) of all employees
of, and consultants and other
<PAGE>
advisers to, the Company (other than the Chairman of the Board of Directors).
Executive shall also serve without additional compensation as a director of the
Company and, if he should so desire, any of its subsidiaries. For all purposes
of this Agreement, the term "Company" means Employer and all corporation,
associations, companies, partnerships, firms and other enterprises controlled by
or under common control with Employer.
3.2 Location of Executive Offices. The Company will maintain its principal
executive offices at a location in the Baltimore, Maryland metropolitan area.
Executive shall not be required to perform services for the Company at any other
location, except for services rendered in connection with reasonably required
travel on the Company's business.
4. Compensation and Related Matters
4.1 Base Salary. Employer shall pay to Executive during the Employment
Period an annual base salary (the "Base Salary") equal to the sum of $450,000,
increased by such raises as the Compensation Committee (the "Committee") of the
Board of the Company or the Board may from time to time determine in their sole
discretion (the "Salary"). The Base Salary for each calendar year shall be
payable in installments in accordance with the Company's policy on payment of
executives in effect from time to time.
4.2 Annual Bonus.
A. Discretionary Bonus. For fiscal year ending February 3, 2001 and for
each fiscal year thereafter that begins during the Employment Period (each such
fiscal year, a "Bonus Year"), Executive shall be entitled to receive a bonus of
up to 100% of Base Salary (each, together with the minimum bonuses provided for
in Section 4.2B, a "Bonus") based upon attainment of annual quantitative and
qualitative performance goals established by the Committee for such Bonus Year
in consultation with Executive, such performance goals to be established as soon
as possible following the beginning of each Bonus Year. The relationship
between the size of each Bonus and degree of attainment of performance
objectives shall be discretionary with the Committee. Bonus earned for any Bonus
Year shall be payable promptly following the determination thereof, but in no
event later than 90 days following the end of each Bonus Year. Notwithstanding
anything to the contrary contained herein or in the Employer's Bonus Plan, in
the event (y) the Employment Period shall end for any reason whatsoever on a day
prior to payment to Executive of a Bonus for the last full Bonus Year contained
within the Employment Period, and (z) Executive would have been entitled to
receive a Bonus for such last full Bonus Year had the Employment Period not
ended - then, Employer shall pay to Executive the Bonus for such last full Bonus
Year as and when such Bonus would have been paid had the Employment Period not
ended.
B. Guaranteed Bonus. For the period from the Start Date through January 29,
2000, Executive, so long as he continued to be employed by Employer throughout
such period, shall be entitled to receive a Bonus equal to $56,250, payable
promptly following January 29, 2000. For the period from January 30, 2000
through October 31, 2000, Executive, so long as he continued to be employed by
Employer throughout such period, shall be entitled to receive a Bonus equal to
2
<PAGE>
$168,750, payable promptly following October 31, 2000. The Bonus provided for in
the immediately preceding sentence shall be credited against any Bonus otherwise
payable to Executive pursuant to the provisions of section 4.2A for the fiscal
year ending February 3, 2001.
4.3 Car Allowance. Employer shall pay to Executive throughout the
Employment Period a car allowance equal to $1,350 per month, which shall be in
lieu of any expense reimbursement related to a car purchased or leased, repairs,
insurance, or gas, oil or mileage charges.
4.4 Other Benefits. Throughout the Employment Period, subject to, and to
the extent Executive is eligible under their respective terms, Executive shall
be entitled to receive such fringe benefits as are, or are from time to time
hereafter, generally provided by Employer to Employer's senior management
employees (other than those provided under or pursuant to separately negotiated
individual employment agreements or arrangements) under any pension or
retirement plan, disability plan or insurance, group life insurance, medical and
dental insurance, travel accident insurance, stock option, phantom stock or
other similar plan or program of Employer. Executive's Base Salary shall (where
applicable) constitute the compensation on the basis of which the amount of
Executive's benefits under any such plan or program shall be fixed and
determined. If, during the Employment Period, any plan or program in which
Executive participates shall be amended so as to result in overall reduction of
Executive's benefits, or shall be terminated without being replaced by a new
plan or program providing for benefits equivalent overall to those provided for
Executive prior thereto, the Company shall make arrangements, in addition to any
such amended or terminated plan or program, for Executive to participate in a
plan or program so as to provide benefits to Executive at least equivalent
overall to those provided to Executive prior to such amendment or termination,
such benefits to be provided through a plan or program of insurance if
commercially available.
4.5 Expense Reimbursement. Employer shall reimburse Executive for all
business expenses, including car rental expense while traveling on Employer
business, reasonably incurred by him in the performance of his duties under this
Agreement and consistent with past practice upon his presentation, not less
frequently than monthly, of signed, itemized accounts of such expenditures, all
in accordance with Employer's procedures and policies as adopted and in effect
from time to time and applicable to its senior management employees. In
addition, Employer shall pay to Executive promptly following the date hereof a
moving allowance equal to $110,000, which shall be in lieu of reimbursement of
any and all relocation expenses incurred by Executive.
4.6 Vacations. Executive shall be entitled to 20 business days of vacation
during each calendar year, which shall accrue in accordance with the Company's
vacation policy in effect from time to time for its senior executive officers,
with reasonable carry-over allowances, which vacations shall be taken at such
time or times as shall not unreasonably interfere with Executive's performance
of his duties under this Agreement. Upon termination of Executive's employment
pursuant to Section 5 herein, for any reason whatsoever, Employer shall pay
Executive, in addition to any termination compensation provided for under
Section 6 herein, an amount equivalent to Executive's per diem compensation at
the then-current Base Salary rate multiplied by the number of unused vacation
days, including any carry-over, accrued by Executive as of the date of
termination.
3
<PAGE>
4.7 Grant of Stock Option. Employer hereby grants to Executive a stock
option to purchase 600,000 shares of the Company's common stock, which option
shall be in form and substance as set forth in the exhibit to this Agreement.
5. Termination of Employment Period
5.1 Termination Without Cause. Employer or Executive may, by delivery of
not less than 60 days' notice to the other at any time during the Employment
Period, terminate the Employment Period without cause.
