<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, 1994
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
10 7/8% Senior Subordinated Notes due January 15, 2002 New York 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. [X]
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 15, 1995, 32,527,540 shares of the Registrant's common stock were
outstanding. The aggregate market value of common stock held by non-affiliates
of the Registrant was $185,538,000.
Certain portions of the Registrant's definitive proxy statement dated
February 28, 1995 for the Annual Meeting of Stockholders to be held April 13,
1995 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.................................................. 4
4 Submission of Matters to a Vote of Security Holders................ 6
Executive Officers of the Registrant............................... 6
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........................ 15
Changes in and Disagreements with Accountants on Accounting and
9 Financial Disclosure.............................................. 32
PART III
10 Directors and Executive Officers of the Registrant................. 32
11 Executive Compensation............................................. 32
12 Security Ownership of Certain Beneficial Owners and Management..... 33
13 Certain Relationships and Related Transactions..................... 33
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 33
</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 and
women's sportswear, including golfwear, and women's career apparel.
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 exclusive license agreements for specified
product lines including Tommy Hilfiger(R), Jack Nicklaus(R), Bobby Jones(R),
Austin Reed(R), Perry Ellis(R), Daniel Hechter(R), Gieves & Hawkes(R), KM 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 16 countries outside the
United States. Additionally, the Company has commenced direct marketing in
Europe and Asia, selling golfwear in these markets through distributors in 17
countries.
As described in the Restructuring Charges note to the consolidated financial
statements on page 24 of this Form 10-K, the Company undertook a comprehensive
operational and financial restructuring in 1992 (the "Restructuring") to
refocus business operations around its profitable core wholesale men's apparel
businesses and to restructure its balance sheet. As of November 30, 1994, all
operational aspects of the Restructuring have been completed.
The Company's operations currently comprise the following businesses--Men's
Apparel Group ("MAG"), Women's Apparel Group and Kuppenheimer. MAG designs,
manufactures and markets tailored clothing, slacks and sportswear to retailers
for resale to consumers. The Women's Apparel Group is comprised of Barrie Pace,
a direct mail catalog marketer of women's apparel and accessories, and
International Women's Apparel ("IWA"), which markets women's career apparel to
department and specialty stores. Kuppenheimer is a 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. The Operating Segment Information on pages 31 and 32 in the
accompanying Notes to Consolidated Financial Statements further describes the
Company's 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 1994, tailored clothing represented approximately 61% of the
Company's total sales. Men's sportswear and slacks represented approximately
31% of sales and women's apparel represented approximately 8% of sales.
1
<PAGE>
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 and slacks are manufactured in
22 factories located in the United States. The Company also 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. The Barrie Pace catalog features branded products principally
purchased from unaffiliated sources, directed towards the business and
professional woman. IWA designs and sources women's career apparel and
sportswear for department and specialty stores under owned and licensed brand
names. 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.
At January 31, 1995, the Company operated 101 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. Included among these stores are 92 Kuppenheimer stores which remain
after the closing of approximately 80 poor performing stores related to the
Restructuring. There are also nine Sansabelt shops 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 20% 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 51% of
the Company's total fabric requirements in fiscal 1994. No other supplier
accounts for over 7% 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
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 by unaffiliated contractors
utilizing Company designs.
2
<PAGE>
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, and men's slacks with expected retail prices over $50. Its women's
apparel sales do not represent a significant percentage of total women's
apparel sales and 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 13% and 12% of
consolidated sales in 1994 and 1993, respectively. No other customer exceeded
6% of net sales.
Trademarks, Licensing Agreements and Research
A significant portion of the Company's sales are of products carrying brands
and trademarks owned by the Company. As noted previously, the Company also
manufactures and markets products pursuant to exclusive license agreements with
others. While the terms and duration of these license agreements with others
vary, typically they provide for certain minimum payments and are subject to
renewal and renegotiation.
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 11,000 employees, of which
approximately 90% are employed in MAG, 9% at Kuppenheimer and 1% in the Women's
Apparel Group. Most of the MAG and Kuppenheimer 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 employees are covered by other union contracts.
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. 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.
3
<PAGE>
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. 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. Peak borrowing levels occur in
late March and September, just prior to the collection of receivables from
men's tailored clothing advance order shipments.
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>
EXPIRATION
APPROXIMATE DATE OF
FLOOR AREA MATERIAL
LOCATION IN SQUARE FEET PRINCIPAL USE LEASES
- -------- -------------- --------------------------------------- ----------
<S> <C> <C> <C>
Anniston, AL............ 76,000 Manufacturing 1999
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 1995
Chicago, IL............. 102,000 Executive and operating company offices 2004
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............ 63,000 Sales offices/showrooms 2000
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>
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* 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.
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 page 26
of this Form 10-K.
