<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1994
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
HARTMARX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 36-3217140
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
101 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 372-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CAREY M. STEIN, ESQ.
EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE
OFFICER, SECRETARY AND GENERAL COUNSEL
HARTMARX CORPORATION
101 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 357-5300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
CHARLES W. MULANEY, JR., ESQ. FRANCIS J. GERLITS, P.C.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM KIRKLAND & ELLIS
333 WEST WACKER DRIVE 200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60606 CHICAGO, ILLINOIS 60601
(312) 407-0700 (312) 861-2000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE (1) PER NOTE (1) FEE (2)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Subordinated notes
due 2002........................ $100,000,000 100% $100,000,000 $34,483
- --------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 14, 1994
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
$100,000,000
(HARTMARX LOGO)
% Senior Subordinated Notes Due 2002
Interest Payable July 15 and January 15 Due , 2002
-----------
The % Senior Subordinated Notes Due 2002 (the "Notes") are not redeemable
prior to , 1998, except that, until , 1997, Hartmarx
Corporation (the "Company") may redeem, at its option, up to $25 million of
the original principal amount of the Notes at the redemption prices set
forth herein plus accrued interest to the date of redemption with the
proceeds of one or more Public Equity Offerings (as defined) or Traco
Warrant Exercises (as defined). On or after , 1998, the Notes
are redeemable at the option of the Company, in whole or in part, at
the redemption prices set forth herein plus accrued interest to the
date of redemption. Upon a Change of Control (as defined), but
subject to the subordination provisions of the Notes, each holder of
Notes may require the Company to repurchase such holder's Notes at
101% of the principal amount thereof plus accrued interest to the
date of repurchase.
The Notes are unsecured, subordinated to all Senior Debt (as defined) of the
Company and effectively subordinated to all indebtedness and accounts
payable of the Company's subsidiaries. At August 31, 1993, after giving
effect to this offering (the "Offering") and the related transactions
described herein, the aggregate amount of Senior Debt and indebtedness
and accounts payable of the Company's subsidiaries that effectively
ranked senior to the Notes would have been approximately $195
million. The Notes do not rank senior to any outstanding
indebtedness of the Company.
-----------
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount Company(1)(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note
- ---------------------------------------------------------------------------------------------
Total
</TABLE>
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(1) Plus accrued interest, if any, from , 1994.
(2) Before deduction of expenses payable by the Company estimated at $ .
-----------
The Notes are offered by the several Underwriters when, as and if issued by
the Company and accepted by the Underwriters and subject to their right to
reject orders in whole or in part. It is expected that the Notes will be ready
for delivery on or about , 1994.
CS First Boston Merrill Lynch & Co.
- --------------------------------------------------------------------------------
The date of this Prospectus is , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade
Center, 13th Floor, New York, New York 10048; and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such reports, proxy statements and other information concerning the Company
also can be inspected at the offices of The New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005, or The Chicago Stock Exchange, Inc.,
440 South LaSalle Street, Chicago, Illinois 60605. The common stock of the
Company, par value $2.50 per share, is listed on each such exchange.
The Company has filed with the Commission a registration statement on Form S-
3 (including all amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Notes offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are contained in schedules
and exhibits to the Registration Statement as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to each such contract, agreement or other
document filed as an exhibit or schedule to the Registration Statement,
reference is made to the exhibit or schedule, as applicable, for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. For further information
pertaining to the Company and the Notes offered hereby, reference is made to
the Registration Statement and the exhibits thereto, which may be examined or
copied at the locations described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (SEC File
No. 1-8501) under the Exchange Act are incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1992, as amended, including the portions of the Company's
definitive proxy statement filed with the Commission on February 26, 1993,
incorporated by reference therein pursuant to Regulation 14A of the
Exchange Act (the "1992 10-K");
(ii) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended February 28, 1993, May 31, 1993 and August 31, 1993 (the "August 10-
Q"); and
(iii) The Company's Current Report on Form 8-K dated December 31, 1992
(the "8-K").
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Notes offered hereby shall be deemed
to be incorporated in this Prospectus by reference and to be a part hereof from
the date of filing of such documents.
2
<PAGE>
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to Hartmarx Corporation,
101 North Wacker Drive, Chicago, Illinois 60606, Attention: Corporate
Secretary, telephone number (312) 372-6300.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere in this Prospectus and
in the 1992 10-K, the August 10-Q and the 8-K referred to herein under
"Incorporation of Certain Documents by Reference." Unless the context otherwise
requires, the terms "Company" and "Hartmarx" refer to Hartmarx Corporation and
its consolidated subsidiaries.
THE COMPANY
Established in 1872, Hartmarx is the largest manufacturer and marketer of
men's suits, sportcoats and slacks ("men's tailored clothing") in the United
States. From this established position, the Company has diversified into the
men's sportswear and women's careerwear and sportswear markets. In 1993, the
Company's business units that primarily produce men's tailored clothing
represented approximately 60% of the Company's sales.
Substantially all of the Company's products are sold under established brand
names or the private labels of major retailers. The Company owns two of the
most recognized brands in men's tailored clothing: Hart Schaffner & Marx(R),
which was introduced in 1887, and Hickey-Freeman(R), which dates from 1899. The
Company also offers its products under other brands which it owns such as
Sansabelt(R), Kuppenheimer(R), Racquet Club(R) and Barrie Pace(R) and under
exclusive license agreements for specified product lines for Tommy Hilfiger(R),
Jack Nicklaus(R), Bobby Jones(R), Austin Reed(R), Gieves & Hawkes(R), KM by
Krizia(TM), MM by Krizia(TM), Henry Grethel(R), Karl Lagerfeld(R), Nino
Cerruti(R), Pierre Cardin(R) and Fumagalli's(R). To broaden the international
distribution of the apparel sold under its owned and licensed trademarks, the
Company has entered into over 35 license or sublicense agreements for specified
product lines with third parties to produce, market and distribute products in
14 countries outside the United States.
The Company believes that the strong brand recognition enjoyed by its
products at both the wholesale and retail level, the breadth of its product
offerings in both price point and fashion direction and the established
relationships it possesses across retail distribution channels are critical
factors which differentiate the Company from its competitors. The Company's
operating groups offer products covering the fashion spectrum (business
professional, American contemporary and British, French and Italian inspired),
which are marketed at different price points to appeal to a broad wholesale and
retail customer base. Recent product developments include the introduction of
men's tailored clothing and prehemmed slacks under a license agreement with
Tommy Hilfiger for Fall 1994, the introduction of casual, prehemmed slacks
under the Company's own brand and the continued development and expansion of
golf-inspired sportswear for the premium market under the Bobby Jones(R) brand
and at moderate price points under the Jack Nicklaus(R) label.
The Company's primary wholesale customer base consists of fine specialty and
leading department stores such as Dillard Department Stores, Inc.; Federated
Department Stores, Inc.; R.H. Macy & Co., Inc.; The May Department Stores
Company; The Neiman Marcus Group, Inc.; Nordstrom, Inc.; and J.C. Penney
Company, Inc. This distribution channel accounted for approximately 60% of
sales in fiscal 1993. In order to take advantage of changing consumer trends,
the Company has supplemented its traditional channel of distribution with
value-oriented retailers, direct mail companies, mass merchandisers and its own
factory- direct-to-consumer retail channel. The growing value-oriented channel,
which includes outlet and off-price retailers, mass merchandisers and the
Company's own factory-direct-to-consumer network, represents an increasingly
important distribution channel for the Company. Other distribution channels
include direct mail companies, golf pro shops and the Company's 28 factory
outlet stores.
As a vertically integrated manufacturer and marketer, the Company is
responsible for the design, manufacturing and sourcing of its apparel.
Substantially all of its men's tailored clothing is manufactured
4
<PAGE>
in its own factories, all of which are located in the United States. The
Company utilizes domestic and foreign contract manufacturers to produce its
remaining products, principally men's and women's sportswear, in accordance
with Company specifications and production schedules. The Company believes that
this combination of owned manufacturing and contract sourcing enables it to
efficiently control the pricing, quality and delivery of its products and to
effectively utilize the capital resources allocated to the manufacturing
process. Increased manufacturing efficiencies and ongoing cost savings, coupled
with new sourcing strategies, have enabled the Company to offer apparel with
higher perceived value at similar or lower wholesale prices while maintaining
its margins and high quality standards.
The Company's business is organized around three primary operating groups:
Men's Apparel Group. The Company's largest operating group, the Men's
Apparel Group ("MAG") designs and manufactures substantially all of the
Company's men's tailored clothing (through its Hart Schaffner & Marx
("HSM"), Hickey-Freeman and Intercontinental Branded Apparel business
units) and sportswear (through its Trans-Apparel Group, Biltwell and Bobby
Jones business units) and markets these products on a wholesale basis.
Kuppenheimer. Kuppenheimer is the Company's vertically integrated,
factory-direct-to-consumer manufacturing and retail business. Kuppenheimer
manufactures substantially all of its tailored clothing in Company-owned
facilities and sells these products exclusively through Kuppenheimer
operated stores.
Women's Apparel Group. The Women's Apparel Group is comprised of Barrie
Pace Ltd. ("Barrie Pace") and International Women's Apparel, Inc. ("IWA").
Barrie Pace is a direct mail company that offers a wide range of apparel
and accessories to the business and professional woman. IWA designs and
sources women's career apparel and sportswear for department and specialty
stores under owned and licensed brand names.
In 1992, the Company implemented a comprehensive operational and financial
restructuring (the "Restructuring") to refocus its business operations around
its profitable core wholesale men's apparel franchise and to restructure its
balance sheet. The operational aspects of the Restructuring included the sale
of Hartmarx Specialty Stores, Inc. ("HSSI"), the Company's principal retail
unit; the discontinuance of its Country Miss retail and manufacturing
operations; the closing of certain Kuppenheimer retail stores not achieving
minimum profitability requirements; the reduction of production capacity which
was no longer required to support reduced retail operations; and the sale or
closing of non-strategic manufacturing businesses which manufactured outerwear
and military and commercial uniforms. The total sales for fiscal 1992 for all
of the businesses and operations sold or discontinued in conjunction with the
Restructuring was approximately $344 million. For additional information
concerning the Company's current relationship with HSSI, see "Risk Factors--
Uncertainties Regarding HSSI" and "The Company--Legal Proceedings."
As part of the Restructuring, the Company's borrowing facilities were
consolidated and extended in maturity, a $35 million seasonal borrowing
facility was added and shares of its common stock and a warrant to purchase its
common stock were sold in a private placement for $30 million. The Company's
financial statements for fiscal 1992 include restructuring charges of $191
million. See Note (d) to "Selected Consolidated Financial Information" and
"Risk Factors--Operational and Financial Restructuring." Concurrently with the
issuance of the Notes, the Company anticipates entering into a New Credit
Facility (as defined herein) and using the proceeds therefrom and the proceeds
of the Offering to repay all outstanding borrowings under its existing credit
facilities and terminate its obligations thereunder. The New Credit Facility
will mature in three years and borrowings under the New Credit Facility will
generally bear interest at the base rate plus 1.50% or LIBOR plus 2.50%. See
"Description of Certain Indebtedness--New Credit Facility."
5
<PAGE>
As a result of the Restructuring, the Company is now focused on those
businesses that have made it an industry leader for most of this century. The
key elements of the Company's strategy are:
. To build on its success as an apparel manufacturer and marketer by
providing branded products to retailers and consumers principally on a
wholesale basis while developing other brands to fill market voids and
repositioning and growing established brands.
. To provide a dynamic mix of apparel products through a broad
merchandising strategy that will include men's tailored clothing, men's
sportswear, women's career apparel and women's sportswear.
. To serve a broad range of retail channels, including fine specialty and
leading department stores, factory-direct-to-consumer stores, value-
oriented retailers, mass merchants and direct mail catalogs.
. To be a leader in technological marketing by providing unparalleled
service to its customers through such programs as "Quick Response" and
"Electronic Data Interchange."
. To expand its presence in the international marketplace by continuing its
international licensing efforts while merchandising, marketing and
producing branded apparel in markets beyond its borders and marketing its
branded products, concepts and expertise through joint ventures,
acquisitions and selling agencies.
RECENT DEVELOPMENTS
On January 13, 1994, the Company announced sales of $184.1 million for the
fourth quarter of fiscal 1993 and $732.0 million for fiscal 1993 compared to
$211.6 million for the fourth quarter of fiscal 1992 and $1,053.9 million for
fiscal 1992. Pre-tax earnings were $9.2 million for the fourth quarter of
fiscal 1993 and $6.4 million for fiscal 1993 compared to $5.6 million for the
fourth quarter of fiscal 1992 and a loss of $226.9 million (which included a
$190.8 million restructuring charge) for fiscal 1992. After tax provisions, the
Company announced net income of $9.0 million, or $.29 per share, for the fourth
quarter of fiscal 1993 and $6.2 million, or $.20 per share, for fiscal 1993
compared to net earnings of $5.6 million, or $.22 per share, for the fourth
quarter of fiscal 1992 and a loss of $220.2 million, or $8.59 per share, for
fiscal 1992. The Company's results include pre-tax income from the reduction of
inventory maintained on a LIFO-cost basis of $3.5 million for the fourth
quarter of fiscal 1993 and $3.6 million for fiscal 1993, compared to $4.0
million for the fourth quarter of fiscal 1992 and $3.3 million for fiscal 1992.
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the information
set forth under the caption "Risk Factors," as well as the other information
and data in this Prospectus.
THE OFFERING
NOTES OFFERED......... $100,000,000 aggregate principal amount of % Senior
Subordinated Notes Due 2002.
INTEREST PAYMENT July 15 and January 15, commencing July 15, 1994.
DATES................
OPTIONAL REDEMPTION... The Notes are not redeemable prior to ,
1998, except that, until , 1997, the Company
may redeem, at its option, up to $25 million of
aggregate principal amount of the Notes at the
redemption prices set forth herein plus accrued
interest to the date of redemption with the proceeds of
one or more Public Equity Offerings (as defined) or
Traco Warrant Exercises (as defined). On or after
, 1998, the Notes are redeemable at the
option of the Company, in whole or in part, at the
redemption prices set forth herein plus accrued
interest to the date of redemption. See "Description of
the Notes--Redemption."
CHANGE OF CONTROL..... Upon a Change of Control and subject to the
subordination provisions of the Notes, each Holder of
Notes may require the Company to repurchase such Notes
at 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of repurchase.
See "Description of the Notes--Change of Control."
6
<PAGE>
RANKING............... The Notes will be unsecured, subordinated to all
existing and future Senior Debt of the Company and
effectively subordinated to all obligations of the
Company's subsidiaries, including substantially all of
the Company's consolidated trade credit. The Notes will
rank pari passu with any future Senior Subordinated
Debt (as defined) of the Company and will rank senior
to all other subordinated debt of the Company. At
August 31, 1993, after giving effect to the use of
proceeds of the Offering contemplated hereby and
borrowings under the New Credit Facility described
herein to repay existing Senior Debt, the aggregate
amount of Senior Debt outstanding would have been
approximately $173 million and the aggregate amount of
indebtedness and accounts payable of the Company's
subsidiaries that effectively ranked senior to the
Notes would have been approximately $22 million
(excluding intercompany debt and guarantees of Senior
Debt by the Company's subsidiaries). See "Description
of the Notes--Subordination."
RESTRICTIVE The indenture under which the Notes will be issued (the
COVENANTS............ "Indenture") will limit (i) the issuance of additional
debt by the Company, (ii) the issuance of debt and
preferred stock by the Company's subsidiaries, (iii)
the payment of dividends on, and redemption of, capital
stock of the Company and its subsidiaries and the
redemption of certain subordinated obligations of the
Company, (iv) restrictions on distributions from
subsidiaries, (v) sales of assets and subsidiary stock,
(vi) transactions with affiliates and (vii)
consolidations, mergers and the transfer of all or
substantially all of the Company's assets. However, all
of these limitations and prohibitions are subject to a
number of important qualifications. See "Description of
the Notes--Certain Covenants."
USE OF PROCEEDS....... The net proceeds from the sale of the Notes and
anticipated borrowings under the New Credit Facility
will be used to repay all outstanding borrowings under
the Company's existing credit facilities and such
credit facilities will be terminated. See "Use of
Proceeds" and "Capitalization."
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
information for the Company for the five fiscal years ended November 30, 1992
and the nine-month periods ended August 31, 1993 and 1992. The summary
historical consolidated financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Company's Consolidated Financial Statements, which are
contained in the 1992 10-K incorporated herein by reference. The data for the
nine-month periods ended August 31, 1993 and 1992 have been derived from the
Company's unaudited consolidated financial statements for such periods
contained in the August 10-Q incorporated herein by reference. Such data are
unaudited but, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial information for such periods. The results of operations for any
interim period are not necessarily indicative of results for any other periods
or for the full year.
Reference is also made to the Supplemental Financial Information contained on
pages 10 and of this Prospectus which presents certain financial data of
the Company for fiscal 1992 on an adjusted basis to reflect certain effects of
the Restructuring and other adjustments as described therein.
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
FISCAL YEAR ENDED NOVEMBER 30, ENDED AUGUST 31,
---------------------------------------------------------------- ---------------------
1988 1989 1990 1991 1992 1992 1993
---------- ---------- ---------- ---------- ---------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $1,174,314 $1,296,993 $1,295,840 $1,215,310 $1,053,949(a) $ 842,389 $547,831
Gross profit............ 473,891 514,412 489,603 434,007 350,304 285,884 162,602
Earnings (loss) before
restructuring charges,
interest and taxes..... 74,360 56,193 11,742 (22,702) (14,915) (26,191) 14,356
Restructuring and retail
consolidation charges.. -- -- 77,600 13,500 190,800 190,800 --
Interest expense........ 14,465 28,418 28,952 23,793 21,135 15,484 17,161
Earnings (loss) before
taxes.................. 59,895 27,775 (94,810) (59,995) (226,850) (232,475) (2,805)
Tax provision (benefit). 21,880 10,365 (33,265) (21,630) (6,605) (6,605) --
Net earnings (loss)..... 38,015 17,410 (61,545)(b) (38,365)(c) (220,245)(d) (225,870) (2,805)
Net earnings (loss) per
common share and
equivalent............. 2.03 .89 (3.11)(b) (1.74)(c) (8.59)(d) (8.84) (.09)
Cash dividends per
share.................. 1.075 1.175 .90 .60 -- -- --
Average number of common
shares and equivalents. 18,727 19,567 19,786 22,056 25,629 25,557 31,140
BALANCE SHEET DATA:
Total assets............ $ 734,116 $ 907,965 $ 762,167 $ 739,848 $ 511,959 $ 510,098 $425,680
Long-term debt.......... 135,470 270,969 226,623 105,498 248,713 6,880 211,972
Total debt.............. 219,612 376,216 288,130 285,649 314,602 314,774 262,682
Total liabilities....... 375,642 547,831 469,629 452,840 441,534 445,517 326,310
Shareholders' equity.... 358,474 360,134 292,538 287,008 70,425 64,581 99,370
OTHER DATA:
EBITDA(e)............... $ 99,378 $ 87,231 $ (30,639) $ (2,393) $ (178,768) $(194,335) $ 25,484
Depreciation and
amortization........... 25,018 31,038 35,219 33,809 26,947 22,656 11,128
Capital expenditures.... 35,996 52,880 21,621 15,488 9,546 6,485 2,707
Ratio of earnings to
fixed charges(f)....... 2.75x 1.54x (g) (g) (g) (g) (g)
</TABLE>
- --------
(a) The historical data includes results of operations sold or discontinued
pursuant to the Restructuring, as described elsewhere herein and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations and in the 1992 Notes to Consolidated Financial Statements,
which are incorporated herein by reference. See "Risk Factors--Operational
and Financial Restructuring" and "Supplemental Financial Information."
8
<PAGE>
(b) Includes a $51 million, or $2.59 per share, after-tax restructuring charge.
(c) Includes a $8.9 million, or $0.40 per share, after-tax charge to reflect
the consolidation of the Company's retail operations.
(d) Includes a $191 million, or $7.44 per share, after-tax restructuring
charge. See "Risk Factors--Operational and Financial Restructuring."
(e) EBITDA is defined as net income before extraordinary items, interest,
taxes, depreciation and amortization and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service and/or incur debt. EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other consolidated income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as
a measure of the Company's profitability or liquidity.
(f) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent earnings before income taxes plus fixed charges. Fixed
charges consist of interest expense, net, including amortization of
discount and financing costs and the portion of operating rental expense
which management believes is representative of the interest component of
rent expense.
(g) Earnings did not cover fixed charges as follows: (in thousands)
Nine months ended August 31,
1993: $ 2,805
Nine months ended August 31,
1992: $232,475
Fiscal year ended November 30,
1992: $226,850
Fiscal year ended November 30,
1991: $ 59,995
Fiscal year ended November 30,
1990: $ 89,907
Giving effect, as of the beginning of each period, to the issuance of the
Notes and the use of the net proceeds to repay all outstanding borrowings
under the Company's existing credit facilities, the amounts by which
earnings did not cover fixed charges would increase to approximately $230
million and $4.8 million in the year ended November 30, 1992 and the nine
months ended August 31, 1993, respectively.
9
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
The following Supplemental Financial Information for 1992 has been prepared
solely for illustrative purposes from the Company's 1992 Consolidated Financial
Statements and the internal books and records of the Company and should be read
in conjunction with the Selected Financial Data and the 1992 Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated by reference in this
Prospectus. The Supplemental Financial Information is intended to reflect
certain results of operations for the Company's continuing businesses and
operations after giving effect to the Restructuring and the other events
described below, assuming that they had occurred at the beginning of fiscal
1992. The Supplemental Financial Information should not be considered in
isolation or as a substitute for consolidated financial statements prepared in
accordance with generally accepted accounting principles. The Supplemental
Financial Information presents certain financial data for fiscal 1992 after
eliminating from the 1992 Consolidated Financial Statements: (i) the sales and
operating results of certain businesses and operations sold or discontinued as
part of the Restructuring; (ii) the sales and estimated operating results
associated with the Company's transactions with HSSI during 1992; (iii) the
other adjustments described below and (iv) the $191 million charge associated
with the Restructuring. The Supplemental Financial Information does not purport
to represent what the condensed statement of earnings of the Company would have
been had these businesses and operations been sold or discontinued for the full
1992 fiscal year and does not purport to project the consolidated statement of
earnings of the Company for any subsequent period.
The Supplemental Financial Information is derived from the Company's 1992
Consolidated Financial Statements after reflecting the following adjustments:
(i) The sales and operating results of HSSI have been eliminated from the
1992 Consolidated Financial Statements for all of fiscal 1992 to reflect
the sale of HSSI as part of the Restructuring.
(ii) Since the sale of HSSI and its subsidiaries in 1992, HSSI has
continued as a significant customer of the Company, although the volume of
purchases by HSSI has been declining. On December 21, 1993, HSSI and 25
affiliates commenced voluntary cases under Chapter 11 of the United States
Bankruptcy Code and are currently operating as debtors-in-possession. As a
result of these circumstances, there can be no assurance that the Company
will have future sales to HSSI. In 1992, the Company sold approximately $67
million of products to HSSI (the "HSSI Sales"), including approximately $50
million prior to the date HSSI was sold and $17 million subsequent to such
date. To reflect the uncertainty regarding future sales to HSSI, the
Supplemental Financial Information eliminates from the 1992 Consolidated
Financial Statements the HSSI Sales, the estimated gross margin associated
with the HSSI Sales and the estimated variable operating costs directly
attributable to the HSSI Sales. While a reduction of fixed operating costs
may be achievable if sales levels are permanently reduced, the Supplemental
Financial Information assumes that the sudden and complete loss of the HSSI
Sales would not allow for a corresponding reduction of fixed costs in the
short term. Consequently, the Supplemental Financial Information does not
eliminate fixed costs relating to the HSSI Sales. To the extent fixed costs
would have been allocated to the HSSI Sales, the estimated earnings would
be greater than those presented below. See "Risk Factors--Uncertainties
Regarding HSSI" and "The Company--Legal Proceedings".
(iii) To reflect the sale or discontinuance of other businesses and
operations principally pursuant to the Restructuring, the sales and
operating results of certain businesses, including Country Miss and certain
non-strategic manufacturing businesses which produced outerwear and
military and commercial uniforms, have been excluded from the 1992
Consolidated Financial Statements.
(iv) The charge related to the Restructuring which has been eliminated
included write-offs and other costs associated with the closing of certain
Kuppenheimer stores and a related production facility. The Supplemental
Financial Information does not include such charges or any other
adjustments relating to Kuppenheimer.
10
<PAGE>
(v) The license agreement between HSM and Christian Dior-New York
providing for the manufacture and marketing of men's tailored clothing
under the Christian Dior(R) brand name was terminated during 1992. As a
result, the sales, estimated gross margin and estimated variable operating
costs attributable to the tailored clothing manufactured and sold by the
Company pursuant to such license agreement have been eliminated from the
1992 Consolidated Financial Statements. See "The Company--Legal
Proceedings."
The Supplemental Financial Information does not reflect an adjustment to
historical interest expense for the investment in the sold or discontinued
businesses and operations described above. To the extent interest expense would
have been allocated to the investment in those sold or discontinued businesses
and operations, the estimated earnings would have been greater than those
presented below.
SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
UNAUDITED
1992 SUPPLEMENTAL
FINANCIAL INFORMATION
---------------------
(IN MILLIONS)
<S> <C>
Sales............................................... $672.3
Earnings before interest,
taxes, depreciation
and amortization (EBITDA).......................... $ 32.8
Earnings before interest
and taxes (EBIT)................................... $ 16.6
Pre-tax earnings (loss)............................. $ (4.5)
</TABLE>
11
<PAGE>
RISK FACTORS
INDEBTEDNESS AND LIQUIDITY
The Company has significant debt service obligations. As of August 31, 1993,
after giving effect to the use of proceeds of the Offering contemplated hereby
and anticipated borrowings under the New Credit Facility (as defined herein) to
repay Senior Debt, the Company's total indebtedness would have been
approximately $273 million and total shareholders' equity would have been
approximately $95 million, resulting in a total pro forma debt to total
capitalization of 74%. In addition, assuming the closing of the Offering and
the New Credit Facility (collectively, the "Financing Transactions") occurred
on August 31, 1993 and after giving effect to the anticipated use of borrowings
under the New Credit Facility to repay Senior Debt, approximately $25 million
of additional borrowing capacity would have been available (subject to the
borrowing base formula) under the Company's New Credit Facility as of August
31, 1993. Although the Company's borrowing needs are seasonal in nature,
management believes that amounts expected to be available under the New Credit
Facility will be sufficient to meet its peak borrowing requirements. As of
August 31, 1993, assuming the closing of the Financing Transactions on such
date, approximately $153 million of the $173 million of Senior Debt that would
be outstanding would mature within three years. Such Senior Debt must be
refinanced on or before such maturity. The Company's ability to refinance the
New Credit Facility at maturity will depend on a number of circumstances,
including prevailing economic and industry conditions and the financial
condition and operations of the Company and the businesses it operates, some of
which are beyond the Company's control. There can be no assurance that the
Company will be able to refinance the New Credit Facility at such time. See
"Description of Certain Indebtedness."
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures,
acquisitions, debt service requirements, general corporate purposes or other
purposes may be impaired, (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of the Company's interest
expense and principal repayment obligations, (iii) the Company may be more
highly leveraged than certain of its competitors, which may place the Company
at a competitive disadvantage and (iv) the Company may be more vulnerable in
the event of a downturn in its businesses.
The New Credit Facility is expected to contain material restrictions on the
operation of the Company's business, including covenants pertaining to capital
expenditures, asset sales, operating leases, minimum net worth and incurrence
of additional indebtedness, and ratios relating to minimum accounts payable to
inventory, maximum funded debt to EBITDA and minimum fixed charge coverage, as
well as other customary covenants, representations and warranties, funding
conditions and events of default. See "Description of Certain Indebtedness--New
Credit Facility." A breach of one or more of certain covenants under such
agreement could result in an acceleration of the Company's obligations
thereunder, the inability of the Company to borrow additional amounts under the
New Credit Facility to meet seasonal borrowing needs or the suspension of
interest payments on the Notes. In addition, the New Credit Facility is
expected to contain cross-default provisions whereby a default under one of the
other agreements governing the Senior Debt will constitute an event of default
under the New Credit Facility. Any or all of such restrictions, limitations or
contingencies, as well as the Company's significant leverage, could adversely
affect the Company's ability to incur additional indebtedness, make capital
expenditures, take advantage of business opportunities that may arise and
withstand competitive pressures or adverse economic conditions.
