UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
----------------------------------------
For the fiscal year ended January 1, 2000 Commission File Number 000-28501
PREMIUMWEAR, INC.
(formerly known as Munsingwear, Inc.)
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 41-0429620
(State of Incorporation) (I.R.S. Employer Identification No.)
5500 FELTL ROAD, MINNETONKA, MINNESOTA 55343-7902
(Address of principal executive office) (Zip Code)
Registrant's telephone number: (612) 979-1700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
- --------------------------------------- -----------------------------
Common Stock, $.01 par value Nasdaq
Preferred share purchase rights Nasdaq
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the Registrant at March 24, 2000 was $12,860,669 based
upon the closing price of $6.25 per share on that date.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES |X| NO |_|
The number of shares of common stock outstanding at March 24, 2000 was
2,563,860.
--------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
Documents incorporated in part by reference in Parts I and II of this
report: Portions of PremiumWear, Inc. 1999 Annual Report to Shareholders for the
fiscal year ended January 1, 2000.
Documents incorporated in part by reference in Part III of this report:
Portions of definitive proxy statement for the 2000 Annual Meeting of
Shareholders.
This Form 10-K consists of 124 total pages: The exhibit index is on
page 19.
<PAGE>
PART I
Item 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
The Company was incorporated under the laws of Delaware in 1923 as the
successor to a business founded in 1886. On July 3, 1991, the Company
filed a voluntary petition for bankruptcy under Chapter 11 of the
United States Bankruptcy Code, together with a proposed Plan of
Reorganization. The Company emerged from bankruptcy on October 29,
1991.
In two separate transactions in 1996, the Company sold its tradenames
and trademarks, and certain associated assets relating to the retail
and professional golf businesses for $23,000,000 in cash.
The Company then changed its name from Munsingwear, Inc. to
PremiumWear, Inc. and entered into a license agreement with Supreme
International Corporation for the use of the Munsingwear(R) brand in
the sale of knit and woven shirts to the promotional
products/advertising specialty channels of distribution which includes
advertising specialty incentive customers, specialty distributors and
uniform market customers. In 1998, the Company introduced its own Page
& Tuttle(R) brand of knit and woven golf shirts and other coordinated
golf apparel to the golf pro shop market, and in 1999 introduced the
Page & Tuttle(R) brand to the promotional products/advertising
specialty markets.
In early 1999 the Company acquired Klouda-Lenz, Inc., its independent
sales representative agency for the promotional products/advertising
specialty market. The purchase price was approximately $1.5 million
cash and 241,892 newly issued shares of common stock. Klouda-Lenz, Inc.
is a wholly-owned subsidiary of the Company.
The Company's principal executive offices are located at 5500 Feltl
Road, Minnetonka, Minnesota 55343-7902, and its telephone number is
(952) 979-1700. As used in this document, the term "Company" refers to
PremiumWear, Inc. and its subsidiaries unless otherwise noted or
indicated by the context. At January 1, 2000, the Company's
subsidiaries included one idle foreign subsidiary.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in one industry segment, apparel wholesaling. As
of January 1, 2000, the Company's foreign operations were not material.
Financial information regarding the Company's revenue, operating profit
and assets can be found in the Company's audited Financial Statements
for the fiscal Year Ended January 1, 2000, included in Exhibit 13 to
this Form 10-K.
2
<PAGE>
C. BUSINESS
Principal Products:
The Company sells knit and woven sport shirts under the Munsingwear(R)
label to promotional products/advertising specialty markets customers
pursuant to a license from Perry Ellis International Corporation
(formerly Supreme International Corporation). The Company sells its
Page & Tuttle(R) brand of knit golf shirts and coordinated apparel to
golf pro shops, resorts and to promotional products/advertising
specialty markets customers. Following the early 1999 acquisition of
Klouda-Lenz, Inc., the Company receives commission income from
representing other companies' products to the promotional products
industry.
Methods of Distribution of Products:
The Company generally utilizes independent sales representatives to
market its products and to solicit orders from customers. All products
are distributed to customers through the Company's Tennessee
distribution facility.
Sources and Availability of Raw Materials and Products:
During the past few years, the Company steadily reduced its use of
domestic manufacturing. In 1999, only 7% of total production was made
domestically, down from 60% in 1997. The balance was sourced primarily
from "full package" manufacturers in the Far East, Central and South
America and through 807 programs (assembly only) in Central America.
The Company still purchases some fabrics for the 807 production
program. These purchases are primarily from one source. There are
currently no major shortages in availability of raw materials and
alternative sources are available. Following the mid-1999 closure of
its North Carolina cutting and sewing facility, the Company transferred
its embroidery and distribution operations to a new leased facility in
Clarksville, Tennessee.
Trademarks and Trade Names:
The Company owns the Page & Tuttle(R) trademark for apparel and is a
licensee of the Munsingwear(R) brand under a license agreement entered
into in September 1996, which allows the Company to use the
Munsingwear(R) name on knit shirts for an initial term of twenty years
and on woven shirts for an initial term of five years. For the first
five years, knit shirt sales are subject to payment of royalties only
after annual sales reach a certain aggregate total, at which time
license fees are due on all such sales. After 2001, all knit shirt
sales are subject to royalty payments. Management expects to reach the
annual sales threshold at which royalties are due in 2001. All sales of
woven shirts are subject to royalty payments.
3
<PAGE>
Seasonal Aspects of the Business:
The Company generally experiences peak seasonal demand for its products
in the second and third quarters of the fiscal year.
Working Capital Practices:
The Company maintains a secured bank line of credit of $6,000,000 to
meet its working capital needs. The bank line of credit is also used
for letters of credit that are required for some purchases from Far
East sources. The Company allows returns of merchandise as a result of
shipping errors, damaged merchandise and for other reasons. Returns
have historically been less than 2% of sales.
Customers:
The Company sells to approximately 4,700 customers. In the promotional
products/specialty advertising market, the Company sells primarily to
wholesale distributors, uniform companies and advertising specialty
dealers. Wholesale distributors comprised approximately 56% of the
Company's 1999 sales volume and included seven individual distributors
who generally are located in key geographic areas of distribution
throughout the United States. In 1999, Alpha Shirt Company and Broder
Bros. each represented approximately 20% of total Company net sales. No
other customer represented more than 10% of total Company sales. While
a loss of one of these customers could have a material short-term
impact on the Company's business, management believes that alternate
customers are available to minimize the long-term impact of any such
loss.
Backlog of Orders:
The Company's backlog of unfilled orders at January 1, 2000 was
approximately $2,900,000 as compared to $2,000,000 a year ago. The
unfilled order backlog consists of orders received for subsequent
delivery. However, since it includes orders subject to change for
color, size, stock adjustments, extension of delivery dates and
cancellation, the unfilled order backlog does not necessarily relate
directly to future sales.
Competition:
The promotional products/advertising specialty marketplace for apparel
is increasingly competitive and is characterized by a number of
broad-line companies. The principal competitive features are pricing,
styling, quality (both in material and production), inventory
replenishment programs, brand recognition, and customization services
such as embroidery and screen printing. Deflationary pricing practices
have been used by the Company and its competitors, primarily as a
result of increased offshore sourcing, which has lowered unit
production costs
4
<PAGE>
industry wide. Many of the Company's competitors have greater financial
and other resources than the Company.
Research and Development:
The Company is involved in limited experimental research activities
related to the development of new fabrics and customization processes.
Research and development expenses, other than for product design, are
not significant.
Environmental Considerations:
The Company is not involved in any pending or threatened proceedings
which would require curtailment of its operations because of such
regulations. In 1999, the Company's capital expenditures for
environmental control facilities were not significant, and no
significant capital expenditures related to environmental issues are
projected in 2000.
Employees:
As of January 1, 2000, there were 142 employees, none of whom were
represented by a union.
Special Cash Distribution to Shareholders:
On January 27, 1997, the Board of Directors declared a special cash
distribution of $5.39 per share, or approximately $12,500,000, to
shareholders of record on February 19, 1997 which was paid on March 5,
1997. The funds utilized were proceeds from the 1996 sales of
trademarks and collection of accounts receivable and liquidation of
inventories related to the former retail and golf businesses.
D. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Sales to foreign customers located outside the United States and its
territories for the past three years were not significant.
5
<PAGE>
Item 2. Properties
At January 1, 2000, the Company occupied the following properties:
Approximate
Square Percentage Lease
Property Footage Utilized Expires
- -------- ------- -------- -------
Minnetonka, MN - Headquarters 23,000 85 2003
Clarksville, TN - Embroidery production and
distribution center 100,000 60 2006
Fairmont, NC - Idle cutting and sewing plant,
warehouse and distribution center 139,100 Idle Owned
The Fairmont, NC facility was closed in late 1999 and, following an
auction of excess equipment in early 2000, was donated to the City of
Fairmont, North Carolina.
At January 1, 2000, no facilities were occupied under capitalized
leases.
Item 3. Legal Proceedings
None of a significant nature or which is expected to have a material
impact on the Company's business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
6
<PAGE>
Executive Officers of the Registrant
The following information is furnished with respect to the Company's executive
officers as of the date hereof, pursuant to Item 401(b) of Regulation S-K. Each
of the officers has been appointed to serve in his respective office until his
successor has been elected.
Executive
Officer
Name and Age Position Since
- ------------ -------- -----
Thomas D. Gleason (64) Chairman and director of the Company 1996
1995 to present; Chief Executive Officer
September 1996 to July 1999; Vice
Chairman of Wolverine World Wide, Inc.
(footwear manufacturing and marketing),
1993 through April 17, 1996; Chief
Executive Officer of Wolverine World
Wide, Inc. from 1972 to 1993.
David E. Berg (43) Chief Executive Officer of the Company 1995
July 1999 to present; Director May 1999
to present; President, August 1997 to
present; Chief Operating Officer,
December 1996 to July 1999; Executive
Vice President, Sales & Marketing May
1995 to August 1997; Vice President,
General Manager, Special Markets,
October 1993 to May 1995; Vice
President, National Sales Manager,
Retail Division, January 1990 to October
1993; Vice President, General Manager,
Furnishings Division, February 1989 to
January 1980.
James S. Bury (56) Vice President of Finance, December 1996 1990
to present; Vice President and
Controller, May 1990 to December 1996;
Corporate Controller, August 1989 to May
1990; Vice President Finance, Men's
Apparel Division, February 1988 to
August 1989.
7
<PAGE>
Cynthia L. Boeddeker (42) Vice President of Operations since March 1996
2000; Vice President and General
Merchandise Manager, December 1996 to
March 2000; Director of Sourcing and
Inventory Management, February 1994 to
December 1996; Import Manager, March
1992 to February 1994; Sourcing
Administrator, July 1991 to March 1992.
Timothy C. Klouda (47) President, Klouda-Lenz, Inc., a
wholly-owned subsidiary of the Company,
and director of the Company May 1999 to
present; Co-founder in 1986, director
and Chief Executive Officer of
Klouda-Lenz, Inc., an independent sales
representative for the Company acquired
by the Company in March 1999.
8
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The information required under this caption in incorporated herein by
reference to the information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Market Statistics" contained in the Company's 1999 Annual
Report to Shareholders.
Item 6. Selected Financial Data
The information required under this caption is incorporated herein by
reference to the information set forth under the caption "Five Year
Financial Review" contained in the Company's 1999 Annual Report to
Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The information required under this caption is incorporated herein by
reference to the information set forth under the captions "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Company's 1999 Annual Report to
Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required under this caption is incorporated herein by
reference to the information set forth under the captions "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk" and "Notes to Consolidated Financial
Statements - Note 1 - New Accounting Pronouncements" contained in the
Company's 1999 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
The information required under this caption is incorporated herein by
reference to the information set forth under the captions "Consolidated
Statements of Operations," "Consolidated Balance Sheets," "Consolidated
Statements of Cash Flows," "Consolidated Statements of Shareholders'
Equity," "Notes to Consolidated Financial Statements," "Report of
Independent Public Accountants," and "Five Year Financial Review"
contained in the Company's 1999 Annual Report to Shareholders.
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
9
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required under this caption is incorporated by
reference to the information set forth under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" of the definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days of Registrant's
fiscal year ended January 1, 2000.
Information regarding executive officers is included in Part I of this
Report.
Item 11. Executive Compensation
The information required under this caption is incorporated by
reference to the information set forth under the caption "Executive
Compensation and Other Information" of the definitive proxy statement
to be filed with the Securities and Exchange Commission within 120 days
of the Registrant's fiscal year ended January 1, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this caption is incorporated by
reference to the information set forth under the caption "Security
Ownership of Certain Beneficial Owners, Directors and Executive
Officers" of the definitive proxy statement to be filed with the
Securities and Exchange Commission within 120 days of the Registrant's
fiscal year ended January 1, 2000.
Item 13. Certain Relationships and Related Transactions
The information required under this caption is incorporated by
reference to the information set forth under the caption "Executive
Compensation and Other Information" of the definitive proxy statement
to be filed within 120 days of the Registrant's fiscal year ended
January 1, 2000.
10
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. Financial statements, included under the following headings in
the 1999 Annual Report to Shareholders, are incorporated by
reference in Item 8:
- Consolidated Statements of Operations for the three
years ended January 1, 2000.
- Consolidated Balance Sheets as of January 1, 2000 and
January 2, 1999.
- Consolidated Statements of Cash Flows for the three
years ended January 1, 2000.
- Consolidated Statements of Shareholders' Equity for
the three years ended January 1, 2000.
- Notes to Consolidated Financial Statements.
- Report of Independent Public Accountants.
2. Financial Statement Schedules for the three years ended
January 1, 2000.
- Schedule II - Valuation and Qualifying Accounts,
pages 14-16 of this report.
- Report of Independent Public Accountants on
Schedules, page 17 of this report.
- All other schedules for which provision is made in
the applicable accounting regulation of the
Securities and Exchange Commission are not required
under the related instructions or are not applicable
and, therefore, have been omitted.
3. Exhibits:
- Exhibit 2 - Plan of Reorganization, as confirmed
October 1, 1991 by the United States Bankruptcy
Court. (1)
11
<PAGE>
- Exhibit 3 - Restated Certificate of Incorporation and
By-Laws, as amended. (1) (2)
- Exhibit 4 - Form of Rights Agreement dated as of July
25, 1997, between the Registrant and Norwest Bank
Minnesota, N.A.(5)
- Exhibit 10 - Material Contracts (Management Contracts
or Compensatory Plans or Agreements):
(A) The Registrant's 1991 Stock Plan, as
amended. (7)
(B) The Registrant's 1999 Stock Plan, as
amended. (7)
(C) Amended and Restated Change in Control
Severance Agreement with Thomas D. Gleason,
effective February 23, 2000. (7)
(D) Form of Change in Control Severance
Agreement with David E. Berg, James S. Bury,
Cynthia L. Boeddeker, Timothy C. Klouda and
Dennis G. Lenz, dated as of September 23,
1999. (7)
- Exhibit 10 - Material Contracts (Other):
(E) Purchase and Sale Agreement, dated May 22,
1996, between the Registrant and Supreme
International Corporation, as amended. (3)
(F) License Agreement, dated September 6, 1996,
between the Registrant and Supreme
International Corporation. (3)
(G) Credit and Security Agreement, dated
February 4, 1997, between the Registrant and
U.S. Bank National Association. (4)
(H) Agreement and Plan of Merger, dated March
25, 1999, between the Registrant,
Klouda-Lenz, Inc., and the other parties
named therein. (6)
(I) Third Amendment to the Credit and Security
Agreement, dated July 31, 1999, between the
Registrant and U.S. Bank National
Association. (7)
12
<PAGE>
- Exhibit 13 - PremiumWear, Inc. 1999 Annual Report to
Shareholders - Such report, except for those portions
thereof which are expressly incorporated by reference
in this report, is furnished for the information of
the Securities and Exchange Commission and is not to
be deemed "filed" as part of this filing. (7)
- Exhibit 23 - Consent of Independent Public
Accountants. (7)
- Exhibit 27 - Financial Data Schedule. (7)
---------------------------------
(1) Incorporated herein by reference to Exhibits
2 and 3, respectively, of the Registrant's
Annual Report on Form 10-K for the year
ended January 4, 1992 (File No. 1-63).
(2) Incorporated herein by reference to Form
8-K, dated August 1, 1995 (File No. 1-63).
(3) Incorporated herein by reference to Exhibits
2.1 and 2.2 respectively of the Registrant's
Form 8-K, dated September 12, 1996 (File No.
1-63).
(4) Incorporated herein by reference to Exhibits
10(B), (G) and (H) respectively of the
Registrant's Annual Report on Form 10-K for
the year ended January 4, 1997 (File No.
1-63).
(5) Incorporated herein by reference to Exhibit
1 of the Registrants' Registration Statement
on Form 8-A filed with the SEC, dated
September 22, 1997.
(6) Incorporated herein by reference to Exhibits
10 (C), and (G) respectively of the
Registrant's Annual Report on Form 10-K for
the year ended January 2, 1999 (File No.
1-63).
(7) Filed herewith.
---------------------------------
(b) REPORTS ON FORM 8-K: None.
(c) EXHIBITS: Reference is made to Item 14(a) (3).
(d) SCHEDULES: Reference is made to Item 14 (a) (2).
13
<PAGE>
SCHEDULE II
PREMIUMWEAR, INC.
Valuation and Qualifying Accounts
Year ended January 1, 2000
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
------------------------
Balance Charged to
Beginning Costs and Charged to Balance at
Description of Year Expenses Net Sales Deductions End of Year
- ----------- ------- -------- --------- ---------- -----------
Allowances deducted
from trade receivables
<S> <C> <C> <C> <C> <C>
Allowance for cash
discounts and other
customer credits $ 278,000 $ (26,000) $ -- $ 152,000(a) $ 100,000
Allowance for
doubtful accounts 400,000 (35,000) -- 138,000(b) 227,000
Allowance for
returns 50,000 -- 690,000 690,000(c) 50,000
----------- ----------- ----------- ----------- -----------
$ 728,000 $ (61,000) $ 690,000 $ 980,000 $ 377,000
=========== =========== =========== =========== ===========
Reserve for
operations
restructuring $ -- $ 1,245,000 $ -- $ 940,000 $ 305,000
=========== =========== =========== =========== ===========
</TABLE>
(a) Discounts allowed and other credits to customers' accounts receivable.
(b) Uncollectable accounts written off, net of recoveries.
(c) Returns applied to customers' accounts receivable.
14
<PAGE>
SCHEDULE II
PREMIUMWEAR, INC.
Valuation and Qualifying Accounts
Year ended January 2, 1999
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
------------------------
Balance Charged to
Beginning Costs and Charged to Balance at
Description of Year Expenses Net Sales Deductions End of Year
- ----------- ------- -------- --------- ---------- -----------
Allowances deducted
from trade receivables
<S> <C> <C> <C> <C> <C>
Allowance for cash
discounts and other
customer credits $ 318,000 $ (116,000)(d) $ 75,000 $ (1,000)(a) $ 278,000
Allowance for
doubtful accounts 170,000 262,000 -- 32,000(b) 400,000
Allowance for
returns 50,000 -- 539,000 539,000(c) 50,000
---------- ---------- ---------- ---------- ----------
$ 538,000 $ 146,000 $ 614,000 $ 570,000 $ 728,000
========== ========== ========== ========== ==========
Reserve for liabilities
related to sold assets $ 578,000 $ (398,000)(e) $ -- $ 180,000 $ --
========== ========== ========== ========== ==========
</TABLE>
(a) Discounts allowed and other credits to customers' accounts receivable.
(b) Uncollectable accounts written off, net of recoveries.
(c) Returns applied to customers' accounts receivable.
(d) $149,000 charged to cost of goods sold, $265,000 credited to bad debt
provision.
(e) Credited to gain on sale of trademarks.
15
<PAGE>
SCHEDULE II
PREMIUMWEAR, INC.
Valuation and Qualifying Accounts
Year ended January 3, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
------------------------
Balance Charged to
Beginning Costs and Charged to Balance at
Description of Year Expenses Net Sales Deductions End of Year
- ----------- ------- -------- --------- ---------- -----------
Allowances deducted
from trade receivables
<S> <C> <C> <C> <C> <C>
Allowance for cash
discounts and other
customer credits $ 709,000 $ (350,000)(d) $ 42,000 $ 83,000(a) $ 318,000
Allowance for
doubtful accounts 150,000 74,000 -- 54,000(b) 170,000
Allowance for
returns 50,000 -- 457,000 457,000(c) 50,000
----------- ----------- ----------- ----------- -----------
$ 909,000 $ (276,000) $ 499,000 $ 594,000 $ 538,000
=========== =========== =========== =========== ===========
Reserve for liabilities
related to sold assets $ 1,530,000 $ -- $ -- $ 952,000 $ 578,000
=========== =========== =========== =========== ===========
</TABLE>
Notes:
(a) Discounts allowed and other credits to customers' accounts receivable.
(b) Uncollectable accounts written off, net of recoveries.
(c) Returns applied to customers' accounts receivable.
(d) Credited to bad debt expense.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE II
To PremiumWear, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in the Company's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 18, 2000. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
accompanying schedule is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
-------------------------
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
February 18, 2000
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on behalf
of the undersigned, thereunto duly authorized.
PREMIUMWEAR, INC.
