<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-8501
HARTMARX CORPORATION
A DELAWARE CORPORATION IRS EMPLOYER NO. 36-3217140
101 NORTH WACKER DRIVE, CHICAGO, ILLINOIS 60606
TELEPHONE NO.: 312/372-6300
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock $2.50 par value per share New York Stock Exchange
Chicago Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
On February 16, 1994, 31,997,182 shares of the Registrant's common stock were
outstanding. The aggregate market value of common stock held by non-affiliates
of the Registrant was $198,863,000.
Certain portions of the Registrant's definitive proxy statement for the
annual meeting of stockholders to be held April 14, 1994, which will be filed
with the Commission subsequent to the date hereof pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended, are incorporated by reference
into Part III of this report.
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<PAGE>
HARTMARX CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
ITEM NO. PAGE
-------- ----
<C> <S> <C>
PART I
1 Business........................................................... 1
2 Properties......................................................... 4
3 Legal Proceedings.................................................. 5
4 Submission of Matters to a Vote of Security Holders................ 7
Executive Officers of the Registrant............................... 7
PART II
Market for Registrant's Common Equity and Related Stockholder
5 Matters........................................................... 7
6 Selected Financial Data............................................ 8
Management's Discussion and Analysis of Financial Condition and
7 Results of Operations............................................. 8
8 Financial Statements and Supplementary Data........................ 16
Changes in and Disagreements with Accountants on Accounting and
9 Financial Disclosure.............................................. 35
PART III
10 Directors and Executive Officers of the Registrant................. 35
11 Executive Compensation............................................. 35
12 Security Ownership of Certain Beneficial Owners and Management..... 35
13 Certain Relationships and Related Transactions..................... 36
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 36
</TABLE>
<PAGE>
PART I
ITEM 1--BUSINESS
General and Operating Segments
Hartmarx Corporation functions essentially as a holding company, overseeing
its various operating companies and providing them with resources and services
in the financial, administrative, legal, human resources, advertising, and
other areas. The operating subsidiaries are separate profit centers. Their
respective managements have responsibility for optimum use of the capital
invested in them and for planning their growth and development in coordination
with the strategic plans of Hartmarx and the other operating entities
(collectively, the "Company").
Established in 1872, the Company 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, Hartmarx has diversified into men's
sportswear and women's career apparel and sportswear.
Substantially all of the Company's products are sold to a wide variety of
retail channels 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 license agreements for specified product
lines including 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 distribution of the apparel sold under its owned
and licensed trademarks, the Company has also entered into over 35 license or
sublicense agreements with third parties for specified product lines to
produce, market and distribute products in 14 countries outside the United
States. Additionally, the Company has commenced direct marketing in Europe and
Asia, selling golf wear in these markets through distributors in 17 countries.
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 $365 million. The Company's financial
statements for fiscal 1992 include restructuring charges of $191 million. 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 for $30 million.
The Company's operations can be categorized within two operating segments--
wholesale and direct-to-consumer. The wholesale segment comprises the Men's
Apparel Group ("MAG") and International Women's Apparel ("IWA") businesses; the
direct-to-consumer segment consists principally of the Kuppenheimer and Barrie
Pace Ltd. ("Barrie Pace") businesses. The Operating Segment Information on
pages 34 and 35 of this Form 10-K further describes the Company's wholesale and
direct-to-consumer operations.
Products Produced and Services Rendered
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 wide variety of fashion directions, price points and distribution
channels. In 1993, the Company's business units that primarily manufacture
men's
1
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tailored clothing represented approximately 66% of the Company's sales. Those
business units that primarily manufacture men's sportswear and slacks
represented approximately 27% of consolidated sales and women's apparel
represented approximately 7% of consolidated sales.
As a vertically integrated manufacturer and marketer, the Company is
responsible for the designing, 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's largest operating group, MAG, designs, manufactures and markets
on a wholesale basis substantially all of the Company's men's tailored clothing
through its Hart Schaffner & Marx ("HSM"), Hickey-Freeman and Intercontinental
Branded Apparel business units. Slacks and sportswear are manufactured and
marketed principally through the Trans-Apparel Group, Biltwell and Bobby Jones
business units. Kuppenheimer is the Company's vertically integrated, factory-
direct-to-consumer business. Kuppenheimer manufactures substantially all of its
tailored clothing in Company-owned facilities and sells these products
exclusively through Kuppenheimer operated stores. Kuppenheimer also offers
men's furnishings and sportswear purchased from other manufacturers. The
Women's Apparel Group is comprised 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
for sale to department and specialty stores under owned and licensed brand
names. The Barrie Pace women's catalog features branded products, purchased
from both affiliated and unaffiliated sources.
At January 31, 1994, the Company operated 132 direct-to-consumer stores in
the United States selling apparel primarily manufactured by the Company, as
well as products purchased from unaffiliated sources. The shipment of products
manufactured by the Company to its owned stores is excluded from consolidated
sales. Kuppenheimer's 115 stores reflect the closing of 54 poor performing
stores related to the Restructuring. Seventeen Sansabelt shops are operated by
the Trans-Apparel Group, primarily carrying merchandise it manufactures.
Sources and Availability of 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, cottons, 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
Industries, Inc., the Company's largest fabric supplier, accounted for 48% of
the Company's total fabric requirements in fiscal 1993. 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
are available to satisfy its raw material requirements.
Product lines are developed primarily for two major selling seasons, spring
and fall, with smaller lines for the holiday season. The majority of the
Company's products are purchased by its customers on an advance order basis,
five to seven months prior to shipment. Seasonal commitments for a portion of
the expected requirements are made approximately three to five months in
advance of the customer order. Certain of the Company's businesses maintain in-
stock inventory programs on selected product styles giving customers the
2
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capability to order electronically with resulting shipment within 24 to 48
hours. Programs with selected fabric suppliers provide for availability to
support in-stock marketing programs. The normal production process from fabric
cutting to finished production is five to six weeks for tailored suits and
sportcoats and three to four weeks for tailored slacks. A substantial portion
of sportswear and women's apparel is produced from Company designs utilizing
unaffiliated contractors.
Competition and Customers
The Company emphasizes quality, fashion, brand awareness and service in
engaging in this highly competitive business. While no manufacturer of men's
clothing accounts for more than a small percentage of the total amount of
apparel produced by the entire industry in the United States, the Company
believes 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. However,
its retail sales of apparel directly to the end consumer do not represent a
significant percentage of total retail apparel sales. 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 largest customer, Dillard
Department Stores, represented approximately 12% of 1993 consolidated sales. No
other customer exceeded 7% of net sales.
Research and Patents
In the apparel industry, new product development is directed primarily
towards new fashion and design changes and does not require significant
expenditures for research. The Company's fixed assets include expenditures for
new equipment developed by others. The Company does not spend material amounts
on research activities relating to the development of new equipment.
Conditions Affecting the Environment
Regulations relating to the protection of the environment have not had a
significant effect on capital expenditures, earnings or the competitive
position of the Company. The making of apparel is not energy intensive and the
Company is not engaged in producing fibers or fabrics.
Employees
The Company presently has approximately 11,200 employees, of whom
approximately 85% are employed in manufacturing-wholesale and 15% in the
direct-to-consumer businesses. Most of the men's apparel employees engaged in
manufacturing and distribution activities are covered by union contracts with
the Amalgamated Clothing and Textile Workers Union; a small number of the
women's apparel and direct-to-consumer employees are covered by other union
contracts. The Company considers its employee relations to be satisfactory.
Seasonality
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.
3
<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>
ADVANCE ORDER
MERCHANDISE SEASON 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.
ITEM 2--PROPERTIES
The Company's principal executive and administrative offices are located in
Chicago, Illinois. Its principal office, manufacturing and distribution
operations are conducted at the following locations:
<TABLE>
<CAPTION>
APPROXIMATE EXPIRATION
FLOOR AREA DATE OF
IN SQUARE MATERIAL
LOCATION FEET PRINCIPAL USE LEASES
- -------- ----------- ------------- ----------
<S> <C> <C> <C>
Anniston, AL............ 76,000 Manufacturing 1994
Buffalo, NY............. 115,000 Manufacturing *
Buffalo, NY............. 280,000 Office; manufacturing; warehousing 1998
Cape Girardeau, MO...... 171,000 Manufacturing; warehousing *
Chaffee, MO............. 78,000 Manufacturing; warehousing 1994
Chicago, IL............. 112,000 Executive and operating company offices 1996
Chicago, IL............. 313,000 Manufacturing *
Des Plaines, IL......... 361,000 Manufacturing; warehousing *
Easton, PA.............. 220,000 Office; warehousing *
Elizabethtown, KY....... 54,000 Manufacturing *
Farmington, MO.......... 65,000 Warehousing *
Farmington, MO.......... 75,000 Manufacturing 1999
Loganville, GA.......... 179,000 Office; manufacturing; warehousing *
Michigan City, IN (2
locations)............. 420,000 Office; manufacturing; warehousing *
New York, NY............ 93,000 Sales offices/showrooms 1995
Norcross, GA............ 59,000 Office 1998
Rector, AR.............. 52,000 Manufacturing *
Rochester, NY........... 223,000 Office; manufacturing; warehousing *
Rochester, NY........... 51,000 Warehousing 1997
St. Louis, MO (2
locations)............. 88,000 Office; manufacturing 2000
Whiteville, NC.......... 105,000 Manufacturing *
Winchester, KY.......... 92,000 Manufacturing *
</TABLE>
- --------
*Properties owned by the Registrant
The Company believes that its properties are well maintained and its
manufacturing equipment is in good operating condition and sufficient for
current production.
4
<PAGE>
Substantially all of the Company's retail stores occupy leased premises. For
information regarding the terms of the leases and rental payments thereunder,
refer to the "Leases" note to the consolidated financial statements on pages 28
and 29 of this Form 10-K.
ITEM 3--LEGAL PROCEEDINGS
Dior 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, (the "Circuit Court") 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.
Spillyards Litigation. 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
Group, Ltd. ("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 notice of appeals with the Illinois Appellate Court
on October 29, 1993 and December 23, 1993. The appeals were consolidated by
court order on February 8, 1994.
HSSI Matters. On September 18, 1992, the Company sold the common stock of
HSSI (the "HSSI Stock") to HSSA, for a promissory note in the principal amount
of $43 million due September 18, 1994 (the "HSSA Note"), which was subject to
adjustment based on inventories to be taken after the closing and was
subsequently adjusted to $35 million. Pursuant to a Stock Pledge Agreement (the
"Pledge Agreement"), the HSSA Note was secured by a pledge of the HSSI Stock
and HSSI also guaranteed the obligations of HSSA under the HSSA Note. The
Company believes that HSSA is 100% owned by the three sons of the sole
shareholders of Maurice L. Rothschild & Co. ("MLR") and at least one of the
shareholders of HSSA is also a director of MLR.
On November 23, 1993, after the Company determined that certain obligations
under the HSSA Note and related documents had been breached, the Company
exercised certain of its rights under the Pledge Agreement to, among other
things, cause the HSSI Stock to be voted to elect a new Board of Directors.
On November 23, 1993 and December 2, 1993, HSSI filed complaints against MLR
in the Circuit Court, seeking (i) to enjoin MLR from foreclosing under an
inventory credit agreement between HSSI and MLR pursuant to which MLR provided
credit support to HSSI, (ii) over $4 million in compensatory damages and
5
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(iii) $30 million in punitive damages for, among other things, breach of
contract and conversion. On January 28, 1994, both of these actions were
removed by MLR to federal court to be administered in the HSSI Chapter 11 case.
On November 29, 1993, HSSA filed a complaint for declaratory and preliminary
and permanent injunctive relief against the Company in the Circuit Court,
seeking an order declaring, among other things, that HSSA is and remains the
owner of HSSI. The complaint alleges that the Company improperly and wrongfully
seized ownership of HSSI. HSSA's request for a temporary restraining order in
this regard was denied and the case remains before the Circuit Court. On
January 24, 1994, HSSA was granted leave, subject to pending objections, to
file an amended complaint. The amended complaint seeks actual damages in an
unspecified amount and punitive damages of at least $10 million for, among
other things, breach of contract, tortious interference with contract and
conversion. The Circuit Court has reserved ruling on the propriety of the
filing of the amended complaint. Primarily, these theories of liability are
based on claims that the Company unilaterally and wrongfully took the HSSI
Stock in the absence of an event of default and in the absence of any notice to
HSSA and failed to dispose of the HSSI Stock in a commercially reasonable
manner, all in breach of the Company's obligations under the HSSA Note, the
Stock Purchase Agreement, the Pledge Agreement and Part 5 of Article 9 of the
Illinois Commercial Code.
On December 3, 1993, HSM and certain other subsidiaries of the Company filed
a complaint against MLR in the Circuit Court seeking damages for goods sold
pursuant to orders of MLR for shipment to HSSI and other retailers to which MLR
provides credit support.
On December 21, 1993, HSSI and 25 affiliates filed voluntary petitions for
relief under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the Northern District of
Illinois, Eastern Division (the "Bankruptcy Court").
On January 19, 1994, the Company filed a complaint against the directors of
HSSA in the Circuit Court seeking damages for wrongfully causing HSSI to make
distributions, returns of capital and compensation and other payments to
principals of HSSA in violation of the HSSA Note.
On January 24, 1994, HSSI filed a complaint in the Bankruptcy Court against
MLR which included many of the claims asserted in the Circuit Court case
described above and which additionally seeks (i) to equitably subordinate the
claim asserted by MLR in HSSI's bankruptcy case and (ii) monetary damages from
the former directors of HSSI and related parties for breach of fiduciary duty.
Also on January 24, 1994, MLR filed a complaint (which was amended on February
4, 1994) against the Company and six subsidiaries, among others, in the Circuit
Court seeking actual damages of $19 million and punitive damages of over $100
million for tortious interference with contract and interference with
prospective economic advantage. These theories of liability are based, in part,
on claims that no default existed under the HSSA Note and that the subsequent
sale of the HSSI Stock was improper because the Company did not give notice of
the time or location of the sale of the HSSI Stock. MLR further alleges that
counsel for the Company conceded in the hearing on HSSA's unsuccessful attempt
to obtain a temporary restraining order that HSSA was entitled to such notice.
On February 4, 1994, MLR filed a voluntary petition for relief under Chapter
11 of the Bankruptcy Code in the Bankruptcy Court and filed an adversary
proceeding against the Company to recover a payment of approximately $4.8
million to the Company as a voidable preference under the Bankruptcy Code. The
preference action was dismissed without prejudice on February 10, 1994.
After consultation with counsel, management of the Company believes that the
Company has meritorious defenses to the actions against the Company referred to
above and that such actions will not have a material adverse effect on the
Company's business or financial condition.
6
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ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Executive Officers of the Registrant
Each of the executive officers of the Registrant listed below has served the
Registrant or its subsidiaries in various executive capacities for the past
five years, with the exception of Mr. Rueckel. Each officer is elected annually
by the Board of Directors, normally for a one-year term and is subject to
removal powers of the Board.
<TABLE>
<CAPTION>
YEARS
OF ELECTED
SERVICE TO
WITH PRESENT
NAME POSITION AGE COMPANY POSITION
---- -------- --- ------- --------
<S> <C> <C> <C> <C>
Elbert O. Hand.......... Chairman and 54 29 1992
Chief Executive Officer
(Director since 1984)
Homi B. Patel........... President and 44 14 1993
Chief Operating Officer
(Director since January, 1994)
Wallace L. Rueckel...... Executive Vice President and 49 1 1993
Chief Financial Officer
Carey M. Stein.......... Executive Vice President, 46 16 1993
Secretary and General Counsel
and Chief Administrative Officer
Glenn R. Morgan......... Senior Vice President 46 14 1993
and Controller,
Chief Accounting Officer
Frank A. Brenner........ Vice President, Marketing Services 65 25 1983
James E. Condon......... Vice President and Treasurer 43 16 1986
Linda J. Valentine...... Vice President, Compensation 43 13 1993
and Benefits
Kenneth A. Hoffman...... President--Men's Apparel Group 50 26 1991
</TABLE>
Wallace L. Rueckel became Executive Vice President and Chief Financial
Officer in March 1993. Prior to joining the Company, he served as a key
financial officer at Guardian Industries and its affiliates for nine years. Mr.
Stein is presently on a medical leave of absence from the Company.
PART II
ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Hartmarx common shares are traded on the New York and Chicago Stock
Exchanges. The quarterly composite price ranges of the Company's common stock
for the past three years were as follows:
<TABLE>
<CAPTION>
1991 1992 1993
-------------- ------------- ------------
HIGH LOW HIGH LOW HIGH LOW
------- ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter......................... $ 9.875 $6.625 $8.625 $6.25 $8.25 $5.375
Second Quarter........................ 13.25 9.625 7.00 5.50 7.25 5.75
Third Quarter......................... 12.375 7.50 6.625 4.875 6.75 5.125
Fourth Quarter........................ 9.00 7.00 5.75 3.00 7.75 5.75
</TABLE>
7
<PAGE>
The most recent quarterly dividend paid was in November, 1991, in the amount
of $.15 per share. Cash dividends may not be declared or paid during the term
of the Company's current financing agreements. The current financing agreements
also include various restrictive covenants pertaining to capital expenditures,
asset sales, operating leases, minimum working capital and current ratio, debt
leverage, consolidated tangible net worth, earnings before interest, taxes,
depreciation and amortization, and interest coverage. The Company is prohibited
from purchasing or redeeming its stock, warrants, rights or options, or from
making certain acquisitions, without lender consent. Consolidated tangible net
worth at November 30, 1993, as defined, was approximately $130 million compared
to the minimum required level of $107 million. The ratio of consolidated funded
indebtedness to consolidated tangible net worth, as defined, was 1.8 compared
to the maximum permitted ratio of 2.7.
As of February 16, 1994, there were approximately 7,400 stockholders of its
$2.50 par value common stock. The number of stockholders was estimated by
adding the number of registered holders furnished by the Company's registrar
and the number of participants in the Hartmarx Employee Stock Ownership Plan.
ITEM 6--SELECTED FINANCIAL DATA
The following table summarizes data from the Company's annual financial
statements for the years 1989 through 1993 and the notes thereto; the Company's
complete annual financial statements and notes thereto for fiscal 1993 are on
pages 18 through 35 of this Form 10-K.
<TABLE>
<CAPTION>
IN THOUSANDS/FOR YEARS 1989 1990 1991 1992 1993
ENDED NOVEMBER 30 ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... $1,296,993 $1,295,840 $1,215,310 $1,053,949 $731,980
Gross profit............ 514,412 489,603 434,007 350,304 226,801
Earnings (loss) before
interest, taxes,
restructuring and
retail consolidation
charges................ 56,193 11,742 (22,702) (14,915) 29,279
Earnings (loss) before
interest, taxes,
depreciation and
amortization........... 87,231 (30,639) (2,393) (178,768) 43,386
Earnings (loss) before
interest and taxes..... 56,193 (65,858) (36,202) (205,715) 29,279
Interest expense........ 28,418 28,952 23,793 21,135 22,869
Earnings (loss) before
taxes.................. 27,775 (94,810) (59,995) (226,850) 6,410
Tax provision (benefit). 10,365 (33,265) (21,630) (6,605) 190
Net earnings (loss)..... 17,410 (61,545) (38,365) (220,245) 6,220
Net earnings (loss) per
common share
equivalent............. .89 (3.11) (1.74) (8.59) .20
Cash dividends per
share.................. 1.17 1/2 .90 .60 -- --
Average number of common
shares and equivalents. 19,567 19,786 22,056 25,629 31,375
<CAPTION>
IN THOUSANDS/AT NOVEMBER
30
<S> <C> <C> <C> <C> <C>
Accounts receivable..... $ 210,555 $ 132,719 $ 134,748 $ 159,772 $120,442
Inventories............. 473,999 409,599 404,995 216,751 193,818
Working capital......... 420,799 334,888 231,290 236,952 249,017
Net properties.......... 192,802 172,470 149,656 66,846 56,477
Total assets............ 907,965 762,167 739,848 511,959 405,111
Long term debt.......... 270,969 226,623 105,498 248,713 207,416
Total debt.............. 376,216 288,130 285,649 314,602 233,113
Shareholders' equity.... 360,134 292,538 287,008 70,425 108,997
Equity per share........ 18.37 14.60 11.32 2.72 3.41
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, along with the Financing, Sale of Receivables, Taxes on Earnings
and Restructuring and Retail Consolidation Charges footnotes to the
consolidated financial statements provide additional information relating to
the comparability of the information presented above.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Fiscal 1993 results reflect the strengthening of the Company's financial
condition as a result of the Restructuring commenced in 1992, which refocused
the Company's business operations around its profitable core wholesale men's
apparel franchise and restructured its balance sheet. See "Business--General
and
8
<PAGE>
Operating Segments." The Company's continuing businesses currently comprise:
(i) MAG, which designs, manufactures and markets men's tailored clothing, on a
wholesale basis, principally through its HSM, Intercontinental Branded Apparel
and Hickey-Freeman business units, and slacks and sportswear, principally
through its Trans-Apparel Group, Biltwell and Bobby Jones business units; (ii)
Kuppenheimer, the vertically integrated factory-direct-to-consumer manufacturer
of popular priced men's tailored clothing whose products are sold, along with
related apparel procured from unaffiliated third parties, exclusively through
Kuppenheimer operated retail stores; and (iii) Women's Apparel Group, comprised
of Barrie Pace, a direct mail business offering a wide range of apparel and
accessories to the business and professional woman through its catalogs, and
IWA, which markets women's career apparel and sportswear to department and
specialty stores under owned and licensed brand names. For financial reporting
purposes, the Company's business units are identified as the wholesale segment,
which principally consists of MAG and IWA, and the direct-to-consumer
("consumer") segment, which is principally comprised of Kuppenheimer and Barrie
Pace.
RESULTS OF OPERATIONS
Consolidated 1993 sales were $732.0 million compared to $1.054 billion in
1992 and $1.215 billion in 1991. The 1993 sales decline of 30.5% compared to
1992 and the 13.3% decrease in 1992 compared to 1991 were substantially
attributable to the disposition or discontinuance of various businesses as a
result of the Restructuring. Over this period, sales of the Company's
continuing businesses experienced small increases, principally related to the
start-up of IWA and growth at Barrie Pace and in men's tailored clothing
(excluding the sales of the Company's continuing businesses to HSSI.)
Consolidated 1993 pre-tax income was $6.4 million compared to pre-tax losses
of $226.9 million in 1992 and $60.0 million in 1991. Results for 1992
reflected, in addition to $190.8 million of restructuring charges, the
aggregate operating losses associated with businesses sold or discontinued in
connection with the Restructuring. Results for 1991 included a $13.5 million
pre-tax charge taken to consolidate the Company's retail operations. Over this
period, pre-tax earnings for the Company's continuing businesses showed a small
improvement, principally related to reductions in corporate expenses. Net
income for 1993 was $6.2 million or $.20 per share and reflected an effective
tax rate of 3.0%. As discussed below, the Company's deferred tax assets include
significant operating loss carryforwards available to offset future taxable
income, which are substantially offset by valuation allowances due to
uncertainties associated with the realization of such tax benefits. The net
loss for 1992 was $220.2 million or $8.59 per share, which reflected a tax
benefit of 2.9%. The net loss of $38.4 million or $1.74 per share in 1991
reflected a full tax benefit of 36.1%.
Wholesale and Consumer Segments. Wholesale segment sales, which represent
products manufactured by the Company and sold to unaffiliated retailers for
resale to consumers, were $567 million in 1993, $592 million in 1992 and $578
million in 1991. The 4.2% decrease in 1993 as compared to 1992 was
substantially attributable to the sale or closing of non-strategic
manufacturing businesses which manufactured outerwear and commercial and
military uniforms. This decrease in sales was partially offset by a slight
increase in sales of the Company's continuing businesses and by $37 million of
sales to HSSI being reflected in consolidated sales in 1993 compared to $18
million in 1992 which represented only those sales to HSSI subsequent to the
Company's disposition of HSSI in September 1992. Prior to this disposition,
sales to HSSI were considered intercompany and not reflected in consolidated
sales. In 1992, such intercompany sales to HSSI were over $50 million. The 2.5%
increase in wholesale segment sales in 1992 over 1991 was principally
attributable to the introduction of new women's apparel brands and a slight
increase in men's apparel sales, which were attributable to $18 million of
sales to HSSI subsequent to its disposition by the Company. As a result of the
Restructuring, the percentage of wholesale segment sales to consolidated sales
increased to 77.5% in 1993 as compared to 56.2% in 1992 and 47.6% in 1991.
Also as a result of the Restructuring, sales in the consumer segment
(identified for reporting purposes in prior years as the retail segment)
declined to $165 million in 1993 from $462 million in 1992 and $637 million in
1991, and, as a result, represented 22.5% of consolidated sales in 1993
compared to 43.8% in 1992 and 52.4% in 1991. The consumer segment was
principally comprised of the Kuppenheimer and Barrie Pace
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<PAGE>
businesses during 1993. The consumer segment in 1992 and 1991 also included
HSSI and the operations of the Old Mill stores. The 64.3% decrease in 1993
compared to 1992 and the 27.6% reduction in 1992 compared to 1991 were
substantially attributable to the disposition of HSSI and discontinuance of the
Old Mill stores as part of the Restructuring. Barrie Pace continued to
experience sales increases during this period. Kuppenheimer's full year
comparable store sales declined 6% in 1993, 5% in 1992 and 4% in 1991. Consumer
segment sales for 1992 reflected declines in comparable store sales at HSSI and
Country Miss, prior to the sale or discontinuance of the stores, of
approximately 13% and 9%, respectively. Consumer segment sales as a percentage
of total sales are expected to decline further in the future, reflecting fewer
Kuppenheimer stores as a result of the Restructuring and the Company's emphasis
on its wholesale businesses.
Wholesale segment earnings before interest and taxes, which include the
manufacturing gross margin on products sold to unaffiliated retailers, were $37
million in 1993, $25 million in 1992 and $27 million in 1991. Men's tailored
clothing represented a substantial portion of segment earnings in each year.
Wholesale segment earnings for 1992 included an $8 million restructuring charge
associated with discontinued businesses. The remaining 1993 increase compared
to 1992 was principally attributable to improvements within the slacks and
sportswear businesses. Also, the operating losses associated with women's
wholesale apparel were reduced in each year.
Consumer segment earnings before interest and taxes include the gross margin
between retail selling price and cost associated with products manufactured by
the Company and products purchased from unaffiliated sources. Consumer segment
earnings were $2.5 million in 1993 compared to losses of $199 million in 1992
and $41 million in 1991. Segment results for 1993 include earnings in the
Barrie Pace catalog business, partially offset by an operating loss at
Kuppenheimer, which was principally attributable to its lower comparable store
sales. Consumer segment results include $168 million in restructuring charges
in 1992 and a $13.5 million provision associated with the consolidation of
retail operations in 1991, actions which followed previous programs to improve
retail operations through selective store closings and expense reductions. In
addition to the non-recurring charges described above, additional factors
contributing to the consumer segment losses in 1992 and 1991 were lower
comparable store sales, high markdowns relative to sales and certain occupancy
and administrative costs which did not decrease proportionately with the lower
sales.
Gross Margins. The consolidated gross margin percentage of sales was 31.0% in
1993, 33.2% in 1992 and 35.7% in 1991, a decline which primarily resulted from
the Company's change in business mix as a result of the Restructuring.
Wholesale sales generally produce a lower gross margin ratio to sales (and
lower selling, administrative and occupancy expenses) compared to the consumer
segment and represented 77.5% of consolidated sales in 1993 compared to 56.2%
in 1992 and 47.6% in 1991. The percentage of wholesale sales to total sales is
expected to increase in 1994 due to fewer stores operated by Kuppenheimer.
While the consolidated ratio of gross margin to sales declined in 1993 compared
to 1992, gross margin in both the wholesale and consumer segments improved
compared to 1992. Current year results included $3.6 million of income
resulting from lower LIFO inventories compared to $3.3 million of LIFO income
in 1992; LIFO income in 1993 produced a .5% favorable impact on gross margin in
1993 compared to a .3% favorable impact in 1992. The consolidated gross margin
percentage decline in 1992 compared to 1991 also reflected lower consumer
segment margins, as wholesale margins were approximately even.
Selling, Administrative and Occupancy Expenses. Selling, administrative and
occupancy expenses represented 27.8% of sales in 1993 compared to 35.6% in 1992
and 38.5% in 1991. Consolidated expenses of $204 million in 1993 declined by
approximately $171 million compared to 1992. The lower dollar level and
percentage of sales ratio of these expenses reflected the disposition of HSSI,
the effect of expense reduction programs in ongoing businesses and the greater
proportion of wholesale business with its lower operating expense ratio to
sales compared to the consumer segment. Both the dollar level and corresponding
ratio to sales are expected to decline further in 1994 from the reduced level
of retail operations compared to 1993. Wholesale segment operating expenses in
1993 declined in comparison to 1992 principally from discontinued businesses,
although the percentage of sales was approximately the same. Consumer segment
operating
10
<PAGE>
expenses declined substantially, both in dollars and as a percentage to sales
in 1993 as compared to 1992, and in 1992 as compared to 1991, reflecting the
disposition of HSSI, the wind down of the Old Mill retail store operations,
expense reduction programs in ongoing businesses and the greater proportion of
consolidated sales represented by the wholesale businesses. Aggregate 1992
expenses of $375 million declined by approximately $93 million from 1991,
attributable to the disposition of HSSI and closing most of the Old Mill retail
stores in 1992.
Advertising expenditures, which are included in Selling, Administrative and
Occupancy Expenses, declined to $20 million in 1993 from $33 million in 1992
and $48 million in 1991, representing 2.7%, 3.1% and 4.0% of consolidated
sales, respectively. The dollar and percentage declines in each year were
principally attributable to the disposition of HSSI and the wind down of the
Old Mill retail stores, although wholesale segment advertising expenditures
also declined both in dollars and as a percentage of sales in each year.
Advertising expenditures applicable to wholesale operations are expected to
increase during 1994 relating to both new and existing brands.
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions ("FAS 106"), requires the
recognition of an obligation related to employee service pursuant to a
postretirement benefit plan and is mandatory for the Company's fiscal year
ending November 30, 1994. As retiree contributions offset the full cost of the
Company-sponsored medical programs, no transition obligation is expected upon
adoption of FAS 106 and there would be no effect on either net earnings or
shareholders' equity.
Statement of Financial Accounting Standards No. 112, Employers' Accounting
for Postemployment Benefits, requires the recognition of obligations related to
benefits provided by an employer to former or inactive employees after
employment but before retirement, and is mandatory for the Company's fiscal
year ending November 30, 1995. The Company believes that adoption is not
expected to have a material impact on its financial condition.
Other Income. Finance charges, interest and other income aggregated $6.0
million in 1993, $9.6 million in 1992 and $10.8 million in 1991. Other income
was comprised principally of licensing income in 1993, and also included
service charges on the retail receivables of HSSI in 1992 and 1991. The
decrease in each year was principally attributable to the impact of the
receivables sale program, described in the accompanying Notes to Consolidated
Financial Statements, which commenced in June 1990 and terminated in October
1992.
Interest Expense. Interest expense was $23 million in 1993, $21 million in
1992 and $24 million in 1991. The increase of approximately $2 million in 1993
compared to 1992 was attributable to increased interest rates associated with
the Company's refinancing along with higher financing fee amortization. On a
weighted average basis, total borrowing rates increased by approximately 1%;
this rate increase was mitigated by lower average borrowings from reduced
working capital requirements and the $30 million equity investment. The
decrease of approximately $3 million in 1992 compared to 1991 reflected a 1.5%
decline in average bank borrowing rates; total borrowings averaged $10 million
higher during 1992 compared to 1991, in part attributable to the termination of
the receivable sale program during 1992.
Income Taxes. The effective tax provision (benefit) rate was 3.0% in 1993,
(2.9)% in 1992 and (36.1)% in 1991. The effective tax rates for 1993 and 1992
reflect the adoption of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("FAS 109"), in the 1992 fiscal year.
A substantial portion of the Company's tax assets are reserved by a tax
valuation allowance aggregating $69 million at November 30, 1993. This
valuation allowance reflects the uncertainties associated with the realization
of the available tax benefit of net operating loss carryforwards, after giving
consideration to the Company's recent operating losses. Although the Company
achieved income during 1993 for financial reporting purposes, a tax operating
loss resulted from the reversal of temporary differences associated with
11
<PAGE>
the Restructuring. The realization of the tax benefit arising from $137 million
of net operating loss carryforwards at November 30, 1993 requires the
generation of future taxable income. The net operating loss carryforwards
expire in 2008. Approximately $2 million of the valuation allowance offsetting
the deferred tax asset, associated with 1993 pre-tax income for financial
reporting, was reversed during 1993. The 1993 effective tax provision rate was
applicable to state income taxes. Upon the determination that the realization
of some or all of the remaining reserved tax asset is more likely than not,
earnings for the applicable year and shareholders' equity would be increased
accordingly.
The 1991 benefit rate reflected the recoverable federal and state income
taxes from the carryback of operating losses to prior years.
CASH FLOW AND FINANCIAL CONDITION
In connection with the Restructuring, the Company consolidated and extended
its borrowing facilities in December, 1992 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 under 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 the Restructuring. The Company also
raised $30 million through the sale of shares of its common stock and a warrant
to purchase additional common shares in a private placement to Traco
International, N.V. Borrowings under the Override Agreement and Bridge Facility
(collectively, "the Agreements") substantially replaced or amended the
provisions of the principal financing agreements existing as of November 30,
1992, and are secured by substantially all assets of the Company and its
subsidiaries, subject to a priority of up to $15 million for trade creditors.
At November 30, 1992, total debt was $314.6 million and reflected full
utilization of then available lines. Upon execution of the Agreements and
related private equity placement, borrowings and other arrangements under the
predecessor Multiple Option Facility and various other agreements were
superceded. The $307 million Override Agreement matures December 30, 1995. The
Bridge Facility, originally $35 million and maturing November 30, 1993, was
extended by the Company for one year at the $15 million commitment level, which
satisfied the $20 million commitment reduction required as of November 30, 1993
under the Agreements. Additional required commitment reductions are $10 million
on May 31, 1994 and $15 million on each of November 30, 1994 and May 31, 1995,
with the balance expiring December 30, 1995. Additional commitment reductions
may be required to the extent of certain asset sales, equity proceeds and
available working capital based on calculations specified in the Agreements.
The Agreements include various restrictive covenants pertaining to capital
expenditures, asset sales, operating leases, minimum working capital and
current ratio, debt leverage, consolidated tangible net worth, earnings before
interest, taxes, depreciation and amortization and interest coverage. Cash
dividends may not be declared or paid during the term of the Agreements and the
Company is prohibited from purchasing or redeeming its stock, warrants, rights
or options, or from making certain acquisitions or investments without specific
lender consent. Any borrowings under the Bridge Facility would be repaid for a
minimum thirty day period during 1993 and for two thirty day periods in 1994.
During 1993, the Company did not borrow under the Bridge Facility and no other
commitment reductions were required. At November 30, 1993, the Company had $89
million of borrowing availability under the Agreements.
During 1993, the Company continued to evaluate refinancing alternatives,
including, but not limited to, extending the maturities of a portion of its
borrowings. In January 1994, two industrial development bonds ("IDBs")
aggregating $15.5 million, associated with the Override Agreement, were
refinanced independent of the Override Agreement. The refinanced bonds bear a
fixed coupon rate of 7.25% and were issued at a discount to yield 7.5%. The
$7.5 million IDB matures on July 1, 2014 while the $8.0 million IDB matures on
July 1, 2015. The Company, at its option, may redeem the IDBs beginning July 1,
2000 at a 3% premium,
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<PAGE>
declining to par on July 1, 2003. The IDBs are now unsecured obligations of
Hartmarx Corporation and include certain customary covenants, representations
and warranties in events of default, but do not contain financial covenants or
cross default provisions.
In January 1994, the Company filed a Registration Statement with respect to a
proposed public offering of $100 million aggregate principal amount of its
senior subordinated notes due 2002 ("Notes"). The ultimate issuance of these
Notes is contingent upon several factors, including a public market environment
acceptable to the Company with respect to interest rates. In addition, the
issuance of the Notes would require the Company to obtain either the consent of
the existing Override Agreement and Bridge Facility lenders or a new credit
facility which, in conjunction with the subordinated debt issue, would provide
sufficient availability to repay and terminate the Agreements.
As discussed in the accompanying Notes to Consolidated Financial Statements,
the Company executed a commitment letter ("Financing Commitment") on January
11, 1994 with General Electric Capital Corporation as managing agent ("Managing
Agent") with respect to a proposed new credit facility for an aggregate maximum
amount of $175 million ("New Credit Facility"). The Financing Commitment is
subject to, among other things, (i) there being no material adverse change in
the business or financial condition of the Company and its subsidiaries taken
as a whole and (ii) definitive documentation for the New Credit Facility
acceptable to the Managing Agent. The Financing Commitment terminates if, among
other things, the Notes are not issued by April 30, 1994. Assuming that the New
Credit Facility was consummated as of March 31, 1994 and the Agreements
cancelled, the Company would expect to record an extraordinary pre-tax charge
in fiscal 1994 of approximately $4 million, representing the loss from early
extinguishment of debt.
The New Credit Facility is expected to contain 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.
As noted above, the proposed Notes and New Credit Facility are subject to
certain conditions precedent. While the consummation of the above noted
transactions are believed to be beneficial to the longer term interests of the
Company, the Company believes its existing arrangements provide sufficient
borrowing availability and flexibility to currently operate its businesses in
the normal course. However, if the Notes and New Credit Facility transactions
are not completed, the Company would need to enter into new financing
agreements by the December 30, 1995 expiration of the Override Agreement.
As indicated in the accompanying Consolidated Statement of Cash Flows, the
net cash provided by operating activities was $30 million in 1993 compared to
net cash used in operating activities of $7 million in 1992 and $11 million in
1991. The cash and cash equivalent balance at November 30, 1993 was $1.5
million, compared to $22.4 million at November 30, 1992 which reflected
approximately $13 million of short-term investments and the full utilization of
then available credit lines. Net accounts receivable of $120.4 million at
November 30, 1993 declined $39.3 million or 24.6% compared to November 30,
1992, principally attributable to the Restructuring, and 1992 receivables
included certain consumer receivables which have subsequently been collected or
written off. The allowance for doubtful accounts decreased to $9.9 million from
$16.0 million in 1992, representing 7.6% of gross receivables in 1993 compared
to 9.1% in 1992; the 1992 reserve reflected increased requirements for the then
remaining consumer receivables. Inventories of $193.8 million at November 30,
1993 declined $22.9 million or 10.6% from November 30, 1992, attributable to
both improvements in ongoing operations and the completion of inventory
liquidations in the Old Mill retail stores and uniform businesses during fiscal
1993. Inventory turn in continuing businesses improved.
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<PAGE>
Recoverable income taxes of $.7 million at November 30, 1993 and $8.2 million
at November 30, 1992 arise from the carryback of operating losses to prior
years. Deferred income taxes were $5.9 million at November 30, 1993 compared to
$5.6 million in 1992. The November 30, 1993 balance reflects a $69 million
valuation allowance ($71 million in 1992) related to a substantial portion of
the tax asset resulting from prior years' operating losses. The Company has and
will continue to assess the necessity for the valuation allowance taking into
consideration such factors as earnings trends and prospects, anticipated
reversal of temporary differences between financial and taxable income, the
expiration or limitations of net operating loss carryforwards and available tax
planning strategies (including the ability to adopt the FIFO inventory
valuation method for those inventories currently valued under the LIFO
valuation method). A future reversal of the valuation allowance in whole or in
part represents a contingent asset which would increase earnings and
shareholders' equity. Also, see discussion under "Income Taxes" above.
At November 30, 1993, net properties were $56.5 million compared to $66.8
million in 1992. The decline principally reflected depreciation expense
exceeding capital additions by approximately $8 million. Capital additions in
1993 were $6.0 million compared to $9.5 million in 1992 which included
additions relating to businesses discontinued pursuant to the Restructuring;
capital additions for 1992 in continuing businesses were $8.1 million. The
Company's current borrowing agreements provide for annual limitations of
capital expenditures, including $9.9 million applicable to 1994. These
limitations are not expected to result in delaying capital expenditures
otherwise planned by the Company. Upon consummation of the New Credit Facility,
the permitted capital expenditures are anticipated to increase from the current
levels. Capital expenditures in the next several years are expected to be
funded from cash generated from operations and principally utilized for
productivity improvements in various manufacturing locations.
The operational aspects of the Restructuring have been substantially
completed. Following the sale of HSSI in September, 1992, all of the Old Mill
stores were closed. The store closings associated with Kuppenheimer were
substantially completed by January 1994. Production facilities supporting the
above noted reduced retail operations have been closed or sold along with
facilities related to the rainwear and military and commercial uniform
businesses. At November 30, 1993, approximately $8 million of accrued
restructuring charges were reflected in the accompanying balance sheet,
representing rent, severance and other employee benefits.
At November 30, 1993, total debt of $233.1 million declined by $81.5 million
as compared to November 30, 1992, as a result of the application of proceeds of
the $30 million equity investment and approximately $21 million of cash and
equivalents to the reduction of outstanding indebtedness, lower working capital
requirements related to both ongoing and discontinued businesses, and lower
capital expenditures. The $25 million of notes payable classified as current at
November 30, 1993 reflects the anticipated seasonal repayments within fiscal
1994. Long-term debt was $207.4 million at November 30, 1993, representing 66%
of the total $316.4 million capitalization, compared to 78% at November 30,
1992; the lower percentage reflected 1993 net earnings, the debt reduction and
equity sales during the year. Total debt, including short- term borrowings and
current maturities, represented 68% of total capitalization at November 30,
1993, compared to 82% at November 30, 1992.
Shareholders' equity of $109.0 million at November 30, 1993 increased $38.6
million during 1993 and represented $3.41 book value per share at year end
compared to $2.72 book value per share at November 30, 1992 ($100.4 million or
$3.18 per share on a pro forma basis reflecting the $30 million equity proceeds
and issuance of 5.7 million additional shares). The increase reflected the net
income for the year, the private placement of equity, ongoing equity sales to
employee benefit plans and recognition of previously unearned employee benefits
associated with the Company's Employee Stock Ownership Plan. Dividends were not
paid in fiscal 1993 or 1992 and dividend payments are prohibited under the
current lending facility. The proposed terms of the Notes and New Credit
Facility restrict the payment of dividends. Consolidated tangible net worth at
November 30, 1993, as defined in the current Agreements, was $130 million
compared to $107 million required under the Agreements.
14
<PAGE>
Considering the impact of inflation, earnings would be lower than reported
due to assuming higher depreciation expense without a corresponding reduction
in taxes. The current value of net assets would be higher than the Company's
$109 million book value after reflecting the Company's use of the LIFO
inventory method and increases in the value of the properties since
acquisition.
HSSI has continued as a customer of the Company subsequent to its
disposition, although its purchases of the Company's products are 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 the
approximate $67 million wholesale value of shipments produced by the Company's
continuing businesses for HSSI in 1992. In connection with the 1992 sale to
HSSA, HSSI agreed to purchase from the Company, in each of the two twelve-month
periods following the closing of the sale, products having an aggregate
wholesale purchase price of at least $35 million. On December 21, 1993, HSSI
and 25 affiliates filed voluntary petitions for relief 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
petitions were filed, HSSI's total outstanding indebtedness to the Company
(excluding its guaranty of a $35 million promissory note of HSSA, the original
direct obligor, to the Company) was approximately $4.5 million. MLR has
extended credit support to HSSI and others in connection with purchases from
the Company and, as a result, has total outstanding indebtedness to the Company
at November 30, 1993 of approximately $10.8 million (including interest
charges). The foregoing amounts of indebtedness of HSSI and MLR have not been
adjusted for amounts received by the Company aggregating approximately $4.8
million in November 1993. On February 4, 1994, MLR filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code. For
additional information concerning these and other legal proceedings involving
HSSI and the Company, see "Part I, Item 3--Legal Proceedings".