For the year ended November 30, 1992 and the nine months ended August 31,
1993, the Company's earnings before income taxes plus fixed charges did not
cover fixed charges by approximately $226.9 million and $2.8 million,
respectively. The Company's ability to make interest payments on the Notes and
to repay the Notes at maturity will be dependent on the Company's future
operating performance, which is itself dependent on a number of factors which
are beyond the Company's control, and the ability of the Company to incur
additional indebtedness. Although there can be no assurance that the Company
will be able to raise sufficient funds, internally or externally, to make such
required payments, the Company believes that, based upon current operations,
anticipated growth in working capital requirements and the amount anticipated
to be available for borrowing under the Company's New Credit Facility, it will
be able to meet its obligations as they come due.
12
<PAGE>
RECENT OPERATING LOSSES
The Company did not report any fiscal year income from continuing operations
from fiscal 1989 through fiscal 1992. For the three months ended August 31,
1993, the Company reported pre-tax earnings of $1.9 million compared to a pre-
tax loss of $213.6 million for the same period in 1992. For the nine months
ended August 31, 1993, the Company's pre-tax loss was $2.8 million compared to
a pre-tax loss of $232.5 million for the same period in 1992. The pre-tax loss
reported in the third quarter of 1992 included a $190.8 million restructuring
charge. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which is incorporated herein by reference, "Summary
Consolidated Financial Information" and "--Operational and Financial
Restructuring." In addition, the Company's IWA business unit, which commenced
operations in 1992, has reported operating losses since its inception. The
Company is reviewing the profitability prospects and strategic direction of,
and its options with respect to, IWA, and may in the future decide to
discontinue IWA's product lines or change its distribution channels. Any such
actions, if taken, may have an adverse effect on the Company's results of
operations. IWA represented approximately 4% of the Company's fiscal 1993 net
sales.
OPERATIONAL AND FINANCIAL RESTRUCTURING
In 1992, the Company implemented the Restructuring to refocus its business
operations around its profitable core wholesale men's apparel franchise and to
restructure its balance sheet. The operational aspects of the Restructuring
included the sale of HSSI, the Company's principal retail unit; the
discontinuance of its Country Miss retail and manufacturing operations; the
closing of certain Kuppenheimer stores not achieving minimum profitability
requirements; the reduction of production capacity which was no longer required
to support reduced retail operations; and the sale or closing of non-strategic
manufacturing businesses which manufactured outerwear and military and
commercial uniforms. The total sales for fiscal 1992 for all of the businesses
and operations sold or discontinued in conjunction with the Restructuring was
approximately $344 million. The Company's financial statements for fiscal 1992
include restructuring charges of $191 million (see Note (d) to "Selected
Consolidated Financial Information"). For additional information regarding the
Company's current relationship with HSSI, see "--Uncertainties Regarding HSSI"
and "The Company--Legal Proceedings."
In conjunction with the Restructuring, in December 1992, the Company
consolidated and extended its borrowing facilities pursuant to which, among
other things, (i) the maturity of $307 million of the Company's outstanding
indebtedness was consolidated and extended until December 30, 1995 pursuant to
the terms of a new secured and guaranteed borrowing facility (the "Override
Agreement"), (ii) an additional seasonal borrowing availability of $35 million
was obtained (the "Bridge Facility") and (iii) certain restrictive covenants
with respect to the Company's indebtedness were added and existing covenants
were adjusted to reflect the condition of the Company following the
commencement of such Restructuring. In addition, the Company raised $30 million
through the sale of shares of its common stock and a warrant to purchase its
common stock in a private placement to Traco International, N.V. ("Traco").
Concurrently with the issuance of the Notes, the Company anticipates entering
into the New Credit Facility and repaying and terminating its obligations under
the Override Agreement and the Bridge Facility. The New Credit Facility is
conditioned upon the consummation of the sale of the Notes contemplated hereby.
As of August 31, 1993, assuming the closing of the Financing Transactions and
the application of the proceeds thereof, approximately $25 million of
additional borrowing capacity would have been available under the New Credit
Facility (subject to the borrowing base formula). See "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which is
incorporated herein by reference, and "Description of Certain Indebtedness."
RANKING OF THE NOTES
The operations of the Company are conducted through its operating
subsidiaries and, therefore, the Company is dependent on the earnings and cash
flow of the operating subsidiaries to meet its debt obligations, including its
obligations with respect to the Notes. There are presently no restrictions on
the ability of the Company's subsidiaries to pay dividends on their capital
stock. Because the consolidated operating assets of the Company will be held by
various operating subsidiaries, the Notes will effectively be subordinated to
the claims of creditors of the operating subsidiaries.
13
<PAGE>
The Notes are also subordinated to all existing and future Senior Debt of
the Company, including up to $175 million that can be outstanding under the
New Credit Facility and approximately $22 million outstanding under other
Senior Debt. See "--Indebtedness and Liquidity," "Description of the Notes--
Subordination" and "Description of Certain Indebtedness." In the event of a
bankruptcy proceeding involving the Company, the Company's assets would be
available to pay obligations on the Notes only after all indebtedness of the
Company's subsidiaries and all Senior Debt has been paid in full, and, in such
event, there may not be sufficient assets to pay in full or in part amounts
due on the Notes. Substantially all of the Company's and its subsidiaries'
current assets and intangible assets will secure, and such subsidiaries will
guaranty, the indebtedness under the New Credit Facility. As of August 31,
1993, assuming the closing of the Financing Transactions on such date and
after giving effect to the use of the proceeds thereof to pay existing credit
facilities, the amount of indebtedness outstanding under the New Credit
Facility would have been approximately $150 million, with approximately $25
million of additional borrowing capacity available (subject to the borrowing
base formula) for future borrowing. See "Use of Proceeds" and "Description of
Certain Indebtedness."
The subordination provisions of the Indenture provide that no payment may be
made by the Company with respect to the Notes upon the occurrence of a default
in the payment or required prepayment of principal of (or premium, if any), or
interest on, certain Senior Debt, until such default shall have been cured or
waived. In addition, upon the occurrence of any other event entitling the
maturity of Senior Debt to be accelerated and receipt by the trustee under the
Indenture of written notice of such occurrence, lenders under the Senior Debt
will be able to block payment on the Notes for specified periods of time. See
"Description of the Notes--Subordination."
UNCERTAINTIES REGARDING HSSI
Since the sale of HSSI and its subsidiaries in 1992 to HSSA Group, Ltd.
("HSSA") in connection with the Restructuring, HSSI has continued as a
significant customer of the Company, although the volume of purchases by HSSI
has been declining. The Company's fiscal 1993 sales to HSSI were approximately
$37 million (representing 5% of the Company's fiscal 1993 total sales), a
decrease from fiscal 1992 sales to HSSI which were approximately $67 million.
In connection with the 1992 sale, HSSI agreed to purchase from the Company in
each of the next two twelve-month periods products having an aggregate
wholesale purchase price of at least $35 million. On December 21, 1993, HSSI
and 25 affiliates commenced voluntary cases under Chapter 11 of the United
States Bankruptcy Code and are currently operating as debtors-in-possession.
Any supply agreement entered into between the Company and HSSI prior to
December 21, 1993 may be deemed an executory contract subject to assumption or
rejection by HSSI under the United States Bankruptcy Code, and there can be no
assurance that HSSI will assume any such supply agreement if such agreement is
deemed an executory contract. When HSSI's Chapter 11 cases were filed, HSSI's
total outstanding indebtedness to the Company (excluding its guaranty of a $35
million promissory note of HSSA to the Company) was approximately $4.6
million. Maurice L. Rothschild & Co. ("MLR"), which has purportedly extended
credit support to HSSI and others in connection with purchases from the
Company, has placed orders with the Company for approximately $10 million of
inventory for shipment to HSSI which has not yet been shipped. MLR also has
total outstanding indebtedness to the Company of approximately $10.8 million
(including interest charges) before adjustment for amounts received by the
Company aggregating approximately $4.8 million in November 1993. According to
documents filed in HSSI's Chapter 11 cases of which the Company is aware, MLR
asserts a secured claim against HSSI and its subsidiaries in the approximate
amount of $17.5 million, which claim is disputed by HSSI and its subsidiaries.
HSSA is believed to be 100% owned by the three sons of the sole shareholder of
MLR and at least one of the shareholders of HSSA is also a director of MLR.
Under current circumstances, there can be no assurance that the Company will
have any future sales to HSSI, that HSSI will be able to purchase goods
previously manufactured for MLR by the Company, that the Company will be able
to sell such goods to others at comparable prices if MLR or HSSI is unable to
purchase them, that the Company will be able to collect amounts owed by HSSI
or MLR or that HSSI will continue as a going concern. A substantial reduction
or loss of sales to HSSI may adversely affect the Company's total revenues and
earnings. For additional information concerning certain legal proceedings
involving HSSI and the Company, see "The Company--Legal Proceedings."
14
<PAGE>
COMPETITION
All of the markets in which the Company competes--men's tailored clothing,
men's sportswear, women's sportswear and women's career apparel--are highly
competitive. The Company's primary competition varies by product, style and
price point. Some of the competitors of the Company's individual business units
are significantly larger and more diversified and have substantially greater
resources than such business units.
The Company's largest product category, men's tailored clothing, is highly
fragmented and characterized by vigorous price and brand competition. According
to the U.S. Department of Commerce, since 1989, the men's and boy's tailored
clothing industry has experienced a decline in both dollar sales and unit
volume. These declines were attributable primarily to the onset of a recession,
which caused retail consumers to curtail or defer their purchases of tailored
clothing. In addition, the impact of the recession on the industry was
exacerbated by a number of other factors, including the significant level of
layoffs among white collar workers, the principal customers for men's tailored
clothing. Moreover, the retailing industry has suffered severe financial
disruptions that have resulted in continuing high levels of price promotion and
discounting. This development placed added pressure on the profit margins
realized by manufacturers of men's tailored clothing. The industry has also
been affected by the relaxation of dress codes by many employers and the long-
term trend toward a more casual lifestyle.
A principal channel of distribution for men's tailored clothing, particularly
outside of large cities, has been small traditional specialty stores. In recent
years, there has been a decline in the number of these stores, caused in large
part by the expansion of department stores and larger specialty store chains
into shopping malls, the growth of factory outlet centers and, especially in
metropolitan markets, the rapid growth of value-priced specialty stores.
Although imports have been a significant factor in the men's tailored
clothing industry in recent years, they have generally been at either the
lowest or the highest retail price points. Imports of men's tailored clothing
are subject to quotas and import duties. The duty on imports of men's and boys'
tailored clothing currently varies depending upon the fabric used and may range
as high as 22%. The recently concluded North American Free Trade Agreement
("NAFTA") provides for the gradual elimination of tariffs and quotas on men's
tailored clothing meeting NAFTA's strict rules of origin. Currently, men's
tailored clothing that is manufactured in Canada but does not meet these strict
rules of origin may be imported into the United States at relatively low tariff
levels subject to specified quotas; any products imported above these quota
levels would be subject to existing tariff rates. The recently consummated
General Agreement on Trade and Tariffs ("GATT") treaty reduces both duties and
quotas for apparel as well as fabric. The net effect on the Company of reduced
tariffs on its foreign competition and on its foreign-sourced finished apparel
and fabric is uncertain at this time.
DEPENDENCE ON BURLINGTON INDUSTRIES
The Company's principal raw material is fabric. In 1993, the Company
purchased approximately 48% of the total dollar amount of its fabric
requirements from Burlington Industries, Inc. ("Burlington"). Burlington has
supplied fabric to the Company for over 30 years, and the Company believes that
it is one of Burlington's major customers. While the Company believes that a
variety of alternative sources of supply exist to satisfy its fabric
requirements, the unanticipated, sudden loss of Burlington as the Company's
principal supplier of fabric or a prolonged interruption in shipments from
Burlington could have a material adverse effect on the Company because of the
cost and delay associated with obtaining one or more alternative sources of
supply or with waiting for the end of any such interruption. As is customary in
its industry, the Company has no long-term supply contracts with Burlington or
any of its other suppliers.
DEPENDENCE ON CERTAIN CUSTOMERS
The Company's customers include major United States department and specialty
stores (certain of which are under common ownership and control), mass
merchandisers, value-oriented retailers and direct mail companies. The
Company's top ten customers accounted for approximately 37% of net sales in
fiscal 1993, and the Company's largest customer, Dillard Department Stores,
represented approximately 12% of net sales.
15
<PAGE>
No other customer accounted for more than 7% of net sales in fiscal 1993. A
decision by any one of these customers to substantially decrease the amount of
merchandise purchased from the Company or to cease carrying the Company's
products could adversely affect the Company. See "--Uncertainties Regarding
HSSI."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There is no existing market for the Notes and there can be no assurance
regarding the future development of a market for the Notes, the ability of
holders of the Notes to sell their Notes or the price at which such holders may
be able to sell their Notes. If such a market were to develop, the Notes could
trade at prices that may be higher or lower than the initial offering price
depending on many factors, including prevailing interest rates, the Company's
operating results and the market for similar securities. Each of the
Underwriters has advised the Company that it intends to act as market maker for
the Notes. However, any such market making may be discontinued by each such
Underwriter at any time in its sole discretion. No assurance can be given as to
the liquidity of the trading market for the Notes. Historically, the market for
non-investment grade debt has been subject to disruptions that have caused
substantial volatility in the prices of securities similar to the Notes. There
can be no assurance that the market for the Notes will not be subject to
similar disruptions in the future. Any such disruptions may have an adverse
effect on holders of the Notes.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby are
estimated to be approximately $ . The Company intends to use the net
proceeds from the sale of the Notes contemplated hereby and borrowings under
the New Credit Facility to repay all outstanding borrowings under the Override
Agreement. Concurrently with such repayment, the Company intends to terminate
the Bridge Facility and the Override Agreement. At August 31, 1993, the
Company's Senior Debt consisted of $255.8 million under the Override Agreement
and $6.9 million of other Senior Debt. Borrowings under the Override Agreement
bear interest at prime plus 2% for bank lenders, 10.3% for the insurance
lenders and 9.19% for the ESOP loan guaranteed by the Company. As of August 31,
1993, the weighted average of interest rates was 8% per annum under the
Override Agreement. See "Risk Factors--Indebtedness and Liquidity" and
"Description of Certain Indebtedness."
16
<PAGE>
CAPITALIZATION
The following table sets forth the historical consolidated capitalization of
the Company at August 31, 1993 and the pro forma capitalization of the Company
as of such date as adjusted to give effect to the sale of the Notes offered
hereby and anticipated borrowings under the New Credit Facility and the
application of the estimated net proceeds therefrom to repay the indebtedness
outstanding under the Override Agreement. This table should be read in
conjunction with "Selected Consolidated Financial Information," "Supplemental
Financial Information" and the Consolidated Financial Statements of the Company
and notes thereto which are incorporated herein by reference.
<TABLE>
<CAPTION>
AUGUST 31, 1993
---------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Short-term debt...................................... $ 50.7(a) $ 50.7(b)
====== ======
Long-term debt:(c)
Override Agreement................................. $190.3 $ --
Bridge Facility.................................... -- --
New Credit Facility................................ -- 100.3
Industrial development bonds....................... 20.6(d) 20.6
Notes offered hereby............................... -- 100.0
Other debt, extending to 2007...................... 1.1 1.1
------ ------
Total long-term debt............................. 212.0 222.0
------ ------
Shareholders' equity:
Preferred shares ($1 par value; authorized--
2,500,000; issued--none).......................... -- --
Common stock ($2.50 par value; authorized--
75,000,000; issued--31,877,950)................... 79.7 79.7
Additional paid-in capital......................... 74.0 74.0
Retained earnings.................................. (42.4) (46.4)(e)
Unearned employee benefits......................... (11.9) (11.9)
------ ------
Total shareholders' equity....................... 99.4 95.4
------ ------
Total long-term debt and shareholders' equity.... $311.4 $317.4
====== ======
</TABLE>
- --------
(a) Includes $50 million of borrowings under the Override Agreement.
(b) Includes $50 million of borrowings under the New Credit Facility.
(c) See "Description of Certain Indebtedness."
(d) Includes $15.5 million of industrial development bonds supported by
letters of credit which are a part of the Override Agreement.
(e) Retained earnings declined due to the write-off of unamortized fees
and payments associated with terminated credit facilities.
17
<PAGE>
THE COMPANY
Established in 1872, Hartmarx is the largest manufacturer and marketer of
men's tailored clothing in the United States. From this established position,
the Company has diversified into the men's sportswear and women's career
apparel and sportswear markets. In 1993, the Company's business units that
primarily produce men's tailored clothing represented approximately 60% of the
Company's sales.
Substantially all of the Company's products are sold under established brand
names or the private labels of major retailers. The Company owns two of the
most recognized brands in men's tailored clothing: Hart Schaffner & Marx(R),
which was introduced in 1887, and Hickey-Freeman(R), which dates from 1899. The
Company also offers its products under other brands which it owns such as
Sansabelt(R), Kuppenheimer(R), Racquet Club(R) and Barrie Pace(R) and under
exclusive license agreements for specified product lines for Tommy Hilfiger(R),
Jack Nicklaus(R), Bobby Jones(R), Austin Reed(R), Gieves & Hawkes(R), KM by
Krizia(TM), MM by Krizia(TM), Henry Grethel(R), Karl Lagerfeld(R), Nino
Cerruti(R), Pierre Cardin(R) and Fumagalli's(R). To broaden the international
distribution of the apparel sold under its owned and licensed trademarks, the
Company has entered into over 35 license or sublicense agreements for specified
product lines with third parties to produce, market and distribute products in
14 countries outside the United States.
The Company believes that the strong brand recognition enjoyed by its
products at both the wholesale and retail level, the breadth of its product
offerings in both price point and fashion direction and the established
relationships it possesses across retail distribution channels are critical
factors which differentiate the Company from its competitors. The Company's
operating groups offer products covering the fashion spectrum (business
professional, American contemporary and British, French and Italian inspired),
marketed at different price points to appeal to a broad wholesale and retail
customer base. Products range from a top-of-the-line Hickey-Freeman(R) suit
expected to retail at $950 to an upper moderately priced ($525) Hart Schaffner
& Marx(R) suit to a moderately priced ($265) Kuppenheimer(R) suit. This
strategy is also employed in the three men's sportswear businesses. Recent
product developments include the introduction of tailored clothing and
prehemmed slacks under a license agreement with Tommy Hilfiger for Fall 1994,
the introduction of casual, prehemmed slacks under the Company's own brand and
the continued development and expansion of golf-inspired sportswear for the
premium market under the Bobby Jones(R) brand and at moderate price points
under the Jack Nicklaus(R) label.
The Company's primary wholesale customer base consists of leading department
and fine specialty stores such as Dillard Department Stores, Federated
Department Stores, Macy's, May Department Stores, Neiman Marcus, Nordstrom and
J.C. Penney. This distribution channel accounted for approximately 60% of sales
in fiscal 1993. In order to take advantage of changing consumer trends, the
Company has supplemented its traditional channel of distribution with value-
oriented retailers, direct mail companies, mass merchandisers and its own
factory-direct-to-consumer retail channel. The growing value-oriented channel,
which includes outlet and off-price retailers, mass merchandisers and the
Company's own factory-direct-to-consumer network, represents an increasingly
important distribution channel for the Company. Other distribution channels
include direct mail companies, golf pro shops and the Company's 28 factory
outlet stores. The Company's top ten customers accounted for approximately 37%
of net sales in fiscal 1993, and the Company's largest customer, Dillard
Department Stores, represented approximately 12% of net sales. No other
customer accounted for more than 7% of net sales in fiscal 1993. See "Risk
Factors--Dependence on Certain Customers."
As a vertically integrated manufacturer and marketer, the Company is
responsible for the design, manufacturing and sourcing of its apparel.
Substantially all of its men's tailored clothing is manufactured in its own
factories, all of which are located in the United States. The Company utilizes
domestic and foreign contract manufacturers to produce its remaining products,
principally men's and women's sportswear, in accordance with Company
specifications and production schedules. The Company believes that this
combination of owned manufacturing and contract sourcing enables it to
efficiently control the pricing, quality and delivery of its products and to
effectively utilize the capital resources allocated to the manufacturing
process. Increased manufacturing efficiencies and ongoing cost savings, coupled
with new sourcing strategies, have enabled the Company to offer apparel with
higher perceived value at similar or lower wholesale prices while maintaining
its margins and high quality standards.
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<PAGE>
The Company's business is organized around three primary operating groups:
Men's Apparel Group. The Company's largest operating group, MAG designs
and manufactures substantially all of the Company's men's tailored clothing
(through its Hart Schaffner & Marx, Hickey-Freeman and Intercontinental
Branded Apparel business units) and sportswear (through its Trans-Apparel
Group, Biltwell and Bobby Jones business units) and markets these products
on a wholesale basis.
Kuppenheimer. Kuppenheimer is the Company's vertically integrated,
factory-direct-to-consumer manufacturing and retail business. Kuppenheimer
manufactures substantially all of its tailored clothing in Company-owned
facilities and sells these products exclusively through Kuppenheimer
operated stores.
Women's Apparel Group. The Women's Apparel Group is comprised of Barrie
Pace and IWA. Barrie Pace is a direct mail company that offers a wide range
of apparel and accessories to the business and professional woman. IWA
designs and sources women's career apparel and sportswear for department
and specialty stores under owned and licensed brand names.
The Company is a Delaware corporation with its principal executive offices
located at 101 North Wacker Drive, Chicago, Illinois 60606, and its telephone
number is (312) 372-6300.
OPERATIONAL AND FINANCIAL RESTRUCTURING
In 1992, the Company implemented the Restructuring to refocus its business
operations around its profitable core wholesale men's apparel franchise and to
restructure its balance sheet. The operational aspects of the Restructuring
included the sale of the Company's principal retail unit, the downsizing of
other retail and manufacturing operations and the sale or closing of non-
strategic manufacturing businesses. As part of the Restructuring, the Company
also consummated a financial restructuring under which commitments under its
borrowing facilities were increased to cover seasonal borrowing requirements
and its borrowing facilities were consolidated and extended in maturity and
shares of its common stock and a warrant to purchase its common stock were sold
in a private placement for $30 million.
A major component of the Restructuring was the sale of the Company's
principal retail unit, HSSI, on September 18, 1992. At the time of the sale,
HSSI operated approximately 180 specialty retail stores. Approximately one-half
of the HSSI stores were closed soon after the sale. The Company's fiscal 1993
sales to HSSI were $37 million compared to fiscal 1992 sales of $67 million.
See "Risk Factors--Uncertainties Regarding HSSI."
The Company entered the specialty retail business in 1926 with the
acquisition of Wallachs and subsequently acquired a number of independent
retail businesses. By the late 1980s, the Company operated approximately 500
retail stores primarily selling men's tailored clothing and sportswear. At the
time, the Company believed that the operation of its own retail stores would
broaden the retail distribution channels available to it for its manufactured
goods in addition to ensuring the existence of appropriate retail outlets for
its products in key markets which did not possess other adequate distribution
for men's tailored clothing. Throughout the 1980s, the Company increased its
commitment to apparel retailing. In 1981, the Company acquired Country Miss,
which manufactured and marketed women's sportswear both through major specialty
and department stores and through its owned Old Mill Stores. This acquisition
was followed by the 1982 purchase of Kuppenheimer and the 1985 launch of Barrie
Pace. In 1990, approximately 55% of the Company's consolidated sales were
contributed by its retail operations.
In spite of the significant capital investment made to support additional
retail stores and related modernization programs, the Company experienced a
substantial decline in the earnings of its retail operations, principally HSSI
and Country Miss, between 1986 and 1992. In 1990, the Company implemented a
restructuring principally targeted at HSSI, which included the closing of
under-performing retail stores, the liquidation of excess retail inventories
and the realignment of sales and merchandising functions. The Company's
financial statements for fiscal 1990 include restructuring charges of $77.6
million. This was followed, in 1991, by the decision to combine the
administrative functions of HSSI and Kuppenheimer. While significant cost
reductions were achieved through these 1990 and 1991 actions, comparable store
sales
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<PAGE>
continued to decline at HSSI, Country Miss and, to a lesser extent,
Kuppenheimer. These sales declines resulted in increased operating losses and
negative cash flow, raising overall consolidated borrowings and interest
expense.
Primarily as a result of the operating and financial performance of its
retail businesses, the Company implemented the Restructuring in 1992. The
Company's financial statements for fiscal 1992 include restructuring charges of
$191 million (see Note (d) to "Selected Consolidated Financial Information").
In addition to the sale of HSSI, the Restructuring included the liquidation of
Country Miss' 80 retail stores and the three production facilities supporting
those operations, the closing of certain Kuppenheimer stores not achieving
minimum profitability requirements and the reduction of production capacity
which was no longer required to support the reduced retail operations. The
Company also sold or closed non-strategic manufacturing businesses which
produced men's outerwear and military uniforms and, in 1993, completed the sale
of Fashionaire Apparel, a wholly-owned subsidiary that manufactured uniforms
for commercial use. The total fiscal 1992 sales of all businesses and
operations sold or discontinued in conjunction with the Restructuring was
approximately $344 million.
In conjunction with the Restructuring, in December 1992, the Company
consolidated and extended its borrowing facilities pursuant to which, among
other things, (i) the maturity of $307 million of the Company's outstanding
indebtedness was consolidated and extended until December 30, 1995 pursuant to
the terms of the Override Agreement, (ii) an additional seasonal borrowing
availability of $35 million was obtained pursuant to the Bridge Facility and
(iii) certain restrictive covenants with respect to the Company's indebtedness
were added and existing covenants were adjusted to reflect the pro forma
condition of the Company following the commencement of such Restructuring. In
addition, the Company raised $30 million through the sale of shares of its
common stock and a warrant to purchase its common stock in a private placement
to Traco. The Company anticipates that the proceeds of the Offering
contemplated hereby and borrowings under the New Credit Facility will be used
to repay its borrowings under the Override Agreement. Concurrently with such
repayment, the Company intends to cancel the Bridge Facility and the Override
Agreement. See "Description of Certain Indebtedness."
COMPANY STRATEGY
As a result of the Restructuring, the Company is now focused on those
businesses that have made it an industry leader for most of this century. The
key elements of the Company's strategy are:
. To build on its success as an apparel manufacturer and marketer by
providing branded products to retailers and consumers principally on a
wholesale basis while developing other brands to fill market voids and
repositioning and growing established brands.
. To provide a dynamic mix of apparel products through a broad
merchandising strategy that will include men's tailored clothing, men's
sportswear, women's career apparel and women's sportswear.
. To serve a broad range of retail channels, including fine specialty and
leading department stores, factory-direct-to-consumer stores, value-
oriented retailers, mass merchants and direct mail catalogs.
. To be a leader in technological marketing by providing unparalleled
service to its customers through such programs as "Quick Response" and
"Electronic Data Interchange." See "--Management Information Systems" for
a more detailed description of these programs.
. To expand its presence in the international marketplace by continuing its
international licensing efforts while merchandising, marketing and
producing branded apparel in markets beyond its borders and marketing its
branded products, concepts and expertise through joint ventures,
acquisitions and selling agencies.
PRODUCTS
The Company's merchandising strategy is to market a wide selection of men's
tailored clothing and sportswear and women's career apparel and sportswear
across a variety of fashion directions, price points and distribution channels.
In 1993, the Company's business units that primarily manufacture men's tailored
clothing represented approximately 60% of the Company's sales, while those
business units that primarily manufacture men's sportswear and slacks
represented approximately 32%. Men's tailored clothing and sportswear are
manufactured and marketed by the Company's MAG and Kuppenheimer operating
groups. Womens apparel is principally marketed by the Company's Women's Apparel
Group.