ITEM 3--LEGAL PROCEEDINGS
Dior Proceedings. In 1989, Hart Schaffner & Marx ("HSM") and Christian Dior-
New York ("Dior") were adverse parties in various lawsuits filed in the Circuit
Court of Cook County, Illinois, arising out of a Trademark License Agreement
under which HSM manufactured and sold apparel products bearing Dior's
trademarks. These lawsuits were eventually settled and dismissed; however, the
settlement agreement among the parties has been the subject of an unfavorable
award in the amount of $1.3 million, plus interest and fees,
4
<PAGE>
against HSM in a subsequent arbitration proceeding and lawsuit which was
recently affirmed on appeal. In addition, both HSM and Dior have initiated
separate arbitration proceedings against each other. Hearings have been held on
the Dior proceeding, in which Dior claims over $5 million in actual damages
plus punitive damages, but no decision is expected before March 1995. An order
denying HSM's grant of second arbitration is pending before the Illinois
Appellate Court.
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, Inc.
("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 International, N.V. (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 notices of appeal with the Illinois Appellate Court on October 29, 1993,
and December 23, 1993. The appeals were consolidated by court order on February
8, 1994. Briefs have been filed with the Appellate Court, and the parties are
awaiting scheduling of oral argument.
After consultation with counsel, management of the Company believes that
there are meritorious defenses to the Dior Proceedings and Spillyards
Litigation referred to above and that such actions will not have a material
adverse effect on the Company's business or financial condition.
HSSI Matters. On August 29, 1994, The Hastings Group, Inc. ("Hastings")
acquired substantially all of the assets of HSSI, Hartmarx' former retail
affiliate, which Hartmarx sold in 1992 to HSSA. In connection with the sale to
Hastings, HSSI, its subsidiaries and an affiliate of HSSA, Maurice L.
Rothschild & Co. ("MLR"), settled principal case controversies in their Chapter
11 bankruptcy reorganization cases. Pursuant to the settlement, which was
approved by the Bankruptcy Court in an order that became final on August 29,
1994, the litigation among Hartmarx and its subsidiaries, and HSSA, HSSI, MLR
and certain other parties pending in the Bankruptcy Court, the Circuit Court of
Cook County, Illinois and the U.S. District Court for the Northern District of
Illinois (Eastern Division) was dismissed with prejudice in September 1994.
This litigation was previously described in Hartmarx' Annual Report on Form 10-
K for the year ended November 30, 1993, Quarterly Reports on Form 10-Q for the
quarters ended February 28, 1994, May 31, 1994 and August 31, 1994 and on
Schedule 5.6, Litigation; Adverse Facts, to the Credit Agreement dated March
23, 1994, and included various proceedings involving Hartmarx or its
subsidiaries. Under the settlement, Hartmarx has been granted an allowed
administrative claim of $2.5 million in the bankruptcy case of HSSI, unsecured
claims in the bankruptcy cases of HSSI and MLR totalling approximately $16.2
million, and additional allowed subordinated claims in the HSSI bankruptcy
case. Hartmarx has also agreed to share certain distributions, if and when
received, with other unsecured creditors of HSSI. In December 1994, a Plan of
Reorganization for MLR was confirmed by the Bankruptcy Court. No Plan has yet
been proposed for HSSI. The amount of any payments with respect to Hartmarx'
claims will depend on the value of the HSSI and MLR bankruptcy estates and
whether MLR and/or HSSI Plans of Reorganization confirmed by the Court are
actually consummated. There can be no assurance as to whether any such payments
will be made or the amounts or timing of such payments.
5
<PAGE>
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 and Mrs. Allen. 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 TO
SERVICE WITH PRESENT
NAME POSITION AGE COMPANY POSITION
---- ------------------------------- --- ------------ ----------
<S> <C> <C> <C> <C>
Elbert O. Hand..... Chairman and 55 30 1992
Chief Executive Officer
(Director since 1984)
Homi B. Patel...... President and 45 15 1993
Chief Operating Officer
(Director since January, 1994)
Wallace L. Rueckel. Executive Vice President and 51 2 1993
Chief Financial Officer
Mary D. Allen...... Executive Vice President 49 1 1994
General Counsel and Secretary
Glenn R. Morgan.... Senior Vice President, 47 15 1994
Finance and Administration,
Chief Accounting Officer
Frank A. Brenner... Vice President, Marketing 66 26 1983
Services
James E. Condon.... Vice President, Long-Term 44 17 1994
Planning
and Investor Relations
Linda J. Valentine. Vice President, Compensation 44 14 1993
and Benefits
Steven R. Davison.. Treasurer 43 10 1994
Andrew A. Zahr..... Controller 51 22 1994
</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.
Mary D. Allen became Executive Vice President, General Counsel and Secretary
in September 1994. Prior to joining the Company, she was employed by JMB Realty
Corporation for seven years during which she served in various capacities, most
recently as senior vice president.
On April 1, 1994, Carey M. Stein, formerly Executive Vice President,
Secretary, General Counsel and Chief Administrative Officer, terminated his
employment with the Company, such termination being deemed to be for good
reason, as that term is defined under his Employment Agreement with the
Company, attached hereto as exhibit 10-F-3. Mr. Stein has received the benefits
accorded him pursuant to that Agreement.