Date: MARCH 31, 2000 By: /s/DAVID E. BERG
--------------------------------
David E. Berg,
President and
Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------- ------------------------------------------
<S> <C> <C>
/s/DAVID E. BERG President and Chief Executive Officer March 31, 2000
- ---------------------- (Principal Executive Officer) and Director
David E. Berg
/s/JAMES S. BURY V. P. of Finance March 31, 2000
- ---------------------- Principal Accounting Officer
James S. Bury
/s/THOMAS D. GLEASON Chairman and Director March 31, 2000
- ----------------------
Thomas D. Gleason
/s/C. D. ANDERSON Director March 31, 2000
- ----------------------
C. D. Anderson
/s/KEITH A. BENSON Director March 31, 2000
- ----------------------
Keith A. Benson
/s/TIMOTHY C. KLOUDA Director March 31, 2000
- ----------------------
Timothy C. Klouda
/s/ALAN W. KOSLOFF Director March 31, 2000
- ----------------------
Alan W. Kosloff
/s/GERALD E. MAGNUSON Director March 31, 2000
- ----------------------
Gerald E. Magnuson
/s/MARK B. VITTERT Director March 31, 2000
- ----------------------
Mark B. Vittert
</TABLE>
18
<PAGE>
EXHIBIT INDEX
Exhibit Exhibit Page
No. No.
- ------- ----------------------------------------------------- ------------
10(A) 1991 Stock Plan, as amended 20-33
10(B) 1999 Stock Plan, as amended 34-47
10(C) Amended and Restated Change in Control Severance 48-57
Agreement with Thomas D. Gleason, effective
February 23, 2000.
10(D) Form of Change in Control Severance Agreement with 58-67
David E. Berg, James S. Bury, Cynthia L. Boeddeker,
Timothy C. Klouda and Dennis G. Lenz, dated as of
September 23, 1999.
10(I) Third Amendment to Credit and Security Agreement, dated 68-80
July 31, 1999, between the Registrant and U.S. Bank
National Association
13 PremuimWear, Inc. 1999 Annual Report to Shareholders 81-121
21 Subsidiaries of the Registrant. 122
23 Consent of Independent Public Accountants. 123
27 Financial Data Schedule. 124
19
EXHIBIT 10(A)
PREMIUMWEAR, INC.
1991 STOCK PLAN
<PAGE>
SECTION CONTENTS PAGE
1. General Purpose of Plan; Definitions 1
2. Administration 3
3. Stock Subject to Plan 4
4. Eligibility 4
5. Stock Options 4
6. Restricted Stock 8
7. Transfer, Leave of Absence, etc. 10
8. Amendments and Termination 10
9. Unfunded Status of Plan 10
10. General Provisions 11
11. Effective Date of Plan 12
<PAGE>
PREMIUMWEAR, INC.
1991 STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the PremiumWear, Inc. 1991 Stock Plan (the
"Plan"). The purpose of the Plan is to enable PremiumWear, Inc. (the "Company")
and its Subsidiaries to retain and attract executives, other key employees,
consultants and directors who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Board" means the Board of Directors of the Company.
b. "Cause" means a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony,
or a participant's willful misconduct or dishonesty, any of
which is directly and materially harmful to the business or
reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then
the functions of the Committee specified in the Plan shall be
exercised by the Board.
e. "Company" means PremiumWear, Inc., a corporation organized
under the laws of the State of Delaware (or any successor
corporation).
f. "Disability" means permanent and total disability as
determined by the Committee.
g. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company.
h. "Fair Market Value" means the value of the Stock on a given
date as determined by the Committee in accordance with Section
422 of the Code and any applicable Treasury Department
regulations with respect to "incentive stock options."
i. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code.
<PAGE>
j. "Non-Employee Director" means a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) under the Securities Exchange
Act of 1934, as amended, or any successor rule.
k. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, and is intended to be and is
designated as a "Non-Qualified Stock Option."
l. "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company on or after age 65.
m. "Outside Director" means a director who (a) is not a current
employee of the Company or any member of an affiliated group
which includes the Company; (b) is not a former employee of
the Company who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the
Company; (d) does not receive remuneration from the Company,
either directly or indirectly, in any capacity other than as a
director, except as otherwise permitted under Code Section
162(m) and regulations thereunder. For this purpose,
remuneration includes any payment in exchange for goods or
services. This definition shall be further governed by the
provisions of Code Section 162(m) and regulations promulgated
thereunder.
n. "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the
Company if each of the corporations (other than the Company)
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain.
o. "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 6 below.
p. "Retirement" means Normal Retirement or Early Retirement.
q. "Stock" means the Common Stock, $.01 par value per share, of
the Company.
r. "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 below.
s. "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company
if each of the corporations (other than the last corporation
in the unbroken chain) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one
of the other corporations in the chain.
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<PAGE>
SECTION 2. Administration.
The Plan shall be administered by the Board or by a Committee appointed
by the Board consisting of at least two directors, all of whom shall be Outside
Directors and Non-Employee Directors, and who shall serve at the pleasure of the
Board. The Committee may be a subcommittee of the Compensation Committee of the
Board.
The Committee shall have the power and authority to grant to eligible
employees, consultants and directors pursuant to the terms of the Plan: (i)
Stock Options and (ii) Restricted Stock.
In particular, the Committee shall have the authority:
(i) to select the officers, other key employees, directors and
consultants of the Company and its Subsidiaries to whom Stock
Options and/or Restricted Stock awards may from time to time
be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, or Restricted Stock
awards, or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder
(including, but not limited to, any restriction on any Stock
Option or other award and/or the shares of Stock relating
thereto); and
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to
an award under this Plan shall be deferred either
automatically or at the election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
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<PAGE>
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 873,500. Such shares may consist, in whole
or in part, of authorized and unissued shares.
If any shares that have been optioned cease to be subject to Stock
Options, or if any shares subject to any Restricted Stock award granted
hereunder are forfeited or such award otherwise terminates without a payment
being made to the participant, such shares shall again be available for
distribution in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding Stock Options granted under the Plan, and in the number
of shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers, other key employees, consultants and members of the Board of
the Company and Subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options or Restricted Stock awards
under the Plan. The optionees and participants under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.
Notwithstanding the foregoing, no person shall receive grants of Stock
Options and Restricted Stock awards under this Plan which exceed 150,000 shares
during any fiscal year of the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after October 21, 2001.
4
<PAGE>
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non- Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option be less than 100% of the Fair Market Value of the Stock on the date
of the grant of the Stock Option. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110% of the
Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time, provided, however, that unless the Stock Option has been approved by
the Board, the Committee or the stockholders of the Company, a Stock Option
granted to an officer, director or 10% stockholder of the Company shall not be
exercisable for a period of six (6) months after the date of grant.
Notwithstanding the foregoing, unless the Stock Option Agreement provides
otherwise, any Stock Option granted under this Plan shall be exercisable in
full, without regard to any installment exercise or vesting provisions, for a
period specified by the Committee, but not to exceed sixty (60) days nor be less
than seven (7) days, prior to the occurrence of any of the following events: (i)
dissolution or liquidation of the Company other than in conjunction with a
bankruptcy
5
<PAGE>
of the Company or any similar occurrence, (ii) any merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, where the
Company will not be the surviving entity or (iii) the transfer of substantially
all of the assets of the Company or 50% or more of the outstanding Stock of the
Company.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or Restricted Stock subject to
an award hereunder (based on the Fair Market Value of the Stock on the date the
option is exercised, as determined by the Committee); provided, however, that in
the event payment is made in the form of shares of Restricted Stock, the
optionee will receive a portion of the option shares in the form of, and in an
amount equal to, the Restricted Stock award tendered as payment by the optionee.
No shares of Stock shall be issued until full payment therefor has been made. An
optionee generally shall have the rights to dividends and other rights of a
shareholder with respect to shares subject to the option when the optionee has
given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of Section
10.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of three months (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after three months (or such shorter period as
the Committee
6
<PAGE>
shall specify at grant) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is shorter. In the
event of termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non- Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three months (or such shorter period as Committee shall specify
at grant) from the date of such termination of employment or the expiration of
the stated term of the option, whichever period is shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.
(k) Directors Who Are Not Employees. Each person who (i) is not an
employee of the Company or its Subsidiaries, and (ii) is elected or reelected to
the Board at any annual or special meeting of the shareholders of the Company,
or (iii) is serving an unexpired term as Director on the date of an annual
meeting at which any other director is elected, shall as of the date of such
meeting automatically be granted a Stock Option to purchase 1,000 shares of the
Company's Stock at an exercise price per share equal to 100% of the Fair Market
Value of a share of the Company's Stock on the date of the grant of the Stock
Option. In the case of an annual or special meeting, the action of the
shareholders in electing or reelecting a director who is not an employee shall
constitute the granting of Stock Options to all such directors who are not
employees, and the date when the shareholders shall take such action shall be
the date of grant of the Stock Options. All such options shall be designated as
Non-Qualified Stock Options and shall be subject to the same terms and
provisions as are then in effect with respect to the grant of Non-Qualified
Stock Options to officers and key employees of the Company, except that the term
of each such Stock Option shall be equal to five years. In the event
discretionary Stock Options are granted to members of the Committee, such Stock
Options shall be granted by the Board.
SECTION 6. Restricted Stock.
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<PAGE>
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
In the event that Restricted Stock awards are granted to members of the
Committee, such awards shall be granted by the Board.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such
certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the PremiumWear, Inc.
1991 Stock Plan and an Agreement entered into between the
registered owner and PremiumWear, Inc. Copies of such Plan and
Agreement are on file in the executive offices of PremiumWear,
Inc.
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. Within these limits, the
8
<PAGE>
Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 6,
the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the
right to vote the shares and the right to receive any cash dividends.
The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional shares of Restricted Stock (to the
extent shares are available under Section 3 and subject to paragraph
(f) of Section 10). Certificates for shares of Unrestricted Stock shall
be delivered to the grantee promptly after, and only after, the period
of forfeiture shall have expired without forfeiture in respect of such
shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c)(iv) of this Section 6, upon termination of employment for
any reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part
any or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
(v) All restrictions with respect to any participant's shares
of Restricted Stock shall lapse or be deemed to have lapsed or been
terminated on the tenth (10th) business day prior to the occurrence of
any of the following events: (i) dissolution or liquidation of the
Company, other than in conjunction with a bankruptcy of the Company or
any similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization or similar occurrence, where the Company
will not be the surviving entity or (iii) the transfer of substantially
all of the assets of the Company or 50% or more of the outstanding
Stock of the Company.
SECTION 7. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
9
<PAGE>
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 8. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option or Restricted Stock award
theretofore granted, without the optionee's or participant's consent, or (ii)
which without the approval of the stockholders of the Company would cause the
Plan to no longer comply with Rule 16b-3 under the Securities Exchange Act of
1934, Section 422 of the Code or any other regulatory requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.
SECTION 9. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 10. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock awards shall be subject to such stock-transfer orders
and other restrictions as the Committee may
10
<PAGE>
deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock
awards under the Plan (not including Stock Options) are not required to make any
payment or provide consideration other than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 10(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) At the time of grant, the Committee may provide in connection with
any grant or award made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a repurchase right in favor of the
Company, pursuant to which the participant shall be required to offer to the
Company upon termination of employment for any reason any shares that the
participant acquired under the Plan, with the price being the then Fair Market
Value of the Stock or, in the case of a termination for Cause, an amount equal
to the cash consideration paid for the Stock, subject to such other terms and
conditions as the Committee may specify at the time of grant. The Committee may,
at the time of the grant of an award under the Plan, provide the Company with
the right to repurchase, or require the forfeiture of, shares of Stock acquired
pursuant to the Plan by any
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<PAGE>
participant who, at any time within two years after termination of employment
with the Company, directly or indirectly competes with, or is employed by a
competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if the Committee (or the
Company's chief executive or chief financial officer) certifies in writing that
under Section 3 sufficient shares are available for such reinvestment (taking
into account then outstanding Stock Options and other Plan awards).
SECTION 11. Effective Date of Plan.
The Plan became effective on October 21, 1991, and was amended by the
shareholders on May 19, 1994. The Board further amended the Plan on September 6,
1996 and February 19, 1997 to comply with new Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 and with Section 162(m) of the Code. The Board
also amended Sections 5(c), 5(d) and 6(c)(v) of the Plan on July 13, 1999.
12
EXHIBIT 10(B)
PREMIUMWEAR, INC.
1999 STOCK PLAN
<PAGE>
SECTION CONTENTS PAGE
1. General Purpose of Plan; Definitions 1
2. Administration 3
3. Stock Subject to Plan 4
4. Eligibility 4
5. Stock Options 4
6. Restricted Stock 8
7. Transfer, Leave of Absence, etc. 9
8. Amendments and Termination 10
9. Unfunded Status of Plan 10
10. General Provisions 10
11. Effective Date of Plan 12
<PAGE>
PREMIUMWEAR, INC.
1999 STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the PremiumWear, Inc. 1999 Stock Plan (the
"Plan"). The purpose of the Plan is to enable PremiumWear, Inc. (the "Company")
and its Subsidiaries to retain and attract executives, other key employees,
consultants and directors who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Board" means the Board of Directors of the Company.
b. "Cause" means a felony conviction of a participant or the
failure of a participant to contest prosecution for a felony,
or a participant's willful misconduct or dishonesty, any of
which is directly and materially harmful to the business or
reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee referred to in Section 2 of
the Plan. If at any time no Committee shall be in office, then
the functions of the Committee specified in the Plan shall be
exercised by the Board.
e. "Company" means PremiumWear, Inc., a corporation organized
under the laws of the State of Delaware (or any successor
corporation).
f. "Disability" means permanent and total disability as
determined by the Committee.
g. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company.
h. "Fair Market Value" means the value of the Stock on a given
date as determined by the Committee in accordance with Section
422 of the Code and any applicable Treasury Department
regulations with respect to "incentive stock options."
i. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code.
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j. "Non-Employee Director" means a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) under the Securities Exchange
Act of 1934, as amended, or any successor rule.
k. "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, and is intended to be and is
designated as a "Non-Qualified Stock Option."
l. "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Parent Corporation of
the Company on or after age 65.
m. "Outside Director" means a director who (a) is not a current
employee of the Company or any member of an affiliated group
which includes the Company; (b) is not a former employee of
the Company who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the
Company; (d) does not receive remuneration from the Company,
either directly or indirectly, in any capacity other than as a
director, except as otherwise permitted under Code Section
162(m) and regulations thereunder. For this purpose,
remuneration includes any payment in exchange for goods or
services. This definition shall be further governed by the
provisions of Code Section 162(m) and regulations promulgated
thereunder.
n. "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the
Company if each of the corporations (other than the Company)
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations
in the chain.
o. "Restricted Stock" means an award of shares of Stock that are
subject to restrictions under Section 6 below.
p. "Retirement" means Normal Retirement or Early Retirement.
q. "Stock" means the Common Stock, $.01 par value per share, of
the Company.
r. "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 below.
s. "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company
if each of the corporations (other than the last corporation
in the unbroken chain) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one
of the other corporations in the chain.
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SECTION 2. Administration.
The Plan shall be administered by the Board or by a Committee appointed
by the Board consisting of at least two directors, all of whom shall be Outside
Directors and Non-Employee Directors, and who shall serve at the pleasure of the
Board. The Committee may be a subcommittee of the Compensation Committee of the
Board.
The Committee shall have the power and authority to grant to eligible
employees, consultants and directors pursuant to the terms of the Plan: (i)
Stock Options and (ii) Restricted Stock.
In particular, the Committee shall have the authority:
(i) to select the officers, other key employees, directors and
consultants of the Company and its Subsidiaries to whom Stock
Options and/or Restricted Stock awards may from time to time
be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, or Restricted Stock
awards, or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder
(including, but not limited to, any restriction on any Stock
Option or other award and/or the shares of Stock relating
thereto); and
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to
an award under this Plan shall be deferred either
automatically or at the election of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
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SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 120,000. Such shares may consist, in whole
or in part, of authorized and unissued shares.
If any shares that have been optioned cease to be subject to Stock
Options, or if any shares subject to any Restricted Stock award granted
hereunder are forfeited or such award otherwise terminates without a payment
being made to the participant, such shares shall again be available for
distribution in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding Stock Options granted under the Plan, and in the number
of shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers, other key employees, consultants and members of the Board of
the Company and Subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options or Restricted Stock awards
under the Plan. The optionees and participants under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.
Notwithstanding the foregoing, no person shall receive grants of Stock
Options and Restricted Stock awards under this Plan which exceed 50,000 shares
during any fiscal year of the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after February 22, 2009.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non- Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
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Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option be less than 100% of the Fair Market Value of the Stock on the date
of the grant of the Stock Option. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110% of the
Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time, provided, however, that unless the Stock Option has been approved by
the Board, the Committee or the stockholders of the Company, a Stock Option
granted to an officer, director or 10% stockholder of the Company shall not be
exercisable for a period of six (6) months after the date of grant.
Notwithstanding the foregoing, unless the Stock Option Agreement provides
otherwise, any Stock Option granted under this Plan shall be exercisable in
full, without regard to any installment exercise or vesting provisions, for a
period specified by the Committee, but not to exceed sixty (60) days nor be less
than seven (7) days, prior to the occurrence of any of the following events: (i)
dissolution or liquidation of the Company other than in conjunction with a
bankruptcy of the Company or any similar occurrence, (ii) any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 50% or more of the outstanding
Stock of the Company.
5
<PAGE>
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or Restricted Stock subject to
an award hereunder (based on the Fair Market Value of the Stock on the date the
option is exercised, as determined by the Committee); provided, however, that in
the event payment is made in the form of shares of Restricted Stock, the
optionee will receive a portion of the option shares in the form of, and in an
amount equal to, the Restricted Stock award tendered as payment by the optionee.
No shares of Stock shall be issued until full payment therefor has been made. An
optionee generally shall have the rights to dividends and other rights of a
shareholder with respect to shares subject to the option when the optionee has
given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in paragraph (a) of Section
10.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of nine months (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after nine months (or such shorter period as
the Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is shorter. In the event of termination of employment by reason of Disability,
if an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, the option will
thereafter be treated as a Non-Qualified Stock Option.
6
<PAGE>
(h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three months (or such shorter period as Committee shall specify
at grant) from the date of such termination of employment or the expiration of
the stated term of the option, whichever period is shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if
an optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.
(k) Directors Who Are Not Employees. Each person who (i) is not an
employee of the Company or its Subsidiaries, and (ii) is elected or reelected to
the Board at any annual or special meeting of the shareholders of the Company,
or (iii) is serving an unexpired term as Director on the date of an annual
meeting at which any other director is elected, shall as of the date of such
meeting automatically be granted a Stock Option to purchase 1,000 shares of the
Company's Stock at an exercise price per share equal to 100% of the Fair Market
Value of a share of the Company's Stock on the date of the grant of the Stock
Option. In the case of an annual or special meeting, the action of the
shareholders in electing or reelecting a director who is not an employee shall
constitute the granting of Stock Options to all such directors who are not
employees, and the date when the shareholders shall take such action shall be
the date of grant of the Stock Options. All such options shall be designated as
Non-Qualified Stock Options and shall be subject to the same terms and
provisions as are then in effect with respect to the grant of Non-Qualified
Stock Options to officers and key employees of the Company, except that the term
of each such Stock Option shall be equal to five years. In the event
discretionary Stock Options are granted to members of the Committee, such Stock
Options shall be granted by the Board. The provisions of this Section 5(k) shall
become effective the day following approval of this Plan by the shareholder of
the Company and shall then replace and supercede Section 5(k) of the Company's
1991 Stock Plan.
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SECTION 6. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
In the event that Restricted Stock awards are granted to members of the
Committee, such awards shall be granted by the Board.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such
certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the PremiumWear, Inc.
1999 Stock Plan and an Agreement entered into between the
registered owner and PremiumWear, Inc. Copies of such Plan and
Agreement are on file in the executive offices of PremiumWear,
Inc.
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the
8
<PAGE>
"Restriction Period"), the participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee may provide for the lapse of
such restrictions in installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 6,
the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the
right to vote the shares and the right to receive any cash dividends.
The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional shares of Restricted Stock (to the
extent shares are available under Section 3 and subject to paragraph
(f) of Section 10). Certificates for shares of Unrestricted Stock shall
be delivered to the grantee promptly after, and only after, the period
of forfeiture shall have expired without forfeiture in respect of such
shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c)(iv) of this Section 6, upon termination of employment for
any reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part
any or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
(v) All restrictions with respect to any participant's shares
of Restricted Stock shall lapse or be deemed to have lapsed or been
terminated on the tenth (10th) business day prior to the occurrence of
any of the following events: (i) dissolution or liquidation of the
Company, other than in conjunction with a bankruptcy of the Company or
any similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization or similar occurrence, where the Company
will not be the surviving entity or (iii) the transfer of substantially
all of the assets of the Company or 50% or more of the outstanding
Stock of the Company.