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The Company's product line organization and list of major owned and licensed
brand names is set forth below:
OPERATING MEN'S APPAREL GROUP
GROUPS KUPPENHEIMER WOMEN'S APPAREL
GROUP
PRODUCT
GROUPS
MEN'S TAILORED MEN'S SLACKS /
CLOTHING SPORTSWEAR MEN'S WOMEN'S CAREER /
TAILORED SPORTSWEAR
CLOTHING
BUSINESS
UNITS
HART SCHAFFNER & MARX TRANS-APPAREL GROUP BARRIE PACE
PRINCIPAL
BRANDS KUPPENHEIMER
HICKEY-FREEMAN BILTWELL INTERNATIONAL
INTERCONTINENTAL BRANDED APPAREL WOMEN'S APPAREL
BOBBY JONES
OWNED OWNED OWNED OWNED
HART SCHAFFNER & MARX(R)
SANSABELT(R)
KUPPENHEIMER(R) BARRIE PACE(R)
HICKEY-FREEMAN(R) STERLING & HUNT(R)
LICENSED SUBURBANS(R)
RACQUET CLUB(R) BRIAR LTD.(R) ESCADRILLE(TM)
JACK NICKLAUS(R)
CONFEZIONI RISERVA(R) TOMMY HILFIGER(R) BIELLA INTERNATIONAL
LICENSED
BOBBY JONES(R) COLLECTION(TM) AUSTIN REED(R)
LICENSED J.G. HOOK(R) MM BY
KRIZIA(TM)
JACK NICKLAUS(R) HENRY GRETHEL(R)
TOMMY HILFIGER(R) KM BY KRIZIA(TM)
AUSTIN REED(R)
The following table sets forth the percentage of sales of the Company's
business units that primarily manufacture the product groups listed below for
fiscal 1992, as adjusted, and fiscal 1993:
GIEVES & HAWKES(R)
NINO CERRUTI(R)
PIERRE CARDIN(R)
FUMAGALLI'S(R)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
------------
1992(A) 1993
------- ----
<S> <C> <C>
Men's Tailored Clothing................................... 62% 60%
Men's Slacks/Sportswear................................... 33% 32%
Women's Career Apparel/Sportswear......................... 5% 8%
---- ----
Total................................................. 100% 100%
</TABLE>
KM BY KRIZIA(TM)
KARL LAGERFELD(R)
JOHNNY CARSON(R)
ALLYN ST. GEORGE(R)
-------
(a) Percentages presented are adjusted as described
under "Supplemental Financial Information."
MEN'S TAILORED CLOTHING
The Company is recognized as the market leader in the men's tailored clothing
industry with a market share believed by management to be approximately 25% of
the estimated $1.5 billion over-$300 retail men's suit market. The Company's
established, well-known brands such as Hart Schaffner & Marx(R) and Hickey-
Freeman(R) are complemented by strong international labels such as Pierre
Cardin(R), Nino Cerruti(R), KM by Krizia(TM), Austin Reed(R) and Karl
Lagerfeld(R).
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<PAGE>
The Company's strategy is to be a broad-based resource for men's tailored
clothing by offering a wide variety of fashion silhouettes across a range of
price points. The Company's tailored clothing businesses offer products
covering the fashion spectrum (business professional, American contemporary and
British, French and Italian inspired), marketed at different price points to
appeal to a broad wholesale and retail customer base.
Increased manufacturing efficiencies and ongoing cost savings, coupled with
new sourcing strategies, have enabled the Company to offer apparel with greater
perceived value at similar or lower wholesale prices while maintaining its
margins and high quality standards. For example, in 1992 the Company introduced
major collections of all-worsted suits by Hart Schaffner & Marx(R) and Austin
Reed(R) which were anticipated to retail at new, lower price points of $495 and
$395, respectively. Effective for the Fall 1994 selling season, the Tommy
Hilfiger(R) label has been added to this price range. At a slightly lower price
point, the Company's Nino Cerruti(R), Pierre Cardin(R) and Confezioni
Riserva(R) brands continue to be prominent in the over-$300 expected retail
price category. In the popular-priced market, the Company offers tailored
clothing through its Kuppenheimer stores at suit prices that range from $150 to
$285. At the upper end of the men's tailored clothing market, the Company's
Hickey-Freeman(R), Gieves & Hawkes(R), Karl Lagerfeld(R) and Cerruti 1881(R)
brands give the Company a strong market position in the $800 and higher
category, demonstrating these prestigious brands' ability to compete with
European imports.
The following table sets forth by general range of expected retail price
point, the fashion segment and brands for the Company's suits:
<TABLE>
<CAPTION>
EXPECTED RETAIL PRICES
-------------------------------------------------------------------------------------------------
UPPER UPPER MODERATE MODERATE POPULAR
FASHION SEGMENT OVER $675 $450-$675 $325-$425 UNDER $325
- --------------------- ------------------ ------------------------ ----------------- -----------------------------------
<S> <C> <C> <C> <C>
BUSINESS PROFESSIONAL Hickey-Freeman(R) Hart Schaffner & Marx(R) Allyn St. George(R)
Sterling & Hunt(R)
Kuppenheimer(R)
AMERICAN CONTEMPORARY Hickey-Freeman(R) Tommy Hilfiger(R) J.G. Hook(R)
Henry Grethel(R)
Johnny Carson(R)
Briar Ltd.(R)
ITALIAN FASHION Cerruti 1881(R) KM by Krizia(TM) Nino Cerruti(R) Confezioni Riserva(R)
Fumagalli's(R) Biella International Collection(TM)
BRITISH FASHION Gieves & Hawkes(R) Austin Reed(R)
Racquet Club(R)
FRENCH FASHION Karl Lagerfeld(R) KL by Karl Lagerfeld(R) Pierre Cardin(R)
</TABLE>
Hart Schaffner & Marx. The Company's largest business unit, HSM, designs,
manufactures and markets tailored clothing under the Hart Schaffner & Marx(R),
Austin Reed(R), KM by Krizia(TM) and Fumagalli's(R) brands. The Hart Schaffner
& Marx(R) brand, which is owned by the Company and was introduced in 1887, is
one of the best-known men's tailored clothing brands in the United States.
HSM's primary customer base consists of fine specialty and leading department
stores. HSM recently entered into a license to manufacture and market a line of
men's tailored clothing under the Tommy Hilfiger(R) brand name and expects to
deliver its first products for Fall 1994. Tommy Hilfiger is a well-known
American designer of men's clothing. Substantially all of the products marketed
by this operating unit are manufactured in Company-owned facilities.
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<PAGE>
HSM sponsors Hart Schaffner & Marx University, which is offered to employees
of all retail customers on a year-round basis. Established in 1990, the
University is the apparel industry's first permanent educational facility
designed to enhance the professionalism of today's retail community. A full-
time staff with broad retail apparel industry experience conducts a number of
courses in product presentation methods, tailoring and management skills. To
date, the University has served over 2,500 employees from more than 250
department and specialty stores.
Hickey-Freeman. Hickey-Freeman manufactures and sells premium-quality men's
tailored clothing in both classic American and various European styles under
the Hickey-Freeman(R), Gieves & Hawkes(R), Karl Lagerfeld(R) and Cerruti
1881(R) brands. The Hickey-Freeman(R) brand, which is owned by the Company and
was introduced in 1899, is one of the most established and best-known labels in
this segment of men's tailored clothing. Custom-made suits constitute an
important component of Hickey-Freeman's business and represented approximately
16% of the business unit's sales for fiscal 1993. Hickey-Freeman's primary
customer base consists of fine specialty stores such as Nordstrom, Neiman
Marcus and Saks Fifth Avenue. Its products are expected to retail at higher
prices than the Company's other apparel lines. All Hickey-Freeman garments are
manufactured in Company-owned facilities.
Intercontinental Branded Apparel. Intercontinental Branded Apparel ("IBA")
manufactures men's tailored clothing at moderate price points for department
store and value-oriented retail distribution. It sells both branded and
private-label products in both the updated traditional and fashion contemporary
markets. Branded products represent approximately 60% of IBA's sales under the
following principal names: Pierre Cardin(R), Nino Cerruti(R), Allyn St.
George(R), Confezioni Riserva(R), Racquet Club(R) and Johnny Carson(R).
Substantially all of IBA's products are manufactured by the Company.
Kuppenheimer. Kuppenheimer is a factory-direct-to-consumer manufacturer of
popularly priced men's tailored clothing sold exclusively through its own
retail stores. In these stores, Kuppenheimer also offers a selection of men's
furnishings and sportswear purchased from other manufacturers. The retail price
of Kuppenheimer suits ranges between $150 and $285. Currently, all of the men's
tailored clothing sold by Kuppenheimer is manufactured by the Company.
In 1993, the Company began implementing a strategic and business
restructuring of Kuppenheimer. This included the closing of certain stores not
achieving minimum profitability criteria, the repositioning of its
merchandising strategy to emphasize value-oriented branded products and the
refocusing of its merchandising around three distinct fashion silhouettes and
brands. Kuppenheimer's strategy is to increase its market share of the highly
fragmented, moderately priced tailored clothing market by offering high
quality, popularly priced garments in a specialty store environment.
Kuppenheimer intends to achieve this strategy through further improvements in
manufacturing efficiencies, enhanced national advertising and the continued
development of its three brands introduced in Fall 1993: Sterling & Hunt(R)
(classic styling), Briar Ltd.(R) (contemporary, traditional styling) and Biella
International Collection(TM) (European styling).
By the end of 1994, it is anticipated that Kuppenheimer's store base will be
fewer than 100, a reduction of over 60 since the beginning of 1992. As a result
of the reduction in retail outlets, Kuppenheimer has also reduced its
production capacity, closing one of its manufacturing facilities in 1992 with a
second factory being transferred to another Company business unit that required
additional capacity.
MEN'S SLACKS AND SPORTSWEAR
From its established leadership position in men's tailored clothing, the
Company has developed a strong presence in men's slacks, while also
diversifying into the men's sportswear market. In 1993, the Company's business
units that primarily produce men's slacks and men's sportswear represented
approximately 32% of the Company's sales. Three of the Company's business units
are devoted to the slacks and men's sportswear
23
<PAGE>
business: Trans-Apparel Group, which manufactures slacks and sources and
distributes sportswear such as Jack Nicklaus(R); Biltwell Clothing Company, the
Company's opening price point slacks business; and Bobby Jones, which sources
and distributes premier golf-inspired sportswear.
Trans-Apparel Group. Through Trans-Apparel Group ("TAG"), the Company has
developed a presence in men's sportswear. This business unit manufactures,
sources and distributes slacks, shirts and sweaters across a variety of price
points and distribution channels. Approximately 50% of TAG's sales are branded
slacks sold under the Sansabelt(R) label or traditional waistband slacks sold
under the Racquet Club(R) and KM by Krizia(TM) brands. These branded slacks are
expected to sell at retail prices between $50 and $140 and are sold to better
specialty and department stores. In 1992, the Company introduced its first line
of casual, prehemmed slacks to compete in this growing market. These slacks are
expected to retail for $30-$40 and are positioned in the sportswear departments
of department stores. In July 1994, TAG will begin to deliver tailored slacks
under the Tommy Hilfiger(R) brand. These slacks will sell in better specialty
and department stores at retail prices expected to be between $50 and $75.
Substantially all of TAG's slacks are manufactured in Company-owned facilities.
The balance of TAG's product offerings consists primarily of knit or woven
shirts and sweaters sold under brand names such as KM by Krizia(TM), Henry
Grethel(R) and Jack Nicklaus(R). KM by Krizia(TM), introduced by the Company in
1992, represents an entry into the moderately priced, contemporary sportswear
marketplace and offers an opportunity for marketing Italian designed slacks.
Jack Nicklaus(R) continues to grow rapidly through pro shop distribution. TAG's
sportswear products are generally expected to be in the $40-to-$75 retail price
range and are sourced from contract manufacturers.
TAG's products are sold to specialty, department and chain stores and value-
oriented retailers. Jack Nicklaus(R) apparel is distributed through golf pro
shops. The Company has expanded the distribution of the Jack Nicklaus(R) brand
to over 16 countries around the world. Approximately 14% of TAG's fiscal 1993
sales are through its 17 Sansabelt and 12 factory outlet stores.
Biltwell Clothing Company. Biltwell's principal product line consists of the
Company's opening price point men's slacks which are sold under brand names
such as John Alexander(R), J.G. Hook(R) and Henry Grethel(R), as well as
private labels developed by the Company's customers. Branded products represent
approximately 50% of Biltwell's total sales. The Company's strategy for
Biltwell is to expand further its branded business in the opening price point
slacks market. Biltwell also manufactures men's suits, sportcoats and
womenswear to complement its slacks offerings. Products are sold through a wide
range of distribution channels, including department, value and specialty
stores, as well as direct mail catalogs.
Bobby Jones. The Company competes in the growing golf-inspired sportswear
market with its Bobby Jones(R) apparel. This business unit delivered its first
product line in 1990. The Bobby Jones(R) product line consists primarily of
knit shirts and sweaters, along with coordinating slacks produced by Hickey-
Freeman, as well as contract manufacturers. The primary customer base for Bobby
Jones includes fine specialty and leading department stores, the golf shops of
prestigious golf clubs and resort shops. Bobby Jones(R) products are sourced
from third parties, with a large percentage produced in Italy.
WOMEN'S CAREER APPAREL AND SPORTSWEAR
The Company's current women's apparel business consists of Barrie Pace, a
direct mail company that offers a wide range of apparel and accessories to the
business and professional woman, and IWA, which designs and sources women's
career apparel and sportswear under the Austin Reed(R), Suburbans(R), MM by
Krizia(TM) and Escadrille(TM) labels.
24
<PAGE>
Barrie Pace Ltd. Barrie Pace, which was launched by the Company in 1985, is
the mainstay of its women's apparel business. Targeting the upscale business
and professional woman, Barrie Pace features classic career apparel and
accessories marketed under the Austin Reed(R) label as well as a variety of
other well-known brands. Barrie Pace provides the Company with the opportunity
to utlilize its tailored clothing expertise to expand into career apparel for
women and to benefit from the growth of the direct mail distribution channel.
Barrie Pace distributes over six million catalogs annually and possesses a list
of 150,000 active customers. It received a Silver Award in 1993 from the
American Catalog Awards in the category of Apparel over $100. The Company
intends to expand Barrie Pace through increased catalog circulation and by
broadening its merchandise mix to include women's sportswear and more informal
career apparel.
International Women's Apparel. IWA designs, sources, markets and distributes
womenswear to department and specialty stores under the Austin Reed(R),
Suburbans(R), MM by Krizia(TM) and Escadrille(TM) labels. Each of these product
lines offers jackets, pants, skirts, blouses and sweaters, at a broad range of
retail prices. Substantially all of IWA's products are sourced from contract
manufacturers in the United States and throughout the world. The primary
exception is the Austin Reed(R) line of tailored jackets, which is manufactured
in a Company-owned facility. The Company is reviewing the profitability
prospects and strategic direction of, and options with respect to, IWA, and may
in the future decide to discontinue IWA's product lines or change its
distribution channels. Any such actions, if taken, may have an adverse effect
on the Company's results of operations. For additional information regarding
IWA, see "Risk Factors--Recent Operating Losses."
DESIGN, MANUFACTURING AND SOURCING
As a vertically integrated manufacturer and marketer, the Company is
responsible for all aspects of the design, manufacturing and sourcing of its
apparel. Over 80% of the Company's fiscal 1993 sales, including substantially
all of its men's tailored clothing, are derived from products manufactured in
its own production facilities, all of which are located in the United States.
The Company utilizes domestic and foreign contract manufacturers to produce its
remaining products, principally men's and women's sportswear, in accordance
with Company specifications and production schedules. The Company believes that
this combination of owned manufacturing and contract sourcing enables it to
efficiently control the pricing, quality and delivery of its products and to
effectively utilize the capital resources allocated to the manufacturing
process.
The Company is implementing programs to streamline its manufacturing
facilities and make them more cost effective. These programs include a
reduction in the number of Company-operated manufacturing facilities, the shift
of production to lower-cost facilities, an increase in the utilization of
foreign contract manufacturers and the adoption of a variety of productivity
enhancement measures. Increased manufacturing efficiencies and ongoing cost
savings, coupled with new sourcing strategies, have enabled the Company to
maintain or reduce the wholesale prices of its garments while maintaining its
margins and high quality standards.
The design and manufacturing of each of the Company's product lines is
managed by a dedicated design team working closely with their sales and
production counterparts to determine the apparel styles and manufacturing plans
for a given season. These plans are based upon a variety of criteria including
an evaluation of prior years' experiences, current design trends, economic
conditions and management estimates of a product's future performance. The
average cycle time for men's apparel, from fabric selection to the production
and shipment of finished goods, ranges from 18 to 24 months.
The design process for a particular season typically begins with the
development of a color palette and the selection of fabrics for the Company's
various product lines. This is followed by silhouette and product model
development and the production of sample prototypes. Throughout the process,
the design teams are
25
<PAGE>
guided by their interpretation of the latest fashion trends and changes in
consumer demand. Once completed, the Company's product designs are reviewed
internally (and, in certain cases, by licensors) to evaluate their market
appeal.
After product models are approved for production, cutting patterns, which are
used to cut the fabric, are made. Once completed, these patterns are
electronically transferred to automatic cutting machines via computer tapes or
discs. Computer-aided design ("CAD") systems are utilized extensively
throughout the new product design and manufacturing process. When coupled with
the Company's computerized automatic cutting machines, this CAD technology
helps systematize production and maximize fabric utilization in the
manufacturing process.
Most of the Company's tailored products are manufactured in three stages.
First, the fabric is generally treated through a "sponging" process prior to
cutting, which reduces the likelihood of fabric shrinkage subsequent to
manufacturing. Second, the fabric is cut into pieces. These pieces are then
sewn together and finished. As is customary for the industry, this production
process is frequently performed in separate facilities to maximize labor
productivity, with the result being that a particular garment produced by the
Company may be assembled at two or, in some cases, three locations.
Men's sportswear and women's career apparel and sportswear are manufactured
under a variety of arrangements with unaffiliated contractors located in the
United States, Asia, Mexico, Central America or Europe. The Company either
supplies fabric to contractors or directs the contractor to purchase raw
materials according to Company specifications. These contractors are monitored
by Company personnel or agents to help ensure that the Company's product
quality standards are satisfied.
RAW MATERIALS
Raw materials, which include fabric, linings, thread, buttons and labels, are
obtained from domestic and foreign sources based on quality, pricing, fashion
trends and availability. The Company's principal raw material is fabric,
including woolens, polyester and blends of wool and polyester. The Company
procures and purchases its raw materials directly for its owned manufacturing
facilities and may also procure and retain ownership of fabric relating to
garments cut and assembled by contract manufacturers. In other circumstances,
fabric is procured by the contract manufacturer directly but in accordance with
the Company's specifications. For certain of its product offerings, the Company
and selected fabric suppliers jointly develop fabric for the Company's
exclusive use. Approximately 25% of the raw materials purchased by the Company
is imported from foreign mills. A substantial portion of these purchases is
denominated in United States dollars. Purchases from Burlington, the Company's
largest fabric supplier, accounted for 48% of the Company's total fabric
requirements in fiscal 1993. See "Risk Factors--Dependence on Burlington
Industries" for a discussion of the Company's purchases of fabric from
Burlington. No other supplier accounts for over 6% of the Company's total raw
material requirements. As is customary in its industry, the Company has no
long-term contracts with its suppliers. The Company believes that a variety of
alternative sources of supply is available to satisfy its raw material
requirements.
SEASONALITY AND BACKLOG
The men's tailored clothing business has two principal selling seasons,
spring and fall. Additional lines for the summer and holiday seasons are
marketed in men's and women's sportswear. Men's tailored clothing, especially
at higher price points, generally tends to be less sensitive to frequent shifts
in fashion trends, economic conditions and weather, as compared to men's
sportswear or women's career apparel and sportswear. While there is typically
little seasonality to the Company's sales on a quarterly basis, seasonality can
be affected by a variety of factors, including the mix of advance and fill-in
orders, the distribution of sales across retail trade channels and overall
product mix between traditional and fashion merchandise.
26
<PAGE>
The Company generally receives orders from its wholesale customers
approximately five to seven months prior to shipment. Some of the Company's
operating groups also routinely maintain in-stock positions of selected
inventory in order to fulfill customer orders on a quick response basis. A
summary of the order and delivery cycle for the Company's two primary selling
seasons is illustrated below:
<TABLE>
<CAPTION>
MERCHANDISE SEASON ADVANCE ORDER PERIOD DELIVERY PERIOD
------------------ -------------------- --------------------------------------------------
<S> <C> <C>
Fall December to March June to October (primarily July and August)
Spring June to September December to March (primarily January and February)
</TABLE>
The Company's borrowing needs are typically lowest in July and January.
Financing requirements begin to rise as inventory levels increase in
anticipation of the spring and fall advance order shipping periods. Borrowings
reach their highest levels in April and October, just prior to the collection
of receivables from men's tailored clothing advance order shipments. Sales and
receivables are recorded when inventory is shipped, with payment terms
generally 30 to 60 days from the date of shipment. With respect to the tailored
clothing advance order shipments, customary industry trade terms are 60 days
from the seasonal billing dates of February 15 and August 15.
COMPETITION
All of the markets in which the Company competes--men's tailored clothing,
men's sportswear, women's sportswear and women's career apparel--are highly
competitive. The Company believes that the strong brand recognition enjoyed by
its products at both the wholesale and retail level, the breadth of its product
offerings in both price point and fashion direction and the established
relationships it possesses across retail distribution channels are critical
factors which differentiate the Company from its competitors. In addition, the
Company believes that its vertically integrated manufacturing structure allows
it to offer high quality products at competitive prices.
The Company believes that it is the largest domestic manufacturer and
marketer of men's tailored clothing as well as men's slacks with expected
retail prices over $50. It competes in these and the other segments of its
business primarily on the basis of its brand names, fashion offerings, quality,
service and price. The Company believes that its competitive position depends
upon its ability to respond effectively to changing consumer demands while
continuing to provide apparel recognized for its consistent styling, quality
and competitive prices.
Although imports have been a significant factor in the men's tailored
clothing industry in recent years, they have generally been offered at either
the lowest or the highest retail price points. The Company believes that a
variety of factors, including the long lead times required for international
shipping and lack of appropriate quality control among foreign manufacturers
(other than certain European manufacturers) have made it impractical for many
foreign manufacturers to import men's tailored clothing products that are
competitive with the Company's products on a price, quality and service basis.
Imports of men's tailored clothing are also subject to quotas and import
duties. The duty on imports of men's and boys' tailored clothing currently
varies depending upon the fabric used and may range as high as 22%. The
recently concluded NAFTA provides for the gradual elimination of tariffs and
quotas on men's tailored clothing meeting NAFTA's strict rules of origin.
Currently, men's tailored clothing that is manufactured in Canada but does not
meet these strict rules of origin may be imported into the United States at
relatively low tariff levels subject to specified quotas; any products imported
above these quota levels would be subject to existing tariff rates. In
addition, the recently completed GATT reduces both duties and quotas for
apparel as well as fabric. The net effect on the Company of reduced tariffs on
its foreign competition and on its foreign-sourced finished apparel and fabric
is uncertain at this time.
27
<PAGE>
SALES AND MARKETING
As a broad-based manufacturer and marketer of apparel, the Company has
focused on the continued diversification of its wholesale customer base to
coincide with changing consumer trends. To effect this strategy, the Company
has supplemented its traditional channel of distribution--department and
specialty stores--with value-oriented retailers, direct mail companies, mass
merchandisers and its own factory-direct-to-consumer retail channel. The
Company believes that its relationships with major retailers, including the
active involvement of the Company's senior management in the selling process,
are of critical importance to the maintenance of its leading market position.
The Company's primary wholesale customer base consists of fine specialty and
leading department stores such as Dillard Department Stores, Federated
Department Stores, Macy's, May Department Stores, Neiman Marcus, Nordstrom and
J.C. Penney. This distribution channel accounted for approximately 60% of sales
in fiscal 1993. The growing value-oriented channel, which includes outlet and
off-price retailers, mass merchandisers and the Company's own factory-direct-
to-consumer network, represents an increasingly important distribution channel
for the Company. Other distribution channels include direct mail companies,
golf pro shops and the Company's 28 factory outlet stores. The Company's top
ten customers accounted for approximately 37% of net sales in fiscal 1993, and
the Company's largest customer, Dillard Department Stores, represented
approximately 12% of net sales. No other customer accounted for more than 7% of
net sales in fiscal 1993.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that advanced information processing is essential in
order to maintain its competitive position and, as a result, has invested in
computer hardware systems, applications and networks to enhance and speed the
apparel design process and to support the manufacturing, sale and distribution
of its products to its customers. CAD systems are utilized throughout the new
product design and manufacturing process. When coupled with the Company's
computerized automatic cutting machines, this CAD technology helps systematize
production and maximize fabric utilization in the manufacturing process. The
Company provides a variety of information processing services, including quick
response and electronic data interchange ("EDI"), to substantially all of its
major customers, enabling the replenishment of inventory for selected product
styles within 24 to 48 hours after an order is placed electronically. EDI
applications include invoicing, purchase order creation and transmission,
inventory advice, shipping notices, point-of-sale feedback data on retail
transactions and electronic mail.
EMPLOYEES
As of November 30, 1993, the Company had approximately 11,200 employees. A
substantial percentage of nonsupervisory employees engaged in manufacturing and
distribution participate in collective bargaining agreements with the
Amalgamated Clothing and Textile Workers Union in effect through August 1994
and April 1995. The Company considers its employee relations to be
satisfactory.
TRADEMARKS AND LICENSING AGREEMENTS
The Company regards the trademarks it utilizes as valuable strategic assets
which serve to differentiate its products in both the wholesale and retail
marketplace. Approximately two-thirds of the Company's sales are of garments
sold under trademarks which it owns, while approximately one-third of its sales
are of products designed, manufactured and marketed by the Company under
licensing agreements it has with others and on a private label basis.
The Company utilizes 14 principal owned trademarks, including several which
it believes are among the oldest and most recognized brand names in tailored
clothing. Its Hart Schaffner and Marx(R) and Hickey-Freeman(R) trademarks were
introduced in 1887 and 1899, respectively. Other principal trademarks owned by
28
<PAGE>
the Company include: Sansabelt(R), Kuppenheimer(R), Racquet Club(R) and Barrie
Pace(R). From time to time, the Company develops new trademarks to support the
introduction of new product lines. All of the Company's owned trademarks have
been registered for use in the United States and various countries throughout
the world. The Company vigorously protects its principal trademarks against
infringement.
In addition to the use of its owned trademarks, the Company operates under
license agreements to manufacture and/or distribute certain men's and women's
apparel. The Company believes that access to these trademarks provides it with
an important strategic advantage, enabling the Company to broaden its product
offering through the use of developed, well-recognized brand franchises. These
licenses generally extend for a term of three to five years, with renewal
options based upon achievement of specific sales levels. The agreements further
provide for royalty payments based on a percentage of sales, minimum royalties
and advertising minimums. The Company influences all aspects of design,
merchandising, distribution, advertising and promotion of these licensed
products with varying degrees of participation by the licensor. The Company
also serves as a licensing agent for several of its principle licensors,
including Jack Nicklaus, Nino Cerruti and Pierre Cardin. Most of the Company's
material licensing agreements have been in place for over five years, and the
Company believes its relationship with its principal licensors to be excellent.
The Company does not believe that the termination of any single licensing
agreement would have a material adverse effect on the business of the Company
taken as a whole.
To broaden the international distribution of the apparel sold under its owned
and licensed trademarks, the Company has entered into over 35 license or
sublicense agreements for specified product lines with third party licensees to
produce, market and distribute products in 14 countries outside the United
States. These agreements allow the Company to utilize the local market
expertise of its licensees and to enter new geographic territories with minimal
capital requirements.
Set forth below is a summary overview of the Company's licensing agreements
under which the Company is the licensee:
<TABLE>
<CAPTION>
GEOGRAPHIC DATE
PRINCIPAL AREA AVAILABLE LICENSE
LICENSOR/BRAND NAME PRODUCTS UNDER LICENSE BEGAN
------------------------------------ ----------------- -------------------- ------------
<S> <C> <C> <C>
The All England Lawn Tennis Club Men's clothing U.S.A., Mexico 3/7/88
Limited
Wimbledon(R)
Allyn St. George International, Inc. Men's suits and U.S.A. 12/1/82
Allyn St. George(R) sportcoats
Asian and Western Classics Men's clothing U.S.A., Canada, 12/20/90
Karl Lagerfeld(R) Mexico
KL by Karl Lagerfeld(R)
Austin Reed Limited Men's furnishings U.S.A., Puerto Rico, 1/1/87
Austin Reed(R) Panama, Guam
Men's sportswear U.S.A., Puerto Rico, 12/31/86
Panama, Guam
Men's clothing U.S.A., Puerto 8/1/72
Rico, Panama, 8/16/67
Guam and, through (predecessor
sublicense, Canada agreement)
Women's clothing U.S.A., Puerto Rico, 1/1/81
Panama, Guam
Cerruti 1881 Paris S.A.