6
<PAGE>
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>
1994 1993 1992
------------ ----------- ----------
HIGH LOW HIGH LOW HIGH LOW
----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter............................ $7.375 $6.125 $8.25 $5.375 8.625 6.25
Second Quarter........................... 7.00 5.875 7.25 5.75 7.00 5.50
Third Quarter............................ 6.625 5.375 6.75 5.125 6.625 4.875
Fourth Quarter........................... 6.00 5.00 7.75 5.75 5.75 3.00
</TABLE>
The most recent quarterly dividend paid was in November, 1991, in the amount
of $.15 per share. The current financing agreements restrict the payment of
dividends to 50% of 1994 consolidated net income, as defined, subject to a
cumulative maximum amount of $22.5 million. The current financing agreements
also contain various restrictive covenants pertaining to minimum net worth,
additional debt incurrence, capital expenditures, asset sales, operating
leases, 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 was in compliance with all covenants under these
agreements.
As of February 15, 1995, there were approximately 6,900 stockholders of the
Company's $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.
7
<PAGE>
ITEM 6--SELECTED FINANCIAL DATA
The following table summarizes data from the Company's annual financial
statements for the years 1990 through 1994 and the notes thereto; the Company's
complete annual financial statements and notes thereto for fiscal 1994 appear
elsewhere herein.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
IN THOUSANDS, EXCEPT PER
SHARE DATA
FOR YEARS ENDED NOVEMBER
30 1994 1993 1992 1991 1990
------------------------ -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $717,706 $731,980 $1,053,949 $1,215,310 $1,295,840
Other income............ 7,412 5,980 9,566 10,761 14,286
Cost of sales........... 505,564 505,179 703,645 781,303 806,237
Operating expenses...... 187,765 203,502 374,785 467,470 492,147
Restructuring and retail
consolidation charges.. -- -- 190,800 13,500 77,600
Earnings (loss) before
interest and taxes..... 31,789 29,279 (205,715) (36,202) (65,858)
Interest expense........ 21,214 22,869 21,135 23,793 28,952
Earnings (loss) before
taxes and extraordinary
charge................. 10,575 6,410 (226,850) (59,995) (94,810)
Tax (provision) benefit. 9,435 (190) 6,605 21,630 33,265
Earnings (loss) before
extraordinary charge... 20,010 6,220 (220,245) (38,365) (61,545)
Extraordinary charge,
net of tax benefit..... (3,862) -- -- -- --
Net earnings (loss)..... 16,148 6,220 (220,245) (38,365) (61,545)
Net earnings (loss) per
share:
before extraordinary
charge................ .62 .20 (8.59) (1.74) (3.11)
after extraordinary
charge................ .50 .20 (8.59) (1.74) (3.11)
Cash dividends per
share.................. -- -- -- .60 .90
Average number of common
shares and equivalents. 32,243 31,375 25,629 22,056 19,786
<CAPTION>
BALANCE SHEET DATA
IN THOUSANDS, EXCEPT PER
SHARE DATA
AT NOVEMBER 30
------------------------
<S> <C> <C> <C> <C> <C>
Cash.................... $ 2,823 $ 1,507 $ 22,356 $ 6,571 $ 2,731
Accounts receivable..... 114,597 120,442 159,772 134,748 132,719
Inventories............. 183,347 193,818 216,751 404,995 409,599
Other current assets.... 11,670 21,948 30,894 32,318 32,845
Net properties.......... 51,543 56,477 66,846 149,656 172,470
Other assets/deferred
taxes.................. 28,220 10,919 15,340 11,560 11,803
Total assets............ 392,200 405,111 511,959 739,848 762,167
Accounts payable,
accrued expenses and
taxes.................. 76,049 63,001 126,932 167,191 181,499
Total debt.............. 187,784 233,113 314,602 285,649 288,130
Shareholders' equity.... 128,367 108,997 70,425 287,008 292,538
Equity per share........ 3.95 3.41 2.72 11.32 14.60
<CAPTION>
OTHER DATA
IN THOUSANDS
FOR YEARS ENDED NOVEMBER
30
------------------------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before
interest, taxes,
depreciation,
amortization and
extraordinary charge... $ 43,822 $ 43,386 $ (178,768) $ (2,393) $ (30,639)
Depreciation and
amortization of fixed
assets................. 12,033 14,107 26,947 33,809 35,219
Capital expenditures.... 7,124 5,953 9,546 15,488 21,621
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, along with the Financing, Taxes on Earnings and Restructuring
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
Results for 1994 reflected the second consecutive year of earnings
improvement following the now completed 1992 Restructuring ("Restructuring"),
as pre-tax earnings increased 65% over 1993. The Company further strengthened
its financial condition during 1994 through the refinancing of substantially
all of its borrowings (the "1994 Refinancing"), which, among other things,
lengthened maturities and shifted $115 million of borrowings from variable to
fixed rate debt.
8
<PAGE>
The Company's businesses currently comprise: (i) Men's Apparel Group ("MAG"),
which designs, manufactures and markets men's tailored clothing on a wholesale
basis, principally through its Hart Schaffner & Marx, 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 business and professional women through its
catalogs, and International Women's Apparel ("IWA"), which markets women's
career apparel and sportswear to department and specialty stores under owned
and licensed brand names. The Restructuring refocused the principal business
operations around the profitable MAG whereby substantial retail operations and
other non-core businesses of the Company were sold or liquidated.