SECTION 7. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
9
<PAGE>
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 8. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option or Restricted Stock award
theretofore granted, without the optionee's or participant's consent, or (ii)
which without the approval of the stockholders of the Company would cause the
Plan to no longer comply with Rule 16b-3 under the Securities Exchange Act of
1934, Section 422 of the Code or any other regulatory requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options under this Plan for options
previously granted under this Plan or any previous stock option plan of the
Company, provided, however, that the exercise price of any such substitute
option granted under this Plan shall not be lower than the exercise price of the
previously granted option (as adjusted, if applicable, for stock splits,
distributions and similar events) without shareholder approval.
SECTION 9. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
10
<PAGE>
SECTION 10. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant
to any Restricted Stock awards shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
Federal or state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock
awards under the Plan (not including Stock Options) are not required to make any
payment or provide consideration other than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 10(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
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(e) At the time of grant, the Committee may provide in connection with
any grant or award made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a repurchase right in favor of the
Company, pursuant to which the participant shall be required to offer to the
Company upon termination of employment for any reason any shares that the
participant acquired under the Plan, with the price being the then Fair Market
Value of the Stock or, in the case of a termination for Cause, an amount equal
to the cash consideration paid for the Stock, subject to such other terms and
conditions as the Committee may specify at the time of grant. The Committee may,
at the time of the grant of an award under the Plan, provide the Company with
the right to repurchase, or require the forfeiture of, shares of Stock acquired
pursuant to the Plan by any participant who, at any time within two years after
termination of employment with the Company, directly or indirectly competes
with, or is employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if the Committee (or the
Company's chief executive or chief financial officer) certifies in writing that
under Section 3 sufficient shares are available for such reinvestment (taking
into account then outstanding Stock Options and other Plan awards).
SECTION 11. Effective Date of Plan.
The Plan became effective on February 22, 1999. Sections 5(c), 5(d) and
6(c)(v) were amended by the Board on July 13, 1999.
12
EXHIBIT 10(C)
AMENDED AND RESTATED
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into by and between PremiumWear,
Inc., a Minnesota corporation with its principal offices at 5500 Feltl Road,
Minnetonka, Minnesota (the "Company") and Thomas D. Gleason, residing at 656
Manhattan Road, Grand Rapids, MI 49506 (the "Executive"), and shall be effective
as of the 23rd day of February, 2000.
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders; and
WHEREAS, the Executive has made and is expected to make, due to the
Executive's intimate knowledge of the business and affairs of the Company, its
policies, methods, personnel, and problems, a significant contribution to the
profitability, growth, and financial strength of the Company; and
WHEREAS, the Company, as a publicly held corporation, recognizes that
the possibility of a Change in Control may exist, and that such possibility and
the uncertainty and questions which it may raise among management may result in
the departure or distraction of the Executive in the performance of the
Executive's duties, to the detriment of the Company and its shareholders; and
WHEREAS, it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and dedication
of management personnel, including the Executive, to their assigned duties
without distraction and to ensure the continued availability to the Company of
the Executive in the event of a Change in Control.
THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement shall be effective from and after
the date hereof and shall continue in effect through December 31, 2001, and
shall automatically be extended for successive one-year periods thereafter
unless the Board of Directors of the Company (the "Board") shall have approved,
and the Executive is notified in writing, prior to January 1, 2001 and each
January 1 thereafter, that the term of this Agreement shall not be extended or
further extended; provided, however, that if a Change in Control shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for a period of 24 months from the date of the
occurrence of a Change in Control. In the event that one or more Change in
Control events shall occur during the original or any extended term of this
Agreement, the 24- month period shall follow the last Change in Control. This
Agreement shall neither impose nor confer any further rights or obligations on
the Company or the Executive on the day after the end of the term of this
Agreement. Expiration of the term of this Agreement of itself and without
subsequent action by the Company or the Executive shall not end the employment
relationship between the Company and the Executive.
<PAGE>
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control. For purposes of this Agreement, a
"Change in Control" of the Company shall mean a change in control which would be
required to be reported in response to Item 6(e) on Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then subject to such reporting
requirement, including, without limitation, if:
(a) 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 an employee benefit plan of the Company or any
subsidiary of the Company, becomes a "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; or
(b) During any period of two consecutive years (not including
any period ending prior to the effective date of this Agreement), the
Incumbent Directors cease for any reason to constitute at least a
majority of the Board of Directors. The term "Incumbent Directors"
shall mean those individuals who are members of the Board of Directors
on the effective date of this Agreement and any individual who
subsequently becomes a member of the Board of Directors (other than a
director designated by a person who has entered into agreement with the
Company to effect a transaction contemplated by Section 2(c)) whose
election or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the then Incumbent
Directors; or
(c) (i) The Company consummates a merger, consolidation, share
exchange, division or other reorganization of the Company with any
corporation or entity, other than an entity owned at least 80% by the
Company, unless immediately after such transaction, the shareholders of
the Company immediately prior to such transaction beneficially own,
directly or indirectly 51% or more of the combined voting power of
resulting entity's outstanding voting securities as well as 51% or more
of the Total Market Value of the resulting entity, or in the case of a
division, 51% or more of the combined voting power of the outstanding
voting securities of each entity resulting from the division as well as
51% or more of the Total Market Value of each such entity, in each case
in substantially the same proportion as such shareholders owned shares
of the Company prior to such transaction; (ii) the shareholders of the
Company approve an agreement for the sale or disposition (in one
transaction or a series of transactions) of assets of the Company, the
total consideration of which is greater than 51% of the Total Market
Value of the Company, or (iii) the Company adopts a plan of complete
liquidation or winding-up of the Company. "Total Market Value" shall
mean the aggregate market value of the Company's or the resulting
entity's outstanding common stock (on a fully diluted basis) plus the
aggregate market value of the Company's or the resulting entity's other
outstanding equity securities as measured by the exchange rate
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of the transaction or by such other method as the Board determines
where there is not readily ascertainable exchange rate.
3. Termination Following Change in Control. If a Change in Control
shall have occurred during the term of this Agreement, the Executive shall be
entitled to the benefits provided in subsection 4(d) unless such termination is
(A) because of the Executive's death or Retirement, (B) by the Company for Cause
or Disability, or (C) by the Executive other than for Good Reason.
(a) Disability; Retirement. If, as a result of incapacity due
to physical or mental illness, the Executive shall have been absent
from the full-time performance of the Executive's duties with the
Company for at least six (6) consecutive months, and within 30 days
after written Notice of Termination is given the Executive shall not
have returned to the full-time performance of the Executive's duties,
the Company may terminate the Executive's employment for "Disability".
Any question as to the existence of the Executive's Disability upon
which the Executive and the Company cannot agree shall be determined by
a qualified independent physician selected by the Executive (or, if the
Executive is unable to make such selection, it shall be made by any
adult member of the Executive's immediate family), and approved by the
Company. The determination of such physician made in writing to the
Company and to the Executive shall be final and conclusive for all
purposes of this Agreement. Termination by the Company or the Executive
of the Executive's employment based on "Retirement" shall mean
termination on or after attaining Normal Retirement Age in accordance
with the PremiumWear, Inc. Profit Sharing Plan and Trust.
(b) Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by the
Executive (other than any such failure resulting from (1) the
Executive's incapacity due to physical or mental illness, (2)
any such actual or anticipated failure after the issuance of a
Notice of Termination by the Executive for Good Reason or (3)
the Company's active or passive obstruction of the performance
of the Executive's duties and responsibilities) to perform
substantially the duties and responsibilities of the
Executive's position with the Company after a written demand
for substantial performance is delivered to the Executive by
the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not
substantially performed the duties or responsibilities;
(ii) the conviction of the Executive by a court of
competent jurisdiction for felony criminal conduct; or
(iii) the willful engaging by the Executive in fraud
or dishonesty which is demonstrably and materially injurious
to the Company, monetarily or otherwise.
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No act, or failure to act, on the Executive's part shall be deemed
"willful" unless committed, or omitted by the Executive in bad faith
and without reasonable belief that the Executive's act or failure to
act was in the best interest of the Company. The Executive shall not be
terminated for Cause unless and until the Company shall have delivered
to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the
Executive's conduct was Cause and specifying the particulars thereof in
detail.
(c) Good Reason. The Executive shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without the Executive's express written consent,
any of the following:
(i) The assignment to the Executive of any duties
inconsistent with the Executive's status or position with the
Company, or a substantial alteration in the nature or status
of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) A reduction by the Company in the Executive's
annual compensation including, but not limited to, base pay or
short and/long term incentive pay in effect immediately prior
to a Change in Control;
(iii) The relocation of the Company's principal
executive offices to a location more than fifty miles from
Minnetonka, Minnesota; (B) the Company requiring the Executive
to be based anywhere other than at his offices in Grand
Rapids, Michigan, except for required travel on the Company's
business to an extent substantially consistent with the
Executive's business travel obligations immediately prior to
the Change in Control, provided, however, that the Executive
shall not be required to travel to the Company's principal
executive offices more than twice a month; or (C) a
significant increase in the level of travel required of the
Executive as compared to travel obligations immediately prior
to the Change in Control;
(iv) The failure by the Company to continue to
provide the Executive with benefits at least as favorable to
those enjoyed by the Executive under any of the Company's
pension, life insurance, medical, health and accident,
disability, deferred compensation, incentive awards, incentive
stock options, or savings plans in which the Executive was
participating immediately prior to the Change in Control, the
taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive
the Executive of any material fringe benefit enjoyed
immediately prior to the Change in Control, or the failure by
the Company to provide the Executive with the number of paid
vacation days to which the
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Executive is entitled immediately prior to the Change in
Control, provided, however, that the Company may amend any
such plan or programs as long as such amendments do not reduce
any benefits to which the Executive would be entitled upon
termination;
(v) The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree
to perform this Agreement, as contemplated in Section 7; or
(vi) any material violation of this Agreement by the
Company.
(d) Notice of Termination. Any purported termination of the
Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto
in accordance with Section 8. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
the facts and circum stances claimed to provide a basis for termination
of the Executive's employment.
(e) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean:
(i) If the Executive's employment is terminated for
Disability, 30 days after Notice of Termination is given
(provided that the Executive shall have been absent from
full-time performance of duties for at least six (6) months
and shall not have returned to the full-time performance of
the Executive's duties during such 30 day period in accordance
with Section 3(a) hereof); and
(ii) If the Executive's employment is terminated
pursuant to subsections (b) or (c) above or for any other
reason (other than Disability), the date specified in the
Notice of Termination (which, in the case of a termination
pursuant to subsection (b) above shall not be less than 10
days, and in the case of a termination pursuant to subsection
(c) above shall not be less than 10 nor more than 30 days,
respectively, from the date such Notice of Termination is
given).
(f) Dispute of Termination. If, within 10 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 (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected);
provided, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the
Company
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shall continue to pay the Executive full compensation in effect when
the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue the Executive as a participant in
all compensation, benefit and insurance plans in which the Executive
was participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this
subsection. Amounts paid under this subsection are in addition to all
other amounts due under this Agreement and shall not be offset against
or reduce any other amounts under this Agreement.
4. Compensation Upon Termination or During Disability. Following a
Change in Control of the Company, as defined in subsection 2(a), upon
termination of the Executive's employment or during a period of Disability, the
Executive shall be entitled to the following benefits:
(a) During any period that the Executive fails to perform
full-time duties with the Company as a result of a Disability, the
Company shall pay the Executive, the Executive's base salary as in
effect at the commencement of any such period and the amount of any
other form or type of compensation otherwise payable for such period if
the Executive were not so disabled, until such time as the Executive is
determined to be eligible for long term disability benefits in
accordance with the Company's insurance programs then in effect or the
Executive is terminated for Disability.
(b) If the Executive's employment shall be terminated by the
Company for Cause or by the Executive other than for Good Reason,
Disability or Retirement, the Company shall pay to the Executive his
full base salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given and the Company shall have
no further obligation to the Executive under this Agreement, except
with respect to any benefits to which the Executive is entitled under
any Company pension or welfare benefit plan, insurance program or as
otherwise required by law.
(c) If the Executive's employment shall be terminated by the
Company or by the Executive for Disability or Retirement, or by reason
of death, the Company shall immediately commence payment to the
Executive (or the Executive's designated beneficiaries or estate, if no
beneficiary is designated) of any and all benefits to which the
Executive is entitled under the Company's retirement and insurance
programs then in effect.
(d) If the Executive's employment shall be terminated (A) by
the Company other than for Cause, Retirement, Disability or the
Executive's death or (B) by the Executive for Good Reason, then the
Executive shall be entitled to the benefits provided below:
(i) The Company shall pay the Executive, through the
Date of Termination, the Executive's base salary as in effect
at the time the Notice of Termination is given and any other
form or type of compensation otherwise payable for such
period;
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(ii) In lieu of any further salary payments for
periods subsequent to the Date of Termination, the Company
shall pay a severance payment (the "Severance Payment") equal
to two times the Executive's Annual Compensation as defined
below. For purposes of this Section 4, "Annual Compensation"
shall mean the Executive's annual salary (regardless of
whether all or any portion of such salary has been contributed
to a deferred compensation plan), the annual amount of the
Company bonus for which the Executive is eligible upon
attainment of 100% of the target (regardless of whether such
target bonus has been achieved or whether conditions of such
target bonus are actually fulfilled), and any other type or
form of compensation paid to the Executive by the Company (or
any corporation (an "Affiliate") affiliated with the Company
within the meaning of Section 1504 of the Internal Revenue
Code of 1986 as it may be amended from time to time (the
"Code")) and included in the Executive's gross income for
federal tax purposes during the 12-month period ending
immediately prior to the Date of Termination, but excluding:
a) any amount actually paid to the Executive as a cash payment
of the target bonus (regardless of whether all or any portion
of such the Company bonus was contributed to a deferred
compensation plan); b) compensation income recognized as a
result of the exercise of stock options or sale of the stock
so acquired; and c) any payments actually or constructively
received from a plan or arrangement of deferred compensation
between the Company and the Executive. All of the items
included in Annual Compensation shall be those in effect on
the Date of Termination and shall be calculated without giving
effect to any reduction in such compensation which would
constitute a breach of this Agreement. The Severance Payment
shall be made in a single lump sum within 60 days after the
Date of Termination.
(iii) For the 24-month period after the Date of
Termination, the Company shall arrange to provide, at its sole
expense, the Executive with life, disability, accident and
health insurance benefits substantially similar to those which
the Executive is receiving or entitled to receive immediately
prior to the Notice of Termination. The cost of providing such
benefits shall be in addition to (and shall not reduce) the
Severance Payment. Benefits otherwise receivable by the
Executive pursuant to this paragraph (iii) shall be reduced to
the extent comparable benefits are actually received by the
Executive during such period, and any such benefits actually
received by the Executive shall be reported to the Company.
(iv) Up to $10,000 for individual outplacement
counseling to the Executive.
(v) The Company shall also pay to the Executive all
legal fees and expenses incurred by the Executive as a result
of such termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination
or in seeking to obtain or enforce any right or benefit
provided by this Agreement).
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(e) The Executive shall not be required to mitigate the amount
of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by
the Executive as the result of employment by another employer or by
retirement benefits after the Date of Termination, or otherwise.
(f) The Executive shall be entitled to receive all benefits
payable to the Executive under Company pension and welfare benefit
plans or any successor of such plan and any other plan or agreement
relating to retirement benefits which shall be in addition to, and not
reduced by, any other amounts payable to the Executive under this
Section 4.
(g) The Executive shall be entitled to exercise all rights and
to receive all benefits accruing to the Executive under any and all
Company stock purchase and stock option plans or programs, or any
successor to any such plans or programs, which shall be in addition to,
and not reduced by, any other amounts payable to the Executive under
this Section 4.
Notwithstanding anything herein to the contrary, if the Executive's
employment is governed by a separate written employment agreement that provides
benefits upon a termination of employment, the aggregate of any payments or
benefits payable under such employment agreement shall offset and reduce the
aggregate of payments and benefits under this Agreement.
5. Limitation on Parachute Payments. If, in the opinion of tax counsel
selected by the Company and acceptable to the Executive, the Severance Payment
(in its full amount or as partially reduced, as the case may be) plus all other
payments or benefits which constitute "parachute payments" within the meaning of
section 280G(b)(2) of the Code exceeds the amount that is deductible by the
Company by reason of section 280G, and in the opinion or such tax counsel, the
Severance Payment (in its full amount or as partially reduced, as the case may
be) plus all other payments or benefits which constitute "parachute payments"
within the meaning of section 280G(b)(2) of the Code are not reasonable
compensation for services actually rendered or to be rendered, within the
meaning of section 280G(b)(4) of the Code, the Severance Payment shall be
reduced by the excess of the aggregate "parachute payments" that would be paid
to or for the Executive without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code. The value of any
non-cash benefit or any deferred cash payments shall be determined by the
Company in accordance with the principles of sections 280G(d)(3) and (4) of the
Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this subsection, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by the Company or its Affiliates by reason of section 280G of the
Code, then the Executive shall have an obligation to pay the Company upon demand
an amount equal to the sum of (A) the excess
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of the aggregate "parachute payments" paid to or for the Executive's benefit
over the aggregate "parachute payments" that would have been paid to or for the
Executive's's benefit without any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code; and (B) interest on the amount
set forth in clause (A) of this sentence at the applicable Federal rate (as
defined in section 1274(d) of the Code) from the date of the Executive's receipt
of such excess until the date of such payment.
6. Funding of Payments. In order to assure the performance of the
Company or its successor of its obligations under this Agreement, the Company
may deposit in trust an amount equal to the maximum payment that will be due the
Executive under the terms hereof. Under a written trust instrument, the Trustee
shall be instructed to pay to the Executive (or the Executive's legal
representative, as the case may be) the amount to which the Executive shall be
entitled under the terms hereof, and the balance, if any, of the trust not so
paid or reserved for payment shall be repaid to the Company. If the Company
deposits funds in trust, payment shall be made no later than the occurrence of a
Change in Control. If and to the extent there are not amounts in trust
sufficient to pay the Executive under this Agreement, the Company shall remain
liable for any and all payments due to the Executive. In accordance with the
terms of such trust, at all times during the term of this Agreement, the
Executive shall have no rights, other than as an unsecured general creditor of
the Company, to any amounts held in trust and all trust assets shall be general
assets of the Company and subject to the claims of creditors of the Company.
Failure of the Company to establish or fully fund such trust shall not be deemed
a revocation or termination of this Agreement by the Company.
7. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to 51% or more of the business
and/or assets of the Company to expressly assume 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 assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to the compensation and benefits from the Company in the same amount
and on the same terms as he would be entitled hereunder if he terminated his
employment for Good Reason following a Change in Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, successors, heirs, and
designated beneficiaries. If the Executive should die while any amount would
still be payable to the Executive hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's designated
beneficiaries, or, if there is no such designated beneficiary, to the
Executive's estate.
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8. Notice. For the purpose 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 United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the last known residence address of the Executive or in the case of
the Company, to its principal office to the attention of each of the then
directors of the Company with a copy to its Secretary, or to such other address
as either 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.
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed by such other-party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or similar time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Minnesota.
10. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned officer, on behalf of PremiumWear,
Inc., and the Executive have hereunto set their hands to be effective as of the
date first above written.
PREMIUMWEAR, INC.
By /s/ David E. Berg
-------------------------------------
David E. Berg
Its President & CEO
-----------------------------------
EXECUTIVE:
/s/ Thomas D. Gleason
----------------------------------------
Thomas D. Gleason
10
EXHIBIT 10(D)
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into by and between PremiumWear,
Inc., a Minnesota corporation with its principal offices at 5500 Feltl Road,
Minnetonka, Minnesota (the "Company") and ______________, residing at
________________, (the "Executive"), and shall be effective as of this ____ day
of September, 1999.
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its shareholders; and
WHEREAS, the Executive has made and is expected to make, due to the
Executive's intimate knowledge of the business and affairs of the Company, its
policies, methods, personnel, and problems, a significant contribution to the
profitability, growth, and financial strength of the Company; and
WHEREAS, the Company, as a publicly held corporation, recognizes that
the possibility of a Change in Control may exist, and that such possibility and
the uncertainty and questions which it may raise among management may result in
the departure or distraction of the Executive in the performance of the
Executive's duties, to the detriment of the Company and its shareholders; and
WHEREAS, it is in the best interests of the Company and its
stockholders to reinforce and encourage the continued attention and dedication
of management personnel, including the Executive, to their assigned duties
without distraction and to ensure the continued availability to the Company of
the Executive in the event of a Change in Control.
THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement shall be effective from and after
the date hereof and shall continue in effect through December 31, 2001, and
shall automatically be extended for successive one-year periods thereafter
unless the Board of Directors of the Company (the "Board") shall have approved,
and the Executive is notified in writing, prior to January 1, 2001 and each
January 1 thereafter, that the term of this Agreement shall not be extended or
further extended; provided, however, that if a Change in Control shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for a period of 24 months from the date of the
occurrence of a Change in Control. In the event that more than one Change in
Control shall occur during the original or any extended term of this Agreement,
the 24- month period shall follow the last Change in Control. This Agreement
shall neither impose nor confer any further rights or obligations on the Company
or the Executive on the day after the end of the term of this Agreement.
Expiration of the term of this Agreement of itself and without subsequent action
by the Company or the Executive shall not end the employment relationship
between the Company and the Executive.