CRR Nino Cerruti Paris(R) Men's clothing U.S.A. 10/10/84
CRR Nino Cerruti(R) Men's clothing Mexico 10/1/91
10/1/88
(predecessor
agreement)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DATE
PRINCIPAL AREA AVAILABLE LICENSE
LICENSOR/BRAND NAME PRODUCTS UNDER LICENSE BEGAN
--------------------------------- ----------------------- ------------------- --------
<S> <C> <C> <C>
The Downtown Athletic Club Men's clothing U.S.A., Canada, 9/1/93
of New York City, Inc. Mexico
The Heisman Trophy Collection(R)
Gieves & Hawkes International Men's tailored clothing U.S.A. except, 6/1/88
Limited Alaska, Hawaii
Gieves & Hawkes(R)
Golden Bear Enterprises, Inc. Men's clothing U.S.A., Mexico, 3/29/83
Jack Nicklaus(R) Puerto Rico
Men's and women's U.S.A., Canada, 7/1/90
golf apparel Mexico
Henry E. Grethel Men's clothing No limitation 5/20/87
Henry Grethel(R)
J.G. Hook, Inc. Men's clothing U.S.A. 5/1/89
J.G. Hook(R)
John W. Carson Men's apparel and No limitation 9/4/86
Johnny Carson(R) accessories
Jonesheirs, Inc. Men's and women's U.S.A. and numerous 6/1/88
Bobby Jones(R) clothing specified countries
Krizia S.p.A.
MM by Krizia(TM) Women's clothing U.S.A., Canada, 9/5/91
Mexico
KM by Krizia(TM) Men's clothing U.S.A., Canada, 12/15/90
Mexico
Luciano Franzoni Men's clothing No limitation 10/16/89
Luciano Franzoni(TM)
Omni Sport b.v. Men's clothing U.S.A., Canada, 7/1/92
Fumagalli's(R) Mexico
Rough Rider Co. Men's clothing U.S.A., military 3/1/78
Rough Rider(TM) exchanges worldwide
S.A.R.L. de Gestion Pierre Cardin Men's clothing U.S.A., Colombia 9/1/72
Pierre Cardin(R)
Tommy Hilfiger Corporation Men's tailored clothing U.S.A. 6/4/93
Tommy Hilfiger(R)
</TABLE>
PROPERTIES
The Company's principal executive and administrative offices are located in
approximately 45,000 square feet of leased space at 101 North Wacker Drive,
Chicago, Illinois 60606. As of November 30, 1993, the Company operated 26
manufacturing and distribution facilities aggregating approximately 3.3 million
square feet. The Company and its various operations occupy sales offices in New
York City, Chicago, Dallas, Los Angeles and Atlanta totalling approximately
92,000 square feet, all of which is leased. Summary information for each of the
Company's manufacturing and administrative locations is set forth below. The
Company also operates 181 retail or outlet stores with an aggregate area of
approximately 700,000 square feet. Three of such stores (comprising 27,000
square feet) are owned by the Company, and the remaining stores are leased.
30
<PAGE>
The Company believes that its properties are well maintained and its
manufacturing equipment is in good operating condition and sufficient for
current production.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
COMPANY LOCATION USE FOOTAGE LEASED/OWNED
- ---------------- ------------------ -------------------------- ----------- ------------
<S> <C> <C> <C> <C>
Hartmarx Chicago, IL Administrative offices 45,000 Leased
Corporation
Hart Schaffner Chicago, IL Coat sewing, matching 313,000 Owned
& Marx Chicago, IL Administrative offices 67,000 Leased
Des Plaines, IL Fabric storage, sponging, 361,000 Owned
cutting, matching,
warehousing, shipping
Cape Girardeau, MO Cutting, coat sewing 171,000 Owned
Winchester, KY Coat sewing 92,000 Owned
Chaffee, MO Pant sewing, warehousing 78,000 Leased
shipping
Rock Island, IL Coat sewing 43,000 Owned
Rochester, IN Pant sewing 37,000 Owned
Intercontinental Buffalo, NY Administrative offices, 280,000 Leased
Branded fabric storage, sponging,
Apparel cutting, matching,
warehousing, shipping
Buffalo, NY Coat sewing 115,000 Owned
Whiteville, NC Coat sewing 105,000 Owned
Hialeah, FL Coat sewing 44,000 Leased
Dunkirk, NY Pant sewing 35,000 Owned
Trans-Apparel Michigan City, IN Administrative offices, 420,000 Owned
Group fabric storage, cutting,
warehousing, shipping
Anniston, AL Pant sewing 76,000 Leased
Elizabethtown, KY Pant sewing 54,000 Owned
East Chicago, IN Pant sewing 44,000 Leased
Biltwell Farmington, MO Fabric storage, cutting, 75,000 Leased
pant sewing
Farmington, MO Warehousing, shipping 65,000 Owned
St. Louis, MO Administrative offices, 88,000 Leased
coat sewing
Rector, AR Pant sewing 52,000 Owned
Hickey-Freeman Rochester, NY Administrative offices, 223,000 Owned
fabric storage, sponging,
cutting, sewing,
warehousing and shipping
Kuppenheimer Loganville, GA Fabric storage, cutting, 179,000 Owned
coat sewing, matching,
warehousing and shipping
Norcross, GA Administrative offices 59,000 Leased
Wellston, OH Pant sewing 34,000 Leased
International Easton, PA Administrative offices, 220,000 Owned
Women's warehousing and shipping
Apparel
Bobby Jones Rochester, NY Warehousing, shipping 51,000 Leased
</TABLE>
31
<PAGE>
LEGAL PROCEEDINGS
In 1989, HSM and Christian Dior-New York, Inc. ("Dior") were adverse parties
in various lawsuits filed in the Circuit Court of Cook County, Illinois,
arising out of a Trademark License Agreement under which HSM manufactured and
sold apparel products bearing Dior's trademark(s). These lawsuits were
eventually settled and dismissed; however, the settlement agreement among the
parties has been the subject of an unfavorable award against HSM in a
subsequent arbitration proceeding and lawsuit which is currently being
appealed. In addition, HSM has initiated a separate arbitration proceeding
against Dior. It is the opinion of management that neither matter will have a
material effect on the Company's business or financial condition.
In September 1992, David Spillyards, represented to be the holder of
approximately 1,800 shares of common stock of the Company, filed a class action
complaint in the Circuit Court of Cook County, Illinois, against the Company,
its directors and former director Harvey A. Weinberg. The complaint claimed
that the Company's directors breached certain duties owed to the Company's
shareholders and sought certification as a class action, the appointment of Mr.
Spillyards' counsel as class counsel and related damages. The complaint, which
also included a derivative action, alleged that the purpose of the sale of the
Company's principal retail unit, HSSI, to HSSA, was to benefit Mr. Weinberg
(who was also alleged to have been a director of the Company at the time of the
announcement of the sale). The complaint was subsequently amended to include
additional allegations pertaining to the ultimate sale of 5,714,286 shares of
common stock of the Company and a three-year warrant for 1,649,600 shares of
common stock of the Company to Traco (the "Traco Agreement"). The complaint, as
amended, was dismissed on November 30, 1992 and Mr. Spillyards was given
permission by the Court to file another amended complaint, which was filed on
December 28, 1992 (the "Second Amended Complaint"). The Second Amended
Complaint, denominated as a class action and derivative complaint, again
challenged certain aspects of the Traco Agreement and alleged that the Company
made certain misleading representations in its July 17, 1991 prospectus. After
the Company's motion to dismiss the Second Amended Complaint was granted on
June 24, 1993, Mr. Spillyards filed a Third Amended Complaint (purportedly
asserting new issues regarding the Traco Agreement), which was again dismissed
on September 29, 1993. Mr. Spillyards filed a notice of appeal with the
Illinois Appellate Court on October 29, 1993.
On September 18, 1992, the Company sold the common stock of HSSI to HSSA, an
affiliate of MLR, for a promissory note in the principal amount of $43 million
due September 18, 1994 (the "HSSA Note"). Pursuant to a Stock Pledge Agreement
(the "Pledge Agreement"), the HSSA Note was secured by a pledge of the common
stock of HSSI, which also guaranteed the obligations of HSSA under the HSSA
Note. The HSSA Note was subsequently adjusted to $35 million.
Following the sale of HSSI to HSSA, HSSA breached certain of its obligations
under the HSSA Note and ancillary agreements and, on November 23, 1993, the
Company exercised its right under the Pledge Agreement to cause the transfer of
the common stock of HSSI to its nominee, Caredon Realty, Inc. ("CRI"). CRI is a
corporation which is 100% owned by a former employee of one of the Company's
subsidiaries. CRI has delivered to the Company, among other things, its
promissory note in the principal amount of $35 million (adjusted by any
nonrefundable payments thereon), due September 18, 1994, for the HSSI stock
(the "CRI Note"). The CRI Note is also secured by a pledge of the common stock
of HSSI and is cancelable, at the Company's option, in the event that certain
of the Company's lenders object to the Company's acceptance of the CRI Note.
Upon any such cancellation of the CRI Note, the Company or its nominee has
certain rights to acquire the HSSI common stock.
On November 29, 1993, HSSA filed a complaint for declaratory and preliminary
and permanent injunctive relief in the Circuit Court of Cook County, Illinois,
against the Company, seeking an order declaring, among other things, that the
Company improperly and wrongfully seized ownership of HSSI and that HSSA is and
remains the owner of HSSI. HSSA's request for a Temporary Restraining Order in
this regard was denied by the Court, but HSSA's request for declaratory and
injunctive relief remains before the Court.
32
<PAGE>
On December 3, 1993, HSM and certain other subsidiaries of the Company filed
a complaint against MLR in the Circuit Court of Cook County, Illinois, seeking
damages aggregating approximately $10.5 million for goods sold to MLR for
shipment to HSSI and other retailers to which MLR provides credit support. The
amount of damages sought in this action has not been adjusted for a November
1993 payment of approximately $4.8 million believed to have been received in
respect of goods shipped to HSSI, or for additional damages, if any, arising
from the failure or inability of MLR to pay for approximately $10 million of
additional goods ordered from various of the Company's subsidiaries for
delivery during 1994. On January 12, 1994, the complaint was amended to add
Clarence Permut, the sole stockholder of MLR, as an additional defendant.
On December 21, 1993 HSSI and 25 affiliates commenced voluntary cases under
Chapter 11 of the United States Bankruptcy Code. See "Risk Factors--
Uncertainties Regarding HSSI."
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following summary of selected consolidated financial information of the
Company for each of the five years ended November 30, 1992 was derived from
the audited consolidated financial statements for the years then ended and
should be read in conjunction with the detailed information and audited
consolidated financial statements contained in the Company's 1992 10-K
incorporated herein by reference. The data for the nine months ended August
31, 1993 and 1992 have been derived from the Company's unaudited consolidated
financial statements for such periods contained in the August 10-Q which is
incorporated herein by reference. Such data are unaudited but, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial information for such
periods. The results of operations for any interim period are not necessarily
indicative of results for any other periods or for the full year.
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
FISCAL YEAR ENDED NOVEMBER 30, ENDED AUGUST 31,
------------------------------------------------------------- ----------------------
1988 1989 1990 1991 1992 1992 1993
---------- ---------- ---------- ---------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $1,174,314 $1,296,993 $1,295,840 $1,215,310 1,053,949 (a) $ 842,389 $547,831
Finance charges,
interest and other
income................. 15,320 14,979 14,286 10,761 9,566 7,710 4,242
Cost of goods sold...... 700,423 782,581 806,237 781,303 703,645 556,505 385,229
Selling, administrative
and occupancy expenses. 414,851 473,198 492,147 467,470 374,785 319,785 152,488
Restructuring and retail
consolidation charges.. -- -- 77,600 13,500 190,800 190,800 --
Interest expense........ 14,465 28,418 28,952 23,793 21,135 15,484 17,161
Earnings (loss) before
taxes.................. 59,895 27,775 (94,810) (59,995) (226,850) (232,475) (2,805)
Tax provision (benefit). 21,880 10,365 (33,265) (21,630) (6,605) (6,605) --
Net earnings (loss)..... 38,015 17,410 (61,545)(b) (38,365)(c) (220,245)(d) (225,870) (2,805)
Net earnings (loss) per
common share and
equivalent............. 2.03 .89 (3.11)(b) (1.74)(c) (8.59)(d) (8.84) (.09)
Dividends per share..... 1.075 1.175 .90 .60 -- -- --
BALANCE SHEET DATA:
Total assets............ $ 734,116 $ 907,965 $ 762,167 $ 739,848 $ 511,959 $ 510,098 $425,680
Current assets.......... 578,184 697,661 577,894 578,632 429,773 432,699 358,498
Accounts receivable..... 186,046 210,555 132,719 134,748 159,772 145,224 147,595
Inventories............. 378,457 473,999 409,599 404,995 216,751 234,883 181,295
Current liabilities..... 240,172 276,862 243,006 347,342 192,821 438,637 114,338
Long-term debt.......... 135,470 270,969 226,623 105,498 248,713 6,880 211,972
Total debt.............. 219,612 376,216 288,130 285,649 314,602 314,774 262,682
Shareholders' equity.... 358,474 360,134 292,538 287,008 70,425 64,581 99,370
OTHER DATA:
EBITDA(e)............... $ 99,378 $ 87,231 $ (30,639) $ (2,393) $(178,768) $(194,335) $ 25,484
Depreciation and
amortization........... 25,018 31,038 35,219 33,809 26,947 22,656 11,128
Capital expenditures.... 35,996 52,880 21,621 15,488 9,546 6,485 2,707
Ratio of earnings to
fixed charges(f)....... 2.75x 1.54x (g) (g) (g) (g) (g)
</TABLE>
- --------
(a) The historical data includes results of operations sold or discontinued
pursuant to the Restructuring, as described elsewhere herein and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations and in the 1992 Notes to Consolidated Financial Statements,
which are incorporated herein by reference. See "Risk Factors--Operational
and Financial Restructuring" and "Supplemental Financial Information."
(b) Includes a $51 million, or $2.59 per share, after-tax restructuring
charge.
(c) Includes a $8.9 million, or $0.40 per share, after-tax charge to reflect
the consolidation of the Company's retail operations.
(d) Includes a $191 million, or $7.44 per share, after-tax restructuring
charge. See "Risk Factors--Operational and Financial Restructuring."
34
<PAGE>
(e) EBITDA is defined as net income before extraordinary items, interest,
taxes, depreciation and amortization and is presented because it is
generally accepted as providing useful information regarding a company's
ability to service and/or incur debt. EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other consolidated income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as
a measure of the Company's profitability or liquidity.
(f) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent earnings before income taxes plus fixed charges. Fixed
charges consist of interest expense, net, including amortization of
discount and financing costs and the portion of operating rental expense
which management believes is representative of the interest component of
rent expense.
(g) Earnings did not cover fixed charges as follows: (in thousands)
Nine months ended August 31,
1993:$ 2,805
Nine months ended August 31,
1992:$232,475
Fiscal year ended November 30,
1992:$226,850
Fiscal year ended November 30,
1991:$ 59,995
Fiscal year ended November 30,
1990:$ 89,907
Giving effect, as of the beginning of each period, to the issuance of the
Notes and the use of the net proceeds to repay all outstanding borrowings
under the Company's existing credit facilities, the amounts by which
earnings did not cover fixed charges would increase by approximately $230
million and $4.8 million in the year ended November 30, 1992 and the nine
months ended August 31, 1993, respectively.
35
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
The following Supplemental Financial Information for 1992 has been prepared
solely for illustrative purposes from the Company's 1992 Consolidated Financial
Statements and the internal books and records of the Company and should be read
in conjunction with the Selected Financial Data and the 1992 Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated by reference in this
Prospectus. The Supplemental Financial Information is intended to reflect
certain results of operations for the Company's continuing businesses and
operations after giving effect to the Restructuring and the other events
described below, assuming that they had occurred at the beginning of fiscal
1992. The Supplemental Financial Information should not be considered in
isolation or as a substitute for consolidated financial statements prepared in
accordance with generally accepted accounting principles. The Supplemental
Financial Information presents certain financial data for fiscal 1992 after
eliminating from the 1992 Consolidated Financial Statements: (i) the sales and
operating results of certain businesses and operations sold or discontinued as
part of the Restructuring; (ii) the sales and estimated operating results
associated with the Company's transactions with HSSI during 1992; (iii) the
other adjustments described below and (iv) the $191 million charge associated
with the Restructuring. The Supplemental Financial Information does not purport
to represent what the condensed statement of earnings of the Company would have
been had these businesses and operations been sold or discontinued for the full
1992 fiscal year and does not purport to project the consolidated statement of
earnings of the Company for any subsequent period.
The Supplemental Financial Information is derived from the Company's 1992
Consolidated Financial Statements after reflecting the following adjustments:
(i) The sales and operating results of HSSI have been eliminated from the
1992 Consolidated Financial Statements for all of fiscal 1992 to reflect
the sale of HSSI as part of the Restructuring.
(ii) Since the sale of HSSI and its subsidiaries in 1992, HSSI has
continued as a significant customer of the Company, although the volume of
purchases by HSSI has been declining. On December 21, 1993, HSSI and 25
affiliates commenced voluntary cases under Chapter 11 of the United States
Bankruptcy Code and are currently operating as debtors-in-possession. As a
result of these circumstances, there can be no assurance that the Company
will have future sales to HSSI. In 1992, the Company sold approximately $67
million of products to HSSI (the "HSSI Sales"), including approximately $50
million prior to the date HSSI was sold and $17 million subsequent to such
date. To reflect the uncertainty regarding future sales to HSSI, the
Supplemental Financial Information eliminates from the 1992 Consolidated
Financial Statements the HSSI Sales, the estimated gross margin associated
with the HSSI Sales and the estimated variable operating costs directly
attributable to the HSSI Sales. While a reduction of fixed operating costs
may be achievable if sales levels are permanently reduced, the Supplemental
Financial Information assumes that the sudden and complete loss of the HSSI
Sales would not allow for a corresponding reduction of fixed costs in the
short term. Consequently, the Supplemental Financial Information does not
eliminate fixed costs relating to the HSSI Sales. To the extent fixed costs
would have been allocated to the HSSI Sales, the estimated earnings would
be greater than those presented below. See "Risk Factors--Uncertainties
Regarding HSSI" and "The Company--Legal Proceedings".
(iii) To reflect the sale or discontinuance of other businesses and
operations principally pursuant to the Restructuring, the sales and
operating results of certain businesses, including Country Miss and certain
non-strategic manufacturing businesses which produced outerwear and
military and commercial uniforms, have been excluded from the 1992
Consolidated Financial Statements.
(iv) The charge related to the Restructuring which has been eliminated
included write-offs and other costs associated with the closing of certain
Kuppenheimer stores and a related production facility. The Supplemental
Financial Information does not include such charges or any other
adjustments relating to Kuppenheimer.
36
<PAGE>
(v) The license agreement between HSM and Christian Dior-New York
providing for the manufacture and marketing of men's tailored clothing
under the Christian Dior(R) brand name was terminated during 1992. As a
result, the sales, estimated gross margin and estimated variable operating
costs attributable to the tailored clothing manufactured and sold by the
Company pursuant to such license agreement have been eliminated from the
1992 Consolidated Financial Statements. See "The Company--Legal
Proceedings."
The Supplemental Financial Information does not reflect an adjustment to
historical interest expense for the investment in the sold or discontinued
businesses and operations described above. To the extent interest expense would
have been allocated to the investment in those sold or discontinued businesses
and operations, the estimated earnings would have been greater than those
presented below.
SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
UNAUDITED
1992 SUPPLEMENTAL
FINANCIAL INFORMATION
---------------------
(IN MILLIONS)
<S> <C>
Sales............................................... $672.3
Earnings before interest,
taxes, depreciation
and amortization (EBITDA).......................... $ 32.8
Earnings before interest
and taxes (EBIT)................................... $ 16.6
Pre-tax earnings (loss)............................. $ (4.5)
</TABLE>
37
<PAGE>
MANAGEMENT
The executive officers and significant employees of the Company and their
ages as of November 30, 1993 are as follows:
<TABLE>
<CAPTION>
CORPORATE EXECUTIVE
OFFICERS AGE POSITION
--------------------- --- ---------------------------
<S> <C> <C>
Elbert O. Hand 54 Chairman, Chief Executive
Officer and Director
Homi B. Patel 44 President, Chief Operating
Officer and Director
Wallace L. Rueckel 49 Executive Vice President
and Chief Financial Officer
Carey M. Stein 46 Executive Vice President,
Chief Administrative Offi-
cer, Secretary and General
Counsel
Glenn R. Morgan 46 Senior Vice President
and Controller
Frank A. Brenner 64 Vice President, Marketing
Services
James E. Condon 43 Vice President and Trea-
surer
Linda J. Valentine 43 Vice President, Compensa-
tion and Benefits
<CAPTION>
OPERATIONS EXECUTIVES
---------------------
<S> <C> <C>
Thomas G. Bowles 44 President and Chief Operat-
ing Officer, Intercontinen-
tal Branded Apparel
Thomas L. Hall 44 President and Chief Execu-
tive Officer, International
Women's Apparel
Kenneth A. Hoffman 50 President and Chief Execu-
tive Officer, Hart Schaff-
ner & Marx
Larry Levy 61 President and Chief Execu-
tive Officer, Kuppenheimer
R. Roydon Ricks 49 President and Chief Operat-
ing Officer, Trans-Apparel
Group
Steven J. Weiner 53 President and Chief Operat-
ing Officer, Hickey-Freeman
Thomas M. Wheeler 40 President and Chief Operat-
ing Officer, Biltwell Com-
pany
Solange Cohen 33 Vice President and
General Manager, Barrie
Pace
</TABLE>
CORPORATE EXECUTIVE OFFICERS
ELBERT O. HAND became Chairman and Chief Executive Officer of Hartmarx
Corporation in 1992. In his 28 years with the Company, he has held many
positions including President and Chief Operating Officer from 1987 to 1992 and
President of the Men's Apparel Group from 1982 to 1987. He has been a director
since 1984. He is the former Chairman and currently a director of the American
Apparel Manufacturers Association.
38
<PAGE>
HOMI B. PATEL became President in 1992 and Chief Operating Officer in 1993.
He also serves as Chairman of the Men's Apparel Group. He became a director of
the Company in January 1994. He has been employed by Hartmarx for 13 years,
during which time he has held a variety of management positions. He is
President of the Clothing Manufacturers Association and serves as its chief
labor negotiator.
WALLACE L. RUECKEL became Executive Vice President and Chief Financial
Officer in 1993. Prior to joining the Company, he served as a key financial
officer at Guardian Industries and its affiliates for nine years. He also
worked for Sundstrand Corporation from 1975 to 1984 and for Cummins Engine Co.
from 1967 to 1975.
CAREY M. STEIN became Chief Administrative Officer in 1993. He was named
Executive Vice President in 1992 and General Counsel and Secretary in 1984. He
has worked for the Company for 15 years. He is a member of the American Apparel
Manufacturers Association Legal Committee.
GLENN R. MORGAN was named Senior Vice President in 1993 and serves as the
Company's Controller and Chief Accounting Officer. He has worked for the
Company for 13 years. He serves on the board of the Financial Management
Committee of the American Apparel Manufacturers Association.
FRANK A. BRENNER became Vice President of Marketing Services in 1983. He has
been employed by Hartmarx for 24 years in a variety of advertising, marketing
and public relations positions.
JAMES E. CONDON became Vice President and Treasurer in 1986. He joined the
Company in 1977 and has been responsible for treasury operations, investor and
financial relationships and pension fund management.
LINDA J. VALENTINE became Vice President of Compensation and Benefits in
1993. She has been employed by Hartmarx for 12 years, during which time she has
held various management positions in compensation and human resources.
OPERATIONS EXECUTIVES
THOMAS G. BOWLES became President and Chief Operating Officer of
Intercontinental Branded Apparel in 1988. He joined IBA in 1987 as Executive
Vice President of Marketing and Merchandising. He began his career at Hartmarx
20 years ago and has worked in several of its business units.
THOMAS L. HALL joined the Company as President and Chief Executive Officer of
International Women's Apparel in 1989. He was formerly President and Chief
Operating Officer of Pyke Manufacturing, a women's apparel manufacturer.
KENNETH A. HOFFMAN became President and Chief Executive Officer of Hart
Schaffner & Marx in 1984. His career at Hartmarx spans 25 years during which he
held several executive positions including President of the predecessor to
Intercontinental Branded Apparel.
LARRY LEVY became President and Chief Executive Officer of Kuppenheimer in
1993. He joined Hartmarx in 1972 and served in various capacities at HSSI,
including Chief Executive Officer of Wallachs in New York and Baskins in
Chicago. Most recently, he was President of Field Bros.
R. ROYDON RICKS was named President and Chief Operating Officer of Trans-
Apparel Group in 1991. Since joining Hartmarx in 1980, Ricks has held several
executive positions for Hart Schaffner & Marx, and was President of the
Company's former Gleneagles outerwear subsidiary.
STEVEN J. WEINER became President and Chief Operating Officer of Hickey-
Freeman in 1992. He joined Hartmarx in 1979 and has worked in several of the
Company's businesses, including Intercontinental Branded Apparel and Hartmarx
International.
39
<PAGE>
THOMAS M. WHEELER was named President and Chief Operating Officer of Biltwell
in 1992. His career with Hartmarx began in 1977 in its former Fashionaire
business, later serving as President and Chief Operating Officer of Hartmarx
Special Markets Group.
SOLANGE COHEN became Vice President and General Manager of Barrie Pace in
1993. Since joining Hartmarx in 1984, she has held various positions at Barrie
Pace, including Buyer, Director of Marketing and Merchandise Manager.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the principal terms of certain indebtedness of the
Company does not purport to be complete and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the documents
relating to such indebtedness, copies of which have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part and other
documents filed by the Company with the Commission.
OVERRIDE AGREEMENT AND BRIDGE FACILITY
In December 1992, the Company entered into the Override Agreement and the
Bridge Facility with the Company's then principal lenders. The Override
Agreement substantially replaced or amended the provisions of prior agreements
covering the Company's $196 million unsecured borrowing facility with 13 banks,
$45 million of insurance term loans, approximately $38 million of bank term
loans, the ESOP loan guarantee and guarantees related to certain industrial
development bonds having aggregate borrowings of approximately $15 million. In
addition, the Bridge Facility provides for new seasonal borrowings of $35
million. Borrowings under the Override Agreement and the Bridge Facility are
secured by substantially all of the assets of the Company and its subsidiaries,
subject to a priority for certain trade creditors. Borrowings under the
Override Agreement, Bridge Facility and certain other debt extending to 2007
collectively constitute the current "Senior Debt."
The $307 million Override Agreement is in effect through December 30, 1995.
As of August 31, 1993, $255.8 million was outstanding under the Override
Agreement with $42.5 million available thereunder after taking into account
$8.7 million of outstanding letters of credit. The Bridge Facility, originally
$35 million and maturing on November 30, 1993, has been extended by the Company
for one year and provides for a $15 million commitment through November 30,
1994. The sale of the Notes contemplated hereby requires the consent of the
lenders under the Override Agreement and the Bridge Facility. Concurrently with
the sale of the Notes, the Company intends to enter into the New Credit
Facility described below (the "New Credit Facility"), cancel the Bridge
Facility and repay obligations outstanding under and cancel the Override
Agreement. At the present time, no borrowings are outstanding under the Bridge
Facility.
NEW CREDIT FACILITY
The Company has executed a commitment letter, which includes a summary of the
principal terms and conditions (the "Financing Commitment") and a fee letter
with General Electric Capital Corporation as managing agent (the "Managing
Agent") with respect to the New Credit Facility. The Financing Commitment is
subject to, among other things, (i) there being no material adverse change in
any information furnished to the Managing Agent regarding the Company and its
subsidiaries or the New Credit Facility or in the business, assets, revenue,
operations or prospects of the Company and its subsidiaries taken as a whole or
the financial condition of the Company and its subsidiaries taken as a whole
and (ii) the due execution and delivery of definitive documentation for the New
Credit Facility acceptable to the Managing Agent and its counsel. The Financial
Commitment terminates if the closing of the New Credit Facility is not
consummated on or before March 31, 1994. The following is a brief description
of the anticipated terms of the New Credit Facility and is subject to the
conditions set forth in the Financing Commitment.
40
<PAGE>
The New Credit Facility will be a secured revolving credit facility in an
aggregate maximum amount of $175 million (including a $25 million letter of
credit facility), subject to a borrowing base formula based upon 85% of
eligible accounts receivable and 55% of eligible inventory. The New Credit
Facility will be used to refinance the existing Override Agreement and Bridge
Facility, to finance ongoing working capital and letter of credit requirements
and for general corporate purposes. The New Credit Facility will mature three
years from its closing date.