RESULTS OF OPERATIONS
Consolidated 1994 sales were $717.7 million compared to $732.0 million in
1993 and $1.054 billion in 1992. The 2.0% decline in 1994 compared to 1993
principally resulted from fewer stores at Kuppenheimer along with the sale of
the Fashionaire uniform business during 1993, as sales increased 2% excluding
these factors. The 30.5% decline from 1992 to 1993 was substantially
attributable to the disposition or discontinuance of various businesses as a
result of the Restructuring, as sales in 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 to HSSI, a retail business formerly owned by the Company and sold
in September, 1992).
Consolidated 1994 pre-tax income increased 65% to $10.6 million from $6.4
million in 1993; the 1992 pre-tax loss was $226.9 million, which included
$190.8 million related to the Restructuring and the aggregate operating losses
associated with businesses sold or discontinued as part of the Restructuring.
As discussed below, results for 1994 reflected recognition of non-cash income
tax benefits of $9.4 million associated with operating loss carryforwards
expected to be realized in future periods. After considering this tax benefit,
consolidated net earnings were $20.0 million or $.62 per share (prior to the
$3.9 million or $.12 per share extraordinary charge associated with the early
repayment of loans associated with the 1994 Refinancing). This compared
favorably to 1993 net earnings of $6.2 million or $.20 per share. The net loss
for 1992 was $220.2 million or $8.59 per share.
The following summarizes sales and earnings before interest and taxes
("EBIT") for the Company's principal business groups (in millions):
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER
30,
------------------------
1994 1993 1992
------ ------ --------
<S> <C> <C> <C>
Sales:
Men's Apparel Group.......................... $569.7 $553.9 $ 630.4
Kuppenheimer................................. 95.8 125.8 136.8
Women's Apparel Group........................ 52.2 52.3 32.7
Other, net of intergroup sales............... -- -- 254.0
------ ------ --------
Total...................................... $717.7 $732.0 $1,053.9
====== ====== ========
EBIT:
Men's Apparel Group.......................... $ 46.3 $ 43.2 $ 37.2
Kuppenheimer................................. 1.7 (1.0) (12.2)
Women's Apparel Group........................ (4.1) (2.9) 1.7
Other and adjustments........................ (12.1) (10.0) (232.4)
------ ------ --------
Total...................................... $ 31.8 $ 29.3 $ (205.7)
====== ====== ========
</TABLE>
9
<PAGE>
MAG sales were $570 million in 1994, $554 million in 1993 and $630 million in
1992. The improvement in 1994 compared to 1993 reflected the initial season
introduction of Tommy Hilfiger tailored clothing and slacks, along with
increases in other brands, which more than offset the impact of the reduction
in sales to HSSI and its successor. Sales to HSSI and its successor declined to
$27 million in 1994 from $36 million in 1993 and $67 million in 1992. Prior to
the September, 1992 disposition of HSSI, such sales were considered
intercompany and not included in consolidated sales. The 12.1% MAG sales
decrease in 1993 compared to 1992 was substantially attributable to
discontinuing or selling the outerwear and uniform manufacturing businesses and
lower sales to HSSI. MAG EBIT improved to $46 million in 1994 from $43 million
in 1993 and $37 million in 1992. The EBIT improvement in 1994 compared to 1993
reflected higher sales while results for 1992 included sales and losses
associated with sold and discontinued businesses. Tailored clothing represented
the most significant contributor to earnings in each year.
Kuppenheimer sales of $96 million in 1994 declined 24% from $126 million in
1993, which reflected both a 45 store reduction associated with Kuppenheimer's
repositioning and a 7% decrease in comparable store sales. The comparable store
decrease was 6% in 1993 and 5% in 1992. Kuppenheimer operated 92 stores at year
end 1994 compared to 137 in 1993 and 169 in 1992. The 8% Kuppenheimer sales
decline in 1993 compared to 1992 was attributable to both fewer stores and the
comparable stores decrease. Kuppenheimer's earnings improved to almost $2
million in 1994 following losses of $1 million in 1993 and $12 million in 1992.
The favorable results in 1994 compared to 1993 were principally attributable to
administrative expense reductions which more than offset the effect of the
lower comparable store sales. Kuppenheimer's results for 1992 included
restructuring charges associated with its now completed store closing program.
Women's Apparel Group sales were $52 million in 1994, $52 million in 1993 and
$33 million in 1992. Catalog sales continued to increase in each year. In the
IWA business, new product lines were added in 1993, two of which were
discontinued during 1994. Women's Apparel Group loss before interest and taxes
was $4 million in 1994 and $3 million in 1993 following $2 million earnings in
1992. The IWA business incurred losses in each year, principally associated
with the two unprofitable product lines which were discontinued in 1994. The
Barrie Pace business was profitable in each year, although 1994 results were
unfavorably impacted compared to 1993 from lower relative response rates on an
increased number and size of catalogs distributed.
Gross Margins. The consolidated gross margin percentage of sales was 29.6% in
1994, 31.0% in 1993 and 33.2% in 1992, a decline which primarily resulted from
the change in business mix. The MAG businesses generally produce a lower gross
margin percentage to sales (and lower selling, administrative and occupancy
expenses) compared to Kuppenheimer and represented 79% of consolidated sales in
1994 compared to 76% in 1993 and 60% in 1992. Gross margins reflected income of
$2.3 million in 1994, down from $3.6 million in 1993 and $3.3 million in 1992
associated with the reduction of inventories maintained on a LIFO cost basis;
LIFO income produced a favorable impact on consolidated gross margin of .3% in
1994, .5% in 1993 and .3% in 1992. The MAG gross margin percentage in 1994 was
approximately even with 1993 following a slight improvement compared to 1992.