5.2 By Employer for Cause. Employer may, at any time during the Employment
Period by notice to Executive in accordance with and only after full compliance
with the procedure set forth herein terminate the Employment Period "for cause"
effective immediately. For the purposes hereof, "for cause" means:
(i) the conviction of Executive in a court of competent jurisdiction
of a crime constituting a felony in such jurisdiction involving
money or other property of Employer or any of its affiliates or
any other felony or offense involving moral turpitude; or
(ii) the willful (a) commission of an act not approved of or ratified
by the Board involving a material conflict of interest or
self-dealing relating to any material aspect of the Company's
business or affairs; or (b) commission of an act of fraud or
misrepresentation (including the omission of material facts),
provided that such acts relate to the business of the Company and
would materially and negatively impact upon the Company; or (c)
material failure of Executive to obey directions of the Board
that are consistent with Executive's status as Chief Executive
Officer; however, for the purposes of this subsection 5.2(ii),
the refusal of Executive to comply with an order or directive of
anyone other than the majority of the Board, or the refusal of
Executive to perform an act which is contrary to his duties,
responsibilities and/or authority as Chief Executive Officer or
is unlawful shall not constitute "for cause". In the event of an
act or omission as provided for in this subsection 5.2(ii),
Employer shall provide Executive with a written notice of intent
to terminate the Employment Period "for cause", setting forth,
with reasonable particularity, the reasons and acts or omissions
constituting "cause" under this subsection, and shall provide
Executive with at least thirty (30) calendar days after such
notice to cure or eliminate the problem or violation giving rise
to such cause or any longer period as reasonably needed by
Executive, provided that it is susceptible of cure or elimination
and Executive is proceeding diligently and in good faith to cure
such violation. In the event and only after the Executive fails
to cure the problem or violation within the period provided for
herein, Employer may exercise its rights to terminate the
Employment Period in accordance with the procedure set forth
4
<PAGE>
below.
Termination "for cause" shall be effected only if (A) Employer has
delivered to Executive of a written notice of termination "for cause", setting
forth, with reasonable particularity, the reasons for such "for cause"
termination, (B) has provided Executive with, on at least ten (10) business
days' prior written notice, in the cause of a termination pursuant to subsection
5.2(ii) the opportunity, together with Executive's counsel, to be heard before
Employer's Board, said hearing to occur at such reasonable time and place that
is mutually convenient to Executive, his counsel, and Employer, and (C)
Employer's Board (after such notice and opportunity to be heard has been
provided to Executive in the case of a termination pursuant to subsection
5.2(ii)) adopts a resolution concurred in by not less than majority of all of
the directors of Employer then in office, including at least two-thirds of all
of the directors who are not officers of Employer, that Executive was guilty of
conduct constituting "for cause" hereunder, which conduct has not been cured (if
applicable), and specifying the particulars thereof in detail.
5.3 BY EXECUTIVE FOR GOOD REASON. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement "for good reason" effective immediately. For the purposes hereof,
"good reason" means any material breach by Employer of any provision of this
Agreement which, if susceptible of being cured, is not cured within 30 days of
delivery of notice thereof to Employer by Executive; it being agreed, however,
that the foregoing 30 day cure period shall not be applicable to any failure
timely to pay (or any reduction in) compensation or benefits paid or payable to
Executive pursuant to the provisions of Section 4 hereof. Without limitation of
the generality of the foregoing, each of the following shall be deemed to be a
material breach of this Agreement by Employer; (x) any failure timely to pay (or
any reduction in) compensation (including benefits) paid or payable to Executive
pursuant to the provisions of Section 4 hereof; (y) any reduction in the duties,
responsibilities or perquisites of Executive as provided in Section 3.1 hereof
and (z) any transfer of the Company's principal executive offices outside the
geographic area described in Section 3.2 hereof or requirement that Executive
principally perform his duties outside such geographic area.
5.4 BY EXECUTIVE FOR A CHANGE OF CONTROL. Executive may by notice to
Employer, terminate the Employment Period under this Agreement for a "change of
control" effective immediately provided that not more than 90 days shall have
elapsed subsequent to Executive's becoming aware of the occurrence of the change
of control.
For purposes of this Agreement, a "change of control" of the Company shall
be deemed to have occurred if, as a result of a single transaction or a series
of transactions, (A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under any employee
benefit plan of the Company or a corporation owned, directly or indirectly, by
the stockholders of the Company (including any nominee corporation that holds
shares of the Company on behalf of the beneficial owners of such corporation),
in substantially the same proportions as their ownership of stock, of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the
5
<PAGE>
Exchange Act), directly or indirectly, of securities of the Company
representing 51% or more of the combined voting power of the Company's then
outstanding securities; or (B) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under any employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the Company
(including any nominee corporation that holds shares of the Company on behalf of
the beneficial owners of such corporation), in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities and there are
at least a majority of directors serving on the Board of Directors who were not
serving in such capacity as of the date hereof or who were not elected with the
consent of the Executive; or (C) the shareholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 70% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets
other than a liquidation or sale which would result in the holders of the voting
securities of the Company immediately prior thereto continuing to hold at least
70% of the combined voting power of the successor entity immediately following
such liquidation or sale.
5.5 DISABILITY. During the Employment Period, if, as a result of physical
or mental incapacity or infirmity (including alcoholism or drug addiction),
Executive shall be unable to perform his material duties under this Agreement
for (i) a continuous period of at least 180 days, or (ii) periods aggregating at
least 270 days during any period of 12 consecutive months (each a "Disability
Period"), and at the end of the Disability Period there is no reasonable
probability that Executive can promptly resume his material duties hereunder
pursuant hereto, Executive shall be deemed disabled (the "Disability") and
Employer, by notice to Executive, shall have the right to terminate the
Employment Period for Disability at, as of or after the end of the Disability
Period, the existence of the Disability shall be determined by a reputable,
licensed physician mutually selected by Employer and Executive, whose
determination shall be final and binding on the parties, provided, that if
Employer and Executive cannot agree upon such physician, such physician shall be
designated by the then acting President of the Baltimore City Medical Society,
and if for any reason such President shall fail or refuse to designate such
physician, such physician shall, at the request of either party, be designated
by the American Arbitration Association. Executive shall cooperate in all
reasonable respects to enable an examination to be made by such physician.
5.6 DEATH. The Employment Period shall end on the date of Executive's
death.