The Company's obligations under the New Credit Facility will be secured by a
first priority security interest in substantially all of the current and
intangible assets of the Company and its subsidiaries. The New Credit Facility
is expected to include a negative pledge on all assets of the Company and its
subsidiaries and be guaranteed by the subsidiaries of the Company.
Borrowing under the New Credit Facility will be maintained as either base
rate or LIBOR loans, as the Company may elect from time to time, at a base rate
which is the greater of (a) a rate based on the weighted average of rates of
the 90-day commercial paper rate or (b) the base rate of a bank to be selected
by the Managing Agent plus 1.50% or LIBOR plus 2.50%. The New Credit Facility
will contain certain provisions for these rates to decline upon the achievement
of certain operating performance ratios. The New Credit Facility will require
the Company to pay certain fees.
The New Credit Facility is expected to contain material restrictions on the
operation of the Company's business, including covenants pertaining to capital
expenditures, asset sales, operating leases, minimum net worth and incurrence
of additional indebtedness, and ratios relating to minimum accounts payable to
inventory, maximum funded debt to EBITDA and minimum fixed charge coverage, as
well as other customary covenants, representations and warranties, funding
conditions and events of default. The Company does not believe that the
restrictions contained in these financial and operating covenants will cause
significant limitations on the Company's financial flexibility. In addition,
the terms of the New Credit Facility will require the obligations under the New
Credit Facility to be reduced to no more than $135 million for a minimum of 30
consecutive days during the period between April 1 and June 30 during each
fiscal year.
INDUSTRIAL DEVELOPMENT BONDS
In December 1993, the Company entered into loan agreements with the Indiana
Development Finance Authority ("IDFA") relating to economic development
refunding revenue bonds (the "EDBs") issued by the IDFA in the amount of $7.5
million (Michigan City issue) and $8.0 million (DesPlaines issue). The EDBs
refunded economic development revenue bonds issued in connection with the
construction of the Company's Michigan City distribution center and offices and
its DesPlaines Plaza facility. The EDBs bear a fixed coupon of 7.25% and were
issued at a discount to yield 7.50%. The EDBs mature July 1, 2014 (Michigan
City issue) and July 1, 2015 (DesPlaines issue). The Company, at its option,
may redeem the EDBs beginning July 1, 2000 at the redemption prices set forth
therein. The EDBs are unsecured obligations of Hartmarx Corporation and include
certain customary covenants, representations and warranties, and events of
default. The EDBs do not contain financial covenants or cross-default
provisions.
DESCRIPTION OF THE NOTES
The Notes will be issued under the Indenture, dated as of , 1994,
between the Company and Bank One Wisconsin Trust Company, N.A., as trustee (the
"Trustee"), a copy of the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summary, which describes certain provisions of the Indenture and the Notes,
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Indenture and the Notes, including the
definitions therein of terms not defined in this Prospectus. As used in
"Description of Notes," (i) capitalized or defined terms shall have the meaning
ascribed to them herein and (ii) the "Company" shall mean Hartmarx Corporation
and shall not include its subsidiaries.
GENERAL
The Notes will mature on , 2002, and will bear interest at the rate
per annum stated on the cover page hereof from , payable
semiannually in arrears on July 15 and January 15 of
41
<PAGE>
each year, commencing July 15, 1994, to the persons who are registered holders
thereof at the close of business on the July 1 or January 1 immediately
preceding such interest payment date. The Trustee will authenticate and deliver
Notes for original issue in an aggregate principal amount of $100 million.
Interest on the Notes will be computed on the basis of a 360-day year of
twelve 30-day months. Principal and interest will be payable at the office of
the Trustee, but, at the option of the Company, interest may be paid by check
mailed to the registered holders at their registered addresses. The Notes will
be transferable and exchangeable at the office of the Trustee and will be
issued in fully registered form, without coupons, in denominations of $1,000
and any integral multiple thereof.
REDEMPTION
On or after , 1998, the Notes may be redeemed at the option of the
Company, at any time as a whole, or from time to time in part, on not less than
30 days' nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest (if any) to the date of redemption (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12-month period commencing ,:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998.......................... %
1999.......................... %
2000.......................... %
2001 and thereafter........... 100.00%
</TABLE>
Notwithstanding the foregoing, at any time prior to , 1997, the
Company may redeem, in part and from time to time, with the net proceeds of one
or more Public Equity Offerings or Traco Warrant Exercises, up to $25 million
aggregate principal amount of the Notes, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest (if any) to the date of redemption (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
If redeemed during the 12-month period commencing ,:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1994.......................... %
1995.......................... %
1996.......................... %
</TABLE>
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
RANKING
The payment of the principal of, premium (if any) and interest on the Notes
is subordinated in right of payment, as set forth in the Indenture, to the
payment in full when due of all Senior Debt of the Company. However, payment
from the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "--Defeasance" below is not subordinate to any
Senior Debt or subject to the restrictions described herein. At August 31,
1993, after giving effect to the use of proceeds from the sale of the Notes
offered hereby and the New Credit Facility to repay existing Senior Debt, the
outstanding Senior Debt of the Company would have been $173 million. Although
the Indenture contains limitations on the amount of additional Debt which the
Company may incur, under certain circumstances the amount of such Debt could be
substantial and, in any case, such Debt may be Senior Debt. See "--Certain
Covenants--Limitation on Debt" below.
42
<PAGE>
The Company is a holding company which derives substantially all of its
income from its Subsidiaries. The Company must rely on dividends or other
intercompany transfers from its Subsidiaries to generate the funds necessary to
meet its debt service and other obligations, including payment of principal and
interest on the Notes. The ability of such Subsidiaries to pay such dividends
or other intercompany transfers is subject to applicable state laws. Claims of
creditors of such Subsidiaries, including trade creditors, secured creditors
and creditors holding guarantees issued by such Subsidiaries, and claims of
holders of Preferred Stock (if any) of such Subsidiaries generally will have
priority with respect to the assets and earnings of such Subsidiaries over the
claims of creditors of the Company, including holders of the Notes, even though
such obligations do not constitute Senior Debt. The Notes, therefore, will be
effectively subordinated to creditors (including trade creditors) and holders
of Preferred Stock (if any) of Subsidiaries of the Company. It is anticipated
that certain of the Subsidiaries will guarantee the Company's obligations under
the New Credit Facility. At August 31, 1993, after giving effect to the use of
proceeds from the Notes and the New Credit Facility to repay Senior Debt, the
amount of indebtedness and accounts payable of the Company's Subsidiaries
(excluding intercompany debt and debt guaranteed by the Company's Subsidiaries
which is included in the calculation of Senior Debt) would have been
approximately $22 million, and the Company's Subsidiaries would have had no
Preferred Stock outstanding. Although the Indenture limits the incurrence of
Debt and issuance of Preferred Stock by the Company's Subsidiaries, such
limitation is subject to a number of significant qualifications; moreover, the
Indenture does not impose any limitation on the incurrence by such Subsidiaries
of liabilities that are not considered Debt or Preferred Stock under the
Indenture. See "--Certain Covenants--Limitation on Subsidiary Debt and
Preferred Stock."
"Senior Debt" is defined as (i) all obligations under the New Credit
Facility; (ii) all obligations consisting of the principal of and premium (if
any) and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not post-filing interest is allowed in such proceeding),
whether existing on the date of the Indenture or thereafter incurred, in
respect of (A) indebtedness of the Company for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which the Company is responsible or liable; (iii) all
Capital Lease Obligations of the Company; (iv) all obligations of the Company
(A) for the reimbursement of any obligor on any letter of credit, bankers'
acceptance or similar credit transaction, (B) under interest rate swaps, caps,
collars, options and similar arrangements and foreign currency hedges entered
into in respect of any obligations described in clauses (i), (ii) and (iii) or
generally to hedge foreign exchange risks, (C) under receivables financing
facilities or (D) issued or assumed as the deferred purchase price of property
or services and all conditional sale obligations of the Company and all
obligations of the Company under any title retention agreement; (v) all
obligations of other persons of the type referred to in clauses (ii), (iii) and
(iv) and all dividends of other persons for the payment of which, in either
case, the Company is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any agreement which has the
economic effect of a guarantee; and (vi) all obligations of the Company
consisting of modifications, renewals, extensions, replacements, refinancings
and refundings of any obligations described in clause (i), (ii), (iii), (iv) or
(v); unless in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Notes. However, Senior Debt will not be
deemed to include (1) any obligation of the Company to any Subsidiary, (2) any
liability for federal, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (4) any indebtedness, guarantee or obligation of
the Company (other than the Bank Debt) which is contractually subordinate or
junior in right of payment to any other indebtedness, guarantee or obligation
of the Company or (5) the portion of any Debt issued in violation of the
provisions described under "--Certain Covenants--Limitation on Debt" below.
Only indebtedness of the Company that is Senior Debt will rank senior to the
Notes in accordance with the provisions of the Indenture. The Notes will in all
respects rank pari passu with all other Senior Subordinated Debt of the
Company. The Company has agreed in the Indenture that it will not issue (as
defined in "--Certain Definitions" below), directly or indirectly, any Debt
which is subordinate or junior in
43
<PAGE>
ranking in any respect to Senior Debt unless such Debt is Senior Subordinated
Debt or is expressly subordinated in right of payment to Senior Subordinated
Debt. Unsecured Debt is not deemed to be subordinate or junior to Secured Debt
merely because it is unsecured.
The Company may not pay the principal of, premium (if any) or interest on,
the Notes or make any deposit pursuant to the provisions described under "--
Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Senior Debt is not paid in full when
due or (ii) any other default on Senior Debt occurs and the maturity of such
Senior Debt is accelerated in accordance with its terms unless, in either case,
the default has been cured or waived and any such acceleration has been
rescinded or such Senior Debt has been paid in full. However, the Company may
pay the Notes without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representatives of the
Designated Senior Debt. During the continuance of any default (other than a
default described in clause (i) or (ii) of the second preceding sentence) with
respect to any Designated Senior Debt pursuant to which the maturity thereof
may be accelerated immediately without further notice (except such notice as
may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Company and the
Trustee of written notice of such default from the Representative of such
Designated Senior Debt specifying an election to effect such prohibition (a
"Payment Notice") and ending 179 days thereafter (or earlier if terminated (i)
by written notice to the Trustee and the Company from the Representative which
gave such Payment Notice, (ii) because such default is no longer continuing or
(iii) because such Designated Senior Debt has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Debt or the Representative of such
holders has accelerated the maturity of such Designated Senior Debt, the
Company may resume payments on the Notes after the end of such Payment Blockage
Period. Not more than one Payment Notice may be given in any consecutive 360-
day period, irrespective of the number of defaults with respect to Designated
Senior Debt during such period. However, if any Payment Notice within such 360-
day period is given by the Representative of any Designated Senior Debt (other
than the Bank Debt), the Representative of the Bank Debt may give another
Payment Notice within such period. In no event, however, may the total number
of days during which any Payment Blockage Period or Periods is in effect exceed
179 days in the aggregate during any consecutive 360-day period.
Upon any payment or distribution of the assets of the Company upon a total or
partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Debt will be
entitled to receive payment in full before the holders of the Notes are
entitled to receive any payment.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Debt or their Representatives of the acceleration. If any Designated
Senior Debt is outstanding, the Company may not pay the Notes until five days
after such notice is received and, thereafter, may pay the Notes only if the
Indenture otherwise permits the payment at that time.
By reason of such subordination provisions contained in the Indenture, in the
event of insolvency, creditors of the Company who are holders of Senior Debt
may recover more, ratably, than the holders of the Notes.
CHANGE OF CONTROL
Upon the occurrence of any of the following events each holder of Notes will
have the right to require the Company to repurchase all or any part of such
holder's Notes at a repurchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date): (i) any "person"
or "group" (within the meaning of Section 13(d) of the Exchange Act), together
with
44
<PAGE>
any Affiliates or Associates thereof, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have a beneficial ownership of all shares that any such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total voting power of equity securities entitled to vote in the election of
directors of the Company; (ii) liquidation or dissolution of the Company; or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved
by a vote of 66 2/3% of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
A Change of Control will be deemed to have occurred if an event described in
any of the foregoing clauses (i), (ii) or (iii) has occurred, regardless of
whether one of the events in any of the other clauses has also occurred.
Subject to the limitations discussed below, the Company could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit
ratings.
The occurrence of certain of the events which would constitute a Change of
Control may constitute a default under the New Credit Facility and could
constitute a default under the Company's other existing or future indebtedness.
In addition, the exercise by the holders of their right to require the Company
to repurchase the Notes could cause a default under such indebtedness, even if
the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. The Company's ability to repurchase the Notes may be
limited by applicable subordination provisions. See "--Ranking." Finally, the
Company's ability to pay cash to the holders of Notes upon a repurchase may be
limited by the Company's then existing financial resources.
Within 30 days following any Change of Control, the Company will mail a
notice to each holder stating (i) that a Change of Control has occurred and
that such holder has the right to require the Company to repurchase all or any
part of such holder's Notes at a repurchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date); (ii) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which will be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions, determined by
the Company consistent with the Indenture, that a holder must follow in order
to have its Notes repurchased.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. The Change of Control purchase
feature is a result of negotiations between the Company and the Underwriters.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with any
offer required to be made by the Company to repurchase the Notes as a result of
a Change of Control.
The provisions relative to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the holders of a majority in principal
amount of the Notes.
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CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture:
Limitation on Debt. The Company shall not issue, directly or indirectly, any
Debt unless the Consolidated EBITDA Coverage Ratio for the period of the most
recently completed four fiscal quarters of the Company ending at least 45 days
prior to (or, if earlier, the date on which the Company files a quarterly or
annual periodic report under the Exchange Act with the Commission which
includes consolidated financial statements including such quarter) the date
such Debt is issued exceeds 2.0 to 1.0.
Notwithstanding the foregoing, the Company may issue the following Debt: (1)
Debt issued pursuant to the New Credit Facility or any agreement or agreements
which refinance or replace the New Credit Facility, but only to the extent that
the aggregate of all Debt issued or issuable by the Company under the New
Credit Facility and all such refinancing agreements does not exceed the greater
of (A) $175 million and (B) the sum of (x) 55% of the book value of the
inventory of the Company and its Wholly Owned Subsidiaries (other than
Nonrecourse Subsidiaries) and (y) 85% of the book value of the accounts
receivable of the Company and its Wholly Owned Subsidiaries (other than
Nonrecourse Subsidiaries), in each case as determined in accordance with
generally accepted accounting principles (such sum of (x) and (y) is referred
to herein as the "Borrowing Base"); (2) Debt under Capital Lease Obligations
which does not exceed $10 million in the aggregate (less the amount of any Debt
under Capital Lease Obligations of any Subsidiary then outstanding and incurred
pursuant to clause (2) of "--Limitation on Subsidiary Debt and Preferred Stock"
below); (3) Debt owed to and held by a Wholly Owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any transfer of such Debt by such Wholly Owned Subsidiary (other
than to a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute
the issuance of such Debt by the Company; (4) the Notes and Debt issued in
exchange for, or the proceeds of which are used to refund or refinance, any
Debt permitted by this clause (4); provided, however, that (i) the principal
amount of the Debt so issued shall not exceed the principal amount of the Debt
so exchanged, refunded or refinanced plus an amount no greater than any
prepayment premium due under the terms of the Debt so exchanged, refunded or
refinanced and fees, costs and expenses of issuance of the Debt so issued and
(ii) either (x) the Debt so issued shall not mature prior to the earlier of (A)
the Stated Maturity of the Debt being exchanged, refunded or refinanced and (B)
the first anniversary of the Stated Maturity of the Notes or (y) the portion,
if any, of the Debt so issued that is scheduled to mature on or prior to the
Stated Maturity of the Notes has a weighted average life to maturity at the
time such Debt is incurred that is equal to or greater than the weighted
average life to maturity of the portion of the Debt being exchanged, refunded
or refinanced that is scheduled to mature on or prior to the Stated Maturity of
the Notes; (5) Debt (other than Debt described in clause (1), (2), (3) or (4)
of this paragraph) outstanding on the date on which the Notes were originally
issued and Debt issued in exchange for, or the proceeds of which are used to
refund or refinance, any Debt permitted by this clause (5); provided, however,
that (i) the principal amount of the Debt so issued shall not exceed the
principal amount of the Debt so exchanged, refunded or refinanced plus an
amount no greater than any prepayment premium due under the terms of the Debt
so exchanged, refunded or refinanced and fees, costs and expenses of issuance
of the Debt so issued and (ii) either (x) the Debt so issued shall not mature
prior to the earlier of (A) the Stated Maturity of the Debt being exchanged,
refunded or refinanced and (B) the first anniversary of the Stated Maturity of
the Notes or (y) the portion, if any, of the Debt so issued that is scheduled
to mature on or prior to the Stated Maturity of the Notes has a weighted
average life to maturity at the time such Debt is incurred that is equal to or
greater than the weighted average life to maturity of the portion of the Debt
being exchanged, refunded or refinanced that is scheduled to mature on or prior
to the Stated Maturity of the Notes; and (6) Debt in an aggregate principal
amount which, together with all other Debt of the Company then outstanding
(other than Debt permitted by clauses (1) through (5) of this paragraph or the
immediately preceding paragraph) does not exceed $10 million (less the amount
of any Subsidiary Debt or Preferred Stock then outstanding and incurred
pursuant to clause (7) of "--Limitation on Subsidiary Debt and Preferred Stock"
below).
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Notwithstanding the two immediately preceding paragraphs, the Company shall
not issue any Debt (i) if the proceeds thereof are used, directly or
indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any
Subordinated Obligations unless such Debt shall be subordinated to the Notes to
at least the same extent as such Subordinated Obligations or (ii) if such Debt
is subordinate or junior in ranking in any respect to any Senior Debt unless
such Debt is Senior Subordinated Debt or is expressly subordinated in right of
payment to Senior Subordinated Debt. In addition, the Company shall not issue
any Secured Debt which is not Senior Debt unless contemporaneously therewith
effective provision is made to secure the Notes equally and ratably with such
Secured Debt for so long as such Secured Debt is secured by a Lien. For
purposes of the preceding sentence, the granting of liquidation or other
preferences by the holders of Senior Debt to providers of trade credit to the
Company or any Subsidiary shall not render such trade credit Secured Debt.
Limitation on Subsidiary Debt and Preferred Stock. The Company shall not
permit any Subsidiary to issue, directly or indirectly, any Debt or Preferred
Stock except: (1) Debt or Preferred Stock issued to and held by the Company or
a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Debt
or Preferred Stock (other than to the Company or a Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the issuance of such Debt or
Preferred Stock by the issuer thereof; (2) Debt under Capital Lease Obligations
which does not exceed $10 million in the aggregate (less the amount of any Debt
under Capital Lease Obligations then outstanding and incurred pursuant to
clause (2) of the second paragraph of "--Limitation on Debt" above); (3) Debt
or Preferred Stock of a Subsidiary issued and outstanding on or prior to the
date on which such Subsidiary was acquired by the Company (other than Debt or
Preferred Stock issued as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Subsidiary became a Subsidiary
or was acquired by the Company); (4) Debt or Preferred Stock issued and
outstanding on or prior to the date on which the Notes were originally issued
(other than Debt or Preferred Stock described in clause (1), (2) or (3) of this
paragraph); (5) Debt or Preferred Stock issued in exchange for, or the proceeds
of which are used to refund or refinance, Debt or Preferred Stock referred to
in clause (2), (3) or (4) of this paragraph; provided, however, that (i) the
principal amount or liquidation value of such Debt or Preferred Stock so issued
shall not exceed the principal amount or liquidation value of the Debt or
Preferred Stock so refunded or refinanced plus an amount no greater than any
prepayment premium due under the terms of the Debt or Preferred Stock so
refunded or refinanced and reasonable expenses of issuance of the Debt or
Preferred Stock so issued and (ii) either (x) the Debt or Preferred Stock so
issued shall not mature prior to the earlier of (A) the Stated Maturity of the
Debt or Preferred Stock being exchanged, refunded or refinanced and (B) the
first anniversary of the Stated Maturity of the Notes or (y) the portion, if
any, of the Debt or Preferred Stock so issued that is scheduled to mature on or
prior to the Stated Maturity of the Notes has a weighted average life to
maturity at the time such Debt or Preferred Stock is issued that is equal to or
greater than the weighted average life to maturity of the portion of the Debt
or Preferred Stock being exchanged, refunded or refinanced that is scheduled to
mature on or prior to the Stated Maturity of the Notes; (6) Nonrecourse Debt of
a Nonrecourse Subsidiary issued after the date of the Indenture to finance the
acquisition of new assets acquired by the Company or its Subsidiaries after
such date; provided, however, that if any such debt thereafter ceases to be
Nonrecourse Debt of a Nonrecourse Subsidiary, then such event will be deemed to
constitute the issuance of such Debt by the issuer thereof; and (7) Debt and
Preferred Stock in an aggregate principal amount which, together with all other
Debt and Preferred Stock of Subsidiaries then outstanding (other than Debt or
Preferred Stock permitted by clauses (1) through (6) of this paragraph) does
not exceed $10 million (less the amount of any Debt then outstanding and
incurred pursuant to clause (6) of the second paragraph of "--Limitation on
Debt" above).
Limitation on Restricted Payments. The Company shall not, and shall not
permit any Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any distribution in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of its Capital
Stock (except dividends or distributions payable solely in its Nonconvertible
Capital Stock or in options, warrants or other rights to purchase its
Nonconvertible Capital
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Stock and except dividends or distributions payable to the Company or a
Subsidiary which is not a Nonrecourse Subsidiary), (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company, a
Subsidiary or any direct or indirect parent of the Company, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of acquisition) or (iv) make any
Investment (other than a Permitted Investment) in any Affiliate of the Company
or person, other than a Wholly Owned Subsidiary which is not a Nonrecourse
Subsidiary or a person which will become a Wholly Owned Subsidiary which is not
a Nonrecourse Subsidiary as a result of any such Investment (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being hereinafter referred to as a "Restricted
Payment") if at the time the Company or such Subsidiary makes such Restricted
Payment: (1) a Default shall have occurred and be continuing (or would result
therefrom); (2) the Company is not able to issue $1.00 of additional Debt in
accordance with the provisions of the first paragraph under "--Limitation on
Debt" above; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the date on which the Notes were originally
issued would exceed the sum of (a) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period) from , 199
to the end of the most recent fiscal quarter ending at least 45 days prior to
(or, if earlier, the date on which the Company files a quarterly or annual
periodic report under the Exchange Act with the Commission which includes
consolidated financial statements including such quarter) the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit); (b) the aggregate Net Proceeds received
by the Company from the issue or sale of, or as a capital contribution in
respect of, its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) subsequent to the date on which the Notes were originally issued (other
than an issuance or sale to a Subsidiary or an employee stock ownership plan or
similar trust); (c) the aggregate Net Proceeds received by the Company from the
issue or sale of its Capital Stock (other than Redeemable Stock or Exchangeable
Stock) to an employee stock ownership plan subsequent to , but
(if such employee stock ownership plan incurs any Debt) only to the extent that
any such proceeds are equal to any increase in the Consolidated Net Worth of
the Company resulting from principal repayments made by such employee stock
ownership plan with respect to Debt incurred by it to finance the purchase of
such Capital Stock; and (d) the amount by which Debt of the Company is reduced
on the Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to the date on which the Notes were originally issued of
any Debt of the Company convertible or exchangeable for Capital Stock (other
than Redeemable Stock or Exchangeable Stock) of the Company (less the amount of
any cash, or other property, distributed by the Company upon such conversion or
exchange).
The preceding paragraph shall not prohibit (i) any purchase or redemption of
Capital Stock or Subordinated Obligations of the Company made by exchange for,
or out of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Redeemable Stock or Exchangeable Stock and other
than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan); provided, however, that (A) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments and (B) the
Net Proceeds from such sale shall be excluded from clauses (3)(b) and (3)(c) of
the previous paragraph; (ii) any purchase or redemption of Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Debt of the Company; provided, however, that
such Debt (A) shall be subordinated to the Notes and shall be subordinated to
Senior Debt and Senior Subordinated Debt to at least the same extent as the
Subordinated Obligations so exchanged, purchased or redeemed and (B) either (x)
shall not mature prior to the earlier of (1) the Stated Maturity of the
Subordinated Obligations so exchanged, purchased or redeemed and (2) the first
anniversary of the Stated Maturity of the Notes or (y) the portion, if any,
that is scheduled to mature on or prior to the Stated Maturity of the Notes has
a weighted average life to maturity at the time such Debt is incurred that is
equal to or greater than the weighted average life to maturity of the portion
of the Subordinated Obligations being exchanged, purchased or redeemed that is
scheduled to mature on or prior to the Stated Maturity of the
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Notes; provided further, however, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments; (iii) any
purchase or redemption of Subordinated Obligations from Net Available Cash to
the extent permitted under "--Limitation on Sales of Assets and Subsidiary
Stock" below; provided, however, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments; (iv)
dividends paid within 60 days after the date of declaration thereof if at such
date of declaration such dividend would have complied with this covenant;
provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments; (v) the redemption by the
Company of any rights to purchase Capital Stock of the Company which rights
were issued pursuant to the Rights Agreement, dated as of January 17, 1986, as
amended, for an amount not to exceed on a per right basis the redemption price
of such right at the date of the Indenture, as adjusted for stock dividends and
similar transactions; provided, however, that such redemption shall be included
in the calculation of the amount of Restricted Payments; (vi) the purchase,
redemption, acquisition, cancellation or other retirement for value of shares
of Capital Stock of the Company, options on any such shares or related stock
appreciation rights or similar securities held by officers or employees or
former officers or employees (or their estates or beneficiaries under their
estates) or by any employee benefit plan, upon death, disability, retirement or
termination of employment or pursuant to the terms of any employee benefit plan
approved by the Board of Directors or a committee thereof or under any other
agreement approved by the Board of Directors or a committee thereof under which
such shares of stock or related rights were issued; provided, however, that the
aggregate cash consideration paid for such purchase, redemption, acquisition,
cancellation or other retirement of such shares of Capital Stock or related
rights after the date of the Indenture does not exceed $2.5 million in any
fiscal year or $1 million payable to any individual in any fiscal year;
provided further, however, that all such payments shall be included in the
calculation of the amount of Restricted Payments; and (vii) loans or advances
to officers, directors and employees of the Company and its Subsidiaries made
after the date of the Indenture in the ordinary course of business consistent
with past practices for the advancement of travel and other normal business
expenses or relocation expenses; provided, however, that such loans and
advances shall be excluded from the calculation of the amount of Restricted
Payments.
Limitation on Restrictions on Distributions from Subsidiaries. The Company
shall not, and shall not permit any Subsidiary to, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Debt or other obligation owed to
the Company, (ii) make any loans or advances to the Company or (iii) transfer
any of its property or assets to the Company, except: (1) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the date
on which the Notes were originally issued; (2) any encumbrance or restriction
with respect to a Subsidiary pursuant to an agreement relating to any Debt
issued by such Subsidiary on or prior to the date on which such Subsidiary
became a Subsidiary or was acquired by the Company (other than Debt issued as
consideration in, or to provide all or any portion of the funds utilized to
consummate, the transaction or series of related transactions pursuant to which
such Subsidiary became a Subsidiary or was acquired by the Company) and
outstanding on such date; (3) any encumbrance or restriction pursuant to an
agreement effecting a refinancing of Debt issued pursuant to an agreement
referred to in clause (1) or (2) of this paragraph or contained in any
amendment to an agreement referred to in clause (1) or (2) of this paragraph;
provided, however, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment are no less favorable to the holders of the
Notes than encumbrances and restrictions contained in such prior agreements;
(4) any such encumbrance or restriction consisting of customary nonassignment
provisions in leases, licenses or other contractual obligations governing
leasehold interests, licenses or contractual rights and entered into in the
ordinary course of business consistent with past practices to the extent such
provisions restrict the transfer of the lease, license or contractual rights or
of customary restrictions on transfer and interim conduct of business of assets
or business entered into in contracts providing for the disposition of such
assets or business; (5) in the case of clause (iii) above, restrictions
contained in agreements relating to purchase money financing arrangements of
Subsidiaries or contained in security agreements securing Debt of the Company
or a Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such purchase money financing arrangements or security
agreements; and (6) encumbrances or restrictions on Nonrecourse Debt of a
Nonrecourse Subsidiary.