Gross margins in the Kuppenheimer business were slightly ahead in 1994 compared
to 1993 and 1992. In the women's businesses, the gross margin ratios declined
in 1994, principally from inventory dispositions associated with discontinued
product lines in the IWA business; however, margins also declined in the
catalog business due to a greater proportion of units sold at less than full
price. Women's gross margin in 1993 was unfavorable compared to 1992,
attributable to lower margins at IWA, as Barrie Pace margins improved.
Selling, Administrative and Occupancy Expenses. Selling, administrative and
occupancy expenses declined to $188 million in 1994 from $204 million in 1993
and $375 million in 1992, principally reflecting discontinued businesses but
also from expense reduction programs effected in continuing businesses.
Expenses as a percentage of sales decreased to 26.2% in 1994 compared to 27.8%
in 1993 and 35.6% in 1992. The percentage decline in each period reflected in
part the greater proportion of MAG sales with its lower operating expense ratio
to sales compared to both Kuppenheimer and the Women's Apparel Group.
10
<PAGE>
Operating expenses declined both in dollars and as a percentage of sales in
both MAG and Kuppenheimer in 1994 compared to 1993; Women's Apparel Group
expenses experienced a small increase resulting from additional catalogs and
pages distributed in 1994 compared to 1993 and lower relative response rates.
MAG operating expenses declined in 1993 compared to 1992 principally from sold
or liquidated operations although the percentage to sales was approximately the
same. Kuppenheimer's operating expenses declined substantially both in dollars
and as a percentage of sales in 1993 as compared to 1992.
Advertising expenditures, which are included in the selling, administrative
and occupancy expenses, declined to $18 million in 1994 from $20 million in
1993 and $33 million in 1992, representing 2.5%, 2.7% and 3.1% of consolidated
sales, respectively. The decline in 1994 compared to 1993 was principally
attributable to lower dollar expenditures at Kuppenheimer from its fewer stores
and at IWA due to the discontinuance of two brands during the year. Advertising
expenditures for 1994 in MAG increased both in dollars and as a percentage of
sales compared to 1993, reflecting in part the introduction of Tommy Hilfiger
tailored clothing and slacks. The dollar and percentage declines in 1993
compared to 1992 were principally attributable to the disposition of HSSI and
discontinuing other businesses.
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Post-Retirement Benefits Other Than Pensions ("FAS 106"), was adopted by
the Company effective December 1, 1993. As required retiree contributions
offset the cost of the Company sponsored medical program, no transition
obligation existed upon adoption of FAS 106 and there was no effect on either
net earnings or shareholders' equity. Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Post-Employment 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 will not have a material impact on its results of
operations or financial condition.
Other Income. Licensing and other income aggregated $7.4 million in 1994,
$6.0 million in 1993 and $9.6 million in 1992. This caption principally
comprised licensing income in 1994 and 1993 and also included service charges
on the retail receivables in 1992.
Interest Expense. Interest expense was $21 million in 1994, $23 million in
1993 and $21 million in 1992. The $2 million decrease in 1994 compared to 1993
was attributable to lower average borrowings, principally from working capital
reductions and earnings. The 1994 Refinancing shifted $115 million of
borrowings from rates variable with changes in the prime rate to fixed rate
debt averaging close to 11%. The Company's weighted average short term
borrowing rate declined to 7.5% in 1994 from 7.9% in 1993, despite the general
increase in interest rates during 1994, due to the favorable effect from the
1994 Refinancing. The $2 million increase in 1993 compared to 1992 was
attributable to higher interest rates associated with a prior refinancing
completed in December 1992, along with higher financing fees and amortization
costs. Interest expense included non-cash amortization of financing fees and
expenses of $1.7 million in 1994, $2.0 million in 1993 and a nominal amount in
1992. The effective interest rate for all borrowings, including amortization
costs, was 9.6% in 1994, 9.0% in 1993 and 7.2% in 1992.
Income Taxes. The recorded tax provision or benefit in each year reflected
the fiscal 1992 adoption of Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("FAS 109"). FAS 109 requires, among other
things, the recognition of deferred tax assets, including the future benefit
associated with net operating loss carryforwards, a periodic evaluation of the
likelihood that the deferred tax assets are realizable and the establishment of
a valuation allowance, in certain circumstances, to offset deferred tax assets
to the extent realization is not considered more likely than not.
