<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended Commission File
April 26, 1997 Number 1-5674
ANGELICA CORPORATION
(Exact name of Registrant as specified in its charter)
MISSOURI 43-0905260
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
424 South Woods Mill Road
CHESTERFIELD, MISSOURI 63017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(314) 854-3800
----------------------------------------------------
Former name, former address and former fiscal year
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such 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
----- -----
The number of shares outstanding of Registrant's Common Stock, par
value $1.00 per share, at June 4, 1997 was 9,152,717 shares.
===============================================================================
<PAGE> 2
ANGELICA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
FOR APRIL 26, 1997 FORM 10-Q QUARTERLY REPORT
<TABLE>
<CAPTION>
Page Number Reference
---------------------
Quarterly Report
to
Form 10-Q Shareholders
--------- ----------------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Consolidated Statements of Income -
First Quarter Ended April 26, 1997 and
April 27, 1996 3
Consolidated Balance Sheets -
April 26, 1997 and January 25, 1997 4
Consolidated Statements of Cash Flows -
First Quarter Ended April 26, 1997
and April 27, 1996 5
Notes to Consolidated Financial
Statements 2
Management's Discussion and Analysis
of Operations and Financial Condition 3-4
Exhibit A - Quarterly Report to
Shareholders 5
PART II. OTHER INFORMATION 6-11
</TABLE>
<PAGE> 3
ANGELICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 26, 1997
(1) The accompanying consolidated condensed financial statements
are unaudited, and it is suggested that these consolidated
statements be read in conjunction with the fiscal 1997 Annual
Report, including Notes to Financial Statements. However, it
is the opinion of the Company that all adjustments,
consisting only of normal recurring adjustments, necessary
for a fair statement of the results during the interim period
have been included.
(2) See Index to Financial Statements and Supporting Schedules on
page 1. Those pages of the Angelica Corporation and
Subsidiaries Quarterly Report to Shareholders for the quarter
ended April 26, 1997, listed in such index are incorporated
herein by reference. The pages of the Quarterly Report to
Shareholders which are not listed on the index and therefore
not incorporated herein by reference are furnished for the
information of the Commission but are not to be deemed
"filed" as a part of this report. The Quarterly Report to
Shareholders referred to herein is located immediately
following page 4 of this report.
(3) For purposes of the Consolidated Statements of Cash Flows,
the Company considers short-term, highly liquid investments
which are readily convertible into cash, as cash equivalents.
Cash payments for income taxes were $526,000 and $395,000 in
the 1997 and 1996 periods, respectively; and in these periods
interest payments were $1,529,000 and $1,252,000,
respectively.
(4) The Financial Accounting Standards Board has issued Statement
128, Earnings per Share, effective for financial statements
for both interim and annual periods ending after December 15,
1997. Had the Company computed earnings per share using
statement 128 the earnings per share reported for each fiscal
period would not have changed.
2
<PAGE> 4
ANGELICA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
QUARTER ENDED APRIL 26, 1997
<TABLE>
Analysis of Operations
<CAPTION>
First Quarter Ended
--------------------------
April 26, April 27,
1997 1996
--------- ---------
<S> <C> <C>
Sales and Textile Service Revenues
- ----------------------------------
Textile Services $ 71,534 $ 65,212
Manufacturing and Marketing 42,412 44,585
Retail Sales 20,369 18,548
Intersegment Sales (6,958) (6,704)
-------- --------
$127,357 $121,641
======== ========
Gross Profit
- ------------
Textile Services $ 13,651 $ 13,174
Manufacturing and Marketing 8,008 9,152
Retail Sales 11,015 10,108
-------- --------
$ 32,674 $ 32,434
======== ========
</TABLE>
Combined sales and textile service revenues increased 4.7 percent compared with
last year's first quarter, and gross profit was up 0.7 percent. Revenues of the
Textile Services segment increased 9.7 percent in the first quarter, and
excluding acquisitions the increase was 5.9 percent. First quarter margins for
this segment were down modestly compared with the first quarter last year due to
a continuation of margin pressure from hospital customers. Poor performance at
a few plants continued to lower results, but efforts are continuing to be made
to correct this. First quarter results also benefited from the acquisition of a
co-op laundry in southern California with approximately $12,000,000 in annual
revenues. First quarter sales of the Manufacturing and Marketing segment
decreased 4.9 percent compared with the same quarter last year, and gross profit
decreased 12.5 percent. The U.S. operations of this segment had an earnings
decline partially offset by an increase in earnings of the foreign operations.
Sales in the U.S. were down due to fewer new uniform programs, slower sales to
healthcare markets and slower-than-expected development of new sales from the
Premier contract. Life Retail Stores had a 9.8 percent increase in sales
and 9.0 percent increase in gross profit, resulting from a 3.8 percent increase
in same-store sales together with new volume from acquisitions made since the
first quarter of last year.
Selling, general and administrative expenses increased 7.0 percent in the first
quarter compared with the same period last year. These expenses increased as a
percent of combined sales and textile service revenues from 20.1 percent to 20.5
percent in the first quarter. The Manufacturing and Marketing segment has
increased its sales and marketing efforts, including catalogs to get products
and capabilities in front of more potential buyers. These costs, together with
the growth of Life Retail Stores (whose selling, general and administrative
expenses are a much larger percentage of
3
<PAGE> 5
sales than in either of the other two business segments) have contributed to the
increase in selling, general and administrative expenses as a percent to
combined sales and revenues. Interest expense was $203,000 higher in the
quarter as a result of higher debt levels associated with acquisitions made
during the last year.
FINANCIAL CONDITION
- -------------------
The Company had a working capital of $158,319,000 and a current
ratio of 3.0 to 1 at April 26, 1997, down from $177,380,000 and 4.7
to 1 a year ago and compared with $163,015,000 and 3.3 to 1 at the
beginning of the year. The ratio of long-term debt to debt-plus-
equity was 34.5 percent at the close of the first quarter,
approximately the same as a year ago and up from 34.0 percent at
the beginning of the year.
Operating activities used a total cash flow of $908,000 in the
first quarter compared with providing $7,814,000 in the first
quarter last year, with the decrease being due to lower net income
and increased requirements for working capital. Cash used in
investing activities increased to $12,134,000 compared with
$7,135,000 a year ago. Included in investing activities were
capital expenditures of $5,513,000 (primarily two new laundry
facilities to be completed later this year to replace existing
facilities) and $6,621,000 for acquisition expenditures. Cash flow
provided by financing activities was a net $12,843,000 this year,
with $12,300,000 in new short-term financing and $3,000,000 of
assumed debt in acquisition being offset by $2,195,000 of dividends
paid. No material change in the Company's future aggregate cash
requirements is foreseen at the present time.
Based on the Company's cash generation from operations, as well as
its strong working capital position, current ratio and ratio of
long-term debt to debt-plus-equity, Management believes that
internal funds available from operations plus external funds
available from the issuance of additional debt and/or equity as
needed in the future, will be sufficient for all planned operating
and capital requirements, including acquisitions.
4
<PAGE> 6
EXHIBIT A
[LETTERHEAD OF ANGELICA CORPORATION]
Angelica Corporation
424 South Woods Mill Road
Chesterfield, Missouri 63017-3406
Angelica(R) Tel: 314.854.3800
May 15, 1997
Dear Shareholder:
As we expected, first quarter results were below the first quarter last year
- -- the strongest quarter we had in terms of earnings last year. However, we
are encouraged to note that results did show improvement compared with the
fourth quarter last year.
First quarter combined sales and textile service revenues were $127,357,000,
an increase of 4.7 percent from $121,641,000 in last year's first quarter.