<PAGE>
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control. For purposes of this Agreement, a
"Change in Control" of the Company shall mean a change in control which would be
required to be reported in response to Item 6(e) on Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then subject to such reporting
requirement, including, without limitation, if:
(a) 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 an employee benefit plan of the Company or any
subsidiary of the Company, becomes a "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; or
(b) During any period of two consecutive years (not including
any period ending prior to the effective date of this Agreement), the
Incumbent Directors cease for any reason to constitute at least a
majority of the Board of Directors. The term "Incumbent Directors"
shall mean those individuals who are members of the Board of Directors
on the effective date of this Agreement and any individual who
subsequently becomes a member of the Board of Directors (other than a
director designated by a person who has entered into agreement with the
Company to effect a transaction contemplated by Section 2(c)) whose
election or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the then Incumbent
Directors; or
(c) (i) The Company consummates a merger, consolidation, share
exchange, division or other reorganization of the Company with any
corporation or entity, other than an entity owned at least 80% by the
Company, unless immediately after such transaction, the shareholders of
the Company immediately prior to such transaction beneficially own,
directly or indirectly 51% or more of the combined voting power of
resulting entity's outstanding voting securities as well as 51% or more
of the Total Market Value of the resulting entity, or in the case of a
division, 51% or more of the combined voting power of the outstanding
voting securities of each entity resulting from the division as well as
51% or more of the Total Market Value of each such entity, in each case
in substantially the same proportion as such shareholders owned shares
of the Company prior to such transaction; (ii) the shareholders of the
Company approve an agreement for the sale or disposition (in one
transaction or a series of transactions) of assets of the Company, the
total consideration of which is greater than 51% of the Total Market
Value of the Company, or (iii) the Company adopts a plan of complete
liquidation or winding-up of the Company. "Total Market Value" shall
mean the aggregate market value of the Company's or the resulting
entity's outstanding common stock (on a fully diluted basis) plus the
aggregate market value of the Company's or the resulting entity's other
outstanding equity securities as measured by the exchange rate of the
transaction or by such other method as the Board determines where there
is not readily ascertainable exchange rate.
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3. Termination Following Change in Control. If a Change in Control
shall have occurred during the term of this Agreement, the Executive shall be
entitled to the benefits provided in subsection 4(d) unless such termination is
(A) because of the Executive's death or Retirement, (B) by the Company for Cause
or Disability, or (C) by the Executive other than for Good Reason.
(a) Disability; Retirement. If, as a result of incapacity due
to physical or mental illness, the Executive shall have been absent
from the full-time performance of the Executive's duties with the
Company for at least six (6) consecutive months, and within 30 days
after written Notice of Termination is given the Executive shall not
have returned to the full-time performance of the Executive's duties,
the Company may terminate the Executive's employment for "Disability".
Any question as to the existence of the Executive's Disability upon
which the Executive and the Company cannot agree shall be determined by
a qualified independent physician selected by the Executive (or, if the
Executive is unable to make such selection, it shall be made by any
adult member of the Executive's immediate family), and approved by the
Company. The determination of such physician made in writing to the
Company and to the Executive shall be final and conclusive for all
purposes of this Agreement. Termination by the Company or the Executive
of the Executive's employment based on "Retirement" shall mean
termination on or after attaining Normal Retirement Age in accordance
with the PremiumWear, Inc. Profit Sharing Plan and Trust.
(b) Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by the
Executive (other than any such failure resulting from (1) the
Executive's incapacity due to physical or mental illness, (2)
any such actual or anticipated failure after the issuance of a
Notice of Termination by the Executive for Good Reason or (3)
the Company's active or passive obstruction of the performance
of the Executive's duties and responsibilities) to perform
substantially the duties and responsibilities of the
Executive's position with the Company after a written demand
for substantial performance is delivered to the Executive by
the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not
substantially performed the duties or responsibilities;
(ii) the conviction of the Executive by a court of
competent jurisdiction for felony criminal conduct; or
(iii) the willful engaging by the Executive in fraud
or dishonesty which is demonstrably and materially injurious
to the Company, monetarily or otherwise.
No act, or failure to act, on the Executive's part shall be deemed
"willful" unless committed, or omitted by the Executive in bad faith
and without reasonable belief that the Executive's act or failure to
act was in the best interest of the Company. The Executive shall not be
terminated for Cause unless and until the Company shall have delivered
to the Executive a
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copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with
the Executive's counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive's conduct was
Cause and specifying the particulars thereof in detail.
(c) Good Reason. The Executive shall be entitled to terminate
his employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without the Executive's express written consent,
any of the following:
(i) The assignment to the Executive of any duties
inconsistent with the Executive's status or position with the
Company, or a substantial alteration in the nature or status
of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) A reduction by the Company in the Executive's
annual compensation including, but not limited to, base pay or
short and/long term incentive pay in effect immediately prior
to a Change in Control;
(iii) (A) The relocation of the Company's principal
executive offices to a location more than fifty miles from
Minnetonka, Minnesota; (B) the Company requiring the Executive
to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the
Executive's business travel obligations immediately prior to
the Change in Control; or (C) a significant increase in the
level of travel required of the Executive as compared to
travel obligations immediately prior to the Change in Control;
(iv) The failure by the Company to continue to
provide the Executive with benefits at least as favorable to
those enjoyed by the Executive under any of the Company's
pension, life insurance, medical, health and accident,
disability, deferred compensation, incentive awards, incentive
stock options, or savings plans in which the Executive was
participating immediately prior to the Change in Control, the
taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive
the Executive of any material fringe benefit enjoyed
immediately prior to the Change in Control, or the failure by
the Company to provide the Executive with the number of paid
vacation days to which the Executive is entitled immediately
prior to the Change in Control, provided, however, that the
Company may amend any such plan or programs as long as such
amendments do not reduce any benefits to which the Executive
would be entitled upon termination;
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(v) The failure of the Company to obtain a
satisfactory agreement from any successor to assume and agree
to perform this Agreement, as contemplated in Section 7; or
(vi) any material violation of this Agreement by the
Company.
(d) Notice of Termination. Any purported termination of the
Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto
in accordance with Section 8. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
the facts and circum stances claimed to provide a basis for termination
of the Executive's employment.
(e) Date of Termination. For purposes of this Agreement, "Date
of Termination" shall mean:
(i) If the Executive's employment is terminated for
Disability, 30 days after Notice of Termination is given
(provided that the Executive shall have been absent from
full-time performance of duties for at least six (6) months
and shall not have returned to the full-time performance of
the Executive's duties during such 30 day period in accordance
with Section 3(a) hereof); and
(ii) If the Executive's employment is terminated
pursuant to subsections (b) or (c) above or for any other
reason (other than Disability), the date specified in the
Notice of Termination (which, in the case of a termination
pursuant to subsection (b) above shall not be less than 10
days, and in the case of a termination pursuant to subsection
(c) above shall not be less than 10 nor more than 30 days,
respectively, from the date such Notice of Termination is
given).
(f) Dispute of Termination. If, within 10 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 (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected);
provided, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the
Company shall continue to pay the Executive full compensation in effect
when the notice giving rise to the dispute was given (including, but
not limited to, base salary) and continue the Executive as a
participant in all compensation, benefit and insurance plans in which
the Executive was participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance
with this subsection. Amounts paid under this
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subsection are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts
under this Agreement.
4. Compensation Upon Termination or During Disability. Following a
Change in Control of the Company, as defined in subsection 2(a), upon
termination of the Executive's employment or during a period of Disability, the
Executive shall be entitled to the following benefits:
(a) During any period that the Executive fails to perform
full-time duties with the Company as a result of a Disability, the
Company shall pay the Executive, the Executive's base salary as in
effect at the commencement of any such period and the amount of any
other form or type of compensation otherwise payable for such period if
the Executive were not so disabled, until such time as the Executive is
determined to be eligible for long term disability benefits in
accordance with the Company's insurance programs then in effect or the
Executive is terminated for Disability.
(b) If the Executive's employment shall be terminated by the
Company for Cause or by the Executive other than for Good Reason,
Disability or Retirement, the Company shall pay to the Executive his
full base salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given and the Company shall have
no further obligation to the Executive under this Agreement, except
with respect to any benefits to which the Executive is entitled under
any Company pension or welfare benefit plan, insurance program or as
otherwise required by law.
(c) If the Executive's employment shall be terminated by the
Company or by the Executive for Disability or Retirement, or by reason
of death, the Company shall immediately commence payment to the
Executive (or the Executive's designated beneficiaries or estate, if no
beneficiary is designated) of any and all benefits to which the
Executive is entitled under the Company's retirement and insurance
programs then in effect.
(d) If the Executive's employment shall be terminated (A) by
the Company other than for Cause, Retirement, Disability or the
Executive's death or (B) by the Executive for Good Reason, then the
Executive shall be entitled to the benefits provided below:
(i) The Company shall pay the Executive, through the
Date of Termination, the Executive's base salary as in effect
at the time the Notice of Termination is given and any other
form or type of compensation otherwise payable for such
period;
(ii) In lieu of any further salary payments for
periods subsequent to the Date of Termination, the Company
shall pay a severance payment (the "Severance Payment") equal
to two times the Executive's Annual Compensation as defined
below. For purposes of this Section 4, "Annual Compensation"
shall mean the
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Executive's annual salary (regardless of whether all or any
portion of such salary has been contributed to a deferred
compensation plan), the annual amount of the Company bonus for
which the Executive is eligible upon attainment of 100% of the
target (regardless of whether such target bonus has been
achieved or whether conditions of such target bonus are
actually fulfilled), and any other type or form of
compensation paid to the Executive by the Company (or any
corporation (an "Affiliate") affiliated with the Company
within the meaning of Section 1504 of the Internal Revenue
Code of 1986 as it may be amended from time to time (the
"Code")) and included in the Executive's gross income for
federal tax purposes during the 12-month period ending
immediately prior to the Date of Termination, but excluding:
a) any amount actually paid to the Executive as a cash payment
of the target bonus (regardless of whether all or any portion
of such the Company bonus was contributed to a deferred
compensation plan); b) compensation income recognized as a
result of the exercise of stock options or sale of the stock
so acquired; and c) any payments actually or constructively
received from a plan or arrangement of deferred compensation
between the Company and the Executive. All of the items
included in Annual Compensation shall be those in effect on
the Date of Termination and shall be calculated without giving
effect to any reduction in such compensation which would
constitute a breach of this Agreement. The Severance Payment
shall be made in a single lump sum within 60 days after the
Date of Termination.
(iii) For the 24-month period after the Date of
Termination, the Company shall arrange to provide, at its sole
expense, the Executive with life, disability, accident and
health insurance benefits substantially similar to those which
the Executive is receiving or entitled to receive immediately
prior to the Notice of Termination. The cost of providing such
benefits shall be in addition to (and shall not reduce) the
Severance Payment. Benefits otherwise receivable by the
Executive pursuant to this paragraph (iii) shall be reduced to
the extent comparable benefits are actually received by the
Executive during such period, and any such benefits actually
received by the Executive shall be reported to the Company.
(iv) Up to $10,000 for individual outplacement
counseling to the Executive.
(v) The Company shall also pay to the Executive all
legal fees and expenses incurred by the Executive as a result
of such termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination
or in seeking to obtain or enforce any right or benefit
provided by this Agreement).
(e) The Executive shall not be required to mitigate the amount
of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any
7
<PAGE>
compensation earned by the Executive as the result of employment by
another employer or by retirement benefits after the Date of
Termination, or otherwise.
(f) The Executive shall be entitled to receive all benefits
payable to the Executive under Company pension and welfare benefit
plans or any successor of such plan and any other plan or agreement
relating to retirement benefits which shall be in addition to, and not
reduced by, any other amounts payable to the Executive under this
Section 4.
(g) The Executive shall be entitled to exercise all rights and
to receive all benefits accruing to the Executive under any and all
Company stock purchase and stock option plans or programs, or any
successor to any such plans or programs, which shall be in addition to,
and not reduced by, any other amounts payable to the Executive under
this Section 4.
Notwithstanding anything herein to the contrary, if the Executive's
employment is governed by a separate written employment agreement that provides
benefits upon a termination of employment, the aggregate of any payments or
benefits payable under such employment agreement shall offset and reduce the
aggregate of payments and benefits under this Agreement.
5. Limitation on Parachute Payments. If, in the opinion of tax counsel
selected by the Company and acceptable to the Executive, the Severance Payment
(in its full amount or as partially reduced, as the case may be) plus all other
payments or benefits which constitute "parachute payments" within the meaning of
section 280G(b)(2) of the Code exceeds the amount that is deductible by the
Company by reason of section 280G, and in the opinion or such tax counsel, the
Severance Payment (in its full amount or as partially reduced, as the case may
be) plus all other payments or benefits which constitute "parachute payments"
within the meaning of section 280G(b)(2) of the Code are not reasonable
compensation for services actually rendered or to be rendered, within the
meaning of section 280G(b)(4) of the Code, the Severance Payment shall be
reduced by the excess of the aggregate "parachute payments" that would be paid
to or for the Executive without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code. The value of any
non-cash benefit or any deferred cash payments shall be determined by the
Company in accordance with the principles of sections 280G(d)(3) and (4) of the
Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this subsection, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by the Company or its Affiliates by reason of section 280G of the
Code, then the Executive shall have an obligation to pay the Company upon demand
an amount equal to the sum of (A) the excess of the aggregate "parachute
payments" paid to or for the Executive's benefit over the aggregate "parachute
payments" that would have been paid to or for the Executive's's benefit without
any portion of such "parachute payments" not being deductible by reason of
section 280G of the Code;
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<PAGE>
and (B) interest on the amount set forth in clause (A) of this sentence at the
applicable Federal rate (as defined in section 1274(d) of the Code) from the
date of the Executive's receipt of such excess until the date of such payment.
6. Funding of Payments. In order to assure the performance of the
Company or its successor of its obligations under this Agreement, the Company
may deposit in trust an amount equal to the maximum payment that will be due the
Executive under the terms hereof. Under a written trust instrument, the Trustee
shall be instructed to pay to the Executive (or the Executive's legal
representative, as the case may be) the amount to which the Executive shall be
entitled under the terms hereof, and the balance, if any, of the trust not so
paid or reserved for payment shall be repaid to the Company. If the Company
deposits funds in trust, payment shall be made no later than the occurrence of a
Change in Control. If and to the extent there are not amounts in trust
sufficient to pay the Executive under this Agreement, the Company shall remain
liable for any and all payments due to the Executive. In accordance with the
terms of such trust, at all times during the term of this Agreement, the
Executive shall have no rights, other than as an unsecured general creditor of
the Company, to any amounts held in trust and all trust assets shall be general
assets of the Company and subject to the claims of creditors of the Company.
Failure of the Company to establish or fully fund such trust shall not be deemed
a revocation or termination of this Agreement by the Company.
7. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to 51% or more of the business
and/or assets of the Company to expressly assume 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 assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to the compensation and benefits from the Company in the same amount
and on the same terms as he would be entitled hereunder if he terminated his
employment for Good Reason following a Change in Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, successors, heirs, and
designated beneficiaries. If the Executive should die while any amount would
still be payable to the Executive hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's designated
beneficiaries, or, if there is no such designated beneficiary, to the
Executive's estate.
8. Notice. For the purpose 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 United States
registered or certified mail, return receipt requested, postage
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<PAGE>
prepaid, addressed to the last known residence address of the Executive or in
the case of the Company, to its principal office to the attention of each of the
then directors of the Company with a copy to its Secretary, or to such other
address as either 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.
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed by such other-party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or similar time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Minnesota.
10. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned officer, on behalf of PremiumWear,
Inc., and the Executive have hereunto set their hands as of the date first above
written.
PREMIUMWEAR, INC.
By
-------------------------------------
Its
-----------------------------------
EXECUTIVE:
-------------------------------------
10
EXHIBIT 10(I)
THIRD AMENDMENT TO
CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT, dated as of July 31st, 1999, amends and modifies
a certain Credit and Security Agreement, dated as of February 4, 1997 as amended
by a First Amendment to Credit and Security Agreement dated as of July 21, 1997
and by a Second Amendment to Credit and Security Agreement dated as of November
1, 1998 (as amended, the "Credit Agreement"), between U.S. BANK NATIONAL
ASSOCIATION, as assignee of FBS BUSINESS FINANCE CORPORATION, (the "Lender"),
PREMIUMWEAR, INC., a Delaware corporation (the "Borrower"). Terms not otherwise
expressly defined herein shall have the meanings set forth in the Credit
Agreement.
PRELIMINARY STATEMENT
WHEREAS, the Borrower and the Lender desire to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for value received, the Borrower and the Lender agree
as follows:
ARTICLE I - AMENDMENTS
1.1 Supplement A. Supplement A to the Credit Agreement is deleted and
Supplement A attached hereto is substituted in its place.
1.2 Year 2000. A new Section 4.26 is hereby added following Section
4.25 of the Credit Agreement to read as follows:
4.26 Year 2000. Borrower has reviewed and assessed its
business operations and computer systems and applications to address
the "year 2000 problem" (that is, that computer applications and
equipment used by Borrower, directly or indirectly through third
parties, may be unable to properly perform date-sensitive functions
before, during and after January 1, 2000). Borrower reasonably believes
that the year 2000 problem will not result in a material adverse change
in the Borrower's business condition (financial or otherwise)
operations, properties or prospects or ability to repay Lender.
Borrower agrees that this representation will be true and correct on
and shall be deemed made by Borrower on each date Borrower requests any
advance under this Agreement or Note or delivers any information to
Lender. Borrower will promptly deliver to Lender such information
relating to this representation as Lender requests from time to time.
1.3 Construction. All references in the Credit Agreement to "this
Agreement," "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
<PAGE>
ARTICLE II - REPRESENTATIONS AND WARRANTIES
2.1 Authorization; Validity and Binding Effect. To induce the Lender to
enter into this Amendment and to make and maintain the Loans under the Credit
Agreement as amended hereby, the Borrower hereby warrants and represents to the
Lender that it is duly authorized to execute and deliver this Amendment and each
other document delivered in connection herewith, and to perform its obligations
under the Credit Agreement as amended hereby and each other document delivered
in connection herewith, that this Amendment and the other documents delivered in
connection herewith constitute the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, and that the
Borrower has taken all action necessary under its Articles of Incorporation,
Bylaws and applicable law regarding the transactions contemplated herein.
2.2 Affirmation of Representations and Warranties. The Borrower hereby
restates all the representations and warranties in Article V of the Credit
Agreement and affirms to the Lender that such representations and warranties are
true and correct as though made on the date hereof the same as if made on the
date hereof and fully set forth herein, except for changes that are permitted by
the terms of the Credit Agreement.
ARTICLE III - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth
above; provided, however, that the effectiveness of this Amendment is subject to
the satisfaction of each of the following conditions precedent:
3.1 Warranties. Before and after giving effect to this Amendment, the
representations and warranties in Article V of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement.
3.2 Defaults. Before and after giving effect to this Amendment, no
Event of Default and no Unmatured Event of Default shall have occurred and be
continuing under the Credit Agreement except as waived herein. The execution by
the Borrower of this Amendment shall be deemed a representation that the
Borrower has complied with the foregoing condition.
3.3 Documents. The following shall have been delivered to the Lender,
each duly executed and dated, or certified, as of the date hereof, as the case
may be:
(a) Secretary's Certificate. The certificate of the Secretary
or an Assistant Secretary of the Borrower certifying that the
resolutions authorizing any Designated Person to, among other
things, execute amendments to the Credit Agreement are still
in full force and effect and that the list of Designated
Persons set forth in that Secretary's Certificate of February
4, 1997 has not changed.
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<PAGE>
(b) Confirmation of Security Agreement. A confirmation of the
Third Party Security Agreement in the form of Exhibit A
attached to this Amendment, duly executed by Klouda-Lenz.
ARTICLE IV - GENERAL
4.1 Expenses. The Borrower agrees to reimburse the Lender upon demand
for all reasonable expenses (including reasonable attorneys' fees and legal
expenses of Dorsey & Whitney LLP, counsel for the Lender) incurred by the Lender
in connection with the preparation of this Amendment and in enforcing the
obligations of the Borrower hereunder, and to pay and save the Lender harmless
from all liability for any stamp or other taxes which may be payable with
respect to the execution or delivery of this Amendment, which obligations of the
Borrower shall survive any termination of the Credit Agreement.
4.2 Counterparts. This Amendment may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same instrument.
4.3 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
4.4 Law. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
4.5 Successors; Enforceability. This Amendment shall be binding upon
the Borrower and the Lender and their respective successors and assigns, and
shall inure to the benefit of the Borrower and the Lender and the successors and
assigns of the Lender. Except as hereby amended, the Credit Agreement shall
remain in full force and effect and is hereby ratified and confirmed in all
respects.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
U.S. BANK NATIONAL ASSOCIATION
By /s/ Leonard H. Ramotar
-------------------------------------
Leonard H. Ramotar
Its VP
PREMIUMWEAR, INC.