During 1992, only a nominal tax benefit was recorded due to the uncertainty
that the substantial operating loss carryforwards would be realized after
considering the 1990-1992 operating losses and absence of available carrybacks
to prior tax years. Approximately $2 million of the valuation allowance
offsetting the deferred tax asset was reversed during 1993 associated with 1993
pre-tax income for financial reporting; the
11
<PAGE>
1993 effective tax rate of 3% was applicable to state income taxes. In the
fourth quarter of fiscal 1994, the Company reevaluated its deferred tax asset
and reversed a portion of its valuation allowance, resulting in a recognized
tax benefit of $9.4 million. Among the factors considered in the recognition
were:
. a second year of profitability in 1994 following the operating losses
during the 1990-1992 period;
. a history of sustained profitability of the core MAG businesses, even
during the 1990-1992 loss years which had been caused principally by
the businesses subsequently sold or discontinued pursuant to the
Restructuring;
. the Company's expected future operating income;
. termination of litigation related to a business sold in 1992, which
eliminated the possibility of a large contingent liability in the
event of an adverse ruling;
. the substantial portion of the available operating loss carryforwards
do not expire until the 2007-2009 period;
. the expected impact of temporary differences between taxable income
and income reported for financial statement purposes.
After giving effect to the benefit from the recognition of a portion of
future net operating loss carryforwards, the remaining valuation reserve at
November 30, 1994 was $55.5 million. 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. (Also see "Liquidity and Capital Resources" for further
discussion of deferred tax assets and remaining net operating loss
carryforwards.)
Extraordinary Charge. Net earnings before extraordinary charge were $20.0
million in 1994 compared to earnings of $6.2 million in 1993 and a loss of
$220.2 million in 1992. Fiscal 1994 reflected a $3.9 million extraordinary
charge, net of a $.1 million state tax benefit, associated with the early
extinguishment of debt resulting from the 1994 Refinancing. Net earnings after
the extraordinary charge were $16.1 million or $.50 per share.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1994, the Company replaced its $307 million borrowing facility,
originally due to mature on December 30, 1995, with $100 million of public
subordinated notes, a $175 million revolving credit facility with a bank
lending group and the private placement of $15.5 million of industrial
development bonds. The 1994 Refinancing accomplished several of the Company's
objectives, including extending maturities, reducing the level of borrowings
subject to interest rate variability and establishing a separate working
capital facility providing greater flexibility in addressing the Company's
seasonal borrowing requirements.
As described in the accompanying Notes to Financial Statements, the $100
million principal amount of 10 7/8% senior subordinated notes is due January
15, 2002 (the "Notes"). The three year revolving financing agreement (the
"Credit Facility") provides for maximum borrowings of $175 million (including a
$25 million letter of credit facility) secured by inventories, accounts
receivable and intangibles of the Company and its subsidiaries. Proceeds from
these two transactions were utilized to repay $236 million of borrowings then
outstanding related to the Company's principal lending facility then in effect.
This repayment also reflected the purchase of the $12.2 million note of the
Company's employee stock ownership plan from a lender, which had been
guaranteed by the Company. The prior lending facility was terminated upon
completion of the Notes and Credit Facility transactions. Earlier in fiscal
1994, two industrial development bonds aggregating $15.5 million associated
with the prior lending facility were refinanced.
The Credit Facility contains certain 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, ratios relating to minimum accounts payable to inventory, maximum
funded debt
12
<PAGE>
to EBITDA and minimum fixed charge coverage, as well as other customary
covenants, representations and warranties, and events of default. The
collective operating and financial covenants currently in effect are less
burdensome compared to those under the prior lending facility. The Company does
not expect that the current restrictions will cause significant limitations on
the Company's financial flexibility.
As indicated in the accompanying Consolidated Statement of Cash Flows, the
net cash provided by operating activities was $56 million in 1994 compared to
$30 million in 1993 and net cash used in operating activities of $7 million in
1992. The improvement in 1994 compared to 1993 was principally attributable to
the higher earnings and reduction in working capital requirements. Net accounts
receivable of $114.6 million at November 30, 1994 declined $5.8 million or 4.9%
compared to November 30, 1993, reflecting improved collections. The allowance
for doubtful accounts declined to $7.4 million from $9.9 million in 1993
representing 6.0% of gross receivables in 1994 as compared to 7.6% in 1993,
reflecting the write off of receivables previously reserved associated with the
Restructuring. Inventories of $183.3 million at November 30, 1994 declined
$10.5 million or 5.4% compared to November 30, 1993 principally attributable to
fewer Kuppenheimer stores. Inventory turn in continuing businesses improved.
Prepaid expenses declined from $15.3 million at November 30, 1993 to $6.7
million at November 30, 1994, principally attributable to worker's compensation
deposits which, during 1994, were converted to letter of credit arrangements.
Recoverable and deferred income taxes at November 30, 1994 aggregated $16.8
million compared to $6.6 million at November 30, 1993. The balance at November
30, 1994 reflected a valuation allowance of $55.5 million ($68.9 million in
1993) principally related to tax assets associated with prior years' operating
losses. As discussed previously, the Company has assessed 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 method for those inventories
currently valued under the LIFO valuation method). Future reversals of the
valuation allowance in whole or in part represent a contingent asset which
would increase earnings and shareholders' equity. Also, see discussion under
"Income Taxes". Approximately $11.8 million of the total deferred income taxes
has been classified as non-current, principally associated with the benefit
recognized attributable to expected utilization of future net operating loss
carryforwards. At November 30, 1994, the Company had over $180 million of
federal tax net operating loss carryforwards available to offset future taxable
income.