Under current circumstances, there can be no assurance that the Company will
have any future sales to HSSI, that the Company will be able to collect amounts
owed by HSSI or MLR, that MLR will provide any future credit support to HSSI or
that either HSSI or MLR will continue as a going concern, events which could
adversely affect the Company's total revenues or earnings. For the two months
ended January 31, 1994, sales to HSSI aggregated $4.8 million and were on a
cash-in-advance basis. While there can be no assurance that a decrease in
business with HSSI can be fully replaced in the next several years, new retail
customers have been added and volume with existing customers has increased in
various markets where HSSI operates or has vacated.
Debt reduction and extension of debt maturities continue to be a priority for
the Company, as demonstrated by the Notes and the New Credit Facility.
Following the Restructuring, the Company has continued to focus its operating
and capital resources principally on its wholesale apparel businesses. The
Company intends to maintain its position as the market leader in men's tailored
clothing, while continuing to expand in men's slacks and sportswear, which
includes the golf-inspired collections under the Jack Nicklaus(R) and Bobby
Jones(R) brands. As anticipated, unit volume with HSSI declined significantly
in 1993 compared to 1992, and further reductions are likely in 1994. The
Company intends to mitigate the impact of reduced volume with HSSI by adding
new customers and increasing volume with existing accounts, as well as by
introducing new brands. Ongoing quick response and electronic data interchange
relationships with major customers, enabling the rapid replenishment of
inventory for selected product styles and enhanced service capabilities, are
expected to continue as an important element of product distribution. The
Company intends to continue its international licensing programs, while
gradually developing merchandising and marketing expertise to sell branded
apparel directly in international markets, which could include joint ventures,
acquisitions and selling agencies.
Conditions in the women's wholesale and men's direct-to-consumer businesses
resulted in operating losses in 1993 for the IWA and Kuppenheimer operations.
As a result, specific marketing and expense
15
<PAGE>
reduction actions have been implemented with the objective of improving results
in these businesses. The Company is reviewing the profitability prospects and
strategic direction of the IWA business, and may discontinue one or more of
IWA's product lines or modify its distribution channels. Kuppenheimer's total
sales are expected to decline due to fewer stores. Its merchandising strategy
has been refocused to emphasize three distinct fashion silhouettes, each having
a defined brand identification. The Company intends to expand the profitable
Barrie Pace catalog business through increasing catalog circulation and by
broadening its merchandise mix to include women's sportswear and more informal
career apparel, while continuing to target the upscale and professional woman.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Accountants....................................... 17
Consolidated Statement of Earnings for the three years ended November
30, 1993............................................................... 18
Consolidated Balance Sheet at November 30, 1992 and 1993................ 19
Consolidated Statement of Cash Flows for the three years ended November
30, 1993............................................................... 20
Consolidated Statement of Shareholders' Equity for the three years ended
November 30, 1993...................................................... 21
Notes to Consolidated Financial Statements.............................. 22
Financial Statement Schedules:
Schedule VIII--Valuation and Qualifying Accounts...................... F-1
Schedule IX--Short Term Borrowings.................................... F-1
Schedule X--Supplementary Income Statement Information................ F-1
</TABLE>
Schedules and notes not included have been omitted because they are not
applicable or the required information is included in the consolidated
financial statements and notes thereto.
<TABLE>
<CAPTION>
<S> <C>
Supplementary Data:
Quarterly Financial Summary (unaudited)................................... 35
</TABLE>
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board
of Directors of Hartmarx Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Hartmarx Corporation and its subsidiaries at November 30, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended November 30, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Hartmarx Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chicago, Illinois
January 12, 1994,
except as to the
Legal Proceedings
Note on page 33
which is as of
February 4, 1994
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management of Hartmarx Corporation is responsible for the preparation of the
Company's financial statements. These financial statements have been prepared
in accordance with generally accepted accounting principles and necessarily
include certain amounts based on management's reasonable best estimates and
judgments, giving due consideration to materiality.
In fulfilling its responsibility, management has established cost-effective
systems of internal controls, policies and procedures with respect to the
Company's accounting, administrative procedures and reporting practices which
are believed to be of high quality and integrity. Such controls include
approved accounting, control and business practices and a program of internal
audit. The Company's business ethics policy, which is regularly communicated to
all key employees of the organization, is designed to maintain high ethical
standards in the conduct of Company affairs. Although no system can ensure that
all errors or irregularities have been eliminated, management believes that the
internal accounting controls in place provide reasonable assurance that assets
are safeguarded against loss from unauthorized use of disposition, that
transactions are executed in accordance with management's authorization, and
that financial records are reliable for preparing financial statements and
maintaining accountability for assets.
The Audit Committee of the Board of Directors meets periodically with the
Company's independent public accountants, management and internal auditors to
review auditing and financial reporting matters. This Committee is responsible
for recommending the selection of independent accountants, subject to
ratification by shareholders. Both the internal and independent auditors have
unrestricted access to the Audit Committee, without Company management present,
to discuss audit plans and results, their opinions regarding the adequacy of
internal accounting controls, the quality of financial reporting and other
relevant matters.
17
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(000'S OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30,
--------------------------------
1991 1992 1993
---------- ---------- --------
<S> <C> <C> <C>
Net sales..................................... $1,215,310 $1,053,949 $731,980
Finance charges, interest and other income.... 10,761 9,566 5,980
---------- ---------- --------
1,226,071 1,063,515 737,960
---------- ---------- --------
Cost of goods sold............................ 781,303 703,645 505,179
Selling, administrative and occupancy
expenses..................................... 467,470 374,785 203,502
Restructuring and retail consolidation
charges...................................... 13,500 190,800 --
Interest expense.............................. 23,793 21,135 22,869
---------- ---------- --------
1,286,066 1,290,365 731,550
---------- ---------- --------
Earnings (loss) before taxes.................. (59,995) (226,850) 6,410
Tax provision (benefit)....................... (21,630) (6,605) 190
---------- ---------- --------
Net earnings (loss) for the year.............. $ (38,365) $ (220,245) $ 6,220
========== ========== ========
Earnings (loss) per common share and common
share equivalent............................. $ (1.74) $ (8.59) $ .20
========== ========== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
18
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
(000'S OMITTED)
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1992 1993
ASSETS --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............................. $ 22,356 $ 1,507
Accounts receivable, less allowance for doubtful
accounts of $16,022 in 1992 and $9,914 in 1993........ 159,772 120,442
Inventories............................................ 216,751 193,818
Prepaid expenses....................................... 17,179 15,346
Recoverable income taxes............................... 8,158 659
Deferred income taxes.................................. 5,557 5,943
--------- ---------
Total current assets................................. 429,773 337,715
--------- ---------
INVESTMENTS AND OTHER ASSETS............................. 15,340 10,919
--------- ---------
PROPERTIES
Land................................................... 4,006 3,882
Buildings and building improvements.................... 57,790 58,345
Furniture, fixtures and equipment...................... 122,482 114,574
Leasehold improvements................................. 39,099 32,155
--------- ---------
223,377 208,956
Accumulated depreciation and amortization.............. (156,531) (152,479)
--------- ---------
Net properties....................................... 66,846 56,477
--------- ---------
TOTAL ASSETS............................................. $ 511,959 $ 405,111
========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable to banks................................. $ 65,000 $ 25,000
Current maturities of long term debt................... 889 697
Accounts payable....................................... 56,016 30,246
Accrued payrolls....................................... 18,517 18,351
Other accrued expenses................................. 52,399 14,404
--------- ---------
Total current liabilities............................ 192,821 88,698
--------- ---------
LONG TERM DEBT, less current maturities.................. 248,713 207,416
--------- ---------
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value; 2,500,000 authorized
and unissued.......................................... -- --
Common shares, $2.50 par value; authorized 75,000,000;
issued 28,106,439 in 1992 and 31,951,464 in 1993...... 70,266 79,878
Capital surplus........................................ 63,810 74,256
Retained earnings (deficit)............................ (17,758) (33,379)
Unearned employee benefits............................. (12,496) (11,758)
--------- ---------
103,822 108,997
Common shares in treasury, at cost, 2,198,864 in 1992
and none in 1993...................................... (33,397) --
--------- ---------
Shareholders' equity................................... 70,425 108,997
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $ 511,959 $ 405,111
========= =========
</TABLE>
(See accompanying notes to consolidated financial statements)
19
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER
30,
-----------------------------
1991 1992 1993
-------- --------- --------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from operating activities:
Net earnings (loss)........................... $(38,365) $(220,245) $ 6,220
Reconciling items to adjust net earnings
(loss) to net cash provided by operating
activities:
Depreciation and amortization............... 33,809 26,947 14,107
Loss on sale of subsidiary.................. -- 136,000 --
Changes in:
Accounts receivable:
Sale of receivables..................... (2,000) (58,000) --
Other changes........................... (29) 23,076 42,330
Inventories............................... 4,604 68,944 12,901
Prepaid expenses.......................... 431 (10,215) 1,786
Other assets.............................. 243 (4,280) 4,364
Accounts payable and accrued expenses..... (6,907) 8,541 (61,030)
Taxes on earnings......................... (7,305) 10,439 7,113
Adjustment of properties to net realizable
value...................................... 4,493 11,510 1,901
-------- --------- --------
Net cash provided by (used in) operating
activities................................... (11,026) (7,283) 29,692
-------- --------- --------
Cash Flows from investing activities:
Capital expenditures.......................... (15,488) (9,546) (5,953)
Cash received re disposition, net of
subsidiary cash.............................. -- -- 4,500
-------- --------- --------
Net cash used in investing activities......... (15,488) (9,546) (1,453)
-------- --------- --------
Cash Flows from financing activities:
Increase (decrease) in notes payable to banks. (3,850) 30,796 (80,600)
Increase (decrease) in other long term debt... 2,014 (1,133) (840)
Proceeds from equity sale..................... 38,550 -- 29,880
Proceeds from other equity transactions....... 7,283 2,951 2,472
Payment of dividends.......................... (13,643) -- --
-------- --------- --------
Net cash provided by (used in) financing
activities................................... 30,354 32,614 (49,088)
-------- --------- --------
Net increase (decrease) in cash and cash
equivalents.................................. 3,840 15,785 (20,849)
Cash and cash equivalents at beginning of
year......................................... 2,731 6,571 22,356
-------- --------- --------
Cash and cash equivalents at end of year...... $ 6,571 $ 22,356 $ 1,507
======== ========= ========
Supplemental cash flow information:
Net cash paid (received) during the year for:
Interest expense............................ $ 24,300 $ 22,200 $ 23,800
Income taxes................................ (14,300) (17,000) (6,900)
</TABLE>
(See accompanying notes to consolidated financial statements)
20
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
PAR VALUE RETAINED UNEARNED
OF COMMON CAPITAL EARNINGS EMPLOYEE TREASURY
STOCK SURPLUS (DEFICIT) BENEFITS SHARES
--------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1990. $58,889 $42,939 $ 266,841 $(13,850) $(62,281)
Net loss for the year...... (38,365)
Cash dividends:
Common shares, $.60 per
share................... (13,643)
Disposition of 1,020,015
treasury shares........... (7,484) (7,615) 22,382
Issuance of 4,300,100
shares of common stock.... 10,751 27,799
Allocation of unearned
employee benefits......... 645
------- ------- --------- -------- --------
Balance at November 30, 1991. 69,640 63,254 207,218 (13,205) (39,899)
Net loss for the year...... (220,245)
Issuance of 242,822 shares
to employee benefit plans. 607 546
Stock options exercised
(7,815 shares issued upon
exercise of 7,815 $1.00
Director Stock Options)... 19 10
Disposition of 296,493
treasury shares........... (4,731) 6,502
Allocation of unearned em-
ployee benefits........... 709
------- ------- --------- -------- --------
Balance at November 30, 1992. 70,266 63,810 (17,758) (12,496) (33,397)
Net earnings for the year.. 6,220
Issuance of 329,482 shares,
principally to employee
benefit plans............. 823 898 10 3
Private placement of common
stock and warrant......... 8,789 9,548 (21,851) 33,394
Allocation of unearned
employee benefits......... 738
------- ------- --------- -------- --------
Balance at November 30, 1993
............................ $79,878 $74,256 $ (33,379) $(11,758) $ --
======= ======= ========= ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
21
<PAGE>
HARTMARX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation--The Company and its subsidiaries ("the Company")
are engaged in the manufacturing and marketing of quality men's and women's
apparel to independent retailers and through owned retail stores and catalogs.
The consolidated financial statements include the accounts of the Company and
all subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. Certain prior year amounts have been
reclassified to conform to the current year's presentation.
Cash and Cash Equivalents--The Company considers as cash equivalents all
highly liquid investments with an original maturity of three months or less.
Inventories--Inventories are stated at the lower of cost or market.
Approximately 18% and 23% of the Company's inventories at November 30, 1992 and
1993, respectively, primarily work in process and finished goods, are valued
using the last-in, first-out (LIFO) method. The first-in, first-out (FIFO)
method is used for substantially all raw materials and the remaining
manufacturing and retail inventories.
Property, Plant and Equipment--Properties are stated at cost. Additions,
major renewals and betterments are capitalized; maintenance and repairs which
do not extend asset lives are charged against earnings. Profit or loss on
disposition of properties is reflected in earnings and the related asset costs
and accumulated depreciation are removed from the respective accounts.
Depreciation is generally computed on the straight line method based on useful
lives of 20 to 45 years for buildings, 5 to 20 years for building improvements
and 3 to 15 years for furniture, fixtures and equipment. Leasehold improvements
are amortized over the terms of the respective leases.
Revenue Recognition--Wholesale sales are recognized at the time the order is
shipped. Retail sales, which include sales of merchandise and leased department
income, are net of returns and exclude sales taxes.
Store Opening/Closing Costs--Non-capital expenditures incurred for new or
remodeled retail stores are expensed upon construction completion. When a store
is closed, the remaining investment in fixtures and leasehold improvements, net
of expected salvage, is charged against earnings; the present value of any
remaining lease liability, net of expected sublease recovery, is also expensed.
Intangibles--Intangible assets are included in "Investments and Other Assets"
at cost, less amortization, which is provided on a straight-line basis over
their economic lives, usually 10 years or less.
Income Taxes--Effective December 1, 1991, the Company adopted Statement of
Financial Accounting Standards No. 109--Accounting for Income Taxes, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Prior to fiscal 1992, the provision (benefit) for income taxes was based on
income and expenses included in the accompanying consolidated statement of
earnings whereby timing differences were classified as deferred tax assets or
liabilities based on the respective tax rates then in effect.
Retirement Plans--The Company and its subsidiaries maintain benefit plans
covering substantially all employees other than those covered by multi-employer
plans. In accordance with Statement of Financial Accounting Standards No. 87--
Employers' Accounting for Pensions, pension expense or income for the Company's
principal defined benefit plan is determined using the projected unit credit
method. Pension
22
<PAGE>
expense under each multi-employer plan is based upon a percentage of the
employer's union payroll established by industry-wide collective bargaining
agreements; such pension expenses are funded as accrued.
Retiree Medical Program--Certain health and insurance programs are made
available to non-union retired employees and eligible dependents. Approximately
175 retired employees are currently participating; substantially all non-union
employees employed prior to September 1, 1993 could ultimately remain eligible
upon attaining retirement age while employed by the Company. These retiree
programs, after considering retiree contributions which offset the full cost,
did not have a significant effect on earnings. Statement of Financial
Accounting Standards No. 106--Employers' Accounting for Postretirement Benefits
Other Than Pensions is mandatory for the Company's fiscal year ending November
30, 1994. Adoption of the statement will have no impact on cash flows. Since
the retiree contributions offset the full cost of the available medical
programs, no transition obligation is expected upon adoption and, accordingly,
there would be no effect on either net income or shareholders' equity.
Other Postemployment Benefits--Statement of Financial Accounting Standards
No. 112--Employers' Accounting for Postemployment Benefits requires the
recognition of obligations related to benefits provided by an employer to
former or inactive employees after employment but before retirement, and is
mandatory for the Company's fiscal year ending November 30, 1995. The Company
believes that adoption is not expected to have a material impact on its
financial condition.
Stock Options--When stock options are exercised, common stock is credited for
the par value of shares issued and capital surplus is credited with the
consideration in excess of par. For stock appreciation rights, compensation
expense is recognized on the aggregate difference between the market price of
the Company's stock and the option price only when circumstances indicate that
the right, and not the option, will be exercised. Compensation expense related
to restricted stock awards is recognized over the vesting period. For director
stock options and director deferred stock awards, compensation expense is
recognized at the date the option is granted or the award is made to the
outside director.
Per Share Information--The computation of earnings or loss per share in each
year is based on the weighted average number of common shares outstanding. When
dilutive, stock options and warrants are included as share equivalents using
the treasury stock method. The number of shares used in computing the earnings
(loss) per share was 22,056,000 in 1991, 25,629,000 in 1992 and 31,375,000 in
1993. Primary and fully diluted earnings per share are the same for each of
these years. In July 1991, the Company sold 4.3 million shares of common stock,
pursuant to a public offering. Net proceeds of $38.5 million were used to repay
bank borrowings. Effective December 30, 1992, the Company completed the sale to
an unrelated third party of 5,714,286 shares of its common stock along with a
three year warrant to purchase an additional 1,649,600 shares at an exercise
price of $6.50 per share, for an aggregate price of $30 million. If this
transaction had occurred as of December 1, 1992, the net earnings per share for
the year would have been the same as the reported net earnings of $.20 per
share.
FINANCING
In December 1992, the Company and its subsidiaries entered into new financing
agreements with its principal lenders ("Override Agreement" and "Bridge
Facility", collectively "the Agreements") aggregating $307 million, which
substantially replaced or amended the provisions of prior agreements covering
the Company's $196 million Multiple Option Revolving Credit Facility with 13
banks, $45 million of insurance term loans, $38 million of bank term loans, the
ESOP loan guarantee and guarantees related to certain industrial development
bonds having aggregate borrowings of $15.5 million. The Agreements also
provided for additional seasonal borrowings of up to $35 million during 1993.
At November 30, 1993, $226.4 million of the total $233.1 million debt
outstanding related to borrowings under the provisions of the Agreements.
Borrowings under the Agreements are secured by substantially all assets of the
Company and its subsidiaries, subject to a priority of up to $15 million for
trade creditors.
23
<PAGE>
The Override Agreement is in effect through December 30, 1995. The Bridge
Facility, originally $35 million and maturing on November 30, 1993, has been
extended by the Company for one year and currently provides for a $15 million
commitment through November 30, 1994. In addition to the aggregate commitment
reduction of $20 million on November 30, 1993, the Agreements provide for
additional commitment reductions of $10 million on May 31, 1994, $15 million on
November 30, 1994 and May 31, 1995, with the balance expiring on December 30,
1995; additional commitment and principal reductions may be required to the
extent of certain asset sales, equity proceeds and excess working capital based
on calculations specified in the Agreements. Generally, principal payments
apply first to the Bridge Facility and then to the Override Agreement. The
Bridge Facility also requires that borrowings, if any, be repaid for a minimum
30 day period during 1993 and for two 30 day periods in 1994; the Company may
reborrow after these periods. The Company had no borrowings under the Bridge
Facility during 1993. Borrowings under the Override Agreement bear interest at
prime plus 2% for bank lenders, 10.3% for the insurance lenders, and 9.19%
related to the ESOP loan guaranteed by the Company. Borrowings under the Bridge
Facility bear interest at prime plus 1.5%. Fees pertaining to the Agreements
aggregating $3.8 million were paid as of the closing date and certain other
fees principally based on utilization are also payable. An additional $2.4
million is payable at the expiration of the Override Agreement.
The Agreements, as amended, include various restrictive covenants pertaining
to capital expenditures, asset sales, operating leases, minimum working capital
and current ratio, debt leverage, consolidated tangible net worth, interest
coverage and earnings before interest, taxes, depreciation and amortization.
Cash dividends may not be declared or paid during the term of the Agreements
and the Company is prohibited from purchasing or redeeming its stock, warrants,
rights or options, or from making certain acquisitions without lender consent.
The Company is in compliance with the various covenants contained in the
Agreements. At November 30, 1993, working capital and the current ratio, as
defined, were $274.7 million and 5.4, respectively, compared to the minimum
required levels of $261.5 million and 4.9, respectively. Consolidated tangible
net worth, as defined, was approximately $130 million compared to the minimum
required level of $107 million. The ratio of consolidated funded indebtedness
to consolidated tangible net worth, as defined, was 1.8 compared to the maximum
permitted ratio of 2.7.
At November 30, 1992 and 1993, long term debt, less current maturities,
comprised the following (000's omitted):
<TABLE>
<CAPTION>
1992 1993
-------- --------
<S> <C> <C>
Notes payable to banks................................. $234,296 $153,696
Notes payable to insurance companies................... 45,000 45,000
Industrial development bonds........................... 21,355 20,943
ESOP loan guarantee.................................... 12,219 12,219
Other debt, extending to 2003.......................... 1,732 1,255
-------- --------
314,602 233,113
Less--current maturities............................... 65,889 25,697
-------- --------
Long term debt......................................... $248,713 $207,416
======== ========
</TABLE>
The industrial development bonds (IDBs), which mature on varying dates
through 2015, were issued by development authorities for the purchase or
construction of various manufacturing facilities having a carrying value of $13
million at November 30, 1993. Interest rates on the various borrowing
agreements range from 7/8 of 1% to 8.5% (average of 4.1% at November 30, 1992
and 4.4% at November 30, 1993). In January 1994, two IDBs aggregating $15.5
million, associated with the Override Agreement, were refinanced independent of
the Override Agreement. The $7.5 million IDB matures on July 1, 2014, while the
$8.0 million IDB is due on July 1, 2015. The IDBs are callable by the Company
beginning July 1, 2000 at a 3% premium, declining to par on July 1, 2003; the
effective interest rate on these obligations is 7.5%.
Other long term debt includes installment notes and mortgages with interest
rates ranging from 8% to 11.5% per annum. (Average interest rate of 10.3% at
November 30, 1992 and 10.2% at November 30, 1993.)
24
<PAGE>
The approximate principal requirements during the next five fiscal years,
including reductions under the Override Agreement, are as follows: $.7 million
in 1994; $.7 million in 1995; $211.5 million in 1996; $.1 million in 1997; $.1
million in 1998.
In January 1994, the Company filed a Registration Statement with respect to a
proposed public offering of $100 million aggregate principal amount of its
senior subordinated notes ("Notes"), due 2002. The ultimate issuance of these
Notes is contingent upon several factors, including a public market environment
acceptable to the Company with respect to interest rates. In addition, the
issuance of the Notes would require the Company to obtain either the consent of
the existing lenders under the Agreements or a new credit facility which, in
conjunction with the subordinated debt issue, would provide sufficient
availability to repay and terminate the Agreements. On January 11, 1994, the
Company executed a commitment letter ("Financing Commitment") with General
Electric Capital Corporation as managing agent ("Managing Agent") with respect
to a proposed new credit facility ("New Credit Facility"). The Financing
Commitment is subject to, among other things, (i) there being no material
adverse change in the business or financial condition of the Company and its
subsidiaries taken as a whole and (ii) definitive documentation for the New
Credit Facility acceptable to the Managing Agent. The Financing Commitment
terminates if, among other things, the Notes are not issued by April 30, 1994.
The New Credit Facility would be a three year 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 would be used to repay borrowings under the Override Agreement
and Bridge Facility, to finance ongoing working capital and letter of credit
requirements and for general corporate purposes. The New Credit Facility would
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, be guaranteed by the subsidiaries of the Company
and contain various restrictive covenants pertaining to net worth, additional
debt incurrence, fixed charge coverage, as well as other customary covenants.
Borrowing under the New Credit Facility would be established as either base
rate or LIBOR loans, as the Company may elect. Base rate loans would be priced
at the greater of (a) a rate based on the weighted average of various 90-day
commercial paper rates or (b) the base rate of a bank to be selected by the
Managing Agent plus 1.50%. LIBOR loans would be priced at LIBOR plus 2.50%.
On December 1, 1988 The Hartmarx Employee Stock Ownership Plan ("ESOP")
borrowed $15 million from a financial institution and purchased from the
Company 620,155 shares of treasury stock at the market value of $24.19 per
share. The loan is guaranteed by the Company and, accordingly, the amount
outstanding has been included in the Company's consolidated balance sheet as a
liability, net of a $.6 million payment made by the Company to the financial
institution holding the ESOP note, and shareholders' equity has been reduced
for the amount representing unearned employee benefits. Company contributions
to the ESOP plus the dividends accumulated on unallocated Company common stock
held by the ESOP are used to repay loan principal and interest. The common
stock is allocated to ESOP participants as the loan principal and interest is
repaid or accrued and amounts reflected as the loan guarantee and unearned
employee benefits are correspondingly reduced. Information related to dividends
received and loan repayments by the ESOP are as follows (000's omitted):
<TABLE>
<CAPTION>
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
Dividends received from Hartmarx Corporation........ $ 316 $ -- $ --
====== ====== ======
Principal payments.................................. $ 645 $ 342 $ --
Interest payments................................... 1,072 1,100 1,041
------ ------ ------
Total loan payments made by ESOP.................... $1,717 $1,442 $1,041
====== ====== ======
</TABLE>
As of November 30, 1993, 188,394 shares of common stock have been allocated
to the accounts of the ESOP participants.
25
<PAGE>
NOTES PAYABLE TO BANKS
The following summarizes information concerning notes payable to banks (000's
omitted):
<TABLE>
<CAPTION>
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Outstanding at November 30....................... $203,500 $234,296 $153,696
Maximum month end balance during the year........ 229,200 234,296 206,196
Average amount outstanding during the year....... 207,200 213,000 174,300
Weighted daily average interest rate during the
year............................................ 8.5% 7.0% 7.9%
Weighted average interest rate on borrowings at
November 30..................................... 7.7% 7.0% 8.0%
</TABLE>
As more fully discussed in the Financing Note, in December, 1992 the Company
entered into a new three year financing agreement through December 30, 1995. At
November 30, 1993, $25 million of the aggregate $153.7 million of bank
borrowings outstanding was classified as current, representing expected
seasonal repayments within the fiscal 1994 year.
The Company enters into interest rate protection agreements from time to
time, based on management's assessment of market conditions, with several
currently in effect covering $100 million of borrowings. Payments to the
Company would occur to the extent the prime interest rate exceeds 6.0%. The
payments made for the rate protection agreements in effect during each of the
three years ended November 30, 1993 were nominal.
RESTRUCTURING AND RETAIL CONSOLIDATION CHARGES
Consistent with the Company's strategies to concentrate operations around its
profitable manufacturing and wholesale businesses and to refinance its capital
structure, fiscal 1992 third quarter and full year results included pre-tax
restructuring charges aggregating $190.8 million ("the Restructuring"). The
Restructuring comprised the direct costs associated with businesses and
facilities sold or disposed of and included the loss on the sale of stock of
Hartmarx Specialty Stores, Inc. ("HSSI"), the parent company of the Company's
principal retail unit. Restructuring components applicable to other operations
sold or liquidated included impairment of leasehold improvements, fixtures and
other properties, anticipated lease settlement obligations, severance, advisory
fees and costs to liquidate inventories. As further discussed in the Taxes on
Earnings footnote, a tax benefit relating to the restructuring charges was not
recorded. At November 30, 1993, accrued restructuring charges of $8 million
were included in the accrued expense caption in the accompanying balance sheet
($34 million at November 30, 1992) principally relating to lease, severance and
employee benefit obligations.
The operational aspects of the Restructuring have been substantially
implemented. Following the sale of the HSSI business in September, 1992 for a
note due on September 18, 1994, all of the Old Mill stores operated by the
Company's Country Miss subsidiary were closed. The store closings associated
with Kuppenheimer were substantially completed by January, 1994. Production
facilities supporting the above noted operations have been closed or sold along
with facilities related to the rainwear and military and commercial uniform
businesses.
The note received in connection with the sale of HSSI, originally $43
million, was subsequently adjusted to $35 million, including interest, based on
the value of physical inventories. This note has been accounted for on a cash
collection basis. Accordingly, no value was assigned to the note in calculating
the loss on the sale. During 1993, HSSA Group, Ltd., the original direct
obligor of the note, breached certain of its obligations under the note and
ancillary agreements and, on November 23, 1993, the Company exercised certain
of its rights to cause, among other things, the common stock of HSSI to be
voted to elect a new Board of Directors.
26
<PAGE>
Fiscal 1991 fourth quarter and full year results included a pre-tax provision
of $13.5 million for expenses associated with the consolidation of certain
retail administrative functions of HSSI and Kuppenheimer, including severance,
lease settlements, and other one time costs.
SALE OF RECEIVABLES
In June 1990, the Company entered into an agreement with an unrelated third
party to sell up to $60 million of undivided interests in a designated pool of
accounts receivable, principally related to revolving charge accounts. The
Company acted as an agent for the purchaser by performing recordkeeping and
collection functions on the interests sold, and was obligated to pay the
purchaser's carrying cost plus fees typical in such transactions, which are
included in the finance charges, interest and other income caption in the
accompanying Consolidated Statement of Earnings for fiscal 1992 and 1991. The
agreement terminated effective October 10, 1992. At November 30, 1992 and 1993,
no sold receivables were outstanding under the program.
INVENTORIES
Inventories at fiscal year end were as follows (000's omitted):
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Raw materials.................................. $ 54,389 $ 52,018 $ 44,370
Work in process................................ 38,408 29,657 26,468
Finished goods................................. 312,198 135,076 122,980
-------- -------- --------
$404,995 $216,751 $193,818
======== ======== ========
</TABLE>
The excess of current cost over LIFO costs for certain inventories was $42.0
million at November 30, 1991, $38.7 million at November 30, 1992 and $35.0
million at November 30, 1993.
TAXES ON EARNINGS
The accompanying financial statements reflect the adoption of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("FAS
109"), as of December 1, 1991, the commencement of the Company's 1992 fiscal
year. Previously, accounting for income taxes was based on the provisions of
Accounting Principles Board Opinion No. 11. Among other things, FAS 109
requires an asset and liability approach in the measurement of deferred taxes,
which are adjusted to reflect changes in statutory tax rates, and permits the
recognition of net deferred tax assets subject to an ongoing assessment of
realization.
The net tax provision (benefit) is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
1991 1992 1993
-------- ------- -------
<S> <C> <C> <C>
Federal....................................... $ (6,644) $(8,262) $ 2,435
State and local............................... (147) (286) 256
-------- ------- -------
Total current............................... (6,791) (8,548) 2,691
-------- ------- -------
Federal....................................... (14,520) 1,943 (320)
State and local............................... (319) -- (66)
-------- ------- -------
Total deferred.............................. (14,839) 1,943 (386)
-------- ------- -------
Change in valuation allowance................. -- -- (2,115)
-------- ------- -------
Total tax provision (benefit)............. $(21,630) $(6,605) $ 190
======== ======= =======
</TABLE>
A substantial portion of the Company's tax assets are reserved in accordance
with FAS 109. The valuation allowance was recorded upon consideration of the
operating losses incurred during the 1990-1992
27
<PAGE>
fiscal years and related uncertainty associated with realization of the tax
benefit of net operating loss carryforwards, which require the generation of
future income from operations. The net tax assets recorded consider amounts
recoverable from carrying back operating losses to prior years and available
tax planning strategies (such as the ability to adopt the FIFO inventory
valuation method for those inventories currently valued under the LIFO
valuation method). During 1993, $2.1 million of the valuation allowance
offsetting the deferred tax asset, associated with 1993 pre-tax income for
financial reporting, was reversed. The valuation allowance offsetting the
deferred tax asset will continue to be evaluated in future periods on an
ongoing basis.
The difference between the tax benefit reflected in the accompanying
statement of earnings and the amount computed by applying the federal statutory
tax rate to the pre-tax income (loss), taking into account the applicability of
enacted tax rate changes, is summarized as follows:
<TABLE>
<CAPTION>
PERCENT OF PRE-
TAX INCOME (LOSS)
---------------------
1991 1992 1993
----- ----- -----
<S> <C> <C> <C>
Tax benefit computed at statutory rate.................. (34.0)% (34.0)% 34.0%
State and local taxes on earnings, net of federal tax
benefit................................................ (.5) (.1) 1.9
Change in valuation allowance........................... -- 30.8 (34.0)
Other--net.............................................. (1.6) .4 1.1
----- ----- -----
Effective tax rate...................................... (36.1)% (2.9)% 3.0%
===== ===== =====
</TABLE>
At November 30, 1992, the Company had a net deferred tax asset of $5.6
million comprised of deferred tax assets of $103.1 million less deferred tax
liabilities aggregating $26.6 million and a $70.9 million valuation allowance.
The principal deferred tax assets included $9.2 million attributable to Tax
Reform Act of 1986 ("TRA") items (allowance for bad debts, accrued vacation and
capitalization of certain inventory costs for tax purposes), net operating loss
carryforwards of $59.2 million, alternative minimum tax credit carryforwards
("AMT") of $4.0 million, and $23.5 million attributable to expenses deducted in
the financial statements not currently deductible for tax purposes, principally
related to the Restructuring. Deferred tax liabilities included excess tax over
book depreciation of $6.7 million and $8.8 million related to employee
benefits, principally pensions.
At November 30, 1993, the Company had a net deferred tax asset of $5.9
million comprised of deferred tax assets of $93.7 million less deferred tax
liabilities aggregating $18.9 million and a $68.9 million valuation allowance.
The principal deferred tax assets included $9.4 million attributable to TRA
items, net operating loss carryforwards of $48.1 million, AMT credit
carryforwards of $4.0 million, and $31.4 million attributable to expenses
deducted in the financial statements not currently deductible for tax purposes,
including expenses related to the Restructuring. Deferred tax liabilities
included excess tax over book depreciation of $4.2 million and $6.9 million
related to employee benefits, principally pensions.
As of November 30, 1993, the Company had approximately $137 million of tax
net operating loss carryforwards available to offset future income tax
liabilities. In general, such carryforwards must be utilized within fifteen
years of incurring the net operating loss; the loss carryforward expires in
2008. Foreign tax credit carryforwards of $.8 million are also available, the
substantial portion of which expire in 1996. The $4.0 million of AMT tax credit
carryforwards can be carried forward indefinitely.
LEASES
The Company and its subsidiaries lease office, manufacturing,
warehouse/distribution, showroom and retail space, automobiles, computers and
other equipment under various noncancellable operating leases. A number of the
leases contain renewal options ranging up to 10 years. Some retail leases
provide for contingent rental payments, generally based on the sales volume of
the retail unit.
28
<PAGE>
At November 30, 1993, total minimum rentals are as follows (000's omitted):
<TABLE>
<CAPTION>
YEARS AMOUNT
----- -------
<S> <C>
1994............................. $20,569
1995............................. 17,394
1996............................. 12,049
1997............................. 7,736
1998............................. 5,529
Thereafter....................... 5,531
-------
Total minimum rentals due........ $68,808
=======
</TABLE>
Rental expense, including rentals under short term leases, comprised the
following (000's omitted):
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Minimum rentals................................ $64,630 $58,742 $28,440
Contingent rentals............................. 4,916 2,418 112
Sublease income................................ (1,070) (896) (570)
------- ------- -------
Total rental expense......................... $68,476 $60,264 $27,982
======= ======= =======
</TABLE>
Most leases provide for additional payments of real estate taxes, insurance,
and other operating expenses applicable to the property, generally over a base
period level. Total rental expense includes such base period expenses and the
additional expense payments, as part of the minimum rentals.
EMPLOYEE BENEFITS
Pension Plans
The Company participates with other companies in the apparel industry in
making collectively-bargained contributions to pension funds covering most of
its union employees. The contribution rate of applicable payroll is based on
the actuarially recommended amount necessary to fund the costs of the benefits.
Pension costs relating to multi-employer plans were approximately $12 million
in 1991, $10 million in 1992 and $8 million in 1993.
The Multi-Employer Pension Plan Amendment Act of 1980 amended ERISA to
establish funding requirements and obligations for employers participating in
multi-employer plans, principally related to employer withdrawal from or
termination of such plans, whereupon separate actuarial calculations would be
made to determine the Company's position with respect to multi-employer plans.
The principal Company sponsored pension plan is a non-contributory defined
benefit pension plan covering substantially all eligible non-union employees.
Certain of the Company's subsidiaries have other defined benefit and
contribution plans, in which the aggregate expense was $.6 million in 1991, $.3
million in 1992 and nominal in 1993. Under the principal pension plan,
retirement benefits are a function of years of service and average compensation
levels during the highest five consecutive salary years occurring during the
last ten years before retirement. To the extent that the calculated retirement
benefit under the formula specified in the plan exceeds the maximum allowable
under the provisions of the tax regulations, the excess is provided on an
unfunded basis. Under the provisions of the Omnibus Budget Reconciliation Act
of 1993, the annual compensation limit that can be taken into account for
computing benefits and contributions under qualified plans was reduced from
$235,840 to $150,000, effective as of January 1, 1994.
It is the Company's policy to fund the plans on a current basis to the extent
deductible under existing tax laws and regulations. Such contributions are
intended to provide for benefits attributed to service to date and also for
those expected to be earned in the future.
29
<PAGE>
Pension data covering the principal plan for the three years ended November
30, 1993 included the following components in accordance with Statement of
Financial Accounting Standards No. 87--Employers' Accounting for Pensions
(000's omitted):
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the
period...................................... $(5,921) $(4,869) $(4,150)
Interest cost on projected benefit
obligation.................................. (7,222) (7,554) (7,607)
Return on plan assets........................ 19,025 15,674 17,452
Net amortization and deferral................ (6,362) (1,438) (3,235)
------- ------- -------
Net periodic pension income (expense)........ $ (480) $ 1,813 $ 2,460
======= ======= =======
</TABLE>
The above amounts do not include periodic pension expense related to the
benefits provided on an unfunded basis of $.2 million in 1991, $.3 million in
1992, and $.6 million in 1993.
The Company sold its Hartmarx Specialty Stores subsidiary ("HSSI") in 1992
and the accrual of further pension benefits related to HSSI employees ceased as
of the sale date. This event qualified as a curtailment under the provisions of
Statement of Financial Accounting Standards No. 88. The projected benefit
obligation exceeded the accumulated benefit obligation for employees of HSSI
and, accordingly, the accompanying financial statements for 1992 reflect an
additional pre-tax pension gain of $5.0 million, which was considered in the
determination of the 1992 restructuring charge.
Plan assets consist primarily of publicly traded common stocks and corporate
debt instruments, and units of certain trust funds administered by the Trustee
of the plan. At November 30, 1993, the plan assets included 519,612 shares of
the Company's stock with a market value of $3.6 million.
The following sets forth the funded status of the principal pension plan at
November 30 (000's omitted):
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1992 1993
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.......................................... $(70,571) $(95,341)
Non-vested benefits...................................... (1,105) (949)
-------- --------
Accumulated benefit obligation........................... (71,676) (96,290)
Effect of projected future compensation levels........... (15,497) (16,992)
-------- --------
Projected benefit obligation............................... (87,173) (113,282)
Plan assets, at fair value................................. 125,379 135,013
-------- --------
Plan assets in excess of projected benefit obligation...... 38,206 21,731
Unrecognized net (gain) loss............................... (10,905) 4,653
Unrecognized prior service cost............................ 592 516
Unrecognized net transition asset.......................... (10,723) (7,270)
-------- --------
Prepaid pension cost....................................... $ 17,170 $ 19,630
======== ========
</TABLE>
The weighted average discount rate used in determining the projected benefit
obligation was 8 3/4% in 1992 and 7% in 1993. The assumed rate of increase in
future compensation levels was 6% in 1992 and 5.5% in 1993, and the expected
long term rate of return on the Company sponsored plan assets was 8 3/4% in
1992 and 1993.
Savings Investment and Employee Stock Ownership Plans
The Company offers an employee savings-investment plan, The Hartmarx Savings-
Investment Plan ("SIP"), which is a qualified salary reduction plan under
Section 401(k) of the Internal Revenue Code.
30
<PAGE>
Eligible participants in SIP can invest from 1% to 16% of earnings among
several investment alternatives, including a company stock fund. Employees
participating in this plan automatically participate in The Hartmarx Employee
Stock Ownership Plan ("ESOP"). Participation in SIP is required to earn
retirement benefits under the Company's principal pension plan. An employer
contribution is made through the ESOP, based on the employee's level of
participation, and invested in common stock of the Company. While employee
contributions up to 16% of earnings are permitted, contributions in excess of
6% are not subject to an employer contribution. In 1992 and 1993, the employer
contribution was one-fourth of the first 1% contributed by the employee plus
one-twentieth thereafter. During 1991, the employer contribution was one-fourth
of employee's contribution up to the 6% limit. The Company's expense related to
the ESOP is based upon the principal and interest payments on the ESOP loan,
the dividends on unallocated ESOP shares, and the cost and market value of
shares allocated to employees' accounts. The Company's annual expense, which
approximates the Company's annual contributions, was $2.8 million in 1991, $2.1
million in 1992 and $2.2 million in 1993. At November 30, 1993, the assets of
SIP and ESOP funds had a market value of approximately $39.1 million, of which
approximately $17.4 million was invested in 2,491,059 shares of the Company's
common stock.
Health Care and Postretirement Benefits
Certain of the Company's subsidiaries make contributions to multi-employer
union health and welfare funds pursuant to collective bargaining agreements.
These payments are based upon wages paid to the Company's active union
employees.
Health and insurance programs are also made available to non-union active and
retired employees and their eligible dependents. Retirees, who elect to receive
the coverage, make contributions which offset the full cost of the retiree
program. Statement of Financial Accounting Standards No. 106--Employers'
Accounting for Postretirement Benefits Other than Pensions requires the
recognition of an obligation related to employee service pursuant to a
postretirement benefit plan and is mandatory for the Company's fiscal year
ending November 30, 1994. Adoption of the statement will have no impact on cash
flows. Since the retiree contributions offset the full cost of the available
medical programs, no transition obligation is expected upon adoption and,
accordingly, there would be no effect on either net income or shareholders'
equity.
EQUITY SALE
On September 21, 1992, the Company entered into an agreement with Traco
International, N.V., a Netherlands Antilles Corporation ("Traco"), pursuant to
which Traco agreed to purchase 5,714,286 shares of common stock of the Company
and receive a three-year warrant to purchase an additional 1,649,600 shares of
common stock of the Company at an exercise price of $6.50 per share, for an
aggregate purchase price of $30 million. The agreement was completed effective
as of December 30, 1992. Traco is also party to an agreement with the Company
providing representation on the Company's Board of Directors and restricting
Traco's rights to acquire, sell and vote the Company's shares.
STOCK PURCHASE RIGHTS
A dividend of one Right per common share was distributed to stockholders of
record January 31, 1986, and effective July 12, 1989, the Agreement governing
the Rights was amended. Each common share, adjusted for the May 1986 3-for-2
stock split, now represents .6667 Right. Each Right, expiring January 31, 1996,
continues to represent a right to buy from the Company 1/100th of a share of
Series B Junior Participating Preferred Stock, $1.00 par value, at a price of
$120. This dividend distribution of the Rights was not taxable to the Company
or its stockholders.
Separate certificates for Rights will not be distributed, nor will the Rights
be exercisable, unless a person or group acquires 15 percent or more, or
announces an offer to acquire 15 percent or more, of the Company's
31
<PAGE>
common shares. Following an acquisition of 15 percent or more of the Company's
common shares (a "Stock Acquisition"), each Right holder, except the 15 percent
or more stockholder, has the right to receive, upon exercise, common shares
valued at TWICE the then applicable exercise price of the Right (or, under
certain circumstances, cash, property or other Company securities), unless the
15 percent or more stockholder has offered to acquire all of the outstanding
shares of the Company under terms that a majority of the independent directors
of the Company have determined to be fair and in the best interest of the
Company and its stockholders. Similarly, unless certain conditions are met, if
the Company engages in a merger or other business combination following a Stock
Acquisition where it does not survive or survives with a change or exchange of
its common shares or if 50 percent or more of its assets, earning power or cash
flow is sold or transferred, the Rights will become exercisable for shares of
the acquiror's stock having a value of TWICE the exercise price (or, under
certain circumstances, cash or property). The Rights are not exercisable,
however, until the Company's right of redemption described below has expired.