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Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Subsidiary to, make any Asset Disposition unless (i)
the Company or such Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value, as determined in good
faith by the Board of Directors (including as to the value of all non-cash
consideration) of the shares and assets subject to such Asset Disposition and,
to the extent that the proceeds of such Asset Dispositions exceed $5 million in
any 12-month period, at least 75% of the consideration thereof received by the
Company or such Subsidiary is in the form of cash or cash equivalents or the
assumption of Debt of the Company or other obligations relating to such assets
and release from all liability on the Debt or other obligations assumed and
(ii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Subsidiary, as the case may be)
(A) first, to the extent the Company elects (or is required by the terms of any
Senior Debt) to prepay, repay or purchase Senior Debt or Debt (other than any
Redeemable Stock) of a Wholly Owned Subsidiary (in each case other than Debt
owed to the Company or an Affiliate of the Company) within 60 days from the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), at the Company's
election, to the investment by the Company or any Wholly Owned Subsidiary in
assets to replace the assets that were the subject of such Asset Disposition or
an asset that (as determined by the Board of Directors) will be used in the
business of the Company and the Wholly Owned Subsidiaries existing on the date
of the original issuance of the Notes or in business reasonably related
thereto, in each case within the later of one year from the date of such Asset
Disposition or the receipt of such Net Available Cash; (C) third, to the extent
of the balance of such Net Available Cash after application in accordance with
clauses (A) and (B), to make an Offer to purchase Notes pursuant to and subject
to the condition of the following paragraph, and (D) fourth, to the extent of
the balance of such Net Available Cash after application in accordance with
clauses (A), (B) and (C), to (x) any investment in the business or operations
of the Company or any Wholly Owned Subsidiary or (y) the prepayment, repayment
or purchase of Debt (other than any Redeemable Stock) of the Company or Debt of
any Subsidiary (other than Debt owed to the Company or an Affiliate of the
Company), in each case within one year from the later of the receipt of such
Net Available Cash and the date the Offer described in the following paragraph
is consummated; provided, however, that in connection with any prepayment,
repayment or purchase of Debt pursuant to clause (A) or (D) above, the Company
shall cause the related loan commitment (if any) to be permanently reduced in
an amount equal to the principal amount so prepaid, repaid or purchased;
provided, further, that the Company shall not be required to reduce the loan
commitment pursuant to clause (A) below the greater of (x) $175 million and (y)
the Borrowing Base after giving effect to the transaction giving rise to the
obligations under this paragraph. Notwithstanding the foregoing provisions of
this paragraph, (i) the Company and the Subsidiaries shall not be required to
apply any Net Available Cash in accordance with this paragraph except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
is not applied in accordance with this paragraph exceeds $10 million, and (ii)
the Company and the Subsidiaries shall not be required to receive any minimum
amount of cash consideration in the event of a sale of all or substantially all
of any Subsidiary of the Company which is or has been a Subsidiary of the
Company prior to the date hereof, the revenues of which are derived primarily
from the direct retail sale of apparel. Pending application of Net Available
Cash pursuant to this paragraph, such Net Available Cash shall be invested in
Permitted Investments of the type specified in clauses (i) or (ii) of the
definition of Permitted Investments.
In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (ii)(C) of the previous paragraph, the Company will be
required to purchase Notes tendered pursuant to an offer by the Company for the
Notes (the "Offer") at a purchase price of 100% of their principal amount plus
accrued interest to the purchase date in accordance with the procedures
(including prorationing in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of Notes tendered pursuant to the
Offer is less than the Net Available Cash allotted to the purchase of the
Notes, the Company shall apply the remaining Net Available Cash in accordance
with clause (ii)(D) of the previous paragraph. The Company shall not be
required to make an Offer for Notes pursuant to this paragraph if the Net
Available Cash available therefor (after application of the proceeds as
provided in clauses (ii)(A) and (ii)(B) of the previous paragraph) is less than
$5 million for any particular Asset Disposition (which lesser amounts shall not
be
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carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to the Offer. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Indenture by virtue thereof.
Limitation on Transactions with Affiliates. The Company shall not, and shall
not permit any Subsidiary to, conduct any business or enter into any
transaction or series of similar transactions (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company or any legal or beneficial owner of 5% or more of any
class of Capital Stock of the Company or with an Affiliate of any such owner
(other than a Wholly Owned Subsidiary or an employee stock ownership plan for
the benefit of the Company's or a Subsidiary's employees) unless (i) the terms
of such business, transaction or series of transactions are (a) set forth in
writing and (b) as favorable to the Company or such Subsidiary as terms that
would be obtainable at the time for a comparable transaction or series of
similar transactions in arm's-length dealings with an unrelated third person
and (ii) the Board of Directors has, by resolution, determined in good faith
that such business or transaction or series of transactions meets the criteria
set forth in (i)(b) above. This paragraph, however, will not prohibit (i) any
dividend, distribution or other transaction permitted under the covenant
described under "--Limitation on Restricted Payments" above or (ii) customary
compensation and employee benefit arrangements entered into with any officer or
director of the Company or of any Subsidiary in their capacity as officer or
director in the ordinary course of business and consistent with past practices.
Securities and Exchange Commission Reports. The Company shall file with the
Trustee and provide the holders of the Notes, within 15 days after it files
them with the Commission, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall continue to file with the Commission and provide the
Trustee and holders of the Notes with such annual reports and such information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) which are specified
in Sections 13 and 15(d) of the Exchange Act.
SUCCESSOR COMPANY
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any person unless:
(i) the resulting, surviving or transferee person (if not the Company) is
organized and existing under the laws of the United States of America or any
state thereof or the District of Columbia and such person expressly assumes by
a supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the
Indenture and the Notes; (ii) immediately prior to and after giving effect to
such transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee person or any Subsidiary as a result of such
transaction as having been issued by such person or such Subsidiary at the time
of such transaction), no Default has occurred and is continuing; (iii)
immediately after giving effect to such transaction, the resulting, surviving
or transferee person would be able to issue at least $1.00 of Debt pursuant to
the provisions of the first paragraph under "--Limitation on Debt" above; (iv)
immediately after giving effect to such transaction, the resulting, surviving
or transferee person has Consolidated Net Worth in an amount which is not less
than the Consolidated Net Worth of the Company prior to such transaction; and
(v) the Company delivers to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture.
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The resulting, surviving or transferee person will be the successor company.
Notwithstanding the foregoing, the covenant shall not restrict the merger of a
Wholly Owned Subsidiary (other than a Nonrecourse Subsidiary) into the Company.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, whether or
not such payment is prohibited by the provisions described under "--Ranking"
above, (ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, whether or not such payment is prohibited by the
provisions described under "--Ranking" above, (iii) the failure by the Company
to comply for 30 days after notice with any of its obligations under the
covenants described above under "--Successor Company," "--Limitation on Sales
of Assets and Subsidiary Stock" (other than a failure to repurchase Notes) or
"--Change of Control" (other than a failure to repurchase Notes), (iv) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (v) Debt of the Company or any
Significant Subsidiary (other than Nonrecourse Debt of a Nonrecourse
Subsidiary) is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Debt unpaid or accelerated exceeds $10 million (or its foreign
currency equivalent) and such failure continues for 10 days after notice (the
"cross acceleration provision"), (vi) certain events of bankruptcy, insolvency
or reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions") or (vii) any judgment or decree for the payment of money in excess
of $10 million is rendered against the Company or a Significant Subsidiary and
is not discharged and either (A) an enforcement proceeding has been commenced
by any creditor upon such judgment or decree or (B) there is a period of 60
days following such judgment or decree during which such judgment or decree is
not discharged, waived or the execution thereof stayed and, in the case of (B),
such default continues for 10 days after notice (the "judgment default
provision"). However, a default under clauses (iii), (iv), (v) or (vii) above
will not constitute an Event of Default until the Trustee or the holders of at
least 25% in principal amount of the outstanding Notes notify the Company of
the default and the Company does not cure such default within the time
specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a
Note may pursue any remedy with respect to the Indenture or the Notes unless
(i) such holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) holders of at least 25% in principal amount of the
outstanding Notes have requested the Trustee to pursue the remedy, (iii) such
holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt thereof and the offer of security or indemnity
and (v) the holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the holders of a majority
in principal amount of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power
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conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder of a Note or
that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of, premium (if any) or interest on any Note, the
Trustee may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is in the interest of the holders of the
Notes. In addition, the Company is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate indicating whether
the signers thereof know of any Default that occurred during the previous year.
The Company also is required to deliver to the Trustee, within 30 days after
the occurrence thereof, written notice of any event which would constitute
certain Defaults, their status and what action the Company is taking or
proposes to take in respect thereof.
AMENDMENT, SUPPLEMENT, WAIVER
Subject to certain exceptions, the Indenture may be amended or supplemented
with the consent of the holders of a majority in principal amount of the Notes
then outstanding and any past default or compliance with any provisions may be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding Note, no amendment may, among other things, (i) reduce the amount
of Notes whose holders must consent to an amendment, (ii) reduce the rate of or
extend the time for payment of interest on any Note, (iii) reduce the principal
of or extend the fixed maturity of any Note, (iv) reduce the premium payable
upon the redemption of any Note or change the time at which any Note may be
redeemed, (v) make any Note payable in money other than that stated in the
Note, (vi) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes, (vii) make any change to the subordination
provisions of the Indenture that adversely affects the rights of any holder or
(viii) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions.
Without the consent of any holder of the Notes, the Company and the Trustee
may amend or supplement the Indenture to cure any ambiguity, omission, defect
or inconsistency, to provide for the assumption by a successor corporation of
the obligations of the Company under the Indenture, to provide for
uncertificated Notes in addition to or in place of certificated Notes (provided
that the uncertificated Notes are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
or in a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code), to make any change to the subordination provisions
of the Indenture that does not adversely affect the rights of any holder of the
Notes, to add guarantees of the Notes, to add to the covenants of the Company
for the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any holder of the Notes or to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the
Trust Indenture Act of 1939. However, no amendment may be made to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Debt then outstanding or in effect unless the holders of
such Senior Debt (required pursuant to the terms of such Senior Debt) consent
to such change.
The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the
Notes, or any defect therein, will not impair or affect the validity of the
amendment.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Indenture or the Notes or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal security laws, and it is the view of the Commission that such a waiver
is against public policy.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes and
the Indenture ("legal defeasance") except for certain obligations, including
those respecting the defeasance trust and obligation to register the transfer
or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes
and to maintain a registrar and paying agent in respect of the Notes. The
Company at any time may terminate its obligations under the covenants described
under "--Certain Covenants" and "--Change of Control," the operation of the
cross acceleration provision, certain of the bankruptcy provisions and the
judgment default provision described under "--Defaults" above and the
limitations contained in clauses (iii) and (iv) described under "--Successor
Company" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii), (v), (vi) (with respect to any
Significant Subsidiary) or (vii) under "--Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) under "--Successor
Company" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivering to the Trustee an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or a change in applicable federal income tax law).
CONCERNING THE TRUSTEE
Bank One Wisconsin Trust Company, N.A. is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
"Affiliate" of any specified person means (i) any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director
or officer (A) of such specified person, (B) of any subsidiary of such
specified person or (C) of any person described in clause (i) above. For
purposes of this definition, control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Subsidiary (other than directors' qualifying shares),
property or other assets (each referred to for the purposes of this definition
as a "disposition") by the Company or any of its Subsidiaries, including any
disposition by means of a merger, consolidation or similar transaction, other
than (i) a disposition by a Subsidiary to the Company or by the Company or a
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of property or
assets in the ordinary course of business, (iii) a disposition of obsolete or
worn out assets in the ordinary course of business, (iv) a disposition subject
to the covenant described under "--Certain Covenants--Limitation on Restricted
Payments" above and (v) a disposition of receivables pursuant to an accounts
receivable financing facility.
"Average Life" means, as of the date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the date of
each successive scheduled principal payment of such Debt or redemption payment
on such Preferred Stock multiplied by the amount of such payment by (ii) the
sum of all such payments.
"Bank Debt" means any and all amounts payable under or in respect of the New
Credit Facility and all documents, instruments and agreements executed in
connection with the New Credit Facility (and any other agreement or agreements
which refinances or replaces the New Credit Facility in whole or in part), as
amended from time to time, including principal, premium (if any) interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any Preferred Stock.
"Consolidated EBITDA Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to (or,
if earlier, the date on which the Company files a quarterly or annual periodic
report
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under the Exchange Act with the Commission which includes consolidated
financial statements including such quarter) the date of such determination to
(ii) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that (1) if the Company or any Subsidiary has issued any Debt since
the beginning of such period that remains outstanding or if the transaction
giving rise to the need to calculate the Consolidated EBITDA Coverage Ratio is
an issuance of Debt, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Debt as if such Debt had been issued on the first day of such period and the
discharge of any other Debt repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Debt as if any such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period the Company or any Subsidiary shall have made any Asset Disposition, the
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any Debt of
the Company or any Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Subsidiaries in
connection with such Asset Dispositions for such period (or, if the Capital
Stock of any Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Debt of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such Debt
after such sale), (3) if since the beginning of such period the Company or any
Subsidiary (by merger or otherwise) shall have made an Investment in any
Subsidiary (or any person which becomes a Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the issuance of any Debt), as if such
Investment or acquisition occurred on the first day of such period, and (4) if
since the beginning of such period any person (that subsequently became a
Subsidiary or was merged with or into the Company or any Subsidiary since the
beginning of such period) shall have made any Asset Disposition or any
Investment that would have required an adjustment pursuant to clause (2) or (3)
above if made by the Company or a Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition or Investment occurred on
the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income
or earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Debt issued in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of the Company. If any Debt bears a floating rate of
interest and is being given pro forma effect, the interest on such Debt shall
be calculated as if the rate in effect on the date of determination had been
the applicable rate for the entire period (taking into account any Interest
Rate Protection Agreement applicable to such Debt to the extent that the
remaining term of such Interest Rate Protection Agreement exceeds 12 months).
"Consolidated Interest Expense" means, for any period and without
duplication, the total interest expense of the Company and its consolidated
Subsidiaries, including (i) interest expense attributable to capital leases,
(ii) amortization of debt discount and debt issuance cost (except to the extent
incurred in connection with the issuance of the Notes), (iii) capitalized
interest, (iv) non-cash interest payments, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs under Interest Rate Protection Agreements (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by persons other than the Company or a Wholly-owned
Subsidiary, (viii) interest incurred in connection with investments in
discontinued operations and (ix) interest actually paid by the Company or any
of its consolidated subsidiaries under any guarantee of Debt or any other
obligation of any other person.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(i) any net income or loss of any person if such person is not a
Subsidiary, except that the Company's equity in the net income of any such
person for such period shall be included in such Consolidated Net
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Income up to the aggregate amount of cash actually distributed by such
person during such period to the Company or a Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution to a Subsidiary, to the limitations contained in clause (iii)
below);
(ii) any net income of any person acquired by the Company or a Subsidiary
in a pooling of interests transaction for any period prior to the date of
such acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Subsidiary, directly or indirectly, to the
Company, except that (A) the Company's equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Subsidiary during such period to the Company or another Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary
for such period shall be included in determining such Consolidated Net
Income;
(iv) any gain or loss realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated
subsidiaries (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain or loss realized upon the sale or other disposition
of any Capital Stock of any person; or
(v) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" of any person means the total amounts shown on the
balance sheet of such person and its consolidated subsidiaries, determined on a
consolidated basis in accordance with generally accepted accounting principles,
as of the end of the most recent fiscal quarter of such person ending at least
45 days prior to (or, if earlier, the date on which the Company files a
quarterly or annual periodic report under the Exchange Act with the Commission
which includes consolidated financial statements including such quarter) the
taking of any action for the purpose of which the determination is being made,
as (i) the par or stated value of all outstanding Capital Stock of such person
plus (ii) paid-in capital or capital surplus relating to such Capital Stock
plus (iii) any retained earnings or earned surplus less (A) any accumulated
deficit, (B) any amounts attributable to Redeemable Stock and (C) any amounts
attributable to Exchangeable Stock.
"Debt" of any person means, without duplication,
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such person is responsible or liable;
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such person
and all obligations of such person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such person of a demand for reimbursement following
payment on the letter of credit);
(v) the amount of all obligations of such person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock or
Exchangeable Stock (but excluding any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through (v)
of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; and
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(vii) all obligations of the type referred to in clauses (i) through (vi)
of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means (i) the Bank Debt and (ii) other Senior Debt
that (A) is issued at one time or under a common agreement in an aggregate
outstanding principal amount of at least $25 million and (B) has been
designated Designated Senior Debt in an Officer's Certificate received by the
Trustee.
"EBITDA" for any period means the Consolidated Net Income for such period
(but without giving effect to adjustments, accruals, deductions or entries
resulting from purchase accounting, extraordinary losses or gains and any gains
or losses from any Asset Dispositions), plus the following to the extent
deducted in calculating such Consolidated Net Income: (i) income tax expense,
(ii) Consolidated Interest Expense, (iii) depreciation expense, (iv)
amortization expense and (v) all other non-cash charges (excluding any such
non-cash charge constituting an extraordinary item of loss or any non-cash
charge which requires an accrual of or a reserve for cash charges for any
future period).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company
which is neither Exchangeable Stock nor Redeemable Stock).
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Debt or other obligation of any person
and any obligation, direct or indirect, contingent or otherwise, of such person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation of such person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Interest Rate Protection Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement
designed to protect the Company or any Subsidiary against fluctuations in
interest rates.
"Investment" in any person means any loan or advance to, any acquisition of
Capital Stock, equity interest, obligation or other security of, or capital
contribution or other investment in, such person. Any subsequent issuance or
transfer of any Capital Stock that results in a Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary shall not be deemed to constitute the making of
a new Investment by the Company to the extent of the Company's then outstanding
Investments therein, except with respect to that portion of such Investment
that was made in connection with or otherwise in anticipation of such issuance
or transfer.
"issue" means issue, assume, guarantee, incur or otherwise become liable for;
provided, however, that any Debt or Capital Stock of a person existing at the
time such person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be issued by such Subsidiary at
the time it becomes a Subsidiary.
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"Lien" means any mortgage, pledge, security interest, lien, conditional sale
or other title retention agreement.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Debt or other obligations relating to
such properties or assets or received in any other noncash form) therefrom, in
each case net of all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, all federal, state, provincial, foreign and
local taxes paid or required to be accrued as a liability under generally
accepted accounting principles as a consequence of such Asset Disposition, and
in each case net of all payments made on any Debt which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be repaid out of the proceeds from such
Asset Disposition, and net of all distributions and other payments required to
be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition.
"Net Proceeds", with respect to any issuance or sale of Capital Stock, means
the aggregate proceeds of such issuance or sale including the fair market value
of property other than cash (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
resolution) net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.
"New Credit Facility" means the Credit Agreement, dated as of ,
1994, among the Company and certain financial institutions named therein as
Lenders and General Electric Capital Corporation as Managing Agent.
"Nonconvertible Capital Stock" means, with respect to any corporation, any
nonconvertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into nonconvertible common stock of such
corporation; provided, however, that Nonconvertible Capital Stock shall not
include any Redeemable Stock or Exchangeable Stock.
"Nonrecourse Debt" means Debt or that portion of Debt (i) as to which neither
the Company nor its Subsidiaries (other than a Nonrecourse Subsidiary) (A)
provide credit support (including any undertaking, agreement or instrument
which would constitute Debt), (B) is directly or indirectly liable, or (C)
constitute the lender and (ii) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against a
Nonrecourse Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Debt of the Company or its Subsidiaries to declare a
default on such other Debt or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity.
"Nonrecourse Subsidiary" means a Subsidiary which (i) has not acquired any
assets (other than cash) directly or indirectly from the Company or any
Subsidiary, (ii) only owns properties acquired after the date of the Indenture
and (iii) has no Debt other than Nonrecourse Debt.
"Officer" means the Chairman of the Board, the President, any Vice President,
the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Investments" shall mean (i) short-term obligations of, or fully
guaranteed by, the United States of America; (ii) commercial paper rated A-1 or
better by Standard and Poor's Corporation or P-1 or better by Moody's Investors
Service, Inc.; (iii) deposit accounts maintained in the ordinary course of
business
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at a bank or trust company which is organized under the laws of the United
States of America or any state thereof having capital, surplus and undivided
profits aggregating in excess of $500,000,000; (iv) certificates of deposit
issued by and time deposits with commercial banks (whether domestic or foreign)
having capital, surplus and undivided profits aggregating in excess of
$500,000,000; (v) deposits maintained as cash collateral with banks and
financial institutions providing cash management services to the Company or its
Wholly Owned Subsidiaries having an aggregate value which is at all times less
than $4 million; (vi) the receipt of notes or other Investments by the Company
or any Subsidiary in settlement of delinquent or defaulted accounts or notes
receivable; and (vii) deposit accounts maintained by the Company or
Subsidiaries under the terms of the Bank Debt. Notwithstanding the foregoing,
the Investments described in clauses (i), (ii) and (iv) above shall constitute
Permitted Investments only to the extent such Investments mature within 90 days
of the date of acquisition thereof.
"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten public offering of common
stock of the Company for cash pursuant to an effective registration statement
under the Securities Act.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise is
required to be redeemed on or prior to the first anniversary of the Stated
Maturity of the Notes or is redeemable at the option of the holder thereof at
any time on or prior to the first anniversary of the Stated Maturity of the
Notes.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Debt.
"Secured Debt" means any Debt of the Company secured by a Lien.
"Senior Subordinated Debt" means the Notes and any other indebtedness,
guarantee or obligation of the Company that specifically provides that such
indebtedness, guarantee or obligation is to rank pari passu with other Senior
Subordinated Debt of the Company and is not subordinated by its terms to any
indebtedness, guarantee or obligation of the Company which is not Senior Debt.
"Significant Subsidiary" means (i) any domestic Subsidiary of the Company
which at the time of determination either (A) had assets which, as of the date
of the Company's most recent quarterly consolidated balance sheet, constituted
at least 3% of the Company's total assets on a consolidated basis as of such
date or (B) had revenues for the 12-month period ending on the date of the
Company's most recent quarterly consolidated statement of income which
constituted at least 3% of the Company's total revenues on a consolidated basis
for such period (each such determination being made in accordance with
generally accepted accounting principles), (ii) any foreign Subsidiary of the
Company which at the time of determination either (A) had assets which, as of
the date of the Company's most recent quarterly consolidated balance sheet,
constituted at least 5% of the Company's total assets on a consolidated basis
as of such date or (B) had revenues for the 12-month period ending on the date
of the Company's most recent quarterly consolidated statement of income which
constituted at least 5% of the Company's total revenues on a consolidated basis
for such period (each such determination being made in accordance with
generally accepted accounting principles) or (iii) any Subsidiary of the
Company which, if merged with all Defaulting
60
<PAGE>
Subsidiaries of the Company, would at the time of determination either (A) have
had assets which, as of the date of the Company's most recent quarterly
consolidated balance sheet, would have constituted at least 10% of the
Company's total assets on a consolidated basis as of such date or (B) have had
revenues for the 12-month period ending on the date of the Company's most
recent quarterly consolidated statement of income which would have constituted
at least 10% of the Company's most recent quarterly consolidated statement of
income which would have constituted at least 10% of the Company's total
revenues on a consolidated basis for such period (each such determination being
made in accordance with generally accepted accounting principles). "Defaulting
Subsidiary" means any Subsidiary of the Company (other than a Nonrecourse
Subsidiary) with respect to which an event described under clause (v), (vi) or
(vii) of the first paragraph under "--Defaults" has occurred and is continuing.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the principal of such security is due
and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency unless such
contingency has occurred).
"Subordinated Obligation" means any Debt of the Company (whether outstanding
on the date hereof or hereafter incurred) which is subordinate or junior in
right of payment to the Notes.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries or (iii) one or more Subsidiaries.
"Tangible Property" means all land, buildings, machinery and equipment and
leasehold interests and improvements which would be reflected on a balance
sheet of the Company prepared in accordance with generally accepted accounting
principles, excluding (i) all such tangible property located outside the United
States of America, (ii) all rights, contracts and other intangible assets of
any nature whatsoever and (iii) all inventories and other current assets.
"Traco Warrant Exercise" means the sale of common stock of the Company for
cash pursuant to any exercise of the three-year Warrant to Purchase 1,649,600
shares of Common Stock issued pursuant to the Purchase Agreement, dated
September 20, 1992, between the Company and Traco.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
61
<PAGE>
UNDERWRITING
CS First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriters") have severally agreed to purchase from the
Company the principal amount of Notes set forth below opposite their respective
names:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
CS First Boston Corporation.............................. $
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......
------------
Total................................................ $100,000,000
============
</TABLE>
The Underwriting Agreement between the Company and the Underwriters provides
that the obligations of the Underwriters are subject to certain conditions
precedent and that the Underwriters will be obligated to purchase all of the
Notes if any are purchased.
The Company has been advised by the Underwriters that they propose to offer
the Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession of not more than % of the principal amount of the Notes; that the
Underwriters and such dealers may allow a discount of not more than % of the
principal amount of the Notes; and that the public offering price and
concession and discount to dealers may be changed.
The Notes will not be listed on any securities exchange. The Notes will be
tradeable in the over-the-counter market, but any such trading may be limited
and sporadic. Each of the Underwriters has advised the Company that it intends
to act as market maker for the Notes. However, any such market making may be
discontinued by each such Underwriter at any time in its sole discretion. No
assurance can be given as to the liquidity of the trading market for the Notes.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.
CS First Boston Corporation has provided financial advisory services to the
Company from time to time, including acting as (i) financial advisor in
connection with the sale of HSSI and the private placement of shares of its
common stock and a warrant to purchase its common stock for $30 million to
Traco and (ii) underwriter in connection with the public offering of 4,300,100
shares of the common stock of the Company consummated in July 1991. CS First
Boston Corporation has received customary fees and underwriting commissions in
connection with providing such services.
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby will be passed
upon for the Company by Skadden, Arps, Slate, Meagher & Flom, Chicago,
Illinois, and for the Underwriters by Kirkland & Ellis, Chicago, Illinois.
EXPERTS
The consolidated financial statements and schedules incorporated in this
Prospectus by reference to the 1992 Form 10-K have been so incorporated in
reliance upon the report of Price Waterhouse, independent accountants, given
upon the authority of said firm as experts in auditing and accounting.
62
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 4
Risk Factors............................................................... 12
Use of Proceeds............................................................ 16
Capitalization............................................................. 17
The Company................................................................ 18
Selected Consolidated Financial Information................................ 34
Supplemental Financial Information......................................... 36
Management................................................................. 38
Description of Certain Indebtedness........................................ 40
Description of the Notes................................................... 41
Underwriting............................................................... 62
Legal Matters.............................................................. 62
Experts.................................................................... 62
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
$100,000,000
% Senior Subordinated Notes
Due 2002
-----------------------
PROSPECTUS
-----------------------
CS First Boston
Merrill Lynch & Co.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all expenses in
connection with the issuance and distribution of the Notes being registered,
other than underwriting discounts and commissions. All amounts except the
Commission registration fee and the NASD filing fee are estimated.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $34,483
NASD Filing Fee.................................................. 10,500
Printing and Engraving Expenses.................................. *
Accounting Fees and Expenses..................................... *
Legal Fees and Expenses.......................................... *
Blue Sky Fees and Expenses....................................... 10,000
Trustee's Fees and Expenses...................................... *
Rating Agency Fees............................................... *
Miscellaneous.................................................... *
-------
Total........................................................ $
=======
</TABLE>
- --------
*To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of the State of Delaware (the "GCLD") and Article
EIGHTH of the Company's Restated Certificate of Incorporation provide for the
indemnification of any person who was, is or is threatened to be made a party
to any action because such person is or was a director, officer, employee or
agent of the Company, or served another enterprise at the request of the
Company, against reasonable expenses (including attorneys' fees) and, except as
to an action by or in the right of the Company whereby such person is found
liable to the Company, judgments, fines and reasonable settlement payments in
connection with such actions.
The Bylaws of the Company provide for indemnification of its officers and
directors to the fullest extent permitted by the GCLD. The Company has entered
into indemnification agreements (ratified by its shareholders) with each member
of its Board of Directors to provide them with specific contractual assurance
of indemnification, rights to advance reimbursement of related expenses and
certain other protections not specifically provided under Delaware law.
Directors' rights under the Indemnification Agreements are not exclusive of
other rights they have under the Company's Bylaws or Restated Certificate of
Incorporation or under Delaware law.
The GCLD authorizes the purchase of indemnification insurance by the Company.