At November 30, 1994, net properties were $51.5 million compared to $56.5
million in 1993. The decline principally reflected depreciation expense
exceeding capital additions. Capital additions during 1994 were $7.1 million
compared to $6.0 million in 1993. The capital expenditure limitations contained
in the Company's present borrowing agreements are not expected to result in
delaying capital expenditures otherwise planned by the Company. Capital
additions during the next several years applicable to existing businesses are
expected to be principally funded from cash generated from operations. The
Company is also assessing the merits of acquiring foreign production facilities
for suit and trouser manufacturing.
At November 30, 1994, total debt of $187.8 million declined by $45.3 million
compared to November 30, 1993, principally from cash generated from earnings
and lower working capital requirements. The $20 million of notes payable
classified as current at November 30, 1994 reflected the anticipated seasonal
repayments within fiscal 1995. Total debt, including short term borrowings and
current maturities, represented 59% of the total $316 million capitalization at
November 30, 1994, compared to 68% at November 30, 1993; the lower percentage
reflected 1994 earnings, the debt reduction and equity sales to employee
benefit plans during the year. Total borrowing availability was $95 million at
November 30, 1994.
Shareholders' equity of $128.4 million at November 30, 1994 represented $3.95
book value per share compared to $3.41 book value per share at November 30,
1993. The $19.4 million increase during 1994 reflected the net earnings for the
year, ongoing equity sales to employee benefit plans and recognition of
previously unearned employee benefits principally associated with the Company's
employee stock ownership
13
<PAGE>
plan. Dividends were not paid in either fiscal 1994 or 1993. The current Credit
Facility restricts, but does not prohibit, the payment of dividends.
Considering the impact of inflation, the current value of net assets would be
higher than the Company's $128 million book value after reflecting the
Company's use of LIFO inventory method and increases in the value of the
properties since acquisition. Earnings would be lower than reported, assuming
higher depreciation expense without a corresponding reduction in taxes.
OUTLOOK
The Company completed 1994 as a multi-product manufacturing and marketing
apparel organization with substantial and sustained market share of its long
standing tailored clothing products. Market share was increased in
complementary product lines, such as sportswear, slacks and golfwear utilizing
distribution channels similar to its tailored clothing offerings.
The outlook for 1995 anticipates continued emphasis on the core manufacturing
and marketing businesses comprising the Men's Apparel Group, product line and
brand extensions closely associated with existing strengths and competencies,
debt reduction from earnings generated from operations and close monitoring of
working capital requirements. Two unprofitable product lines in the IWA
wholesale business, now discontinued, were the principal contributors to the
operating loss in the Women's Apparel Group; the investment in the IWA business
has been reduced, and there is now a more focused concentration on classic and
career product lines with less fashion risk. The size and number of catalogs
distributed by the Barrie Pace business were substantially increased during
1994 with the objective of obtaining new customers; postage and paper cost
increases effective for fiscal 1995 will make profitable sales growth in the
near term more challenging. Kuppenheimer returned to profitability during 1994
following operating losses in 1992 and 1993, and the completion of its
downsizing plan resulted in both working capital and net property reductions.
In October, 1994, an investment bank was retained to review alternative
strategies for Kuppenheimer with the objective of redeploying the Company's
investment in this business to the wholesale businesses, where growth prospects
are believed to be more favorable.
As anticipated, sales to the Company's former retail subsidiary declined
during 1994, and represented approximately one-fourth of the 1990 peak volume
with this customer. While further reductions are anticipated for 1995, a
substantial portion of the revenue reduction has been replaced through new and
existing customers. During 1994, the litigation between the Company and the
purchasers of HSSI was resolved.
Ongoing quick response and electronic data interchange relationships with
major customers, enabling the rapid replenishment of inventory for selected
product styles and enhanced service capability, are expected to continue as an
important factor of product distribution. International licensing programs
continue to expand. The passage of NAFTA and GATT will result in gradual
reductions in duties and quotas for both finished apparel and fabric. The
Company has historically utilized foreign sources for both fabric and certain
finished apparel products and such usage is expected to increase especially for
its sportswear and more casual product lines. The Company contemplates
complementing its current production capacity by adding additional production
capabilities in Latin America.
Following the successful 1994 launch of Tommy Hilfiger tailored clothing and
slacks, the Company recently entered into agreements for the licensing of Perry
Ellis and Daniel Hechter tailored clothing through the newly formed Novapparel
subsidiary, effective for Fall, 1995 shipments. The Company continues its
growth emphasis in men's slacks and sportswear, which include the golf inspired
collections under the Jack Nicklaus and Bobby Jones brands; women's golf lines
have been added for 1995 under these labels and a new "Jack Nicklaus Signature"
sportswear line will be distributed principally to department stores. Although
these new product lines will not generate significant volume and earnings in
1995, enhanced market share and earnings growth will augment the Company's more
established brands and product lines.
14
<PAGE>
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Accountants....................................... 16
Consolidated Statement of Earnings for the three years ended November
30, 1994............................................................... 17
Consolidated Balance Sheet at November 30, 1994 and 1993................ 18
Consolidated Statement of Cash Flows for the three years ended November
30, 1994............................................................... 19
Consolidated Statement of Shareholders' Equity for the three years ended
November 30, 1994...................................................... 20
Notes to Consolidated Financial Statements.............................. 21
Financial Statement Schedules
Schedule VIII--Valuation and Qualifying Accounts...................... F-1
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.