Generally, Rights may be redeemed for $.033 cents each (in cash, common
shares or other consideration the Company deems appropriate) until the earlier
of (i) the tenth day following public announcement that a 15 percent or greater
position has been acquired in the Company's stock or (ii) the final expiration
of the Rights. In connection with the previously discussed sale of 5.7 million
shares of common stock and three year warrant to purchase an additional 1.6
million shares ("stock sale"), the Agreement governing the Rights was amended
to exclude the stock sale from qualifying as an event which would give rise to
the distribution or exercisability of the Rights. Until exercise, a Right
holder, as such, has no rights as a stockholder of the Company.
At the annual meeting in April 1993, a majority of the stockholders voted in
favor of a non-binding stockholder proposal calling for either the submission
of the Rights Plan to a binding shareholder vote or a redemption of the Rights.
However, the Company's current financing agreements prohibit the purchase or
redemption of the Rights.
STOCK OPTION PLANS
The Company has stock option plans under which officers and key employees may
be granted options to purchase the Company's common stock at prices equal to
the fair market value at date of grant. Generally, options under the 1982 and
1985 Stock Option Plans are exercisable to the extent of 25% each year
(cumulative) from the second through the fifth year, and expire ten years after
date of grant; however, all or any portion of the shares granted are
exercisable during the period beginning one year after date of grant for
participants employed by the Company for at least five years. A portion of the
options granted under the 1988 Stock Option Plan have exercise provisions
similar to the other plans; the remaining grants become exercisable over a
three to five year period based upon the achievement of company-wide
performance goals. Under certain circumstances, the vesting may be accelerated.
All options expire ten years after date of grant under the Plans.
The 1982, 1985 and 1988 Plans also provide for the discretionary grant of
stock appreciation rights in conjunction with the option, which allows the
holder a combination of stock and cash equal to the gain in market price from
the grant until its exercise; the cash payment is limited to one-half of the
gain. Under certain circumstances, the entire gain attributable to rights
granted under the 1988 Plan may be paid in cash. When options and stock
appreciation rights are granted in tandem, the exercise of one cancels the
other. The 1985 and 1988 Plans provide for the discretionary grant of
restricted stock awards which allows the holder to obtain full ownership rights
subject to terms and conditions specified at the time each award is granted.
The 1988 Plan provides for an annual grant of Director Stock Options (DSO) to
outside members of the Board of Directors at market value on the date of grant.
In addition, each outside director may make an irrevocable election to receive
a DSO in lieu of all or part of his or her retainer. The number of whole shares
to be granted is based on the annual retainer divided by the market value minus
one dollar and the exercise price is $1. Each outside director is also eligible
for an annual grant of a Director Deferred Stock Award
32
<PAGE>
(DDSA) equal to 150 DDSA units, with a unit equal to one share of the Company's
common stock; DDSA units are payable in shares of common stock upon death,
disability or termination of service. Dividend equivalents may be earned on
qualifying DSO and DDSA units and allocated to directors' respective accounts
in accordance with the terms of the Plan. During fiscal 1993, 23,336 DSO were
granted, no DSO were exercised and 64,132 DSO were outstanding at November 30,
1993.
Stock options outstanding at November 30, 1993 included 265,989 shares
granted in tandem with stock appreciation rights. Activity for 1992 included
the October 14th grant of 326,500 stock options at $5.25 per share, which
exceeded the market price of $3.83 per share, to employees who agreed to the
cancellation of 1,035,606 options granted to them from 1983 through 1992. In
general, one-third of these options are exercisable on each of the first three
anniversaries of the grant date. Options for 503,140 shares were exercisable at
November 30, 1993 at prices ranging from $5.25 to $30.81. At November 30, 1993,
2,012,161 shares were reserved for options and restricted stock awards granted
or to be granted including 496,181 shares for future stock options and/or
restricted stock awards (958,770 at November 30, 1992).
Information regarding stock option activity for the three years ended
November 30, 1993 is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER SHARE
---------- ----------------
<S> <C> <C>
Balance at November 30, 1990................ 1,532,750 $ 6.00 to $31.62
Granted................................... 326,000 $ 7.31 to $12.50
Expired or terminated..................... (86,166) $10.81 to $31.62
----------
Balance at November 30, 1991................ 1,772,584 $ 6.00 to $31.62
Granted................................... 458,655 $ 5.25 to $ 7.25
Expired or terminated..................... (1,342,798) $ 6.00 to $31.62
----------
Balance at November 30, 1992................ 888,441 $ 5.25 to $30.81
Granted................................... 368,000 $ 6.88 to $ 7.06
Expired or terminated..................... (230,650) $ 5.25 to $30.81
----------
Balance at November 30, 1993................ 1,025,791 $ 5.25 to $30.81
==========
</TABLE>
LEGAL PROCEEDINGS
The Company is involved in certain litigation as described in "Item 3--Legal
Proceedings." The Company believes that it has meritorious defenses to the
actions against the Company referred to under such caption and that such
actions will not have a material adverse effect on the Company's financial
condition.
33
<PAGE>
OPERATING SEGMENT INFORMATION
The Company is engaged in the business of manufacturing and marketing apparel
to unaffiliated retailers (identified below as the wholesale segment) and
directly to consumers through its owned retail stores and catalogs (identified
below as the direct-to-consumer segment and previously called the retail
segment). Information on the Company's wholesale and direct-to-consumer
operations for the three years ended November 30, 1993 is summarized as follows
(in millions):
<TABLE>
<CAPTION>
1991
----------------------------------
DIRECT-
TO-
WHOLESALE CONSUMER ADJ. CONSOL.
--------- -------- ----- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers.......... $578.0 $637.3 -- $1,215.3
Earnings (loss) before taxes............. 27.2 (41.2) (46.0) (60.0)
Gross assets at year end................. 328.0 372.7 39.1 739.8
Depreciation and amortization............ 9.6 23.6 0.6 33.8
Property additions....................... 7.2 8.2 0.1 15.5
<CAPTION>
1992
----------------------------------
DIRECT-
TO-
WHOLESALE CONSUMER ADJ. CONSOL.
--------- -------- ----- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers.......... $592.3 $461.6 -- $1,053.9
Earnings (loss) before taxes............. 24.8 (198.5) (53.2) (226.9)
Gross assets at year end................. 367.4 98.4 46.2 512.0
Depreciation and amortization............ 10.8 15.8 0.3 26.9
Property additions....................... 4.2 5.3 -- 9.5
<CAPTION>
1993
----------------------------------
DIRECT-
TO-
WHOLESALE CONSUMER ADJ. CONSOL.
--------- -------- ----- --------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers.......... $567.3 $164.7 -- $ 732.0
Earnings (loss) before taxes............. 36.8 2.5 (32.9) 6.4
Gross assets at year end................. 313.4 73.3 18.4 405.1
Depreciation and amortization............ 9.1 4.9 0.1 14.1
Property additions....................... 5.3 0.6 -- 5.9
</TABLE>
The largest customer represents approximately 12% of consolidated sales in
1993. The wholesale segment reflects products sold to unaffiliated retailers
for resale to consumers, principally from the Men's Apparel Group. The direct-
to-consumer segment reflects sales to end consumers through owned retail stores
and catalogs, comprised of products manufactured by the Company's subsidiaries
as well as products purchased from unaffiliated sources. In 1993, approximately
76% of Kuppenheimer's sales and 6% of Barrie Pace catalog sales represented
products manufactured by the Company. Prior to the disposition of HSSI to an
unaffiliated third party in September, 1992, sales of those products
manufactured by certain of the Company's subsidiaries and sold by HSSI were
reported in the direct-to-consumer segment upon their ultimate sale to
consumers. Direct-to-consumer segment sales for 1992 included approximately
$250 million related to sales made by HSSI prior to its disposition and $34
million related to the Old Mill stores.
Wholesale segment earnings before taxes reflect the manufacturing gross
margin associated with products sold to unaffiliated retailers. The earnings
(loss) before taxes of the direct-to-consumer segment reflect the gross margin
between retail selling price and cost associated with products manufactured by
the Company and those purchased from unaffiliated sources. Segment results for
1992 include pre-tax restructuring charges of $190.8 million, principally
attributable to the disposition and liquidation of retail operations. Direct-
to-consumer segment assets reflect the disposition of HSSI during 1992. The
direct-to-consumer segment results for 1991 include the $13.5 million of
expenses provided for the retail consolidation.
34
<PAGE>
Operating expenses incurred by the Company in generating sales are charged
against the respective segment's sales; indirect operating expenses are
allocated to the segments benefited. Segment results exclude any allocation of
general corporate expense, interest expense or income taxes.
Adjustments of earnings before taxes consist of interest expense and general
corporate expenses. Adjustments of gross assets are for cash, recoverable
income taxes and corporate properties, investments and other assets.
Adjustments of depreciation and amortization and net property additions are for
corporate properties.
QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
Selected quarterly financial and common share information for each of the
four quarters in fiscal 1992 and 1993 is as follows (000's omitted):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1992 QUARTER QUARTER QUARTER QUARTER
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................... $304,740 $273,584 $264,065 $211,560
Gross profit............................ 103,386 102,119 80,379 64,420
Net earnings (loss)..................... (6,595) (5,670) (213,605) 5,625
Net earnings (loss) per share........... (.26) (.22) (8.30) .22
<CAPTION>
FIRST SECOND THIRD FOURTH
1993 QUARTER QUARTER QUARTER QUARTER
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................... $186,931 $171,907 $188,993 $184,149
Gross profit............................ 53,993 55,073 53,536 64,199
Net earnings (loss)..................... (1,235) (3,480) 1,910 9,025
Net earnings (loss) per share........... (.04) (.11) .06 .29
</TABLE>
The net loss for the third quarter of 1992 includes $190.8 million or $7.44
per share after-tax restructuring charge. The full year 1992 loss per share was
$8.59 compared to $8.56 when aggregating the individual quarters, the
difference attributable to the number of outstanding shares during the third
quarter when the restructuring charge was recorded.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information to be included under the caption "Information About Nominees For
Directors" contained in the section entitled "Election of Directors" in the
Company's definitive Proxy Statement for the annual meeting of stockholders to
be held April 14, 1994 (the "Proxy Statement") which will be filed with the
Commission pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended, is incorporated herein by reference.
Information on Executive Officers of the Registrant is included as a separate
caption in Part I of this Form 10-K Annual Report.
ITEM 11--EXECUTIVE COMPENSATION
Information to be included under the captions "Executive Officer
Compensation" and "Information About Nominees for Directors" in the Proxy
Statement is incorporated herein by reference.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information to be included under the captions "Information About Nominees for
Directors" and "Ownership of Common Stock" in the Proxy Statement is
incorporated herein by reference.
35
<PAGE>
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information to be included under the caption "Information About Nominees for
Directors" in the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Financial statements for Hartmarx Corporation listed in the Index to
Financial Statements and Supplementary Data on page 16 are filed as part of
this Annual Report.
(a)(2) Financial Statement Schedules
Financial Statement Schedules for Hartmarx Corporation listed in the
Index to Financial Statements and Supplementary Data on page 16 are filed
as part of this Annual report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consent of Independent Accountants....................................... F-2
(a)(3) Index to Exhibits................................................. 37
</TABLE>
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the quarter
ended November 30, 1993.
36
<PAGE>
HARTMARX CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
AND
APPLICABLE
SECTION OF
601 OF
REGULATION
S-K
-----------
<C> <S> <C>
3-A Restated Certificate of Incorporation.
3-A-1 Certificate of Stock Designation for Series B Junior
Participating Preferred Stock.
3-A-2 Certificate of Amendment for increase in authorized
shares of Common Stock.
3-A-3 Certificate of Amendment adding Article Fourteenth
limiting director liability as provided under Delaware
General Corporation Law (S) 102(b)(7).
*3-A-4 Amended Certificate of Designation for Series B Junior
Participating Preferred Stock (Exhibit 3-A-4 to Form 10-
K for the year ended November 30, 1992), (1).
3-B By-laws of the Company as amended to the date hereof.
*4-A Rights Agreement, dated as of January 17, 1986, between
the Company and The First National Bank of Chicago
(Exhibit 1 to Registration Statement on Form 8-A
effective January 31, 1986), (1).
*4-A-1 Amendment to Rights Agreement, dated as of July 12,
1989, among the Company, The First National Bank of
Chicago and First Chicago Trust Company of New York
(Exhibit 4-B-1 to Form 10-Q for the quarter ended May
31, 1989), (1).
*4-A-2 Second Amendment to Rights Agreement, dated as of
September 20, 1992, between the Company and First
Chicago Trust Company of New York (Exhibit 4-A-2 to Form
10-K for the year ended November 30, 1992), (1).
*4-A-3 Third Amendment to Rights Agreement, dated as of
December 30, 1992, between the Company and First Chicago
Trust Company of New York (Exhibit 4-A-3 to Form
10-K for the year ended November 30, 1992), (1).
*4-B Override Agreement, dated as of December 30, 1992, among
the Company and certain of the Company's subsidiaries
named therein as Borrowers, certain financial
institutions named therein as Lenders, and The First
National Bank of Chicago as MOF Agent for certain
Lenders and as Collateral Agent for all of the Lenders
(Exhibit 4-B to Form
10-K for the year ended November 30, 1992), (1).
*4-B-1 Amendment No. 1, Waiver No. 1 and Consent No. 1, dated
as of May 21, 1993, to Certain Override Documents
(Exhibit 4-B-1 to Form 10-Q for the quarter ended May
31, 1993), (1).
4-B-2 Amendment No. 2, Waiver No. 2 and Consent No. 2, dated
as of December 20, 1993, to Certain Override Documents.
*4-C Senior Bridge Loan and Letter of Credit Agreement, dated
as of December 30, 1992, for $35,000,000 among certain
of the Company's subsidiaries as Borrowers and
Guarantors, the Company and certain other subsidiaries
of the Company as Guarantors, certain financial
institutions named therein, National Westminster Bank
PLC, New York Branch, as Agent, and The First National
Bank of Chicago as Co-Agent and as Collateral Agent
(Exhibit 4-C to Form 10-K for the year ended November
30, 1992), (1).
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
AND
APPLICABLE
SECTION OF
601 OF
REGULATION
S-K
-----------
<C> <S> <C>
*4-C-1 Amendment No. 1, Waiver No. 1 and Consent No. 1, dated
May 21, 1993, to Senior Bridge Loan and Letter of Credit
Agreement and Other Loan Documents (Exhibit
4-C-1 to Form 10-Q for the quarter ended May 31, 1993),
(1).
4-C-2 Amendment No. 2, Waiver No. 2 and Consent No. 2, dated
December 20, 1993, to Senior Bridge Loan and Letter of
Credit Agreement and Other Loan Documents.
*9-A Stockholders Agreement, dated as of September 20, 1992,
between the Company and Traco International, N.V.
(Exhibit 9-A to Form 10-K for the year ended November
30, 1992), (1).
*10-B-1 1988 Stock Option Plan (Exhibit A to Proxy Statement of
the Company relating to the 1988 Annual Meeting, (1).**
10-B-2 1985 Stock Option Plan, as amended.**
10-C-1 Hartmarx Long-Term Incentive Plan.**
10-C-2 Description of Hartmarx Management Incentive Plan.**
10-D-1 Form of Deferred Compensation Agreement, as amended,
between the Company and Directors Abboud, Baldrige,
Farley, Jacobs, Marshall and Segnar.**
*10-D-2 Form of First Amendment to Director Deferred
Compensation Agreement between the Company and Directors
Abboud, Baldrige, Farley, Jacobs, Marshall and Segnar
(Exhibit 10-D-2 to Form 10-K for the year ended November
30, 1989), (1).**
10-E-1 Form of Deferred Compensation Agreement, as amended,
between the Company and Messrs. Hand, Patel, Stein and
Morgan.**
*10-E-2 Form of First Amendment to Executive Deferred
Compensation Agreement between the Company and Messrs.
Hand, Patel, Stein and Morgan (Exhibit 10-E-2 to Form
10-K for the year ended November 30, 1989), (1).**
*10-F-1 Employment Agreement between the Company and Elbert O.
Hand (Exhibit 10-F-1 to Form 10-K for the year ended
November 30, 1992), (1).**
*10-F-2 Employment Agreement between the Company and Homi B.
Patel (Exhibit 10-F-2 to Form 10-K for the year ended
November 30, 1992), (1).**
*10-F-3 Employment Agreement between the Company and Carey M.
Stein (Exhibit 10-F-3 to Form 10-K for the year ended
November 30, 1992), (1).**
*10-F-4 Consulting Agreement between the Company and Jerome Dorf
(Exhibit 10-F-4 to Form 10-K for the year ended November
30, 1992), (1).**
10-F-5 Form of Severance Agreement between the Company and
Executive Officers Frank A. Brenner, James E. Condon,
Kenneth A. Hoffman and Glenn R. Morgan.**
*10-F-6 Form of Amendment to Severance Agreement between the
Company and Executive Officers Frank A. Brenner, James
E. Condon, Kenneth A. Hoffman and Glenn R. Morgan
(Exhibit 10-F-9 to Form 10-K for the year ended November
30, 1989), (1).**
10-F-7 Employment Agreement between the Company and Wallace L.
Rueckel.**
10-G-1 Form of Indemnity Agreement between the Company and
Directors Abboud, Baldrige, Cole, Farley, Hand, Jacobs,
Marsh, Marshall, Olson, Othman, Patel, Scott and Segnar.
21 Subsidiaries of the Registrant.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
AND
APPLICABLE
SECTION OF
601 OF
REGULATION
S-K
-----------
<C> <S> <C>
23 Consent of Independent Accountants included on page F-2
of this Form 10-K.
24 Powers of Attorney, as indicated on page 40 of this Form
10-K.
</TABLE>
- --------
*Exhibits incorporated herein by reference. (1) File No. 1-8501
**Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Hartmarx Corporation
(Registrant)
/s/ Wallace L. Rueckel /s/ Glenn R. Morgan
By:__________________________________ and By:______________________________
Wallace L. Rueckel Glenn R. Morgan
Executive Vice President and Chief Financial Officer
Senior Vice President and
Controller and Chief Accounting
Officer
Date: February 25, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
Elbert O. Hand* Homi B. Patel*
- ------------------------------------- -------------------------------------
Elbert O. Hand Homi B. Patel
Chairman, Chief Executive Officer, President, Chief Operating Officer,
Director Director
A. Robert Abboud* Charles Marshall*
- ------------------------------------- -------------------------------------
A. Robert Abboud, Director Charles Marshall, Director
Letitia Baldrige* Charles K. Olson*
- ------------------------------------- -------------------------------------
Letitia Baldrige, Director Charles K. Olson, Director
Jeffrey A. Cole* Talat M. Othman*
- ------------------------------------- -------------------------------------
Jeffrey A. Cole, Director Talat M. Othman, Director
Raymond F. Farley* Stuart L. Scott*
- ------------------------------------- -------------------------------------
Raymond F. Farley, Director Stuart L. Scott, Director
Donald P. Jacobs* Sam F. Segnar*
- ------------------------------------- -------------------------------------
Donald P. Jacobs, Director Sam F. Segnar, Director
Miles L. Marsh* /s/ Wallace L. Rueckel
- ------------------------------------- -------------------------------------
Miles L. Marsh, Director Wallace L. Rueckel
Executive Vice President Chief
Financial Officer Principal
Financial Officer
/s/ Wallace L. Rueckel
*By:_________________________________ Glenn R. Morgan*
Wallace L. Rueckel, Attorney-in-fact -------------------------------------
Glenn R. Morgan
Senior Vice President, Controller
Principal Accounting Officer
- --------
Date: February 25, 1994
40
<PAGE>
HARTMARX CORPORATION
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED NOVEMBER 30, 1991, 1992 AND 1993
(000'S OMITTED)
<TABLE>
<CAPTION>
RESERVE FOR DOUBTFUL
ACCOUNTS
YEAR ENDED NOVEMBER 30,
-------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year......................... $13,980 $15,153 $16,022
Charged to costs and expenses........................ 7,225 6,813 3,868
Deductions from reserves(1).......................... (6,052) (5,944) (9,976)
------- ------- -------
Balance at end of year............................... $15,153 $16,022 $ 9,914
======= ======= =======
</TABLE>
- --------
(1) Notes and accounts written off as uncollectible, net of recoveries of
accounts previously written off as uncollectible.
SCHEDULE IX--SHORT TERM BORROWINGS
FOR FISCAL YEARS ENDED NOVEMBER 30, 1991, 1992 AND 1993
(000'S OMITTED)
<TABLE>
<CAPTION>
NOTES PAYABLE TO BANKS
FOR BORROWINGS CLASSIFIED
AS SHORT TERM
YEAR ENDED NOVEMBER 30,
---------------------------
1991 1992 1993
-------- -------- -------
<S> <C> <C> <C>
Balance at end of year............................ $178,500 $ 65,000 $25,000
Maximum amount outstanding at any month end during
the year......................................... 178,500 234,296 50,000
Average amount outstanding during the year........ 66,262 163,853 49,231
Weighted average interest rate on balance at end
of year.......................................... 7.7% 7.0% 8.0%
Weighted average interest rate during the year.... 8.5% 7.0% 7.9%
</TABLE>
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR FISCAL YEARS ENDED NOVEMBER 30, 1991, 1992 AND 1993
(000'S OMITTED)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND
EXPENSES
FOR THE YEAR ENDED
NOVEMBER 30,
-----------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Depreciation and amortization.......................... $33,809 $26,947 $14,107
Advertising costs...................................... 48,249 33,185 20,056
</TABLE>
F-1
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Commission File Nos. 33-21549 and 33-42202) of Hartmarx
Corporation of our report dated January 12, 1994, except as to the Legal
Proceedings Note, which is as of February 4, 1994, appearing on page 17 of this
Form 10-K.
PRICE WATERHOUSE
Chicago, Illinois
February 25, 1994
F-2
<PAGE>
EXHIBIT 3.A
RESTATED CERTIFICATE OF INCORPORATION
OF
HARTMARX CORPORATION
FIRST: The name of the corporation (hereinafter "Corporation") is:
HARTMARX CORPORATION
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 306 South
State Street, City of Dover, County of Kent; and the name of the registered
agent of the Corporation in the State of Delaware at such address is United
States Corporation Company.
THIRD: The purposes and powers of the Corporation shall be to conduct any
lawful business, to promote any lawful purpose, and to engage in any lawful act
or activity, anywhere in the world, for which corporations may be organized
under the General Corporation Law of the State of Delaware.
These purposes and powers shall be in no wise limited or restricted by
reference to, or inference from, the terms of any provision of this or any
other Article of this Certificate of Incorporation.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 27,500,000. Of these, (i)
25,000,000 shares shall be shares of common stock of the par value of $2.50 per
share (hereinafter sometimes referred to as "Common Stock"); and (ii) 2,500,000
shares shall be shares of preferred stock of the par value of $1.00 per share
(hereinafter sometimes referred to as "Preferred Stock").
The designations, powers, preferences and relative, participating, optional
and other special rights and the qualifications, limitations or restrictions
for each class of stock shall be and be determined as set forth below.
Part 1. Common Stock
1.1 Dividend Rights. Subject to provisions of law and the preferences of the
shares of Preferred Stock and of any other shares ranking prior to the Common
Stock as to dividends, the holders of the Common Stock shall be offered
dividends in such amounts as may be determined by the Board of Directors, which
dividends shall be payable, upon acceptance, on and after such dates as may be
determined by the Board of Directors, if accepted within three years after the
first date so determined for the payment of each such dividend.
1.2 Voting Rights. Except as provided by law and in or pursuant to this
Article Fourth, the holders of the Common Stock shall have one vote for each
share on each matter submitted to a vote of the stockholders of the Corporation
Except as otherwise provided by law, by this Certificate of Incorporation, or
by resolutions of the Board of Directors providing for the issue of any series
of Preferred Stock, the holders of the Common Stock shall have sole voting
power.
1.3 Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (herein
sometimes referred to as "liquidation"), after payment or provision for payment
of the debts and o~her liabilities of the Corporation and the preferential
amounts to
1
<PAGE>
which the holders of any shares ranking prior to the Common Stock in the
distribution of assets shall be entitled upon liquidation, the holders of the
Common Stock shall be entitled to receive, pro rata, all of the remaining
assets of the Corporation available for distribution to its stockholders.
Part 2. Preferred Stock
2.1 Authority of the Board of Directors to Issue in Series. The Preferred
Stock may be issued from time to time in one or more series. Subject to the
provisions of this Certificate of Incorporation, authority is expressly granted
to the Board of Directors to authorize the issue of one or more series of
Preferred Stock and to fix by resolutions providing for the issue of each such
series the designations, relative rights, preferences and limitations of such
series, to the full extent now or hereafter permitted by law, including but not
limited to the following:
(a) The number of shares of such series (which, except as otherwise
provided by the resolutions of the Board of Directors providing for the
issue of such series, may subsequently be increased, or decreased to a
number not less than the number of shares thereof then outstanding, by
resolutions of the Board of Directors) and the distinctive designation
thereof;
(b) The dividend rate of such series and any limitations, restrictions or
conditions on the payment of such dividends;
(c) The price or prices at which, and the terms and conditions on which,
the shares of such series may be redeemed;
(d) The amounts which the holders of the shares of such series are
entitled to receive in the event of any liquidation, dissolution or winding
up of the Corporation;
(e) The terms of any purchase, retirement or sinking fund which may be
provided for the shares of such series;
(f) The terms and conditions, if any, upon which the shares of such
series shall be convertible into or exchangeable for shares of any other
series, class or classes, or other securities;
(g) The voting powers, if any, of such series in addition to the voting
powers provided by law and in this Article Fourth;
(h) The relative rank of each such series in relation to each other
series; and
(i) Any other term, condition or provision with respect to any such
series not inconsistent with the provisions of this Article Fourth.
Part 3. General
No holder of any of the shares of stock of the Corporation, whether now or
hereafter authorized and issued, shall be entitled, as of right, to purchase or
subscribe for (1) any unissued shares of any class, or (2) any additional
shares of any class to be issued by reason of any increase of the authorized
shares of the Corporation of any class, or (3) bonds, certificates of
indebtedness, debentures or other securities convertible into shares of the
Corporation, or carrying any right to purchase shares of any class, but any
such unissued shares or such additional authorized issue of any shares or of
other securities convertible into shares, or carrying any right to purchase
shares, may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations and upon such
terms as may be deemed advisable by the Board of Directors in the exercise of
its discretion.
FIFTH: Any action required to be, or which may be, taken at any annual or
special meeting of stockholders, may be taken by stockholder consent without a
meeting, in accordance with section 228(a) of the General Corporation Law of
the State of Delaware, except that unanimous written consent of all
2
<PAGE>
stockholders, or action taken at a stockholders meeting, is required for every
election or removal of directors by stockholders and for every amendment to,
or for repeal of, Article Sixth of this Certificate of Incorporation, and
unanimous written consent of all stockholders or the favorable vote of two-
thirds of all outstanding shares of stock of the Corporation at a meeting of
stockholders is required for every amendment to, or for repeal of, this
Article Fifth of this Certificate of Incorporation.
SIXTH:
1.1 Combinations with an Excess Stockholder. In addition to any approval of
the Board of Directors or any stockholder vote or consent required by the laws
of the State of Delaware or any other provision of this Certificate of
Incorporation in effect at the time of the adoption or authorization of a
Combination, it shall be required for the adoption or authorization of a
Combination with an Excess Stockholder that the following three conditions
shall so fulfilled:
(a) A majority of the Board of Directors shall consist of Disinterested
Directors and a majority of the Disinterested Directors shall select two
independent experts who shall be required to give their opinion that the
terms of the Combination are fair to the holders of outstanding Common
Stock which are not owned by such Excess Stockholder. Those experts shall
include as one of the factors that they shall take into account the
requirement, which is imposed by this Paragraph (a), that the stockholders
receive their proportionate share of the economic benefits which reasonably
can be foreseen from the Combination. The Corporation shall pay the
reasonable fees and expenses associated with the retention of those
experts.
(b) The affirmative vote or consent of the holders of majority of the
outstanding Common Stock which are not owned by such Excess Stockholder
shall be required for the adoption or authorization of a Combination with
such Excess Stockholder.
(c) A proxy statement which complies with the requirements of the
Securities Exchange Act of 1934, as amended, shall be mailed to the holders
of Common Stock for the purpose of soliciting stockholder approval of such
Combination. The proxy statement shall contain (as exhibits or otherwise)
the entire opinions of the two independent experts required by Paragraph
(a) of this Section 1.1.
1.2 Definitions. For purposes of this Article Sixth:
1.21 "Combination" means a merger or consolidation of the Corporation or any
subsidiary of the Corporation with or into any other corporation, or the sale
or lease of all or a substantial part of the assets of the Corporation or any
subsidiary of the Corporation to any other person, or any sale or lease to the
Corporation, or any subsidiary of the Corporation, in exchange for securities
of the Corporation of any assets having fair market value greater than $5
million controlled by any other person.
1.22 An "Excess Stockholder" is any person who (or which), as of any date,
owns~ ten percent (10%) or more of the outstanding Voting Shares of the
Corporation.
1.23 A "person" includes a natural person, corporation, partnership,
association, joint stock company, trust, unincorporated association or other
entity. When two or more persons act as a partnership, limited partnership,
syndicate, or other group for the purpose of acquiring, holding, or disposing
of common stock, such syndicate or group shall be deemed a person for purposes
of this Article Sixth.
1.24 "Voting Shares" means the issued and outstanding shares of any class of
stock of the Corporation which is entitled to vote for the election of
directors.
1.25 "Ownership" includes beneficial ownership. A beneficial owner of Voting
Shares includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or
3
<PAGE>
otherwise, has or shares (i) voting power, which includes the power to vote, or
to direct the voting of, the Voting Shares, or (ii) investment power, which
includes the power to dispose of, or to direct the disposition of, the Voting
Shares.
Notwithstanding the foregoing, beneficial ownership shall not include (i)
ownership by registered broker holding Voting Shares in its street name for
customers, or (ii) ownership by a employee plan maintained by the Corporation
in which Voting Shares are held In trust for the Corporation's employees,
provided that each employee is entitled to vote the shares in the trust which
are allocable to him.
1.26 An "Affiliate" of a specified person is a person who directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such specified person.
1.27 An "associate" of specified person is (i) any person of which such
specified person is a officer or partner or is the owner of ten percent (10%)
or more of any class of equity securities, (ii) any trust or other estate in
which such specified person owns ten percent (10%) or more of the total
beneficial interest or as to which such specified person serves as trustee or
in similar fiduciary capacity, (iii) any relative or spouse of such specified
person, or any relative of such spouse, who has the same home as such specified
person, (iv) any person who is a director or officer of such specified person
or any corporation which controls or is controlled by such specified person, or
(v) any other member or partner in a partnership, limited partnership,
syndicate or other group, formal or informal, of which such specified person is
a member or partner and which is acting together for the purpose of acquiring,
holding or disposing of securities of the Corporation.
1.28 A "subsidiary" of the Corporation is any company fifty percent (50%) or
more of the voting securities of which are owned by the Corporation.
1.29 A "Disinterested Director" is a Director of the Corporation who (i) is
not and never has been an officer or director of an Excess Stockholder or any
affiliate or association of such Excess Stockholder and is not and has not been
for the past five years an employee of an Excess Stockholder or any affiliate
or associate of such Excess Stockholder; (ii) does not own the lesser of one
percent (1%) or 10,000 shares of any class of equity securities of an Excess
Stockholder or any affiliate or associate of such Excess Stockholder; (iii) is
not the settlor of any trust, and does not serve as the trustee, executor or in
a similar capacity for any trust or estate, which owns the lesser of one
percent (1%) or 10,000 shares of any class of equity securities of any Excess
Stockholder or any affiliate or associate of such Excess Stockholder; (iv) is
not the relative of any person or of the spouse of such person who could not be
a Disinterested Director because of any of the provisions of clauses (i), (ii),
or (iii) above who has the same home as such person; (v) is not the spouse,
brother, sister, son, daughter, father or mother of any person who could not be
a Disinterested Director because of any of the provisions of clauses (i), (ii),
or (iii) above; and (vi) is not otherwise by reason of past, present or
anticipated circumstances unable to act solely in the interest of the
Corporation with respect to the Combination, provided that no officer or
employee of the Corporation shall be disqualified from being a Disinterested
Director solely by reason of being an officer or employee of the Corporation.
1.3 Enforcement. The Board of Directors is specifically authorized to seek
equitable relief, including an injunction, to enforce the provisions of this
Article Sixth.
1.4 Exemption. The Board of Directors is specifically authorized to waive or
to suspend the enforcement of the provisions of this Article Sixth as to any
Person or any events, or to exempt any Person from its requirements before such
Person becomes an Excess Stockholder.
1.5 Amendment. No amendment to this Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article Sixth unless such
amendment, in addition to receiving any
4
<PAGE>
stockholder vote or consent required by the laws of the State of Delaware in
effect at the time, shall receive the affirmative vote of the holders of a
majority of the Voting Shares entitled to vote in elections of directors, which
are not owned by any person who (or which) is an Excess Stockholder.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1.1 The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in
the manner provided in, the By-Laws. The phrase "whole Board" and the phrase
"total number of directors" shall be deemed to have the same meaning, to wit,
the total number of directors which the Corporation would have if there were no
vacancies. No election of directors need be by written ballot.
1.2 The original By-Laws of the Corporation shall be adopted by the
Incorporator unless this Certificate of Incorporation shall name the initial
Board of Directors herein. Thereafter, the power to make, alter, amend, change,
or add to or repeal the By-Laws, and to adopt any new By-Law, except a By-Law
classifying directors for election for staggered terms, shall be vested in the
Board of Directors, except with respect to any matter as to which the General
Corporation Law of the State of Delaware explicitly requires action by
stockholders and, as to any such matter, approval of both stockholders and the
Board of Directors shall be required.
1.3 Whenever the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the Corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of this
Certificate of Incorporation shall entitled the holder thereof to the right to
vote at any meeting of stockholders, except as the provisions of Paragraph (c)
(2) of Section 242 of the General Corporation Law of the State of Delaware
shall otherwise require; provided, that no share of any such class which is
otherwise denied voting power shall entitle the holder thereof to vote upon the
increase or decrease in the number of authorized shares of said class.
EIGHTH: The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have
power to indemnify under said Section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders of disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
NINTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation,
5
<PAGE>
as the case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
TENTH: The principal office of the Corporation shall be located at such
place, whether within or without the State of Delaware, as may be provided in
the By-Laws.
ELEVENTH: The books of the Corporation may be kept outside the State of
Delaware at such place or places as may from time to time be designated by the
Board of Directors or in the By-Laws of the Corporation.
TWELFTH: The Corporation is to have perpetual existence.
THIRTEENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article Thirteenth.
6
<PAGE>
EXHIBIT 3.A.l
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
HARTMARX CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Richard P. Hamilton, Chairman, and Carey M. Stein, Secretary, of Hartmarx
Corporation, a corporation organized and existing under the General Corporation
Law of the State of Delaware, in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the said Corporation, the said Board
of Directors on January 16, 1986, adopted the following resolution creating a
series of 165,000 shares of Preferred Stock designated as Series B Junior
Participating Preferred Stock:
FURTHER RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the relative rights, preferences and
limitations of such series are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series B Junior Participating Preferred Stock" (herein "Series B
Preferred Stock") and the number of shares constituting such series shall be
165,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares of
any other series of Preferred Stock ranking prior and superior to the shares of
Series B Preferred Stock with respect to dividends, the holders of shares of
Series B Preferred Stock shall be offered and entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable, upon acceptance, in cash on the fifteenth
day of February, May, August and November of each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), if accepted within
three years after the first date each such dividend is payable, commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series B Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $5.00 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount
<PAGE>
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), offered or declared
on the Common Stock, par value $2.50 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series B Preferred Stock. In
the event the Corporation shall at any time (i) offer, declare or pay any
dividend on Common Stock payable in Common Stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock, into a greater or lesser
number of shares of Common Stock, then in each such case the amounts to which
holders of shares of Series B Preferred Stock were entitled immediately prior
to such event under clause (a) and clause (b) of the preceding sentence shall
be adjusted by multiplying each such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
ouch event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) The Corporation shall offer or declare a dividend or distribution on the
Series B Preferred Stock as provided in Paragraph (A) of this Section 2
------------- ---------
immediately after it offers or declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been offered
or declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date,
a dividend of $5.00 per share on the Series B Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series B Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series B Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series B Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series B Preferred Stock entitled to receive payment of a dividend or
distribution offered thereon, which record date shall be no more than thirty
(30) days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Preferred Stock
-------------
shall have the following voting rights:
- 2 -
<PAGE>
(A) Subject to the provision for adjustment hereinafter set forth, each share
of Series B Preferred Stock shall entitle the holder thereof to 100 votes on
all matters submitted to a vote of the stockholders of the Corporation. In the
event the Corporation shall at any time (i) offer, declare or pay any dividend
on Common Stock payable in Common Stock, (ii) subdivide the outstanding Common
Stock, (iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a reclassification of
the outstanding Common Stock, then in each such case the number of votes per
share to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series B Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) (i) If at any time dividends on any Series B Preferred Stock shall be in
arrears in an amount equal to six (6) quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period
(herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of
Series B Preferred Stock then outstanding shall have been offered or
declared and paid or set apart for payment. During each default period,
the holders of Preferred Stock, voting as a class, irrespective of
series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series B Preferred Stock may be exercised initially at a special meeting
called pursuant to Subparagraph (C) (iii) of this Section 3 or at any
---------------------- ---------
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of
the holders of any other series of Preferred Stock, if any, to increase,
in certain cases, the authorized number of Directors shall be exercised
unless the holders of ten percent (10%) in number of shares of Preferred
Stock outstanding shall be present in person or by proxy. The absence of
a quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, irrespective of series, to elect Directors to fill
such vacancies, if any, in the Board of Directors as may then exist up
to two (2) Directors or, if such right is exercised at an annual
meeting, to elect two (2) Directors. If the number which may be so
elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of the
Preferred Stock
- 3 -
<PAGE>
shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights
of any equity securities ranking senior to or pari passu with the Series
----------
B Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding, irrespective
of series, may request, the calling of a special meeting of the holders
of Preferred Stock, which meeting shall thereupon be called by the
Chairman, the Senior Vice Chairman or the Secretary of the Corporation.
Notice of such meeting and of any annual meeting at which holders of
Preferred Stock are entitled to vote pursuant to this Subparagraph (C)
----------------
(iii) of this Section 3 shall be given to each holder of record of
----- ---------
Preferred Stock by mailing a copy of such notice to him at his last
address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than ten (10) days and
not later than sixty (60) days after such order or request or in default
of the calling of such meeting within sixty (60) days after such order
or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Subparagraph (C)
----------------
(iii) of this Section 3, no such special meeting shall be called during
-----
the period within sixty (60) days immediately preceding the date fixed
for the next annual meeting of the stockholders.
(iv) In any default period the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2)
Directors voting as a class, after the exercise of which right (a) the
Directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (b) any vacancy in the
Board of Directors may (except as provided in Subparagraph (C) (ii) of
---------------------
this Section 3) be filled by vote of a majority of the remaining
----------
Directors theretofore elected by the holders of the class of stock which
elected the Director whose office shall have become vacant. References
in this Paragraph (C) to Directors elected by the holders of a
-------------
particular class of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (b) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period, (a) the right
of the holders of Preferred Stock as a class to elect Directors shall
cease, (b) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (c) the number of Directors shall
be such number as may be provided for in the Restated
- 4 -
<PAGE>
Certificate of Incorporation or By-Laws irrespective of any increase
made pursuant to the provisions of Subparagraph (C) (ii) of this Section
--------------------- -------
3 (such number being subject, however, to change thereafter in any
-
manner provided by law or in the Restated Certificate of Incorporation
or By-Laws). ~Any vacancies in the Board of Directors effected by the
provisions of clauses (b) and (c) in the preceding sentence may be
filled by a majority of the remaining Directors.
(D)Except as set forth herein, holders of Series B Preferred Stock shall
have no special voting rights and their consent shall not be required (except
to the extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A)Whenever quarterly dividends or the dividends or distributions payable on
the Series B Preferred Stock as provided in Section 2 are in arrears,
---------
thereafter and until all accrued and unpaid dividends and distributions,
whether or not offered or declared, on shares of Series B Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) offer, declare, or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation) to the Series B Preferred Stock, provided that the
Corporation may at any time (a) offer, declare, or pay dividends on
stock ranking junior to the Series B Preferred Stock payable in stock
ranking junior to the Series B Preferred Stock, and cash in lieu of
fractional shares in connection with any such dividend, (b) purchase,
redeem or otherwise acquire stock junior to the Series B Preferred Stock
in connection with a reclassification or exchange of any stock junior to
the Series B Preferred Stock through the issuance of other stock junior
to the Series B Preferred Stock both as to dividends and upon
liquidation, or (c) purchase, redeem or otherwise acquire stock junior
to the Series B Preferred Stock with proceeds of a reasonably
contemporaneous sale of other stock junior to the Series B Preferred
Stock both as to dividends and upon liquidation;
(ii) offer, declare, or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation) with the Series B Preferred Stock, except dividends
paid ratably on the Series B Preferred Stock and all such parity stock
on which dividend are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation) with the Series B Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares
of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon liquidation)
to the Series ~ Preferred Stock; or
- 5 -
<PAGE>
(iv) purchase or otherwise acquire for consideration any shares of
Series B Preferred Stock, or any shares of stock ranking on a parity
with the Series B Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B)The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Paragraph (A) of this Section
------------- -------
4, purchase or otherwise acquire such shares at such time and in such manner.
- -
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation.
-----------
(A)Upon any voluntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation), to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not offered
or declared, to the date of such payment (the "Series B Liquidation
Preference"). Following the payment of the full amount of the Series B
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series B Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series
B Liquidation Preference by (ii) 100 (a~ appropriately adjusted as set forth
in Subparagraph (C) of this Section 6 to reflect such events as stock splits,
---------------- ---------
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series B Liquidation Preference and the Common Adjustment
in respect of all outstanding shares and of Series B Preferred Stock and
Common Stock, respectively, holders of Series B Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number
to 1 with respect to such Preferred Stock and Common Stock, on a per share
basis respectively.
(B)In the event, however, that there are not sufficient assets available to
permit payment in full of the Series B Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank pari passu with the Series B Preferred Stock, then such assets shall be
- 6 -
<PAGE>
distributed ratably to the holders of all such pari passu shares (including
holders of shares of Series B Preferred Stock) in proportion to their
respective liquidation preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of
Common Stock.
(C)In the event, however, the Corporation shall at any time (i) offer,
declare or pay any dividend on Common Stock payable in Common Stock, (ii)
subdivide the outstanding Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares, or (iv) issue any shares of its capital
stock in a reclassification of the outstanding Common Stock, then in each such
ease the Adjustment Number relating to the amount to which holders or shares of
Series B Preferred Stock were entitled immediately prior to such event pursuant
to the provisions of the final sentence of Subparagraph (A) of the Section 6
---------------- ---------
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, Combination and Other Transactions. In case
---------------------------------------------------------
the Corporation shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of Series B Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time (i) offer, declare or
pay any dividend on Common Stock payable in Common Stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series B Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption. The shares of Series B Preferred Stock shall not be
-------------
redeemable.
Section 9. Ranking. The Series B Preferred Stock shall rank junior to all
-------
other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Fractional Shares. Series B Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holders fractional share, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preferred Stock.
- 7 -
<PAGE>
Section 11. Amendment. The Corporation will not, without the affirmative vote
---------
or consent of the holders of at least 66 2/3 percent of the Series B Preferred
Stock then outstanding, amend, alter or repeal any of the provisions hereof so
as to adversely affect the relative rights, preferences or limitations of the
Series B Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 17th day of
January, 1986.
/s/ Richard P.Hamilton
-------------------------------------
Richard P.Hamilton
Chairman
Attest:
/s/ Carey M. Stein
- -------------------------------------
Carey M. Stein
Secretary
- 8 -
<PAGE>
EXHIBIT 3.A.2
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
HARTMARX CORPORATION
----------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
----------------
We, Richard P. Hamilton, Chairman, and Carey M. Stein, Secretary, of HARTMARX
CORPORATION, a corporation existing under the laws of the State of Delaware, do
hereby certify as follows:
FIRST: That the name of the corporation is HARTMARX CORPORATION.