The Company currently maintains a policy insuring, subject to certain
exceptions, its directors and officers and the directors and officers of its
subsidiaries against liabilities that may be incurred by such persons acting in
such capacities.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
Exhibit 1 *Form of Underwriting Agreement.
Exhibit 4-C *Form of % Senior Subordinated Notes Due 2002 of Hartmarx
Corporation.
Exhibit 4-D *Form of % Senior Subordinated Debt Securities Indenture.
Exhibit 4-E *Credit Agreement, dated as of , 1994, among the Company and
.
Exhibit 5 *Opinion of Skadden, Arps, Slate, Meagher & Flom as to the
legality of the Notes.
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges of Hartmarx
Corporation.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
Exhibit 23-A Consent of Price Waterhouse.
Exhibit 23-B *Consent of Skadden, Arps, Slate, Meagher & Flom (included as
part of Exhibit 5).
Exhibit 24 Power of Attorney of directors and certain officers of Hartmarx
Corporation, included on signature page.
Exhibit 25 Form T-1 Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Bank One Wisconsin Trust Company,
National Association, as Trustee under the Senior Subordinated
Debt Securities Indenture.
</TABLE>
- --------
*To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING THIS REGISTRATION STATEMENT ON FORM S-3 AND
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF
ILLINOIS, ON JANUARY 13, 1994.
Hartmarx Corporation
/s/ Wallace L. Rueckel
By: _________________________________
Wallace L. Rueckel
Executive Vice President and Chief
Financial Officer
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATE INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS ELBERT O. HAND, WALLACE L. RUECKEL AND CAREY M.
STEIN, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, EACH ACTING ALONE,
WITH FULL POWERS OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME,
PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO
FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, EACH ACTING ALONE, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, THEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS, EACH ACTING ALONE, OR HIS SUBSTITUTE OR SUBSTITUTES, MAY
LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Elbert O. Hand
- ------------------------------------
Elbert O. Hand Director, Chairman of the
Board and Chief Executive
Officer (Principal
Executive Officer) January 13, 1994
/s/ Wallace L. Rueckel
- ------------------------------------
Wallace L. Rueckel Executive Vice President and
Chief Financial Officer
(Principal Financial
Officer) January 13, 1994
/s/ Glenn R. Morgan
- ------------------------------------
Glenn R. Morgan Senior Vice President and
Controller (Principal
Accounting Officer) January 13, 1994
/s/ A. Robert Abboud
- ------------------------------------
A. Robert Abboud Director January 13, 1994
/s/ Letitia Baldrige
- ------------------------------------
Letitia Baldrige Director January 13, 1994
/s/ Jeffrey A. Cole
- ------------------------------------
Jeffrey A. Cole Director January 13, 1994
/s/ Raymond F. Farley
- ------------------------------------
Raymond F. Farley Director January 13, 1994
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald P. Jacobs
- ------------------------------------
Donald P. Jacobs Director January 13, 1994
/s/ Miles L. Marsh
- ------------------------------------
Miles L. Marsh Director January 13, 1994
/s/ Charles Marshall
- ------------------------------------
Charles Marshall Director January 13, 1994
/s/ Charles K. Olson
- ------------------------------------
Charles K. Olson Director January 13, 1994
/s/ Talat M. Othman
- ------------------------------------
Talat M. Othman Director January 13, 1994
/s/ Homi B. Patel
- ------------------------------------
Homi B. Patel Director January 13, 1994
/s/ Stuart L. Scott
- ------------------------------------
Stuart L. Scott Director January 13, 1994
/s/ Sam F. Segnar
- ------------------------------------
Sam F. Segnar Director January 13, 1994
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
------- ------------------- ----------
<C> <S> <C>
Exhibit 1 Form of Underwriting Agreement. *
Exhibit 4-C Form of % Senior Subordinated Notes Due 2002 of *
Hartmarx Corporation.
Exhibit 4-D Form of % Senior Subordinated Debt Securities *
Indenture.
Exhibit 4-E Credit Agreement, dated as of , 1994, among the *
Company and .
Exhibit 5 Opinion of Skadden, Arps, Slate, Meagher & Flom as *
to the legality of the Notes.
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges of
Hartmarx Corporation.
Exhibit 23-A Consent of Price Waterhouse.
Exhibit 23-B Consent of Skadden, Arps, Slate, Meagher & Flom *
(included as part of Exhibit 5).
Exhibit 24 Power of Attorney of directors and certain officers
of Hartmarx Corporation, included on signature
page.
Exhibit 25 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939, as amended, of Bank One
Wisconsin Trust Company, National Association, as
Trustee under the Senior Subordinated Debt
Securities Indenture.
</TABLE>
- --------
*To be filed by amendment.
II-5
<PAGE>
EXHIBIT 12
HARTMARX CORPORATION
STATEMENT OF COMPUTATION OF RATIOS
(in thousands, except ratios)
(unaudited)
<TABLE>
<CAPTION>
Years Ended November 30, 9 Months Ended
1988 1989 1990 1991 1992 8/31/92 8/31/93
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income per consolidated $38,015 $17,410 ($61,545) ($38,365) ($220,245) ($225,870) ($2,805)
statement of earnings
Add:
Income taxes 21,880 10,365 (33,265) (21,630) (6,605) (6,605) 0
Interest Expense 14,465 28,418 28,952 23,793 21,135 15,484 17,161
Portion of rents representative
of the interest factor (a) 18,772 21,760 23,138 22,825 20,088 18,754 8,068
Subtract:
Undistributed earnings of
non-consolidated affiliate (1,850) (510) 4,903 0 0 0 0
------- ------- -------- -------- --------- --------- -------
Income as adjusted $91,282 $77,443 ($37,817) ($13,377) ($185,627) ($198,237) $22,424
======= ======= ======== ======== ========= ========= =======
Fixed Charges:
Interest expense $14,465 $28,418 $28,952 $23,793 $21,135 $15,484 $17,161
Portion of rents representative
of the interest factor (a) 18,772 21,760 23,138 22,825 20,088 18,754 8,068
------- ------- -------- -------- --------- --------- -------
Fixed Charges $33,237 $50,178 $52,090 $46,618 $41,223 $34,238 $25,229
======= ======= ======== ======== ========= ========= =======
Ratio of earnings to fixed charges 2.75 1.54 * * * * *
======= ======= ======== ======== ========= ========= =======
* - Coverage shortfall $89,907 $59,995 $226,850 $232,475 $2,805
======== ======== ========= ========= =======
</TABLE>
(a) Represents one-third of rent expense which management believes
represents a reasonable approximation of the interest component of rent
expense.
<PAGE>
EXHIBIT 23-A
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 14, 1993, which appears on page 13 of the 1992 Annual Report to
Stockholders of Hartmarx Corporation, which is incorporated by reference in
Hartmarx Corporation's Annual Report on Form 10-K for the year ended November
30, 1992. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page 11 of such Annual Report on
Form 10-K. We also consent to the references to us under the headings "Experts"
and "Selected Consolidated Financial Information" in such Prospectus. However,
it should be noted that Price Waterhouse has not prepared or certified such
"Selected Consolidated Financial Information."
/s/ Price Waterhouse
PRICE WATERHOUSE
Chicago, Illinois
January 14, 1994
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION
305(B)(2)
----------------
BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
39-1332458
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
111 EAST WISCONSIN AVENUE, 53201
MILWAUKEE, WISCONSIN (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
----------------
HARTMARX CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3217140
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
101 NORTH WACKER DRIVE, 60606
CHICAGO, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
SENIOR SUBORDINATED DEBT SECURITIES
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES
OF THE TRUSTEE:
AS OF JANUARY 10, 1994
<TABLE>
<CAPTION>
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
<S> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING
INFORMATION:
(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE.
Not applicable by virtue of response to Item 13.
(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF
THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER
INDENTURE, INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES
WILL RANK AS COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER
INDENTURE.
Not applicable by virtue of response to Item 13.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR
REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR,
IDENTIFY EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND STATE THE NATURE
OF EACH SUCH CONNECTION.
Not applicable by virtue of response to Item 13.
1
<PAGE>
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
AS OF JANUARY 10,1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
------------- -------------- ------------ -----------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
AS OF JANUARY 10,1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
------------- -------------- ------------ -----------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE:
AS OF JANUARY 10,1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
WHETHER THE
SECURITIES
ARE VOTING AMOUNT OWNED BENEFICIALLY OR PERCENT OF CLASS
OR NONVOTING HELD AS COLLATERAL SECURITY REPRESENTED BY AMOUNT
TITLE OF CLASS SECURITIES FOR OBLIGATIONS IN DEFAULT GIVEN IN COL. C
- -------------- ------------ ---------------------------- ---------------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
2
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH
UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
AS OF JANUARY 10, 1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED BENEFICIALLY OR PERCENT OF CLASS
NAME OF ISSUER AND AMOUNT HELD AS COLLATERAL SECURITY FOR REPRESENTED BY AMOUNT
TITLE OF CLASS OUTSTANDING OBLIGATIONS IN DEFAULT BY TRUSTEE GIVEN IN COL. C
- ------------------ ----------- --------------------------------- ---------------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE
OF THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH
PERSON.
AS OF JANUARY 10, 1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED BENEFICIALLY OR PERCENT OF CLASS
NAME OF ISSUER AND AMOUNT HELD AS COLLATERAL SECURITY FOR REPRESENTED BY AMOUNT
TITLE OF CLASS OUTSTANDING OBLIGATIONS IN DEFAULT BY TRUSTEE GIVEN IN COL. C
- ------------------ ----------- --------------------------------- ---------------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES
OF SUCH PERSON ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
AS OF JANUARY 10, 1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED BENEFICIALLY OR PERCENT OF CLASS
NAME OF ISSUER AND AMOUNT HELD AS COLLATERAL SECURITY FOR REPRESENTED BY AMOUNT
TITLE OF CLASS OUTSTANDING OBLIGATIONS IN DEFAULT BY TRUSTEE GIVEN IN COL. C
- ------------------ ----------- --------------------------------- ---------------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
3
<PAGE>
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
AS OF JANUARY 10, 1994
<TABLE>
<CAPTION>
COL. A COL. B COL. C
NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
- ---------------------- ------------------ --------
<S> <C> <C>
</TABLE>
Not applicable by virtue of response to Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not nor has there been a default with respect to the
securities under this indenture.
(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE
HAS BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE
INDENTURE OR SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not nor has there been a default with respect to securities
outstanding under this indenture. The trustee is not a trustee under
another indenture under which other securities of the obligor are
outstanding.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable by virtue of response to Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE
QUALIFIED UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY.
Exhibit 1. A copy of the Articles of Association of Bank One Wisconsin
Trust Company, National Association as now in effect.
Exhibit 2. A copy of the certificate of authority to commence business.
Exhibit 3. A copy of the authorization to exercise corporate trust powers.
Exhibit 4. A copy of the existing By-laws of Bank One Wisconsin Trust
Company, National Association as now in effect.
Exhibit 5. Not applicable by virtue of response to Item 13.
5
<PAGE>
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
Exhibit 7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority, filed herewith.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE,
BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION, A NATIONAL BANKING
ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF
MILWAUKEE, AND STATE OF WISCONSIN, ON THE 12TH DAY OF JANUARY, 1994.
BANK ONE WISCONSIN TRUST COMPANY,
NATIONAL ASSOCIATION
/s/ John R. Rudolph
By
-----------------------------------
John R. Rudolph
Vice President
5
<PAGE>
Exhibit 1
THE MARINE TRUST COMPANY, N.A.
CONSENT OF SOLE STOCKHOLDER
April 28, 1988
The undersigned, being the sole stockholder of The Marine Trust Company,
N.A., does hereby waive notice of meeting and consents in writing to the
adoption of the following resolution as if the same was unanimously adopted at a
Special meeting of Stockholders duly called and held on April 28, 1988.
"RESOLVED, that Article First of The Articles of Association of The
Marine Trust Company, N.A. is hereby amended to read as follows:
'FIRST. The name and title of this Association shall be Bank One
Wisconsin Trust Company, National Association.
FURTHER RESOLVED, that this resolution and amendment shall become
effective on June 13, 1988."
MARISUB, INC.
By: /s/ Frederick L. Cullen
-----------------------------
Frederick L. Cullen
Executive Vice President
<PAGE>
Minutes of
The Marine Trust Company, N.A.
SPECIAL MEETING OF SHAREHOLDERS
October 28, 1980
A Special Meeting of the Shareholders of The Marine Trust Company, N.A., was
called to order by Norman A. Jacobs, President of the Association, at 1:55
p.m., October 28, 1980, at 111 East Wisconsin Avenue, Milwaukee, Wisconsin,
pursuant to Notice dated and mailed October 16, 1980. Arthur Saltzstein,
Secretary of the Association, acted as secretary of the meeting.
The Secretary presented the Notice of Meeting mailed to all Shareholders at
least ten days prior to the meeting in the manner required in the Articles of
Association.
The Secretary reported that out of a total of 10,000 shares of stock
outstanding and entitled to vote at the meeting, the following shares were
represented at the meeting in person or by proxy as follows:
The Marine Corporation by George R.
Slater, its proxy, 9,600 shares
Russell W. Britt 40 shares
Robert C. Di Renzo 40 shares
Richard M. Fitzsimmons 40 shares
Norman A. Jacobs 40 shares
George R. Slater 40 shares
Robert L. Waldo 40 shares
-----
Total shares represented 9,840 shares
The President announced that the owners of a majority of the stock of this
Association were either present in person or
<PAGE>
represented by proxy, thereby constituting a quorum for the conduct of business.
The purpose of the meeting stated in the Notice was to consider and act upon
the following proposed Resolution to amend the Articles of Association:
"RESOLVED, that the second paragraph of Article THIRD of the Articles of
Association of The Marine Trust Company, N.A. be amended to read as
follows by adding the underlined language:
'Each Director, during the full term of his directorship, shall own a
minimum of $1,000 par value of stock of this Association or an equivalent
----------------
ownership in a company controlling this national bank. Any vacancy in the
-----------------------------------------------------
Board of Directors may be filled by action of the Board of Directors. A
majority of the Board of Directors shall be necessary to constitute a
quorum for the transaction of business at any Director's meeting.'"
After discussion and upon motion duly made and seconded, the foregoing
resolution was unanimously adopted.
Upon motion duly made, seconded and unanimously carried, the meeting was
adjourned.
/s/ Arthur Saltztien
-------------------------------
Secretary
APPROVED:
/s/ Norman A. Jacobs
- -------------------------------
President
<PAGE>
ARTICLES OF ASSOCIATION
-----------------------
OF
--
THE MARINE TRUST COMPANY, N.A.
------------------------------
MILWAUKEE, WISCONSIN
--------------------
JULY 31, 1979
<PAGE>
ARTICLES OF ASSOCIATION
OF
THE MARINE TRUST COMPANY, N.A.
MILWAUKEE, WISCONSIN
For the purpose of organizing an Association to carry on the business of a
National Bank with Trust Powers limited to the exercise of trust powers under
the laws of the United States, the undersigned do enter into the following
Articles of Association:
FIRST: The title of this Association shall be "The Marine Trust Company,
N.A."
SECOND: The main office shall be in Milwaukee, Milwaukee County, Wisconsin.
The general business of the Association shall be conducted at its main office
and its legally established trust service offices.
THIRD: The Board of Directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) Shareholders. The number of
Directors to be elected shall be determined at the annual meeting of
Shareholders by a majority of the votes cast by the Shareholders in person or by
proxy, or by a similar vote at any special meeting called for that purpose, upon
due notice having been given according to law. Between meetings of the
Shareholders the Board of Directors by affirmative action of a majority of the
full Board may increase the number of Directors determined by the Shareholders
to constitute the Board of Directors and may appoint persons to fill the
resulting vacancies. The number of Directors shall not be so increased, however,
to a number which; (i) exceeds by more than two the number of Directors last
elected by the Shareholders where such number was fifteen or less; or (ii) to a
number which exceeds by more than four the number of Directors last elected by
the Shareholders where such number was sixteen or more.
Each Director, during the full term of his directorship, shall own a minimum
of $1,000 par value of stock of this Association. Any vacancy in the Board of
Directors may be filled by action of the Board of Directors. A majority of the
Board of Directors shall be necessary to constitute a quorum for the transaction
of business at any Director's meeting.
FOURTH: The regular annual meeting of the Shareholders of this Association
shall be held at its main office, or other convenient place duly authorized by
the Board of Directors on such day of each year as is specified therefor in the
By-Laws.
-1-
<PAGE>
FIFTH: The authorized amount of capital stock of this Association shall be
Two Hundred and Fifty Thousand Dollars ($250,000), divided into 10,000 shares of
common stock of the par value of Twenty-five Dollars ($25) each; but said
capital stock may be increased or decreased from time to time, in accordance
with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof,
each Shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the Shareholders, unless another time
subsequent to the date of the Shareholders' Meeting is specified in a resolution
adopted by the Shareholders at the time the increase is authorized. The Board of
Directors shall have the power to prescribe a reasonable period of time within
which the pre-emptive rights to subscribe to the new shares of capital stock
must be exercised.
If the capital stock is increased by a stock dividend, each Shareholder
shall be entitled to his proportionate amount of such increase in accordance
with the number of shares of capital stock owned by him at the time the increase
is authorized by the Shareholders, unless another time subsequent to the date of
the Shareholders' Meeting is specified in a resolution adopted by the
Shareholders at the time the increase is authorized.
SIXTH: The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board, unless the Board appoints
another director to be Chairman. The Board of Directors shall have the power to
appoint and to establish the compensation to be paid to such other officers as
may be required to transact the business of this Association; provided that the
Board may delegate by By-Law the power to appoint and establish the compensation
to be paid to all such other officers who do not have authority to participate
in major policy making functions of this Association. The Board of Directors
shall have the power to dismiss any officer of this Association.
The Board of Directors shall have the power to define the duties of officers
and employees of this Association and to require adequate bonds from them for
the faithful performance of their duties; to make all By-Laws that may be
lawful for the general regulation of the business of this Association and the
management of its affairs, and generally to do and perform all acts that may be
lawful for a Board of Directors to do and perform.
-2-
<PAGE>
Any person, his heirs, personal representatives, executors, or
administrators, may be indemnified or reimbursed by the Association for
reasonable expenses actually incurred in connection with any action, suit, or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of the
Association or of any firm, corporation, or organization which he served in any
such capacity at the request of the Association: Provided, however, that no
person shall be so indemnified or reimbursed in relation to any matter in such
action, suit, or proceeding as to which he shall finally be adjudged to have
been guilty of or liable for negligence or willful misconduct in the performance
of his duties to the Association: And, provided further, that no person shall
be so indemnified or reimbursed in relation to any matter in such action, suit,
or proceeding which has been made the subject of a compromise settlement
except with the approval of a court of competent jurisdiction, or the holders
of record of a majority of the outstanding shares of the Association, or the
Board of Directors, acting by vote of directors not parties to the same or
substantially the same action, suit, or proceeding constituting a majority of
the whole number of the directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which such person, his
heirs, personal representatives, executors, or administrators, may be entitled
as a matter of law.
The Board of Directors shall have the power to change the location of the
main office of this Association to any other place within the limits of
Milwaukee, Wisconsin, without the approval of the Shareholders of this
Association but subject to the approval of the Comptroller of the Currency, and
shall have the power to establish or change the location of any trust service
office of this Association to any other location, without the approval of the
Shareholders of this Association but subject to the approval of the Comptroller
of the Currency.
SEVENTH: The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
EIGHTH: The Board of Directors of this Association, any Shareholder owning
more than 50% of the stock of this Association, or any three or more
Shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of the Shareholders at any
time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place, and purpose of every regular annual, and every special meeting of
the Shareholders shall be given by first class mail, postage prepaid, mailed at
least ten days prior to the date of such meeting to each Shareholder of record
at his address as shown upon the books of this Association.
-3-
<PAGE>
Subject to the provisions of the laws of the United States, these Articles
of Association may be amended at any meeting of the Shareholders for which
adequate notice has been given, by the affirmative vote of the owners of a
majority of the stock of this Association, voting in person or by proxy.
IN WITNESS WHEREOF, we have hereunto set our hands this 31st day of July,
1979.
/s/ Willard H. Davidson Willard H. Davidson
- -----------------------
/s/ John C. Geilfuss John C. Geilfuss
- -----------------------
/s/ Norman A. Jacobs Norman A. Jacobs
- -----------------------
/s/ Robert F. Quasius Robert F. Quasius
- -----------------------
/s/ George R. Slater George R. Slater
- -----------------------
Filed August 13, 1979
Comptroller of the Currency
-4-
<PAGE>
LOGO EXHIBIT 2
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Robert L. Clarke, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "Bank One Wisconsin Trust Company, National Association'', Milwaukee,
Wisconsin, Charter No. 16823, is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the business
of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal
of office to be affixed to these
presents at the Treasury Department,
in the City of Washington and
District of Columbia, this 7th day of
September, 1990.
Signature of Comptroller of
the Currency
---------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 3
Comptroller of the Company
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D.C.
WHEREAS, THE MARINE TRUST COMPANY, N. A., L0CATED IN MILWAUKEE, STATE OF
WISCONSIN, BEING A NATIONAL BANKING ASSOCIATION, ORGANIZED UNDER THE STATUTES OF
THE UNITED STATES, HAS MADE APPLICATION FOR AUTHORITY TO ACT AS FIDUCIARY
AND WHEREAS, APPLICABLE PROVISIONS OF THE STATUTES OF THE UNITED STATES
AUTHORIZE THE GRANT OF SUCH AUTHORITY;
NOW THEREFORE, I HEREBY CERTIFY THAT THE NECESSARY APPROVAL HAS BEEN GIVEN AND
THAT THE SAID ASSOCIATION IS AUTHORIZED, EFFECTIVE AS OF THE COMMENCEMENT OF
BUSINESS JANUARY 2, 1980, TO ACT IN ALL FIDUCIARY CAPACITIES PERMITTED BY SUCH
STATUTES.
IN TESTIMONY WHEREOF, WITNESS MY SIGNATURE AND SEAL OF OFFICE
THIS THIRTY-FIRST DAY OF DECEMBER, 1979
(SEAL) (SIGNATURE LOGO OF Comptroller of the Currency)
COMPTROLLER OF THE CURRENCY
<PAGE>
STATE OF ILLINOIS
OFFICE OF
COMMISSIONER OF BANKS AND TRUST COMPANIES
Springfield, September 8, 1993
To all to whom these Presents Shall Come, Greeting:
CERTIFIED COPY
--------------
I, RICHARD N. LUFT, as Commissioner of Banks and Trust Companies of the State of
Illinois, do hereby certify that the attached is a true and correct copy of
Certificate of Authority, No. 226, issued under date of November 7, 1990, to the
BANK ONE WISCONSIN TRUST COMPANY, N.A., Milwaukee, Wisconsin, under the
provisions of an Act of the General Assembly of the State of Illinois entitled,
"An Act to provide for and regulate the administration of trusts by trust
companies,'' approved June 15, 1887 in force July 1, 1887, and acts amendatory
thereto and rules promulgated thereunder, subject to the limitations contained
in the accompanying Order.
Further, that said Certificate of Authority continues in full force and effect
as of this date.
IN TESTIMONY WHEREOF, I hereunto subscribe my
name and affix the seal of my office, the day
and year first above written.
RICHARD N. LUFT
-------------------------------------------
Commissioner of Banks and Trust Companies
By SCOTT D. CLARKE
-----------------------------------------
Scott D. Clarke, Manager
Corporate Fiduciary Division
(SEAL)
<PAGE>
STATE OF ILLINOIS
OFFICE OF
COMMISSIONER OF BANKS AND TRUST COMPANIES
Springfield, November 7, 1990
To all to whom these Presents Shall Come, Greeting:
BEFORE THE ILLINOIS COMMISSIONER OF BANKS AND TRUST COMPANIES
IN THE MATTER OF THE APPLICATION )
OF BANK ONE WISCONSIN TRUST )
COMPANY, N.A., MILWAUKEE, WISCONSIN, )
FOR A CERTIFICATE OF AUTHORITY )
TO BE AUTHORIZED AS A FOREIGN ) NO. 90-F-1
CORPORATE FIDUCIARY PURSUANT TO )
THE PROVISIONS OF SECTION 4-5 )
OF THE CORPORATE FIDUCIARY )
ACT. )
ORDER
-----
THIS MATTER coming before the Illinois Commissioner of Banks and Trust Companies
(hereafter the "Commissioner") upon the application of Bank One Wisconsin Trust
Company, N.A., Milwaukee, Wisconsin (hereafter the "Applicant"), for a
Certificate of Authority to act as a foreign corporate fiduciary under the
provisions of Section 4-5 of the Corporate Fiduciary Act (hereafter the "Act");
WHEREAS in the application the Applicant requested authority to act as fiduciary
in the following capacities:
1. trustee under agreement
2. trustee under will
3. trustee under bond indenture, mortgage, or other indebtedness
<PAGE>
4. executor
5. administrator
6. administrator to collect
7. guardian
WHEREAS the Commissioner has reviewed the application and accompanying and
supporting documents, has conducted such reviews and investigation as he deems
appropriate to support the findings required by Section 4-5 of the Act; and,
WHEREAS the Commissioner is of the opinion and finds:
1. That such foreign corporation is authorized by the laws
of the state of its organization or domicile to act as
a fiduciary in that state; and,
2. That a corporation organized under the laws of Illinois,
a national banking association, having its principal
place of business in Illinois, and a federal savings
and loan association or federal savings bank, having
its principal place of business in Illinois, and
authorized to act as a fiduciary in this State, may,
in the State of Wisconsin, act in a similar fiduciary
capacity or capacities as the case may be, under
conditions and qualifications which are not unduly
restrictive, when compared to those imposed by the
laws in Illinois.
WHEREAS Section 4-5(a) of the Corporate Fiduciary Act provides that the
Commissioner shall issue a Certificate of Authority to such corporation
concerning only the fiduciary capacity or such fiduciary capacities to which the
application pertains and with respect to which the Commissioner has been
furnished satisfactory evidence that such foreign corporation meets the
requirements of Section 4-5 of the Act.
THEREFORE, pursuant to the authority granted to the Commissioner under Section
4-2 of the Corporate Fiduciary Act, it is ordered and judged as follows that:
1. a Certificate of Authority is hereby issued to the Applicant,
a copy of which is attached hereto as an Exhibit and made
apart hereof;
2. the Applicant is hereby authorized and approved to exercise
only the following fiduciary functions:
a. trustee under agreement
b. trustee under will
c. trustee under bond indenture, mortgage, or other
indebtedness
d. executor
e. administrator
-2-
<PAGE>
f. administrator to collect
g. guardian
3. prior to accepting an appointment which would require
the Applicant to exercise fiduciary functions other than
those specifically enumerated in this Order, the Applicant
shall make further written application and obtain prior
written approval from the Commissioner;
4. this Certificate of Authority shall remain in full force
and effect until such time as such foreign corporate
fiduciary ceases to be eligible so to act under the
provisions of the Act; and
5. the Commissioner retains jurisdiction to enter such
other and further orders as may be appropriate to
enforce the provisions of this Order, the Corporate
Fiduciary Act and the rules and regulations promulgated
thereunder.
This Order entered this 7th day of November 1990.