Pretax income of $3,187,000 compared with last year's $4,931,000, and net
income of $1,976,000 was down from the $3,057,000 earned in the first quarter
last year. Net income per share was $.22 versus $.33 in the first quarter of
last year, a decrease of 33.3 percent.
Nearly all -- over 80 percent -- of the drop in first quarter earnings was
caused by poor results in the U.S. operations of the Manufacturing and
Marketing segment. Life Retail Stores continues to post significantly
improved results with an excellent increase in first quarter earnings, and
Textile Services, while having a slight decline compared with last year's
first quarter, showed improvement from the fourth quarter last year. Interest
costs increased because of higher debt levels associated with acquisitions
made during the last year.
First quarter revenues of the Textile Services segment increased 9.7 percent,
with about 40 percent of that increase being the result of acquisitions made
during the last twelve months. The remainder of the revenue increase was due
to implementation of some price increases plus addition of new customers, as
this quarter's organic growth was the best in over five years. Margins and
earnings in the first quarter were down modestly compared with the first
quarter last year due to a continuation of margin pressure from hospital
customers, but were better than any of the last three quarters of last year.
Poor performance at a few plants is still hindering results, but efforts are
continuing to be made to correct this. First quarter results also benefitted
from the acquisition of Automated Health System Laundry (AHSL), a co-op
laundry in southern California with about $12,000,000 in annual revenues.
Customers and revenues from this acquisition were absorbed by existing
Angelica plants in the area, and the positive effect of these incremental
revenues on earnings is expected to be even greater in future quarters. Our
new plant in Rockmart, Georgia continues to exceed our expectations, and we
are looking forward to completion in the second and third quarters of two
additional new plants currently under construction in Edison, New Jersey and
Ooltewah, Tennessee. All three of these plants replace older, less efficient
plants nearby.
First quarter sales of Life Retail Stores increased 9.8 percent, as this
segment achieved in the period a 3.8 percent same-store sales gain in addition
to the positive effect on sales of acquisitions over the last twelve months.
Earnings increased at a more rapid rate than the sales increase. Our
merchandising staff continues to do an excellent job of filling the on-the-job
apparel needs of nurses and other health care professionals. At the end of
the quarter, Life was operating 285 stores, one less than at last year end.
While Life made no acquisitions during the first quarter, several are in
process and we are expecting this pace to pick up as we work to grow this
segment by acquisition even more rapidly than in recent years. Life Retail
Stores had an excellent first quarter, and we expect this business segment
will have comparable success throughout this fiscal year.
In the Manufacturing and Marketing businesses, first quarter sales declined
4.9 percent compared with the same quarter last year, and earnings were down
much more significantly than the sales
<PAGE> 7
decline. Taken in the aggregate, sales and earnings of our foreign operations
- -- in Canada and the U.K. -- improved over the first quarter of last year. In
the United States, Angelica Image Apparel's sales declined for several
reasons. First, several large, new uniform programs which occurred in the
first quarter last year did not repeat, nor were there enough new programs
this year to offset this decline. Secondly, there continues to be an overall
softness in purchases by the health care market as they strive to reduce their
costs. And lastly, incoming business from the new Premier contract with the
Angelica/Standard Textile alliance, announced late last year, has not
developed nearly as fast as we had expected. However, early indications from
commitments made so far by the Premier hospitals, who have twelve months to
select a preferred supplier, show that as previously expected, increased
annual sales in the range of $7,500,000 to $10,000,000 are achievable once the
program is fully in place. Two other cost issues had an impact on earnings at
Angelica Image Apparel. First, we are increasing our marketing and
advertising efforts, including catalogs to get our products and capabilities
in front of more potential buyers. We are also expanding our sales efforts.
The other cost issue affecting first quarter results was a strike at two of
our principal manufacturing facilities in Missouri, employing approximately
360. We have operated these plants for over 40 years with no work
interruptions. The inability to settle this strike and the resulting ongoing
cost of these plants had a significant impact on this segment's results. We
have just recently announced our desire to close one of the two plants, and to
reduce operations at the other facility in order to turn it into a "quick
response" plant to service customers. This strike will continue to have some
negative impact on second quarter results, but hopefully not beyond. On a
positive note, we were recently notified by the New York City Transit
Authority that Angelica Image Apparel has been awarded its uniform contract
for the next five years. That contract will generate revenues of over
$20,000,000 and is expected to have a significant positive impact on sales and
earnings starting in the fourth quarter this year. A number of important
organizational and management changes have been made over the past six months
at the Image Apparel division, and these, together with many other actions we
have taken to improve the Manufacturing and Marketing business, are expected
to begin to provide benefits during the remainder of this year.
Although first quarter results were below last year, several things happened
that suggest improved performance in the future. Most important were the
better revenue and margins of the Textile Services segment, our largest profit
producer. Angelica Image Apparel's new uniform contract with New York City
Transit Authority plus the continuing excellent performance of Life Retail
Stores also are encouraging. Furthermore, the first quarter suggested
slightly reduced margin pressure from the health care market, and our other
markets are experiencing good economic conditions. We remain encouraged that
fiscal 1998 full-year results will show improvement over fiscal 1997.
Respectfully submitted,
/s/ Lawrence J. Young
Lawrence J. Young
Chairman of the Board and President
<PAGE> 8
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands, except per share amounts)
<CAPTION>
First Quarter Ended
-----------------------------------
April 26, 1997 April 27, 1996
-------------- --------------
<S> <C> <C>
Textile service revenues $ 71,534 $ 65,212
Net sales 55,823 56,429
-------- --------
127,357 121,641
-------- --------
Cost of textile services 57,883 52,038
Cost of goods sold 36,800 37,169
-------- --------
94,683 89,207
-------- --------
Gross profit 32,674 32,434
-------- --------
Selling, general and
administrative expenses 26,164 24,449
Interest expense 2,553 2,350
Other expense, net 770 704
-------- --------
29,487 27,503
-------- --------
Income before income taxes 3,187 4,931
Provision for income taxes 1,211 1,874
-------- --------
Net income $ 1,976 $ 3,057
======== ========
Net income per share<F*> $ .22 $ .33
======== ========
Dividends per common share $ .24 $ .24
======== ========
<FN>
<F*> Based upon weighted average number of common and common equivalent shares
outstanding of 9,141,011 and 9,152,884 for fiscal periods of 1998 and
1997, respectively.