SECOND: That the Certificate of Incorporation of the corporation was filed by
the Secretary of State of Delaware on February 10, 1983.
THIRD: That the first paragraph of Article FOURTH of the Restated Certificate
of Incorporation of said Corporation has been amended to read as follows:
"FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 77,500,000. Of these, (i)
75,000,000 shares shall be shares of common stock of the par value of $2.50
per share (hereinafter sometimes referred to as "Common Stock'); and (ii)
2,500,000 shares shall be shares of preferred stock of the par value of
$l.00 per share (hereinafter sometimes referred to as "Preferred Stock')."
FOURTH: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
<PAGE>
affirmative vote of the holders of a majority of all outstanding stock entitled
to vote at a meeting of stockholders.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under penalties of perjury this 10th day of April,
1986.
/s/ Richard P. Hamilton
-------------------------------------
Richard P. Hamilton, Chairman
Attest:
/s/ Carey M. Stein
- -------------------------------------
Carey M. Stein, Secretary
<PAGE>
EXHIBIT 3.A.3
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
AS AMENDED
OF
HARTMARX CORPORATION
----------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
----------------
We, John R. Meinert, Chairman, and Carey M. Stein, Secretary, of HARTMARX
CORPORATION, a corporation existing under the laws of the State of Delaware, do
hereby certify as follows:
FIRST: That the name of the corporation is HARTMARX CORPORATION.
SECOND: That the Certificate of Incorporation of the corporation was filed by
the Secretary of State of Delaware on February 10, 1983.
THIRD: That the Restated Certificate of incorporation, as amended, of said
Corporation has been further amended by adding the following Article FOURTEENTH
thereto:
"FOURTEENTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, provided that this Article Fourteenth shall
not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
<PAGE>
(iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any
transaction from which the director derived an improper personal benefit.
The amendment or repeal of this Article Fourteenth shall not increase the
liability of any director for any act or omission occurring prior to such
amendment or repeal. If the General Corporation Law of the State of
Delaware is amended to further eliminate or limit the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended from time to time."
FOURTH: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
affirmative vote of the holders of a majority of all outstanding stock entitled
to vote at a meeting of stockholders.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under penalties of perjury this 8th day of April,
1987.
/s/ John R. Meinert
-------------------------------------
John R. Meinert, Chairman
Attest:
/s/ Carey M. Stein
- -------------------------------------
Carey M. Stein, Secretary
COCS2
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EXHIBIT 3-B
BY-LAWS
OF
HARTMARX CORPORATION
(Formed under the laws of the State of Delaware)
As Adopted by the Board of Directors on February 11, 1983
---------------------------------------------------------
as amended April 4, 1983, October 13, 1983, April 11, 1984,
July 13, 1984, January 16, 1985, April 9, 1985 and October 17, 1985;
as amended and restated January 16, 1986;
as amended April 10, 1986, October 9, 1986 and November 3, 1986;
as amended and restated January 15, 1987;
as amended January 1, 1990, April 12, 1990, January 17, 1991,
April 11, 1991, December 30, 1992, February 11, 1993,
April 14, 1993 and January 13, 1994.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. A meeting of the stockholders for the
election of directors and the transaction of other business shall be held
annually on a day between April 1 and April 15, inclusive, to be designated by
the Board of Directors and in the absence of such designation, on the first
Monday in April, or, if it be a public holiday, on the next succeeding business
day.
Section 2. Special Meetings. Special meetings of the stockholders
may be called by the Board of Directors or, subject to the control of the Board,
by the Chairman, or in his absence, by the Vice Chairman or the President and
shall be called by the Board upon written request of the holders of record of
not less than fifty per centum of the outstanding shares of stock of the
Corporation entitled to vote at the meeting requested to be called.
Section 3. Place of Meetings. Meetings of stockholders shall be
held at such place, within or without the State of Delaware, as may be fixed by
the Board of Directors. If no place is so fixed, such meetings shall be held at
the office of the Corporation in the City of Chicago, in the State of Illinois.
Section 4. Notice of Meetings. Notice of each meeting of
stockholders shall be given in writing and shall state the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called.
Notice of a special meeting shall indicate that it is being issued by or at the
direction of the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if
taken, entitle objecting stockholders to receive payment for their shares of
stock, the notice shall include a statement of that purpose and to that effect.
<PAGE>
A copy of the notice of each meeting shall be given, personally or by
first class mail, not less than ten nor more than sixty days before the date of
the meeting, to each stockholder entitled to vote at such meeting. If mailed,
such notice is given when deposited in the United States mail, with postage
thereon prepaid, directed to the stockholder at his address as it appears on the
record of stockholders, or, if he shall have filed with the Secretary of the
Corporation a written request that notices to him be mailed to some other
address, then directed to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if the adjournment is for more than thirty (30) days, or if after the
adjournment, the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record on the new record date entitled to notice under the preceding paragraphs
of this Section 4.
Section 5. Waiver of Notice. Notice of any meeting need not be
given to any stockholder who submits a signed waiver of notice, in person or by
proxy, whether before or after the meeting. The attendance of any stockholder
at a meeting, in person or by proxy, without protesting prior to the conclusion
of the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors shall, in
advance of any stockholders' meeting, appoint one or more inspectors to act at
the meeting or any adjournment thereof and to make a written report thereof.
The Board of Directors may designate one or more alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act,
the person presiding at the meeting shall appoint one or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute his duties of
inspector with strict impartiality and according to the best of his ability.
The inspector(s) shall ascertain the number of shares outstanding and
the voting power of each, determine the shares represented at the meeting, the
existence of a quorum and the validity of proxies and ballots, count all votes
and ballots, determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspector(s),
certify their determination of the number of shares represented at the meeting
and their count of all votes and ballots, and do such other acts as are proper
to conduct the election or vote with fairness to all stockholders. The
inspector(s) may appoint or retain other persons or entities to assist the
inspector(s) in the performance of the duties of the inspector(s). Any record
or certificate made by the inspectors shall be prima facie evidence of the facts
stated and of the vote as certified by said inspector(s).
Section 7. List of Stockholders at Meetings. The Secretary shall
provide a complete list of the stockholders entitled to vote at the ensuing
election, arranged in
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alphabetical order, with the address of each, and the number of shares held by
each. Such list shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 8. Qualification of Voters. Unless otherwise provided in
the Certificate of Incorporation, every stockholder of record shall be entitled
at every meeting of stockholders to one vote for every share of stock standing
in his name on the record of stockholders.
Treasury shares as of the record date and shares held as of the record
date by another domestic or foreign corporation of any type or kind, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as trustee or into the name of his
nominee.
Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such officer, agent or proxy as the By-Laws
of such corporation may provide, or, in the absence of such provision, as the
board of directors of such corporation may determine.
A stockholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Stockholders. The holders of not less than
one-third of the shares of stock entitled to vote thereat shall constitute a
quorum at a meeting of stockholders for the transaction of any business,
provided that when a specified item of business is required to be voted on by a
class or series, voting as a class, the holders of not less than one-third of
the shares of such class or series of stock shall constitute a quorum for the
transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any stockholders.
The stockholders who are present in person or by proxy and who are
entitled to vote may, by a majority of votes cast, adjourn the meeting despite
the absence of a quorum.
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Section 10. Proxies. Every stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after the expiration of three years from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the stockholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the stockholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote of Stockholders. Directors shall, except as
otherwise required by law, be elected by a plurality of the votes cast at a
meeting of stockholders by the holders of shares entitled to vote in the
election.
Whenever any corporate action, other than the election of directors,
is to be taken by vote of the stockholders, it shall, except as otherwise
required by law or the Certificate of Incorporation or the By-Laws, be
authorized by a majority of the votes cast at a meeting of stockholders by the
holders of shares entitled to vote thereon.
Section 12. Fixing Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
When a determination of stockholders of record entitled to notice of
or to vote at any meeting of stockholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The
business of the Corporation shall be managed by the Board of Directors. Each
director shall be at least twenty-one years of age.
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Section 2. Number of Directors. The number of directors constituting
the entire Board of Directors shall be thirteen. A majority of the total number
of directors authorized by this By-Law may amend this By-Law, to change the
number of directors, provided, however, that no decrease in the number of
directors shall shorten the term of an incumbent director.
Section 3. Election and Term of Directors. At each annual meeting
of stockholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Section 4. Quorum of Directors and Action by the Board. A majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business, and, except where otherwise provided in these By-Laws, the vote of
a majority of the directors present at a meeting at the time of such vote, if a
quorum is then present, shall be the act of the Board.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
stockholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the Chairman, or in his absence, the Vice Chairman or the
President, or upon the call of any two directors.
Meetings of the Board of Directors shall be held at such places as may
be fixed by the Board for annual and regular meetings and in the notice of
meeting for special meetings.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, Chicago time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, Chicago time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail;
by telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that purpose, or, if none has been so designated,
at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any
meeting of the Board of Directors.
A majority of directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present
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at the time of the adjournment and, unless such time and place are announced at
the meeting, to the other directors.
Section 5.1. Participation in Meetings of the Board or Committees
Thereof by Means of Telephone or Similar Equipment. Any one or more members of
the Board of Directors, the Executive Committee, or any other Committee of the
Board may participate in a meeting of such Board or Committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
Section 5.2. Action of the Board or Committees Thereof by Unanimous
Written Consent. Any action required or permitted to be taken by the Board of
Directors, the Executive Committee, or any other Committee of the Board of
Directors may be taken without a meeting if all members of the Board or of the
Committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
Board or Committee shall be filed with the minutes of the proceedings of the
Board or Committee.
Section 6. Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board of Directors or to the
Chairman or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any or all of the directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors at a meeting of the stockholders or
by the unanimous written consent of all stockholders entitled to vote.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason may be filled by
vote of a majority of the directors then in office, although less than a quorum
exists. A director elected to fill a vacancy shall be elected to hold office
for the unexpired term of his predecessor.
Section 9. Compensation of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any
capacity.
Section 10. Indemnification. Directors and officers of the
Corporation shall be indemnified to the fullest extent now or hereafter
permitted by law and in accord with the procedural requirements as specified in
(S)145(d) of Delaware General Corporation Law in connection with any actual or
threatened action or proceeding (including civil, criminal, administrative or
investigative proceedings) arising out of their service to the Corporation or to
another organization at the Corporation's request. Persons who are not
directors or officers of
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the Corporation may be similarly indemnified in respect of such service to the
extent authorized at any time by the Board of Directors.
Section 11. Executive Committee. The Board of Directors, by
resolution adopted by a majority of the entire Board, may designate from among
its members an Executive Committee, consisting of four or more directors, which
shall have all the authority of the Board, except that the Executive Committee
shall have no authority as to the following matters:
(1) Amending the Certificate of Incorporation;
(2) Adopting an agreement of merger or consolidation;
(3) Recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and
assets;
(4) Recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution;
(5) Amending the By-Laws of the Corporation;
(6) Declaring a dividend; or
(7) Authorizing the issuance of stock.
The Board of Directors may designate one or more directors (who may or
may not be officers and employees of the Corporation) as alternate members of
the Executive Committee, who may replace any absent member or members for all
purposes, including the constituting of a quorum at any meeting of such
Committee.
Five members of the Executive Committee shall constitute a quorum for
the transaction of business, and the vote of a majority of the members present
at a meeting at the time of such vote if a quorum is then present, shall be the
act of such Committee. Meetings of the Executive Committee may be called by any
member of the Executive Committee, and notices thereof shall be given to each
member of the Executive Committee in the same manner as notices to directors are
provided for in the case of notices of special meetings of the Board of
Directors, but notice may in any case be waived.
The Executive Committee shall serve at the pleasure of the Board of
Directors.
Section 12. Audit Committee. The Audit Committee of the Board of
Directors will consist of three or more directors, none of whom shall be an
officer or employee of the Corporation. The number of members of the Committee
will be determined each year at the annual meeting of the Board of Directors.
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The Audit Committee will maintain, through regularly scheduled
meetings, communications between the directors and independent accountants and
will provide assistance to the Board in fulfilling its fiduciary and statutory
responsibilities related to corporate accounting, integrity of financial
controls, and reporting practices. The Committee will make periodic reports to
the entire Board on such matters as the Committee or the Board may specify.
Section 13. Compensation and Stock Option Committee. The Compen-
sation and Stock Option Committee of the Board of Directors will consist of
three or more directors, none of whom shall be an officer or employee of the
Corporation. The number of members of the Committee will be determined each
year at the annual meeting of the Board of Directors.
The Compensation and Stock Option Committee will exercise the full
powers of the entire Board with respect to fixing the compensation to be paid
from time to time to all officers and employees of the Corporation and its
subsidiaries whose compensation is above the minimum level determined by the
Committee from time to time to be appropriate for control by directors of the
Corporation. The Committee will also grant all stock options and make other
determinations necessary or advisable for the administration of all stock option
plans and similar plans. The Committee will make periodic reports to the entire
Board on such matters as the Committee or the Board may specify.
Section 14. Nominating Committee. The Nominating Committee of the
Board of Directors will consist of three or more directors. The number of
members of the Committee will be determined each year at the annual meeting of
the Board of Directors.
The Nominating Committee will propose to the entire Board qualified
nominees for election to fill vacancies on the Board.
Section 15. Management Operations Committee. The Board of Directors
shall establish from time to time by resolution the composition, functions and
responsibilities of the Management Operations Committee of the Board of
Directors.
Section 16. Strategy Committee. The Strategy Committee of the Board
of Directors will consist of the Chairman and three or more other directors.
The number of members of the Committee will be determined each year at the
annual meeting of the Board of Directors.
The Strategy Committee will provide advice and assistance to the Board
on matters relating to the initiation, implementation and completion of the
Corporation's plans and the conduct of its business and affairs. The Committee
will make periodic reports to the entire Board on such matters as the Committee
or Board may specify.
Section 17. Other Committees. The Board of Directors, by resolution
adopted by a majority of the entire Board, may designate from among its members
committees other than those described in the foregoing By-Laws. Any such
Committee of which a majority
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of the members shall not be officers or employees of the Corporation may be
authorized by the resolution establishing it to have all of the authority of the
Board with respect to matters delegated to it by said resolution. No resolution
establishing and delegating authority to a committee pursuant to this section
shall confer authority as to any of the matters listed in Section 11 of this
Article, Paragraphs (1) - (6) inclusive.
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ARTICLE III
OFFICERS
Section 1. Officers. The officers of the Corporation shall consist
of a Chairman, a President, a Secretary and a Treasurer. In addition, the Board
of Directors may elect a Vice Chairman, one or more Group Chairmen or Group
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
General Counsel, a Controller, Assistant Secretaries, Assistant Treasurers,
Assistant General Counsels, other group officers, divisional officers and such
other officers as the Board of Directors may determine, and the respective
provisions of these By-Laws with respect to the duties and powers of such
additional officers shall be applicable only during any time such additional
officers shall be elected and acting. The Chairman shall be a member of the
Board of Directors. Other officers of the Corporation may, but need not, be
members of the Board of Directors. Any two or more offices may be held by the
same person, except the offices of Chairman and Secretary, Vice Chairman and
Secretary or President and Secretary.
Section 2. Term of Office and Removal. All officers of the
Corporation shall be elected annually by the Board of Directors as soon as may
be practicable after the annual election of directors. Vacancies may be filled,
or new offices created and filled, at any meeting of the Board of Directors.
Each officer elected by the Board of Directors shall hold office for the term
for which he is elected, and until his successor has been elected and qualified.
Unless otherwise provided in the resolution of the Board of Directors electing
an officer, his term of office shall extend to and expire at the meeting of the
Board following the next annual meeting of stockholders. Any officer may be
removed by the Board, with or without cause, at any time. Removal of an officer
without cause shall be without prejudice to his contract rights, if any, and the
election of an officer shall not of itself create contract rights.
Section 3. Powers and Duties. The officers of the Corporation shall
have such authority and perform such duties in the management of the
Corporation, as may be prescribed in these By-Laws or by the Board of Directors
and, to the extent not so prescribed, they shall have such authority and perform
such duties in the management of the Corporation, subject to the control of the
Board, as generally pertain to their respective offices. Securities of other
corporations held by the Corporation may be voted by any officer designated by
the Board and, in the absence of any such designation, by the Chairman, the Vice
Chairman, the President, any Vice President, the Secretary or the Treasurer.
The Board may require any officer, agent or employee to give security for the
faithful performance of his duties.
Section 4. Books to be Kept. The Corporation shall keep (a) correct
and complete books and records of account, (b) minutes of the proceedings of the
stockholders, Board of Directors, Executive Committee and any other committees
of directors, and (c) a current list of the directors and officers and their
residence addresses; and the Corporation shall also keep at its office in the
State of Illinois, or at the office of its transfer agent or registrar in the
State of Illinois, if any, a record containing the names and addresses of all
stockholders, the
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number and class of shares held by each and the dates when they respectively
became the owners of record thereof.
The Board of Directors may determine whether and to what extent and at
what times and places and under what conditions and regulations any accounts,
books, records or other documents of the Corporation, other than the stock
ledger and list of stockholders, shall be open to inspection, and no creditor,
security holder or other person shall have any right to inspect any accounts,
books, records or other documents of the Corporation except as conferred by the
Statute or as so authorized by the Board or an officer of the Corporation.
Section 5. Checks, Notes, etc. All checks and drafts on, and
withdrawals from, the Corporation's accounts with banks or other financial
institutions, and all bills of exchange, notes and other instruments for the
payment of money, drawn, made, indorsed, or accepted by the Corporation, shall
be signed on its behalf by the person or persons thereunto authorized by, or
pursuant to resolution of, the Board of Directors.
ARTICLE IV
DUTIES OF OFFICERS
Section 1. Chairman. The Chairman shall preside at all meetings of
the stockholders and of the Board of Directors, and shall have such other duties
and powers as may be assigned to him by the Board of Directors or the Executive
Committee.
Section 2. Vice Chairman. The Vice Chairman shall have such duties
and powers as may be assigned to him by the Board of Directors or the Executive
Committee. In the absence of the Chairman, he or the President shall preside at
meetings of the stockholders and of the Board of Directors.
Section 3. President. The President shall have such duties and
powers as may be assigned to him by the Board of Directors or the Executive
Committee. In the absence of both the Chairman and the Vice Chairman, he shall
preside at meetings of the stockholders and of the Board of Directors.
Section 4. Group Chairman or Group President. A Group Chairman or
Group President shall direct and control the businesses of a Group comprising
two or more related divisions or subsidiaries of the Corporation, in accordance
with policies established by the Chairman, the Vice Chairman or the President,
the Board of Directors or the Executive Committee. If a Group shall have both a
Chairman and a President, their respective duties and powers shall be determined
and assigned by the Chairman, the Vice Chairman or the President, the Board of
Directors or the Executive Committee.
Section 5. Senior Vice President. The Senior Vice President shall
have such duties and powers as may be assigned to him by the Chairman, the Vice
Chairman or the President, the Board of Directors or the Executive Committee.
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Section 6. Vice Presidents. The Vice Presidents shall have such
duties and powers as may be assigned to them by the Chairman, the Vice Chairman
or the President, the Board of Directors or the Executive Committee.
Section 7. Secretary. The Secretary shall: (a) keep the minutes of
meetings of the stockholders, the Board of Directors and the Executive Committee
in one or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these By-Laws or as required by
law; (c) be custodian of the corporate record books and of the seal of the
Corporation, and see that the seal of the Corporation is affixed to all
documents, the execution of which on behalf of the Corporation under its seal is
duly authorized in accordance with the provisions of these By-Laws; and (d) in
general perform all duties incident to the office of the Secretary and such
other duties as from time to time may be assigned to him by the Board of
Directors, the Executive Committee, the Chairman, the Vice Chairman or the
President.
Section 8. General Counsel. The General Counsel shall give legal
counsel and advice to the Board of Directors and its committees. He shall be
the chief attorney at law for the Corporation and its subsidiaries, shall be the
head of the Corporation's Legal Department, and shall select, engage and approve
payment of fees to attorneys retained to represent the Corporation or its
subsidiaries in litigation or otherwise.
Section 9. Treasurer. The Treasurer shall have charge and custody
of all funds and securities of the Corporation. He shall deposit or invest all
monies and other valuable effects of the Corporation in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or the Executive Committee or in such short-term investments as he
shall select with the approval of the Chairman, the Vice Chairman or the
President. He shall disburse funds of the Corporation as may be ordered by the
Board of Directors or the Executive Committee, taking proper vouchers for such
disbursements. He shall render to the Chairman, the Vice Chairman or the
President, the Board of Directors and the Executive Committee, whenever any
thereof may require it, an account of his transactions as Treasurer and of the
financial position of the Corporation.
Section 10. Controller. The Controller shall be the chief accounting
officer of the Corporation. He shall, when proper, approve all bills for
purchases, payrolls and similar instruments providing for disbursement of money
by the Corporation, for payment by the Treasurer. He shall be in charge of and
maintain books of account and accounting records of the Corporation. He shall
perform such other acts as are usually performed by the controller of a
corporation. He shall render to the Chairman, the Vice Chairman or the
President, the Board of Directors and the Executive Committee, such reports as
any thereof may require.
Section 11. Assistant Secretaries, Assistant Treasurers and Assis-
tant General Counsels. The Assistant Secretaries, Assistant Treasurers and
Assistant General Counsels shall have such duties and powers as may be assigned
by the Secretary, the Treasurer or the General Counsel respectively, or by the
Chairman, the Vice Chairman or the President, the Board of Directors or the
Executive Committee.
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Section 12. Divisional and Group Officers. The divisional officers
and group officers shall have such duties and powers with respect to their
divisions or groups as may be assigned to them by the Chairman, the Vice
Chairman or the President, the Group Chairman for such division or group, the
Group President for such division or group, the Board of Directors or the
Executive Committee.
ARTICLE V
FORMS OF CERTIFICATES AND LOSS
AND TRANSFER OF STOCK
Section 1. Forms of Stock Certificates. The shares of stock of the
Corpo-ration shall be represented by certificates, in such forms as the Board of
Directors may prescribe, signed by the Chairman, the Vice Chairman, the
President or a Vice President, and the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation or its employee.
In case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of issue.
Each certificate representing shares of stock shall state upon the
face thereof:
(1) That the Corporation is formed under the laws of the State of
Delaware;
(2) The name of the person or persons to whom issued; and
(3) The number and class of stock, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Stock. Shares of stock of the Corporation
shall be transferable on the stock ledger upon presentment to the Corporation or
a transfer agent of a certificate or certificates representing the shares of
stock requested to be transferred, with proper endorsement on the certificate or
on a separate accompanying document, together with such evidence of the payment
of transfer taxes and compliance with other provisions of law as the Corporation
or its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Stock Certificates. No
certificate for shares of stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed or wrongfully taken, except
if and to the extent required by the Board of Directors, upon:
13
<PAGE>
(1) Production of evidence of loss, destruction or
wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account
of the alleged loss, destruction or wrongful taking of the
replaced certificate or the issuance of the new certificate; and
(3) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE VI
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a
corporate seal, alter such seal at pleasure, and authorize it to be used by
causing it or a facsimile to be affixed or impressed or reproduced in any other
manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of December in each year and end on the thirtieth day of
November in each year.
Section 3. Amendments. By-Laws of the Corporation may be adopted,
amended or repealed by vote of the holders of the shares of stock at the time
entitled to vote in the election of any directors. By-Laws may also be adopted,
amended or repealed by the Board of Directors, but any By-Law adopted by the
Board may be amended or repealed by the stockholders entitled to vote thereon as
hereinabove provided.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of stockholders for the election of directors
the By-Law so adopted, amended or repealed, together with a concise statement of
the changes made.
______________________________
Carey M. Stein, Secretary
S:ADMIN\BYLW194.HMP
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<PAGE>
EXHIBIT 4-B-2
AMENDMENT NO. 2
WAIVER NO. 2
AND
CONSENT NO. 2
Dated as of December 20, 1993
TO
CERTAIN OVERRIDE DOCUMENTS
Dated as of December 30, 1992
THIS AMENDMENT NO. 2, WAIVER NO. 2 AND CONSENT NO. 2 TO CERTAIN
OVERRIDE DOCUMENTS ("Agreement") is entered into as of December 20, 1993 by and
among Hartmarx Corporation, a Delaware corporation ("Hartmarx"), Hart Schaffner
& Marx, a New York corporation ("Hart Schaffner"), Jaymar-Ruby, Inc., an Indiana
corporation ("Jaymar"), Hartmarx Employee Stock Ownership Plan Trust (the "ESOP
Trust"), Trade Finance International Limited, an Illinois corporation ("TFIL")
(Hartmarx, Hart Schaffner, Jaymar, the ESOP Trust and TFIL being sometimes
collectively referred to herein as the "Borrowers"), the financial institutions
named as "Lenders" on the signature pages hereto, and The First National Bank of
Chicago, in its separate capacities as "MOF Agent" for certain of the Lenders
and as "Collateral Agent" for all of the Lenders. Capitalized terms used herein
but not defined herein shall have the meanings provided in the "Override
Agreement" referred to below.
WITNESSETH:
----------
WHEREAS, the Borrowers, the Lenders, the MOF Agent and the Collateral
Agent are parties to that certain Override Agreement dated as of December 30,
1992, as modified by that certain Amendment No. 1, Waiver No. 1 and Consent No.
1 dated as of May 21, 1993 (the "Override Agreement"), pursuant to which, among
other things, the Borrowers and the Lenders restructured certain Obligations
owing to the Lenders by the Borrowers and certain of the Lenders have agreed to
extend additional credit to Hartmarx and TFIL;
WHEREAS, Hartmarx desires to enter into a certain Loan Agreement with
the City of Des Plaines, Illinois substantially in the form of Exhibit A
attached hereto (the "Des Plaines Loan Agreement"), pursuant to which the City
of Des Plaines, Illinois will lend to Hartmarx the proceeds of such city's
issuance and sale of its Economic Development Refunding Revenue Bonds (Hartmarx
Corporation Project) Series 1993 (the "Des Plaines Bonds"), which loan shall be
in the original principal amount of $8,000,000 (the "Des Plaines IDB Loan"), and
which Des Plaines Bonds shall be issued pursuant to that certain indenture
substantially in the form of Exhibit A-1 attached hereto;
WHEREAS, Hartmarx intends to advance all of the proceeds of the Des
Plaines IDB Loan on behalf of Hart Schaffner
<PAGE>
to cause the Hart Schaffner Bonds to be redeemed in full and to satisfy, in
full, all of Hart Schaffner's outstanding obligations under that certain Loan
Agreement dated August 1, 1985 between the City of Des Plaines, Illinois and
Hart Schaffner (the "Prior Des Plaines IDB Loan");
WHEREAS, upon the provision for redemption of the Hart Schaffner Bonds
and repayment in full of the Prior Des Plaines IDB Loan, (i) the NatWest Letter
of Credit will be terminated, (ii) the Restated NatWest Cash Pledge will be
terminated, (iii) the Restated NatWest Bonds Pledge will be terminated, (iv) the
NatWest Letter of Credit Obligations will have been satisfied, (v) the Hart
Schaffner-NatWest L/C Obligations will have been satisfied, (vi) the NatWest
Lien will be released, (vii) the Restated NatWest Guaranty will be terminated
and (viii) all Existing Pledged Cash held by NatWest pursuant to the Restated
NatWest Cash Pledge shall be released and applied pursuant to this Agreement;
WHEREAS, Hartmarx desires to enter into a certain Loan Agreement with
the Indiana Development Finance Authority substantially in the form of Exhibit B
attached hereto, pursuant to which the Indiana Development Finance Authority
will lend to Hartmarx the proceeds of such authority's issuance and sale of its
Economic Development Refunding Revenue Bonds (Hartmarx Corporation Project)
Series 1993 (the "Indiana Bonds"), which loan shall be in the original principal
amount of $7,500,000 (the "Indiana IDB Loan"), and which Indiana Bonds shall be
issued pursuant to that certain indenture substantially in the form of Exhibit
B-1 attached hereto;
WHEREAS, Hartmarx intends to advance all of the proceeds of the
Indiana IDB Loan on behalf of Jaymar to cause the Jaymar Bonds to be redeemed in
full and to satisfy, in full, all of Jaymar's outstanding obligations under that
certain Loan Agreement dated September 1, 1984 between the Indiana Employment
Development Commission and Jaymar (the "Prior Indiana IDB Loan");
WHEREAS, upon the provision for redemption of the Jaymar Bonds and the
repayment in full of the Prior Indiana IDB Loan, (i) the BTC Letter of Credit
will be terminated, (ii) the Restated BTC Cash Pledge will be terminated, (iii)
the Restated BTC Bonds Pledge will be terminated, (iv) BTC Letter of Credit
Obligations will have been satisfied, (v) the Jaymar-BTC L/C Obligations will
have been satisfied, (vi) the BTC Lien will be released, (vii) the Restated BTC
Guaranty will be terminated and (viii) all Existing Pledged Cash held by BTC
pursuant to the Restated BTC Cash Pledge shall be released and applied pursuant
to this Agreement; and
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<PAGE>
WHEREAS, the Borrowers, the MOF Agent, the Collateral Agent and the
Required Lenders and certain other Lenders have agreed to further amend the
Override Agreement to, among other things, allow for the consummation of the
foregoing transactions, to consent to certain other actions of the Borrowers,
and to waive certain other violations by the Borrowers, all on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Amendment No. 2 to the Override Agreement. Effective as of the
date first written above, upon the satisfaction of the conditions precedent set
forth in Paragraph 5 below, the Override Agreement is hereby amended as follows:
(a) Article I is amended to add each of the following definitions to
such article in the appropriate alphabetical location:
"'Des Plaines Bonds' means those certain Economic Development
Refunding Revenue Bonds (Hartmarx Corporation Project) Series 1993 in the
aggregate original principal amount of $8,000,000, issued by the City of
Des Plaines, Illinois pursuant to the Des Plaines Indenture.
'Des Plaines IDB Intercompany Advance' means that certain loan in the
aggregate original principal amount of $8,000,000 made by Hartmarx to Hart
Schaffner with the proceeds of the Des Plaines IDB Loan and other funds of
Hartmarx.
'Des Plaines IDB Loan' means that certain loan in the original
principal amount of $8,000,000 made by the City of Des Plaines, Illinois to
Hartmarx pursuant to the Des Plaines IDB Loan Agreement with the proceeds
of the sale by such city of the Des Plaines Bonds.
'Des Plaines IDB Loan Agreement' means that certain Loan Agreement
dated as of December 1, 1993 between the City of Des Plaines, Illinois and
Hartmarx, substantially in the form attached to that certain Amendment No.
2, Waiver No. 2 and Consent No. 2 to this Agreement as Exhibit A thereto,
as the same may be amended, restated or otherwise modified from time to
time in accordance with the provisions of this Agreement.
'Des Plaines Indenture' means that certain Indenture of Trust dated as
of December 1, 1993 between the City of Des Plaines, Illinois and Norwest
Bank Minnesota, National Association, as Trustee, substantially in the form
attached
-3-
<PAGE>
to that certain Amendment No. 2, Waiver No. 2 and Consent No. 2 to this
Agreement as Exhibit A-1 thereto, as the same may be amended, restated or
otherwise modified from time to time in accordance with the provisions of
this Agreement.
'Indiana Bonds' means those certain Economic Development Refunding
Revenue Bonds (Hartmarx Corporation Project) Series 1993 in the aggregate
original principal amount of $7,500,000, issued by the Indiana Development
Finance Authority pursuant to the Indiana Indenture.
'Indiana IDB Intercompany Advance' means that certain loan in the
aggregate original principal amount of $7,500,000 made by Hartmarx to
Jaymar with the proceeds of the Indiana IDB Loan and other funds of
Hartmarx.
'Indiana IDB Loan' means that certain loan in the original principal
amount of $7,500,000 made by the Indiana Development Finance Authority to
Hartmarx pursuant to the Indiana IDB Loan Agreement with the proceeds of
the sale by such authority of the Indiana Bonds.
'Indiana IDB Loan Agreement' means that certain Loan Agreement dated
as of December 1, 1993 between the Indiana Development Finance Authority
and Hartmarx, substantially in the form attached to that certain Amendment
No. 2, Waiver No. 2 and Consent No. 2 to this Agreement as Exhibit B
thereto, as the same may be amended, restated or otherwise modified from
time to time in accordance with the provisions of this Agreement.
'Indiana Indenture' means that certain Indenture of Trust dated as of
December 1, 1993 between the Indiana Development Finance Authority and
Norwest Bank Fort Wayne, N. A., as Trustee, substantially in the form
attached to that certain Amendment No. 2, Waiver No. 2 and Consent No. 2 to
this Agreement as Exhibit B-1 thereto, as the same may be amended, restated
or otherwise modified from time to time in accordance with the provisions
of this Agreement.
'1993 Bond Documents' means, collectively, the Des Plaines Indenture,
the Des Plaines IDB Loan Agreement, the Indiana Indenture, the Indiana IDB
Loan Agreement, and all other agreements, instruments and documents
contemplated by or related to such indentures or loan agreements to which
Hartmarx or any Subsidiary is a party or third party beneficiary, in each
case as the same may be amended, restated or otherwise modified from time
to time in accordance with the provisions of this Agreement."
(b) Article I is further amended to delete in its entirety clause
(iii) of the definition of "Permitted Investments" and to replace such clause
with the following clause:
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<PAGE>
"(iii) Deposit accounts (other than those described in clause (vii) of this
definition) maintained in the ordinary course of business; provided, that
all such deposit accounts are maintained with the Collateral Agent, a
Lender, or an Affiliate or any such Person and are subject to the
Collateral Agent's Lien securing the Obligations or are otherwise subject
to blocked account agreements, lock box agreements or cash collection or
cash concentration agreements established for the benefit of the Lenders,
except in the case of such Investments which (A) at all times aggregate
less than $4,000,000 and constitute (1) disbursement, payroll and deposit
accounts other than those into which proceeds of Receivables and/or cash
sales are deposited, collected or concentrated or (2) deposit accounts into
which proceeds of Receivables and/or cash sales are deposited, collected or
concentrated and which, with respect to each calendar month after June,
1993, have average monthly balances of less than $20,000 each and receive
less than $100,000 each in the aggregate of deposits during each month, or
(B) constitute (1) accounts maintained at the Bank of New York and/or
Manufacturers and Traders Trust Company in connection with either such
institution's issuance of Commercial Letters of Credit or (2) accounts
maintained at banks and trust companies in connection with such
institutions' issuance of Commercial Letters of Credit; provided, further,
that such amounts maintained pursuant to clauses (B)(1) and (B)(2) of this
paragraph shall only be Permitted Investments to the extent of the face
amount of Commercial Letters of Credit issued by such institutions for the
account of Hartmarx or its Subsidiaries and then only with respect to such
Commercial Letters of Credit which, in the case of amounts maintained
pursuant to clause (B)(1), are or were issued on or before January 31,
1993, and in the case of amounts maintained pursuant to clause (B)(2), are
issued after June 30, 1995, in any such case as the same may be amended,
extended, replaced or substituted thereafter in connection with the
transaction giving rise to the original issuance of such Commercial Letter
of Credit, but not, in the case of amounts pursuant to clause (B)(1), with
respect to new transactions occurring after January 31, 1993;"
(c) Article I is further amended to delete in its entirety clause
(xi) of the definition of "Permitted Investments" and to replace such clause
with the following clause:
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<PAGE>
"(xi) To the extent not prohibited by Section 10.2.10 or other
provisions of this Agreement, intercompany advances or
equity investments by Hartmarx to or in any of its Wholly-
Owned Subsidiaries, or by a Wholly-Owned Subsidiary to or in
another Wholly-Owned Subsidiary or Hartmarx, (1) for the
purchase or construction of fixed assets, plant and
equipment which are capitalized in accordance with Agreement
Accounting Principles, (2) for working capital purposes, or
(3) which constitute the Des Plaines IDB Intercompany
Advance or the Indiana IDB Intercompany Advance; provided,
however, that no such investment made after the Effective
Date in a Wholly-Owned Subsidiary shall be a Permitted
Investment if such Wholly-Owned Subsidiary is not an Active
Subsidiary or if such Wholly-Owned Subsidiary is HSSI or any
of its Subsidiaries; and"
(d) Section 10.1.2(d) is amended to delete the word "and" which
appears at the end of clause (iii) of such section, to replace such word with a
comma, and to add the following provision to the end of such section:
", (v) the prepayment in full by Jaymar of all of Jaymar's outstanding
Indebtedness under that certain Loan Agreement dated September 1, 1984
between the Indiana Employment Development Commission and Jaymar with the
proceeds of the Indiana IDB Intercompany Advance and (vi) the prepayment in
full by Hart Schaffner of all of Hart Schaffner's outstanding Indebtedness
under that certain Loan Agreement dated August 1, 1985 between the City of
Des Plaines, Illinois and Hart Schaffner with the proceeds of the Des
Plaines IDB Intercompany Advance. Notwithstanding anything in this section
or Agreement to the contrary, Hartmarx shall not, and shall not permit any
of its Subsidiaries to, voluntarily prepay prior to its stated maturity the
Des Plaines IDB Loan or the Indiana IDB Loan or to voluntarily purchase,
redeem, or cause the redemption of, any of the Des Plaines Bonds or the
Indiana Bonds."
(e) Section 10.1.24 is amended to delete in its entirety the last
sentence of such section and to replace such sentence with the following
provisions:
"Notwithstanding the foregoing, (a) upon the termination or expiration of
the Bridge Commitments and payment in full of all "Obligations" under and
defined in the Bridge Loan Agreement, such agreements and arrangements
shall thereafter be maintained for the benefit of the Lenders in form,
scope and substance substantially as maintained immediately prior to such
termination or expiration and (b) no such agreements
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<PAGE>
shall be required with respect to deposit accounts which constitute
Permitted Investments under clauses (iii)(A), (iii)(B), (vi) or (vii) of
the definition of such term contained in Article I hereof."
(f) Section 10.2.1 is amended to replace the comma which appears at
the end of clause (g) of such section with a period and to delete in their
entirety clauses (h), (i) and (j) of such section.
(g) Section 10.2.3 is amended to add the following provision to the
end of clause (c) of such section:
", and provided, further, that, and notwithstanding the foregoing
provisions of this clause (c), (i) Jaymar's outstanding Indebtedness under
that certain Loan Agreement dated September 1, 1984 between the Indiana
Employment Development Commission and Jaymar shall be refunded and
refinanced in full with the proceeds of the Indiana IDB Intercompany
Advance which, in turn, shall be funded by Hartmarx with, together with
other funds, the proceeds of the Indiana IDB Loan, and, in each case, such
refunding, refinancing and funding shall occur on or before the thirtieth
(30th) day immediately following the date on which the Indiana Bonds are
issued and that, during such thirty (30) day period, the proceeds of the
sale of such Indiana Bonds shall be held in trust by such Persons and
pursuant to such agreements as may be acceptable to the Collateral Agent
and (ii) Hart Schaffner's outstanding Indebtedness under that certain Loan
Agreement dated August 1, 1985 between the City of Des Plaines, Illinois
and Hart Schaffner shall be refunded and refinanced in full with the
proceeds of the Des Plaines IDB Intercompany Advance which, in turn, shall
be funded by Hartmarx with, together with other funds, the proceeds of the
Des Plaines IDB Loan, and, in each case, such refunding, refinancing and
funding shall occur on or before the thirtieth (30th) day immediately
following the date on which the Des Plaines Bonds are issued and that,
during such thirty (30) day period, the proceeds of the sale of such Des
Plaines Bonds shall be held in trust by such Persons and pursuant to such
agreements as may be acceptable to the Collateral Agent;"
(h) Section 10.2.4 is amended to delete in its entirety clause (c) of
such section and to replace such clause with the following clause:
"(c) Make any other distribution of assets or property in respect of
the common stock of Hartmarx or any Subsidiary, except cash or Property
distributions in respect of the common stock of Hartmarx's Wholly-Owned
Subsidiaries to Hartmarx or to other Wholly-Owned Subsidiaries of Hartmarx
(other than to HSSI or any of its Subsidiaries should HSSI become a
Subsidiary of Hartmarx)."
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<PAGE>
(i) Section 10.2.5 is amended to delete in its entirety clause (c) of
such section and to replace such clause with the following clause:
"(c) Make any other distribution of assets or property in respect of
any of the Other Capital Stock of Hartmarx or any Subsidiary, except cash
or Property distributions in respect of any of the Other Capital Stock of
Hartmarx's Wholly-Owned Subsidiaries to Hartmarx or to other Wholly-Owned
Subsidiaries of Hartmarx (other than to HSSI or any of its Subsidiaries
should HSSI become a Subsidiary of Hartmarx),"
(j) Section 10.2.5 is further amended to add the following provision
to the end of clause (d) thereof:
"except as may be permitted pursuant to Section 10.1.2(d) hereof."
(k) Section 10.2.7(a) is amended to delete in its entirety clause
(ii) of the proviso which appears at the end of such section and to replace such
clause with the following provision:
"[intentionally omitted]."
(l) Section 10.2.15 is amended to add the following provision to the
end of such section:
"Notwithstanding the foregoing, prior to the occurrence, or in the absence
of the continuation, of any Default, each Borrower may, and shall permit
each of their respective Subsidiaries to, repay "Intercompany Claims" (as
defined in the Contribution and Subordination Agreement) in the ordinary
course of such parties businesses as conducted on the Effective Date."
(m) Section 10.2.20(a) is amended to add the following reference to
such section immediately following the first reference to "Bridge Documents" in
such section:
", 1993 Bond Documents"
(n) Section 10.2.20 is further amended to add the following clause to
the end of such section:
"(c) Hartmarx shall promptly provide each Lender with notice of the
occurrence of any "Event of Default" under the Des Plaines IDB Loan
Agreement or the Indiana IDB Loan Agreement, any "Determination of
Taxability" (as defined in the Des Plaines IDB Loan Agreement or the
Indiana IDB Loan Agreement), or the occurrence of any "Default" or "event
of default" under the Des Plaines Indenture or the Indiana Indenture."
-8-
<PAGE>
(o) Section 10.2.21 is amended to add the following provisions to the
end of clause (b) of such section:
", provided, however, that, the Hart Schaffner Bonds shall be redeemed in
full in connection with the issuance of the Des Plaines Bonds, which
redemption shall occur no later than the thirtieth (30th) day immediately
following the issuance of such Des Plaines Bonds, and the Jaymar Bonds
shall be redeemed in full in connection with the issuance of the Indiana
Bonds, which redemption shall occur no later than the thirtieth (30th) day
immediately following the issuance of such Indiana Bonds. Hartmarx shall
not exercise any optional rights under the 1993 Bond Documents to prepay
the outstanding principal balance of all or any portion of the Des Plaines
IDB Loan or the Indiana IDB Loan or to redeem, or cause the redemption of,
the Des Plaines Bonds or the Indiana Bonds."
(p) Section 11.7 is amended to add the following provision to the end
of such section:
"; or there shall occur any "Event of Default" under the Des Plaines IDB
Loan Agreement or the Indiana IDB Loan Agreement, any "Determination of
Taxability" (as defined in the Des Plaines IDB Loan Agreement or the
Indiana IDB Loan Agreement), or any "Default" or "event of default" under
the Des Plaines Indenture or the Indiana Indenture, or there shall occur
any other event, or any other condition shall exist, the result of which
occurrence or condition would permit (a) the issuer of the Des Plaines
Bonds or the Indiana Bonds, any trustee with respect thereto or any holder
of such bonds to require that any such bonds be redeemed or (b) the issuer
of the Des Plaines Bonds or the Indiana Bonds, any trustee with respect
thereto or any holder of such bonds to accelerate the maturity of the Des
Plaines IDB Loan or the Indiana IDB Loan."
(q) Section 13.1 is amended to delete in their entirety clause (c)
and (d) of such section and to replace such clauses with the following
provisions:
"(c) [intentionally omitted].
(d) [intentionally omitted]."