WILLIAM C. HARRIS
--------------------------------------------------
Commissioner of Banks and Trust Companies
SCOTT A. MILLER
-------------------------------------------------
Scott A. Miller, Acting First Deputy Commissioner
(SEAL)
<PAGE>
EXHIBIT 4
BYLAWS
OF
BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION
As Adopted September 11, 1979
And as last amended February 28, 1989
<PAGE>
TABLE OF CONTENTS
INTRODUCTION PAGE 1
PART I MEETING OF SHAREHOLDERS
-----------------------
Section 1.01 Annual Meetings Page 1
Section 1.02 Postponed Election of Directors Page 2
Section 1.03 Special Meetings Page 2
Section 1.04 Notice of Meetings Page 2
Section 1.05 Proxies Page 2
Section 1.06 Voting Rights Page 3
Section 1.07 Voting for Election of Directors Page 3
Section 1.08 Organization of Shareholders'
Meeting Page 3
Section 1.09 Records of Voting at Meetings Page 3
Section 1.10 Reports of Meetings to the
Comptroller of the Currency Page 4
PART II DIRECTORS
---------
Section 2.01 Number of Directors Page 4
Section 2.02 Term of Office Page 4
Section 2.03 Oath of Office Page 5
Section 2.04 Vacancies Page 5
Section 2.05 Organization Meeting of the Board Page 5
Section 2.06 Regular Meetings Page 5
Section 2.07 Special Meetings Page 5
Section 2.08 Quorum Page 6
Section 2.09 Vote of Directors Proxies Page 6
Section 2.10 Fees Page 6
Section 2.11 Notice of Meeting; Waiver Page 6
Section 2.12 Unanimous Consent Without Meeting Page 7
PART III OFFICERS AND EMPLOYES
---------------------
Section 3.01 Officers Page 7
Section 3.02 Terms of Office Page 8
Section 3.03 Surety Bonds Page 8
Section 3.04 President Page 8
Section 3.05 Other Officers Page 9
Section 3.06 Secretary of the Board Page 9
<PAGE>
PART IV - COMMITTEES
----------
Section 4.01 Executive Committee Page 9
Section 4.02 Examining Committee Page 10
Section 4.03 Other Committees Page 11
Section 4.04 Committee Meetings Page 11
Section 4.05 Temporary Committee Vacancies Page 11
PART V - SEAL
----
Section 5.01 Form Page 12
Section 5.02 Authority to Use Seal Page 12
PART VI - STOCK
-----
Section 6.01 Transfer of Stock Page 12
Section 6.02 Dividends Page 12
Section 6.03 Certificates Page 12
Section 6.04 General Authority Page 13
PART VII - MISCELLANEOUS
-------------
Section 7.01 Real Estate Page 13
Section 7.02 Contracts, Drafts, Checks, etc. Page 13
Section 7.03 Delegation of Fiduciary Powers Page 13
Section 7.04 Fiduciary Files Page 13
Section 7.05 Fiduciary Investments Page 14
Section 7.06 Security Deposit Page 14
PART VIII - EMERGENCY OPERATIONS
--------------------
Section 8.01 Page 14
Section 8.02 Page 14
Section 8.03 Page 15
PART IX - CHANGES IN BYLAWS
-----------------
Section 9.01 Amendments Page 15
Section 9.02 Inspection Page 15
<PAGE>
BYLAWS
______
OF
__
BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION
______________________________________________________
AN ASSOCIATION ORGANIZED UNDER THE
__________________________________
NATIONAL BANKING LAWS OF THE UNITED STATES
__________________________________________
INTRODUCTION
____________
BUSINESS OF THE ASSOCIATION
___________________________
BANK ONE WISCONSIN TRUST COMPANY, National Association has been established
and organized for the purpose of carrying on the business of a national bank
with trust powers limited to the exercise of trust powers under the provisions
of the United States Code as amended (12 USC 27). Its operations are limited to
those of a trust company and nonbanking activities closely related thereto
including (1) serving as an investment advisor to an investment company, and (2)
providing to others data processing and data transmission services, facilities,
data bases, or access to such services, facilities or data bases by any
technological means.
The Board of Directors is responsible for the proper exercise of fiduciary
powers by the trust company. All matters pertinent thereto, including the
determination of policies, the investment and disposition of property held in a
fiduciary capacity, and the direction and review of the actions of all officers,
employees, and committees utilized by the trust company in the exercise of its
fiduciary powers, are the responsibility of the Board. In discharging this
responsibility, the Board of Directors may assign, by action duly entered in the
minutes, the administration of such of the trust company's fiduciary powers as
it may consider proper to assign such director(s), officer(s), employee(s) or
committee(s) as it may designate.
PART I
______
MEETINGS OF SHAREHOLDERS
________________________
1.01 ANNUAL MEETINGS
_______________
The regular annual meeting of the Shareholders of this Association, for
the election of Directors and for the transaction of such other business
as properly may come before the meeting, shall be held at its Main Office
in Milwaukee, Wisconsin, or any other convenient place duly
<PAGE>
authorized by the Board of Directors, on the first Wednesday of February
of each year at 1:45 o'clock p.m. or at such other date or hour as may be
specified by the Board of Directors, all in accordance with the annual
meeting the President of the Association shall make a report to the
Shareholders regarding the condition of the Association and shall review
the business of the preceding year.
1.02 POSTPONED ELECTION OF DIRECTORS
-------------------------------
If, from any cause, an election of Directors is not made on the day
fixed as hereinbefore prescribed, such election may be held at any
adjournment of the regular annual meeting of the Shareholders of this
Association or at a subsequent special meeting called in accordance with
the provisions of the laws of the United States.
1.03 SPECIAL MEETINGS
----------------
The Board of Directors of this Association, any Shareholder owning more
than 50% of the stock of this Association, or any three (3) or more
Shareholders owning, in the aggregate, not less than ten percent (10%) of
the stock of this Association, may call a special meeting of the
Shareholders at any time.
1.04 NOTICE OF MEETINGS
------------------
Unless otherwise provided by the laws of the United States or by the
Articles of Association, a notice of the time, place, and purpose of every
regular annual meeting and every special meeting of the Shareholders shall
be given by first-class mail, postage prepaid, mailed at least ten (10)
days prior to the date of such meeting to each Shareholder of record at
his address as shown upon the books of the Association.
1.05 PROXIES
-------
Shareholders may vote at any meeting of the Shareholders by proxies
duly authorized in writing, but no officer or employe of this Association
shall act as proxy. Proxies shall be valid for only one meeting, to be
specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
-2-
<PAGE>
1.06 VOTING RIGHTS
-------------
In deciding on questions at meetings of Shareholders, except in the
election of Directors, each Shareholder shall be entitled to one vote for
each share of stock held. A majority of votes cast shall decide each
matter submitted to the Shareholders at the meeting, except in cases where
by law a larger vote is required.
1.07 VOTING FOR ELECTION OF DIRECTORS
--------------------------------
In all elections of Directors, each Shareholder shall have the right to
vote the number of shares owned by him for as many persons as there are
Directors to be elected, or to cumulate such shares and give one candidate
as many votes as the number of Directors multiplied by the number of his
shares shall equal, or to distribute them on the same principle among as
many candidates as he shall think fit.
1.08 ORGANIZATION OF SHAREHOLDERS' MEETING
-------------------------------------
The holders of a majority of the outstanding shares entitled to vote, and
represented at any meeting of the Shareholders, may choose persons to act
as Chairman and as Secretary of the meeting. However, in the absence of
such choice, the Chairman of the Board, or in his absence the President of
the Association or, in his absence, a Vice President of the Association
shall act as Chairman of the meeting, and the Secretary of the Board of
Directors, or in his absence or in case he be the Chairman, a person
appointed by the Chairman of the meeting, shall act as Secretary of the
meeting.
1.09 RECORDS OF VOTING AT MEETINGS
-----------------------------
The record of proceedings at each meeting of the Shareholders shall show
the names of the Shareholders present and the number of shares of stock
held by each, the names of the Shareholders represented by proxy and the
number of shares of stock held by each, and the names of the proxies; and
also the number of shares voted on each action taken and the number of
shares voted for each candidate for Director. This record shall be
included in the minute book of the Association.
1.10 REPORTS OF MEETINGS TO THE
COMPTROLLERS OF THE CURRENCY
----------------------------
After each meeting of the Shareholders, there shall be forwarded to the
Comptroller of the Currency a report thereof, in the form prescribed by the
Comptroller of the Currency.
<PAGE>
PART II
-------
DIRECTORS
---------
2.01 NUMBER OF DIRECTORS
-------------------
As prescribed by the Laws of the United States and the Articles of
Association, the Board of Directors shall consist of not less than five (5)
nor more than twenty-five (25) Shareholders. The number of Directors to be
elected shall be determined at the annual meeting of Shareholders by a
majority of the votes cast by the Shareholders in person or by proxy, or by
a similar vote at any special meeting called for the purpose, upon due
notice having been given according to law. Between meetings of the
Shareholders, the Board of Directors by affirmative action of a majority of
the full Board may increase the number of Directors determined by the
Shareholders to constitute the Board of Directors and may appoint persons
shall not be so increased, however, to a number which; (i) exceeds by more
than two (2) the number of Directors last elected by the Shareholders where
such number was fifteen (15) or less; or (ii) to a number which exceeds by
more than four (4) the number of Directors last elected by the Shareholders
where such number was sixteen (16) or more. In no event, shall the number
of Directors be increased to more than twenty-five (25).
2.02 TERMS OF OFFICE
---------------
The Directors of this Association shall hold office until the next
annual meeting of Shareholders or until their successors are elected and
have qualified. In the event the number of Directors as determined by the
Shareholders is increased between annual meetings of the Shareholders by
action of the Board of Directors, the persons appointed to fill the
resulting vacancies shall hold office until the next election of Directors
and until their successors shall have qualified. However, a director shall
resign, effective as of the last day of the month in which he attains
Seventy (70) years of age or, in the opinion of the Chief Executive Officer
of the Association, ceases to be active in business, whichever first
occurs. All directors who are officers of the Association, its parent
holding company or a holding company subsidiary shall resign on the last
day of the month in which they attain Sixty-five (65) years of age or when
they cease to be employed by the Association, its parent holding company or
a holding company subsidiary except that any officer who has been Chief
Executive Officer of the Association or its parent holding company may
serve through the end of the month in which he attains Seventy (70) years
of age. All directors must meet such citizenship, residency and stock
ownership requirements as prescribed by law.
-4-
<PAGE>
2.03 OATH OF OFFICE
Each person elected or appointed a Director of this Association must
take the oath of such officer in the form prescribed by the Comptroller of
the Currency. No person elected or appointed a Director of this
Association shall exercise the functions of such office until he has taken
such oath.
2.04 VACANCIES
Any vacancies occurring in the Board of Directors shall be filled, in
accordance with the laws of the United States, by appointment by the
remaining Directors, and any Director so appointed shall hold office until
the next election except as provided in Section 2.02. (Rev. 2/15/84)
2.05 ORGANIZATION MEETING OF THE BOARD
Following the annual meeting of the Shareholders, the Chairman, or the
Secretary, of the meeting shall notify promptly the Directors-Elect of
their election, and they shall meet promptly for the purpose of taking
their oaths, organizing the new Board, appointing officers and fixing
salaries for the ensuing year, and for transacting such other business as
properly may come before the Organization Meeting.
2.06 REGULAR MEETINGS
The regular meetings of the Board of Directors shall be held without
notice of the first Wednesday of the months of February, May, August and
November at the Main Office at 2:00 o'clock p.m., or at such other time,
date or place as shall be designed by the Board or the Executive Committee.
When any regular meeting of the Board falls upon a holiday, the meeting
shall be held without notice on the next banking business day unless the
Board or Executive Committee shall designate some other day.
2.07 SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by the
Chairman of the Board if there be one, the President of the Association, or
at the request of three (3) or more Directors.
-5-
<PAGE>
2.08 QUORUM
------
A majority of the members of the Board of Directors shall constitute
a quorum for the transaction of business. If, at the time fixed for the
meeting, including the meeting to organize the new Board following the
annual meeting of Shareholders, a quorum is not present, the Directors in
attendance may adjourn the meeting from time to time until a quorum is
obtained.
2.09 VOTE OR DIRECTORS - PROXIES
---------------------------
Except as otherwise provided in Section 8.01 of these Bylaws, a
majority of those Directors present and voting at any meeting of the Board
of Directors shall decide each matter considered. A Director cannot vote
by proxy or otherwise act by proxy at a meeting of the Board of Directors.
2.10 NOTICE OF MEETING; WAIVER
--------------------------
Notice of each meeting of the Board of Directors, except the annual
meeting, shall be (a) given at least five (5) days previously thereto by
written notice mailed to each director at his business address; or (b)
delivered or given, as the case may be, at least 24 hours previously
thereto by written notice delivered personally or given by telegram, cable
or radiogram or oral notice, by word of mouth, telephone or radiophone. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice
be given by telegram such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company at the point of origin of
the message.
Whenever any notice whatever is required to be given to any Director of
the Association under the provisions of these Bylaws or under the
provisions of the Articles of Association or under the provisions of any
statute, a waiver thereof in writing, signed at any time whether before or
after the time of meeting, by the Director entitled to timely notice. The
attendance of a Director at a meeting shall constitute a waiver of notice
of such meeting, except where a Director attends a meeting and thereat
objects to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at nor
the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
-6-
<PAGE>
2.12 UNANIMOUS CONSENT WITHOUT MEETING
---------------------------------
Any action required or permitted by the Articles of Association or
Bylaws or any provision of law to be taken by the Board of Directors at a
meeting or by resolution may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
Directors then in office.
PART III
--------
OFFICERS AND EMPLOYEES
----------------------
3.01 OFFICER
-------
The Board of Directors shall appoint and establish the compensation to
be paid to a President, one or more Vice Presidents, one or more of who
may be designated Executive Vice President, or Senior Vice President, a
Secretary and Cashier who may also be a Vice President, and may appoint
and establish the compensation to be paid to a Chairman of the Board. The
President shall be the Chairman of the Board unless the Board appoints
some other Director to act in that capacity. If the Board has appointed a
Chairman of the Board and he is absent or unable to act, the President
shall act as Chairman of the Board in his stead.
The Chief Executive Officer shall appoint, establish the compensation
to be paid to, and shall have the authority to terminate officers of this
Association below the rank of Vice President.
3.02 TERMS OF OFFICE
---------------
The President shall hold office for the current year for which the
Board of which he shall be a member was elected, unless he shall resign,
become disqualified or be removed; and any vacancy occurring in the office
of the President shall be filled promptly by the remaining members of the
Board of Directors. Each officer shall hold office at the pleasure of the
Board of Directors.
3.03 SURETY BONDS
------------
Each officer and employee of the Association shall give bond of
suitable amount with security to be approved by the Board of Directors,
conditioned for the honest faithful discharge of his duties as such
officer or employee. At the discretion of the Board, such bonds may be
schedule or blanket form and the premiums shall be paid by the
Association. The amount of such bonds, the form of coverage and the name
of the company providing the surety therefor shall be reviewed annually
by the Board of Directors.
-7-
<PAGE>
3.04 PRESIDENT
---------
The President shall be the chief executive officer and principal trust
officer of the Association and shall manage, direct and supervise all its
activities. He shall perform such duties as may be required of him by the
laws of the United States, the Articles of Association, these Bylaws and
the Board of Directors; and he shall have such other powers and duties as
usually are incident to the office of President. To the extent not
delegated by the Board of Directors to others, he shall do or cause to be
done all things necessary or proper in carrying on the fiduciary
activities of the Association in accordance with the provisions of law and
regulations and shall be repsonsible for all assets and documents held by
the Association in connection with fiduciary matters. He shall act
pursuant to opinion of counsel where such opinion is deemed necessary.
Opinions of counsel shall be retained on file in connection with all
important matters pertaining to fiduciary activities. No fiduciary account
shall be accepted on behalf of the Association without the approval of the
President or such other officers or employees as he may designate.
3.05 OTHER OFFICERS
--------------
All other officers of the Association appointed by the Board of
Directors shall perform such duties as it shall prescribe. The duties of
officers appointed by the Chief Executive Officer shall be as prescribed
by him. The Chairman of the Board, if there be one, shall perform the
duties of the President and Chief Executive Officer if he is absent or
unable to act, or if there be no Chairman of the Board or he too is absent
or unable to act, the Vice Presidents shall perform the duties of the
President in his absence or his inability to act in the order designated
by the Board of Directors or, if it has made no such designation, in the
order of priority designated by the President.
3.06 SECRETARY OF THE BOARD
----------------------
The Secretary and Cashier will act as Secretary of the Association and
the Board and its committees and shall be responsible for the minute book
of the Association in which he shall maintain and preserve the
organization papers of the Association, the Articles of Association, the
returns of elections, the Bylaws, the proceedings of regular and special
meetings of the Board of Directors and of the Shareholders and the reports
of the Committees and Board of Directors. The minutes of each meeting
shall be signed by the Secretary of the Board of the acting secretary of
the meeting and shall be attested by the presiding officer.
-8-
<PAGE>
PART IV
-------
COMMITTEES
----------
4.01 EXECUTIVE COMMITTEE
-------------------
There shall be a standing committee of this Association known as the
Executive Committee consisting of the President, together with at least
two (2) other Directors, who shall be appointed by the Board of Directors
each year at its annual meeting.
The board shall designate one of the members to be Chairman. If the
Chairman of the Executive Committee is unable to act for any reason, the
remaining members of the committee shall appoint one of their members to
act as temporary chairman. The Chairman of the Executive Committee may
appoint from the members of the Board of Directors a substitute to fill
any temporary vacancy in the Committee.
Subject to the control of the Board of Directors, the committee shall
direct the management of the affairs, of the association to the extent
permitted by law in the interim between meetings of the Board.
The committee may hold its meetings at such times and places as it may
determine. Special meetings shall be held at the call of the Chairman of
the Executive Committee, or the President of the Association. A majority
of the members shall constitute a quorum for the transaction of business,
and in every case the affirmative vote of a majority of the members shall
be necessary to the adoption of any resolution. Minutes shall be kept on
the business transacted at its meetings, and shall be read at the next
succeeding meeting of the committee.
The Executive Committee shall report its actions in writing at each
regular meeting of the Board of Directors, which shall approve or
disapprove the report and record such action in the minutes of the meeting.
4.02 EXAMINING COMMITTEE
-------------------
There shall be a standing committee of this Association known as the
Examining Committee appointed annually by the Board of Directors. This
committee shall consist of not less than two (2) members of the Board of
Directors, none of whom shall be officers of this Association. Committee
members may be added by the Board of Directors from time to time. The
board shall designate one of the members to be
-9-
<PAGE>
Chairman. Each member shall serve until the next organizational meeting of
the Board, unless otherwise specified at the time of his appointment. A
majority of the members of the committee shall constitute a quorum for the
transaction of business.
The Committee shall at least once during each calendar year and within
15 months of the last such audit, make suitable audits of the trust
company or cause suitable audits to be made by auditors responsible only
to the board of directors, and at such time shall ascertain the company
has been administered in accordance with law, Regulation 9 of the
Comptroller of the Currency and sound fiduciary principles. The board of
directors may elect, in lieu of such periodic audits, to adopt an adequate
continuous audit system. A report of the audits and examination required
under this section, together with the action taken thereon, shall be noted
in the minutes of the board of directors.
In performing its duties the committee may utilize any person,
including auditors, public accountants, attorneys or officers or employees
of The Marine Corporation, any of its subsidiaries of this Association to
assist it. The authority and duties of this committee shall be as follows:
(a) To examine the reports of audits conducted by the Auditing
Department of The Marine Corporation or the Association, and such
supplemental information as may be required of the auditing staff in
relation to the Association.
(b) To review each Report of Examination of the Association by National
Bank Examiners, and any correspondence from the Comptroller of the
Currency relating to its activities, for the purpose of verification and
correction of exceptions which may have been brought to the attention of
the Association.
(c) To report to the Board of Directors, not less often than annually,
the results of its examination and review and results of audits made and
the sufficiency of auditing practices and procedures from time to time in
effect, together with its recommendations.
(d) To perform such other duties as may be prescribed by the Board of
Directors.
4.03 OTHER COMMITTEES
----------------
The Board of Directors may appoint, from time to time, other
committees, composed of one or more members each, for such purposes and
with such powers as the Board may determine.
-10-
<PAGE>
4.04 COMMITTEE MEETINGS
------------------
Each committee shall determine its own time and place of meetings
unless otherwise directed by the Board of Directors.
4.05 TEMPORARY COMMITTEE VACANCIES
-----------------------------
If any committee member shall be absent or temporarily unable to act,
the Board of Directors may designate another directors, who is otherwise
qualified to act in his stead; in the interim between meetings of the
Board, the Chairman of the Board or in the event of his absence or
inability to act, the President shall have the power to designate such
substitute members of all committees, except the Executive Committee.
PART V
------
SEAL
----
5.01 FORM
----
The following is an impression of the Seal adopted by the Board of
Directors of this Association.
(CORPORATE SEAL)
5.02 AUTHORITY TO USE SEAL
---------------------
Each officer of this Association shall have the authority to affix the
corporate seal of this Association and to attest the same.
PART VI
-------
STOCK
-----
6.01 TRANSFER OF STOCK
-----------------
The stock of this Association shall be assignable and transferable only
on the books of this Association, subject to the restrictions and
provisions of the laws of the United States; a stock ledger shall be
maintained under the supervision of the Secretary of the Board in which
all assignments and transfers of stock shall be made. Transfer of stock
shall not be suspended preparatory to the declaration or payments of
dividends.
-11-
<PAGE>
6.02 DIVIDENDS
---------
Dividends may be declared by the Board of Directors in accordance with
law and shall be payable at such time or times as the Board of Directors
shall determine. Such dividends shall be paid to the Shareholders in whose
names the stock shall stand at the date or dates sepcified in the
resolutions declaring such dividends.
6.03 CERTIFICATES
------------
Certificates of stock, signed by the President or a Vice President and
the Secretary and Cashier or an Assistant Secretary, shall be issued to
Shareholders, and when stock is transferred the certificates thereof shall
be returned to the Association, cancelled, preserved and new certificates
issued. Certificates of stock shall state upon the face thereof that the
stock is transferable only upon the books of the Association and shall
meet the requirements of the laws of the United States.
6.04 GENERAL AUTHORITY
-----------------
The Board of Directors shall have the power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer, registration and replacement of lost certificates for share of
the Capital Stock of the Association.
PART VII
--------
MISCELLANEOUS
-------------
7.01 REAL ESTATE
-----------
All transfers and conveyances of real estate shall be made by the
Association, under seal, and shall be signed by the President, a Vice
President, an Assistant Vice President, or a Trust Officer and attested
by the Secretary and Cashier or an Assistant Secretary.
7.02 CONTRACTS, DRAFTS, CHECKS, ETC.
-------------------------------
Except as otherwise provided in these Bylaws, all contracts and other
instruments on behalf of the association by the President, and Vice
President, Assistant Vice President or Trust Officer with or without the
attestation of the Secretary and Cashier or any Assistant Secretary and
with or without the seal of the Association, or by such other officer or
officers or person or persons as may from time to time be authorized by
resolution of the Board of Directors and, in the absence of such
authorization, designated and authorized by the President.
-12-
<PAGE>
7.03 DELEGATION OF FIDUCIARY POWERS
------------------------------
The Board of Directors may delegate to such persons or committees such
of its fiduciary powers as the Board may determine.
7.04 FIDUCIARY FILES
---------------
There shall be maintained in the Association files containing all
fiduciary records necessary to assure that the fiduciary responsibilities
of this Association have been properly undertaken and discharged.
7.05 FIDUCIARY INVESTMENTS
---------------------
Funds held in a fiduciary capacity shall be invested in accordance with
the instrument establishing the fiduciary relationship and local law.
Where such instrument does not specify the character and class of
investments to be made and does not vest in this Association a discretion
in the matter, funds held pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
7.06 SECURITY DEPOSIT
----------------
The appropriate officers of this Association shall from time to time,
as required by Wisconsin law, deposit with the Treasurer of the State of
Wisconsin, securities acceptable to him in quality and value to be held by
him in trust as security for the faithful execution of any trust which may
be lawfully imposed upon and accepted by this Association.
PART VIII
---------
EMERGENCY OPERATIONS
--------------------
8.01 In the event of an emergency declared by the President of the United
States or the person performing his functions, the officers and employees
of this association will continue to conduct the affairs of the association
under such guidance from the directors as may be available, except as to
matters which by statute require specific approval of the Board of
Directors and subject to conformance with any governmental directives
during the emergency.
8.02 In the event of a state disaster of sufficient severity to prevent the
conduct and management of the affairs and business of this association as
contemplated by these Bylaws, any two or more available members of the then
-13-
<PAGE>
incumbent Executive Committee shall constitute a quorum of that Committee
for the full conduct and management of the affairs and business of the
association in accordance with these Bylaws, except as to matters which by
statute require specific approval of the board of Directors; and, in
addition, such Committee shall be empowered to exercise all the powers
reserved to other committees by provision of these Bylaws or by statute.
In the event of unavailability, at such time, of a minimum of two
members of the then incumbent Executive Committee, any three available
directors shall constitute the Executive Committee for the full conduct
and management of the affairs and business of the association in
accordance with the foregoing provisions of this section. This Bylaw
shall be subject to implementation by resolutions of the Board of
Directors passed from time to time for that purpose, and any provisions of
any such implementary resolutions shall be suspended until it shall be
determined by an interim Executive Committee acting under this section that
it shall be to the advantage of this association to resume the conduct and
management of its affairs and business under all of the other provisions of
these Bylaws.
8.03 During an emergency resulting in any authorized place of business of
this association being unable to function, the business ordinarily
conducted at such location shall be relocated elsewhere is suitable
quarters, as may be designated by the Board of Directors or by the
Executive Committee or by such persons as are then, in accordance with
other provisions of these Bylaws and resolutions adopted from time to time
by the Board of Directors dealing with the exercise of authority in the
time of such emergency, conducting the affairs of this association. Any
temporarily relocated place of business of this association shall be
returned to its legally authorized location as soon as practicable and
such temporary place of business shall then be discontinued.
PART IX
-------
CHANGES IN BYLAWS
-----------------
9.01 AMENDMENTS
----------
These Bylaws may be amended, altered or repealed at any regular or
special meeting of the Board of Directors, by a vote of a majority of the
directors then in office. A certified copy of any amendments to these
Bylaws shall be forwarded to the Comptroller of the Currency immediately
after adoption.
-14-
<PAGE>
9.02 INSPECTION
----------
A copy of the Bylaws, with all amendments thereto, shall at all times be
kept in a convenient place at the main Office of the Association, and shall
be open for inspection to all shareholders, during banking hours.
-15-
<PAGE>
EXHIBIT 6
[LETTERHEAD OF BANK ONE]
In accordance with the provisions of Section 321(b) of the Trust Indenture Act
of 1939, Bank One Wisconsin Trust Company, National Association consents that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Commission upon request therefor.
By: /s/ John R. Rudolph
-------------------
Title: Vice President
----------------
Date: January 12, 1994
----------------
<PAGE>
EXHIBIT 7
(OFFICIAL PUBLICATION)
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1993
BANK ONE WISCONSIN TRUST COMPANY, NATIONAL ASSOCIATION
Charter No. National Bank Region No.
In the state of Wisconsin at the close of business on September 30, 1993
published in response to call made by Comptroller of the Currency, under title
12, United States Code, Section 161.
<TABLE>
<CAPTION>
ASSETS In Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................. $ 2,157
Interest-bearing balances.......................................... 0
Securities........................................................... 24,689
Federal funds sold and securities purchased under agreements to
resell:
Federal funds sold................................................. 4,000
Securities purchased under agreements to resell.................... 0
Loans and lease financing receivables:
Loans and leases, net of unearned income................ $0
LESS: Allowance for loan and lease losses............... 0
LESS: Allocated transfer risk reserve................... 0
Loans and leases, net of unearned income, allowance and reserve.... 0
Assets held in trading accounts...................................... 0
Premises and fixed assets (including capitalized leases)............. 1,985
Other real estate owned.............................................. 0
Investments in unconsolidated subsidiaries and associated companies.. 0
Customers' liability to this bank on acceptances outstanding......... 0
Intangible assets.................................................... 0
Other assets......................................................... 3,114
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TOTAL ASSETS....................................................... $35,945
=======
LIABILITIES
Deposits:
In domestic offices................................................ $ 0
Noninterest-bearing..................................... $0
Interest-bearing........................................ 0
In foreign offices, Edge and Agreement subsidiaries, and IBFs........
Noninterest-bearing..................................... $
Interest-bearing........................................
Federal funds purchased and securities sold under agreements to
repurchase:
Federal funds purchased............................................ 0
Securities sold under agreements to repurchase..................... 0
Demand notes issued to the U.S.Treasury.............................. 0
Other borrowed money................................................. 0
Mortgage indebtedness and obligations under capitalized leases....... 0
Bank's liability on acceptances executed and outstanding............. 0
Notes and debentures subordinated to deposits........................ 0
Other liabilities.................................................... 4,639
-------
TOTAL LIABILITIES.................................................. 4,639
-------
Limited-life preferred stock......................................... 0
EQUITY CAPITAL
Perpetual preferred stock............................................ 0
Common stock......................................................... 250
Surplus.............................................................. 4,750
Undivided profits and capital reserves............................... 26,306
LESS: Net unrealized loss on marketable equity securities.......... 0
Cumulative foreign currency translation adjustments.................. 0
-------
TOTAL EQUITY CAPITAL............................................... 31,306
-------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY CAPITAL $35,945
=======
</TABLE>
I, Mark VandenBusch, Vice President of the above-named bank do hereby declare
that this Report of Condition is true and correct to the best of my knowledge
and belief.
MARK VANDENBUSCH
------------------
Vice President
October 26, 1993