By /s/ James S. Bury
-------------------------------------
James S. Bury
Its VP of Finance
Signature Page to Third Amendment
<PAGE>
SUPPLEMENT A
(AMENDED JULY 31ST, 1999)
TO
CREDIT AND SECURITY AGREEMENT
DATED AS OF FEBRUARY 4, 1997 BETWEEN
U.S. BANK NATIONAL ASSOCIATION, AS ASSIGNEE OF
FBS BUSINESS FINANCE CORPORATION (THE "LENDER")
AND
PREMIUMWEAR, INC. (THE "BORROWER")
1. CREDIT AGREEMENT REFERENCE. This Supplement A, as it may be amended
or modified from time to time, is a part of the Credit and Security Agreement,
dated as of February 4, 1997, between the Borrower and the Lender (together with
all amendments, modifications and supplements thereto, the "Credit Agreement").
Capitalized terms used herein which are defined in the Credit Agreement shall
have the meanings given such terms in the Credit Agreement unless the context
otherwise requires.
2. DEFINITIONS.
2.1 CREDIT AMOUNT. The term "Credit Amount" shall mean the
maximum amount of Loans which the Lender will make available to the
Borrower which amount shall not exceed Six Million Dollars
($6,000,000); provided, however, that the aggregate outstanding
principal balance of the Loans plus the Letter of Credit Obligations
shall not exceed the Credit Amount.
2.2 BORROWING BASE.
(a) DEFINITION. The term "Borrowing Base" shall mean:
(i) an amount (the "Accounts Receivable
Availability") of up to 80% of the net amount (as
determined by the Lender after deduction of such
reserves and allowances as the Lender deems proper
and necessary) of the Borrower's Eligible Accounts
Receivable; plus
(ii) an amount (the "Inventory
Availability") of up to 50% of the net value (the
lower of the cost, determined on a first in first out
basis, or market value of such Inventory, as
determined by the Lender after deduction of such
reserves and allowances as the Lender deems proper
and necessary) of the Borrower's Eligible Inventory.
2.3 LETTER OF CREDIT SUBLIMIT. The term "Letter of Credit
Sublimit" shall mean $2,000,000.
2.4 TERMINATION DATE. The term "Termination Date" shall mean
February 3, 2002.
2.5 ADDITIONAL DEFINITIONS. As used herein, the following
terms shall have the following respective meanings:
<PAGE>
"Adjusted Eurodollar Rate": With respect to each
Interest Period applicable to a Eurodollar Rate Advance, the
rate (rounded upward, if necessary, to the next one hundredth
of one percent) determined by dividing the Eurodollar Rate for
such Interest Period by 1.00 minus the Eurodollar Reserve
Percentage.
"Advance": Any portion of the outstanding principal
balance under the Credit Agreement as to which the Borrower
elected one of the available interest rate options and, if
applicable, an Interest Period. An Advance may be a Eurodollar
Rate Advance or a Reference Rate Advance.
"Applicable Margin": With respect to:
(a) Reference Rate Advances -- 0%.
(b) Eurodollar Rate Advances -- 2.25%.
"Board": The Board of Governors of the Federal
Reserve System or any successor thereto.
"Eurodollar Business Day": A Business Day which is
also a day for trading by and between Lenders in United States
dollar deposits in the interbank Eurodollar market and a day
on which banks are open for business in New York City.
"Eurodollar Rate": With respect to each Interest
Period applicable to a Eurodollar Rate Advance, the interest
rate per annum (rounded upward, if necessary, to the next
one-sixteenth of one percent) at which United States dollar
deposits are offered to the Lender in the interbank Eurodollar
market two Eurodollar Business Days prior to the first day of
such Interest Period for delivery in Immediately Available
Funds on the first day of such Interest Period and in an
amount approximately equal to the Advance to which such
Interest Period is to apply as determined by the Lender and
for a maturity comparable to the Interest Period; provided,
that in lieu of determining the rate in the foregoing manner,
the Lender may substitute the per annum Eurodollar interest
rate (LIBOR) for United States dollars displayed on the
Reuters Screen LIBO Page two Eurodollar Business Days prior to
the first day of the Interest Period. "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the
Reuter Monitor Money Rates Screen (or such other page as may
replace the LIBO page on that service) for the purpose of
displaying London Interbank offered rates of major Lenders for
United States dollar deposits.
"Eurodollar Rate Advance": An Advance with respect to
which the interest rate is determined by reference to the
Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board for determining the maximum
reserve requirement (including any basic, supplemental or
emergency reserves) for a member Lender of the Federal Reserve
2
<PAGE>
System, with deposits comparable in amount to those held by
the Lender, in respect of "Eurocurrency Liabilities" as such
term is defined in Regulation D of the Board. The rate of
interest applicable to any outstanding Eurodollar Rate
Advances shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve
Percentage.
"Interest Period": With respect to each Eurodollar
Rate Advance, the period commencing on the date of such
Advance or on the last day of the immediately preceding
Interest Period, if any, applicable to an outstanding Advance
and ending one, two or three months thereafter, as the
Borrower may elect in the applicable notice of borrowing,
continuation or conversion; provided that:
(1) Any Interest Period that would otherwise
end on a day which is not a Eurodollar Business Day
shall be extended to the next succeeding Eurodollar
Business Day unless such Eurodollar Business Day
falls in another calendar month, in which case such
Interest Period shall end on the next preceding
Eurodollar Business Day;
(2) Any Interest Period that begins on the
last Eurodollar Business Day of a calendar month (or
a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day
of a calendar month; and
(3) Any Interest Period that would otherwise
end after the Termination Date shall end on the
Termination Date.
"Reference Rate": The rate of interest from time to
time publicly announced by Lender as its "reference rate." The
Lender may lend to its customers at rates that are at, above
or below the Reference Rate. For purposes of determining any
interest rate hereunder or under any Note which is based on
the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
"Reference Rate Advance": An Advance with respect to
which the interest rate is determined by reference to the
Reference Rate.
"Regulatory Change": Any change after the date of the
Credit Agreement in federal, state or foreign laws or
regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of
Lenders including the Lender under any federal, state or
foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
3. INTEREST; FEES.
3.1 PROCEDURE FOR ADVANCES. Any request for an Advance must be
given so as to be received by the Lender not later than 1:00 p.m.
(Minneapolis time) two Eurodollar
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Business Days prior to the date of the requested Advance if the Advance
is requested as a Eurodollar Rate Advance and not later than 1:00 p.m.
on the date of the requested Advance if the Advance is requested as a
Reference Rate Advance. Each request for an Advance shall specify (i)
the date of the Advance, (ii) the amount of the Advance to be made on
such date which shall be in a minimum amount of $1,000 for Reference
Rate Advances, or $500,000 for Eurodollar Rate Advances or, if more in
either case, an integral multiple thereof, (iii) whether such Advance
is to be funded as a Reference Rate Advance or a Eurodollar Rate
Advance, and (iv) in the case of a Eurodollar Rate Advance, the
duration of the initial Interest Period applicable thereto.
3.2 CONVERSIONS AND CONTINUATIONS. On the terms and subject to
the limitations hereof, the Borrower shall have the option at any time
and from time to time to convert all or any portion of the Advances
into Reference Rate Advances or Eurodollar Rate Advances, or to
continue a Eurodollar Rate Advance as such; provided, however that a
Eurodollar Rate Advance may be converted or continued only on the last
day of the Interest Period applicable thereto and no Advance may be
converted or continued as a Eurodollar Rate Advance if a Default or
Event of Default has occurred and is continuing on the proposed date of
continuation or conversion. Advances may be converted to, or continued
as, Eurodollar Rate Advances only in amounts of $500,000 or an integral
multiple thereof. The Borrower shall give the Lender written notice of
any continuation or conversion of any Advance and such notice must be
given so as to be received by the Lender not later than 3:00 p.m.
(Minneapolis time) two Eurodollar Business Days prior to requested date
of conversion or continuation in the case of the continuation of, or
conversion to, a Eurodollar Rate Advance. Each such notice shall
specify (a) the amount to be continued or converted, (b) the date for
the continuation or conversion (which must be (i) the last day of the
preceding Interest Period for any continuation or conversion of
Eurodollar Rate Advances, and (ii) a Eurodollar Business Day), and (c)
in the case of conversions to or continuations as Eurodollar Rate
Advances, the Interest Period applicable thereto. Any notice given by
the Borrower under this Section shall be irrevocable. If the Borrower
shall fail to notify the Lender of the continuation of any Eurodollar
Rate Advance within the time required by this Section, such Advance
shall, on the last day of the Interest Period applicable thereto,
automatically be converted into a Reference Rate Advance of the same
principal amount.
3.3 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Advances as follows:
3.3 (a) Each Eurodollar Rate Advance shall bear
interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal
to the sum of (i) the Adjusted Eurodollar Rate for such
Interest Period, plus (ii) the Applicable Margin.
3.3(b) Each Reference Rate Advance shall bear
interest on the unpaid principal amount thereof at a varying
rate per annum equal to the sum of (i) the Reference Rate,
plus (ii) the Applicable Margin.
3.3 (c) Any Advance not paid when due, whether at the
date scheduled therefor or earlier upon acceleration, shall
bear interest until paid in full at the
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<PAGE>
Default Rate, which shall be (i) during the balance of any
Interest Period applicable to such Advance, at a rate per
annum equal to the sum of the rate applicable to such Advance
during such Interest Period plus 2.0%, and (ii) otherwise, at
a rate per annum equal to the sum of (A) the Reference Rate,
plus (B) the Applicable Margin for Reference Rate Advances,
plus (C) 2.0%.
3.3 (d) Interest shall be payable (i) with respect to
each Eurodollar Rate Advance having an Interest Period of
three months or less, on the last day of the Interest Period
applicable thereto; (ii) with respect to any Eurodollar Rate
Advance having an Interest Period greater than three months,
on the last day of the Interest Period applicable thereto and
on each day that would have been the last day of the Interest
Period for such Advance had successive Interest Periods of
three months duration been applicable to such Advance; (iii)
with respect to any Reference Rate Advance, on the last day of
each month; (iv) with respect to all Advances, upon any
permitted prepayment (on the amount prepaid); and (v) with
respect to all Advances, on the Termination Date; provided
that interest under Section 3.3 (c) shall be payable on
demand.
3.4 OPTIONAL PREPAYMENTS. The Borrower may prepay Reference
Rate Advances, in whole or in part, at any time, without premium or
penalty. Any such prepayment must be accompanied by accrued and unpaid
interest on the amount prepaid. Each partial prepayment shall be in a
minimum amount of $10,000 or, if more, an integral multiple thereof.
Except upon an acceleration following an Event of Default or upon
termination of the Credit in whole, the Borrower may pay Eurodollar
Rate Advances only on the last day of the Interest Period applicable
thereto. Amounts paid (unless following an acceleration or upon
termination of the Credit in whole) or prepaid on Advances under this
Section 3.4 may be reborrowed upon the terms and subject to the
conditions and limitations of the Credit Agreement.
3.5 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior to
the date for determining the Adjusted Eurodollar Rate in respect of the
Interest Period for any Eurodollar Rate Advance, the Lender determines
(which determination shall be conclusive and binding, absent error)
that:
(a) deposits in dollars (in the applicable amount)
are not being made available to the Lender in the relevant
market for such Interest Period, or
(b) the Adjusted Eurodollar Rate will not adequately
and fairly reflect the cost to the Lender of funding or
maintaining Eurodollar Rate Advances for such Interest Period,
the Lender shall forthwith give notice to the Borrower of such
determination, whereupon the obligation of the Lender to make or
continue, or to convert any Advances to, Eurodollar Rate Advances, as
the case may be, shall be suspended until the Lender notifies the
Borrower that the circumstances giving rise to such suspension no
longer exist. While any such suspension continues, all further Advances
by the Lender shall be made as Reference Rate Advances. No such
suspension shall affect the interest rate then in effect during the
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<PAGE>
applicable Interest Period for any Eurodollar Rate Advance outstanding
at the time such suspension is imposed.
3.6 INCREASED COST. If any Regulatory Change:
(a) shall subject the Lender to any tax, duty or
other charge with respect to its Eurodollar Rate Advances, its
obligation to make Eurodollar Rate Advances or shall change
the basis of taxation of payment to the Lender of the
principal of or interest on Eurodollar Rate Advances or any
other amounts due under this Agreement in respect of
Eurodollar Rate Advances or its obligation to make Eurodollar
Rate Advances (except for changes in the rate of tax on the
overall net income of the Lender imposed by the jurisdiction
in which the Lender's principal office is located); or
(b) shall impose, modify or deem applicable any
reserve, special deposit, capital requirement or similar
requirement (including, without limitation, any such
requirement imposed by the Board, but excluding with respect
to any Eurodollar Rate Advance any such requirement to the
extent included in calculating the applicable Adjusted
Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, the Lender or shall impose
on the Lender or on the interbank Eurodollar market any other
condition affecting its Eurodollar Rate Advances or its
obligation to make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to the
Lender of making or maintaining any Eurodollar Rate Advance, or to
reduce the amount of any sum received or receivable by the Lender under
this Agreement or under the Note, then, within 30 days after demand by
the Lender, the Borrower shall pay to the Lender such additional amount
or amounts as will compensate the Lender for such increased cost or
reduction. The Lender will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will
entitle the Lender to compensation pursuant to this Section. A
certificate of the Lender claiming compensation under this Section,
setting forth the additional amount or amounts to be paid to it
hereunder and stating in reasonable detail the basis for the charge and
the method of computation, shall be conclusive in the absence of error.
In determining such amount, the Lender may use any reasonable averaging
and attribution methods. Failure on the part of the Lender to demand
compensation for any increased costs or reduction in amounts received
or receivable with respect to any Interest Period shall not constitute
a waiver of the Lender's rights to demand compensation for any
increased costs or reduction in amounts received or receivable in any
subsequent Interest Period.
3.7 ILLEGALITY. If any Regulatory Change shall make it
unlawful or impossible for the Lender to make, maintain or fund any
Eurodollar Rate Advances, the Lender shall notify the Borrower,
whereupon the obligation of the Lender to make or continue, or to
convert any Advances to, Eurodollar Rate Advances shall be suspended
until the Lender notifies the Borrower that the circumstances giving
rise to such suspension no longer exist. If the Lender determines that
it may not lawfully continue to maintain any Eurodollar Rate Advances
to the end of the applicable Interest Periods, all of the affected
Advances shall
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<PAGE>
be automatically converted to Reference Rate Advances as of the date of
the Lender's notice, and upon such conversion the Borrower shall
indemnify the Lender in accordance with Section 3.8.
3.8 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower
shall compensate the Lender, upon its written request, for all losses,
expenses and liabilities (including any interest paid by the Lender to
lenders of funds borrowed by it to make or carry Eurodollar Rate
Advances to the extent not recovered by the Lender in connection with
the re-employment of such funds and including loss of anticipated
profits) which the Lender may sustain: (i) if for any reason, other
than a default by the Lender, a funding of a Eurodollar Rate Advance
does not occur on the date specified therefor in the Borrower's request
or notice as to such Advance under Section 3.1 or 3.2, or (ii) if, for
whatever reason (including, but not limited to, acceleration of the
maturity of Advances following an Event of Default), any repayment of a
Eurodollar Rate Advance, or a conversion pursuant to Section 3.7,
occurs on any day other than the last day of the Interest Period
applicable thereto. The Lender's request for compensation shall set
forth the basis for the amount requested and shall be final, conclusive
and binding, absent error.
3.9 DISCRETION OF LENDER AS TO MANNER OF FUNDING. The Lender
shall be entitled to fund and maintain its funding of Eurodollar Rate
Advances in any manner it may elect, it being understood, however, that
for the purposes of this Agreement all determinations hereunder
(including, but not limited to, determinations under Section 3.8, but
excluding determinations that the Lender may elect to make from the
Telerate System, Inc. screen) shall be made as if the Lender had
actually funded and maintained each Eurodollar Rate Advance during the
Interest Period for such Advance through the purchase of deposits
having a maturity corresponding to the last day of the Interest Period
and bearing an interest rate equal to the Eurodollar Rate for such
Interest Period.
3.10 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to
Section 2.7 or Section 2.8 of the Credit Agreement, as applicable.
3.11 COMMITMENT FEE. The Borrower shall pay to the Lender a
commitment fee for the period from the date hereof to the date the
Credit terminates in an amount equal to the sum of .25% per annum on
the average daily Unused Credit Amount that is between the outstanding
balance of the Loans and the Borrowing Base plus .25% per annum on the
average daily Unused Credit Amount that is between the Borrowing Base
and the Credit Amount.
3.12 LETTER OF CREDIT FEES. The Borrower shall pay the Lender,
or any Affiliate, a commission on the undrawn amount of each standby
Letter of Credit and on each L/C Draft accepted by the Lender or such
Affiliate, on any standby Letter of Credit, in an amount equal to 1.75%
per annum. The Borrower will pay the Lender, or any Affiliate, a
commission of .75% per annum (subject to a minimum fee of $50) on the
drawn amount of all trade Letters of Credit, plus the Lender's or such
Affiliate's standard issuance fee and out of pocket expenses.
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<PAGE>
3.13 CREDIT TERMINATION FEE. Upon termination or cancellation
of the Credit by the Borrower, the Borrower shall pay to the Lender a
termination fee in an amount equal to one percent (1%) of the Credit
Amount in the event that the Credit is terminated or canceled by the
Borrower during the period from the date hereof through the one year
anniversary of such date.
3.14. AUDIT FEES. In the absence of an Event of Default, fees
for collateral audits shall be limited to $500 per day plus expenses
for up to three collateral audits per year.
4. ELIGIBLE ACCOUNT RECEIVABLE REQUIREMENTS. The Account Receivable
must not be unpaid on the date that is 121 days after the date of the invoice
evidencing such Account Receivable. If invoices representing 10% or more of the
unpaid amount of all Accounts Receivable from any one Account Debtor are unpaid
more than 120 days after the dates of such invoices, then all Accounts
Receivable relating to such Account Debtor shall cease to be Eligible Accounts
Receivable. The Account Receivable must not be for finance charges.
5. ELIGIBLE INVENTORY REQUIREMENTS. The Inventory must be finished
goods and not raw materials or work in process.
6. Intentionally Omitted.
7. ADDITIONAL COVENANTS. From the date of the Credit Agreement and
thereafter until all of the Borrower's Obligations under the Credit Agreement
are paid in full, the Borrower agrees that, unless the Lender shall otherwise
consent in writing, it will not, and will not permit any Subsidiary to, do any
of the following:
7.1 NET WORTH. Permit the Borrower's Net Worth to be less than
twelve million dollars ($12,000,000) at any time.
7.2 CAPITAL EXPENDITURES. Make Capital Expenditures in an
amount exceeding $2,500,000 on a consolidated basis in any fiscal year.
7.3 INTEREST COVERAGE RATIO. Permit the ratio, as of the last
day of any fiscal quarter, of the Borrower's Earnings Before Interest
and Taxes for the four consecutive fiscal quarters ending on that date
to its consolidated interest expense (including, without limitation,
imputed interest expense on Capitalized Leases) for the same period to
be less than 1.1 to 1.0.
Borrower's Initials __JSB__
Lender's Initials __LHR__
Date: July 31, 1999.
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<PAGE>
CONFIRMATION OF SECURITY AGREEMENT
Reference is made to that certain Third Party Security Agreement dated
as of April 27th, 1999 (the "Security Agreement"), made and given by the
undersigned to secure the Obligations (as defined in the Security Agreement) of
PREMIUMWEAR , INC. (the "Borrower") under that certain Credit and Security
Agreement dated as of February 4, 1997 (as amended, the "Credit Agreement"),
between the Borrower and U.S. BANK NATIONAL ASSOCIATION, as assignee of FBS
BUSINESS FINANCE CORPORATION (the "Lender").
The undersigned acknowledges that it has received a copy of a proposed
Third Amendment to Credit and Security Agreement to be dated on or about July
31, 1999 (the "Amendment"). The undersigned hereby (a) consents to the terms of
the Amendment, and to the execution and delivery of the Amendment by the
Borrower to the Lender; (b) acknowledges that the obligations of the Borrower to
the Lender under the Credit Agreement constitute "Obligations" of the Borrower
to the Lender within the meaning of the above-referenced Security Agreement; and
(c) reaffirms that the security interests granted pursuant to the Security
Agreement secure, among other things, the Borrower's obligations and duties
under the Credit Agreement and the obligations of the undersigned under the
Security Agreement. The undersigned further reaffirms that all of the terms,
covenants and conditions of the Security Agreement remain in full force and
effect.
Date: August 16, 1999.
KLOUDA-LENZ
By /s/ James S. Bury
--------------------------------
James S. Bury
Its Secretary
EXHIBIT 13
PREMIUMWEAR, INC.
1999 Annual Report to Shareholders
<PAGE>
LETTER FROM THE CHAIRMAN
[PHOTO]
THOMAS D. GLEASON
CHAIRMAN
It was some three and a half years ago that we changed the course of Munsingwear
Inc.'s business by exiting the segment that marketed to retail stores. This
segment accounted for more than two-thirds of the Company's sales in 1995 but
also suffered sizeable operating losses. By mid-1996, we had downsized the
Company by two-thirds, changed the Company's name to PremiumWear, Inc., and
focused on a smaller segment serving the promotional products/advertising
specialty market (which we referred to as "special markets"). Since then, our
operating earnings (excluding one-time charges to close a manufacturing plant in
North Carolina and open a new distribution and embroidery center in Tennessee)
have grown to $4.0 million in 1999 from a loss of $6.3 million (before royalty
income) in 1995. During this time, our sales to the promotional
products/advertising specialty industry have tripled.