6
<PAGE>
6. TERMINATION COMPENSATION; NON-COMPETE
6.1 TERMINATION WITHOUT CAUSE BY EMPLOYER OR FOR GOOD REASON OR CHANGE OF
CONTROL BY EXECUTIVE. If the Employment Period is terminated by Executive at any
time pursuant to the provisions of Section 5.4 hereof, by Employer pursuant to
the provisions of Section 5.1 hereof on or before February 3, 2001 or by
Executive pursuant to the provisions of Section 5.3 hereof on or before February
3, 2001, Employer will pay to Executive, within 60 days of the
date of termination, (a) an amount equal to two multiplied by the sum of (i)
his then annual Base Salary, plus (ii) his maximum Bonus for the year in which
the termination occurs, and (b), if applicable, the Bonus for the last full
Bonus Year pursuant to Section 4.2. If the Employment Period is terminated by
Employer pursuant to the provisions of Section 5.1 hereof or by Executive
pursuant to the provisions of Section 5.3 hereof in either case after February
3, 2001 and before February 2, 2002, Employer will pay to Executive, within 60
days of the date of termination, an amount equal to the sum of (i) his then
annual Base Salary, plus (ii) his maximum Bonus for the year in which the
termination occurs, and, if applicable, the Bonus for the last full Bonus Year
pursuant to Section 4.2. Employer shall have no obligation to continue any other
benefits provided for in Section 4 past the date of termination.
6.2 CERTAIN OTHER TERMINATIONS. If the Employment Period is terminated by
Employer pursuant to the provisions of Section 5.2 at any time prior to a
change of control of the Company, by Executive pursuant to Section 5.1, or for
Disability pursuant to the provisions of Section 5.5 or by death, pursuant to
the provisions of Section 5.6., Employer shall pay to Executive, within 60 days
of the date of termination, (a) his then annual Base Salary through the date of
termination, (b) in the case of termination for Disability or by death pursuant
to the provisions of Section 5.5 or 5.6, when due pursuant to the provisions of
Section 4.2 the maximum Bonus for the Bonus Year in which the date of
termination occurred multiplied by a fraction, the numerator of which shall be
the number of days of the Employment Period within the Bonus Year and the
denominator of which shall be 365 and (c) if applicable, the Bonus for the
last full Bonus Year pursuant to Section 4.2. Employer shall have no obligation
to continue any other benefits provided for in Section 4 past the date of
termination.
6.3 Termination for Cause Following a Change of Control. In the event
Employer terminates the Employment Period for cause pursuant to Section 5.2 at
any time within 90 days following a change of control of the Company, Employer
shall pay to Executive (a) an amount equal to two multiplied by the sum of (i)
Executive's then current Base Salary, plus (ii) the maximum Bonus for the Bonus
Year in which the date of termination occurs, payable within 60 days of the date
of termination, and (b), if applicable, the Bonus for the last full Bonus Year
pursuant to Section 4.2. Employer shall have no obligation to continue any other
benefits provided for in Section 4 past the date of termination.
6.4 EXPIRATION WITH SEVERANCE. If (i) at least 275 days prior to the stated
expiration date of the Employment Period Employer notifies Executive that
Employer will not agree to a renewal or extension of the Employment Period on
its then current terms or (ii) at least 183 days prior to the stated expiration
date of the Employment Period Executive notifies Employer that he will not agree
7
<PAGE>
to a renewal or extension of the Employment Period on its then current terms,
then if the Employment Period expires on its then stated expiration date,
Employer will pay to Executive, within 60 days of the date of termination, an
amount equal to the sum of his then annual Base Salary plus his maximum Bonus
for the year in which the termination occurs and if applicable, the earned Bonus
for the Bonus Year ending on the stated expiration date of the Employment
Period. Employer shall have no obligation to continue any other benefits
provided in Section 4 past the date of termination.
6.5 NO OTHER TERMINATION COMPENSATION. Executive shall not, except as set
forth in this Section 6 and in Section 4.6, be entitled to any compensation
following termination of the Employment Period, except as may be otherwise
provided in any stock options granted by Employer to Executive.
6.6 MITIGATION. Executive shall not be required to mitigate the amount of
any payments or benefits provided for hereunder upon termination of the
Employment Period by seeking employment with any other person, or otherwise, nor
shall the amount of any such payments or benefits be reduced by any
compensation, benefit or other amount earned by, accrued for or paid to
Executive as the result of Executive's employment by or consultancy or other
association with any other person, provided, that any medical, dental or
hospitalization insurance or benefits provided to Executive with his employment
by or consultancy with an unaffiliated person during such period shall be
primary to the benefits to be provided to Executive pursuant to this Agreement
for the purposes of coordination of benefits.
6.7 NON-COMPETE. For (A) the two year period following the termination of
the Employment period for any reason whatsoever in respect of which Executive
receives termination compensation equal to two multiplied by the sum of his then
annual Base Salary plus his maximum Bonus for the year in which the termination
occurs, (B) the one year period following any termination of the Employment
Period by Executive pursuant to Section 5.1 or any termination of the Employment
Period in respect of which Executive receives termination compensation in an
amount equal to the sum of his then annual Base Salary plus his maximum Bonus
for the year in which the termination occurs or (C) the six month period
following the termination of the Employment Period by Employer pursuant to
Section 5.2, Executive shall not, directly or indirectly (i) engage in any
activities that are in competition with the Company in any geographic area
within 50 miles of the location of any Company store (owned or franchised) as of
the date of termination of Executive (provided, that the foregoing geographic
limitation shall not be construed to allow Executive to engage in any catalogue
business that focuses on the sale of mens clothing), (ii) solicit any customer
of the Company or (iii) solicit any person who is then employed by the Company
or was employed by the Company within one year of such solicitation to (a)
terminate his or her employment with the Company, (b) accept employment with
anyone other than the Company, or (c) in any manner interfere with the business
of the Company. Executive acknowledges and agrees that in the event of any
violation or threatened violation by Executive by his obligations under the
preceding sentence, Employer shall be entitled to injunctive relief without any
necessity to post bond. Executive acknowledges and agrees that the Company's
catalogue business is competitive with retail store businesses offering similar
product lines.