(r) Section 14.13 is amended to delete in its entirety the
parenthetical which appears in clause (ii) of such section and to replace such
parenthetical with the following parenthetical:
"(and Hartmarx, on behalf of itself and the other Subsidiaries, shall have
certified its compliance with such section by delivering prior to the
closing of such transaction to the MOF Agent, the Collateral Agent and each
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<PAGE>
Lender or, if the amount of such disposition is $75,000 or less and the
aggregate amount of all such dispositions of $75,000 or less (including
such disposition) during the then immediately preceding twelve (12) month
period is $500,000 or less, to the Collateral Agent, (a) an Officer's
Certificate substantially in the form of Exhibit XIV and (b) copies of the
substantially final version of the agreement or agreements providing for
such disposition)"
(s) Schedule 18.1 is deleted in its entirety and replaced with the
restated schedule attached to this Agreement as Exhibit C hereto.
2. Waiver No. 2 to Override Agreement. Effective as of the date
first written above, upon the satisfaction of the conditions precedent set forth
in Paragraph 5 below, the Lenders hereby waive any noncompliance by Hartmarx or
the Subsidiaries with the following provisions to the extent occurring prior to
the date hereof and specifically described below:
(a) Failure to comply with Section 10.2.6 of the Override Agreement,
to the extent that Hartmarx or the Subsidiaries maintained deposit accounts in
an aggregate amount in excess of $4,000,000 in (i) disbursement, payroll and
deposit accounts other than those into which proceeds of Receivables and/or each
sales are deposited, collected or concentrated, (ii) accounts maintained at The
Bank of New York and/or Manufacturers and Traders Trust Company in connection
with either such institution's issuance of Commercial Letters of Credit, (iii)
accounts maintained at banks and trust companies in connection with such
institutions' issuance of Commercial Letters of Credit, and (iv) deposit
accounts into which proceeds of Receivables and/or cash sales are deposited,
collected or concentrated and which, with respect to each calendar month after
June, 1993, have average monthly balances of less than $20,000 each and receive
less than $100,000 each in the aggregate of deposits during each month;
provided, however, that such waiver shall only be effective if the aggregate of
the amounts described in clauses (i), (iii) and (iv) of this paragraph at no
time prior to the effective date hereof exceeded $4,000,000; and
(b) Defaults, if any, under Section 11.7 of the Override Agreement as
a result of the occurrence of the Bridge Borrowers' failure to comply with the
provisions of the Bridge Loan Agreement which are specifically waived pursuant
to that certain amendment, waiver and consent agreement substantially in the
form of Exhibit D attached hereto and made a part hereof (the "Bridge
Modification Agreement").
3. Consent No. 2 to the Override Agreement. Effective as of the
date first written above, upon the satisfaction of the conditions precedent set
forth in Paragraph 5 below, each of the Lenders hereby agrees that,
notwithstanding the provisions of Section 10.2.20(a) of the Override Agreement,
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<PAGE>
Hartmarx and the Subsidiaries may enter into the Bridge Modification Agreement.
4. Satisfaction of Certain Obligations Held by NatWest and BTC and
Release of Related Liens; Application of Existing Pledged Cash. Subject to the
satisfaction of the conditions precedent set forth in Paragraph 5 below, and,
(x) in the case of clauses (a) and (c) below in this paragraph, each of NatWest,
the other Lenders, the Collateral Agent, the MOF Agent and the Borrowers hereby
agrees that, as of such time as (and only in the event that) NatWest shall have
notified the Collateral Agent that (1) the NatWest Letter of Credit shall have
been cancelled or terminated, (2) the original thereof shall have been returned
to NatWest and (3) all outstanding Hart Schaffner-NatWest L/C Obligations shall
have been paid in full, (y) in the case of clauses (b) and (d) below in this
paragraph, each of BTC, the other Lenders, the Collateral Agent, the MOF Agent
and the Borrowers hereby agrees that, as of such time as (and only in the event
that) BTC shall have notified the Collateral Agent that (1) the BTC Letter of
Credit shall have been cancelled or terminated, (2) the original thereof shall
have been returned to BTC and (3) all outstanding Jaymar-BTC L/C Obligations
shall have been paid in full, and (z) in either such case without any other
action on the part of any Person:
(a) (i) the Restated NatWest Cash Pledge will thereupon be deemed
terminated, (ii) the Restated NatWest Bonds Pledge will thereupon be deemed
terminated, (iii) the NatWest Letter of Credit Obligations will thereupon be
deemed satisfied, (iv) the Hart Schaffner-NatWest L/C Obligations will thereupon
be deemed satisfied, (v) the NatWest Lien will thereupon be deemed released and
(vi) the Restated NatWest Guaranty will thereupon be deemed terminated;
(b) (i) the Restated BTC Cash Pledge will thereupon be deemed to
terminated, (ii) the Restated BTC Bonds Pledge will thereupon be deemed
terminated, (iii) BTC Letter of Credit Obligations will thereupon be deemed
satisfied, (iv) the Jaymar-BTC L/C Obligations will thereupon be deemed
satisfied, (v) the BTC Lien will thereupon be deemed released and (vi) the
Restated BTC Guaranty will thereupon be deemed terminated;
(c) Hart Schaffner will have thereupon be deemed to have hereby
irrevocably authorized and directed NatWest to deliver to the Collateral Agent,
and NatWest shall thereupon so deliver, for application pursuant to Sections
4.1.6 and 4.3 of the Override Agreement as a Mandatory Prepayment (after giving
effect to the provisions of clauses (a) and (b) of this Paragraph 4, and without
giving effect to the provisions of Section 4.1.7 of the Override Agreement with
respect to any related mandatory reduction of Bridge Commitments required under
the Bridge Agreement or the Bridge Modification Agreement) the aggregate amount
of all Existing Pledged Cash then held by or for the
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<PAGE>
benefit of NatWest pursuant to the Restated NatWest Cash Pledge; and
(d) Jaymar will have thereupon be deemed to have hereby irrevocably
authorized and directed BTC to deliver to the Collateral Agent, and BTC shall
thereupon so deliver, for application pursuant to Sections 4.1.6 and 4.3 of the
Override Agreement as a Mandatory Prepayment (after giving effect to the
provisions of clauses (a) and (b) of this Paragraph 4, and without giving effect
to the provisions of Section 4.1.7 of the Override Agreement with respect to any
related mandatory reduction of Bridge Commitments required under the Bridge
Agreement or the Bridge Modification Agreement) the aggregate amount of all
Existing Pledged Cash held by or for the benefit of BTC pursuant to the Restated
BTC Cash Pledge.
5. Conditions to Effectiveness; Subsequent Requirements;
Acknowledgements. (a) This Agreement shall become effective as of the date
first written above if, and only if, on or before January 31, 1994:
(i) the Collateral Agent shall have received originally-executed
counterparts to this Agreement, executed and delivered by a duly authorized
officer of (i) each Borrower and (ii) Lenders constituting the Required
Lenders, NatWest and BTC;
(ii) the Collateral Agent shall have received originally-executed
counterparts of the Acknowledgements attached hereto from each of the
Persons named therein as signatories thereto; and
(iii) the Collateral Agent shall have received a copy of the fully-
executed Bridge Modification Agreement executed by each Bridge Borrower and
each Bridge Lender and other Person required to execute such Agreement as a
condition to its effectiveness;
provided, however, that the amendments described in clauses (f), (h), (i), (k)
and (q) of Paragraph 1 of this Agreement shall not become effective unless and
until (y) NatWest shall have notified the Collateral Agent that (1) the NatWest
Letter of Credit shall have been cancelled or terminated, (2) the original
thereof shall have been returned to NatWest and (3) all outstanding Hart
Schaffner-NatWest L/C Obligations shall have been paid in full and (z) BTC shall
have notified the Collateral Agent that (1) the BTC Letter of Credit shall have
been cancelled or terminated, (2) the original thereof shall have been returned
to BTC and (3) all outstanding Jaymar-BTC L/C Obligations shall have been paid
in full.
(b) Each of the parties hereto agrees and acknowledges that no
consent of any Person other than the Persons named in
-12-
<PAGE>
clause (a)(i) of this paragraph is required in order for this Agreement to
become effective.
(c) Upon their execution and delivery, Hartmarx hereby agrees to
promptly deliver to each Lender true and correct copies of each of the "1993
Bond Documents" (as defined in Paragraph 1 hereof).
(d) Hartmarx hereby agrees and acknowledges that, when made, the "Des
Plaines IDB Intercompany Advance" and the "Indiana IDB Intercompany Advance"
(each as defined in Paragraph 1 hereof) will constitute "Intercompany Claims"
under, as defined in, and subordinated pursuant to, the Contribution and
Subordination Agreement.
(e) At such time as NatWest shall have received and cancelled the
original NatWest Letter of Credit and all outstanding Hart Schaffner-NatWest L/C
Obligations shall have been paid in full, Hartmarx and NatWest shall provide
Collateral Agent with notice and evidence reasonably satisfactory to it of the
occurrence of such events.
(f) At such time as BTC shall have received and cancelled the
original BTC Letter of Credit and all outstanding Hart Jaymar-BTC L/C
Obligations shall have been paid in full, Hartmarx and BTC shall provide
Collateral Agent with notice and evidence reasonably satisfactory to it of the
occurrence of such events.
(g) At such time as the Hart Schaffner Bonds have been redeemed in
full and the Prior Des Plaines IDB Loan shall have been repaid in full, Hartmarx
shall provide the Collateral Agent and NatWest with evidence reasonable
satisfactory to them of the occurrence of such events.
(h) At such time as the Jaymar Bonds have been redeemed in full and
the Prior Indiana IDB Loan shall have been repaid in full, Hartmarx shall
provide the Collateral Agent and BTC with evidence reasonable satisfactory to
them of the occurrence of such events.
(i) At such time as the Collateral Agent shall have received any or
all of the Existing Pledged Cash from NatWest and/or BTC pursuant to clauses (c)
and/or (d) of Paragraph 4 of this Agreement, the Collateral Agent shall apply
such amounts in accordance with such clauses.
(j) Hartmarx hereby covenants and agrees (i) that the aggregate
disbursements required to be made by Hartmarx and its Subsidiaries (whether to
be paid in cash or to be set off against amounts to be disbursed to Hartmarx or
its Subsidiaries) in connection with the issuance of the Des Plaines Bonds and
the Indiana Bonds, the funding of the Des Plaines IDB Loan and the Indiana IDB
Loan, the funding of the Des Plaines IDB Intercompany
-13-
<PAGE>
Advance and the Indiana IDB Intercompany Advance, the redemption and retirement
of the Hart Schaffner Bonds and the Jaymar Bonds, and the payment in full of the
Prior Des Plaines IDB Loan and the Prior Indiana IDB Loan (excluding, however,
the payment of principal with respect to the Prior Des Plaines IDB Loan and the
Prior Indiana IDB Loan, the payment of accrued interest with respect to any of
the foregoing, and the payment of legal fees and expenses with respect to the
preparation of this Agreement, but including, without limitation, all other
underwriter's fees, trustee's fees, issuer's fees, discounts, attorneys' and
paralegal's fees, taxes, prepayment penalties and premiums, reimbursements and
other transactions costs, expenses and charges), shall not exceed $825,000; and
(ii) to deliver to the Collateral Agent, promptly following the last of such
transactions, a certificate from an Authorized Officer as to such aggregate
disbursements supported by a schedule itemizing each component thereof in form
and scope satisfactory to the Collateral Agent.
(k) Hartmarx, Hart Schaffner and Jaymar hereby each covenant and
agree to, as soon as practicable and in no event later than the thirtieth (30th)
day immediately following the issuance of the Indiana Bonds and the Des Plaines
Bonds, to cause (i) the redemption in full of the Hart Schaffner Bonds and the
Jaymar Bonds, (ii) the satisfaction in full of the Prior Des Plaines IDB Loan
and the Prior Indiana IDB Loan, (iii) the return and cancellation of the NatWest
Letter of Credit and the BTC Letter of Credit and (iv) the payment in full of
all outstanding Hart Jaymar-NatWest L/C Obligations and Jaymar-BTC L/C
Obligations.
6. Representations and Warranties.
(a) Each Borrower hereby represents and warrants that this Agreement
and the Override Documents as amended and modified hereby, constitute legal,
valid and binding obligations of Hartmarx and each Subsidiary to the extent they
are parties thereto and are enforceable against Hartmarx and such Subsidiaries
in accordance with their terms (except as enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization and other laws affecting the
rights of creditors generally and (ii) rules of equity affecting the enforcement
of obligations generally).
(b) Each Borrower hereby represents and warrants that, as of the date
such Borrower executes and delivers its counterpart of this Agreement (and
assuming the effectiveness of this Agreement) (i) no Default or Unmatured
Default has occurred and is continuing and (ii) all of the representations and
warranties of such Borrower contained in the Override Documents (in each case
other than representations and warranties which are expressly indicated in such
documents as being made only as of a different date) are true and correct in all
material respects.
-14-
<PAGE>
7. Authority to Execute Release Documents. Subject to the
effectiveness of this Agreement, each Lender hereby expressly authorizes the
Collateral Agent, (a) following such time as (and only in the event that) the
Collateral Agent shall have received notice from NatWest that (1) the NatWest
Letter of Credit shall have been cancelled or terminated, (2) the original
thereof shall have been returned to NatWest and (3) all outstanding Hart
Schaffner-NatWest L/C Obligations shall have been paid in full, to execute and
deliver to Hartmarx or Hart Schaffner such documents and instruments as may be
necessary or desirable to release the NatWest Lien, in each case pursuant to
release documentation in form and substance satisfactory to the Collateral Agent
and NatWest, and (b) following such time as (and only in the event that) the
Collateral Agent shall have received notice from BTC that (1) the BTC Letter of
Credit shall have been cancelled or terminated, (2) the original thereof shall
have been returned to BTC and (3) all outstanding Jaymar-BTC L/C Obligations
shall have been paid in full, to execute and deliver to Hartmarx or Jaymar such
documents and instruments as may be necessary or desirable to release the BTC
Lien, in each case pursuant to release documentation in form and substance
satisfactory to the Collateral Agent and BTC.
8. Reference to and Effect on the Override Agreement.
(a) Upon the effectiveness of this Agreement, (i) each reference in
the Override Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import shall mean and be a reference to the Override Agreement as
amended and modified hereby and (ii) each reference to the Override Agreement in
each Override Document shall mean and be a reference to the Override Agreement
as amended and modified hereby.
(b) Except as specifically amended or modified above, the Override
Agreement and each Override Document shall remain in full force and effect, and
is hereby ratified and confirmed.
(c) Except as expressly provided herein, the execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of the Collateral Agent, the MOF Agent, or any of the Lenders,
nor constitute a waiver of any provision of any of the Override Documents.
Without limiting the generality of the foregoing, the Lenders', the MOF Agent's
and the Collateral Agent's failure to specifically waive in Paragraph 2 hereof
any breach or other violation by Hartmarx or the Subsidiaries of any provision
of the Override Documents which has occurred on or prior to the date hereof with
or without the knowledge of any Lender or the Collateral Agent shall not
constitute the Lender's, MOF Agent's or the Collateral Agent's agreement that
such breach or violation is immaterial nor shall it constitute an implied waiver
of such breach or violation, and each Lender, the MOF Agent and the Collateral
Agent hereby reserves all rights and remedies with respect to any such breach or
other violation.
-15-
<PAGE>
(d) This Agreement shall constitute a Override Document subject to
the terms and provisions of the Override Agreement. Notwithstanding anything in
Section 11.4 of the Override Agreement or any other provision to the contrary,
the Borrowers further agree that any failure by any one of them to perform any
of its covenants under this Agreement shall constitute an immediate Default
without the benefit of any grace period.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
10. Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same agreement among the parties hereto.
-15A-
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Lenders, the MOF Agent and the
Collateral Agent have executed this Agreement as of the date first above
written.
Borrowers:
---------
HARTMARX CORPORATION
By: __________________________
Name: ________________________
Title:________________________
TRADE FINANCE INTERNATIONAL LIMITED
By: __________________________
Name: ________________________
Title: _______________________
HART SCHAFFNER & MARX
By: _________________________
Name: _______________________
Title: ______________________
JAYMAR-RUBY, INC.
By: _________________________
Name: _______________________
Title: ______________________
HARTMARX EMPLOYEE STOCK OWNERSHIP
PLAN TRUST
By: CONTINENTAL BANK N.A., as ESOP
Trustee
By: _________________________
Name: _______________________
Title: ______________________
-16-
<PAGE>
Collateral Agent and MOF Agent:
------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent for the Lenders
and as MOF Agent for the MOF Lenders
By: _________________________
Name: _______________________
Title: ______________________
Lenders:
-------
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
ABN AMRO BANK N.V., as a Lender
and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
BANKERS TRUST COMPANY, as a Lender,
an Issuer and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
-17-
<PAGE>
BANCA NAZIONALE DEL LAVORO,
CHICAGO BRANCH, as a Lender
and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Lender
and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
THE ROYAL BANK OF CANADA, as a
Lender and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
CONTINENTAL BANK N.A., as a Lender
and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
-18-
<PAGE>
THE FUJI BANK, LIMITED,
CHICAGO BRANCH, as a Lender
and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
HARRIS TRUST AND SAVINGS BANK,
as a Lender and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH, as a Lender,
an Issuer and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
NATIONSBANK OF NORTH CAROLINA,
N.A., as a Lender and a MOF
Lender
By: _________________________
Name: _______________________
Title: ______________________
THE SANWA BANK, LIMITED, CHICAGO
BRANCH, as a Lender and a MOF
Lender
By: _________________________
Name: _______________________
Title: ______________________
-19-
<PAGE>
SWISS BANK CORPORATION, as a Lender
and a MOF Lender
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
COMMERZBANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH, as a Lender
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
WACHOVIA BANK OF NORTH CAROLINA,
N.A., as a Lender
By: _________________________
Name: _______________________
Title: ______________________
-20-
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY,
as a Lender
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
NATIONWIDE LIFE INSURANCE COMPANY,
as a Lender
By: _________________________
Name: _______________________
Title: ______________________
FARMLAND LIFE INSURANCE COMPANY,
as a Lender
By: _________________________
Name: _______________________
Title: ______________________
WEST COAST LIFE INSURANCE COMPANY,
as a Lender
By: _________________________
Name: _______________________
Title: ______________________
WISCONSIN HEALTH CARE LIABILITY
INSURANCE PLAN, as a Lender
By: _________________________
Name: _______________________
Title: ______________________
-21-
<PAGE>
FINANCIAL HORIZONS LIFE INSURANCE
COMPANY, as a Lender
By: _________________________
Name: _______________________
Title: ______________________
GUARANTEE MUTUAL LIFE COMPANY,
as a Lender
By: _________________________
Name: _______________________
Title: ______________________
-22-
<PAGE>
ACKNOWLEDGMENT
--------------
As of December 20, 1993 each of the undersigned hereby (i)
acknowledges receipt of a copy of the foregoing Amendment No. 2, Waiver No. 2
and Consent No. 2 of even date herewith to Certain Override Documents dated as
of December 30, 1992 (the "Agreement"), (ii) except as expressly amended or
otherwise modified in the Agreement, reaffirms the terms and conditions of each
of the respective Override Documents to which it is a party, and (iii)
acknowledges and agrees that (A) such Override Documents remain in full force
and effect (including, without limitation, with respect to the Obligations of
the Borrowers under the Override Agreement as amended by the Agreement), (B)
that such Override Documents are hereby ratified and confirmed and (C) that
neither the solicitation nor procurement of the undersigned's signature hereon
shall establish a course of dealing with respect to amendments or other
modifications to the Override Agreement.
HARTMARX CORPORATION HICKEY-FREEMAN CO., INC.
AMERICAN APPAREL BRANDS, INC. HOOSIER FACTORIES, INCORPORATED
ANNISTON SPORTSWEAR INTERCONTINENTAL APPAREL, INC.
CORPORATION INTERNATIONAL WOMEN'S APPAREL
BILTWELL COMPANY, INC. INC.
BRIAR, INC. JAYMAR-RUBY, INC.
CHICAGO TROUSER COMPANY, LTD. JRSS, INC.
COLEMAN CLOTHES, INC. KUPPENHEIMER MANUFACTURING COMPANY,
C.M. CLOTHING, INC. INC.
C.M. OUTLET CORP. KUPPENHEIMER MEN'S CLOTHIERS
COUNTRY MISS, INC. DADEVILLE, INC.
COUNTRY MISS INTERNATIONAL MEN'S QUALITY BRANDS, INC.
LIMITED NATIONAL CLOTHING COMPANY, INC.
DIRECT ROUTE MARKETING 106 REAL ESTATE CORP.
CORPORATION RECTOR SPORTSWEAR CORPORATION
E-TOWN SPORTSWEAR CORPORATION SEAFORD CLOTHING CO.
FAIRWOOD-WELLS, INC. SOCIETY BRAND, LTD.
GLENEAGLES, INC. THORNGATE, LTD.
HENRY GRETHEL APPAREL, INC. THORNGATE UNIFORMS, INC.
HANDMACHER FASHIONS FACTORY TRADE FINANCE INTERNATIONAL LIMITED
OUTLET, INC. UNIVERSAL DESIGN GROUP, LTD.
HART SCHAFFNER & MARX WALTON MANUFACTURING COMPANY
HART SERVICES, INC. M. WILE & COMPANY
HARTMARX INTERNATIONAL, WINCHESTER CLOTHING COMPANY
INC. (F/K/A HARTMARX YORKE SHIRT CORPORATION
LICENSING, INC.) ROBERT SURREY, INC.
HGA LICENSING, INC.
By: _________________________ By: __________________________
Name: __________________ Name: ___________________
Title: _________________ Title: __________________
-23-
<PAGE>
EXHIBIT C
---------
SCHEDULE 18.1
-------------
NOTICES
-------
IF TO BORROWERS: HARTMARX CORPORATION
101 North Wacker Drive
Chicago, Illinois 60606-7389
Attention: Carey M. Stein
Telephone Number: (312) 372-6300
Telecopy Number: (312) 855-3868
TRADE FINANCE INTERNATIONAL LIMITED
101 North Wacker Drive
Chicago, Illinois 60606-7389
Attention: Carey M. Stein
Telephone Number: (312) 372-6300
Telecopy Number: (312) 855-3868
HART SCHAFFNER & MARX
101 North Wacker Drive
Chicago, Illinois 60606-7389
Attention: Carey M. Stein
Telephone Number: (312) 372-6300
Telecopy Number: (312) 855-3868
JAYMAR-RUBY, INC.
5000 South Ohio Street
Michigan City, Indiana 46360
Attention: President
Telephone Number: (219) 879-7341
Telecopy Number: (219) 879-0388
With copies to Carey M. Stein
at address indicated above
HARTMARX EMPLOYEE STOCK OWNERSHIP PLAN TRUST
c/o Marianne Bamonte
Continental Bank N.A., as
ESOP Trustee
231 South LaSalle Street, 7J
Chicago, Illinois 60697
Telephone Number: (312) 828-6051
Telecopy Number: (312) 987-1205
With copies to Carey M. Stein
at address indicated above
-24-
<PAGE>
COLLATERAL AGENT: THE FIRST NATIONAL BANK OF
CHICAGO
One First National Plaza
Chicago, Illinois 60670
Attention: Richard A. Peterson
Telephone Number: (312) 732-7626
Telecopy Number: (312) 732-1775
Telex: 4330253
Answerback: FNBC UI
MOF AGENT AND LENDERS: THE FIRST NATIONAL BANK OF
CHICAGO
One First National Plaza
Chicago, Illinois 60670
Attention: Richard A. Peterson
Telephone Number: (312) 732-7626
Telecopy Number: (312) 732-1775
Telex: 4330253
Answerback: FNBC UI
ABN AMRO Bank N.V.
135 South LaSalle Street
Room 425
Chicago, Illinois 60603
Attention: Patricia M. Luken
Telephone Number: (312) 443-2853
Telecopy Number: (312) 606-8425
Telex: 6732700
Answerback: ABN AMRO CGO
BANKERS TRUST COMPANY
280 Park Avenue - Mail #1191
New York, New York 10017
Attention: Susan Ryan
Telephone Number: (212) 454-3256
Telecopy Number: (212) 454-3996
Telex: 62922
Answerback: BTNY UW
BANCA NAZIONALE DEL LAVORO
CHICAGO BRANCH
55 West Monroe Street
Chicago, Illinois 60603
Attention: Ronald J. Stazuk
Assistant Vice President
Attention: Pietro De Luca
First Vice President and Manager
Telephone Number: (312) 444-9250
Telecopy Number: (312) 444-9410
Telex: 3731374
-25-
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
200 West Adams Street
Chicago, Illinois 60606
Attention: Lynette M. Songy
Vice President
Telephone Number: (312) 269-4638
Telecopy Number: (312) 641-2350
Telex: 6972650
Answerback: BAIC UW
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, #5183
335 Madison Avenue, 5th Floor
New York, New York 10017
Attention: Faith Larsen
Senior Vice President
Telephone Number: (212) 503-7287
Telecopy Number: (212) 503-7080
THE ROYAL BANK OF CANADA
33 North Dearborn Street
Suite 2300
Chicago, Illinois 60602
Attention: Everett M. Harner
Telephone Number: (312) 372-4404
Telecopy Number: (312) 782-3429
CONTINENTAL BANK N.A.
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Michael J. Bacevich
Telephone Number: (312) 828-3153
Telecopy Number: (312) 987-1205
Telex: 253460
Answerback: CONTL BK CGO
THE FUJI BANK, LIMITED
CHICAGO BRANCH
225 West Wacker Drive
Suite 2000
Chicago, Illinois 60606
Attention: Mark L. McCracken
Manager and Vice President
Telephone Number: (312) 621-0397
Telecopy Number: (312) 621-0539
or 419-3677
Telex: 25314
Answerback: FUJI BK CGO
-26-
<PAGE>
HARRIS TRUST AND SAVINGS BANK
200 West Monroe Street
Chicago, Illinois 60690
Attention: Cathy Ciolek
Telephone Number: (312) 987-4767
Telecopy Number: (312) 765-1724
NATIONAL WESTMINSTER BANK PLC
NEW YORK BRANCH
Loan Administration Department
175 Water Street
New York, New York 10038-4924
Attention: U.S. Team
Telephone Number: (212) 602-4115
Telecopy Number: (212) 602-4118
NATIONSBANK OF NORTH CAROLINA, N.A.
Special Asset Bank
1 Independence Center
101 North Tryon Street I13-17
Charlotte, North Carolina 28255
Attention: Charlie Kerr
Telephone Number: (704) 386-8535
Telecopy Number: (704) 386-1759
THE SANWA BANK, LIMITED, CHICAGO
BRANCH
10 South Wacker
31st Floor
Chicago, Illinois 60606
Attention: Ed White
Telephone Number: (312) 368-3018
Telecopy Number: (312) 346-6677
Telex: 3735188
Answerback: SANWA BK CGO
SWISS BANK CORPORATION
10 East 50th Street
New York, New York 10022
Attention: Phyllis J. Karno
Telephone Number: (212) 574-4007
Telecopy Number: (212) 574-3162
Telex: WUD 254527
Answerback: SWISS BANK CGO
-27-
<PAGE>
COMMERZBANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH
311 South Wacker Drive
Suite 5800
Chicago, Illinois 60606
Attention: Linda Michelson
Telephone Number: (312) 408-6947
Telecopy Number: (312) 435-1486
Telex: 210272
Answerback: CBCH UR
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
Suite 1740, Xerox Center
55 West Monroe Street
Chicago, Illinois 60603
Attention: Donna Johnson
Telephone Number: (312) 853-0454
Telecopy Number: (312) 853-0693
ALLSTATE LIFE INSURANCE COMPANY
Private Placement Department
Allstate Plaza West
Northbrook, Illinois 60062
Attention: Ron Mendell
Telephone Number: (708) 402-3473
Telecopy Number: (708) 402-3092
NATIONWIDE LIFE INSURANCE COMPANY
One Nationwide Plaza 1-33-07
Columbus, Ohio 43216
Attention: Laurie Clingman
Securities Analyst
Telephone Number: (614) 249-3825
Telecopy Number: (614) 249-4553
FARMLAND LIFE INSURANCE COMPANY
One Nationwide Plaza 1-33-07
Columbus, Ohio 43216
Attention: Laurie Clingman
Securities Analyst
Telephone Number: (614) 249-3825
Telecopy Number: (614) 249-4553
WEST COAST LIFE INSURANCE COMPANY
One Nationwide Plaza 1-33-07
Columbus, Ohio 43216
Attention: Laurie Clingman
Securities Analyst
Telephone Number: (614) 249-3825
Telecopy Number: (614) 249-4553
-28-
<PAGE>
WISCONSIN HEALTH CARE LIABILITY
INSURANCE PLAN
One Nationwide Plaza 1-33-07
Columbus, Ohio 43216
Attention: Laurie Clingman
Securities Analyst
Telephone Number: (614) 249-3825
Telecopy Number: (614) 249-4553
FINANCIAL HORIZONS LIFE INSURANCE
COMPANY
One Nationwide Plaza 1-33-07
Columbus, Ohio 43216
Attention: Laurie Clingman
Securities Analyst
Telephone Number: (614) 249-3825
Telecopy Number: (614) 249-4553
GUARANTEE MUTUAL LIFE COMPANY
8801 Indian Hills Drive
Omaha, Nebraska 68114
Attention: Steven A. Scanlan
Telephone Number: (402) 398-2636
Telecopy Number: (402) 390-7400
HMX93A49.URC (2/16/94 2:10pm)
-29-
<PAGE>
EXHIBIT 4-C-2
AMENDMENT NO. 2,
WAIVER NO. 2
AND
CONSENT NO. 2
Dated as of December 20, 1993
TO
THE SENIOR BRIDGE LOAN AND
LETTER OF CREDIT AGREEMENT
Dated as of December 30, 1992
THIS AMENDMENT NO. 2, WAIVER NO. 2 AND CONSENT NO. 2 TO THE SENIOR
BRIDGE LOAN AND LETTER OF CREDIT AGREEMENT ("Agreement") is entered into as of
December 20, 1993 by and among certain subsidiaries of Hartmarx Corporation, a
Delaware corporation ("Hartmarx"), appearing on the signature pages hereof as
"Borrowers and Guarantors" (collectively, the "Borrowers"), Hartmarx and certain
other of its subsidiaries appearing on the signature pages hereof as
"Guarantors", the financial institutions appearing on the signature pages
hereof, as "Lenders", National Westminster Bank Plc, New York Branch, as "Agent"
for the Lenders, and The First National Bank of Chicago, in its separate
capacities as "Co-Agent" for the Lenders and as "Collateral Agent" for the
Lenders. Capitalized terms used herein but not defined herein shall have the
meanings provided in the "Bridge Agreement" referred to below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrowers, the Guarantors, the Lenders, the Agent, the
Co-Agent and the Collateral Agent are parties to that certain Senior Bridge Loan
and Letter of Credit Agreement dated as of December 30, 1992 (as amended by that
certain Amendment No. 1, Waiver No. 1 and Consent No. 1 dated as of May 21,
1993, the "Bridge Agreement"), pursuant to which the Lenders agreed to extend
credit to the Borrowers;
WHEREAS, Hartmarx desires to enter into a certain Loan Agreement with
the City of Des Plaines, Illinois substantially in the form of Exhibit A
attached hereto, pursuant to which the City of Des Plaines, Illinois will lend
to Hartmarx the proceeds of such city's issuance and sale of its Economic
Development Refunding Revenue Bonds (Hartmarx Corporation Project) Series 1993
(the "Des Plaines Bonds"), which loan shall be in the original principal amount
of $8,000,000 (the "Des Plaines IDB Loan"), and which Des Plaines Bonds shall be
issued pursuant to that certain indenture substantially in the form of Exhibit
A-1 attached hereto;
WHEREAS, Hartmarx intends to advance all of the proceeds of the Des
Plaines IDB Loan on behalf of Hart Schaffner to cause the Hart Schaffner Bonds
to be redeemed in full and to
<PAGE>
satisfy, in full, all of Hart Schaffner's outstanding obligations under that
certain Loan Agreement dated August 1, 1985 between the City of Des Plaines,
Illinois and Hart Schaffner (the "Prior Des Plaines IDB Loan");
WHEREAS, upon the provision for redemption of the Hart Schaffner Bonds
and repayment in full of the Prior Des Plaines IDB Loan, (i) the NatWest Letter
of Credit will be terminated, (ii) the Restated NatWest Cash Pledge will be
terminated, (iii) the Restated NatWest Bonds Pledge will be terminated, (iv) the
NatWest Letter of Credit Obligations will have been satisfied, (v) the Hart
Schaffner-NatWest L/C Obligations will have been satisfied, (vi) the NatWest
Lien will be released, (vii) the Restated NatWest Guaranty will be terminated
and (viii) all Existing Pledged Cash held by NatWest pursuant to the Restated
NatWest Cash Pledge shall be released and applied pursuant to this Agreement;
WHEREAS, Hartmarx desires to enter into a certain Loan Agreement with
the Indiana Development Finance Authority substantially in the form of Exhibit B
attached hereto, pursuant to which the Indiana Development Finance Authority
will lend to Hartmarx the proceeds of such authority's issuance and sale of its
Economic Development Refunding Revenue Bonds (Hartmarx Corporation Project)
Series 1993 (the "Indiana Bonds"), which loan shall be in the original principal
amount of $7,500,000 (the "Indiana IDB Loan"), and which Indiana Bonds shall be
issued pursuant to that certain indenture substantially in the form of Exhibit
B-1 attached hereto;
WHEREAS, Hartmarx intends to advance all of the proceeds of the
Indiana IDB Loan on behalf of Jaymar to cause the Jaymar Bonds to be redeemed in
full and to satisfy, in full, all of Jaymar's outstanding obligations under that
certain Loan Agreement dated September 1, 1984 between the Indiana Employment
Development Commission and Jaymar (the "Prior Indiana IDB Loan");
WHEREAS, upon the provision for redemption of the Jaymar Bonds and the
repayment in full of the Prior Indiana IDB Loan, (i) the BTC Letter of Credit
will be terminated, (ii) the Restated BTC Cash Pledge will be terminated, (iii)
the Restated BTC Bonds Pledge will be terminated, (iv) BTC Letter of Credit
Obligations will have been satisfied, (v) the Jaymar-BTC L/C Obligations will
have been satisfied, (vi) the BTC Lien will be released, (vii) the Restated BTC
Guaranty will be terminated and (viii) all Existing Pledged Cash held by BTC
pursuant to the Restated BTC Cash Pledge shall be released and applied pursuant
to this Agreement; and
WHEREAS, the Borrowers, the Guarantors, the Agent, the Co-Agent, the
Collateral Agent and the Required Lenders have agreed further to amend the
Bridge Agreement to, among other things, allow for the consummation of the
foregoing transactions, consent to other actions of the Loan Parties, and waive
certain
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other violations of the Loan Parties, all on the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Amendment No. 2 to the Bridge Agreement. Effective as of the
date first written above, upon the satisfaction of the conditions precedent set
forth in Paragraph 4 below, the Bridge Agreement is hereby amended as follows:
(a) Article I is amended to add each of the following definitions to
such article in the appropriate alphabetical location:
"'BTC' means Bankers Trust Company and each successor and assign
thereof permitted under the Override Agreement.
'Des Plaines Bonds' means those certain Economic Development Refunding
Revenue Bonds (Hartmarx Corporation Project) Series 1993 in the aggregate
original principal amount of $8,000,000, issued by the City of Des Plaines,
Illinois pursuant to the Des Plaines Indenture.
'Des Plaines IDB Intercompany Advance' means that certain loan in the
aggregate original principal amount of $8,000,000 made by Hartmarx to Hart
Schaffner with the proceeds of the Des Plaines IDB Loan and other funds of
Hartmarx.
'Des Plaines IDB Loan' means that certain loan in the original
principal amount of $8,000,000 made by the City of Des Plaines, Illinois to
Hartmarx pursuant to the Des Plaines IDB Loan Agreement with the proceeds
of the sale by such city of the Des Plaines Bonds.
'Des Plaines IDB Loan Agreement' means that certain Loan Agreement
dated as of December 1, 1993 between the City of Des Plaines, Illinois and
Hartmarx, substantially in the form attached to that certain Amendment No.
2, Waiver No. 2 and Consent No. 2 to this Agreement as Exhibit A thereto,
as the same may be amended, restated or otherwise modified from time to
time in accordance with the provisions of this Agreement.
'Des Plaines Indenture' means that certain Indenture of Trust dated as
of December 1, 1993 between the City of Des Plaines, Illinois and Norwest
Bank Minnesota, National Association, as Trustee, substantially in the form
attached to that certain Amendment No. 2, Waiver No. 2 and Consent No. 2 to
this Agreement as Exhibit A-1 thereto, as the same
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<PAGE>
may be amended, restated or otherwise modified from time to time in
accordance with the provisions of this Agreement.
'Indiana Bonds' means those certain Economic Development Refunding
Revenue Bonds (Hartmarx Corporation Project) Series 1993 in the aggregate
original principal amount of $7,500,000, issued by the Indiana Development
Finance Authority pursuant to the Indiana Indenture.
'Indiana IDB Intercompany Advance' means that certain loan in the
aggregate original principal amount of $7,500,000 made by Hartmarx to
Jaymar with the proceeds of the Indiana IDB Loan and other funds of
Hartmarx.
'Indiana IDB Loan' means that certain loan in the original principal
amount of $7,500,000 made by the Indiana Development Finance Authority to
Hartmarx pursuant to the Indiana IDB Loan Agreement with the proceeds of
the sale by such authority of the Indiana Bonds.
'Indiana IDB Loan Agreement' means that certain Loan Agreement dated
as of December 1, 1993 between the Indiana Development Finance Authority
and Hartmarx, substantially in the form attached to that certain Amendment
No. 2, Waiver No. 2 and Consent No. 2 to this Agreement as Exhibit B
thereto, as the same may be amended, restated or otherwise modified from
time to time in accordance with the provisions of this Agreement.
'Indiana Indenture' means that certain Indenture of Trust dated as of
December 1, 1993 between the Indiana Development Finance Authority and
Norwest Bank Fort Wayne, N.A., as Trustee, substantially in the form
attached to that certain Amendment No. 2, Waiver No. 2 and Consent No. 2 to
this Agreement as Exhibit B-1 thereto, as the same may be amended, restated
or otherwise modified from time to time in accordance with the provisions
of this Agreement.
'1993 Bond Documents' means, collectively, the Des Plaines Indenture,
the Des Plaines IDB Loan Agreement, the Indiana Indenture, the Indiana IDB
Loan Agreement, and all other agreements, instruments and documents
contemplated by or related to such indentures or loan agreements to which
Hartmarx or any Subsidiary is a party or third party beneficiary, in each
case as the same may be amended, restated or otherwise modified from time
to time in accordance with the provisions of this Agreement."
(b) Article I is further amended to add "(a)" prior to the first line
thereof, to add "(c)" prior to the second-to-last line thereof and to add the
following after the end of the definition of "Wholly Owned Subsidiary":
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<PAGE>
"(b) the following terms have the meanings set forth in the Override
Agreement:
BTC Letter of Credit
BTC Letter of Credit Obligations
BTC Lien
Existing Pledged Cash
Hart Schaffner-NatWest L/C Obligations
Jaymar Bonds
Jaymar-BTC L/C Obligations
NatWest Letter of Credit
NatWest Letter of Credit Obligations
NatWest Lien
Restated BTC Bonds Pledge
Restated BTC Cash Pledge
Restated BTC Guaranty
Restated NatWest Bonds Pledge
Restated NatWest Cash Pledge
Restated NatWest Guaranty."
(c) Article I is further amended to delete in its entirety clause
(iii) of the definition of "Permitted Investments" and to replace such clause
with the following clause:
"(iii) Deposit accounts (other than those described in clause (vii)
of this definition) maintained in the ordinary course of
business; provided, that all such deposit accounts are
maintained with the Collateral Agent, the Agent, the Co-
Agent, a Lender, or an Affiliate or any such Person and are
subject to the Collateral Agent's Lien securing the
Obligations or are otherwise subject to blocked account
agreements, lock box agreements or cash collection or cash
concentration agreements established for the benefit of the
Lenders, except in the case of such Investments which (A) at
all times aggregate less than $4,000,000 and constitute (1)
disbursement, payroll and deposit accounts other than those
into which proceeds of Accounts and/or cash sales are
deposited, collected or concentrated or (2) deposit accounts
into which proceeds of Accounts and/or cash sales are
deposited, collected or concentrated and which, with respect
to each calendar month after June, 1993, have average
monthly balances of less than $20,000 each and receive less
than $100,000 each in the aggregate of deposits during each
month, or (B) constitute (1) accounts maintained at the Bank
of New York and/or Manufacturers and Traders Trust Company
in connection with
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<PAGE>
either such institution's issuance of Commercial Letters of
Credit or (2) accounts maintained at banks and trust
companies in connection with such institutions' issuance of
Commercial Letters of Credit; provided, further, that such
amounts maintained pursuant to clauses (B)(1) and (B)(2) of
this paragraph shall only be Permitted Investments to the
extent of the face amount of Commercial Letters of Credit
issued by such institutions for the account of Hartmarx or
its Subsidiaries and then only with respect to such
Commercial Letters of Credit which, in the case of amounts
maintained pursuant to clause (B)(1), are or were issued on
or before January 31, 1993, and in the case of amounts
maintained pursuant to clause (B)(2), are issued after June
30, 1995, in any such case as the same may be amended,
extended, replaced or substituted thereafter in connection
with the transaction giving rise to the original issuance of
such Commercial Letter of Credit, but not, in the case of
amounts pursuant to clause (B)(1), with respect to new
transactions occurring after January 31, 1993;"
(d) Article I is further amended to delete in its entirety clause
(xi) of the definition of "Permitted Investments" and to replace such clause
with the following clause:
"(xi) To the extent not prohibited by Section 6.2.8 or other
provisions of this Agreement, intercompany advances or
equity investments by Hartmarx to or in any of its
Wholly Owned Subsidiaries, or by a Wholly Owned
Subsidiary of any Loan Party to or in another Wholly
Owned Subsidiary or Hartmarx, (1) for the purchase or
construction of fixed assets, plant and equipment which
are capitalized in accordance with Agreement Accounting
Principles, (2) for working capital purposes, or (3)
which constitute the Des Plaines IDB Intercompany
Advance or the Indiana IDB Intercompany Advance;
provided, however, that no such investment made after
the Effective Date in a Wholly Owned Subsidiary shall
be a Permitted Investment if such Wholly Owned
Subsidiary is not an Active Subsidiary or if such
Wholly Owned Subsidiary is HSSI or any of its
Subsidiaries; and"
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<PAGE>
(e) Section 6.1.2(d) is amended to delete the word "and" which
appears at the end of clause (iii) of such section and to add the following
provision to the end of such section:
", (v) the prepayment in full by Jaymar of all of Jaymar's outstanding
Indebtedness under that certain Loan Agreement dated September 1, 1984
between the Indiana Employment Development Commission and Jaymar with the
proceeds of the Indiana IDB Intercompany Advance and (vi) the prepayment in
full by Hart Schaffner of all of Hart Schaffner's outstanding Indebtedness
under that certain Loan Agreement dated August 1, 1985 between the City of
Des Plaines, Illinois and Hart Schaffner with the proceeds of the Des
Plaines IDB Intercompany Advance. Notwithstanding anything in this section
or Agreement to the contrary, Hartmarx shall not, and shall not permit any
of its Subsidiaries to, voluntarily prepay prior to its stated maturity the
Des Plaines IDB Loan or the Indiana IDB Loan or to voluntarily purchase,
redeem, or cause the redemption of, any of the Des Plaines Bonds or the
Indiana Bonds."
(f) Section 6.2.3 is amended to delete in its entirety clause (c) of
such section and to replace such clause with the following clause:
"(c) Make any other distribution of assets or property in respect of
the common stock of Hartmarx or any of its Subsidiaries, except cash or
property distributions in respect of the common stock of Hartmarx's Wholly
Owned Subsidiaries to Hartmarx or to other Wholly Owned Subsidiaries of
Hartmarx (other than to HSSI or any of its Subsidiaries should HSSI become
a Subsidiary of Hartmarx)."