</TABLE>
<PAGE> 9
<TABLE>
CONSOLIDATED BALANCE SHEETS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
<CAPTION>
April 26, 1997 January 25, 1997
-------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and short-term investments $ 1,923 $ 2,122
Receivables, less reserves of $3,091 and $2,645 66,585 66,632
Inventories:
Raw material 31,313 30,961
Work in progress 5,442 6,366
Finished goods 76,453 74,129
-------- --------
113,208 111,456
Linens in service 50,593 47,544
Prepaid expenses 6,408 4,658
-------- --------
Total Current Assets 238,717 232,412
-------- --------
Property and Equipment 225,163 216,893
Less -- reserve for depreciation 117,189 114,063
-------- --------
107,974 102,830
-------- --------
Goodwill 7,840 7,951
Other acquired assets 9,185 8,814
Cash surrender value of life insurance 14,680 14,455
Miscellaneous 7,780 7,642
-------- --------
39,485 38,862
-------- --------
Total Assets $386,176 $374,104
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Short-term debt $ 27,700 $ 15,400
Current maturities of long-term debt 3,289 2,689
Accounts payable 18,261 21,551
Accrued expenses 28,762 28,337
Income taxes 2,386 1,420
-------- --------
Total Current Liabilities 80,398 69,397
-------- --------
Long-Term Debt, less current maturities 99,436 97,417
Other Long-Term Obligations 17,201 18,049
Shareholders' Equity:
Preferred Stock:
Class A, Series 1, $1 stated value,
authorized 100,000 shares, outstanding: None -- --
Class B, authorized 2,500,000 shares,
outstanding: None -- --
Common stock, $1 par value, authorized 20,000,000
shares, issued: 9,471,538 9,472 9,472
Capital surplus 4,196 4,196
Retained earnings 185,971 186,438
Translation adjustment (1,930) (1,763)
Common Stock in treasury,
at cost: 324,749 and 340,699 (8,568) (9,102)
-------- --------
189,141 189,241
-------- --------
Total Liabilities and Shareholders' Equity $386,176 $374,104
======== ========
</TABLE>
<PAGE> 10
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
<CAPTION>
First Quarter Ended
------------------------------------
April 26, 1997 April 27, 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 1,976 $ 3,057
Non-cash items included in net income:
Depreciation 3,369 3,190
Amortization of acquisition costs 922 831
Change in working capital components,
net of businesses acquired (5,964) 2,008
Other, net (1,211) (1,272)
-------- --------
Net cash (used in) provided
by operating activities (908) 7,814
-------- --------
Cash Flows from Investing Activities
Expenditures for property and equipment, net (5,513) (6,986)
Cost of businesses acquired (6,621) (149)
-------- --------
Net cash used in investing activities (12,134) (7,135)
-------- --------
Cash Flows from Financing Activities
Proceeds from issuance of short-term debt 12,300 --
Dividends paid (2,195) (2,198)
Debt assumed in acquisition 3,000 --
Other, net (262) (209)
-------- --------
Net cash provided by (used in)
financing activities 12,843 (2,407)
-------- --------
Net increase (decrease) in cash and
short-term investments (199) (1,728)
Balance at beginning of year 2,122 11,029
-------- --------
Balance at end of period $ 1,923 $ 9,301
======== ========
</TABLE>
<PAGE> 11
<TABLE>
SUMMARY FINANCIAL POSITION DATA
Angelica Corporation and Subsidiaries
(In thousands, except ratios, shares and per share amounts)
<CAPTION>
(Unaudited) Year Ended January<F*>
----------------------- -------------------------------------------------------------------
April 26, April 27,
1997 1996 1997 1996 1995 1994 1993
-------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital $158,319 $177,380 $163,015 $181,043 $150,734 $157,188 $161,129
Current ratio 3.0 to 1 4.7 to 1 3.3 to 1 5.0 to 1 3.2 to 1 4.0 to 1 4.7 to 1
Long-term debt $99,436 $100,061 $97,417 $100,103 $69,683 $72,255 $78,175
Shareholders' equity $189,141 $190,820 $189,241 $189,530 $196,660 $191,993 $189,209
Percent long-term debt to
debt and equity 34.5% 34.4% 34.0% 34.6% 26.2% 27.3% 29.2%
Equity per common share $20.68 $20.84 $20.73 $20.73 $21.57 $21.13 $20.88
Common shares outstanding 9,146,789 9,157,420 9,130,839 9,141,508 9,118,912 9,086,034 9,063,834
<FN>
<F*> As reported in Company's Annual Report.
</TABLE>
<PAGE> 12
PART II. OTHER INFORMATION
ANGELICA CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) See Exhibit Index included herein on page 7-11.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the first quarter ended April 27, 1996.
SIGNATURES
----------
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.
Angelica Corporation
--------------------
(Registrant)
Date: June 4, 1997 /s/ T. M. Armstrong
------------------------------
T. M. Armstrong
Senior Vice President -
Finance and Administration
Chief Financial Officer
(Principal Financial Officer)
/s/ L. Linden Mann
-----------------------------
L. Linden Mann
Controller
(Principal Accounting Officer)
6
<PAGE> 13
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<FN>
<F*>Asterisk indicates exhibits filed herewith.
<F**>Management contract or compensatory plan incorporated by
reference from the document listed.
<C> <S>
3.1 Restated Articles of Incorporation of the Company, as currently in
effect. Said Articles were last filed as and are incorporated herein by
reference to Exhibit 3.1 to the Form 10-K for the fiscal year ended
1/26/91.
3.2 Current By-Laws of the Company, as last amended February 25, 1997. Said
By-Laws were last filed as and are incorporated herein by reference to
Exhibit 3.2 to Form 10-K for fiscal year ended 1/25/97.
4.1 Shareholder Protection Rights Plan. Filed as Registration Statement on
Form 8-A dated August 24, 1988 and incorporated herein by reference.
4.2 10.3% and 9.76% Senior Notes to insurance company due annually to 2004,
together with Note Facility Agreement. Filed as and incorporated herein
by reference to Exhibit 4.2 to the Form 10-K for the fiscal year ended
1/27/90.
4.3 9.15% Senior Notes to insurance companies due December 31, 2001,
together with Note Agreements and First Amendment thereto. Filed as and
incorporated herein by reference to Exhibit 4.3 to the Form 10-K for the
fiscal year ended 2/1/92.
4.4 8.225% Senior Notes to Nationwide Life Insurance Company, American
United Life Insurance Company, Aid Association for Lutherans, and Modern
Woodmen of America due May 1, 2006, together with Note Agreement. Filed
as and incorporated herein by reference to Exhibit 4.4 to the Form 10-Q
for the fiscal quarter ended July 29, 1995.
4.5 Uncommitted Shelf Agreement dated March 1, 1996 for Senior Notes to
insurance company, together with Amendment Agreement No. 1 to Note
Facility Agreement
7
<PAGE> 14
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<C> <S>
referred to in Exhibit 4.2 above. Filed as and incorporated herein by
reference to Exhibit 4.5 to the Form 10-K for the fiscal year ended
1/27/96.
4.6 Term Loan Agreement between Angelica Corporation and The First National
Bank of Boston dated as of October 2, 1995. Filed as and incorporated
hereby by reference to Exhibit 4.6 to the Form 10-K for the fiscal year
ended 1/27/96.
Note: No other long-term debt instrument issued by the Registrant
exceeds 10% of the consolidated total assets of the Registrant and
its subsidiaries. In accordance with Item 601(b) (4) (iii) (A) of
Regulation S-K, the Registrant will furnish to the Commission upon
request copies of long-term debt instruments and related
agreements.