8
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7. INDEMNIFICATION
The Company shall indemnify and hold Executive harmless from and against
any expenses (including attorneys' fees of the attorneys selected by Executive
to represent him, which shall be advanced as incurred), judgements, fines and
amounts paid in settlement incurred by him by reason of his being made a party
or threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal administrative or investigative, by
reason of any act or omission to act by Executive during or before the
Employment Period or otherwise by reason of the fact that he is or was a
director or officer of Employer of any subsidiary or affiliate included as a
part of the Company, to the fullest extent and in the manner set forth and
permitted by the General Corporation Law of the State of Delaware and any other
applicable law as from time to time in effect. The provisions of this Section 7
shall survive any termination of the Employment Period or any deemed termination
of this Agreement.
8. MISCELLANEOUS
8.1 NOTICES. Any notice, consent or authorization required or permitted to
be given pursuant to this Agreement shall be in writing and sent to the party
for or to whom intended, at the address of such party set forth below, be
registered or certified mail, postage paid (deemed given five days after
deposit in the U.S. mails) or personally or by facsimile transmission (deemed
given upon receipt), or at such other address as either party shall designate by
notice given to the other in the manner provided herein.
If to Employer: Jos. A. Bank Clothiers, Inc.
500 Hanover Pike
Hampstead, Maryland 21704-2095
Attn: Secretary
With copy to: Ralph J. Sutcliffe, Esq.
Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
If to Executive: Mr. Robert N. Wildrick
Jos. A. Bank Clothiers, Inc.
500 Hanover Pike
Hampstead, Maryland 21074-2095
With copy to: Jim J. Shoemake, Esq.
Guilfoil Petzall & Shoemake, L.L.C.
100 South Fourth Street, Suite 500
St. Louis, MO 63102
8.2 LEGAL FEES. The Company shall pay the reasonable legal fees and
expenses incurred
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by Executive in connection with preparation, negotiation, executive and
delivery of this Agreement (not to exceed $7,500), as well as such fees and
expenses incurred in connection with any amendment or modification hereof
or enforcement of Executive's rights hereunder.
8.3 TAXES. Employer is authorized to withhold (from any compensation or
benefits payable hereunder to Executive) such amounts for income tax, social
security unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgement of Employer to comply with applicable
laws and regulations.
8.4 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed therein.
8.5 ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Baltimore,
Maryland in accordance with the rules of the American Arbitration Association
then in effect. Judgement may be entered on the arbitration award in any court
having jurisdiction; PROVIDED, HOWEVER, that Executive shall be entitled to seek
specific performance of his right to be paid until expiration of the Employment
Period during the pendency of any arbitration.
8.6 HEADING. All descriptive headings in this Agreement are inserted for
convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
8.7 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
8.8 SEVERABILITY. If any provision of this Agreement, or any part thereof,
is held to be unenforceable, the remainder of such provision and this Agreement,
as the case may be, shall nevertheless remain in full force and effect.
8.9 ENTIRE AGREEMENT AND REPRESENTATIONS. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to the Company or its several businesses, or relating to the
Company's assets, liabilities, operations, future plans or prospects have been
made by or on behalf of Employer to Executive. This Agreement supersedes any
prior agreement between the parties relating to the subject matter hereof.
8.10 SUCCESSOR AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors,
heirs (in the case of Executive) and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JOS. A BANK CLOTHIERS, INC.
By: /s/ David A. Preiser
---------------------------------
Name: David A. Preiser
-------------------------------
Title: Chairman of Comp. Committee
--------------------------------
/s/ Robert N. Wildrick
--------------------------------------
ROBERT N. WILDRICK
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(INSERT MSP21-26 HERE)
<PAGE>
EXHIBIT
OPTION AGREEMENT
THIS OPTION AGREEMENT, dated as of November 1, 1999, by and between Robert
N. Wildrick ("Optionee") and JOS. A. BANK CLOTHIERS, INC. (the "Company"), a
Delaware corporation
WITNESSETH THAT:
WHEREAS, Optionee is an employee of the Company or a Subsidiary
(collectively, the "Bank Group") pursuant to an Employment Agreement dated as of
November 1, 1999 (the "Agreement") and has been awarded the hereinafter
described Option pursuant to Section 4.8 of the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Optionee hereby
agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee the right and
option (the "Option") to purchase an aggregate of 600,000 shares (the "Option
Shares") of the Company's Common Stock, $.01 par value per share (the "Common
Shares"), which option is not intended to qualify as an incentive stock option,
as defined in Section 422 of the Internal Revenue Code of 1986 (the "Code").
2. PURCHASE PRICE. The purchase price (the "Purchase Price") of each Option
Share shall be the average closing price of the Common Shares for the thirty
trading day period commencing ten trading days prior to the date of this Option
per share, subject to adjustment pursuant to Paragraph 6. Following
determination of the Purchase Price, Employer shall insert it in the following
space: $______________.
3. TIME OF EXERCISE. Unless sooner terminated pursuant to the provisions of
Paragraph 4 hereof and subject to acceleration of vesting as provided in the
next sentence, the Option shall vest and become exercisable in whole or in part
from time to time as to (a) 200,000 of the Option Shares on or after the date
hereof (the "First Vesting Date"), (b) and additional 200,000 of the Option
Shares on or after the first anniversary of the First Vesting Date and (c) as to
an additional 200,000 Option Shares on and after the earlier of September 30,
2009 and the first date after which the average closing price of the Common
Shares for any consecutive 90-day period equals or exceeds $8.00 per share, and
shall not be exercisable after the tenth anniversary or the date hereof. Upon
the occurrence of a change in control (as defined in the Agreement), any then
invested installments of the Option shall vest and become immediately
exercisable.
4. EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT OF DEATH.
(a) If the employment of the Optionee with a member of the Bank Group shall
be terminated voluntarily by the Optionee without the consent of such employer
or for "Cause" (as hereinafter defined), and immediately after such termination
the Optionee shall not then be employed by any other member of the Bank Group,
the Option to the extent not theretofore exercised shall expire
<PAGE>
forthwith. For purposes of this Option Agreement, "Cause" shall mean "Cause" as
defined in the Agreement.
(b) If the Optionee's employment with a member of the Bank Group shall
terminate other than (i) by reason of death, (ii) voluntarily by the Optionee
without the consent of his employer, or (iii) for Cause, and immediately after
such termination the Optionee shall not then be employed by any other member of
the Bank Group, the Option may be exercised at any time within three months
after such termination, subject to the provisions of subparagraph (d) of this
Paragraph 4. The Option, to the extent unexercised, shall expire on the day
three months after the termination of the Optionee's employment with the member
of the Bank Group. For the purposes of this Option Agreement, the retirement of
the Optionee either pursuant to a pension or retirement plan adopted by his
employer or on the normal retirement date prescribed from time to time by his
employer, and the termination of employment as a result of a disability (as
defined in Section 22 (e) (3) of the Code) shall be deemed to be a termination
of such Optionee's employment other than voluntarily by the Optionee without the
consent of his employer.