(g) Section 6.2.4 is amended to delete in its entirety clause (c) of
such section and to replace such clause with the following clause:
"(c) Make any other distribution of assets or property in respect of
any of the Other Capital Stock of Hartmarx or any of its Subsidiaries,
except cash or property distributions in respect to any of the Other
Capital Stock of Hartmarx's Wholly Owned Subsidiaries to Hartmarx or to
other Wholly Owned Subsidiaries of Hartmarx (other than to HSSI or any of
its Subsidiaries should HSSI become a Subsidiary of Hartmarx),"
(h) Section 6.2.12 is amended to add the following provision to the
end of such section:
"Notwithstanding the foregoing, prior to the occurrence, or in the absence
of the continuation, of any Default, each Loan Party may repay
"Intercompany Claims" (as defined in
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<PAGE>
the Subordination Agreement) in the ordinary course of such parties
businesses as conducted on the Closing Date."
(i) Section 6.2.16(a) is amended to add the following reference to
such section immediately following the existing reference to "Override
Documents" in such section:
", 1993 Bond Documents"
(j) Section 6.2.16 is further amended to add the following clause to
the end of such section:
"(c) The Loan Parties shall promptly provide each Lender with notice
of the occurrence of any "Event of Default" under the Des Plaines IDB Loan
Agreement or the Indiana IDB Loan Agreement, any "Determination of
Taxability" (as defined in the Des Plaines IDB Loan Agreement or the
Indiana IDB Loan Agreement), or the occurrence of any "Default" or "event
of default" under the Des Plaines Indenture or the Indiana Indenture."
(k) Section 6.2.19 is amended to add the following provision to the
end of clause (c) of such section:
", and provided, further, that, and notwithstanding the foregoing
provisions of this clause (c), (i) Jaymar's outstanding Indebtedness under
that certain Loan Agreement dated September 1, 1984 between the Indiana
Employment Development Commission and Jaymar shall be refunded and
refinanced in full with the proceeds of the Indiana IDB Intercompany
Advance which, in turn, shall be funded by Hartmarx with, together with
other funds, the proceeds of the Indiana IDB Loan, and, in each case, such
refunding, refinancing and funding shall occur on or before the thirtieth
(30th) day immediately following the date on which the Indiana Bonds are
issued and that, during such thirty (30) day period, the proceeds of the
sale of such Indiana Bonds shall be held in trust by such Persons and
pursuant to such agreements as may be acceptable to the Collateral Agent
and (ii) Hart Schaffner's outstanding Indebtedness under that certain Loan
Agreement dated August 1, 1985 between the City of Des Plaines, Illinois
and Hart Schaffner shall be refunded and refinanced in full with the
proceeds of the Des Plaines IDB Intercompany Advance which, in turn, shall
be funded by Hartmarx with, together with other funds, the proceeds of the
Des Plaines IDB Loan, and in each case, such refunding, refinancing and
funding shall occur on or before the thirtieth (30th) day immediately
following the date on which the Des Plaines Bonds are issued and that,
during such thirty (30) day period, the proceeds of the sale of such Des
Plaines Bonds shall be held in trust by such Persons and pursuant to such
agreements as may be acceptable to the Collateral Agent;"
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<PAGE>
(l) Section 7.5 is amended to add the following provision to the end
of such section:
"; or there shall occur any "Event of Default" under the Des Plaines IDB
Loan Agreement or the Indiana IDB Loan Agreement, any "Determination of
Taxability" (as defined in the Des Plaines IDB Loan Agreement or the
Indiana IDB Loan Agreement), or any "Default" or "event of default" under
the Des Plaines Indenture or the Indiana Indenture, or there shall occur
any other event, or any other condition shall exist, the result of which
occurrence or condition would permit (a) the issuer of the Des Plaines
Bonds or the Indiana Bonds, any trustee with respect thereto or any holder
of such bonds to require that any such bonds be redeemed or (b) the issuer
of the Des Plaines Bonds or the Indiana Bonds, any trustee with respect
thereto or any holder of such bonds to accelerate the maturity of the Des
Plaines IDB Loan or the Indiana IDB Loan."
(m) Section 10.13 is amended to delete in its entirety the
parenthetical which appears in clause (ii) of such section and to replace such
parenthetical with the following parenthetical:
"(and Hartmarx, on behalf of itself and its Subsidiaries, shall have
certified its compliance with such section by delivering prior to the
closing of such transaction to the Agent, the Co-Agent, the Collateral
Agent and each Lender or, if the amount of such disposition is $75,000 or
less and the aggregate amount of all such dispositions of $75,000 or less
(including such disposition) during the then immediately preceding twelve
(12) month period is $500,000 or less, to the Collateral Agent and the
Agent, (a) an Officer's Certificate substantially in the form of Exhibit M
and (b) copies of the substantially final version of the agreement or
agreements providing for such disposition)"
(n) Schedule 13.1 is deleted in its entirety and replaced with the
restated schedule attached to this Agreement as Exhibit C hereto.
2. Waiver No. 2 to Bridge Agreement. Effective as of the date first
written above, upon the satisfaction of the conditions precedent set forth in
Paragraph 4 below, the Lenders hereby waive any noncompliance by the Loan
Parties with the following provisions to the extent occurring prior to the date
hereof and specifically described below:
(a) Failure to comply with Section 6.2.18 of the Bridge Agreement, to
the extent that the Loan Parties maintained deposit accounts in an
aggregate amount in excess of $4,000,000 in (i) disbursement, payroll and
deposit accounts other than those into which proceeds of Accounts and/or
each sales are deposited, collected or concentrated,
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<PAGE>
(ii) accounts maintained at The Bank of New York and/or Manufacturers and
Traders Trust Company in connection with either such institution's issuance
of Commercial Letters of Credit, (iii) accounts maintained at banks and
trust companies in connection with such institutions' issuance of
Commercial Letters of Credit, and (iv) deposit accounts into which proceeds
of Accounts and/or cash sales are deposited, collected or concentrated and
which, with respect to each calendar month after June, 1993, have average
monthly balances of less than $20,000 each and receive less than $100,000
each in the aggregate of deposits during each month; provided, however,
that such waiver shall only be effective if the aggregate of the amounts
described in clauses (i), (iii) and (iv) of this paragraph at no time prior
to the effective date hereof exceeded $4,000,000; and
(b) Defaults, if any, under Section 7.5 of the Bridge Agreement as a
result of the occurrence of "Defaults" under the Override Agreement by
reason of Hartmarx's failure to comply with the provisions of the Override
Agreement which are specifically waived pursuant to that certain amendment,
waiver and consent agreement substantially in the form of Exhibit D
attached hereto and made a part hereof (the "Override Modification
Agreement").
3. Consent No. 2 to the Override Agreement. Effective as of the
date first written above, upon the satisfaction of the conditions precedent set
forth in Paragraph 4 below, each of the Lenders hereby agrees as follows:
(a) Notwithstanding the provisions of Section 6.2.16(a) of the Bridge
Agreement, the Loan Parties may enter into the Override Modification
Agreement;
(b) Notwithstanding the provisions of Section 2.1.2(b) of the Bridge
Agreement, upon the satisfaction of the conditions precedent set forth in
Paragraph 4 below and as of such a time as (and only in the event that) the
NatWest Letter of Credit shall have been cancelled or terminated and the
original thereof shall have been returned to NatWest and all Hart
Schaffner-NatWest L/C Obligations shall have been repaid or otherwise
satisfied in full, NatWest may deliver to the "Collateral Agent" under the
Override Agreement for application as a "Mandatory Prepayment" pursuant to
Sections 4.1.6 and 4.3 of the Override Agreement (without giving effect to
the provisions of Section 2.1.2(b) of the Bridge Agreement with respect to
Mandatory Prepayments under the Bridge Agreement) the aggregate amount of
all Existing Pledged Cash held by or for the benefit of NatWest pursuant to
the Restated NatWest Cash Pledge; and
(c) Notwithstanding the provisions of Section 2.1.2(b) of the Bridge
Agreement, upon the satisfaction of the conditions precedent set forth in
Paragraph 4 below and as
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of such a time as (and only in the event that) the BTC Letter of Credit
shall have been cancelled or terminated and the original thereof shall have
been returned to BTC and all Jaymar-BTC L/C Obligations shall have been
repaid or otherwise satisfied in full, BTC may deliver to the "Collateral
Agent" under the Override Agreement, for application as a "Mandatory
Prepayment" pursuant to Sections 4.1.6 and 4.3 of the Override Agreement
(without giving effect to the provisions of Section 2.1.2(b) of the Bridge
Agreement with respect to Mandatory Prepayments under the Bridge Agreement)
the aggregate amount of all Existing Pledged Cash then held by or for the
benefit of BTC pursuant to the Restated BTC Cash Pledge.
4. Conditions to Effectiveness; Subsequent Requirements;
Acknowledgements. (a) This Agreement shall become effective as of the date
first written above if, and only if, on or before January 31, 1994:
(i) the Agent and the Collateral Agent shall have received originally
executed counterparts to this Agreement, executed and delivered by a duly
authorized officer of (A) each Loan Party and (B) Lenders constituting the
Required Lenders;
(ii) the Agent and the Collateral Agent shall have received a copy of
the fully executed Override Modification Agreement executed by Hartmarx,
Hart Schaffner, Jaymar, the ESOP, each "Required Lender" (as defined in the
Override Agreement) and each other Person required to execute such
Agreement as a condition to its effectiveness; and
(iii) the Agent and the Collateral Agent shall have received a copy of
the fully executed Amendment to Subordinated Revolving Notes Dated December
30, 1992, executed by Kuppenheimer and Direct Marketing;
provided, however, that the amendments described in clauses (f) and (g) of
Paragraph 1 of this Agreement shall not become effective unless and until (x)
NatWest shall have notified the Agent and the Collateral Agent that (1) the
NatWest Letter of Credit shall have been cancelled or terminated, (2) the
original thereof shall have been returned to NatWest and (3) all Hart Schaffner-
NatWest L/C Obligations shall have been repaid or otherwise satisfied in full
and (y) BTC shall have notified the Agent and the Collateral Agent that (1) the
BTC Letter of Credit shall have been cancelled or terminated, (2) the original
thereof shall have been returned to BTC and (3) all Jaymar-BTC L/C Obligations
shall have been repaid or otherwise satisfied in full.
(b) Each of the parties hereto agrees and acknowledges that no
consent of any Person other than the Persons named in
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clause (a)(i) of this paragraph is required in order for this Agreement to
become effective.
(c) The Loan Parties hereby agree promptly to cause to be delivered
to each Lender true and correct copies of each of the "1993 Bond Documents" (as
defined in Paragraph 1 hereof) upon the execution and delivery thereof by the
parties thereto.
(d) The Loan Parties hereby agree and acknowledge that, when made,
the "Des Plaines IDB Intercompany Advance" and the "Indiana IDB Intercompany
Advance" (each as defined in Paragraph 1 hereof) will constitute "Intercompany
Claims" under, as defined in, and subordinated pursuant to, the Subordination
Agreement.
(e) At such time as NatWest shall have received and cancelled the
original NatWest Letter of Credit and all Hart Schaffner-NatWest L/C Obligations
shall have been repaid or otherwise satisfied in full, the Loan Parties and
NatWest shall provide the Agent and the Collateral Agent with notice and
evidence reasonably satisfactory to them of the occurrence of such events.
(f) At such time as BTC shall have received and cancelled the
original BTC Letter of Credit and all Jaymar-BTC L/C Obligations shall have been
repaid or otherwise satisfied in full, the Loan Parties shall provide the Agent
and the Collateral Agent with notice and evidence reasonably satisfactory to
them of the occurrence of such events.
(g) At such time as the Hart Schaffner Bonds have been redeemed in
full and the Prior Des Plaines IDB Loan shall have been repaid in full, the Loan
Parties shall cause to be provided to the Agent, the Collateral Agent and
NatWest evidence reasonably satisfactory to them of the occurrence of such
events.
(h) At such time as the Jaymar Bonds have been redeemed in full and
the Prior Indiana IDB Loan shall have been repaid in full, the Loan Parties
shall cause to be provided to the Agent, the Collateral Agent and BTC evidence
reasonably satisfactory to them of the occurrence of such events.
(i) At such time as the Collateral Agent shall have received any or
all of the Existing Pledged Cash from NatWest, BTC and/or the Loan Parties as
described in clauses (b) and/or (c) of Paragraph 3 of this Agreement, the
Collateral Agent shall apply such amounts in accordance with such clauses.
(j) Hartmarx hereby covenants and agrees (i) that the aggregate
disbursements required to be made by Hartmarx and its Subsidiaries (whether to
be paid in cash or to be set off against amounts to be disbursed to Hartmarx or
its Subsidiaries) in connection with the issuance of the Des Plaines Bonds and
the Indiana Bonds, the funding of the Des Plaines IDB Loan and the
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Indiana IDB Loan, the funding of the Des Plaines IDB Intercompany Advance and
the Indiana IDB Intercompany Advance, the redemption and retirement of the Hart
Schaffner Bonds and the Jaymar Bonds, and the payment in full of the Prior Des
Plaines IDB Loan and the Prior Indiana IDB Loan (excluding, however, the payment
of principal with respect to the Prior Des Plaines IDB Loan and the Prior
Indiana IDB Loan, the payment of accrued interest with respect to any of the
foregoing, and the payment of legal fees and expenses with respect to the
preparation of this Agreement but including, without limitation, all other
underwriter's fees, trustee's fees, issuer's fees, discounts, attorneys' and
paralegal's fees, taxes, prepayment penalties and premiums, reimbursements and
other transactions costs, expenses and charges), shall not exceed $825,000; and
(ii) to deliver to the Agent and the Collateral Agent, promptly following the
last of such transactions, a certificate from an Authorized Officer as to such
aggregate disbursements supported by a schedule itemizing each component thereof
in form and scope satisfactory to the Agent and the Collateral Agent.
(k) Hartmarx, Hart Schaffner and Jaymar hereby each covenant and
agree to, as soon as practicable and in no event later than the thirtieth (30th)
day immediately following the issuance of the Indiana Bonds and the Des Plaines
Bonds, to cause (i) the redemption in full of the Hart Schaffner Bonds and the
Jaymar Bonds, (ii) the satisfaction in full of the Prior Des Plaines IDB Loan
and the Prior Indiana IDB Loan, (iii) the return and cancellation of the NatWest
Letter of Credit and the BTC Letter of Credit, and (iv) payment or other
satisfaction in full of all Hart Schaffner-NatWest L/C Obligations and all
Jaymar-BTC L/C Obligations.
5. Representations and Warranties.
(a) Each Loan Party hereby represents and warrants that this
Agreement and the Loan Documents as amended hereby, constitute legal, valid and
binding obligations of each of the Loan Parties which is a party thereto and are
enforceable against such Loan Parties in accordance with their terms (except as
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization and other laws affecting the rights of creditors generally and
(ii) rules of equity affecting the enforcement of obligations generally).
(b) Each Loan Party hereby represents and warrants that, as of the
date such Loan Party executes and delivers its counterpart of this Agreement
(and assuming the effectiveness of this Agreement) (i) no Default or Unmatured
Default has occurred and is continuing and (ii) all of the representations and
warranties of such Loan Party contained in the Loan Documents (in each case
other than representations and warranties which are expressly indicated in such
documents as being made only as of a particular date or dates) are true and
correct in all material respects.
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6. Authority to Execute Release Documents. Subject to the
effectiveness of this Agreement, each Lender hereby expressly authorizes the
Collateral Agent, (a) following such time as (and only in the event that) the
Agent and the Collateral Agent shall have received notice from NatWest that (1)
the NatWest Letter of Credit shall have been cancelled or terminated, (2) the
original thereof shall have been returned to NatWest and (3) all Hart Schaffner-
NatWest L/C Obligations shall have been repaid or otherwise satisfied in full,
to execute and deliver to Hartmarx or Hart Schaffner such documents or
instruments necessary or desirable to release the NatWest Lien, pursuant to
release documentation in form and substance satisfactory to the Agent, the
Collateral Agent and NatWest, and (b) following such time as (and only in the
event that) the Agent and the Collateral Agent shall have received notice from
BTC that (1) the BTC Letter of Credit shall have been cancelled or terminated,
(2) the original thereof shall have been returned to BTC and (3) all Jaymar-BTC
L/C Obligations shall have been repaid or otherwise satisfied in full, to
execute and deliver to Hartmarx or Jaymar such documents and instruments as may
be necessary or desirable to release the BTC Lien pursuant to release
documentation in form and substance satisfactory to the Agent, the Collateral
Agent and BTC.
7. Reference to and Effect on the Bridge Agreement.
(a) Upon the effectiveness of this Agreement, (i) each reference in
the Bridge Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import shall mean and be a reference to the Bridge Agreement as
amended hereby and (ii) each reference to the Bridge Agreement in each other
Loan Document shall mean and be a reference to the Bridge Agreement as amended
hereby.
(b) Except as specifically amended above, the Bridge Agreement shall
remain in full force and effect, and is hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Agreement shall
not operate as a waiver of any right, power or remedy of the Agent, the Co-
Agent, the Collateral Agent or any of the Lenders, nor, except as specifically
provided in Paragraph 2 above, constitute a waiver of any provision of any of
the Loan Documents. Without limiting the generality of the foregoing, the
Lenders', the Agent's, the Co-Agent's and the Collateral Agent's failure to
specifically waive in Paragraph 2 hereof any breach or other violation by any
Loan Party of any provision of the Loan Documents which has occurred on or prior
to the date hereof with or without the knowledge of any Lender, the Agent, the
Co-Agent or the Collateral Agent shall not constitute the Lenders', the Agent's,
the Co-Agent's or the Collateral Agent's agreement that such breach or violation
is immaterial nor shall it constitute an implied waiver of such breach or
violation, and each Lender, the Agent, the Co-Agent and the Collateral Agent
hereby reserve all
-14-
<PAGE>
rights and remedies with respect to any such breach or other violation.
(d) This Agreement shall constitute a Loan Document subject to the
terms and provisions of the Bridge Agreement. Notwithstanding anything in
Section 7.4 of the Bridge Agreement or any other provision to the contrary, the
Loan Parties further agree that any failure by any one of them to perform any of
its covenants under this Agreement shall constitute an immediate Default without
the benefit of any grace period.
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois.
9. Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same agreement among the parties hereto.
-15-
<PAGE>
IN WITNESS WHEREOF, the Loan Parties, the Lenders, the Agent, the Co-
Agent and the Collateral Agent have executed this Agreement as of the date first
above written.
Borrowers and Guarantors:
------------------------
HART SCHAFFNER & MARX
JAYMAR-RUBY, INC.
BILTWELL COMPANY, INC.
M. WILE & COMPANY, INC.
HICKEY-FREEMAN CO., INC.
INTERNATIONAL WOMEN'S APPAREL,
INC., and
AMERICAN APPAREL BRANDS, INC., each,
as a Borrower and Guarantor
By: /s/ Carey M. Stein
--------------------------------
Title: Secretary
-----------------------------
Guarantors:
----------
HARTMARX CORPORATION
TRADE FINANCE INTERNATIONAL
LIMITED
FAIRWOOD-WELLS, INC.
THOS. HEATH CLOTHES, INC.
HSM UNIVERSITY, INC.
NATIONAL CLOTHING COMPANY, INC.
SEAFORD CLOTHING CO.
SOCIETY BRAND, LTD.
TAILORED TREND, INC.
THORNGATE, LTD.
WINCHESTER CLOTHING COMPANY
HOOSIER FACTORIES, INCORPORATED
CHICAGO TROUSER COMPANY, LTD.
JRSS, INC.
ANNISTON SPORTSWEAR CORPORATION
E-TOWN SPORTSWEAR CORPORATION
RECTOR SPORTSWEAR CORPORATION
DIRECT ROUTE MARKETING CORPORATION
KUPPENHEIMER MANUFACTURING COMPANY,
INC.
COLEMAN CLOTHES, INC.
KUPPENHEIMER MEN'S CLOTHIERS
DADEVILLE, INC.
WALTON MANUFACTURING COMPANY, and
By: /s/ Carey M. Stein
--------------------------------
Title: Secretary
-----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
INTERCONTINENTAL APPAREL, INC.,
as a Guarantor
By: /s/Carey M. Stein
--------------------------------
Title: Secretary
-----------------------------
Collateral Agent:
----------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent for the
Lenders
By: /s/Richard A. Peterson
--------------------------------
Title: Vice President
-----------------------------
Agent, Co-Agent and Lenders:
---------------------------
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH, as Agent and a
Lender
By: /s/Ernest V. Hodge
--------------------------------
Title: Vice President
-----------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agent and a Lender
By: /s/Richard A. Peterson
--------------------------------
Title: Vice President
-----------------------------
ABN AMRO BANK N.V., as a Lender
By: /s/Bernard J. McGuigan
--------------------------------
Title: Group Vice President
--------------------------
By: /s/John Ellenwood
--------------------------------
Title: Vice President
-----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
ROYAL BANK OF CANADA,
as a Lender
By: /s/Yvonne Bernard
--------------------------------
Title: Credit Officer
-----------------------------
CONTINENTAL BANK N.A., as a Lender
By: /s/Michael I. Bacevich
--------------------------------
Title: Vice President
-----------------------------
HARRIS TRUST AND SAVINGS BANK, as a
Lender
By: /s/Catherine C. Ciolek
--------------------------------
Title: Vice President
-----------------------------
NATIONSBANK OF NORTH CAROLINA,
N.A., as a Lender
By: /s/Charles A. Kerr
--------------------------------
Title: Senior Vice President
-----------------------------
SWISS BANK CORPORATION, as a Lender
By: /s/Phyllis J. Karno
--------------------------------
Title: Director, Restructuring
-----------------------------
By: /s/Peter V. Matton
--------------------------------
Title: Executive Director,
-----------------------------
Restructuring
-----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
COMMERZBANK AKTIENGESSELLSCHAFT,
GRAND CAYMAN BRANCH, as a Lender
By:/s/Anthony L. Giraldi
--------------------------------
Title:Vice President
-----------------------------
By:/s/Kalyan Basu
--------------------------------
Title:First Vice President
-----------------------------
WACHOVIA BANK OF NORTH CAROLINA,
N.A., as a Lender
By:/s/Robert G. Brookby
--------------------------------
Title:Senior Vice President/Group
-----------------------------
Executive
-----------------------------
<PAGE>
EXHIBITS A & B
--------------
1993 BOND DOCUMENTS
[Sent under separate cover]
<PAGE>
EXHIBIT C
---------
SCHEDULE 13.1
-------------
NOTICES
-------
IF TO BORROWERS HARTMARX CORPORATION
OR LOAN PARTIES: 101 North Wacker Drive
Chicago, Illinois 60606-7389
Attention: Carey M. Stein
Telephone Number: (312) 372-6300
Telecopy Number: (312) 855-3868
COLLATERAL AGENT: THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Chicago, Illinois 60670
Attention: Richard A. Peterson
Telephone Number: (312) 732-7626
Telecopy Number: (312) 732-1775
Telex: 4330253
Answerback: FNBC UI
AGENT, CO-AGENT AND LENDERS: NATIONAL WESTMINSTER BANK PLC
NEW YORK BRANCH
Loan Administration Department
175 Water Street
New York, New York 10038-4924
Attention: U.S. Team
Telephone Number: (212) 602-4115
Telecopy Number: (212) 602-4118
with a copy to:
JONES, DAY, REAVIS & POGUE
77 West Wacker Drive
Chicago, Illinois 60601-1692
Attention: Robert J. Graves
Telephone Number: (312) 782-3939
Telecopy Number: (312) 782-8585
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Chicago, Illinois 60670
Attention: Richard A. Peterson
Telephone Number: (312) 732-7626
Telecopy Number: (312) 732-1775
Telex: 4330253
Answerback: FNBC UI
ABN AMRO BANK N.V.
135 South LaSalle Street
Room 425
Chicago, Illinois 60603
Attention: Patricia M. Luken
Telephone Number: (312) 443-2853
Telecopy Number: (312) 606-8425
Telex: 6732700
Answerback: ABN AMRO CGO
<PAGE>
ROYAL BANK OF CANADA
33 North Dearborn Street
Suite 2300
Chicago, Illinois 60602
Attention: Everett M. Harner
Telephone Number: (312) 372-4404
Telecopy Number: (312) 782-3429
CONTINENTAL BANK N.A.
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Michael J. Bacevich
Telephone Number: (312) 828-3153
Telecopy Number: (312) 987-1205
Telex: 253460
Answerback: CONTL BK CGO
HARRIS TRUST AND SAVINGS BANK
200 West Monroe Street
17th Floor
Chicago, Illinois 60606
Attention: Catherine C. Ciolek
Telephone Number: (312) 987-4767
Telecopy Number: (312) 765-1724
NATIONSBANK OF NORTH CAROLINA, N.A.
Special Asset Bank
1 Independence Center
101 North Tryon Street I13-17
Charlotte, North Carolina 28255
Attention: Charlie Kerr
Telephone Number: (704) 386-8535
Telecopy Number: (704) 386-1759
SWISS BANK CORPORATION
10 East 50th Street
New York, New York 10022
Attention: Phyllis J. Karno
Telephone Number: (212) 574-4007
Telecopy number: (212) 574-3162
COMMERZBANK AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH
311 South Wacker Drive
Suite 5800
Chicago, Illinois 60606
Attention: Linda Michelson
Telephone Number: (312) 435-1000
Telecopy Number: (312) 435-1486
Telex: 210272
Answerback: CBCH UR
-2-
<PAGE>
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
Suite 1740, Xerox Centre
55 West Monroe Street
Chicago, Illinois 60603
Attention: Donna Johnson
Telephone Number: (312) 853-0454
Telecopy Number: (312) 853-0693
-3-
<PAGE>
EXHIBIT D
---------
AMENDMENT NO. 2
WAIVER NO. 2
AND
CONSENT NO. 2
Dated as of November 30, 1993
TO
CERTAIN OVERRIDE DOCUMENTS
Dated as of December 30, 1992
[Sent under separate cover]
<PAGE>
EXHIBIT 10.B.2
HARTMARX CORPORATION
1985 STOCK OPTION PLAN
AS ADOPTED AT THE APRIL 9, 1985
ANNUAL MEETING OF STOCKHOLDERS
AND AMENDED EFFECTIVE APRIL 7, 1987
1. PURPOSE OF THE PLAN
The purpose of this 1985 Stock Option Plan (the "Plan") is to promote the
interest of Hartmarx Corporation, a Delaware Corporation ("the Company"), and
its stockholders by providing key employees of the Company and its subsidiaries
with opportunities to acquire a proprietary interest in the Company and thereby
develop a stronger incentive to put forth maximum effort for the success and
growth of the Company and its subsidiaries. In addition, the opportunity to
acquire a proprietary interest in the Company will aid in attracting and
retaining key personnel of outstanding ability.
2. ADMINISTRATION
The Plan shall be administered by a Compensation and Stock Option Committee
(herein called the "Committee") of not less than three Directors of the Company
who shall be appointed, from time to time, by the Board of Directors of the
Company. No person who shall have been or is a member of the Committee shall be
eligible to receive an option, right or award under the Plan. The Committee is
authorized to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the form and content of options,
rights or awards to be issued under the Plan, to permit or require the
acceleration of the exercise of such options and rights and the acceleration of
full ownership rights of shares under such awards, and to make all other
determinations necessary or advisable for the administration of the Plan but
only to the extent not contrary to the express provisions of the Plan.
3. SHARE~ SUBJECT TO THE PLAN
The aggregate number of shares of Common Stock of the Company subject to
options, Stock Appreciation Rights ("SARs") or Restricted Stock Awards
("Awards") which may be granted under the Plan shall not exceed 500,000 shares,
provided, however, that no more than 100,000 of such shares shall be granted as
Awards. Options granted under this Plan will be either Incentive Stock Options
("ISOs") or Non-Qualified Stock Options ("NQSOs"). If any option granted under
this Plan lapses or terminates for any reason before being completely exercised
or if any Award is forfeited by a grantee prior to the lapse of restrictions as
to full ownership rights, the shares covered by the unexercised portion of such
option or the forfeited portion of such Award may again be made subject to
options or Awards granted under the Plan, but this does not apply to any shares
for which a cash payment is made pursuant to Section 8 below. Shares issued
upon exercise of options or pertaining to Awards granted under the Plan may be
shares of authorized but previously unissued shares or shares held by the
Company as treasury shares. Shares of Common Stock of the Company, of the par
value of $2.50 per share, shall be delivered unless Section 13 shall be
applicable.
4. ELIGIBLE EMPLOYEES
Options and Awards may be granted under the Plan to any key employee of the
Company or any subsidiary thereof, including any such employee who is also an
officer or director of the Company or a subsidiary. No option or Award may be
granted under the Plan to any person who is or has been a member of the
Committee.
A-1
<PAGE>
5. GRANTING OF OPTIONS
Subject to the terms and conditions of the Plan, the Committee may, from
time to time and as of any date or dates prior to April 9, 1995 as shall be
specified by the Committee, grant to such eligible employees as the Committee
may determine, options to purchase such number of shares of Common Stock of
the Company on such terms and conditions as the Committee may determine,
including the granting of an option with an SAR pursuant to Section 8 below.
More than one option may b~ granted to the same employee. Except as otherwise
permitted by the Internal Revenue Code of 1954, as amended (the "Code"), no
individual shall receive ISO grants from the Company to purchase shares of the
Company's Common Stock to the extent that the aggregate fair market value of
such shares, when added to the aggregate fair market value of shares of stock
which may be purchased pursuant to other ISO grants received by such
individual under all stock option plans of the Company and its subsidiaries
which first become exercisable in the same calendar year as such ISO grants
first become exercisable, exceeds $100,000 (as determined at the date or dates
of grant).
6. OPTION PRICE
The purchase price of each share of Common Stock subject to an option shall
be fixed by the Committee, but shall not be less than 100% of the fair market
value of the share at the time the option is granted and shall not be less
than the par value thereof, provided, that the purchase price for each such
share subject to an ISO granted to an employee who owns stock possessing 10
percent or more of the combined voting power of all classes of stock of the
Company (or of its parent or subsidiaries) shall be 110 percent of such fair
market value. Unless otherwise determined by the Committee, the fair market
value of a share shall be the mean between the high and low prices for the
Company's Common Stock on the New York Stock Exchange--Composite Transactions,
or other principal market quotation, on the date the option is granted or, if
no sale has been made on such exchange on such day, on the last preceding day
on which any sale shall have been made.
7. OPTION PERIOD
Each option granted under the Plan shall expire and all rights to purchase
shares thereunder or exercise an SAR as set forth in Section 8 below shall
cease ten years after the date the option is granted or on such date prior
thereto as the Committee shall specify at the time of grant. No option shall
permit the purchase of any shares thereunder or the exercise of an SAR as set
forth in Section 8 below during the first year after the date the option is
granted except in cases of retirement or involuntary termination of employment
such as death, disability or termination at the option of the Company (or its
subsidiaries), or otherwise with the consent of the Committee. No ISO granted
to an employee who owns stock possessing 10 percent or more of the combined
voting power of all classes of stock of the Company (or of its parent or
subsidiaries) shall be exercisable more than five years after the date of such
grant.
Unless otherwise specified by the Committee at the time of grant, the
optionee shall have the right to elect to exercise the option as to all or any
portion of the shares granted in any option under this Plan at any time during
the period which begins one year after any individual grant and ends five
years following the date of grant in the case of ISOs granted to employees who
own 10 percent or more of the voting power of the Company (or of its parent or
subsidiaries) or ten years following such date in the case of all other
employees, and this optionee right shall also apply to the exercise of any
SARs which may apply to some or all of such exercisable shares.
A-2
<PAGE>
The rights to exercise ISOs shall be governed by applicable provisions of
Section 422A of the Code and the regulations and rulings promulgated thereunder
with respect to sequential exercise of options granted hereunder (or under
predecessor plans) and other matters not governed by rules set forth herein or
by the Committee.
8. ALTERNATE RIGHTS
At the Committee's discretion, individual option grants may, when made,
include the grant of an SAR which permits the optionee to either: (a) exercise
his or her option with respect to a specified portion of the exercisable shares
and receive a cash payment equal to the gain in market price from the date of
grant to the date of exercise with respect to the remaining portion of the
exercisable shares; or (b) elect to receive a combination of shares of stock
and a cash payment at the time of exercise with the sum of the then market
value of such shares and the cash payment for any given option grant being
equal to the gain in market price from the date of grant to the date of
exercise. With respect to alternative (b) above, the Committee shall never
grant an SAR which permits more than one-half of the gain in market price from
the time of grant to the time of exercise to be paid in the form of a cash
payment for any individual optionee with respect to any single grant. In lieu
of exercising such SAR, an optionee to whom such SAR is extended by the
Committee may elect to purchase all, or any portion of, such shares at the date
of exercise.
9. TRANSFERABILITY AND TERMINATION TO OPTIONS AND SARS
Unless rules of the Committee otherwise provide, during the lifetime of an
individual to whom an option or SAR is granted, only such individual may
exercise the option or SAR, and only while such individual is an employee of
the Company or of a parent or subsidiary thereof, and only if he or she has
been continuously so employed since the date the option or SAR was granted. (An
option or SAR may be exercised following the optionee's death or termination of
employment subject to rules established from time to time by the Committee.) In
no event shall any option be exercisable at any time after its expiration date.
When an option or SAR is no longer exercisable, it shall be deemed to have
lapsed or terminated.
10. EXERCISE OF OPTIONS
A person entitled to exercise an option may, subject to its terms and
conditions and the terms and conditions of the Plan, exercise it by delivery to
the Company at its principal office in Chicago, Illinois, of written notice of
exercise, specifying the number of shares with respect to which the option is
being exercised, accompanied by payment in full of the purchase price of any
shares to be purchased at the time. Such payment may be in the form of cash or
shares of Common Stock of the Company having an equivalent cash value at the
time of exercise, or a combination of cash and such shares. No shares shall be
issued unless their issuance complies with all applicable Federal and State
laws and unless required payment therefor has been made. The granting of an
option or SAR to an individual shall give such individual no rights as a
stockholder except as to shares actually issued.
11. RESTRICTED STOCK AWARDS
The Committee may, from time to time and as of any date prior to April 9, 1995,
grant Restricted Stock Awards to eligible employees hereunder. In the
Committee's discretion, an Award may also entitle the grantee to receive
dividends, if any, on the shares subject to the Award. Each Award shall be for
a specified number of shares of the Company's Common Stock as to which the
grantee will obtain full ownership rights upon the satisfaction of such
conditions or the lapse of such restrictions as the Committee shall specify in
writing at the time the Award is granted. The Award may also require that the
grantee include the fair market value of the Award in his or her gross income
for Federal Income Tax purposes in the year in which the Award is granted. No
Award shall convey unrestricted
A-3
<PAGE>
ownership rights of any shares to a grantee before the first anniversary of the
date the Award is granted, except in the case of the grantee's death,
disability or retirement (or otherwise with the consent of the Committee).
All rights of a grantee to shares and undistributed dividends covered by a
Restricted Stock Award shall be forfeited (unless the Committee shall determine
that such forfeiture should not occur) if the conditions or restrictions
specified in the Award are not fully satisfied or have not fully lapsed prior
to the grantee's termination of employment for reasons other than death,
disability or retirement. An Award may not be transferred by a grantee, except
by will or applicable laws of descent.
12. TERMINATION OF EMPLOYMENT
Neither the transfer of employment of an individual to whom an option or
Award is granted between any combination of the Company, a parent and a
subsidiary thereof, nor a leave of absence granted to such individual and
approved by the Committee, shall be deemed a termination of employment for
purposes of the Plan.
13. CHANGE IN CAPITALIZATION AND SIMILAR CHANGES
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
combination, exchange of shares or other similar corporate change, the
aggregate number and class of shares as to which options, rights or Awards may
be granted under the Plan and the terms of any outstanding options, rights or
Awards shall be equitably adjusted by the Committee; provided, however, that in
no event shall the option price for a share of stock be adjusted below the par
value of such share nor shall any fraction of a share of stock be issued.
14. WRITTEN AGREEMENTS
All options and Awards granted under the Plan shall be evidenced by written
agreements in such form or forms as the Committee may from time to time
determine.
15. AMENDMENT AND DISCONTINUANCE OF PLAN
The Board may at any time amend, suspend or discontinue the Plan, provided,
however, that no amendment by the Board shall, without further approval of the
stockholders of the Company (except as provided in Section 13 hereof) increase
the total number of shares of Common Stock of the Company which may be made
subject to options, rights or Awards granted under the Plan, change the minimum
purchase price or the terms of any SAR pursuant to Section 8 above, increase
the maximum period during which options may be exercised, extend the term of
the Plan beyond the date which is ten years after approval of this Plan by the
stockholders, or permit the granting of options, rights or Awards to employees
who have ever been or are then members of the Committee. No amendment of the
Plan shall, without the consent of the holder of the option, right or Award
alter or impair any option, right or Award previously granted under the Plan.
16. EFFECTIVE DATE AND SHAREHOLDER APPROVAL OF PLAN
The Plan shall become effective on April 9, 1985, subject to approval and
ratification of the Plan, at an annual meeting of the stockholders of the
Company to be held on April 9, 1985, by the affirmative vote of the holders of
a majority of the shares of Common Stock of the Company voting at the meeting.
A-4
<PAGE>
EXHIBIT 10.C.1
HARTMARX
1983 LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED
The purpose of this Long-Term Incentive Plan is to promote the growth and
profitability of Hartmarx Corporation ("Corporation") and to provide certain
officers and key executives of the Corporation with an incentive to achieve
long-term corporate objectives.
SECTION I
DEFINITIONS
In this Plan, the terms used will have the following definitions:
(a) Plan means this Long-Term Incentive Plan.
----
(b) Corporation means Hartmarx Corporation and its subsidiaries.
-----------
(c) Board of Directors means the Board of Directors of Hartmarx
------------------
Corporation.
(d) Committee means the Compensation and Stock Option Committee of the
---------
Board of Directors.
(e) Participant means any full-time salaried employee of the Corporation
-----------
to whom an award has been granted under the Plan.
(f) Performance Period means a period of not less than two nor more than
------------------
five years, commencing the first day of a fiscal year of the Corporation,
as determined by the Committee.
(g) Performance Award means the earned incentive payout awarded to a
-----------------
Participant for a single Performance Period.
(h) Performance Goals means the goals fixed by the Committee for a
-----------------
Performance Period.
(i) Restricted Stock means the Common Stock of the Corporation, $2.50 par
----------------
value, with restrictions on ownership attached.
SECTION II
ADMINISTRATION OF PLAN
(a) COMPENSATION AND STOCK OPTION COMMITTEE. The Committee will consist of
not less than three Directors of the Corporation who shall be appointed, from
time to time, by the Board of Directors. The Committee shall have full power
and authority to interpret and administer the Plan in accordance with its terms
and the Regulations (as defined below). No person who shall have been or is a
member of the Committee shall be eligible to be granted a Performance Award
under the Plan.
(b) ROLE OF THE COMMITTEE. The Committee shall have the power to adopt
eligibility and other rules and regulations (herein referred to as the
"Regulations") not inconsistent with the provisions of
B-1
<PAGE>
the Plan for the administration thereof, and to alter, amend, or revoke any
Regulation so adopted. The Committee shall make all other determinations, in
accordance with the Regulations, necessary or advisable for the administration
of the Plan, including any proration of Performance Awards with respect to
Participants in the Plan who have not been Participants for an entire
Performance Period or have assumed different responsibilities during a
Performance Period.
(c) FORM OF AWARDS. Performance Awards may be granted from time to time by
the Committee in the form of cash, Restricted Stock, or any combination of cash
and Restricted Stock.
(d) SHARES SUBJECT TO PERFORMANCE AWARDS. Shares of Common Stock which may be
issued pursuant to Performance Awards granted under the Plan may be either
authorized and unissued shares of Common Stock or authorized and issued shares
of Common Stock held in the Corporation's treasury.
SECTION III
PARTICIPANTS
Participants in the Plan shall be selected by the Committee in accordance
with the Regulations, and shall be limited to those full-time salaried senior
corporate and subsidiary officers and other key employees of the Corporation
who establish and/or implement the long-range goals and objectives of the
Corporation. Initial participation will be limited to the:
Chairman and Chief Executive Officer
President and Chief Operating Officer
Vice-Chairman and Chief Financial and Administrative Officer
Group Chairman, Specialty Stores Group
Group President, Men's Apparel Group
SECTION IV
PERFORMANCE AWARDS
Awards may be granted from time to time in the form of Performance Awards
which entitle recipients thereof to payment contingent upon the achievement of
specified Performance Goals during a Performance Period. Performance Awards
shall be evidenced by written agreements in such form, and not inconsistent
with this Plan or the Regulations, as the Committee shall approve from time to
time. The agreements shall contain in substance the following terms and
conditions:
(a) PERFORMANCE PERIOD. At the time of award, the Committee shall establish
with respect to each Performance Award a Performance Period of not less than
two, nor more than five, years.
(b) VALUE OF PERFORMANCE AWARDS. Prior to the start of the applicable
Performance Period, the Committee shall establish with respect to each
Performance Award a value which it shall state shall not thereafter change, or
which it shall state may vary thereafter in accordance with criteria specified
by the Committee at the time of award. Performance Awards will have the minimum
value being 12% of average annual base salary, the target value being 24% of
average annual base salary, and the maximum value being 36% of average annual
base salary through the Performance Period.
B-2
<PAGE>
(c) PERFORMANCE GOALS.
(i) Prior to the start of the applicable Performance Period, the
Committee shall establish minimum, target and maximum Performance Goals to
be achieved with respect to each Performance Award. A Participant shall be
entitled to payment with respect to all or a portion of a Performance Award
according to the level of achievement of the Performance Goals specified by
the Committee. No payment shall be made with respect to a Performance Award
if the minimum Performance Goal is not achieved.
(ii) The Performance Goals established shall relate to corporate,
division, or unit performance and may be established in terms of growth in
net income, return on average shareholders' equity, or such other
performance standards as determined by the Committee. Multiple goals may be
used and may have the same or different weighting, and they may relate to
absolute performance, or relative performance as measured against other
similar companies.
(d) ADJUSTMENTS. Prior to the end of a Performance Period, the Committee may
adjust previously established Performance Goals and other terms and conditions,
including the Corporation's financial performance for Plan purposes, to reflect
major unforeseen events such as changes in laws, regulations or accounting
practices, mergers, acquisitions or divestitures or extraordinary, unusual or
non-recurring items or events. The Committee may also adjust previously
established Performance Goals to reflect major changes in general economic
conditions, or in the apparel industry as documented by peer group performance.
(e) PAYMENT OF PERFORMANCE AWARDS. Following the conclusion of each
Performance Period, the Committee shall determine the extent to which
Performance Goals have been achieved for such Performance Period as well as any
other terms and conditions established by the Committee. The Committee shall
determine what, if any, payment is due relative to each Performance Award and
whether such payment shall be made in cash, in Restricted Stock, or partially
in cash and partially in Restricted Stock. Payment shall be made in a lump sum
or in installments, and shall be subject to such vesting and other terms and
conditions as may be prescribed by the Committee for such purpose.
(f) RESTRICTED STOCK. Payment of Performance Awards in Common Stock may be in
the form of shares of Common Stock which are subject to such terms, conditions,
and restrictions, including without limitation, prohibitions against transfer
and substantial risks of forfeiture for such period or periods as shall be
prescribed by the Committee. The Committee shall have the power to permit an
acceleration of the expiration of the applicable restriction period with
respect to any part or all of the shares so awarded.
(i) Restriction Upon Transfer. Shares of Restricted Stock awarded, and
the right to vote such shares and to receive dividends thereon, may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, except as herein provided, during the restriction period
applicable to such shares. Notwithstanding the foregoing, and except as
otherwise provided in the Plan, the Participant shall have all the other
rights of a stockholder including, but not limited to, the right to receive
dividends and the right to vote such shares from and after the date
certificates representing the shares are issued.