10.1 Angelica Corporation 1994 Performance Plan (as amended 1/31/95) - Form
10-K for fiscal year ended 1/28/95, Exhibit 10.1.<F**>
10.2 Retirement Benefit Agreement between the Company and Alan D. Wilson
dated August 25, 1987 - Form 10-K for fiscal year ended 1/28/95, Exhibit
10.2.<F**>
10.3 Form of Participation Agreement for the Angelica Corporation Management
Retention and Incentive Plan (filed as Exhibit 10.3 to the Form 10-K for
fiscal year ended 1/30/93 and incorporated herein by reference) with
revised schedule setting out executive officers covered under such
agreements and the "Benefit Multiple" listed for each - Form 10-K for
fisal year ended 1/25/97, Exhibit 10.3.<F**>
10.4 Angelica Corporation Stock Option Plan (As amended November 29, 1994)-
Form 10-K for fiscal year ended 1/28/95, Exhibit 10.7.<F**>
10.5 Angelica Corporation Stock Award Plan - Form 10-K for fiscal year ended
2/1/92, Exhibit 10.<F**>
10.6 Angelica Corporation Retirement Savings Plan, as amended and restated -
Form 10-K for fiscal year ended
8
<PAGE> 15
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<C> <S>
1/27/90, Exhibit 19.3, incorporating all amendments thereto through the
date of this filing. The last amendment thereto was filed as Exhibit
10.22 to Form 10-Q for fiscal quarter ended 10/26/96.<F**>
10.7 Supplemental Plan - Form 10-K for fiscal year ended 1/27/90, Exhibit
19.10, incorporating all amendments thereto through the date of this
filing. The last amendment thereto was filed as Exhibit 10.31 to Form
10-K for fiscal year ended 1/25/97.<F**>
10.8 Incentive Compensation Plan (restated) - Form 10-K for fiscal year ended
1/27/90, Exhibit 19.11.<F**>
10.9 Deferred Compensation Option Plan for Selected Management Employees -
Form 10-K for fiscal year ended 1/26/91, Exhibit 19.9, incorporating all
amendments thereto filed through the date of this filing. The last
amendment thereto was filed as Exhibit 10.34 to Form 10-K for fiscal
year ended 1/25/97.<F**>
10.10 Deferred Compensation Option Plan for Directors - Form 10-K for fiscal
year ended 1/26/91, Exhibit 19.8, incorporating all amendments thereto
filed through the date of this filing.<F**>
10.11 Supplemental and Deferred Compensation Trust - Form 10-K for fiscal year
ended 2/1/92, Exhibit 19.5.<F**>
10.12 Management Retention Trust - Form 10-K for fiscal year ended 2/1/92,
Exhibit 19.4.<F**>
10.13 Performance Shares Plan for Selected Senior Management (restated) - Form
10-K for fiscal year ended 1/26/91, Exhibit 19.3.<F**>
10.14 Management Retention and Incentive Plan (restated) - Form 10-K for
fiscal year ended 1/26/91, Exhibit 19.1.<F**>
10.15 Non-Employee Directors Stock Plan - Form 10-K for fiscal year ended
1/27/90, Exhibit 10.3, incorporating all amendments thereto through the
date of this filing.<F**>
10.16 Restated Deferred Compensation Plan for Non-Employee Directors - Form
10-K for fiscal year ended 1/28/84,
9
<PAGE> 16
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<C> <S>
Exhibit 10 (v), incorporating all amendments thereto through the date of
this filing. The last amendment thereto was filed as Exhibit 10.25 to
Form 10-K for the fiscal year ended 1/28/95.<F**>
10.17 Restated Angelica Corporation Stock Bonus and Incentive Plan
(Incorporating Amendments Adopted Through October 25, 1994)- Form 10-K
for fiscal year ended 1/28/95, Exhibit 10.20, incorporating all
amendments thereto through the date of this filing. The last amendment
thereto was filed as Exhibit 10.23 to Form 10-K for the fiscal year
ended 1/27/96.<F**>
10.18 Angelica Corporation Pension Plan as Amended and Restated - Form 10-K
for fiscal year ended 1/26/91, Exhibit 19.7, incorporating all
amendments thereto through the date of this filing. The last amendment
thereto was filed as Exhibit 10.23 to Form 10-Q for fiscal quarter ended
7/27/96.<F**>
10.19 Angelica Corporation 1994 Non-Employee Directors Stock Plan,
incorporated by reference to Appendix A of the Company's Proxy Statement
for the Annual Meeting of Shareholders held on May 23, 1995.<F**>
10.20 Specimen form of Stock Option Agreement under the Angelica Corporation
Stock Option Plan - Form 10-K for fiscal year ended 1/27/96, Exhibit
10.20.<F**>
10.21 Form of Stock Option Agreement under the Angelica Corporation 1994
Performance Plan (filed as Exhibit 10.21 to Form 10-K for fiscal year
ended 1/27/96 and incorporated herein by reference) with four of the
Company's executive officers, together with schedule identifying the
officers and setting forth the material details in which the agreements
differ from the form of agreement that is filed - Form 10-K for fiscal
year ended 1/25/97, Exhibit 10.21.<F**>
10.22 Form of Indemnification Agreement between the Company and each of its
directors and executive officers, together with a schedule identifying
the directors and executive officers executing such agreements - Form
10-K for fiscal year ended 1/25/97, Exhibit 10.22.<F**>
10.23 Employment Agreement between the Company and Lawrence
10
<PAGE> 17
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<C> <S>
J. Young, dated November 27, 1996 - Form 10-K for fiscal year ended
1/25/97, Exhibit 10.23.<F**>
10.24 Employment Agreement between the Company and Theodore M. Armstrong,
dated November 27, 1996 - Form 10-K for fiscal year ended 1/25/97,
Exhibit 10.24.<F**>
10.25 Employment Agreement between the Company and Jill Witter, dated November
27, 1996 - Form 10-K for fiscal year ended 1/25/97, Exhibit 10.25.<F**>
10.26 Employment Agreement between the Company and L. Linden Mann, dated
November 27, 1996 - Form 10-K for fiscal year ended 1/25/97, Exhibit
10.26.<F**>
10.27 Employment Agreement between the Company and Alan D. Wilson, dated April
2, 1997 - Form 10-K for fiscal year ended 1/25/97, Exhibit 10.27.<F**>
10.28 Employment Agreement between the Company and Michael E. Burnham, dated
April 8, 1997 - Form 10-K for fiscal year ended 1/25/97, Exhibit
10.28.<F**>
10.29 Employment Agreement between the Company and Thomas M. Degnan, dated May
1, 1997.<F*>
27 Financial Data Schedule<F*>
</TABLE>
11
<PAGE> 1
ANGELICA CORPORATION
EMPLOYMENT AGREEMENT
--------------------
This agreement ("Agreement") has been entered into this
1st day of May, 1997, by and between Angelica Corporation, a Missouri
corporation ("Company"), and Thomas M. Degnan, an individual ("Executive").
RECITALS
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its stockholders to reinforce and encourage the continued
attention and dedication of the Executive to the Company as a
member of the Company's management and to assure that the Company
will have the continued dedication of the Executive,
notwithstanding the possibility or occurrence of a Triggering
Transaction (as defined below) with respect to the Company or the
Operating Line of Business (as defined below). The Board desires
to provide for the continued employment of the Executive on terms
competitive with those of other corporations, and the Executive
is willing to rededicate himself and continue to serve the
Company. Additionally, the Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a potential or
pending Triggering Transaction and to encourage the Executive's
full attention and dedication to the Company currently and in the
event of any potential or pending Triggering Transaction, and to
provide the Executive with compensation and benefits arrangements
upon any breach of this Agreement by the Company or upon a
termination of employment either immediately prior to or after a
Triggering Transaction which ensure that the compensation and
benefits expectations of the Executive will be satisfied.
Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
IT IS AGREED AS FOLLOWS:
SECTION 1: DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. For purposes of this Agreement, the
following words and phrases, whether or not capitalized, shall
have the meanings specified below, unless the context plainly
requires a different meaning.
1.1(a) "ACCRUED COMPENSATION" has the meaning set
forth in Section 4.5 of this Agreement.
1.1(b) "ACCRUED OBLIGATIONS" has the meaning set
forth in Section 4.1(a) of this Agreement.
1.1(c) "ANNUAL BASE SALARY" has the meaning set
forth in Section 2.4(a) of this Agreement.
1.1(d) "BOARD" means the Board of Directors of the
Company.
1.1(e) "CAUSE" has the meaning set forth in Section
3.3 of this Agreement.