(c) If the Optionee dies (i) while employed by any member of the Bank Group
or (ii) within three months after the termination of his employment other than
voluntarily by the Optionee without the consent of his employer or for Cause,
the Option may be exercised at any time within six months after the Optionee's
death, subject to the provisions of subparagraph (d) of this Paragraph 4. The
Option, to the extent unexercised, shall expire on the date six months after the
Optionee's death.
(d) The Option may not be exercised pursuant to this Paragraph 4 except to
the extent that the Optionee was entitled to exercise the Option at the time of
the termination of his employment, or at the time of his death, and in any event
may not be exercised after the tenth anniversary of the date hereof.
5. LEAVE OF ABSENCE. In the event the Optionee is on military or sick leave
or other bona fide leave of absence (such as temporary employment by the United
States or any state government), the Optionee shall be considered as remaining
in the employ of his employer for 90 days or such longer period as shall be
determined by the Board of Directors of his employer.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event that the outstanding shares of Common Stock are hereafter
changed by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination or exchange of shares and the
like, or dividends payable in shares of Common Stock, an appropriate adjustment
shall be made by the Board of Directors of the Company in the aggregate number
of Option Shares and Purchase Price. If the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or substantially all
of the assets of the Company shall be sold or exchanged, the Optionee shall
thereupon, be entitled to receive upon the exercise of the Option the same
number and kind of shares of stock or the same amount of property, cash or
securities as he would have been entitled to receive upon the occurrence of any
such corporate event as if he had been, immediately prior to such event, the
holder of the number of Option Shares covered by the Option; provided, however,
that if any
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of such events occur, the Board of Directors of the Company shall have the
discretionary power to prevent the Option from being disqualified as an
incentive stock option.
(b) Any adjustment under this Paragraph 6 in the number of shares of Common
Stock subject to the Option shall apply proportionately to only the unexercised
portion of the Option. If fractions of a share would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
shares.
7. Method of Exercising Option.
(a) The Option shall be exercised by the delivery by Optionee to the
Company at its principal office (or at such other address as may be established
by the Company's Board of Directors) of written notice of the number of shares
of Common Stock with respect to which the Option is being exercised accompanied
by payment in full of the Purchase Price of such shares. Payment of the Purchase
Price for such shares of Common Stock may be made (i) in U.S. dollars by
delivery of cash or personal check, bank draft or money order payable to the
order of the Company or by money transfers or direct account debits; (ii) by
delivery of certificates representing shares of Common Stock having a fair
market value (as defined below) equal to the such Purchase Price; (iii) pursuant
to a broker-assisted "cashless exercise" program if established by the Company,
or (iv) by any combination of the methods of payment described in (i) through
(iii) above.
(b) For purposes of this Paragraph 7, the fair market value of a share of
Common Stock on a particular day shall be the closing price for the Common Stock
on NASDAQ on such day, or it there were no sales on such day, on the next
preceding day on which such closing price was recorded, or, if the Common Stock
is not listed on NASDAQ, the closing price for the Common Stock as officially
reported on the relevant date by the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if the Common Stock
is not listed or admitted to trading on any such national securities exchange,
as determined in good faith by resolution of the Board of Directors of the
Company or the Committee (whose determination shall be conclusive), based on the
information available to it.
8. Withholding. The Company's obligation to deliver shares of Common Stock
upon the exercise of the Option shall be subject to the payment by the Optionee
of any applicable federal, state and local withholding tax. The Company shall,
to the extent permitted by law, have the right to deduct from any payment of any
kind otherwise due to the Optionee any federal, state or local taxes required to
be withheld with respect to such payment. Subject to the right of the Company's
Board of Directors or the Committee to disapprove any such election and require
the withholding tax in cash, the Optionee shall have the right to elect to pay
the withholding tax with shares of Common Stock to be received upon exercise of
the Option or which are otherwise owned by the Optionee. Any election to pay
withholding taxes with stock shall be irrevocable once made.
9. Representations.
(a) Unless prior to the exercise of the Option the shares of Common Stock
issuable upon such exercise are the subject of a registration statement filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Securities Act"), and there is then in effect a
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prospectus filed as part of such registration statement meeting the requirements
of Section 10(a)(3) of the Securities Act, the notice of exercise with respect
to the Option shall be accompanied by a representation or agreement of the
Optionee to the Company to the effect that such shares are being acquired for
investment only and not with a view to the resale or distribution thereof, or
such other documentation as may be required by the Company, unless, in the
opinion of counsel to the Company, such representation, agreement or
documentation is not necessary to comply with the Securities Act. If
appropriate, certificate(s) for the Option Shares issued upon the exercise of
the Option shall bear a legend reciting that such Option Shares may only be
transferred if there is then in effect a prospectus filed as part of such
registration statement meeting the requirements of Section 10(a)(3) of the
Securities Act unless, in the opinion of counsel to the Company, such
registration is not required. The Company may also issue "stop transfer"
instructions with respect to Option Shares acquired by the exercise of the
Option.
(b) The Company shall not be obligated to issue or sell any shares of
Common Stock until they have been listed on each securities exchange on which
the shares of Common Stock may then be listed and until and unless, in the
opinion of counsel to the Company, the Company may issue such shares pursuant to
a qualification or an effective registration statement, or an exemption from
registration, under such state and federal laws, rules or regulations as such
counsel may deem applicable. The Company shall use reasonable efforts to effect
such listing, qualification and registration, as the case may be.
10. Option Cannot be Transferred. The Option is not transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised during Optionee's lifetime only by the Optionee. Any attempt to
transfer the Option in contravention of this Paragraph 10 is void ab initio. The
Option shall not be subject to execution, attachment or other process.
11. No Rights in Option Shares. The Optionee shall have none of the rights
as a shareholder with respect to any Option Shares until such Option Shares
shall be issued to him upon exercise of the Option.