In 1998, we entered the golf apparel business with the introduction of the Page
& Tuttle(R) brand. Since then, we have expanded distribution to more than 1,200
on-course professional and specialty golf shops. We expect this new line to
continue to grow in golf shops and to add to our promotional products business
as Page & Tuttle(R) gains momentum in that market also.
In March 1999, we acquired our independent sales and customer service
representative firm, Klouda-Lenz, Inc. This acquisition has not only increased
our ability to sell and service our promotional products customers more
effectively, it also allows us the opportunity to expand the breadth of our
product offerings to this market in and beyond apparel. Recent examples of this
include PremiumWear's designation as the exclusive special markets
representative for CROAKIES(R) eyeglass retainers and lanyards and for the
Softspikes(R) golf specialty products.
I am personally gratified by the turnaround and progress that the Company has
made in the past three and a half years. During my tenure as chief executive
officer from mid-1996 to mid-1999, I witnessed substantial growth in sales and
earnings but, more importantly, a dramatic growth in the confidence and ability
of our management team.
This team has advanced the Company's competitive position in the markets we now
serve and has put PremiumWear on sound marketing and financial footing.
In July, I was both pleased and proud to turn over the chief executive's post to
David E. Berg. Dave lives and breathes this business. He has grown in stature
from leading the special markets sales and marketing effort to assuming full
responsibility for both our special markets and golf businesses. I have seen
Dave grow as an executive, providing both operational and strategic leadership
to our seasoned, capable management team. I am confident he will continue to
provide this leadership in the years ahead.
It is an honor for me to have served as your chief executive officer and to
continue to serve as your chairman of the board. I wish to thank the
shareholders for your support and our customers for their confidence in us. But
most of all, I want to thank my valued and dedicated associates who have built
the Company to what it is today.
Sincerely,
/s/ Thomas D. Gleason
Thomas D. Gleason
Chairman of the Board
<PAGE>
LETTER FROM THE CEO
[PHOTO]
DAVID E. BERG
PRESIDENT & CEO
In my first shareholder letter, I am very pleased to report that 1999 was a
banner year for PremiumWear, marked by improved financial results and several
strategic operating accomplishments.
For 1999, revenues increased 11% to $47.0 million, and, excluding special items,
net income advanced 69% to $2.5 million, or $0.96 per share. Our operating
margin improved to 8.4% of revenues from 5.6% last year, again excluding special
charges. The source of the charges was actually a major reason for 1999's
improvement. We incurred operations restructuring charges of $1.7 million
pretax, or $1.1 million ($0.40 per share) after tax, in order to shut down our
Fairmont, N.C., facility and transfer our embroidery and distribution operations
to a newer, more efficient and more centrally located facility in Clarksville,
Tenn. As part of this operating initiative, we have outsourced production
completely to lower-cost, high-quality offshore manufacturers. Two other
initiatives-the acquisition of Klouda-Lenz and the further development of our
higher margin Page & Tuttle(R) line-also contributed to the nearly three
percentage point increase in our operating margin ratio.
I'm also glad to report that the market for promotional apparel continues to
grow with the popularity of golf and casual attire in the workplace. In 1999,
domestic promotional products sales were approximately $15 billion, and
wearables remained the largest and fastest growing segment of that market. Our
sales to this market approached $43 million in 1999, earning us a top-10
supplier status within the promotional products industry.
Our success has been the result of our notoriety as a quick-response source for
branded, high-quality apparel.
Within this market, we are active in the more upscale segment of the apparel and
accessories market, purposely avoiding lower-margin promotional items such as
screenprinted T-shirts and plastic trinkets. For example, a recent addition to
PremiumWear's line has been Page & Tuttle(R), which we first introduced as a
logo'd apparel line to golf pro and resort shops in 1998. We have built the
brand as an in-stock fashion product that a pro shop can order daily or weekly
if need be, and this unique approach, along with the product quality and growing
recognition of the brand, has led to its success. Today, a year and a half since
its introduction, Page & Tuttle(R) apparel is in more than 1,200 golf pro and
resort shops, including well-known golf courses such as Pebble Beach, Pinehurst,
Kapalua, The Phoenician and The Broadmoor. Corporate executives who are also
golf enthusiasts find Page & Tuttle(R) apparel at the pro shop, carrying the
country club's logo. Now they have the opportunity to have their company's logo
embroidered on Page & Tuttle(R) golf shirts, windshirts, sweaters and other
apparel. We are certain that this two-pronged marketing effort will augment Page
& Tuttle(R)'s brand power, resulting in higher golf and promotional product
sales. In 1999, we introduced the Page & Tuttle line to the promotional products
market, and we have been pleased by its initial reception. For 1999, Page &
Tuttle(R) sales quadrupled to nearly $5 million. Of these sales, approximately
60% was to the golf pro and resort shop market and the balance to the
promotional products market.
In March 1999, we acquired Klouda-Lenz, a leading customer service and sales
representative firm that had marketed our products to the promotional products
industry. It now acts as our internal sales force and continues to represent
several complementary lines, including sweaters, jackets and leather outerwear,
alongside PremiumWear's own Page & Tuttle(R) and Munsingwear(R) lines. In
addition, early in 2000 we began representing two additional lines, CROAKIES(R)
eye restraints and other products and Softspikes(R) golf accessories.
PremiumWear's commission income totaled $1.3 million for the nine months in 1999
that Klouda-Lenz was a PremiumWear subsidiary. Equally as important, in
acquiring Klouda-Lenz, we also brought on board the firm's principals, Timothy
Klouda and Dennis Lenz, who offer our Company a wealth of promotional product
experience.
In this industry, there are six S-words that, if executed effectively, lead to
another: success. They are strategy, sourcing, systems, service, style and
sales. By remaining focused on these areas, I am confident that we will meet or
exceed our financial goals of 10% to 15% internal revenue growth, 15% to 20%
earnings growth and a 10% operating income margin.
We hope that you share our excitement for the future. Thank you for your
continued support and vote of confidence.
Sincerely,
/s/ David E. Berg
David E. Berg
President and Chief Executive Officer
<PAGE>
Q&A
DAVID E. BERG
PRESIDENT & CEO
WHAT ARE THE GREATEST GROWTH OPPORTUNITIES FOR PREMIUMWEAR?
"WE WILL GROW OUR CORE PROMOTIONAL BUSINESS IN SEVERAL WAYS, THROUGH LINE AND
PRODUCT EXTENSIONS, NEW LICENSES, NEW PARTNERSHIPS AND ACQUISITIONS. LINE AND
PRODUCT EXTENSIONS SERVE TO FILL OUT OUR PRODUCT OFFERING TO MEET THE NEEDS OF
THE MARKETPLACE. FOR INSTANCE, WITH PAGE & TUTTLE(R), WE SAW THE OPPORTUNITY TO
CREATE PREMIUM LOGO'D GOLF APPAREL AS BOTH A PRO SHOP LINE AND A PROMOTIONAL
PRODUCT LINE. IN THE PAST YEAR, THE NUMBER OF GOLF PRO AND RESORT SHOPS CARRYING
THE PAGE & TUTTLE(R) LINE INCREASED FROM APPROXIMATELY 500 TO OVER 1,200 TODAY,
AND SALES QUADRUPLED.
WITH NEW LICENSING AGREEMENTS LIKE MUNSINGWEAR(R) OR NEW PARTNERSHIPS SIMILAR TO
THE MARKETING AGREEMENTS WE RECENTLY SIGNED WITH CROAKIES(R) AND SOFTSPIKES(R),
WE WILL BE ABLE TO EXPAND THE NUMBER OF BRANDED LINES WE REPRESENT TO THE
PROMOTIONAL PRODUCTS MARKET. WE ARE TARGETING STRONG BRANDS, WELL RECOGNIZED BY
THE INDUSTRY AND THE END CUSTOMER. AS WE INCREASE OUR STABLE OF BRANDS, WE WILL
IMPROVE OUR COMPETITIVE POSITIONING WITHIN THE INDUSTRY.
AS FOR ACQUISITIONS, PREMIUMWEAR IS FINANCIALLY UNLEVERAGED. SIMPLY PUT, WE HAVE
ALMOST NO LONG-TERM DEBT AND, AS A RESULT, ARE IN A POSITION TO BE ON THE
ACQUISITION PATH. TWO IMPORTANT CRITERIA FOR US ARE ACQUISITIONS BOTH
COMPLEMENTARY TO OUR CORE PROMOTIONAL BUSINESS AND ACCRETIVE TO EARNINGS IN THE
FIRST YEAR OF PURCHASE."
LOOKING AHEAD, WHAT IS THE SINGLE-GREATEST CHALLENGE FOR THE COMPANY?
"OUR SINGLE-GREATEST CHALLENGE IS THE COMPETITIVENESS OF THE INDUSTRY. IN THIS
INDUSTRY, YOU MUST DELIVER ON PRICE, QUALITY AND SERVICE TO THE CUSTOMER. WE
HAVE REALLY FOCUSED ON THIS, AND IT IS A MAJOR REASON WE HAVE ACHIEVED A TOP-10
SUPPLIER STATUS IN THE PROMOTIONAL APPAREL INDUSTRY."
WHAT ROLE WILL THE INTERNET PLAY IN THE COMPANY'S BUSINESS IN THE FUTURE?
"WE DEFINITELY SEE OPPORTUNITIES FOR THE INTERNET TO ENHANCE PREMIUMWEAR'S SALES
AND CUSTOMER SERVICE CAPABILITIES. THE FIRST STEP WE ARE TAKING IN THIS
DIRECTION IS UPDATING OUR WEB SITE, WWW.PREMIUMWEAR.COM, AND ADDING
FUNCTIONALITY THAT WILL ALLOW CUSTOMERS TO PREVIEW OUR ENTIRE PRODUCT LINE AND
ORDER OVER THE INTERNET.
WE EXPECT THE UPGRADED WEB SITE TO BE UP AND RUNNING IN THE NEXT FEW MONTHS."
WHAT IS THE MOST IMPORTANT TREND IN THE PROMOTIONAL APPAREL INDUSTRY?
"THE MOST IMPORTANT TREND IN APPAREL IN THE LAST FIVE YEARS HAS BEEN THE
INCREASED ACCEPTANCE AND PRESENCE OF CASUAL APPAREL IN CORPORATE AMERICA. MORE
THAN 90% OF WORKPLACES OFFER CASUAL DRESS OPPORTUNITIES OF SOME SORT. AS A
RESULT, SALES OF CASUAL PROMOTIONAL APPAREL-LIKE KNIT GOLF SHIRTS WITH COMPANY
LOGOS-HAVE ACCELERATED ALONG WITH THIS TREND."
<PAGE>
THE GROWING PROMOTIONAL PRODUCTS BUSINESS
Golf shirts embroidered with an organization's logo used as giveaways for a
fundraising golf outing...windshirts with the company's logo distributed to its
salesforce...a logo'd chambray shirt provided to top customers. These are just a
few ways PremiumWear's products-promotional products-are used.
Promotional products, as a concept, originated more than 50 years ago, when
sales representatives gave away pens, pencils and pads of paper with the
supplier's logo to their customers' buyers. Today, just like then, promotional
products are used to create brand identity-heightening awareness while building
recognition and loyalty. Promotional products serve as a functional and ongoing
reminder of the company's or organization's marketing message. To the
recipients, promotional products are useful.
Today the market for promotional products in the U.S. is approximately $15
billion and has grown more than 10% annually over the past decade. Accounting
for approximately one-quarter of all promotional products sales, "wearables,"
the category in which PremiumWear participates, is the largest and fastest
growing segment.
Just recently, PremiumWear became recognized as a top-10 supplier of unimprinted
apparel to the promotional products/advertising specialty industry (PPAI/ASI).
As illustrated by the flow chart to the left, PremiumWear supplies promotional
apparel to wholesale apparel distributors, advertising specialty dealers,
embroiderers, and uniform companies, collectively referred to as the promotional
products/advertising specialty industry. The Company sells to more than 3,000 of
the approximately 16,000 companies that comprise this industry. Some of the
Company's largest customers include Alpha Shirt Co., Boise Marketing, Broder
Bros., Corporate Express and HA-LO. These companies, in turn, sell PremiumWear
apparel to corporations, schools, churches, civic groups and other organizations
wanting to promote their name, to reward customers, donors or employees, or to
use as giveaways for a special function.
WHERE'S ALL THAT GROWTH COMING FROM?
Two important trends have been the key growth drivers for the promotional
apparel industry.
For one, what was once a workplace perk is fast becoming a standard. In 1992,
17% of U.S. offices allowed employees to wear casual dress all week, according
to one study. By 1997,
<PAGE>
53% allowed casual dress five days a week. Another study, by the Society for
Human Resources Management, found that in 1999, 95% of all companies surveyed
offered casual dress opportunities, whether it be during holidays, once a week
or five times a week. That was an increase from 83% two years prior. There can
be no doubt that Corporate America has embraced the casual look as a way to
boost morale and attract employees.
How does logo'd apparel fit into all of this? Many companies have begun offering
logo'd apparel that can be worn on casual days. They have found logo'd apparel
to be a great marketing tool, a morale booster, and a great way to provide
clothing acceptable as part of their casual policy. Some companies offer the
logo'd apparel as gifts or incentives; others have a corporate catalog where
employees can purchase company logo'd apparel.
The second trend is golf's increased popularity. The wealth of young talent that
is now competing on the PGA Tour-Tiger Woods, David Duval, Justin Leonard, and
Sergio Garcia to name a few-has sparked renewed interest in the sport. According
to the National Golf Foundation, 26 million Americans in 1998 played golf, with
almost 3 million Americans taking up the game for the first time that year. Golf
has grown into a $30 billion industry, with $2.5 billion being spent each year
on golf apparel.
PREMIUMWEAR LINES: MUNSINGWEAR(R) AND PAGE & TUTTLE(R)
PremiumWear currently designs, sources, markets and distributes apparel under
two brand names: Munsingwear(R) and Page & Tuttle(R).
Munsingwear(R), the brand PremiumWear licenses from Perry Ellis International
Corporation, was the brand under which PremiumWear began to design and market
promotional apparel in 1993. Today Munsingwear(R) logo'd apparel such
<PAGE>
as golf shirts, long-sleeved shirts, sweaters, jackets and windshirts still
represents the majority of the Company's sales.
In 1998, PremiumWear introduced the Page & Tuttle(R) line to the retail golf
market, positioning it as an upscale brand bearing the logo of golf courses and
resorts. Today it can be found in over 1,200 golf pro and resort shops,
approximately 10% of the number of such shops nationwide, including many
well-known courses such as Pebble Beach and Pinehurst. Page & Tuttle(R)-named
after Frank H. Page and Edward O. Tuttle who together founded PremiumWear's
predecessor company, The Northwestern Knitting Co., in 1886-marries the
tradition and heritage of golf with today's fashion.
In 1999, PremiumWear expanded the presence of the Page & Tuttle(R) line by
marketing it to the promotional products industry, offering corporations and
organizations the opportunity to put their logo on the same apparel. Page &
Tuttle(R) has become a premium, complementary line to the Munsingwear(R) line
the Company already provides to the wholesale apparel distributors, advertising
specialty dealers and embroiderers in the promotional products industry.
PremiumWear continues to expand and redesign these lines, adding apparel in new
styles, new colors and new fabrics. For instance, short-sleeved micro cord polo
shirts were added to both the Munsingwear(R) and Page & Tuttle(R) lines (see the
front cover and inside front cover). This shirt is expected to be one of
PremiumWear's top sellers this year.
REPRESENTED LINES
With the March 1999 acquisition of Klouda-Lenz, Inc., a leading sales
representative and customer service firm to the promotional products industry,
PremiumWear began representing several additional lines for other companies
<PAGE>
in the industry. By outsourcing sales and customer service, these companies can
focus on design, manufacturing and distribution.
The lines PremiumWear represents-California Outerwear, Burk's Bay(TM) leather
outerwear and accessories, Winona Knitting Mills sweaters-are complementary to
its own Munsingwear(R) and Page & Tuttle(R) lines. This way, PremiumWear offers
a more complete line to the wholesale apparel distributors, advertising
specialty dealers and embroiderers.
In early 2000, PremiumWear announced agreements to represent two additional
lines: CROAKIES(R) and Softspikes(R). Both are well-recognized brands,
CROAKIES(R) for its outdoor accessories and Softspikes(R) for its golf
accessories. Through these agreements, PremiumWear represents CROAKIES(R)
eyewear restraints and other accessories and MagneSport(TM) magnetic sports
bracelets and DriStix(TM) rain hoods for golf bags, two lines owned by
Softspikes(R). These CROAKIES(R) and Softspikes(R) lines offer companies and
other organizations the opportunity to imprint their logo on quality branded
products.
PREMIUMWEAR'S HALLMARK: SERVICE
Service is the foundation of the promotional products industry. PremiumWear has
made its mark by offering complete lines of high-quality, branded imprinted
apparel and accessories and making them available on a quick-response basis.
The two latest initiatives in service for PremiumWear center on a new
distribution facility and renovation of its Internet site. In fall 1999,
PremiumWear opened its Clarksville, Tenn., facility, replacing an outdated
facility in North Carolina. The new facility is more efficient and more
centrally located, allowing quicker and more cost effective delivery to
customers. PremiumWear also is in the process of updating its Web site,
www.premiumwear.com. When the renovation is complete, customers will be able to
view the entire product line and order online.
PremiumWear's quick ascent as a leader in promotional apparel, since entering
the industry just six years ago, is a tribute to the Company's ability to
complement quality branded products with excellent service.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES, WHICH PROVIDE ADDITIONAL INFORMATION
CONCERNING THE COMPANY'S FINANCIAL ACTIVITIES AND CONDITION.
CAPITAL RESOURCES AND LIQUIDITY
In the past three years, the Company's operations have become increasingly
profitable. Operating income has improved from 4.2% of revenue in 1997 to 8.4%
in 1999, excluding the effects of restructuring of operations in 1999. This has
been primarily the result of increased offshore sourcing. In 1997 imports
represented approximately 40% of total product needs, while in 1999 that ratio
grew to 93%, eventually leading to the closure of the Company's North Carolina
production facility. Management has used the reduced unit production costs as a
means to improve profitability and to remain competitive in the marketplace.
Profitability has also improved as a result of strong revenue growth. Revenues
increased from $33.8 million in 1997 to $47 million in 1999. The increase has
been the result of focusing on the PPAI/ASI market following the sale of the
Company's former retail-oriented business to Perry Ellis International, Inc. in
late 1996, the re-entry into the golf pro shop and resort market in 1998 under
the Page & Tuttle(R) label, and the early 1999 purchase of Klouda-Lenz, Inc.,
the Company's former independent sales organization, which provides
infrastructure to expand products and brands in the PPAI/ASI market.
As a result of improved profitability, increased revenues, better inventory
management and utilization of significant net operating loss carryforwards, the
Company's financial position has become stronger over the past three fiscal
years.
At January 1, 2000, working capital totaled $14,623,000 compared to $14,824,000
the previous year and the current ratio was 2.7:1 compared to 4.0:1 in 1998.
During 1999 operating activities provided $2,747,000 of cash, primarily due to
an increase of $2,767,000 in accounts payable resulting from imported goods
received in late-December 1999. During the year the Company utilized $793,000 of
net operating loss carryforwards while depreciation and amortization of $545,000
was lower than the prior year's $731,000, which included an asset impairment
charge of $472,000 for declining use of the Company's North Carolina production
facility. These sources of cash were offset by a $1,318,000 increase in accounts
receivable, primarily due to a 24% increase in fourth quarter revenue compared
to the same quarter in 1998, and a $1,309,000 increase in inventories to meet
anticipated fiscal 2000 needs. Capital expenditures of $2,379,000 included
$1,362,000 of leasehold improvements, equipment and systems at the Company's new
leased Tennessee distribution and embroidery facility. In addition, the Company
spent $812,000 to replace core business software in conjunction with a general
systems upgrade and its Year 2000 compliance project. In March 1999 the Company
spent $1,554,000 net cash in the acquisition of Klouda-Lenz, Inc. In mid-1999
the Company purchased 50,000 shares of its outstanding common stock for $272,000
and in late 1999 issued $937,000 of long-term debt to help finance equipment
2
<PAGE>
purchases and leasehold improvements for the new distribution center. At fiscal
year-end cash and cash equivalents of $2,744,000 were essentially all invested
in short-term government securities.
At January 2, 1999, working capital totaled $14,824,000 compared to $11,149,000
the previous year and the current ratio was 4.0:1 compared to 3.3:1 in 1997.
During 1998 operating activities provided $837,000 of cash, primarily due to net
income of $1,453,000, depreciation of $989,000 and $731,000 from the utilization
of net operating loss carryforwards. These sources of cash were offset by a
$2,089,000 increase in receivables due to higher sales in the fourth quarter of
1998 compared to the 1997 fourth quarter. Capital expenditures totaled $609,000,
primarily for purchases of embroidery equipment, leasehold improvements and
upgrading of the Company's information systems. At 1998 year-end cash and cash
equivalents totaling $3,215,000 were essentially all invested in short-term
government securities.