(ii) Certificates. Each certificate issued in respect of shares of
Restricted Stock awarded to a Participant shall be deposited with the
Corporation, or its designee, and shall bear the following legend:
"This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture provisions
and restrictions against transfer) contained in the Hartmarx Long-
Term Incentive Plan and an Agreement entered
B-3
<PAGE>
into between the registered owner and Hartmarx Corporation. Release
from such terms and conditions shall occur only in accordance with
the provisions of the Plan and Agreement, a copy of each of which is
on file in the offices of the Secretary of Hartmarx Corporation."
(iii) Lapse of Restrictions. The Agreement shall specify the terms and
conditions upon which any restrictions upon shares of Restricted Stock
awarded under the Plan shall lapse, as determined by the Committee. Upon
the lapse of such restrictions, certificates for the same number of shares
of Common Stock, free of restrictive legend shall be issued to the
Participant, or such other person as is entitled under the Plan, or his or
her legal representative.
(iv) Termination Prior to Lapse of Restriction. Part of the consideration
for issuance of shares of Restricted Stock under the Plan is the continued
employment of the Participant by the Corporation until retirement, death or
disability. In the event of termination of a Participant's employment
otherwise than by reason of retirement, death or disability, or of a
retired Participant accepting employment with a competitor of the
Corporation, prior to the lapse of restrictions as determined pursuant to
the provisions of the immediately preceding paragraph (iii), all shares as
to which there still remain unlapsed restrictions shall be forfeited by
such Participant to the Corporation without payment of any consideration by
the Corporation, and neither the Participant nor any successors, heirs,
assigns or personal representatives of such Participant shall thereafter
have any further rights or interest in such shares or certificates.
If the Participant becomes disabled, dies or retires at age 65 and does
not accept employment thereafter with a competitor, the restrictions will
be considered to have been met, unless it is made known that a retired
Participant has accepted employment with a competitor of the Corporation,
in which case the above paragraph shall apply.
(g) TERMINATION OF EMPLOYMENT PRIOR TO END OF PERFORMANCE PERIOD. In the
event that a Participant holding a Performance Award ceases to be an employee
of the Corporation prior to the end of the applicable Performance Period by
reason of death, disability, or retirement with the consent of the Corporation,
Performance Awards, to the extent achieved under the applicable Performance
Goals, shall be payable immediately in proportion to the number of full years
worked by the Participant during such Performance Period. A full year will be
considered to be worked if the Participant was employed for at least 270
calendar days of the fiscal year. Such payments will be made in cash only. The
basis for such awards will be the results which would be achieved at the end of
the fiscal year or Performance Period underway at the time of death,
disability, or retirement on the assumption that the Corporation's results from
the beginning of the Corporation's fiscal year or Performance Period to the
date of death, disability, or retirement would continue at the same rate to the
end of that fiscal year or Performance Period. Upon any other termination of
employment, participation shall terminate forthwith and all outstanding
Performance Awards held by the Participant shall be cancelled.
(h) OTHER TERMS. Performance Award agreements shall contain such other terms,
provisions and conditions not inconsistent with this Plan as shall be
determined by the Committee.
B-4
<PAGE>
SECTION V
GENERAL PROVISIONS
(a) GENERAL RESTRICTIONS. Each Performance Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of shares of Common Stock
subject or related thereto upon any securities exchange or under any Federal or
State law, or (ii) the consent or approval of any government regulatory body,
or (iii) an agreement by the recipient of a Performance Award with respect to
the disposition of shares of Common Stock, is necessary or desirable as a
condition of, or in connection with the granting of such Performance Award or
the issue of shares of Common Stock thereunder, such Performance Award may not
be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been affected or
obtained free of any conditions not acceptable to the Committee.
(b) RIGHTS OF A STOCKHOLDER. The recipient of any Performance Award under the
Plan, unless otherwise provided by the Plan, shall have no rights as a
stockholder with respect thereto unless and until certificates for shares of
Common Stock are issued and delivered to him.
(c) RIGHTS TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any agreement
entered into pursuant to the Plan shall confer upon any Participant the right
to continue in the employment of the Corporation or affect any right which the
Corporation may have to terminate the employment of such Participant.
(d) WITHHOLDING. Whenever the Corporation proposes or is required to issue or
transfer shares of Common Stock under the Plan, the Corporation shall have the
right to require the recipient to remit to the Corporation an amount sufficient
to satisfy any Federal, State and/or local withholding tax requirement prior to
the delivery of any certificate or certificates for such shares. Whenever under
the Plan payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any Federal, State and/or local withholding tax.
(e) NON-ASSIGNABILITY. No Performance Award under the Plan shall be
assignable or transferable by the recipient thereof except to the Participant's
heirs, executors, or administrators, or otherwise with the consent of, or
pursuant to regulations adopted by, the Committee. During the life of the
Participant, such award shall be received only by the Participant or by the
conservator of the Participant's estate.
(f) NON-UNIFORM DETERMINATIONS. The Committee's determinations under the Plan
(including without limitation determinations of the persons to receive
Performance Awards, the form, amount and timing of such Performance Awards, the
terms and provisions of such Performance Awards and the agreements evidencing
same, and the establishment of values and Performance Goals) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, Performance Awards under the Plan, whether or not such
persons are similarly situated.
(g) ADJUSTMENTS. In the event of any change in the outstanding Common Stock
of the Corporation by reason of a stock dividend or split, recapitalization,
merger, consolidation, combination, exchange of shares or other similar
corporate change the Committee may adjust the number or value of shares of
Common Stock which may be issued under the Plan and, in its sole discretion,
provide for an equitable adjustment of any outstanding Performance Award or
shares issuable pursuant to any outstanding Performance Award under this Plan.
B-5
<PAGE>
(h) AMENDMENT. The Board of Directors may at any time amend, suspend or
discontinue the Plan, provided, however, that no amendment of the Plan shall,
without the consent of a Participant, affect his rights under a Performance
Award previously granted.
(i) EFFECT ON OTHER PLANS. Participation in this Plan shall not affect an
employee's eligibility to participate in any other benefit or incentive plan of
the Corporation and any Performance Awards made pursuant to this Plan shall not
be used in determining the benefits provided under any other plan of the
Corporation unless specifically provided.
(j) STOCKHOLDER APPROVAL. The issuance of shares of Common Stock under the
Plan is subject to approval by the affirmative vote of the holders of a
majority of the shares of Common Stock of the Corporation voting at an annual
meeting of stockholders of the Corporation to be held on April 9, 1985.
B-6
<PAGE>
EXHIBIT 10-C-2
HARTMARX MANAGEMENT INCENTIVE PLAN
- ----------------------------------
Executives are eligible for annual bonuses under the Management Incentive
Plan (MIP). Incentive opportunities are determined in relation to competitive
market data as provided in the aforementioned national executive compensation
surveys and subject to periodic review by independent consultants. Awards are
based upon the achievement of financial goals established for individual
operating units and on a consolidated basis in accordance with the Corporation's
business plan. Individual awards for Corporate executives are based upon the
achievement of both consolidated and operating unit goals weighted according to
sales volume. Operating unit executives are measured on the goals appropriate to
the unit within which they report with unit heads also accountable for
consolidated goals. For fiscal 1993, Corporate executives were measured on
Consolidated Pre-Tax Income and operating unit sales-weighted Pre-Tax Income,
Cash Flow and Inventory Turnover goals. Operating unit executives were measured
on Pre-Tax Income, Sales, Cash Flow and Inventory Turnover goals with unit heads
also measured on Consolidated Pre-Tax Income. No bonuses would have been earned
if the Corporation had not achieved positive income results. Bonuses were paid
for 1993 to 56 executives, averaging 31.0% of salaries and 69.3% of maximum
incentive opportunities.
<PAGE>
EXHIBIT 10.D.1
DIRECTOR DEFERRED COMPENSATION AGREEMENT
----------------------------------------
THIS AGREEMENT is made and entered into at Chicago, Illinois, as of January,
1, 1986 ("Effective Date") by and between Hartmarx Corporation (the "Company"),
and _____________________ (the "Director").
WHEREAS, the Company desires to provide Director with a tax-favored
investment opportunity by providing a means whereby Director's remuneration may
be deferred into the future; and
WHEREAS, Director desires to participate in such investment opportunity.
NOW, THEREFORE, the Company and the Director hereby agree as follows.
1. DEFINITIONS
-----------
1.1 "Agreement" means this Agreement executed between Director and the
Company, whereby Director agrees to defer a portion of his remuneration
pursuant hereto, and the Company agrees to make benefit payments in accordance
with the provisions hereof.
1.2 "Normal Benefit Date" means the date of the termination of Director's
directorship.
<PAGE>
1.3 "Deferral Year" means any calendar year, 1986 through 1989.
1.4 "Remuneration" means the total amount of fees payable to Director in
respect of his directorship of the company during a Deferral Year, before
reduction for the fees deferred pursuant to this Agreement; and "Base
Remuneration" shall mean only that portion of Remuneration payable on an annual
basis, without regard to meeting attendance, committee memberships or
chairmanships, or similar matters. Base Remuneration at the date of this
Agreement is $17,500.
1.5 "Beneficiary" means the person(s) or trust so designated by Director
pursuant to Section 3.8 hereof.
-----------
1.6 "Board of Directors" means the Board of Directors of the Company and
"Committee" means the Management Operations Committee of the Board of
Directors.
1.7 "Deferred Benefit Account" means the account maintained on the books of
the Company for Director pursuant hereto. Director's Deferred Benefit Account
shall not constitute or be treated as a trust fund of any kind, but shall be
utilized solely as a device for the measurement and determination of the amount
to be paid to Director pursuant to this Agreement, and shall be subject to
Section 6.2 hereof.
- -----------
l.8 "Determination Date" means the last day of any calendar month in which
the amount of Director's Deferred Benefit Account is determined pursuant to
Section 2.4 hereof.
- -----------
- 2 -
<PAGE>
1.9 "Moody's Rate" means the seasoned Moody's Corporate Bond Index (expressed
as an annual percentage) published by Moody's Investors' Service, Inc. or, if
the Moody's Corporate Bond Index is no longer available, such substantially
similar index as shall be selected and used by the Committee.
1.10 "Interest Yield" means either the Death Interest Yield, or the
Termination Interest Yield, each as determined from time to time by the
Company, provided, however, that:
(a) The "Death Interest Yield" shall not be less than the Moody's Rate; and
(b) The "Termination Interest Yield" shall not be less than one hundred and
ten percent (110%) of the Moody's Rate.
1.11 "Total Expected Deferral" as of any date means the sum of (i) the total
amount of Base Remuneration actually deferred by Director pursuant to this
Agreement as of such date; (determined without regard to any withdrawals
pursuant to Section 2.3); plus (ii) the total amount of Base Remuneration
-----------
expected to be deferred by Director pursuant to this Agreement after such date,
based on Director's elected deferral percentage as set forth in Section 2.1
-----------
(without regard to any reductions thereof) and Director's actual Base
Remuneration as at such date.
- 3 -
<PAGE>
2. DEFERRAL ELECTION.
-----------------
2.1 Deferral Amounts. Director hereby irrevocably elects to defer receipt of
----------------
the following percentage(s) of his Remuneration for Deferral Years 1986 through
and including 1989:
<TABLE>
<CAPTION>
DEFERRAL DEFERRAL
YEAR PERCENTAGE
-------- ----------
<S> <C>
1986 %
----
1987 %
----
1988 %
----
1989 %
----
</TABLE>
Every request to reduce the deferral percentages set forth in this Section 2.1
must be submitted by Director to the Committee in writing not less than ninety
(90) days prior to the beginning of the Deferral Year for which such reduction
is requested and must detail the reasons therefor. A reduction of the deferral
amount, if granted by the Committee, shall be effective on a prospective basis
only.
2.2 Timing of Deferral Credits. The amount of Remuneration deferred by
--------------------------
Director pursuant to this Agreement shall cause an equivalent reduction in his
Remuneration and shall be credited to Director's Deferred Benefit Account
during each Deferral Year, as and when deferred.
2.3 Withdrawals. After giving not less than ninety (90) days prior written
-----------
notice to the Committee, the Director shall have the option to withdraw, in a
lump sum, all or any portion of his or her Deferred Benefit Account (including
interest calculated under Section 2.4 hereof using the Death Interest Yield) on
-----------
the first day of any Deferral Year after 1985, provided, however, that the
deferred percentage set forth in Section 2.1 for the Deferral Year in which
-----------
such withdrawal occurs
- 4 -
<PAGE>
shall be automatically reduced to zero and, provided further, that the Director
shall not be entitled to withdraw any portion of his or her Deferred Benefit
Account in any subsequent Deferral Year except in cases of actual or threatened
hardship which the Committee, in its sole discretion, deems worthy of
exceptional consideration.
2.4 Determination of Account. Director's Deferred Benefit Account as of each
------------------------
Determination Date shall consist of the balance of the Director's Deferred
Benefit Account as of the immediately preceding Determination Date, plus the
amount of Director's Remuneration deferred pursuant to Section 2.1 since such
-----------
immediately preceding Determination Date. Director's Deferred Benefit Account
shall be reduced by the amount of all withdrawals and distributions, if any,
made from such Deferred Benefit Account since the preceding Determination Date.
As of each Determination Date, interest on the average daily balance of
Director's Deferred Benefit Account since the last preceding Determination Date
after adjustment for any additions (including previously credited interest
thereon), withdrawals or distributions thereto or therefrom during such period
shall be calculated by the Company using the appropriate Interest Yield and
credited to Director's Deferred Benefit Account.
3. BENEFITS
--------
3.1 Termination Benefit. Upon Director's Normal Benefit Date, the Company
-------------------
agrees to pay Director the amount of his Deferred Benefit Account, calculated
under Section 2.4 hereof using the Termination Interest Yield. The form of
-----------
benefit payment shall be as provided in Section 3.4 of this Agreement.
-----------
- 5 -
<PAGE>
Director shall immediately cease to be eligible for any other benefits under
Section 3.2 of this Agreement.
- -----------
3.2 Death. Upon the death of Director prior to his Normal Benefit Date, the
-----
Company agrees to pay Director's Beneficiary a death benefit equal to the
greater of: (i) the remaining balance, if any, of Director's Deferred Benefit
Account as of the date of death, calculated under Section 2.4 using the
-----------
Termination Interest Yield, or (ii) the product obtained by multiplying
Director's Total Expected Deferral at date of death by a factor based upon
Director's age on the date of this Agreement, as follows:
<TABLE>
<CAPTION>
AGE AT DATE
OF THIS
AGREEMENT MULTIPLIER
----------- ----------
<S> <C>
50 and under 5.0
51 4.8
52 4.6
53 4.4
54 4.2
55 4.0
56 3.8
57 3.6
58 3.4
59 3.2
60 3.0
61 2.8
62 2.6
63 2.4
64 and above 2.0
</TABLE>
Payment of said death benefit, together with interest on any unpaid portion
thereof using the Death Interest Yield, shall be as provided in Sections 3.4
------------
and 3.6, except that the Committee, in its sole discretion, may elect that the
---
Company pay such benefit in a lump sum. This benefit shall be in lieu of all
other benefits under this Agreement.
- 6 -
<PAGE>
Director represents and warrants to the Company that he was born on
___________, 19__.
3.3 Failure to Continue Deferrals. In the event that the percentage of
-----------------------------
Remuneration that Director has elected to defer during a Deferral Year is
reduced for any reason other than a withdrawal pursuant to Section 2.3 hereof,
such reduction shall be deemed effective at the end of such Deferral Year and
Director shall no longer be eligible for the benefit described in Section 3.2
-----------
unless such reduction is approved by the Committee.
3.4 Form of Benefit Payment. Subject to Sections 3.6 and 3.7, Director hereby
----------------------- ------------ ---
elects the following form of benefit payment hereunder:
(i) Substantially equal (monthly) (annual) installment payments of
principal, commencing on the Determination Date coincident with or
next following Director's Normal Benefit Date or death, together with
interest thereon (based on the applicable Interest Yield at the
commencement of such payments, the actual rate of interest changing
as the rate of such Interest Yield changes) and continuing for ____
years.
(ii) A lump sum payment on the_____day following Director's Normal
Benefit Date or death.
- 7 -
<PAGE>
Such election shall be subject to change at the option of Director each January
1, but not less than one (1) year prior to commencement of such benefit
payments.
3.5 Withholding; Employment Taxes. To the extent required by the law in
-----------------------------
effect at the time payments are made, the Company shall withhold any taxes
required to be withheld by the federal, or any state or local, government from
payments made hereunder.
3.6 Commencement of Payments. Unless otherwise provided, payments under this
------------------------
Agreement shall commence within sixty (60) days following receipt of notice by
the Committee of an event which entitles Director (or his Beneficiary) to
payments hereunder, or at such earlier date as may be determined by the
Committee. All payments shall be made as of the last day of the month.
3.7 Full Payment of Benefits. Notwithstanding any other provision of this
------------------------
Agreement, all benefits shall be paid no later than by the Director's eightieth
(80th) birthday.
3.8 Recipients of Payments; Designation of Beneficiary. All payments to be
--------------------------------------------------
made by the Company hereunder shall be made to Director during his lifetime,
provided that if Director dies prior to the completion of such payments, then
all subsequent payments under the Plan shall be made by the Company to the
Beneficiary or Beneficiaries determined in accordance with this
- 8 -
<PAGE>
Section 3.8. Director may designate a Beneficiary by filing a written notice
- -----------
of such designation with the Committee in such form as the Committee requires
and may include contingent Beneficiaries. Director may from time to time change
the designated Beneficiary or Beneficiaries without the consent of such
Beneficiary or Beneficiaries by filing a new designation in writing with the
Committee; provided, that if Director maintains his primary residence in a
state which has community property laws, the spouse of Director must join in
any designation of a Beneficiary or Beneficiaries other than said spouse. If no
designation shall be in effect at the time when any benefits payable hereunder
shall become due, the Beneficiary shall be the spouse of Director at such time,
or if no spouse is then living, the representatives of Director's estate.
4. COMMITTEE FUNCTIONS
-------------------
4.1 Information to be Furnished to Committee. The Company shall furnish the
----------------------------------------
Committee with such data and information as the Committee may require. The
records of the Company shall be determinative of Director's Remuneration and
personal data. Director and his Beneficiaries shall furnish to the Committee
such evidence, data, or information, and execute such documents as the
Committee may reasonably request.
- 9 -
<PAGE>
4.2 Responsibility. No member of the Committee or of the Board of Directors
--------------
shall be liable to any person for any action taken or omitted in connection
with this Agreement unless attributable to his own fraud or willful misconduct;
nor shall the Company be liable to any person for any such action unless
attributable to fraud or willful misconduct on the part of a director, officer
or employee of the Company.
5. AMENDMENT; TERMINATION
----------------------
5.1 Amendment. This Agreement may be amended in whole or in part by the
---------
Company at any time. Notice of any such amendment shall be given in writing to
the Committee and to Director (or to each designated Beneficiary of Director,
if Director has died). No amendment shall decrease the value of Director's
Deferred Benefit Account or the Interest Yield applicable thereto.
5.2 Company's Right to Terminate. The Company reserves the sole right to
----------------------------
terminate this Agreement at any time prior to Director's death and the
commencement of payment of benefits hereunder. In the event of any such
termination, Director shall be entitled to a benefit equal to the amount of his
Deferred Benefit Account calculated under Section 2.4 using the Termination
-----------
Interest Yield as of the date of such termination.
5.3 Termination. This Agreement shall terminate if at any date:
-----------
- 10 -
<PAGE>
(i) the consolidated current assets of the Company and its subsidiaries
(taken as a whole) is less than 205% of the sum of (a) the consolidated
current liabilities of the Company and its subsidiaries, plus (b) the
current liabilities of others which are guaranteed by the Company or any
such subsidiary, at such date; or
(ii) the consolidated debt of the Company and its subsidiaries (taken as a
whole) including, without limitation, indebtedness for borrowed money,
obligations to pay the deferred purchase price of property or services
other than trade payables arising in the ordinary course of business,
obligations as lessee under a capital lease, obligations secured by a
lien on any asset of the Company or any such subsidiary, and obligations
of others guaranteed by the Company or any such subsidiary, exceeds 95%
of the consolidated shareholders equity of the Company and its
subsidiaries, excluding the value of intangible assets such as, without
limitation, unamortized debt, discount and expense, unamortized deferred
charges, good will, patents, trademarks, service marks, tradenames,
copyrights, organizational or developmental expenses and other similar
intangible items; or
(iii) the Company enters into any material borrowing arrangement requiring
the Company's maintenance of financial conditions which are similar to
those described in (i) and (ii) of this Section 5.3, if it is
- 11 -
<PAGE>
possible for the Company to fail to maintain such financial conditions
before this Agreement so terminates, unless prior to entering into such
borrowing arrangement, the Company amends this Section 5.3 accordingly.
All accounting terms used herein shall be interpreted and all accounting
determination hereunder shall be made in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes approved by the Company's independent public
accountants) with the last audited consolidated financial statements of the
Company prior to the Effective Date.
As soon as available, and in any event within sixty (60) days after the end
of each of the first three quarters, and within ninety (90) days after the end
of the fourth quarter, of each fiscal year of the Company, the Company will
furnish to Director (or Director's Beneficiary) a written statement showing the
balance of Director's Deferred Benefit Account and containing a certificate of
the Chief Financial Officer or Controller of the Company stating as to whether
any of the foregoing events in (i), (ii) or (iii) of this Section 5.3 has
occurred since the immediately preceding quarter.
In the event of the termination of this Agreement pursuant to this Section
5.3, Director shall be entitled to a benefit
- 12 -
<PAGE>
equal to the amount of his Deferred Benefit Account calculated under Section
2.4 using the Termination Interest Yield as of the date of such termination.
Such benefit shall be due and payable within five (5) days following such
termination.
6. MISCELLANEOUS
-------------
6.1 No Implied Rights; Rights on Termination of Service. Nothing herein
---------------------------------------------------
shall be construed as giving Director or any Beneficiary any legal or equitable
rights other than as expressly herein set forth.
6.2 No Right to Company Assets. Neither Director nor any other person shall
--------------------------
acquire by reason of this Agreement any right in or title to any specific
funds, assets, or other property of the Company. No trust of any kind shall be
created in connection with or by the execution of this Agreement, and any
benefits which become payable hereunder shall be paid from the general assets
of the Company. Director shall have only a contractual right to the amounts, if
any, payable hereunder, unsecured by any asset of the Company. Nothing
contained herein constitutes a guarantee by the Company that the assets of the
Company shall be sufficient to pay any benefit to any person.
6.3 No Employment Rights. Nothing herein Company shall constitute a contract
--------------------
of employment or of continuing service or in any
- 13 -
<PAGE>
manner obligate the Company to continue the directorship of Director, or
obligate Director to continue as a Director of the Company, or as a limitation
of the right of the Company to remove Director, with or without cause. Nothing
herein shall be construed as fixing or regulating the remuneration payable to
Director.
6.4 Offset. If, at the time payments or installments of payments are to be
------
made hereunder and Director or the Beneficiary, or both, are indebted or
obligated to the Company, then the payments remaining to be made to Director or
the Beneficiary, or both, may, at the discretion of the Company and to the
extent permitted by law, be reduced by the amount of such indebtedness or
obligation, provided, however, that an election by the Company not to reduce
any such payment or payments shall not constitute a waiver of its claim for
such indebtedness or obligation.
6.5 Protective Provisions. In the event of Director's suicide within two (2)
---------------------
years following the date of this Agreement, or if Director fails to make any
material disclosure of information reasonably requested in connection with this
Agreement, then, upon payment to Director (or his Beneficiary) of the
Remuneration deferred hereunder, no benefits will be payable hereunder, or, in
the Committee's sole discretion, benefits may be payable in a reduced amount.
- 14 -
<PAGE>
6.6 Non-Assignability. Neither Director nor any other person shall have any
-----------------
voluntary or involuntary right to commute, sell, assign, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof,
which are expressly declared to be unassignable and non-transferable. No part
of the amounts payable shall be, prior to actual payment, subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by Director or any other person, or be transferable by
operation of law in the event of Director's or any other person's bankruptcy or
insolvency. This Agreement shall inure to the benefit of, and be binding upon,
the Company, its successors and assigns, and Director and Director's
Beneficiaries.
6.7 Gender and Number. Wherever appropriate herein, the masculine may mean
-----------------
the feminine and the singular may mean the plural or vice versa.
6.8 Notice. Any notice required or permitted to be given hereunder shall be
------
sufficient if in writing and hand delivered, or sent by registered or certified
mail, and if given to the Company, delivered to the principal office of the
Company, directed to the attention of its General Counsel. Such notice shall be
deemed given as of the date of delivery or, if delivery is made by mail, as of
the date shown on the postmark or the receipt for registration or
certification.
- 15 -
<PAGE>
6.9 Governing Laws. This Agreement shall be construed and administered
--------------
according to the internal laws of the State of Illinois.
6.10. Tax Advice. Director acknowledges that he must rely on his own tax
----------
advisor with respect to the tax consequences of this Agreement.
6.11 Entire Acquirement. This Agreement represents the entire agreement
------------------
between the parties with respect to the subject matter hereof and shall not be
modified or affected by any offer, proposal, statement or representation, oral
or written, heretofore made by or for either party in connection with the
negotiation of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the date first above written.
DIRECTOR: HARTMARX CORPORATION
- --------------------------------- By: _________________________________
Its _________________________________
- 16 -
<PAGE>
EXHIBIT 10.E.1
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
-----------------------------------------
THIS AGREEMENT is made and entered into at Chicago, Illinois, as of December
1, 1985 ("Effective Date") by and between HARTMARX CORPORATION (the
---------
"Company"), and (the "Executive").
------
WHEREAS, the Company desires to provide Executive with a tax-favored
investment opportunity by providing a means whereby Executive's compensation
may be deferred into the future; and
WHEREAS, Executive desires to participate in such investment opportunity.
NOW, THEREFORE, the Company and the Executive hereby agree as follows.
1. DEFINITIONS
-----------
1.1 "Agreement" means this Agreement execute~ between Executive and the
Company, whereby Executive agrees to defer a portion of his compensation
pursuant hereto, and the Company agrees to make benefit payments in accordance
with the provisions hereof.
1.2 "Normal Benefit Date" means the date of Executive's termination of
service on or after his Normal Retirement Date or
<PAGE>
Early Retirement Date (as those terms are defined in the Hartmarx Corporation
Retirement Income Plan).
1.3 "Deferral Year" means any calendar year, 1986 through 1989, except that
for 1985, the term Deferral Year means December 1, 1985 through December 31,
1985.
1.4 "Compensation" means the compensation paid to Executive as an employee of
the Company or any subsidiary thereof during a Deferral Year and considered to
be "wages" for purposes of federal income tax withholding in such Deferral
Year, before reduction for compensation deferred pursuant to this Agreement.
1.5 "Termination of Service" means the permanent cessation of Executive'~s
service with the Company and all subsidiaries thereof for any reason
whatsoever, whether voluntarily or involuntarily, including by reason of death
or Disability.
1.6 "Disability" means such condition as would entitle Executive to benefits
under the provisions of the Hartmarx Corporation Long Term Disability Plan
(regardless of whether Executive actually participates in said Plan).
1.7 "Beneficiary" means the person(s) or trust so designated by Executive
pursuant to Section 3.10 hereof.
------------
-2-
<PAGE>
1.8 "Board of Directors" means the Board of Directors of the Company and
"Committee" means the Management Operations Committee of the Board of
Directors.
1.9 "Deferred Benefit Account" means the account maintained on the books of
the Company (or any subsidiary thereof) for Executive pursuant hereto.
Executive's Deferred Benefit Account shall not constitute or be treated as a
trust fund of any kind, but shall be utilized solely as a device for the
measurement and determination of the amount to be paid to Executive pursuant to
this Agreement, and shall be subject to Section 6.2 hereof.
-----------
1.10 "Determination Date" means the last day of any calendar month in which
the amount of Executive's Deferred Benefit Account is determined pursuant to
Section 2.4 hereof.
- -----------
1.11 "Moody's Rate" means the seasoned Moody's Corporate Bond Index
(expressed as an annual percentage) published by Moody's Investors' Service,
Inc. or, if the Moody's Corporate Bond Index is no longer available, such
substantially similar index as shall be selected and used by the Committee.
1.12 "Interest Yield" means either the Termination Interest Yield, or the
Retirement Interest Yield, each as determined from time to time by the Company,
provided, however, that:
-3-
<PAGE>
(a)The "Termination Interest Yields" shall not be less than the Moody's
Rate; and
(b)The "Retirement Interest Yield" shall not be less than one hundred and
ten percent (110%) of the Moody's Rate;
1.13 "Total Expected Deferral" as of any date means the sum of (i) the total
amount of Compensation actually deferred by Executive pursuant to this
Agreement as of such date (determined without regard to any withdrawals
pursuant to Section 3.1); plus (ii) the total amount of Compensation expected
-----------
to be deferred by Executive pursuant to this Agreement after such date, based
on Executive's elected deferral percentage as set forth in Section 2.1 (without
-----------
regard to any reductions thereof) and Executive's actual Compensation as at
such date.
1.14 "Change in Control" means the sale of the Company or substantially all
of the Company's assets, in any form whatsoever, including by merger,
consolidation, or other reorganization, or any other sale, transfer, change or
circumstance which the Committee, in its sole discretion, determines to be a
Change in Control of the Company or any subsidiary thereof, including, without
limitation, (i) any such sale, transfer or change resulting in any person, as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, other than a trustee or other fiduciary holding
-4-
<PAGE>
securities under an employee benefit plan of the Company becoming the
beneficial owner, as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities; or (ii) if, for any reason, individuals who at the
beginning of any two consecutive year period, together with new director(s)
whose election to the Board was approved by a vote of at least two-thirds (2/3)
of said individuals, fail to constitute a majority of the Board of Directors of
the Company.
2. DEFERRAL ELECTION.
-----------------
2.1 Deferral Amounts. Executive hereby irrevocably elects to defer receipt of
----------------
% of the Compensation remaining due him as salary between December 1, 1985
and December 31, 1985 and, subject to Section 3.1 hereof, to defer receipt of
-----------
the following percentage(s) of his Compensation for Deferral Years 1986 through
and including 1989:
<TABLE>
<CAPTION>
DEFERRAL DEFERRAL
YEAR PERCENTAGE
-------- ----------
<S> <C>
1986 %
-----
1987 %
-----
1988 %
-----
1989 %
-----
</TABLE>
Notwithstanding anything herein to the contrary, in no event shall the actual
amount deferred in respect of any Deferral Year
-5-
<PAGE>
exceed one hundred percent (100%) of Executive's Compensation (determined
without regard to bonus amounts) paid in such Deferral Year. Every request to
reduce the deferral percentages set forth in this Section 2.1 must be
submitted by Executive to the Committee in writing not less than ninety (90)
days prior to the beginning of the Deferral Year for which such reduction is
requested and must detail the reasons therefor. A reduction of the deferral
amount, if granted by the Committee, shall be effective on a prospective basis
only.
2.2 Source of Deferrals. Executive agrees that the source of the deferrals
-------------------
under Section 2.1 for Deferral Years 1986-1989 shall be as follows:
(i) 100% from bonus amounts, if any, paid in such Deferral Years,
provided, that if at the time any such bonus amount is otherwise
payable, the portion of Executive's Compensation which is then
otherwise payable to him (or her), determined without regard to such
bonus amounts less than the product obtained by multiplying Executive's
then expected compensation for such Deferral Year by the applicable
Deferral Percentage specified in Section 2.1 above, Executive shall be
deemed to have consented to (a) the accelerated referral of salary
coming due him (or her) for such Deferral Year to the extent of such
deficiency; and (b) the immediate repayment of such accelerated salary
out
-6-
<PAGE>
of such bonus amount; and provided further, that if actual bonus is
less than the amount to be deferred, the balance of that year's
deferral shall derive from salary payable during the remainder of the
same Deferral Year until the full amount has been deferred.
(ii)Substantially equal monthly installments from salary only payable
in months to ; or
--- ---
(iii) One-half through substantially equal monthly installments from
salary payable in months to , and one-half from bonus, provided,
--- ---
that in the event that actual bonus is less than that portion of
deferral to derive from bonus for a Deferral Year, the balance of such
deferral shall derive from salary in substantially equal monthly
installments during the same Deferral Year.
(iv)
With the consent of the Committee, Executive shall have the opportunity to
change the source of such deferrals, prospectively, prior to the beginning of
each Deferral Year. If a Disability occurs during a Deferral Year, further
deferral of Executive's Compensation during the period of Disability shall be
waived by the Company.
2.3 Timing of Deferral Credits. The amount of Compensation deferred by
--------------------------
Executive pursuant to this Agreement shall cause an equivalent reduction in
his Compensation and shall be credited to Executive'~s Deferred Benefit
Account during each Deferral Year, as and when deferred.
-7-
<PAGE>
2.4 Determination of Account. Executive's Deferred Benefit Account as of each
------------------------
Determination Date shall consist of the balance of the Executive's Deferred
Benefit Account as of the immediately preceding Determination Date, plus the
amount of Executive's Compensation deferred pursuant to Section 2.1 since such
-----------
immediately preceding Determination Date. Executive's Deferred Benefit Account
shall be reduced by the amount of all withdrawals and distributions, if any,
made from such Deferred Benefit Account since the preceding Determination Date.
As of each Determination Date, interest on the average daily balance of
Executive's Deferred Benefit Account since the last preceding Determination
Date after adjustment for any additions (including previously credited interest
thereon), distributions or withdrawals thereto or therefrom during such period
shall be calculated by the Company using the appropriate Interest Yield and
credited to Executive's Deferred Benefit Account.
3. RETURN OF DEFERRALS; BENEFITS
-----------------------------
3.1 Return of Deferrals. The Company hereby a agrees to pay to Executive (or
-------------------
his Beneficiary) the amount of his Compensation deferred pursuant to Section
2.1 hereof, as follows:
<TABLE>
<CAPTION>
PORTION OF
PORTION DEFERRAL TO
RETURN OF BE DEFERRED
OF DEFERRAL UNTIL
DEFERRAL DEFERRAL TO BE TERMINATION
YEAR YEAR RETURNED OF SERVICE
-------- -------- -------- -----------
<S> <C> <C> <C>
1985 1992 % %
1986 1993 % %
1987 1994 % %
1988 1995 % %
1989 1996 % %
</TABLE>
-8-
<PAGE>
The date of each payment to be made prior to Executive's Termination of
Service shall be the first day of any one month during the appropriate "Return
of Deferral Year" shown above as shall be specified by Executive in a written
notice to the Committee given at least sixty (60) days before such payment
date, or, in the absence of such written notice, on December 31 of such Return
of Deferral Year. Notwithstanding the foregoing, after giving not less than
ninety (90) days prior written notice to the Committee, Executive shall have
the option to withdraw, in a lump sum, all or any portion of his Deferred
Benefit Account (including interest calculated under Section 2.4 hereof using
-----------
the Termination Interest Yield) on the first day of any Deferral Year after
1985, provided however, that the deferral percentage set forth in Section 2.1
-----------
for the Deferral Year in which such withdrawal occurs shall be automatically
reduced to zero and, provided further, that Executive shall not be entitled to
withdraw any portion of his Deferred Benefit Account in any subsequent
Deferral Year except in cases of actual or threatened hardship which the
Committee, in its sole discretion, deems worthy of exceptional consideration.
Prior to January 1 of each Return of Deferral Year and with the consent of the
Committee, Executive may elect to defer all or any portion of the payment
otherwise to be paid to Executive during such year for an additional seven (7)
year(s), and thereafter if permitted by the Company, but not beyond
Executive's Retirement or other Termination of Service. Payments of deferred
Compensation paid pursuant to this Section 3.1 shall be deducted from
Executive's Deferred Benefit Account.
-9-
<PAGE>
3.2 Retirement Benefit. Upon Executive's Normal Benefit Date, the Company
------------------
agrees to pay Executive the amount of his Deferred Benefit Account, calculated
under Section 2.4 hereof using the Retirement Interest Yield. The form of
-----------
benefit payment shall be as provided as elected in Section 3.6 of this
-----------
Agreement. Executive shall thereupon immediately cease to be eligible for any
other benefit provided under Sections 3.3 or 3.4 of this Agreement.
------------ ---
3.3 Termination Benefit. Upon Executive's Termination of Service prior to
-------------------
his Normal Benefit Date for reasons other than his death or Disability, the
Company agrees to pay Executive the amount of his Deferred Benefit Account,
calculated under Section 2.4 hereof using the Termination Interest Yield. The
-----------
form of benefit payment shall be as provided in Sections 3.6 of this
------------
Agreement, except that the Committee, in its sole discretion, may elect that
the Company pay such benefit in a lump sum within sixty (60) days following
Executive's Termination of Service. Upon such Termination of Service,
Executive shall immediately cease to be eligible for any other benefits under
Sections 3.2 or 3.4 of this Agreement.
- ------------ ---
3.4 Death. Upon the death of Executive prior to Termination of Service, the
-----
Company agrees to pay Executive's Beneficiary a death benefit equal to the
greater of: (~i) the remaining balance, if any, of Executive's Deferred
Benefit Account as of the date of death, calculated under Section 2.4
-----------
-10-
<PAGE>
using the Retirement Interest Yield, or (ii) the product obtained by
multiplying Executive's Total Expected Deferral at date of death by a factor
based upon Executive's age on the date of this Agreement, as follows:
<TABLE>
<CAPTION>
AGE AT DATE
OF THIS
AGREEMENT MULTIPLIER
----------- ----------
<S> <C>
50 and under 5.0
51 4.8
52 4.6
53 4.4
54 4.2
55 4.0
56 3.8
57 3.6
58 3.4
59 3.2
60 3.0
61 2.8
62 2.6
63 2.4
64 and above 2.0
</TABLE>
Payment of said death benefit, together with interest on any unpaid portion
thereof using the Termination Interest Yield, shall be as provided in Section
-------
3.6 and 3.8, except that the Committee, in its sole discretion, may elect that
- --- ---
the Company pay such benefit in a lump sum. This benefit shall be in lieu of
all other benefits under this Agreement. Executive represents and warrants to
the Company that he was born on and his current compensation is
------------
$ .
-----------
-11-
<PAGE>
3.5 Failure to Continue Deferrals. In the event that the percentage of
-----------------------------
Compensation that Executive has elected to defer during a Deferral Year is
reduced for any reason other than death, Disability, or withdrawal pursuant to
Section 3.1 hereof, such reduction shall be deemed effective at the end of such
- -----------
Deferral Year and Executive shall no longer be eligible for any benefit
described in Sections 3.4 unless such reduction is approved by the Committee or
------------
is due to a material reduction in Executive's Compensation.
3.6 Form of Benefit Payment. Subject to Sections 3.8 and 3.9, Executive
----------------------- ------------ ---
hereby elects the following form of benefit payment hereunder:
(i) Substantially equal installment payments of principal,
----------
commencing on the Determination Date coincident with or next following
Executive's Normal Benefit Date or other Termination of Service,
together with interest thereon (based on the applicable Interest Yield
at the commencement
-12-
<PAGE>
of such payments, the actual rate of interest changing as the rate of
such Interest Yield changes) and continuing for years.
-------
(ii) A lump sum payment on the day following Executive's Normal
----
Benefit Date or Termination of Service.
Such election shall be subject to change at the option of Executive each
January 1, but not less than one (1) year prior to commencement of such benefit
payments.
3.7 Withholding; Employment Taxes. To the extent required by the law in
-----------------------------
effect at the time payments are made, the Company shall withhold any taxes
required to be withheld by the federal or any state or local government from
payments made hereunder.
3.8 Commencement of Payments. Unless otherwise provided, payments under this
------------------------
Agreement shall commence within sixty (60) days following receipt of notice by
the Committee of an event which entitles Executive (or his Beneficiary) to
payments hereunder, or at such earlier date as may be determined by the
Committee. All payments shall be made as of the last day of the month.
-13-
<PAGE>
3.9 Full Payments of Benefits. Notwithstanding any other provision of this
-------------------------
Agreement, all benefits shall be paid no later than by the Executive's
eightieth (80th) birthday.
3.10 Recipients of Payments; Designation of Beneficiary. All payments to be
--------------------------------------------------
made by the Company hereunder shall be made to Executive during his lifetime,
provided that if Executive dies prior to the completion of such payments, then
all subsequent payments under this Agreement shall be made by the Company to
the Beneficiary or Beneficiaries determined in accordance with this Section
-------
3.10. Unless the Executive files a written notice of a different Beneficiary
- ----
designation with the Committee, Executive's Beneficiary shall be the
Beneficiary designated ~n the Hartmarx Corporation Savings-Investment Plan.
Executive may designate a Beneficiary by filing a written notice of such
designation with the Committee in such form as the Committee requires and may
include contingent Beneficiaries. Executive may from time to time change the
designated Beneficiary or Beneficiaries without the consent of such Beneficiary
or Beneficiaries by filing ~ new designation in writing with the Committee;
provided, that if Executive maintains his primary residence in a state which
has community property laws, the spouse of Executive must join in any
designation of a Beneficiary or Beneficiaries other than said spouse. If no
designation shall be in effect at the time when any benefits payable hereunder
shall become due, the Beneficiary shall be the spouse of
-14-
<PAGE>
Executive at such time, or if no spouse is then living, the representatives of
the Executive's estate.
4. COMMITTEE FUNCTIONS
-------------------
4.1 Information to be Furnished to Committee. The Company shall furnish the
----------------------------------------
Committee with such data and information as the Committee may require. The
records of the Company shall be determinative of Executive's period of
Employment, termination of employment and the reason therefor, leave of
absence, reemployment, years of service, personal data, Compensation and bonus,
if any. Executive and his Beneficiaries shall furnish to the Committee such
evidence, data, or information, and execute such documents as the Committee may
reasonably request.
4.2 Responsibility. No member of the Committee or of the Board of Directors
--------------
shall be liable to any person for any action taken or omitted in connection
with this Agreement unless attributable to his own fraud or willful misconduct:
nor shall the Company be liable to any person for any such action unless
attributable to fraud or willful misconduct on the part of a director, officer
or employee of the Company.
5. AMENDMENT; TERMINATION
----------------------
5.1 Amendment. This Agreement may be amended in whole or in part by the
---------
Company at any time. Notice of any such amendment shall be given in writing to
the Committee and to Executive (or to each designated Beneficiary of Executive,
if Executive has
-15-
<PAGE>
died). No amendment shall decrease the value of Executive's Deferred Benefit
Account or the Interest Yield applicable thereto.
5.2 Company's Right to Terminate. The Company reserves the sole right to
----------------------------
terminate this Agreement at any time prior to Executive's death and the
commencement of payment of benefits hereunder. In the event of any such
termination, Executive shall be entitled to a benefit equal to the amount of
his Deferred Benefit Account calculated under Section 2.4 using the Retirement
Interest Yield as of the date of such termination.
5.3 Termination. This Agreement shall terminate if at any date:
-----------
(i) the consolidated current assets of the Company and its subsidiaries
(taken as a whole) is less than 205% of the sum of (a) the consolidated
current liabilities of the Company and its subsidiaries, plus (b) the
current liabilities of others which are guaranteed by the Company or any
such subsidiary, at such date; or
(ii) the consolidated debt of the Company and its subsidiaries (taken as a
whole) including, without limitation, indebtedness for borrowed money,
obligations to pay the deferred purchase price of property or services
other than trade payables arising in the ordinary course of business,
obligations as lessee under capital lease, obligations secured by a
-16-
<PAGE>
lien on any asset of the Company or any such subsidiary, and obligations of
others guaranteed by the Company or any such subsidiary, exceeds 95%~ of
the consolidated shareholders equity of the Company and its subsidiaries,
excluding the value of intangible assets such as, without limitation,
unamortized debt, discount and expense, unamortized deferred charges, good
will, patents, trademarks, service marks, tradenames, copyrights,
organizational or developmental expenses and other similar intangible
items; or
(iii) the Company enters into any material borrowing arrangement requiring
the Company's maintenance of financial conditions which are similar to
those described in (i) and (ii) of this Section 5.3, if it is possible for
the Company to fail to maintain such financial conditions before this
Agreement so terminates, unless prior to entering into such borrowing
arrangement, the Company amends this Section 5.3 accordingly.
All accounting terms used herein shall be interpreted and all accounting
determination hereunder shall be made in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes approved by the Company's independent public
accountants) with the last audited consolidated financial statements of the
Company prior to the Effective Date.