12. Not a Contract of Employment. Nothing contained herein shall confer
upon the Optionee any right to remain in the employ of any member of the Bank
Group.
13. Miscellaneous. This Option Agreement cannot be changed or terminated
orally. This Option Agreement contains the entire agreement between the parties
relating to the subject matter hereof. This Option Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware. The
paragraph headings herein are intended for convenience of reference only and
shall not affect the interpretation hereof. Capitalized terms used but not
defined herein shall have those respective meanings attributed to them in the
Plan.
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IN WITNESS WHEREOF, the parties have executed this Option Agreement as of
the day and year first above written.
JOS. A. BANK CLOTHIERS, INC.
By: ________________________
Optionee:
_____________________________
5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 30 day of November l999, by
and between ROBERT HENSLEY ("Employee") and JOS. A. BANK CLOTHIERS, INC.
("Employer" or "Company").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which
are hereby acknowledged, Employer hereby agrees to employ Employee as an
Executive Vice President, and Employee hereby agrees to be and remain in the
employ of Employer, upon the terms and conditions hereinafter set forth:
1. EMPLOYMENT PERIOD. Subject to earlier termination as set forth in this
Agreement, the period of employment under this Agreement (the "Employment
Period") shall be for approximately two years beginning December 6, 1999 (the
"Start Date") and ending February 2, 2002.
2. DUTIES AND RESPONSIBILITIES.
2.1 General. During the Employment Period, Executive shall (i) have the
title of Executive Vice President and (ii) devote substantially all of his
business time and expend his best efforts, energies and skills to the business
of the Company. Executive shall perform such duties, consistent with his status
as Executive Vice President, as he may be assigned from time to time by
Employer's Chief Executive Officer (the "Chief Executive Officer").
2.2 Location of Executive Office. The Company will maintain its principal
executive offices at a location in the Baltimore, Maryland metropolitan area.
Executive shall not be required to perform services for the Company at any other
location, except for services rendered in connection with reasonably required
travel on Company business.
3. COMPENSATION AND RELATED MATTERS
3.1 Base Salary. Employer shall pay to Executive during the Employment
Period an annual base salary (the "Base Salary") of $250,000. The Base Salary
for each year shall be payable in installments in accordance with the Company's
policy on payment to executives in effect from time to time.
3.2 Annual Bonus. For fiscal year 2000 (ending on or about January 31,
2001) and for each other fiscal year that begins during the Employment Period
(each such fiscal year, a "Bonus Year"), Executive shall be eligible to receive
a bonus of up to 40% of Base Salary (each, a "Bonus") conditioned upon the
satisfaction of (a) Company performance goals established by the Compensation
Committee of the Board of Directors of the Company (the "Committee") for such
Bonus Year and (b) personal performance goals submitted by the Executive to, and
approved by, the Chief Executive Officer and the Committee for such Bonus Year.
Company and personal performance goals are herein referred to collectively as
the "Performance Goals". The Performance Goals for each Bonus Year shall be
established as soon as possible following the beginning of such Bonus Year. The
Bonus earned for any Bonus Year shall be payable promptly
<PAGE>
following the determination thereof, but in no event later than 90 days
following the end of each Bonus Year. If (a) the Employment Period shall expire
or terminate and (b) Employee is entitled to payment of a bonus pursuant to
Section 5 hereof, the Bonus payable for the Bonus Year in which the Employment
Period terminates or expires shall equal the Bonus that would have been paid had
the Employment Period not so terminated or expired, multiplied by a fraction,
the numerator of which shall be the number of days of the Employment Period
within the Bonus Year and the denominator of which shall be 365. For the
purposes of determining the amount of Bonus payable pursuant to the immediately
preceding sentence, it shall be assumed that all conditions to payment based
upon performance by the Executive (e.g. personal performance goals) have been
satisfied. Notwithstanding anything to the contrary contained herein or in the
Employer's Bonus Plan, in the event (y) the Employment Period shall end for any
reason whatsoever on a day prior to payment to Executive of a Bonus for the last
full Bonus Year contained within the Employment Period, and (z) Executive would
have been entitled to receive a Bonus for such last full Bonus Year had the
Employment Period not ended - then, Employer shall pay to Executive the Bonus
for such last full Bonus Year as and when such Bonus would have been paid had
the Employment Period not ended.
3.3 Other Benefits. During the Employment Period, subject to, and to
the extent Executive is eligible under their respective terms, Executive shall
be entitled to receive such fringe benefits as are, or are from time to time
hereafter, generally provided by Employer to Employer's senior management
employees (other than those provided under or pursuant to separately negotiated
employment agreements or arrangements).
3.4 Moving Allowance. Employer shall pay to Executive, or pay on
Executive's behalf, an allowance of not more than $75,000 in connection with
Executive's relocation from Cleveland to Baltimore (the "Moving Allowance").
Employer shall contract directly for the one-time transportation of Executive's
household goods to Baltimore. Employer and Executive shall cooperate in good
faith to arrange for a third-party relocation service to assist in the
disposition of Executive's personal residence in Cleveland. Employer shall
reimburse Executive for ordinary and customary settlement expenses incurred in
connection with the sale of Executive's Cleveland residence and the purchase of
Executive's Baltimore residence; provided, however, that Employer shall not
reimburse Executive for more than 2% of any purchase money mortgage for
origination fees and discount points, any prepaid or escrow amounts or any
amounts adjusted between buyer and seller (e.g. taxes or utilities). Any portion
of the Moving Allowance not used by Executive, or paid on Executive's behalf,
for actual relocation expenses may be used by Executive to offset the tax
consequences, if any, of the compensation to Executive represented by the Moving
Allowance. Notwithstanding anything to the contrary contained in this Section
3.4, the total of all payments made by Employer hereunder, whether directly to
Executive or to third parties in connection with Executive's relocation, shall
in no event exceed $75,000, inclusive of any tax gross-up.
3.5 Stock Options. Subject to the approval of the Committee, Employer
shall grant to Executive an option to purchase 50,000 shares of Employer's
common stock at an option price equal to the market closing price of such stock
on the Start Date, vesting as to 25,000 shares on the Start Date and as to
25,000 shares on the first anniversary of the Start Date. The option shall
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otherwise be upon such terms and conditions as are usual and customary for
grants of options by Employer to executives.