At January 3, 1998, working capital totaled $11,149,000 compared to $21,266,000
the previous year and the current ratio was 3.3:1 compared to 3.9:1 in 1996.
After giving effect, on a pro forma basis, to the $12,500,000 special cash
distribution in early 1997, working capital at January 4, 1997 would have
totaled $8,766,000 and the current ratio would have been 2.2:1. During 1997,
operating activities provided $392,000 of cash, primarily due to a $1,214,000
decrease in inventories as a result of more effective inventory management
practices, $837,000 of net income, $463,000 from the utilization of net
operating loss carryforwards and $439,000 of depreciation. These sources of cash
were offset by a $2,441,000 reduction in payables and other liabilities,
primarily due to payments of severance and professional services related to the
1996 sales of trade names and trademarks and reduced trade payables as a result
of lower year-end inventories. Capital expenditures totaled $435,000, primarily
for purchases of manufacturing equipment, leasehold improvements and upgrading
of the Company's information systems. Financing activities included the March
1997 special cash distribution of $12,500,000 and $959,000 received from
officers, directors and employees in the exercise of common stock options. At
1997 year-end cash and cash equivalents totaling $2,870,000 were essentially all
invested in short-term government securities.
Management expects the Company's financial resources and liquidity to continue
to improve through profitable development of the promotional products and golf
businesses. In addition, management will continue to focus efforts on inventory
control. Over the past three years improved inventory management practices and
forecasting procedures led to an increase in inventory turns from 2.7 in 1997 to
3.4 in 1999, which generated significant positive cash flow. Finally, the
Company has net operating loss carryforwards of approximately $18,000,000 for
domestic federal income tax purposes, which will reduce cash outlays otherwise
necessary for income taxes.
Management expects to be able to finance working capital needs and capital
expenditures, which are estimated to be approximately $1,500,000 in fiscal 2000,
through a combination of funds from operations and its long-term bank line of
credit which provides up to $6,000,000 of available funds based on certain
financial formulas.
3
<PAGE>
RESULTS OF OPERATIONS
REVENUES for fiscal 1999 increased 11% due to increased sales to promotional
products customers and golf pro shops in addition to commission revenue received
by the promotional products division as a result of the early-1999 purchase of
Klouda-Lenz. Sales to PPAI/ASI customers increased 15%, primarily due to the
Company's improved inventory position during the last half of 1999, while sales
to distributors were flat due to consolidation of customers and stricter buying
methods used by distributors to improve inventory turns. Sales to golf pro
shops, although relatively small in proportion to total Company revenues,
increased nearly threefold. At 1999 year end the Company had opened over 1,100
new accounts since entering the golf pro shop channel of distribution in 1998.
Commission revenue was income earned from representing apparel products of other
companies to the PPAI/ASI marketplace. Selling prices remained relatively flat
from 1998 to 1999.
1998 revenues increased 26% over 1997 primarily due to a 22% increase in sales
to promotional products customers. Sales growth was due to both added customers
and additional volume with existing customers. The remaining growth came from
the introduction of the Page & Tuttle(R) brand into the golf market, where the
Company opened nearly 500 accounts. Selling prices remained relatively constant
from 1997 to 1998.
GROSS MARGIN reached 32.6% in 1999 compared to 25.4% in 1998. A significant
portion of this improvement was due to increased offshore manufacturing, which
lowered unit production costs in 1999. Offshore production comprised 93% of 1999
total units produced compared to two-thirds of production in 1998.
Gross margin improved to 25.4% in 1998 compared to 22.4% in 1997. The
improvement was due to increased offshore manufacturing, which comprised
approximately two-thirds of 1998 production versus 40% in 1997. This was the
result of management's strategy to expand offshore sourcing in order to reduce
costs and remain competitive in the marketplace. Golf market sales, while
modest, helped increase gross margin.
SELLING, GENERAL AND ADMINISTRATIVE expenses in 1999 increased $2,935,000 over
1998 spending, reaching 24.2% of sales for the year versus 19.9% in 1998.
Expenses of Klouda-Lenz after the purchase date comprised approximately
$1,300,000 of the increase. In addition, selling expenses increased $855,000 due
to increased commissions expense, salaries and fringe benefits related to
additional sales management and customer service personnel, and expenses related
to customer service process improvements. Advertising expenses increased
$358,000 over 1998 levels due to increased trade and cooperative advertising
programs with customers. Warehouse and distribution costs increased $263,000 due
to an increase in the number of orders processed, higher freight costs and
additional manning in the new distribution center after opening in November
through year-end. Amortization of goodwill resulting from the Klouda-Lenz
acquisition totaled $122,000 for the year.
Selling, general and administrative expenses in 1998 increased $2,297,000 over
the prior year, reaching 19.9% of sales versus 18.2% in 1997. Selling expenses
accounted
4
<PAGE>
for $1,155,000 of the increase, primarily due to the volume effect on variable
costs such as commissions, advertising and warehouse expenses. The bad debt
provision increased by $188,000 over the prior year, and management incentives
and profit sharing covering all employees increased $507,000 versus 1997. Other
administrative expenses increased $431,000, primarily due to costs related to
various potential acquisition activities, public and shareholder relations
expenses and accelerated depreciation on computer systems that were retired in
mid-1999 as a result of a general systems upgrade and the Company's Year 2000
project.
In 1999 the Company recognized a $1,684,000 OPERATIONS RESTRUCTURING EXPENSE,
comprised of $1,245,000 of costs related to closing the Company's North Carolina
production and distribution facilities and $439,000 of pre-opening expenses
related to the new leased distribution and embroidery facility in Tennessee.
Closing costs for the North Carolina facility included severance and fringe
benefit costs for 217 terminated employees, occupancy costs, legal and
professional fees and asset impairment charges. Pre-opening expenses for the
Tennessee facility included salaries and fringe benefits, moving, occupancy and
other costs incurred prior to the early November opening of the facility. In
1998, a $472,000 asset impairment charge was recorded to recognize the reduced
production levels experienced at the North Carolina facility resulting from
management's decision to source more goods offshore.
INTEREST EXPENSE increased and INTEREST INCOME decreased in 1999 compared to
1998 as a result of the $1,554,000 net cash paid in the acquisition of
Klouda-Lenz in early 1999. Interest expense decreased and interest income
increased in 1998 compared to 1997 as a result of improved inventory control,
which led to excess funds throughout 1998. During all periods, excess funds were
invested in short-term government securities.
In 1998, the Company recognized a $398,000 GAIN ON SALE OF TRADEMARKS from 1996
transactions due to remaining accruals that were no longer deemed necessary.
PROVISION FOR INCOME TAXES represents federal, state, local and foreign taxes.
At January 1, 2000, the Company had net operating loss carryforwards of
approximately $18,000,000 for domestic federal income tax purposes. Due to the
adoption of "Fresh Start Reporting" in 1991, the Company recognized no benefit
from net operating loss carryforwards in its statement of operations, but rather
reflected such benefit as a direct credit to shareholders' equity, which amount
totaled $793,000 in 1999, $731,000 in 1998 and $463,000 in 1997.
LOOKING FORWARD
Management's strategy is to continue profitable development of the special
markets channel of distribution. This is expected to occur through internal
development of additional brands and labels, continued growth of the licensed
Munsingwear(R) brand of knit and woven shirts, and through the licensing of and
acting as sales representative for other brands and labels for apparel and
accessory products. For example, in early 1998 the Company entered the
golf-oriented apparel market under its internally developed Page & Tuttle(R)
brand, following management's strategy to develop and/or
5
<PAGE>
acquire complementary brands, markets and products. The Company then introduced
the Page & Tuttle(R) brand to the PPAI/ASI market in 1999. In early 2000, the
Company announced agreements to act as the exclusive sales representative for
CROAKIES(R) and Softspikes(R) accessories in the PPAI/ASI market.
Management expects to maintain substantially all 2000 production offshore in
order to achieve lower unit costs to help the Company remain competitive in the
apparel marketplace, where deflationary pricing practices are common.
The Company currently pays no license fees on the majority of its sales under
the terms of its licensing agreement with Perry Ellis International, Inc. and is
not required to pay any such fees until aggregate sales dollars reach a specific
amount, which is not likely to occur until the year 2001. At that time, license
fees will represent an additional expense to the Company, which management plans
to recover through improved margins and reduced costs in other areas.
MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates
and prices, such as foreign currency exchange rates, interest rates and
commodity futures pricing. The Company is exposed to various market risks,
including fluctuations in foreign currency exchange rates, interest rates and
commodity prices for cotton. The Company does not enter into derivatives or
other financial instruments for trading, speculative or hedging purposes.
The Company follows certain practices to manage market risk. Contracts for the
purchase of goods from Far East suppliers are negotiated in U.S. dollars, which
tends to minimize the potential for short-term loss due to adverse changes in
foreign currency exchange rates. The Company invests excess funds in U.S.
government securities with maturities of 30 days or less, minimizing the effect
of short-term interest rate changes on investments. The Company's products are
made chiefly of cotton, the price of which is affected by worldwide commodity
futures markets. The Company negotiates fabric purchases for twelve-month
intervals, which minimizes the effect of short-term fluctuations in the price of
cotton.
YEAR 2000
The Year 2000 issue was the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Computer systems based
on a two-digit format were potentially unable to interpret dates beyond the year
1999 which could have caused a system failure or other computer errors, leading
to disruption in operations.
The Company spent $812,000 of identifiable costs related to the replacement and
upgrade of its computer systems and to become year 2000 compliant. Such costs
were capitalized in accordance with established Company accounting policy. The
Company encountered no material disruption of operations as a result of the year
2000 date change and will continue to monitor the potential for disruption
throughout the year. However, there can be no assurances that disruptions will
not occur.
6
<PAGE>
CAUTIONARY STATEMENT
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, in the Letter to Shareholders, elsewhere in
the Annual Report, in the Company's Form 10-K, in future filings by the Company
with the Securities and Exchange Commission, in the Company's press releases and
in oral statements made with the approval of an authorized executive officer
which are not historical or current facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made. The following important factors, among others, in some cases
have affected and in the future could affect the Company's actual results and
could cause the Company's actual financial performance to differ materially from
that expressed in any forward-looking statement: (i) competitive conditions that
currently exist, including the entry into the market by a number of competitors
with significantly greater financial resources than the Company, are expected to
continue, placing pressure on selling prices which could adversely impact sales
and gross margins; (ii) the inability to carry out marketing and sales plans
would have a materially adverse impact on the Company's projections; (iii) the
Company is a licensee of the Munsingwear(R) name and maintaining a cooperative
working relationship with the licensor is important for continued successful
development of the special markets business; (iv) as a licensee, the Company is
dependent on the licensor to adequately promote and properly distribute the
brand and defend it from trademark infringement. The foregoing list should not
be construed as exhaustive and the Company disclaims any obligation subsequently
to revise any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
IMPACT OF INFLATION
Inflation affects the Company's business principally in the form of cost
increases for materials and wages. The Company generally attempts to offset
these cost increases by a combination of merchandising and design techniques,
purchasing practices, improved workflow efficiencies, increased offshore
sourcing and selective price increases.
MARKET STATISTICS
On December 15, 1999, the Company's common stock became listed on The Nasdaq
Stock Market under the symbol WEAR. Prior to that date, the Company's common
stock was listed on the New York Stock Exchange under the symbol PWA.
7
<PAGE>
The 1999 and 1998 market price high and low were as follows:
QUARTER
- --------------------------------------------------------------------------------
1ST 2ND 3RD 4TH
- --------------------------------------------------------------------------------
1999
- --------------------------------------------------------------------------------
High 7 5 7/8 6 6
Low 4 3/4 4 1/4 4 11/16 5
1998
- --------------------------------------------------------------------------------
High 5 7/8 5 9/16 7 13/16 7 5/8
Low 4 11/16 4 3/4 4 7/8 6
================================================================================
No dividends were paid in the past two years. The Company's long-term bank line
of credit restricts the payment of dividends.
As of March 8, 2000, the Company had 845 shareholders of record.
8
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS PremiumWear, Inc.
<TABLE>
<CAPTION>
Year ended Year ended Year ended
January 1, January 2, January 3,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $ 45,647 $ 42,445 $ 33,820
Commissions 1,305 -- --
- ------------------------------------------------------------------------------------------------------------
46,952 42,445 33,820
- ------------------------------------------------------------------------------------------------------------
EXPENSES:
Cost of goods sold 31,610 31,647 26,256
Selling, general and administrative 11,378 8,443 6,146
Operations restructuring (See Note 3) 1,684 472 --
- ------------------------------------------------------------------------------------------------------------
44,672 40,562 32,402
- ------------------------------------------------------------------------------------------------------------
OPERATING INCOME 2,280 1,883 1,418
- ------------------------------------------------------------------------------------------------------------
Interest expense (62) (40) (91)
Interest income 97 180 114
Gain on sale of trademarks -- 398 --
Other 17 (57) 6
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 2,332 2,364 1,447
Provision for income taxes 900 911 610
- ------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,432 $ 1,453 $ 837
============================================================================================================
NET INCOME PER COMMON SHARE:
- ------------------------------------------------------------------------------------------------------------
Basic $ .57 $ .63 $ .36
Diluted $ .56 $ .60 $ .36
- ------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding 2,506 2,324 2,309
Dilutive effect of outstanding stock options
after application of the treasury stock method 53 81 29
-------------------------------------------------------------------------------------------------------
Common and common equivalent shares
outstanding - diluted 2,559 2,405 2,338
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS PremiumWear, Inc.
<TABLE>
<CAPTION>
January 1, January 2,
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) 2000 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,744 $ 3,215
Receivables:
Trade, net of allowances of $377 and $728 7,518 5,670
Other 251 356
- -----------------------------------------------------------------------------------------------------------------
7,769 6,026
Inventories 10,421 9,037
Deferred taxes 1,224 944
Prepaid expenses 1,146 624
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 23,304 19,846
- -----------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land -- 15
Buildings and leasehold improvements 273 738
Machinery and equipment 4,156 4,700
- -----------------------------------------------------------------------------------------------------------------
4,429 5,453
Less accumulated depreciation and amortization 1,171 4,335
- -----------------------------------------------------------------------------------------------------------------
3,258 1,118
- -----------------------------------------------------------------------------------------------------------------
DEFERRED TAXES, net of valuation allowance of $4,490 and $6,961 2,788 1,556
NONCURRENT PREPAID EXPENSES 176 --
GOODWILL 2,277 --
- -----------------------------------------------------------------------------------------------------------------
$ 31,803 $ 22,520
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,607 $ 3,061
Accrued payroll and employee benefits 1,323 1,552
Other accruals 751 409
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 8,681 5,022
- -----------------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES:
Long-term debt 937 --
Postretirement benefits 657 695
- -----------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 1,594 695
- -----------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 4, 5, AND 8-12)
SHAREHOLDERS' EQUITY
Series B preferred stock, $100 stated value; voting, cumulative and
participating (authorized 75,000 shares, none issued) -- --
Preferred stock, no par value (authorized 925,000 shares, none issued) -- --
Common stock, $.01 par value (authorized 20,000,000 shares, 2,596,610
and 2,339,530 shares issued) 26 23
Additional paid-in capital 18,052 14,490
Treasury stock (50,000 shares, at cost) (272) --
Retained earnings 3,722 2,290
- -----------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 21,528 16,803
- -----------------------------------------------------------------------------------------------------------------
$ 31,803 $ 22,520
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS PremiumWear, Inc.
<TABLE>
<CAPTION>
Year Year Year
Ended ended ended
January 1, January 2, January 3,
(AMOUNTS IN THOUSANDS) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,432 $ 1,453 $ 837
Reconciling items:
Depreciation and amortization 545 989 439
Deferred taxes 793 731 463
Provision for losses on accounts receivable (35) 262 74
Gain on sale of trademarks -- (398) --
Loss on sale of property, plant and equipment -- 64 --
Changes in operating assets and liabilities:
Receivables (1,318) (2,089) (43)
Inventories (1,309) (447) 1,214
Prepaid expenses (613) (345) (151)
Accounts payable 2,767 240 (1,188)
Other accrued liabilities 485 377 (1,253)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,747 837 392
- ------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (2,379) (609) (435)
Proceeds from sale of property, plant and equipment -- 51 --
Purchase of Klouda-Lenz, Inc. net of cash acquired (1,554) -- --
- ------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (3,933) (558) (435)
- ------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net change in restricted cash -- -- 447
Proceeds from issuance of long-term debt 937 -- --
Principal payments on long-term debt and capital lease
obligations -- -- (23)
Special cash distribution -- -- (12,500)
Purchase of treasury stock (272) -- --
Proceeds from exercise of stock options 50 66 959
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 715 66 (11,117)
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (471) 345 (11,160)
Cash and cash equivalents at beginning of period 3,215 2,870 14,030
- ------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,744 $ 3,215 $ 2,870
========================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid for taxes $ 84 $ 69 $ 368
- ------------------------------------------------------------------------------------------------------------------------
Cash paid for interest $ 58 $ 40 $ 84
- ------------------------------------------------------------------------------------------------------------------------
Cashless exercise of stock options $ -- $ -- $ 112
- ------------------------------------------------------------------------------------------------------------------------
Common shares issued in connection with the acquisition of
Klouda-Lenz, Inc. 242 -- --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY PremiumWear, Inc.
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Additional
Issued Stock Paid-in Retained
Shares Amount Shares Amount Capital Earnings
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 4, 1997 2,163,153 $ 22 -- -- $ 17,128 $ 5,032
Exercise of stock options 156,177 1 -- -- 1,070 --
Utilization of net operating
loss carryforwards -- -- -- -- 463 --
Special cash distribution -- -- -- -- (7,468) (5,032)
Net Income -- -- -- -- -- 837
- --------------------------------------------------------------------------------------------------------------------------
Balance at January 3, 1998 2,319,330 $ 23 -- -- $ 11,193 $ 837
Exercise of stock options 20,200 -- -- -- 66 --
Utilization of net operating
loss carryforwards and
adjustment of related
reserves -- -- -- -- 3,231 --
Net Income -- -- -- -- -- 1,453
- --------------------------------------------------------------------------------------------------------------------------
Balance at January 2, 1999 2,339,530 $ 23 -- -- $ 14,490 $ 2,290
Issued pursuant to 1991
reorganization 38 -- -- -- -- --
Shares issued in purchase of
Klouda-Lenz, Inc. 241,892 3 -- -- 1,207 --
Exercise of stock options 15,150 -- -- -- 50 --
Utilization of net operating
loss carryforwards and
adjustment of related
reserves -- -- -- -- 2,305 --
Purchase of treasury stock -- -- (50,000) $ (272) -- --
Net income -- -- -- -- -- 1,432
- --------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2000 2,596,610 $ 26 (50,000) $ (272) $ 18,052 $ 3,722
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
PremiumWear, Inc. (the "Company") designs, sources and markets knit and
woven shirts and other apparel to the promotional products/advertising
specialty industry and to golf pro and resort shops utilizing its Page
& Tuttle(R) brand and other licensed brands. In addition, the Company
derives commission income by representing products of other companies
to the promotional products/advertising specialty industry. Over 95% of
all sales are to customers in the United States. The Company's products
are assembled or manufactured primarily in Central America, South
America and the Far East.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of PremiumWear, Inc., its
wholly - owned subsidiary Klouda-Lenz, Inc. and one inactive foreign
subsidiary. All significant intercompany accounts and transactions have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. The carrying
value of cash equivalents approximates fair value.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventoriable costs include raw materials, labor and related
manufacturing overhead expenses. Inventories consist of:
January 1, January 2,
(IN THOUSANDS) 2000 1999
-----------------------------------------------------------------------
Raw materials $ 141 $ 632
Work in process 1,458 1,432
Finished goods 8,822 6,973
-----------------------------------------------------------------------
$10,421 $9,037
=======================================================================
13
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. The Company provides
for depreciation using the straight-line method for financial reporting
purposes and generally uses accelerated methods for income tax
purposes. Estimated useful lives used in computing depreciation and
amortization for financial reporting purposes range from five to forty
years for buildings and leasehold improvements and from two to ten
years for machinery and equipment. Assets recorded under leasehold
improvements are amortized over the lease terms. The Company
periodically reviews property, plant and equipment to determine that
the carrying values have not been impaired (see Note 3).
INCOME TAXES
The Company accounts for income taxes under the liability method. In
accordance with Fresh Start Reporting, any tax benefit associated with
utilization of the net operating loss carryforwards which survived a
1991 reorganization is reflected as additional paid-in capital.
NET INCOME PER COMMON SHARE
Net income per common share was computed by dividing net income by the
weighted average number of common shares outstanding during the year.
Diluted income per common share includes the dilutive effect of
outstanding stock options using the treasury stock method.
REVENUES
Net sales are recognized at the time of shipment and reserves are
established for returns and allowances at that time. Sales to one
customer in 1999, 1998 and 1997 totaled 20%, 17% and 15%, respectively,
of total net sales. Sales to another customer in 1999 and 1998 totaled
20% and 14%, respectively, of total net sales. Sales to a third
customer in 1998 and 1997 totaled 11% and 16%, respectively, of total
net sales.
ADVERTISING COSTS
Advertising costs are comprised primarily of cooperative advertising
programs, catalogs and trade advertising. Cooperative advertising
obligations are expensed at the time the related revenues are
generated. Catalog and trade advertising costs are capitalized upon
production and expensed ratably over the corresponding sales period.