-17-
<PAGE>
As soon as available, and in any event within sixty (60) days after the end
of each of the first three quarters, and within ninety (90) days after the end
of the fourth quarter, of each fiscal year of the Company, the Company will
furnish to Executive (or Executive's beneficiary) a written statement showing
the balance of Executive's Deferred Benefit Account and containing a
certificate of the Chief Financial Officer or Controller of the Company stating
as to whether any of the foregoing events in (i), (ii) or (iii) of this Section
5.3 has occurred since the immediately preceding quarter.
In the event of the termination of this Agreement pursuant to this Section
5.3, Executive shall be entitled to a benefit equal to the amount of his
Deferred Benefit Account calculated under Section 2.4 using the Retirement
Interest Yield as of the date of such termination. Such benefit shall be due
and payable within five (5) days following such termination.
5.4 Change in Control. Notwithstanding any other provision of this Agreement,
-----------------
if there is a Change in Control, this Agreement shall be terminated in its
entirety and the Company shall pay to Executive (or his Beneficiary) a lump sum
payment of his Deferred Benefit Account determined under Section 2.4 hereof
-----------
using the Retirement Interest Yield on or before the fifth (5th) day following
such Change in Control.
-18-
<PAGE>
6. MISCELLANEOUS
-------------
6.1 No Implied Rights; Rights on Termination of Service. Nothing herein
---------------------------------------------------
shall be construed as giving Executive or any Beneficiary any legal or
equitable rights other than as expressly herein set forth.
6.2 No Right to Company Assets. Neither Executive nor any other person shall
--------------------------
acquire by reason of this Agreement any right in or title to any specific
funds, assets, or other property of the Company. No trust of any kind shall be
created in connection with or by the execution of this Agreement, and any
benefits which become payable hereunder shall be paid from the general assets
of the Company. Executive shall have only a contractual right to the amounts,
if any, payable hereunder, unsecured by any asset of the Company. Nothing
contained herein constitutes a guarantee by the Company that the assets of the
Company shall be sufficient to pay any benefit to any person.
6.3 No Employment Rights. Nothing herein shall constitute a contract of
--------------------
employment or of continuing service or in any manner obligate the Company to
continue the services of Executive, or obligate Executive to continue in the
service of the Company, or as a limitation of the right of the Company to
discharge Executive, with or without cause. Nothing herein shall be construed
as fixing or regulating the compensation payable to Executive.
-19-
<PAGE>
6.4 Offset. If, at the time payments or installments of payments are to be
------
made hereunder and Executive or the Beneficiary, or both, are indebted or
obligated to the Company, then the payments remaining to be made to Executive
or the Beneficiary, or both, may, at the discretion of the Company and to the
extent permitted by law, be reduced by the amount of such indebtedness or
obligation, provided, however, that an election by the Company not to reduce
any such payment or payments shall not constitute a waiver of its claim for
such indebtedness or obligation.
6.5 Protective Provisions. In the event of Executive's suicide within two
---------------------
(2) years following the date of this Agreement, or if Executive fails to make
any material disclosure of information reasonably requested in connection with
this Agreement, then, upon payment to Executive (or his Beneficiary) of the
Compensation deferred hereunder, no benefits will be payable hereunder, or, in
the Committee's sole discretion, benefits may be payable in a reduced amount.
6.6 Non-Assignability. Neither Executive nor any other person shall have any
-----------------
voluntary or involuntary right to commute, ~sell, assign, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof,
which are expressly declared to be unassignable and non-transferable. No part
of the amounts payable shall be, prior to actual payment,
-20-
<PAGE>
subject to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by Executive or any other person, or be
transferable by operation of law in the event of Executive's or any other
person's bankruptcy or insolvency.
6.7 Gender and Number. Wherever appropriate herein, the masculine may mean
-----------------
the feminine and the singular may mean the plural or vice versa.
6.8 Notice. Any notice required or permitted to be given hereunder shall be
------
sufficient if in writing and hand delivered, or sent by registered or
certified mail, and if given to the Company, delivered to the principal office
of the Company, directed to the attention of its General Counsel. Such notice
shall be deemed given as of the date of delivery or, if delivery is made by
mail, as~ of the date shown on the postmark or the receipt for registration or
certification.
6.9 Governing Laws. This Agreement shall be construed and administered
--------------
according to the internal laws of the State of Illinois.
6.10. Tax Advice. Executive acknowledges that he must rely on his own tax
----------
advisor with respect to the tax consequences of this Agreement.
-21-
<PAGE>
6.11. Limitation of Benefit. Executive agrees that if his service with the
---------------------
Company is terminated prior to Normal Benefit Date other than by death or
Disability, hi~s benefit shall be limited to the Termination Benefit as set
forth in Section 3.3 of this Agreement. This Agreement shall inure to the
benefit of, and be binding upon, the Company, its successors and assigns, and
Executive and Executive's Beneficiaries.
6.12 Entire Agreement. This Agreement represents the entire agreement between
----------------
the parties with respect to the subject matter hereof and shall not be modified
or affected by any offer, proposal, statement or representation, oral or
written, heretofore made by or for either party in connection with the
negotiation of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the date first above written.
EXECUTIVE: HART MARX CORPORATION
_____________________________________ By: _________________________________
Its _________________________________
-22-
<PAGE>
EXHIBIT 10.F.5
November 30, 1987
Dear :
_________
At a regularly scheduled meeting of its Board of Directors, Hartmarx
Corporation ("Hartmarx") was authorized to take appropriate steps approved by
the Compensation and Stock Option Committee to induce your continued attention
to your assigned duties as an important Company executive in the event of a
potential CHANGE IN CONTROL, although not now contemplated, of Hartmarx.
Accordingly, if you agree to remain employed by Hartmarx and/or any
subsidiary of Hartmarx (collectively, the Company) until a CHANGE IN CONTROL,
Hartmarx agrees to pay you the severance benefit described below ("Severance
Payment") in the event of the termination of your employment at any time during
the twenty-four (24) month period next following a CHANGE IN CONTROL for any
reason other than (i) your death, disability or retirement; (ii) by the Company
for Cause (as hereinafter defined); or (iii) by you for other than for Good
Reason (as hereinafter defined).
The initial term of this agreement continues through November 30, 1988, and
shall automatically be extended for one additional year on each December 1
thereafter unless the Company gives you written notice not later than August 30
immediately preceding any December 1 that it does not wish to extend this
agreement, provided, however, that if any of the following events shall occur
during the initial or extended period, then the agreement shall continue for a
period of twenty-four months beyond the month in which such a CHANGE IN CONTROL
shall be deemed to have occurred. A CHANGE IN CONTROL shall be deemed to have
occurred if:
(A) any person, as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee
or other fiduciary holding securities under an employee benefit
plan of Hartmarx, is or becomes the beneficial owner, as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
directly or indirectly, of securities of Hartmarx representing 25%
or more of the combined voting power of Hartmarx' then outstanding
securities; or
<PAGE>
(B) during any period of two consecutive years (not including any
period prior to the date of this letter), individuals who at the
beginning of such period constitute the Board of Directors of
Hartmarx ("Board") and any new director whose election by the Board
or nomination for election by the stockholders of Hartmarx was
approved by a vote of at least two-thirds (2/3) of the directors
who were directors at the beginning of the period, cease for any
reason to constitute a majority thereof; or
(C) the business of Hartmarx is disposed of pursuant to a partial or
complete liquidation of Hartmarx, a sale of all or substantially
all of its assets (including stock of its subsidiaries), or
otherwise.
The Severance Payment will be equal to (i) 50% of your Annual Compensation
plus one-twelfth (1/12) of your Annual Compensation for each of your full or
partial years of employment by the Company at the time of your termination, up
to twelve years if you are under age 50, otherwise, up to eighteen years; plus
(ii) the excess of the value of all shares of Hartmarx common stock issuable
upon exercise of then outstanding stock options granted to you under any
Hartmarx stock option plan (whether or not then exercised or fully
exercisable), over the aggregate exercise price of such options. All such
options shall be cancelled upon the making of said payment. For purposes of
calculating your Severance Payment, the term "Annual Compensation" means the
average annual rate of compensation payable to you by the Company for the three
(3) calendar years immediately preceding the calendar year in which a CHANGE IN
CONTROL occurs, including, without limitation, all compensation income
recognized as a result of your exercise of Hartmarx stock options (or Stock
Appreciation Rights) or the sale of the stock so acquired, or earned by you but
not paid for any reason other than your agreement to postpone and defer such
payment.
Termination of your employment for "Cause" means termination because of (i)
your willful and continued failure to substantially perform your duties with
the Company (other than resulting from your disability or after you have
notified the Company that you intend to terminate your employment for Good
Reason) after a written demand for substantial performance is delivered to you
by the Board, which demand specifically identifies the manner in which the
Board believes you have not substantially performed your duties; or (ii) your
willful engaging in conduct which is demonstrably and materially injurious to
the Company; provided, however, that no act or failure to act on your part
shall be deemed "willful" unless done, or omitted to be done, in bad faith and
without reasonable belief that your action or omission was in the best
interests of the Company. Termination of your employment for "Good Reason"
means your termination after the Company has taken any action without your
express written consent, which directly or
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indirectly reduces or deprives you of any material benefit enjoyed by you or
any of your beneficiaries immediately prior to a CHANGE IN CONTROL, including,
without limitation, the occurrence of any of the following:
(A) the assignment to you of any duties inconsistent with your status
as an officer of the Company, or a substantial adverse alteration
in the nature or status of your responsibilities from those in
effect immediately prior to a CHANGE IN CONTROL;
(B) a reduction in your annual base salary and/or bonus opportunity as
in effect immediately prior to a CHANGE IN CONTROL, except for
across-the-board reductions similarly affecting all executives of
the Company and all executives of any person in control of the
Company;
(C) the Company's requiring you to be based anywhere outside the
metropolitan area of the city in which you are principally engaged
or performing your duties for the Company immediately prior to a
CHANGE IN CONTROL;
(D) the Company's failure to: (i) pay you any portion of your
compensation, including bonus and/or deferred compensation, within
seven (7) days of its due date; (ii) continue any compensation or
benefit plan in which you participate, or to continue your
participation therein on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of
your participation relative to other participants; (iii) continue
to provide you with benefits substantially similar to those you
enjoy at the time of a CHANGE IN CONTROL; (iv) to provide you with
the number of paid vacation days to which you may then be entitled
on the basis of years of service with the Company in accordance
with the Company's normal vacation policy in effect at the time of
a CHANGE IN CONTROL; or (v) to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement.
If you are employed by the Company upon a CHANGE IN CONTROL and
simultaneously or thereafter become eligible to receive a Severance Payment, it
will be paid to you, in a lump sum, immediately upon your termination of
employment in addition to all other amounts to which you may be entitled under
any employment agreement(s) and/or compensation plan(s) of the Company. If any
part of the Severance Payment is subject to the Excise Tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), Hartmarx will also pay you an
additional amount such that the net amount retained by you, after deduction of
any such tax and any federal, state and local income tax upon the payment
provided for by this paragraph, shall be equal to the Severance Payment. Hart
Marx will also pay or reimburse you for all legal
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fees and expenses which you incur to obtain any benefit (including the
Severance Payment) to be provided to you pursuant to this letter. If you should
die while any amount is payable to you hereunder, such amount shall be paid to
your devisee, legatee or other designee or, if there is no such designee, to
your estate.
Nothing in this letter is intended to give you the right to be retained in
the employ of Hartmarx or any of its subsidiaries or to interfere with the
Company's right to discharge you at any time for any reason. Prior to a CHANGE
IN CONTROL, you will have no right or interest whatsoever in or to the
Severance Payment or any portion thereof.
Upon receiving this letter, please sign the copy enclosed for that purpose
where indicated (acknowledging your agreement to the foregoing) and return it
as soon as possible.
AGREED AND ACCEPTED: HARTMARX CORPORATION
By: _________________________________
Its _________________________________
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(Executive)
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EXHIBIT 10-F-7
EMPLOYMENT AGREEMENT
--------------------
This Agreement entered into as of the 8th day of March, 1993, by and
between HARTMARX CORPORATION, a Delaware corporation ("Hartmarx"), and WALLACE
L. RUECKEL ("Executive"),
WITNESSETH THAT:
----------------
WHEREAS, the parties hereto desire to enter into this Agreement pertaining
to the terms of Executive's employment by Hartmarx; and
WHEREAS, upon the execution of this Agreement by Hartmarx and Executive the
terms and conditions of this Agreement shall control and govern the employment
relationship between Hartmarx and Executive.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the parties hereto as
follows:
1. Employment Period. Hartmarx hereby employs Executive and Executive
hereby agrees to remain in the employ of Hartmarx for a two-consecutive-year
term beginning on January 1, 1993, and continuing in effect through December 31,
1994. This Agreement
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shall automatically be extended for a two-consecutive-year term beginning on
January 1, 1995, and continuing in effect through December 31, 1996 (including
the initial two-year period, the "Agreement Period"), unless notice to cancel is
delivered by either party hereto prior to July 1, 1994. While Executive is
employed by Hartmarx during the Agreement Period, Hartmarx shall use its best
efforts to have the Board of Directors elect Executive to the office(s) of
Executive Vice President and Chief Financial Officer of Hartmarx.
2. Performance of Duties. While he is employed by Hartmarx Executive
agrees that he shall devote his best efforts and full business time exclusively
to the business affairs of Hartmarx and its subsidiaries and shall perform his
duties faithfully and efficiently, subject to the direction of the Hartmarx
Board of Directors; provided, however, that Executive may become a director of
other corporations and engage in charitable, civic, professional and other
similar pursuits to the extent that such activities do not interfere with his
devoting his best efforts to his duties to Hartmarx.
3. Compensation. Subject to the terms and provisions of this Agreement,
during the Agreement Period, Executive shall be compensated for his services by
Hartmarx as follows:
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(a) Executive's annual base salary shall not be less than his annual
base salary as of the date hereof (i.e., $200,000) and shall be
payable semi-monthly or more frequently, in arrears, subject to
all normal deductions and withholdings. Such annual base salary
may be increased at the discretion of the Compensation and Stock
Option Committee of the Hartmarx Board of Directors (the
"Committee").
(b) Executive shall be entitled to a bonus in accordance with the
terms and conditions of the Hartmarx Management Incentive Plan
(the "MIP") and/or any successor plan.
(c) Executive shall be a participant in the Hartmarx Long Term
Incentive Plan (the "LTI Plan") for such period of time as it may
be in effect and in any successor to that plan.
4. Participation in Benefit Plans. The payments and participation
provided in Paragraph 3 hereof are in addition to any benefits to which
Executive shall be, or may become, entitled under any group hospitalization,
health, dental care, vacation or sick-leave plan, salary continuance or
disability plan, life or other insurance or death benefit plan, travel or
accident insurance arrangement, auto and/or liability insurance plan, auto lease
arrangement, or executive contingent compensation plan, including, without
limitation, any capital accumulation and termination pay
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programs, restricted or stock purchase plan, retirement income or pension plan,
or other present or future group employee benefit plan or program of Hartmarx
which key executives are or shall become eligible; and Executive shall be
eligible to receive during the Agreement Period, all benefits and emoluments for
which key executives are eligible under every such plan, program or arrangement
of Hartmarx, to the extent permissible under the general terms and provisions of
such plans or programs and in accordance with the provisions hereof (all of such
benefits and emoluments being hereinafter referred to as "Fringe Benefits").
5. Noncompete and Confidentiality. Provided Hartmarx is not in default
hereunder, Executive shall not, during the Agreement Period:
(a) engage in any competitive activities, unless Executive is
discharged or resigns due to the occurrence of any of the events set
forth in Paragraph 7 hereof;
(b) disparage, discredit or otherwise publicly criticize Hartmarx
or any subsidiary thereof; or
(c) engage in any act, directly or indirectly, for purposes of
disparaging, ridiculing or bringing scorn upon Hartmarx, any
subsidiary thereof, or any of their respective officers, directors,
businesses, tradenames or trademarks.
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For the purpose of this Paragraph 5, the term "competitive activities" shall
mean engaging directly or indirectly, anywhere, in any business or activity,
whether as an individual, partner or employee, or as an officer, director or
stockholder of a corporation which substantially competes with the business or
activities of Hartmarx or any of its subsidiaries; provided, that shareholdings
aggregating less than 5% of the outstanding shares of any publicly held company
shall not constitute "competitive activities."
During and after the Agreement Period, Executive will not divulge or
appropriate to his own use or to the use of others or maliciously divulge any
trade or confidential or proprietary information pertaining to the business of
Hartmarx or of any of its subsidiaries.
Executive acknowledges that Hartmarx would be irreparably injured by a
violation of the provisions of this Paragraph 5 and agrees that Hartmarx shall
be entitled to an injunction restraining Executive from any actual or threatened
breach of this Paragraph 5 and to any other appropriate equitable remedy without
any bond or other security being required.
6. Discharge. If Executive is discharged by Hartmarx other than for
"Cause" (as hereinafter defined), or resigns due to the occurrence of any of the
events set forth in Paragraph 7 hereof:
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(a) Executive shall be entitled to receive from Hartmarx (provided
Executive shall not be in breach of any provision of this Agreement
applicable to him after such discharge or resignation):
(i) The then applicable salary provided for in Paragraph 3(a) hereof
for a period of twenty-four (24) consecutive months, payable
semi-monthly or more frequently, in arrears, commencing on the
date Executive's employment with Hartmarx is terminated.
(ii) The balance, if any, as of the date Executive's employment with
Hartmarx is terminated, of Executive's deferred compensation
account under any deferred compensation agreement between
Executive and Hartmarx.
(iii) An amount equal to the sum of (A) any unpaid incentive
compensation (including the cash value, determined without regard
to any restrictions on the sale thereof, of restricted stock)
allocated or awarded to Executive under the MIP for any fiscal
year ending prior to the year in which Executive's employment
with Hartmarx is terminated; plus (B) any amount payable under
the MIP (including the cash value, determined without regard to
any restrictions on the sale thereof, of restricted stock) for
the year in which Executive's employment with Hartmarx is
terminated calculated based on the
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assumption that Hartmarx' actual results from the beginning of
such year to the date of termination (expressed as a percentage
of achievement of projected or budgeted results for the same
period) would continue at the same rate until the end of the year
in which Executive's employment with Hartmarx is terminated, plus
(C) an amount equal to the bonus compensation (including the cash
value, determined without regard to any restrictions on the sale
thereof, of restricted stock) which would be payable under the
MIP for the year in which Executive's employment is terminated
calculated based on the assumption that Hartmarx achieves its
"Step-1" target level (as defined in the MIP) for such year; plus
(D) an additional amount equal to the amount calculated in (C)
above in the event of the termination of Executive's employment
after a Change in Control (as defined herein). The amounts set
forth in item (B), (C) and (D) above shall be payable to
Executive regardless of whether Hartmarx actually achieves the
performance levels upon which the calculation of such amounts are
based.
(iv) An amount equal to the sum of (A) any unpaid incentive
compensation (including the cash value, determined without regard
to any restrictions on the sale thereof, of restricted stock)
allocated or
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awarded to Executive under the LTI Plan for any fiscal year
ending prior to such date of termination; plus (B) a pro rata
portion of the aggregate value of all contingent incentive
compensation (including the cash value, determined without regard
to any restrictions on the sale thereof, of restricted stock)
awards to Executive for all uncompleted periods under the LTI
Plan, to the extent covered under the performance goals for the
performance period(s) in which such date of termination occurs;
plus (C) the aggregate value of all incentive compensation
(including the cash value, determined without regard to any
restrictions on the sale thereof, of restricted stock) awards
which would have been payable to Executive under the LTI Plan for
such performance period(s), calculated based on the assumption
that Hartmarx' results from the beginning of such performance
period(s) to the date of termination would continue at the same
rate until the originally intended completion date(s) of such
performance period(s). The amount set forth in item (C) above
shall be payable to Executive regardless of whether Hartmarx
actually achieves the performance level upon which the
calculation of such amount is based.
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(v) All Fringe Benefits (other than group medical/dental insurance)
for a period of twenty-four (24) consecutive months (or thirty-
six (36) months in the event of the termination of Executive's
employment after a Change in Control), commencing on the date
Executive's employment with Hartmarx is terminated; plus (subject
to Executive's continued payment of his share of any premium with
respect thereof) group medical/dental insurance coverage
equivalent to that provided at the time Executive's employment
with Hartmarx is terminated, until the earlier of (A) the date
twenty-four (24) months (or thirty-six (36) months in the event
of the termination of Executive's employment after a Change in
Control) after the date Executive's employment with Hartmarx is
terminated, or (B) the date covered medical/dental benefits for
Executive and Executive's dependents are payable under any
comparable medical insurance policy furnished to Executive by a
subsequent employer. Following the expiration of the twenty-four
or thirty-six month period (whichever is applicable) described in
the preceding sentence, Executive shall be permitted to
participate in any medical (including dental and vision) plans
maintained by Hartmarx in which he was
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participating immediately prior to his termination of employment
(if permitted under the terms of and/or policies governing such
plans and by applicable law) at his own cost (i.e., without
Hartmarx subsidization) until the earlier of his sixty-fifth
(65th) birthday or the commencement of his employment (by other
than Hartmarx). Nothing herein shall be deemed to limit
Executive's rights, if any, to thereafter participate in any
retiree medical plan then in effect.
The payments, if any, due in respect of items (ii), (iii) and (iv)
above shall be made not later than five (5) days after the date
Executive's employment with Hartmarx is terminated.
(b) In addition to Executive's entitlement to receive the aforesaid
payments and Fringe Benefits:
(i) All stock options (whether or not then fully exercisable) granted
to Executive under any of Hartmarx's stock option plans prior to
the date Executive's employment with Hartmarx is terminated shall
become immediately exercisable and Executive shall be entitled to
exercise any or all of such options at any time prior to the
respective
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<PAGE>
expiration dates of such options (as set forth in the grant
document evidencing same);
(ii) All restricted stock granted to Executive prior to the date
Executive's employment with Hartmarx is terminated (and all
restricted stock to be awarded pursuant to Paragraph 6 hereof)
shall become fully vested and all restrictions thereon shall
lapse; and
(iii) The number of full and partial calendar months between the date
Executive's employment with Hartmarx is terminated and the date
that all payments due Executive pursuant to Paragraph 6(a)(i)
hereof are made (but not less than twenty-four (24) months, or,
in the event of the termination of Executive's employment after a
Change in Control, thirty-six (36) months) shall be counted in
determining the number of Executive's Years of Service for
benefit accrual purposes under the Hartmarx Retirement Income
Plan (RIP). In addition, any supplemental annual retirement
benefit theretofore authorized to be paid to Executive due to
ERISA limitations (SERP) shall be payable to Executive in the
form of a single life annuity, monthly, at the same times and for
the same duration as Executive's benefit payments from RIP. In
the event Executive shall elect to receive
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payment of his RIP benefits in the form of a joint and survivor
annuity, said supplemental annual benefit shall be paid in the
same form, and the amount of such annual income payable to
Executive and to his surviving spouse shall be adjusted so that
the value of such supplemental benefit is the actuarial
equivalent of the benefit which would otherwise be payable if
paid in the form of a single life annuity. Notwithstanding the
foregoing, in the event that Hartmarx thereafter elects to pay a
SERP benefit payable to any chief executive officer of Hartmarx
in the form of a discounted lump sum payment, Executive shall
have the option to receive his SERP benefit paid in a similar
manner.
For all purposes of this Agreement, the term "Cause" shall include any
material breach of this Agreement by Executive and/or any action or failure to
act on the part of Executive involving material malfeasance, nonfeasance (not
due to disability) or gross negligence having a material adverse effect on
Hartmarx.
7. Resignation for Good Reason. Executive may treat any of the following
events as a termination of his employment by Hartmarx without Cause, with the
consequences provided in Paragraph 6 hereof:
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(a) without Cause (as defined in Paragraph 6 hereof), the Board of
Directors of Hartmarx determines not to elect Executive to the
office(s) stated in Paragraph 1 hereof;
(b) [intentionally omitted]
(c) the provisions of Hartmarx' bylaws describing, or the relative
duties and responsibilities of, the office of Executive Vice
President or Chief Financial Officer are changed without
Executive's consent;
(d) the assignment to Executive of any duties inconsistent with
Executive's status as Executive Vice President and Chief
Financial Officer of Hartmarx or a substantial adverse alteration
in the nature or status of Executive's responsibilities;
(e) any reduction by Hartmarx in Executive's annual base salary as in
effect on the date hereof or as the same may be increased from
time to time, except for across-the-board salary reductions
similarly affecting all executives of Hartmarx;
(f) the failure by Hartmarx, without Executive's consent, to pay to
Executive any portion of Executive's current compensation, or to
pay to Executive any portion of an installment of deferred
compensation under any deferred compensation
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program of Hartmarx, within seven (7) days of the date such
compensation is due; or
(g) the failure by Hartmarx to continue to provide Executive with
Fringe Benefits substantially similar to those enjoyed by
Executive under any of Hartmarx' pension, life insurance,
medical, health and accident, or disability plans in which
Executive was participating as of the date hereof; the taking of
any action by Hartmarx which would directly or indirectly
materially reduce or deprive Executive of any material Fringe
Benefit enjoyed by Executive or any beneficiary of Executive as
of the date hereof or to which Executive is entitled pursuant to
this Agreement; the failure by Hartmarx to calculate Executive's
annual bonus compensation, if any, using at least the valuation
and number of accountability points used to determine the bonus
opportunity in any previous year during the Agreement Period for
any corporate officer position held by Executive; or the failure
by Hartmarx to provide Executive with the number of paid vacation
days to which Executive may then be entitled on the basis of
years of service with Hartmarx in accordance with Hartmarx'
normal vacation policy in effect as of the date hereof; except
(as to all of the foregoing) for changes (including termination)
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in such benefits and/or policies similarly affecting all
executives of Hartmarx; or
(h) the cancellation of, or failure to renew, this Agreement by
Hartmarx pursuant to Paragraph 1 hereof.
Executive's right to treat any of the foregoing events as a termination of
his employment shall be exercised by notice given to Hartmarx after the
occurrence of such event.
8. Change in Control. Hartmarx further agrees to pay the severance
benefit described in this Paragraph 8 (the "Severance Payment") in the event of
Executive's termination of employment at any time during the twenty-four (24)
month period next following a Change in Control for any reason other than (i)
Executive's death, disability or retirement; (ii) by Hartmarx for Cause; or
(iii) by Executive for other than the occurrence of any of the events set forth
in Paragraph 7 hereof.
The Severance Payment shall be a lump sum payment equal to three (3) times
the annual base salary payable to Executive pursuant to Paragraph 3 hereof as of
the date Executive's employment with Hartmarx is terminated and shall be paid to
Executive, in lieu of any amounts otherwise payable under Paragraph 6(a)(i)
hereof, not later than five (5) days after the date Executive's employment with
Hartmarx is terminated. Executive
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shall also continue to be entitled to all other payments, Fringe Benefits and
entitlements set forth in Paragraphs 6(a)(ii)-(v) and Paragraphs 6(b)(i)-(iii)
hereof in accordance with the provisions of said Paragraphs.
A Change in Control shall be deemed to have occurred during the Agreement
Period if:
(a) any person, as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended, other than a
trustee or other fiduciary holding securities under an employee
benefit plan of Hartmarx, is or becomes the beneficial owner, as
defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, directly or indirectly, of securities of Hartmarx
representing 25% or more of the combined voting power of
Hartmarx' then outstanding securities; or
(b) during any period of two consecutive years (not including any
period prior to the date of this Agreement), individuals who at
the beginning of such period constitute the Board of Directors of
Hartmarx ("Board") and any new director whose election by the
Board or nomination for election by the stockholders of Hartmarx
was approved by a vote of at least two-thirds (2/3) of the
directors who
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were directors at the beginning of the period, cease for any
reason to constitute a majority thereof; or
(c) the business of Hartmarx is disposed of pursuant to a partial or
complete liquidation of Hartmarx, a sale of all or substantially
all of its assets (including stock of its subsidiaries), or
otherwise.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur in the event of a Management Change in Control. A Management Change in
Control shall mean a Change in Control pursuant to which Executive (alone or
with others) acquires or retains, directly or indirectly, the power to direct or
cause the direction of the management and policies of the Company (whether
through the ownership of voting securities, by contract, or otherwise) and which
is directly or indirectly attributable to a public announcement by Executive (or
others acting in concert with Grantee) of an intention to take actions which, if
consummated, would constitute such Management Change in Control.
Notwithstanding any other provision of this Agreement, in the event that
any payment or benefit received or to be received by Executive in connection
with the termination of the Executive's employment after a Change in Control
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with
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Hartmarx, any person whose actions result in a Change in Control or any person
affiliated with Hartmarx or such person, all such payments and benefits,
including the Severance Payment, being hereinafter called "Total Payments")
would be subject, in whole or part, to any excise tax (the "Excise Tax") imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then the Severance Payment shall be reduced to the extent necessary so
that no portion of the Total Payments is subject to the Excise Tax (after taking
into account any reduction in the Total Payments provided by reason of section
280G of the Code in such other plan, arrangement or agreement), provided,
however, that there shall be no reduction to the Severance Payment unless (A)
the net amount of such Total Payments, as so reduced, and after deduction of the
net amount of federal, state and local income tax on such reduced Total Payments
is greater than (B) the excess of (i) the net amount of such Total Payments,
without reduction, but after deduction of the net amount of federal, state and
local income tax on such Total Payments, over (ii) the amount of Excise Tax to
which the Executive would be subject in respect of such Total Payments. For
purposes of determining whether and the extent to which the Total Payments will
be subject to the Excise Tax, (i) no portion of the Total Payments the receipt
or enjoyment of which the Executive shall have effectively waived in writing
prior to the date Executive's employment with Hartmarx is terminated shall be
taken into account, (ii) no portion of the Total Payments shall be taken into
account which in the opinion of tax counsel selected by Executive does not
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constitute a "parachute payment" within the meaning of section 280G(b)(2) of the
Code, (including by reason of section 280G(b)(4)(A) of the Code) and, in
calculating the Excise Tax, no portion of such Total Payments shall be taken
into account which constitutes reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the Base Amount (as defined in section 280G(b)(3) of the Code) allocable to such
reasonable compensation, and (iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by Executive in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. Prior to the payment of the Severance Payment as provided in
Paragraph 8 hereof, Hartmarx shall provide the Executive with its calculation of
the amounts referred to in this paragraph and such supporting materials as are
reasonably necessary for the Executive to evaluate Hartmarx' calculations. If
the Executive objects to Hartmarx' calculations, Hartmarx shall pay to the
Executive such portion of the Severance Payments (up to 100% thereof) as the
Executive determines is necessary to result in the Executive receiving the
greater of clauses (A) and (B) of this paragraph.
9. Amendment. This Agreement may be amended in writing by mutual
agreement of the parties without the consent of any other person and, during the
life of Executive, no person, other than the parties hereto, shall have any
rights under or interest in this Agreement or the subject matter hereof.
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10. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and, if sent by registered mail, to
Hartmarx at its principal executive offices, to the attention of its General
Counsel, or to Executive at the last address filed by him in writing with the
Committee, as the case may be.
11. Nonalienation. The interests of Executive under this Agreement are
not subject to the claims of his creditors, other than Hartmarx and its
subsidiaries, and may not otherwise be voluntarily or involuntarily assigned,
alienated or encumbered.
12. Successors. This Agreement shall be binding upon, and inure to the
benefit of, Hartmarx and its successors and assigns and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of Hartmarx's assets and business.
13. Prior Agreements. This Agreement cancels any agreements entered into
between the parties hereto prior to the day and year first above written.
14. Severability. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall to the full
extent consistent with law
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continue in full force and effect. If any provision of this Agreement shall be
held invalid in part, such invalidity shall in no way affect the rest of such
provision not held so invalid, and the rest of such provision, together with all
other provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect.
15. Applicable Law. The provisions of this Agreement shall be construed
in accordance with the laws of the State of Illinois.
16. Counterparts. The Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
17. Attorney's Fees. Hartmarx will pay or reimburse Executive for all
legal fees and expenses incurred to obtain any benefit (including but not
limited to the Severance Payment) to be provided to Executive pursuant to this
Agreement.
18. Beneficiaries. If Executive should die while any amount is payable to
him hereunder, such amount shall be paid to Executive's devisee, legatee or
other designee or, if there is no such designee, to Executive's estate.
19. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by
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arbitration, conducted before a panel of three arbitrators in Chicago, Illinois
in accordance with the rules of the American Arbitration Association then in
effect. Hartmarx and the Executive shall each be entitled to select one
arbitrator, with the two selected arbitrators choosing the third arbitrator.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The expense of such arbitration shall be borne by Hartmarx.
20. Mitigation. In no event shall the payments to be made and the
benefits to be provided by Hartmarx under this Agreement be reduced by
Executive's receipt of any compensation or benefits from other employment
following the termination of Executive's employment with Hartmarx.
IN WITNESS WHEREOF, Executive has hereunto set his hand, and Hartmarx has
caused these presents to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, all as of
the day and year first above written.
___________________________________
Wallace L. Rueckel
Attest: HARTMARX CORPORATION
_______________________ By:___________________________
Its Secretary Its:__________________________
22
<PAGE>
a:emplyagt.wlr
DRAFT #4 2/19/93
23
<PAGE>
EXHIBIT 10.G.1
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of , between HARTMARX CORPORATION, a
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Delaware corporation ("Company"), and ("Indemnitee").
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WHEREAS, it is essential that the Company retain and attract the most capable
persons available as directors; and
WHEREAS, Indemnitee is a director of the Company; and
WHEREAS, the Company's Restated Certificate of Incorporation, as amended
("Charter"), and the Company's By-Laws ("By-Laws") each provide that the
Company indemnify its directors to the fullest extent permitted by law, and
Indemnitee serves as a director of the Company in reliance on such Charter and
By-Laws; and
WHEREAS, the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors of public
companies; and
WHEREAS, basic protection against this risk has heretofore been provided to
Indemnitee through insurance coverage, and Indemnitee has relied on the
availability of such coverage, but it has become increasingly more difficult to
obtain such insurance on terms providing reasonable protection at reasonable
cost:
NOW, THEREFORE, to ensure Indemnitee's continued service to the Company by
providing Indemnitee with specific contractual assurance that the
indemnification now set forth in the Charter and By-Laws will be available to
Indemnitee regardless of, among other things, any change in the Charter or By-
Laws (or any change in the composition of the Company's Board of Directors),
and in consideration of Indemnitee's continued service to the Company as a
director, the parties hereto agree as follows:
1. Certain Definitions:
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(a) Claim: any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
in which Indemnitee was, is or becomes a party, witness or
participant, and/or any inquiry or investigation that might lead to
the institution of any such action, suit or proceeding.
(b) Indemnifiable Event: any event or occurrence related to the fact
-------------------
that Indemnitee is or was a director of the Company or is or was
serving at the specific request of the Company as a director,
officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust
or other enterprise, or arising out of any act or failure to act by
Indemnitee in any such capacity.
(c) Expenses: include reasonable attorneys' fees and all other
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reasonable costs, expenses and obligations paid or incurred by
Indemnitee in connection with any Claim relating to any Indemnifiable
Event.
(d) Reviewing Party: such appropriate person or body now or hereafter
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designated by the Company's Board of Directors, consisting of a
member or members of such Board, or any other person or body who is
not a party to the particular Claim for which Indemnitee is seeking
indemnification.
<PAGE>
2. Basic Indemnification Arrangement. In the event of any Claim arising in
---------------------------------
whole or in part out of an Indemnifiable Event, the Company shall indemnify
Indemnitee to the fullest extent permitted by law against any and all Expenses,
judgments, fines, penalties and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or
in respect of such Expenses, judgments, fines, penalties or amounts paid in
settlement) of such Claim. The Company shall reimburse Indemnitee therefor as
soon as practicable, but not later than thirty (30) days after the Company's
receipt of Indemnitee's demand and shall advance any and all documented
Expenses to Indemnitee ("Expense Advance") within two (2) business days after
the Company's receipt of Indemnitee's request.
3. Limitation of Indemnity. Notwithstanding anything in this Agreement to the
-----------------------
contrary, (i) the obligations of the Company under Section 2 hereof shall be
---------
subject to the condition that the Reviewing Party shall not have determined
that Indemnitee is not permitted to be indemnified under applicable law; (ii)
the obligation of the Company to make any Expense Advance pursuant to Section 2
---------
shall be subject to the condition that, if, when and to the extent that the
Reviewing Party determines that Indemnitee is not permitted to be indemnified
under applicable law, the Company shall be entitled to be repaid by Indemnitee
(who hereby agrees to repay the Company) for all such Expense Advances,
provided, however, that if Indemnitee has commenced legal proceedings in a
court of competent jurisdiction to determine whether Indemnitee is permitted to
be indemnified under applicable law, any contrary determination made by the
Reviewing Party shall not be binding (and Indemnitee shall not be required to
repay the Company for any Expense Advance) until a final unappealable judicial
determination is made with respect thereto; and (iii) Indemnitee shall not be
entitled to be indemnified pursuant to this Agreement in connection with any
Claim initiated by Indemnitee against the Company or any director or officer of
the Company unless the Company has joined in or consented to the initiation of
such Claim. If there has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively is not permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have the
right to commence a suit or proceeding in any court in the states of Illinois
or Delaware seeking an initial determination by the court or challenging any
such determination by the Reviewing Party or any aspect thereof, and the
Company hereby consents to service of process and to appear in any such suit or
proceeding. In connection with any determination as to whether Indemnitee is
entitled to be indemnified hereunder the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
4. Expenses to Enforce this Agreement. The Indemnitee shall be entitled to
----------------------------------
recover from the Company any and all expenses (including attorneys' fees)
incurred by Indemnitee in connection with any claim asserted or action brought
by Indemnitee against the Company for indemnification or advance payment of
Expenses by the Company under this Agreement, provided that Indemnitee
ultimately is determined to be entitled to such indemnification or advance
payment of Expenses, as the case may be. If Indemnitee ultimately is determined
not to be entitled to such indemnification or advance payment of Expenses, the
Company shall be entitled to be repaid by Indemnitee (who hereby agrees to
repay the Company) for all expenses recovered from the Company pursuant to this
Section 4.
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5. Partial Indemnity. If Indemnitee is entitled under any provision of this
-----------------
Agreement to indemnification by the Company for any portion of the Expenses,
judgments, fines, penalties or amounts paid in settlement of a Claim, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled to
indemnification. Moreover, to the extent that Indemnitee is successful on the
merits or otherwise in defense of any Claim relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, Indemnitee
shall be indemnified against all Expenses incurred in connection therewith.
- 2 -
<PAGE>
6. No Presumption. For purposes of this Agreement, the termination of any
--------------
Claim by judgment, order, settlement (whether with or without court approval)
or conviction, or upon a plea of nolo contendere or its equivalent, shall not
create a presumption that Indemnitee did not act in good faith and in a manner
which Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
7. Non-exclusivity. The rights of the Indemnitee hereunder shall be in
---------------
addition to any other rights Indemnitee may have under the By-Laws, the
Charter, Delaware General Corporation Law, or otherwise. To the extent that a
change in the Delaware General Corporation Law (whether by statute or judicial
decision) permits greater indemnification by agreement than would be afforded
currently under the Charter, the By-Laws and this Agreement, it is the intent
of the parties hereto that Indemnitee shall enjoy the greater indemnification
so afforded by such change.
8. Liability Insurance. To the extent the Company maintains an insurance
-------------------
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms.
9. Period of Limitations. No action, suit or proceeding shall be brought and
---------------------
no claim or cause of action shall be asserted by or on behalf of the Company or
any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors, administrators or personal or legal representatives after the
expiration of two (2) years from the date such claim or cause of action first
arises, and any claim or cause of action of the Company or any affiliate shall
be extinguished and deemed released unless asserted by the timely filing of an
action, suit or proceeding within such two-year period; provided, however, that
if any shorter period of limitations is otherwise applicable to any such claim
or cause of action, such shorter period shall govern.
10. Amendments. No amendment, modification or supplement to this Agreement
----------
shall be binding unless executed in writing by both of the parties hereto. No
waiver of any provision of this Agreement shall constitute or be deemed a
waiver of any other provision hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
11. Subrogation. If any payment is made under this Agreement, the Company
-----------
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring a suit
or proceeding to enforce such rights.
12. No Duplication of payments. The Company shall not be liable under this
--------------------------
Agreement to make any payment in connection with any Claim to the extent
Indemnitee has actually received or receives payment therefor from the Company,
any source funded by the Company, or pursuant to an indemnification or similar
arrangement with, or recovery from, any third party.
13. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of and be enforceable by the parties hereto and their respective
successors (including, but not limited to, any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company), assigns, spouses, heirs, executors,
administrators and personal and legal representatives. This Agreement shall
continue in effect with respect to Claims arising out of Indemnifiable Events
regardless of whether Indemnitee continues to serve as a director of the
Company or of any other enterprise at the Company's request.
- 3 -
<PAGE>
14. Severability. If any provisions of this Agreement (including any
------------
provision within a single section, paragraph or sentence) are held invalid,
void or otherwise unenforceable by a court of competent jurisdiction, such
provisions shall be deemed omitted and the remaining provisions shall continue
enforceable to the fullest extent permitted by law.
15. Notices. Any notice, request or demand required or permitted to be given
-------
under this Agreement shall be delivered in writing in person or by certified
mail, return receipt requested, to the Company at its principal executive
offices to the attention of its General Counsel or to Indemnitee at the last
address filed in writing with the Secretary of the Company.
16. Governing Law. All rights and obligations of the parties under this
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Agreement shall be governed by and construed and enforced in accordance with
the internal laws, and not the laws of conflicts, of the State of Delaware.
17. Headings. Section headings and numbers appearing in this Agreement are
--------
inserted only as a matter of convenience and do not define, limit, construe or
describe the scope or intent of the provisions of this Agreement.
18. Counterparts. This Agreement may be executed in two or more counterparts,
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each of which shall be deemed an original for all purposes.
HARTMARX CORPORATION
Attest By __________________________________
Chairman
By ______________________________
Secretary
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AM:ASSINDM.HXP
- 4 -
<PAGE>
EXHIBIT 21
SUBSIDIARIES
------------
<TABLE>
<CAPTION>
Jurisdiction in
Name which Incorporated
---- ------------------
<S> <C>
HARTMARX CORPORATION (Registrant)............................Delaware
Direct Route Marketing Corporation......................New Hampshire
Henry Grethel Apparel, Inc..............................Delaware
Hart Schaffner & Marx...................................New York
American Apparel Brands, Inc.......................New York
National Clothing Company, Inc.....................New York
Thorngate, Ltd.....................................Missouri
Winchester Clothing Company........................Kentucky
HGA Licensing, Inc......................................Delaware
Hickey-Freeman Co., Inc.................................New York
International Women's Apparel, Inc......................Texas
Jaymar-Ruby, Inc........................................Indiana
Anniston Sportswear Corporation....................Indiana
E-Town Sportswear Corporation.................Kentucky
Rector Sportswear Corporation.................Arkansas
Biltwell Company, Inc..............................Missouri
Chicago Trouser Company, Ltd.......................Illinois
Hoosier Factories, Incorporated....................Indiana
JRSS, Inc..........................................Indiana
Kuppenheimer Manufacturing Company, Inc.................Ohio
Walton Manufacturing Company.......................Georgia
Men's Quality Brands, Inc...............................New York
Robert Surrey, Inc......................................Illinois
Trade Finance International Limited.....................Illinois
M. Wile & Company, Inc. (d/b/a Intercontinental
Branded Apparel).......................................New York
Intercontinental Apparel, Inc......................Delaware
Universal Design Group, Ltd.............................New York
</TABLE>
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The names of 25 subsidiaries are omitted, as such subsidiaries, considered
in the aggregate as a single subsidiary, would not constitute a significant
subsidiary. The Registrant owns, directly or indirectly, 100% of the voting
securities of both the named and unnamed subsidiaries. All of the above
subsidiaries (including unnamed subsidiaries) are included in the consolidated
financial statements of the Registrant and its subsidiaries.