<PAGE> 2
1.1(f) "CHANGE IN CONTROL" means:
(i) The acquisition by any individual,
entity or group, or a Person (within the
meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) of ownership of 30% or more
of either (a) the then outstanding shares of
common stock of the Company (the "Outstanding
Company Common Stock") or (b) the combined
voting power of the then outstanding voting
securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities"); or
(ii) Individuals who, as the date hereof,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however,
-----------------
that any individual becoming a director
subsequent to the date hereof whose election,
or nomination for election by the Company's
stockholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but excluding,
as a member of the Incumbent Board, any such
individual whose initial assumption of office
occurs as a result of either an actual or
threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies
or consents by or on behalf of a Person other
than the Board; or
(iii) Approval by the stockholders of the
Company of a reorganization, merger or
consolidation, in each case, unless,
following such reorganization, merger or
consolidation, (a) more than 50% of,
respectively, the then outstanding shares of
common stock of the corporation resulting
from such reorganization, merger or
consolidation and the combined voting power
of the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors is then
beneficially owned, directly or indirectly,
by all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such reorganization,
merger or consolidation in substantially the
same proportions as their ownership,
immediately prior to such reorganization,
merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (b) no
Person beneficially owns, directly or
indirectly, 30% or more of, respectively, the
then outstanding shares of common stock of
the corporation resulting from such
reorganization, merger or consolidation or
the combined voting power of the then
outstanding voting securities of such
corporation, entitled to vote generally in
the election of directors and (c) at least a
majority of the members of the board of
directors of the corporation resulting from
such reorganization, merger or consolidation
were members of the Incumbent Board at the
time of the execution of the initial
agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the stockholders of the
Company of (a) a complete liquidation or
dissolution of the Company or (b) the sale or
other disposition
- 2 -
<PAGE> 3
of all or substantially all of the assets of
the Company, other than to a corporation, with
respect to which following such sale or other
disposition, (1) more than 50% of,
respectively, the then outstanding shares of
common stock of such corporation and the
combined voting power of the then outstanding
voting securities of such corporation entitled
to vote generally in the election of directors
is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such sale or other
disposition in substantially the same
proportion as their ownership, immediately
prior to such sale or other disposition, of
the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the
case may be, (2) no Person beneficially owns,
directly or indirectly, 30% or more of,
respectively, the then outstanding shares of
common stock of such corporation and the
combined voting power of the then outstanding
voting securities of such corporation
entitled to vote generally in the election of
directors and (3) at least a majority of the
members of the board of directors of such
corporation were members of the Incumbent
Board at the time of the execution of the
initial agreement or action of the Board
providing for such sale or other disposition
of assets of the Company.
1.1(g) "COMPANY" has the meaning set forth in the
first paragraph of this Agreement and, with regard to
successors, in Section 6.2 of this Agreement.
1.1(h) "CODE" shall mean the Internal Revenue Code
of 1986, as amended.
1.1(i) "CURRENT TARGET BONUS" has the meaning set
forth in Section 4.1(a) of this Agreement.
1.1(j) "DATE OF TERMINATION" has the meaning set
forth in Section 3.6 of this Agreement.
1.1(k) "DISABILITY" has the meaning set forth in
Section 3.2 of this Agreement.
1.1(l) "DISABILITY EFFECTIVE DATE" has the meaning
set forth in Section 3.2 of this Agreement.
1.1(m) "DISPOSITION OF A MAJOR PART" means:
(i) when used with reference to the stock of
the Operating Line of Business that is or
becomes a separate corporation, limited
liability corporation, partnership or other
business entity, the sale, exchange,
transfer, distribution or other disposition
of the ownership, either beneficially or of
record or both, by the Company of more than
50% of either (a) the then outstanding shares
of common stock (or the equivalent equity
interests) of the Operating Line of Business,
or (b) the combined voting power of the then
outstanding voting securities of the
Operating Line of Business entitled to vote
generally in the election of the Board or the
equivalent governing body of the Operating
Line of Business;
- 3 -
<PAGE> 4
(ii) when used with reference to the merger
or consolidation of the Operating Line of
Business that is or becomes a separate
corporation, limited liability corporation,
partnership or other business entity, any
such transaction that results in the Company
owning, either beneficially or of record or
both, less that 50% of either (a) the then
outstanding shares of common stock (or the
equivalent equity interests) of the Operating
Line of Business, or (b) the combined voting
power of the then outstanding voting
securities of the Operating Line of Business
entitled to vote generally in the election of
the Board or the equivalent governing body of
the Operating Line of Business; or
(iii) when used with reference to the assets
of the Operating Line of Business, the sale,
exchange, transfer, liquidation, distribution
or other disposition of assets of the
Operating Line of Business (a) having a fair
market value (as determined by the Incumbent
Board) aggregating more than 50% of the
aggregate fair market value of all of the
assets of the Operating Line of Business as
of the Triggering Transaction Date, (b)
accounting for more than 50% of the aggregate
book value (net of depreciation and
amortization) of all of the assets of the
Operating Line of Business, as would be shown
on a balance sheet for the Operating Line of
Business, prepared in accordance with
generally accepted accounting principles then
in effect, as of the Triggering Transaction
Date, or (c) accounting for more than 50% of
the net income of the Operating Line of
Business, as would be shown on an income
statement, prepared in accordance with
generally accepted accounting principles then
in effect, for the 12 months ending on the
last day of the month immediately preceding
the month in which the Triggering Transaction
Date occurs.
1.1(n) "EFFECTIVE DATE" means the date of this
Agreement.
1.1(o) "EMPLOYMENT PERIOD" means the period
beginning on the Effective Date and ending on the later
of (i) a date two years after the Effective Date
("Ending Date") or (ii) the same date as the Ending
Date of any succeeding fiscal year during which notice
is given by either party (as described in
Section 1.1(aa) of this Agreement) of such party's
intent not to renew this Agreement.
1.1(p) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
1.1(q) "GOOD REASON" has the meaning set forth in
Section 3.4 of this Agreement.
1.1(r) "INCENTIVE BONUS" has the meaning set forth
in Section 2.4(b) of this Agreement.
1.1(s) "INCUMBENT BOARD" has the meaning set forth
in Section 1.1(f)(ii) of this Agreement.
1.1(t) "NOTICE OF TERMINATION" has the meaning set
forth in Section 3.5 of this Agreement.
1.1(u) "OPERATING LINE OF BUSINESS" means the
following lines of business of the Company, whether
operated as a division or as a separate subsidiary: (i)
textile rental
- 4 -
<PAGE> 5
and laundry services, which provide textiles and laundry
services, principally to health care institutions, and,
to a more limited extent, to hotels, casinos, motels and
restaurants in or near major metropolitan areas of the
United States; (ii) uniform and business apparel
manufacturing and marketing which manufactures and sells
uniforms and business apparel to a wide variety of
institutions and businesses in the United States, Canada
and the United Kingdom; and (iii) retail specialty
stores, which operate a nationwide chain of specialty
retail stores primarily for a clientele of nurses and
other health care professionals.
1.1(v) "OTHER BENEFITS" has the meaning set forth in
Section 4.1(c) of this Agreement.
1.1(w) "OUTSTANDING COMPANY COMMON STOCK" has the
meaning set forth in Section 1.1(f)(i) of this
Agreement.
1.1(x) "OUTSTANDING COMPANY VOTING SECURITIES" has
the meaning set forth in Section 1.1(f)(i) of this
Agreement.
1.1(y) "PAYMENT" has the meaning set forth in
Section 4.2(f) of this Agreement.
1.1(z) "PERSON" means any "person" within the
meaning of Sections 13(d) and 14(d) of the Exchange
Act.
1.1(aa) "TERM" means the period that begins on the
Effective Date and ends on the earlier of: (i) the Date
of Termination as defined in Section 3.6 of this
Agreement, or (ii) the close of business on the later
of the Ending Date of the initial term or any renewal
term as set forth in Section 2.1 of this Agreement.
1.1(bb) "TRIGGERING TRANSACTION" means (i) a Change
in Control of the Company or (ii) a Disposition of a
Major Part of two or more of the Company's Operating
Lines of Business.
1.1(cc) "TRIGGERING TRANSACTION DATE" shall mean the
date of the Triggering Transaction.