Advertising expense for the last three fiscal years was $1,175,000,
$770,000 and $537,000, respectively.
FISCAL YEAR
The Company's fiscal year ends on the first Saturday following December
31. The 1999, 1998 and 1997 fiscal years ended January 1, 2000, January
2, 1999 and January 3, 1998, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," will be adopted by
the Company
14
<PAGE>
on January 1, 2001. Since the Company does not currently engage or plan
to engage in derivative or hedging activities, there will be no impact
to the Company's results of operations, financial position or cash
flows upon adoption of this standard.
The Securities and Exchange Commission Staff Accounting Bulletin No.
101, "Revenue Recognition" (SAB No. 101), provides guidance on the
recognition, presentation and disclosure of revenue in financial
statements. SAB No. 101 is effective for the Company's fiscal quarter
beginning January 2, 2000. SAB No. 101 is not expected to have a
material effect on the Company's financial position or results of
operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Ultimate
results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform to 1999 presentation. These reclassifications
had no effect on previously reported net income or shareholder's
equity.
15
<PAGE>
2. PURCHASE OF KOUDA-LENZ, INC.
On March 25, 1999, the Company acquired Klouda-Lenz, Inc., its
independent sales representative agency for the promotional
products/advertising specialty market. Klouda-Lenz, Inc. merged into a
wholly owned subsidiary of the Company. The purchase price was
$1,554,000 net cash and 241,892 newly issued shares of common stock,
which are subject to a two-year holding restriction. The $2,398,811
excess of purchase cost over net assets acquired was recorded as
goodwill and is being amortized over 15 years. Amortization of $121,587
was recorded in 1999 selling, general and administrative expenses in
the accompanying consolidated statements of operations.
16
<PAGE>
3. OPERATIONS RESTRUCTURING
In early 1999 the Company announced a plan to close its North
Carolina production and distribution facilities, the result of
management's decision to move all production offshore in order to
achieve lower unit production costs and to improve shipping time to
customers. Sewing operations were closed in early July 1999, cutting
operations were closed at the end of September 1999, and the
distribution center was closed in mid-November 1999. During the year,
$1,245,000 was charged to operations restructuring expense primarily
for estimated severance, fringe benefits, legal services, occupancy
costs and asset impairment charges. At 1999 year-end, shutdown
obligations of $305,000 remained and were classified in other accrued
expenses in the accompanying consolidated balance sheets. Following an
early 2000 auction of used equipment, the Company donated the
facilities to the city of Fairmont, North Carolina and the remaining
employees were terminated.
In conjunction with the North Carolina closing, the Company transferred
distribution center and embroidery operations to a new 100,000 square
foot leased facility in Clarksville, Tennessee, which opened for
operations in early November 1999. In 1999 the Company recognized
$439,000 of operations restructuring expense primarily for training
pay, fringe benefits, inventory moving costs and occupancy expenses
incurred prior to opening the facility.
During the last half of 1998 the Company reduced sewing production
levels at its North Carolina facility to one-half the previous level.
As a result, the Company recognized a $472,000 asset impairment charge
to operations restructuring expense to write-down the facility to net
realizable value. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," the carrying value was determined by projecting cash
flows over the expected remaining useful productive life of the
facility.
17
<PAGE>
4. LICENSING AGREEMENT AND SALE OF TRADEMARKS
In 1996 the Company entered into a license agreement with Perry Ellis
International, Inc. for the use of the Munsingwear(R) brand for knit
shirts for twenty years and certain other products for five years. The
license agreement includes an obligation to pay license fees through
late 2001 on the sales of knit shirts when such sales reach specified
annual amounts. Since the inception of the agreement, sales have not
reached the specified annual amount for knit shirt sales. Management
estimates the annual threshold will not be met until late in the year
2001, at which time license fees will become due under the agreement on
knit shirt sales in excess of the specified amount. After 2001 license
fees will be payable on all sales of knit shirts, regardless of the
sales level, and will represent an additional cost to the Company at
that time. The Company pays license fees on all sales of other
Munsingwear(R) products. There are no guaranteed minimum royalty
payments under the license agreement.
18
<PAGE>
5. FINANCING AGREEMENTS AND LONG-TERM DEBT
The Company has a bank line-of-credit under which up to $6,000,000 is
available for borrowings and letters of credit through February 2002.
Borrowings and letters of credit are limited to an aggregate amount
equaling approximately 80% of eligible receivables and 50% of eligible
finished goods inventories. Essentially all the assets of the Company
except property, plant and equipment are pledged as collateral under
the agreement. Borrowings under the facility bear interest at the
bank's base rate of interest (8.5% at January 1, 2000). At January 1,
2000, $1,605,000 was utilized for letters of credit, resulting in
unused availability of $4,395,000. The agreement contains a commitment
fee of .5% per annum on the unused line of credit and also contains
cross default provisions to other agreements and other covenants which,
among other matters, require maintenance of certain financial ratios,
restrict the sale of assets, restrict payment of dividends and restrict
consolidation or merger of the Company with another entity.
Additionally, the Company is restricted from incurring additional
indebtedness and liens on assets. At January 1, 2000, the Company was
in compliance with all debt covenants.
The Company has a $937,000 seven-year bank term loan with annual
interest of 9.25%. Principal is due on October 1, 2006. The loan is
secured by certain property, plant and equipment at the Company's new
Tennessee distribution facility.
19
<PAGE>
6. INCOME TAXES
The income tax provision for the past three years consisted of the
following:
(IN THOUSANDS) 1999 1998 1997
-----------------------------------------------------------------------
Current $107 $180 $147
Deferred 793 731 463
=======================================================================
$900 $911 $610
-----------------------------------------------------------------------
The current provision resulted from federal alternative minimum, state
income, franchise and foreign taxes payable. As of January 1, 2000, the
Company had net operating loss carryforwards for regular federal income
tax purposes of approximately $18,000,000, which will begin to expire
in 2005.
The components of the net deferred tax asset were as follows:
January 1, January 2,
(IN THOUSANDS) 2000 1999
-----------------------------------------------------------------------
Net operating loss carryforwards $7,390 $ 6,884
Tax credit carryforwards 471 864
Deductible temporary differences 641 1,713
-----------------------------------------------------------------------
8,502 9,461
Valuation allowance (4,490) (6,961)
-----------------------------------------------------------------------
$4,012 $ 2,500
=======================================================================
A valuation allowance has been established to reduce the deferred tax
asset to estimated realizable amounts. In 1999 and 1998, respectively,
the Company reversed previously established valuation reserves of
$1,512,000 and $2,500,000 for the estimated realizable portion of the
deferred tax asset and, in accordance with "Fresh Start Reporting",
credited additional paid-in capital for the adjustment.
A reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate is as follows:
1999 1998
-----------------------------------------------------------------------
Statutory federal income tax rate 34.0% 34.0%
State income taxes, net of federal income tax benefits 2.7% 4.0%
Other 1.3% 0.5%
-----------------------------------------------------------------------
38.0% 38.5%
=======================================================================
The effective tax rate was reduced by the result of certain state taxes
which do not vary with income and by permanent differences that become
less significant as income increases.
20
<PAGE>
7. SHAREHOLDERS' EQUITY
At January 1, 2000, the Company's capital structure included 20,000,000
shares authorized for all classes of common stock and 1,000,000 shares
authorized for all classes of preferred stock, of which 75,000 shares
are reserved for Class B preferred stock. There are restrictions with
respect to the trading of common stock to or from Five Percent Holders,
as defined in the Company's 1991 Plan of Reorganization, through
October 2001 as a means of preserving the benefits of the net operating
loss carryforwards following the Company's reorganization in 1991.
Preferred stock has been reserved for issuance under a shareholders'
rights plan, which replaced the prior rights plan that expired in late
1997. Upon the occurrence of certain events, the shareholders' rights
plan entitles the registered holder to purchase one one-hundredth of a
share of preferred stock at a stated price or to purchase either the
Company's shares or stock in an acquiring entity at half their market
value.
In 1999 the Company's Board of Directors authorized the repurchase of
up to 50,000 shares of the Company's common stock. The Board considered
this to be an advantageous use of funds as a result of the market price
of the Company's common stock at that time. Subsequently, 50,000 shares
of common stock were repurchased and were held in treasury at January
1, 2000.
On March 5, 1997 a special cash distribution of $5.39 per share, or
approximately $12,500,000, was paid to shareholders of record February
19, 1997, using proceeds from the 1996 sales of trademarks.
21
<PAGE>
8. STOCK OPTIONS AND RESTRICTED STOCK
The Company's 1991 and 1999 Stock Plans include a provision for the
granting of stock options, which are accounted for under Accounting
Principles Board (APB) Opinion No. 25, under which no compensation cost
has been recognized. Had compensation costs for these plans been
determined consistent with SFAS Statement No. 123, the Company's net
income and earnings per share would have been reduced to the following
pro forma amounts:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
As Reported $1,432 $1,453 $837
Net income: Pro Forma $1,352 $1,410 $821
------------------------------------------------------------------------------------------
As Reported $0.57 $0.63 $0.36
Basic earnings per share: Pro Forma $0.54 $0.61 $0.36
------------------------------------------------------------------------------------------
As Reported $0.56 $0.60 $0.36
Diluted earnings per share: Pro Forma $0.53 $0.59 $0.35
==========================================================================================
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted average assumptions summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk free interest rate 5.64% to 6.28% 4.28% to 5.66% 6.34% to 6.58%
Expected life of options granted 5 years 5 to 10 years 5 years
Expected volatility of options granted 48% to 51% 44% to 52% 48%
Expected dividend yield $0 $0 $0
------------------------------------------------------------------------------------------
Shares granted 40,000 261,600 131,950
Weighted average fair value
of options granted $2.75 $2.34 $1.73
==========================================================================================
</TABLE>
22
<PAGE>
The 1991 and 1999 Stock Plans reserved 873,500 and 120,0000 shares,
respectively, of common stock for grants to employees in the form of
restricted stock awards and incentive and non-qualified stock options.
In addition, the Plans annually grant to each non-employee director an
option to purchase a combined total of 1,000 shares of common stock. At
January 1, 2000 there were 6,704 shares and 105,000 shares,
respectively, available for future grants under the 1991 and 1999 Stock
Plans. Information regarding the plans is summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 390,200 $4.99 153,750 $4.70 255,800 $7.73
Granted 40,000 5.46 261,600 5.05 131,950 3.31
Canceled (18,400) 4.63 (4,950) 7.56 (37,900) 8.61
Exercised (15,150) 3.31 (20,200) 3.25 (196,100) 6.86
--------------------------------------------------------------------------------------------------
Options outstanding,
end of year 396,650 $5.12 390,200 $4.99 153,750 $4.70
--------------------------------------------------------------------------------------------------
Options exercisable,
end of year 146,488 93,975 $6.49 64,815 $6.67
==================================================================================================
</TABLE>
Options outstanding under the Plans expire during the years 2001
through 2008.
23
<PAGE>
9. RETIREMENT PLAN
The Company has a 401(k) profit-sharing plan covering all employees.
The Company also matches one-half of the employee's first 5%
contribution. Expense under this plan, including profit sharing and
company match, totaled $246,000, $289,000 and $164,000 for 1999, 1998
and 1997, respectively.
The Company's wholly owned subsidiary Klouda-Lenz, Inc. had a
retirement plan which was terminated at the time of the acquisition.
Distribution of all vested benefits, which totaled $147,000 at January
1, 2000, was made in early 2000. At January 1, 2000, vested benefits in
this terminated plan approximated plan assets.
24
<PAGE>
10. POSTRETIREMENT MEDICAL AND LIFE INSURANCE PLANS
The Company sponsors postretirement benefit plans for certain retirees.
The Company has adopted SFAS No. 132 "Employer's Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132 is intended
to standardize certain footnote disclosure requirements for pension and
other retirement benefits.
The Company has unfunded plans providing certain medical and life
insurance benefits to specific retiree groups. Future retirees are not
covered by these plans. The Company accounts for these plans under the
accrual method of accounting. Information concerning these plans is as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
----------------------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS:
Benefit obligation at beginning of year $ 844 $ 869
Interest cost 52 55
Actuarial (gains)/losses (76) (7)
Benefits paid (76) (73)
----------------------------------------------------------------------------
Benefit obligations at end of year $ 744 $ 844
============================================================================
FUNDED STATUS RECONCILIATION:
Funded status $ (744) $ (844)
Unrecognized actuarial losses 12 90
----------------------------------------------------------------------------
Net accrued liability recognized $ (732) $ (754)
============================================================================
</TABLE>
The following table provides the components of net periodic benefit
cost for the plans for the past three years:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost on accumulated postretirement
benefit obligation $52 $55 $59
Net amortization and deferral -- -- 1
---------------------------------------------------------------------------------------
Annual net benefit expense $52 $55 $60
=======================================================================================
</TABLE>
An 8.0% increase in the cost of covered medical benefits was assumed
for 1999. This rate is assumed to decrease incrementally to 5.5% after
6 years and remain at that level thereafter. The discount rate used in
determining the accumulated benefit obligation was 7.5% for 1999, 6.75%
for 1998 and 7.0% for 1997.
25
<PAGE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the post retirement medical plans. A 1% change in
assumed health care costs trend rates would have the following effects:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1% Increase 1% Decrease
-------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total service and interest cost components $ 3 $ (3)
Effect on the accumulated benefit obligation $ 41 $ (39)
</TABLE>
26
<PAGE>
11. LEASES
The Company is party to certain operating lease agreements covering
office space and equipment through 2006. Minimum future obligations on
operating leases in effect that have initial or remaining
non-cancelable lease terms in excess of one year as of January 1, 2000
are as follows:
(IN THOUSANDS)
----------------------------------------------------------------------
2000 $ 789
2001 649
2002 610
2003 547
2004 303
2005 and beyond 518
----------------------------------------------------------------------
$ 3,416
======================================================================
Total rent expense under operating leases was $676,000, $443,000 and
$437,000 for 1999, 1998 and 1997, respectively.
27
<PAGE>
12. COMMITMENTS AND CONTINGENCIES
The Company has Change in Control Severance Agreements with certain
executives. The agreements provide the employees with certain severance
rights after a Change in Control (as defined) of the Company and other
events occur. The agreements continue until December 31, 2001, and will
automatically renew for additional one-year periods unless the Board of
Directors elects not to renew them. As of January 1, 2000, if such
events had occurred, the Company's liability would have been
approximately $2,900,000.
28
<PAGE>
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a condensed summary of actual quarterly results for
1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------------
Net income per
Operating Net common share
Quarter Revenue income income(1) Basic Diluted
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999: First $ 9,047 $ 453 $ 290 $.12 $.12
Second 14,379 189 115 .05 .04
Third 11,859 831 505 .20 .20
Fourth 11,667 807 522 .20 .20
--------------------------------------------------------------------------------------
$46,952 $2,280 $1,432 $.57 $.56
======================================================================================
1998: First $9,350 $ 419 $ 256 $.11 $.11
Second 12,938 736 460 .20 .19
Third 10,719 444 293 .13 .12
Fourth 9,438 284 444 .19 .18
--------------------------------------------------------------------------------------
$42,445 $1,883 $1,453 $.63 $.60
======================================================================================
</TABLE>
(1) 1999 includes operations restructuring charges of $100,000,
$1,200,000, $86,000 and $298,000 for the first, second, third and
fourth quarters, respectively, before income taxes. 1998 includes
$472,000 asset impairment charge and $398,000 gain from the reversal of
liabilities related to sold assets, in the fourth quarter, before
income taxes.
29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PremiumWear, Inc.
We have audited the accompanying consolidated balance sheets of PremiumWear,
Inc. (a Delaware corporation) and subsidiaries as of January 1, 2000 and January
2, 1999, and the related consolidated statements of operations, cash flows and
shareholders' equity for each of the three fiscal years in the period ended
January 1, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PremiumWear, Inc. and
subsidiaries as of January 1, 2000 and January 2, 1999 and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended January 1, 2000 in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
February 18, 2000
30
<PAGE>
FIVE YEAR FINANCIAL REVIEW
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------------------------------------
FOR THE YEAR 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 45,647 $ 42,445 $ 33,820 $ 49,948 $ 51,512
Commissions 1,305 -- -- -- --
Royalty income -- -- -- 2,969 4,609
Cost of sales 31,610 31,647 26,256 40,452 42,714
Gross margin % 32.6% 25.4% 22.4% 23.6% 23.9%
Interest expense 62 40 91 771 1,158
Income (loss) before income taxes 2,332 2,364 1,447 11,252 (2,230)
Net income (loss) 1,432 1,453 837 7,181 (2,335)
Earnings per share $ 0.56 $ 0.60 $ 0.36 $ 3.37 $ (1.13)
Purchases of property, plant and equipment 2,379 609 435 689 1,201
Depreciation and amortization 545 989 439 847 782
Special cash distribution -- -- 12,500 -- --
AS OF THE END OF THE YEAR
- -------------------------------------------------------------------------------------------------------------
Total assets $ 31,803 $ 22,520 $ 17,551 $ 30,256 $ 33,653
Current assets 23,304 19,846 15,938 28,639 24,244
Current liabilities 8,681 5,022 4,789 7,373 20,318
Working capital 14,623 14,824 11,149 21,266 3,926
Current ratio 2.7 4.0 3.3 3.9 1.2
Long-term debt 937 -- -- -- 22
Common shareholders' equity 21,528 16,803 12,053 22,182 12,984
Number of employees 142 265 261 312 343
=============================================================================================================
</TABLE>
No dividends were declared or paid for the years listed.
31
<PAGE>
DRAFT COPY - PRINTED 03/23/00
BOARD OF DIRECTORS
C. D. Anderson(2)
SENIOR MANAGING PARTNER
PLANTAGENET CAPITAL MANAGEMENT LLC, SAN FRANCISCO
Keith A. Benson(1,2)
VICE CHAIRMAN, CHIEF FINANCIAL OFFICER
MUSICLAND STORES CORPORATION, MINNEAPOLIS
David E. Berg
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Thomas D. Gleason(3)
CHAIRMAN OF THE BOARD
Timothy C. Klouda
PRESIDENT, KLOUDA-LENZ, INC.
Alan W. Kosloff(1)
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, KOSLOFF AND PARTNERS, LLC, KANSAS CITY
Gerald E. Magnuson(1,3)
OF COUNSEL TO LINDQUIST & VENNUM PLLP, MINNEAPOLIS
Mark B. Vittert(2,3)
PRIVATE INVESTOR
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Governance Committee
32
<PAGE>
OFFICERS
Thomas D. Gleason
CHAIRMAN OF THE BOARD
David E. Berg
PRESIDENT AND CHIEF EXECUTIVE OFFICER
James S. Bury
CHIEF FINANCIAL OFFICER AND ASSISTANT SECRETARY
Cynthia L. Boeddeker
VICE PRESIDENT OF OPERATIONS
Timothy C. Klouda
PRESIDENT, KLOUDA-LENZ, INC.
Dennis G. Lenz
VICE PRESIDENT, KLOUDA-LENZ, INC.
James R. Murphy
GENERAL MANAGER, GOLF DIVISION
Frank B. Bennett
PARTNER IN THE LAW FIRM OF LINDQUIST & VENNUM PLLP
SECRETARY
33
<PAGE>
CORPORATION INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders will be held Wednesday, May 17, 2000, at 3:30
p.m. CDT at the Company's headquarters, 5500 Feltl Road, Minnetonka, MN
55343-7902
FORM 10-K
Copies of Form 10-K annual report, filed with the Securities and Exchange
Commission, are available without charge upon written request to Seyferth &
Associates, Inc., Rockford Center, 110 Ionia Avenue NW, Grand Rapids, MI
49503-3003, (616) 776-3511, E-mail: [email protected].
TRANSFER AGENT AND REGISTRAR OF COMMON STOCK
Norwest Bank Minnesota, N.A.
Shareowner Services
P. O. Box 64854
St. Paul, MN 55164-0854
(651) 450-4064 / (800) 468-9716
PREMIUMWEAR STOCK
Nasdaq: WEAR
PREMIUMWEAR ON THE INTERNET AND BY FAX
Company website: www.premiumwear.com
Company News On Call (through PR Newswire):
1-800-758-5804 (Code #589750)
LEGAL COUNSEL
Lindquist & Vennum PLLP
Minneapolis, MN
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Minneapolis, MN
INVESTOR RELATIONS COUNSEL Seyferth & Associates, Inc.
Grand Rapids, MI
FACILITIES
CORPORATE HEADQUARTERS DISTRIBUTION AND EMBROIDERY
5500 Feltl Road 975 International Blvd.
Minnetonka, MN 55343-7902 Clarksville, TN 37040
34
EXHIBIT 21
PREMIUMWEAR, INC. and SUBSIDIARIES
Subsidiaries of the Registrant
State of Jurisdiction
of Incorporation
---------------------
Munsingwear Canada Limited (inactive) Canada
Klouda-Lenz, Inc. Minnesota
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 18, 2000 incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statements File Nos. 33-833386 and
33-381153.
/s/ARTHUR ANDERSEN LLP
--------------------------
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
March 31, 2000
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