3.6 Vacation. Executive shall be entitled to 20 days of vacation
during each 12-month vacation accrual period, which days shall accrue in
accordance with the Company's vacation policy in effect from time to time for
its senior executive officers. Vacations shall be taken at such time or times as
shall not unreasonably interfere with Executive's performance of his duties
under this Agreement. The number of vacation days shall be prorated for any
12-month vacation accrual period not wholly within the Employment Period. Upon
termination of Executive's employment pursuant to Section 4 for any reason
whatsoever, Employer shall pay Executive, in addition to any termination
compensation provided for under Section 5, an amount equivalent to Executive's
per diem compensation at the then-current Base Salary rate multiplied by the
number of unused vacation days, including any carry-over, accrued by Executive
as of the date of termination.
4. TERMINATION OF EMPLOYEMNT PERIOD.
4.1. Termination without Cause or Good Reason. Employer or Employee may
terminate the Employment Period at any time without cause or without good reason
upon 60 days notice.
4.2 Termination by Employer for Cause. Employer may terminate the
Employment Period in accordance with this Section 4.2 at any time for cause. For
the purpose of this Section 4.2, "cause" shall mean any of the following:
a) the conviction of Executive in a court of competent
jurisdiction of a crime constituting a felony in such jurisdiction involving
money or other property of the Company or any of its affiliates or any other
felony or offense involving moral turpitude;
b) the willful commission of an act not approved of or
ratified by the Chief Executive Officer involving a material conflict of
interest or self-dealing relating to any material aspect of the Company's
business or affairs;
c) the willful commission of any act of fraud or
misrepresentation (including the omission of material facts) provided that such
act relates to the business of the Company and would materially and negatively
impact upon the Company ; or
d) the willful and material failure of Executive to comply
with the lawful orders of the Chief Executive Officer, provided such orders are
consistent with Executive's duties, responsibilities and/or authority as
Executive Vice President of the Company.
In the event Employer shall elect to pursue a termination for cause,
Employer shall deliver to Executive a written notice from the Chief Executive
Officer setting forth with reasonable particularity the grounds upon which the
Chief Executive Officer has found cause for termination. In the event such
grounds are predicated upon acts or omissions as set forth in paragraphs (b),
(c) or (d) above, Executive shall have thirty (30) days, or such longer period
as
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may be necessary provided Executive has commenced and is diligently proceeding,
to cure or eliminate the cause for termination. In the event Executive has
failed to timely cure or eliminate the cause for termination as set forth in the
immediately preceding sentence, or in the event the grounds for termination are
predicated upon conviction of Executive as set forth in paragraph (a) above, the
Company, acting by and through the Chief Executive Officer, shall have the right
to immediate terminate Executive for cause.
4.3. Termination by Employee for Good Reason. Executive may, at any
time during the Employment Period by notice to Employer, terminate the
Employment Period effective immediately for "good reason". For the purposes
hereof, "good reason" means any material breach by Employer of any provision of
this Agreement which, if susceptible of being cured, is not cured within 30 days
of delivery of notice thereof to Employer by Executive; it being agreed,
however, that the foregoing 30 day cure period shall not be applicable to any
failure to pay timely (or any reduction in) compensation or benefits paid or
payable to Executive pursuant to the provisions of Section 3 hereof. Without
limitation of the generality of the foregoing, each of the following shall be
deemed to be a material breach of this Agreement by Employer: (x) any failure to
pay timely (or any reduction in) compensation (including benefits) paid or
payable to Executive pursuant to the provisions of Section 3 hereof; (y) any
reduction in the duties, responsibilities or perquisites of Executive as
provided in this Agreement and (z) any transfer of the Company's principal
executive offices outside the geographic area described in Section 2.2 hereof or
requirement that Executive principally perform his duties outside such
geographic area.
4.4 Disability. During the Employment Period, if, as a result of physical
or mental incapacity or infirmity (including alcoholism or drug addiction),
Executive shall be unable to perform his material duties under this Agreement
for (i) a continuous period of at least 180 days, or (ii) periods aggregating at
least 270 days during any period of 12 consecutive months (each a "Disability
Period"), and at the end of the Disability Period there is no reasonable
probability that Executive can promptly resume his material duties hereunder
pursuant hereto, Executive shall be deemed disabled (the "Disability") and
Employer, by notice to Executive, shall have the right to terminate the
Employment Period for Disability at, as of or after the end of the Disability
Period. The existence of the Disability shall be determined by a reputable,
licensed physician mutually selected by Employer and Executive, whose
determination shall be final and binding on the parties, provided, that if
Employer and Executive cannot agree upon such physician, such physician shall be
designated by the then acting President of the Baltimore City Medical Society,
and if for any reason such President shall fail or refuse to designate such
physician, such physician shall, at the request of either party, be designated
by the American Arbitration Association. Executive shall cooperate in all
reasonable respects to enable an examination to be made by such physician.
4.5 Death. The Employment Period shall end on the date of Executive's
death.
5. TERMINATION COMPENSATION; NON-COMPETE
5.1 Termination Without Cause by Employer or for Good Reason by
Executive. If the Employment Period is terminated by Employer pursuant to the
provisions of Section 4.1 hereof or by Executive pursuant to the provisions of
Section 4.3 hereof, Employer will pay to Executive
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(a) Base Salary for a period of twelve (12) months following the date of
termination (calculated at the Base Salary rate in effect as of the date of
termination) payable in equal installments at the times Base Salary would have
been paid had the Employment Period not been terminated; (b) when and if due
pursuant to the provisions of Section 3.2 hereof, the prorated Bonus for the
then current Bonus Year and (c) if applicable, the Bonus for the last full Bonus
Year pursuant to Section 3.2. Employer shall have no obligation to continue any
other benefits provided for in Section 3 past the date of termination, except as
provided in Section 3.6.
5.2 Certain Other Terminations. If the Employment Period is terminated
by Employer pursuant to the provisions of Section 4.2, by Executive pursuant to
Section 4.1, for Disability pursuant to the provisions of Section 4.4 or as a
result of the death of Executive as set forth in Section 4.5, Employer shall pay
to Executive (a) Base Salary through the date of termination, (b) in the case of
termination as a result of a Disability or the death of Executive, when and if
due pursuant to provisions of Section 3.2, the prorated Bonus for the Bonus Year
in which the date of termination occurred and (c) if applicable, the Bonus for
the last full Bonus Year pursuant to Section 3.2. Employer shall have no
obligation to continue any other benefits provided for in Section 3 past the
date of termination, except as provided in Section 3.6.