1.2 GENDER AND NUMBER. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender,
words in the singular include the plural, and words in the plural
include the singular.
1.3 HEADINGS. All headings in this Agreement are included
solely for ease of reference and do not bear on the interpretation of
the text. Accordingly, as used in this Agreement, the terms "Article"
and "Section" mean the text that accompanies the specified Article or
Section of the Agreement.
1.4 APPLICABLE LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Missouri,
without reference to its conflict of law principles.
- 5 -
<PAGE> 6
SECTION 2: TERMS AND CONDITIONS OF EMPLOYMENT.
2.1 PERIOD OF EMPLOYMENT. The Executive shall remain in
the employ of the Company throughout the Term of this Agreement in
accordance with the terms and provisions of this Agreement. This
Agreement will automatically renew for annual one-year periods unless
either party gives the other written notice, within the Ending Date of
the initial term or any succeeding year, of such party's intent not to
renew this Agreement.
2.2 POSITIONS AND DUTIES.
2.2(a) Throughout the Term of this Agreement, the
Executive shall serve as Treasurer of the Company, subject
to the reasonable direction of the Board and the Chief
Executive Officer. The Executive shall have such authority
and shall perform such duties as are substantially similar
to the authority and duties assigned to him on the Effective
Date, subject to the control exercised by the Chief
Financial Officer, the Board and the Chief Executive Officer
from time to time.
2.2(b) Throughout the Term of this Agreement (but
excluding any periods of vacation and sick leave to which
the Executive is entitled), the Executive shall devote
reasonable attention and time during normal business hours
to the business and affairs of the Company and shall use his
reasonable best efforts to perform faithfully and
efficiently such responsibilities as are assigned to him
under or in accordance with this Agreement; provided that,
it shall not be a violation of this paragraph for the
Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill
speaking engagements or (iii) manage personal investments,
so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as
an employee of the Company in accordance with this Agreement
or violate the Company's conflict of interest policy as in
effect immediately prior to the Effective Date.
2.3 SITUS OF EMPLOYMENT. Throughout the Term of this
Agreement, the Executive's services shall be performed at the
location where the Executive was employed immediately prior to
the Effective Date, or any office of the Company or any of its
subsidiaries to which Executive shall be transferred.
2.4 COMPENSATION.
2.4(a) ANNUAL BASE SALARY. For the first calendar
year within the Term of this Agreement, the Executive shall
receive an annual base salary ("Annual Base Salary") of
Eighty-two thousand seven hundred eighty-eight dollars
($82,788), which shall be paid in equal or substantially
equal semi-monthly installments. During the Term of this
Agreement, the Annual Base Salary payable to the Executive
shall be reviewed at least annually and shall be increased
at the discretion of the Board or the Chief Executive
Officer but shall not be reduced.
2.4(b) INCENTIVE BONUSES. In addition to Annual
Base Salary, the Executive shall be awarded the opportunity
to earn an incentive bonus on an annual basis ("Incentive
Bonus") under any incentive compensation plan which are
generally available to other similarly situated executives
of the Company. During the Term of this Agreement, the
annual target Incentive Bonus which the Executive will have
the opportunity to earn shall
- 6 -
<PAGE> 7
be reviewed at least annually and be increased at the
discretion of the Board or the Chief Executive Officer.
2.4(c) WELFARE BENEFIT PLANS. Throughout the Term
of this Agreement (and thereafter), the Executive and/or the
Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs
provided by the Company (including, without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
generally available to other similarly situated executives
of the Company.
2.4(d) EXPENSES. Throughout the Term of this
Agreement, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the
Executive in accordance with the policies, practices and
procedures generally applicable to other similarly situated
executives of the Company.
2.4(e) OFFICE AND SUPPORT STAFF. Throughout the
Term of this Agreement, the Executive shall be entitled to
an office or offices of a size and with furnishings and
other appointments, and to personal secretarial and other
assistance, at least equal to those generally provided to
other similarly situated executives of the Company.
2.4(f) VACATION. Throughout the Term of this
Agreement, the Executive shall be entitled to paid vacation
in accordance with the plans, policies, programs and
practices generally provided with respect to other similarly
situated executives of the Company.
SECTION 3: TERMINATION OF EMPLOYMENT.
3.1 DEATH. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
3.2 DISABILITY. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), the
Company may give to the Executive written notice in accordance with
Section 7.2 of its intention to terminate the Executive's employment.
In such event, the Executive's employment with the Company shall
terminate effective on the thirtieth (30th) day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided
that, within the thirty (30) days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean that
the Executive has been unable to perform the services required of the
Executive hereunder on a full-time basis for a period of one hundred
eighty (180) consecutive business days by reason of a physical and/or
mental condition. "Disability" shall be deemed to exist when certified
by a physician selected by the Company and acceptable to the Executive
or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably). The Executive will
submit to such medical or psychiatric examinations and tests as such
physician deems necessary to make any such Disability determination.
3.3 TERMINATION FOR CAUSE. The Company may terminate the
Executive's employment during the Employment Period for "Cause,"
which shall mean termination based upon: (i) the Executive's
willful and continued failure to substantially perform his duties
with the Company (other than as a result of incapacity due to
physical or mental condition), after a written demand for
substantial performance is delivered to the Executive by the
Company, which specifically identifies the manner in which the
- 7 -
<PAGE> 8
Executive has not substantially performed his duties; (ii) the
Executive's commission of an act constituting a criminal offense
involving moral turpitude, dishonesty or breach of trust; or
(iii) the Executive's material breach of any provision of this
Agreement. For purposes of this Section, no act, or failure to
act on the Executive's part, shall be considered "willful" unless
done, or omitted to be done, without good faith and without
reasonable belief that the act or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause
unless and until (i) he receives a Notice of Termination from the
Company, (ii) he is given the opportunity, with counsel, to be
heard before the Board, and (iii) the Board finds, in its good
faith opinion, the Executive was guilty of the conduct set forth
in the Notice of Termination.
3.4 GOOD REASON. Pursuant to Section 4.2, the Executive
may terminate his employment with the Company for "Good Reason,"
which shall mean:
3.4(a) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), authority, duties or responsibilities as
contemplated by Section 2.2(a) or any other action by the
Company which results in a material diminution in such
position, authority, duties or responsibilities, excluding
for this purpose any action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
3.4(b) (i) the failure by the Company to continue in
effect any benefit or compensation plan, stock ownership
plan, life insurance plan, health and accident plan or
disability plan to which the Executive is entitled as
specified in Section 2.4, (ii) the taking of any action by
the Company which would adversely affect the Executive's
participation in, or materially reduce the Executive's
benefits under, any plans described in Section 2.4, (iii)
the failure by the Company to provide the Executive with
paid vacation to which the Executive is entitled as
described in Section 2.4(f);
3.4(c) a material breach by the Company of any
provision of this Agreement;
3.4(d) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
3.4(e) within a period ending at the close of
business on the date two (2) years after the Triggering
Transaction Date of any Change in Control, if the Company
has failed to comply with and satisfy Section 6.2 on or
after such Triggering Transaction Date.
For purposes of this Section, any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
3.5 NOTICE OF TERMINATION. Any termination by the Company
for Cause or Disability, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party, given in
accordance with Section 7.2. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated, and (iii) if the Date of Termination
(as defined in Section 3.6 hereof) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not
more than fifteen (15) days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the
- 8 -
<PAGE> 9
Executive or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
3.6 DATE OF TERMINATION. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the Date of
Termination shall be the date of receipt of the Notice of
Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be, or (iii) if the Executive's employment is terminated
by the Company other than for Cause, death or Disability, the
Date of Termination shall be the date of receipt of the Notice of
Termination; provided that if within thirty (30) days after any
Notice of Termination is given, the party receiving such Notice
of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties, or by a final judgment, order
or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been
perfected).
SECTION 4: CERTAIN BENEFITS UPON TERMINATION.
4.1 TERMINATION WITHOUT CAUSE NOT IN CONNECTION WITH
A TRIGGERING TRANSACTION. If, prior to a Triggering Transaction
during the Employment Period (except in the event that one of the
following terminations of employment occurs within the six-month
period prior to the earlier of (a) a Triggering Transaction or
(b) the execution of a definitive agreement or contract that
eventually results in a Triggering Transaction, which shall
result in the payment of severance benefits set forth in Section
4.2 of this Agreement), the Company shall terminate the
Executive's employment without Cause, the Executive shall be
entitled to the payment of the benefits provided below as of the
Date of Termination:
4.1(a) Accrued Obligations. Within thirty (30) days
-------------------
after the Date of Termination, the Company shall pay to the
Executive the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not previously
paid, and (2) any accrued vacation pay; in each case to the
extent not previously paid (the "Accrued Obligations").
In addition, on the date that Incentive Bonuses are
paid to other peer executives for the year in which the
Executive's employment is terminated, the Executive will be
paid an amount equal to the product of the Current Target
Bonus multiplied by a fraction, the numerator of which is
the number of days during the fiscal year for which the
Incentive Bonus is paid prior to the Date of Termination and
the denominator of which is 365. For purposes of this
Agreement, the term "Current Target Bonus" means the
Incentive Bonus that would have been paid to the Executive
for the fiscal year in which the termination of employment
occurred, if the Executive's employment had not been so
terminated and the Executive had earned 100% of the
Incentive Bonus that he could have earned for such year.
4.1(b) Severance Payment. If the Date of
-----------------
Termination occurs within two years after the date hereof,
within thirty (30) days after the Date of Termination, the
Company shall pay to the Executive as severance pay in a
lump sum, in cash, an amount equal to (i) one-twelfth the
Executive's then-current Annual Base Salary times (ii)
twelve (12).
4.1(c) Other Benefits. To the extent not previously
--------------
paid or provided, the Company shall timely pay or provide to
the Executive and/or the Executive's family any other amounts
or benefits required to be paid or provided for which the
Executive and/or the Executive's family is eligible to
receive pursuant to this Agreement and under any plan,
- 9 -
<PAGE> 10
program, policy or practice or contract or agreement
of the Company as those provided generally to other peer
executives and their families ("Other Benefits").
4.2 BENEFITS UPON TERMINATION IN CONNECTION WITH A
TRIGGERING TRANSACTION. If (a) a Triggering Transaction occurs
during the Employment Period and within two years after the
Triggering Transaction Date (i) the Company shall terminate the
Executive's employment without Cause, or (ii) the Executive shall
terminate employment with the Company for Good Reason, or,
--
alternatively, (b) if one of the above-described terminations of
employment occurs within the six-month period prior to the
earlier of (i) a Triggering Transaction or (ii) the execution of
a definitive agreement or contract that eventually results in a
Triggering Transaction, then the Executive shall become entitled
to the payment of the benefits as provided below as of either (y)
the Date of Termination, in the case where the sequence of the
requisite events is as set forth in subsection (a) above or (z)
the Triggering Transaction Date, in the case where the sequence
of the requisite events occurred as set forth in subsection (b)
above (the relevant date for purposes of entitlement to the
benefits as set forth in this Section 4.2 is hereinafter referred
to as the "Entitlement Date"):
4.2(a) Accrued Obligations. Within thirty (30) days
-------------------
after the Entitlement Date, the Company shall pay to the
Executive the Accrued Obligations.
In addition, on the date that Incentive Bonuses are
paid to other peer executives for the year in which the
Executive's employment is terminated, the Executive will be
paid an amount equal to the product of the Current Target
Bonus multiplied by a fraction, the numerator of which is
the number of days during the fiscal year for which the
Incentive Bonus is paid prior to the Date of Termination and
the denominator of which is 365.
4.2(b) Severance Amount. Within thirty (30) days
----------------
after the Entitlement Date, the Company shall pay to the
Executive as severance pay in a lump sum in cash, an amount
equal to two times an amount equal to his then-current
Annual Base Salary and Current Target Bonus.
4.2(c) Stock Options. To the extent not otherwise
-------------
provided for under the terms of the Company's stock option
plans or the Executive's stock option agreements, all stock
options held by the Executive that have not expired in
accordance with their respective terms shall vest and become
fully exercisable as of the Entitlement Date.
4.2(d) Stock Bonus and Incentive Plan Shares. To the
-------------------------------------
extent not otherwise provided for under the terms of the
Company's Stock Bonus and Incentive Plan, all "Matching
Shares" (as defined in such plan) held by or for the benefit
of the Executive that are unvested and restricted at the
Date of Termination shall vest and become unrestricted as of
the Entitlement Date and all "Elected Shares" (as defined in
such plan) held by or for the benefit of the Executive that
are restricted at the Date of Termination shall become
unrestricted as of the Entitlement Date.
4.2(e) Supplemental Retirement Plan Benefits. In the
-------------------------------------
event the Executive has been employed by the Company for less
than ten years on the Date of Termination, Executive shall be
deemed to be vested in the Angelica Corporation Supplemental
Plan (as originally effective April 1, 1980 and as amended from
time to time, including a restatement as of January 23, 1990)
(the "Supplemental Plan"), at a percentage equal to two and
one-half percent for each year the Executive has been employed
by the Company, up to ten years.
- 10 -
<PAGE> 11
Vesting for eleven through thirty years of employment and the
payment of benefits shall be in accordance with the terms of the
Supplemental Plan.
4.2(f) Other Benefits. To the extent not previously
--------------
paid or provided, the Company shall timely pay or provide to
the Executive and/or the Executive's family any Other
Benefits required to be paid or provided for which the
Executive and/or the Executive's family is eligible to
receive pursuant to this Agreement and under any plan,
program, policy or practice or contract or agreement of the
Company as those provided generally to other peer executives
and their families.
Any provision in any plan or program of the Company in
which Executive is a participant that precludes Executive
from competing with the Company, or denies Executive
entitlement to a benefit in the event Executive does compete
with the Company, shall be null and void.
4.3 DEATH. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period
(either prior or subsequent to a Triggering Transaction), this
Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for (i) payment of Accrued Obligations (as defined in
Section 4.1(a)) (which shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within thirty
(30) days of the Date of Termination) and (ii) the timely payment
or provision of Other Benefits (as defined in Section 4.1(c)),
including death benefits pursuant to the terms of any plan,
policy, or arrangement of the Company.
4.4 DISABILITY. If the Executive's employment is terminated
by reason of the Executive's Disability during the Employment Period
(either prior or subsequent to a Triggering Transaction), this Agreement
shall terminate without further obligations to the Executive, other than
for (i) payment of Accrued Obligations (as defined in Section 4.1(a))
(which shall be paid to the Executive in a lump sum in cash within
thirty (30) days of the Date of Termination) and (ii) the timely payment
or provision of Other Benefits (as defined in Section 4.1(c)) including
Disability benefits pursuant to the terms of any plan, policy or
arrangement of the Company.
4.5 TERMINATION FOR CAUSE; OTHER THAN GOOD REASON. If
the Executive's employment shall be terminated for Cause during the
Employment Period (either prior or subsequent to a Triggering
Transaction), this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive his Accrued Compensation (as defined in this
Section). If the Executive terminates employment with the
Company during the Employment Period (excluding a termination for
Good Reason), this Agreement shall terminate without further
obligations to the Executive, other than for the payment of
Accrued Compensation (as defined in this Section) and the timely
payment or provision of Other Benefits (as defined in Section
4.1(c)). In such case, all Accrued Compensation shall be paid to
the Executive in a lump sum in cash within thirty (30) days of
the Date of Termination.