5.3 Expiration at Election of Employer. If (a) at least 275 days prior
to the stated expiration date of the Employment Period Employer notifies
executive that Employer will not agree to a renewal or extension of the
Employment Period on its then current terms, or (b) at least 183 days prior to
the stated expiration date of the Employment Period Executive notifies Employer
that he will not agree to an extension or renewal of the Employment Period on
its then current terms, then if the Employment Period expires on its then stated
expiration date, Employer shall pay to Executive (x) Base Salary for the twelve
(12) month period following the date of termination (calculated at the Base
Salary rate in effect as of the date of termination), payable in equal
installments at the times Base Salary would have been paid had the Employment
Period not been terminated, (b) when and if due pursuant to the provisions of
Section 3.2, the Bonus for the Bonus Year in which the Employment Period expired
prorated as provided in said Section 3.2 and (c) if applicable, the Bonus for
the last full Bonus Year pursuant to Section 3.2. Employer shall have no
obligation to continue any other benefits provided for in Section 3 past the
date of termination, except as provided in Section 3.6.
5.4 No Other Termination Compensation. Executive shall not, except as
set forth in this Section 5 and in Section 3.6, be entitled to any compensation
following termination of the Employment Period, except as otherwise provided in
any stock options granted by Employer to Executive.
5.5 Mitigation. Executive shall not be required to mitigate the amount
of any payments or benefits provided for hereunder upon termination of the
Employment Period by seeking employment with any other person, or otherwise, nor
shall the amount of any such payments or benefits be reduced by any
compensation, benefit or other amount earned by, accrued for or paid to
Executive as the result of Executive's employment by or consultancy or other
association with any other person. Without any obligation of Employer to provide
any benefits to Executive after termination of the Employment Period except as
specifically set forth herein, any medical, dental or hospitalization insurance
or other benefits provided to Executive with his employment by or
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consultancy with an unaffiliated person shall be primary to any benefits
provided to Executive pursuant to this Agreement for the purposes of
coordination of benefits.
5.6 Non-Compete. For the 6 month period following the termination or
expiration of the Employment Period for any reason whatsoever (other than a
termination by Executive pursuant to Section 4.1, in which case the applicable
period shall be one year), and for so long as Employer is making and the
Executive is accepting the payments required to be made to Executive pursuant to
this Section 5, Executive shall not, directly or indirectly, (i) engage in any
activities that are in competition with the Company in any geographic area
within 50 miles of the location of any Company store (owned or franchised) as of
the date of termination of the Employment Period (provided that the foregoing
geographic limitation shall also be construed to prohibit Executive from
engaging in any catalogue business that focuses on the sale of men's clothing),
(ii) solicit any customer of the Company or (iii) solicit any person who is then
employed by the Company or was employed by the Company within one year of such
solicitation to (a) terminate his or her employment with the Company, (b) accept
employment with anyone other than the Company, or (c) in any manner interfere
with the business of the Company. Executive acknowledges and agrees that in the
event of any violation or threatened violation by Executive of his obligations
under the preceding, Employer shall be entitled to injunctive relief without any
necessity to post bond. Executive acknowledges and agrees that the Company's
catalogue business is competitive with retail store business offering similar
product lines.
6. INDEMNIFICATION
The Company shall indemnify and hold Executive harmless from and
against any expenses (including attorneys' fees of the attorneys selected by
Executive to represent him, which shall be advanced as incurred), judgements,
fines and amounts paid in settlement incurred by him by reason of his being made
a party or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of any act or omission to act by Executive during the
Employment Period or otherwise by reason of the fact that he is or was a
director or officer of Employer or any subsidiary or affiliate included as a
part of the Company, to the fullest extent and in the manner set forth and
permitted by the General Corporation Law of the State of Delaware and any other
applicable law as from time to time in effect. The provisions of this Section 6
shall survive any termination of the Employment Period or any deemed termination
of this Agreement.
7. MISCELLANEOUS
7.1 Notices. Any notice, consent or authorization required or permitted
to be given pursuant to this Agreement shall be in writing and sent to the party
for or to whom intended, at the address of such party set forth below, be
registered or certified mail, postage paid (deemed given five days after deposit
in the U.S. mails) or personally or by facsimile transmission
6
<PAGE>
(deemed given upon receipt), or at such other address as either party shall
designate by notice given to the other in the manner provided herein.
If to Employer: Jos. A. Bank Clothiers, Inc.
500 Hanover Pike
Hampstead, Maryland 21074-2095
Attn: Secretary
If to Executive: Mr. Robert Hensley
Jos. A. Bank Clothiers, Inc.
500 Hanover Pike
Hampstead, Maryland 21074-2095
7.2 Legal Fees. The Company shall pay the reasonable legal fees and
expenses incurred by Executive in connection with the preparation, negotiation,
execution and delivery of this Agreement (not to exceed $3,000), as well as such
fees and expenses incurred in connection with any amendment or modification
hereof or enforcement of Executive's rights hereunder.
7.3 Taxes. Employer is authorized to withhold from any compensation or
benefits payable hereunder to Executive such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgement of Employer to comply with applicable
laws and regulations.
7.4 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maryland applicable to
agreements made and to be performed therein.
7.5 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Baltimore, Maryland in accordance with the rules of the American Arbitration
Association then in effect. Judgement may be entered on the arbitration award in
any court having jurisdiction; provided, however, that Executive shall be
entitled to seek specific performance of his right to be paid until expiration
of the Employment Period during the pendency of any arbitration.
7.6 Headings. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
7.7 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
7.8 Severability. If any provision of this Agreement, or any part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
7
<PAGE>
7.9 Entire Agreement and Representation. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to the Company or its several businesses, or relating to the
Company's assets, liabilities, operations, future plans or prospects have been
made by or on behalf of Employer to Executive. This Agreement supersedes any
prior agreement between the parties relating to the subject matter hereof.
7.10 Successor and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors, heirs (in the case of Executive) and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JOS. A. BANK CLOTHIERS, INC.
By: /s/ Robert N. Wildrick, /s/ Robert Hensley
-------------------------- ----------------------
Robert N. Wildrick, ROBERT HENSLEY
Chief Executive Officer
8
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