For the purpose of this Section, the term "Accrued
Compensation" means the sum of (i) the Executive's Annual Base
Salary through the Date of Termination to the extent not
previously paid, (ii) any compensation previously deferred by the
Executive (together with any accrued interest or earnings
thereon), and (iii) any accrued vacation pay in each case to the
extent not previously paid.
4.6 NON-EXCLUSIVITY OF RIGHTS; SUPERSESSION OF CERTAIN
BENEFITS. Except as provided in this Section 4.6, nothing in
this Agreement shall prevent or limit the Executive's continuing
or future
- 11 -
<PAGE> 12
participation in any plan, program, policy or practice provided by the Company
and for which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company, except for the elimination of penalties for
competing as provided in Section 4.2(f). Amounts which are vested benefits of
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, the Company at or
subsequent to the Date of Termination, shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
4.7 FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to
pay promptly as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive regarding the amount of
any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate
provided for in Code Section 7872(f)(2)(A).
4.8 RESOLUTION OF DISPUTES. If there shall be any dispute
between the Company and the Executive (i) in the event of any
termination of the Executive's employment by the Company, whether
such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason
existed, then, unless and until there is a final, nonappealable
judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by the
Executive of the existence of Good Reason was not made in good
faith, the Company shall pay all amounts, and provide all
benefits, to the Executive and/or the Executive's family or other
beneficiaries, as the case may be, that the Company would be
required to pay or provide pursuant to Section 4.1 or 4.2 as
though such termination were by the Company without Cause or by
the Executive with Good Reason; provided, however, that the
-----------------
Company shall not be required to pay any disputed amounts
pursuant to this Section except upon receipt of an undertaking by
or on behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be
entitled.
4.9 BENEFITS UPON TERMINATION BY EMPLOYMENT CONNECTED WITH
RELOCATION. If a Triggering Transaction occurs during the Employment Period
and within two years after the Triggering Transaction Date the Executive
shall terminate employment with the Company as a result of the Company's
requiring the Executive to be based at an office or location outside the
metropolitan St. Louis area, then the Executive shall become entitled to
the payment of the benefits as provided below to the extent not paid or
provided by the Company pursuant to this Section 4, as of the Date of
Termination.
4.9(a) Accrued Obligations. Within thirty (30) days
-------------------
after the Date of Termination, the Company shall pay to the
Executive the Accrued Obligations.
In addition, on the date that Incentive Bonuses are paid to
other peer executives for the year in which the Executive's
employment is terminated, the Executive will be paid an amount
equal to the product of the Current Target Bonus multiplied by
a fraction, the
- 12 -
<PAGE> 13
numerator of which is the number of days during the
fiscal year for which the Incentive Bonus is paid prior to the
Date of Termination and the denominator of which is 365.
4.9(b) Severance Amount. Within thirty (30) days after
----------------
the Termination Date, the Company shall pay to the Executive as
severance pay in a lump sum in cash, an amount equal to his
then-current Annual Base Salary, divided by three.
4.9(c) Supplemental Retirement Plan Benefits. In the event
-------------------------------------
the Executive has been employed by the Company for less than ten
years on the Date of Termination, Executive shall be deemed to be
vested in the Angelica Corporation Supplemental Plan (as originally
effective April 1, 1980 and as amended from time to time, including
a restatement as of January 23, 1990) (the "Supplemental Plan"), at
a percentage equal to two and one-half percent for each year the
Executive has been employed by the Company, up to ten years.
Vesting for eleven through thirty years of employment and the
payment of benefits shall be in accordance with the terms of
the Supplemental Plan.
4.9(d) Other Benefits. To the extent not previously paid
--------------
or provided, the Company shall timely pay or provide to the
Executive and/or the Executive's family any Other Benefits required
to be paid or provided for which the Executive and/or the
Executive's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or
contract or agreement of the company as those provided generally
to other peer executives and their families.
SECTION 5: NON-COMPETITION.
5.1 NON-COMPETE AGREEMENT.
5.1(a) It is agreed that during the period beginning
on the date the Term of this Agreement expires and ending
one (1) year thereafter, the Executive shall not, without
prior written approval of the Board, become an officer,
employee, agent, partner or director of any business
enterprise in substantial direct competition (as defined in
Section 5.1(b)) with the Company; provided that, if the
Executive is terminated by the Company without Cause or if
the Executive terminates his employment for Good Reason,
then he will not be subject to the restrictions of this
Section.
5.1(b) For purposes of Section 5.1, a business
enterprise with which the Executive becomes associated as an
officer, employee, agent, partner or director shall be
considered in substantial direct competition, if such entity
competes with the Operating Line of Business and is within
the Company's market area as of the date that the Employment
Period expires.
5.1(c) The above constraint shall not prevent the
Executive from making passive investments, not to exceed
five percent (5%), in any enterprise.
5.2 CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company
or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). After termination of
the Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company, or as may otherwise
be required by law or legal
- 13 -
<PAGE> 14
process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In
no event shall an asserted violation of the provisions of this Section
constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
SECTION 6: SUCCESSORS.
6.1 SUCCESSORS OF EXECUTIVE. This Agreement is personal
to the Executive and, without the prior written consent of the Company,
the rights (but not the obligations) shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
6.2 SUCCESSORS OF COMPANY. The Company will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
the Executive to terminate the Agreement at his option on or
after the Triggering Transaction Date for Good Reason. As used
in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
SECTION 7: MISCELLANEOUS.
7.1 NOTICE. For purposes of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses as set forth below; provided that all notices to the
Company shall be directed to the attention of the Chairman of the
Board, or to such other address as one party may have furnished
to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
Notice to Executive:
-------------------
Thomas M. Degnan
4717 Oakridge Park Drive
St. Louis, MO 63129-1788
Notice to Company:
-----------------
Angelica Corporation
424 South Woods Mill Road
Chesterfield, MO 63017-3406
7.2 VALIDITY. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
- 14 -
<PAGE> 15
7.3 WITHHOLDING. The Company may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
7.4 WAIVER. The Executive's or the Company's failure
to insist upon strict compliance with any provision hereof or any
other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3.4 shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
IN WITNESS WHEREOF, the Executive and, the Company, pursuant
to the authorization from its Board, have caused this Agreement to be
executed in its name on its behalf, all as of the day and year first
above written.
/s/ Thomas M. Degnan
------------------------------------
Thomas M. Degnan
ANGELICA CORPORATION
By /s/ L. J. Young
----------------------------------
Name: L. J. Young
-------------------------------
Title: Chairman and President
------------------------------
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for period ended April 26, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> APR-26-1997
<CASH> 1,923
<SECURITIES> 0
<RECEIVABLES> 69,676
<ALLOWANCES> (3,091)
<INVENTORY> 163,801
<CURRENT-ASSETS> 238,717
<PP&E> 225,163
<DEPRECIATION> (117,189)
<TOTAL-ASSETS> 386,176
<CURRENT-LIABILITIES> 80,398
<BONDS> 99,436
<COMMON> 9,472
0
0
<OTHER-SE> 179,669
<TOTAL-LIABILITY-AND-EQUITY> 386,176
<SALES> 55,823
<TOTAL-REVENUES> 127,357
<CGS> 36,800
<TOTAL-COSTS> 94,683
<OTHER-EXPENSES> 25,765
<LOSS-PROVISION> 399
<INTEREST-EXPENSE> 2,553
<INCOME-PRETAX> 3,187
<INCOME-TAX> 1,211
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,976
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