Supplementary Data:
Quarterly Financial Summary (unaudited)................................. 32
</TABLE>
15
<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, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended November 30, 1994, 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 LLP
Chicago, Illinois
January 9, 1995
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 or 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.
16
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(000'S OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER
30,
------------------------------
1994 1993 1992
-------- -------- ----------
<S> <C> <C> <C>
Net sales...................................... $717,706 $731,980 $1,053,949
Licensing and other income..................... 7,412 5,980 9,566
-------- -------- ----------
725,118 737,960 1,063,515
-------- -------- ----------
Cost of goods sold............................. 505,564 505,179 703,645
Selling, administrative and occupancy expenses. 187,765 203,502 374,785
Restructuring charge........................... -- -- 190,800
-------- -------- ----------
693,329 708,681 1,269,230
-------- -------- ----------
Earnings (loss) before interest, taxes and
extraordinary charge.......................... 31,789 29,279 (205,715)
Interest expense............................... 21,214 22,869 21,135
-------- -------- ----------
Earnings (loss) before taxes and extraordinary
charge........................................ 10,575 6,410 (226,850)
Tax (provision) benefit........................ 9,435 (190) 6,605
-------- -------- ----------
Earnings (loss) before extraordinary charge.... 20,010 6,220 (220,245)
Extraordinary charge, net of $120 tax benefit.. (3,862) -- --
-------- -------- ----------
Net earnings (loss)............................ $ 16,148 $ 6,220 $ (220,245)
======== ======== ==========
Earnings (loss) per share:
Primary and fully diluted:
before extraordinary charge................... $ .62 $ .20 $ (8.59)
after extraordinary charge.................... $ .50 $ .20 $ (8.59)
</TABLE>
(See accompanying notes to consolidated financial statements)
17
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
(000'S OMITTED)
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1994 1993
ASSETS -------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................ $ 2,823 $ 1,507
Accounts receivable, less allowance for doubtful accounts
of $7,368 in 1994 and $9,914 in 1993.................... 114,597 120,442
Inventories.............................................. 183,347 193,818
Prepaid expenses......................................... 6,672 15,346
Recoverable and deferred income taxes.................... 4,998 6,602
-------- --------
Total current assets................................... 312,437 337,715
-------- --------
INVESTMENTS AND OTHER ASSETS............................... 16,403 10,919
-------- --------
DEFERRED INCOME TAXES...................................... 11,817 --
-------- --------
PROPERTIES
Land..................................................... 3,877 3,882
Buildings and building improvements...................... 58,498 58,345
Furniture, fixtures and equipment........................ 112,850 114,574
Leasehold improvements................................... 27,964 32,155
-------- --------
203,189 208,956
Accumulated depreciation and amortization................ (151,646) (152,479)
-------- --------
Net properties......................................... 51,543 56,477
-------- --------
TOTAL ASSETS............................................... $392,200 $405,111
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable............................................ $ 20,000 $ 25,000
Current maturities of long term debt..................... 699 697
Accounts payable......................................... 38,455 30,246
Accrued payrolls......................................... 19,818 18,351
Other accrued expenses................................... 17,776 14,404
-------- --------
Total current liabilities.............................. 96,748 88,698
-------- --------
LONG TERM DEBT, less current maturities.................... 167,085 207,416
-------- --------
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value; 2,500,000 authorized and
unissued................................................ -- --
Common shares, $2.50 par value; authorized 75,000,000;
issued 32,477,800 in 1994 and 31,951,464 in 1993........ 81,194 79,878
Capital surplus.......................................... 76,063 74,256
Retained earnings (deficit).............................. (17,231) (33,379)
Unearned employee benefits............................... (11,659) (11,758)
-------- --------
Shareholders' equity..................................... 128,367 108,997
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................. $392,200 $405,111
======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
18
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER
30,
----------------------------
1994 1993 1992
-------- ------- ---------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from operating activities:
Net earnings (loss), including extraordinary
charge........................................ $ 16,148 $ 6,220 $(220,245)
Extraordinary charge, net of tax benefit....... 3,862 -- --
Reconciling items to adjust net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization................ 13,771 16,061 26,947
Loss on sale of subsidiary................... -- 136,000
Changes in:
Accounts receivable:
Sale of receivables...................... -- -- (58,000)
Other changes............................ 5,845 42,330 23,076
Inventories................................ 10,471 12,901 68,944
Prepaid expenses........................... 7,402 1,773 (10,215)
Other assets............................... (3,152) 3,156 (4,280)
Accounts payable and accrued expenses...... 11,381 (61,763) 8,541
Taxes and deferred taxes................... (10,093) 7,113 10,439
Adjustment of properties to net realizable
value....................................... -- 1,901 11,510
-------- ------- ---------
Net cash provided by (used in) operating
activities.................................... 55,635 29,692 (7,283)
-------- ------- ---------
Cash Flows from investing activities:
Capital expenditures........................... (7,124) (5,953) (9,546)
Cash received re disposition, net of subsidiary
cash.......................................... -- 4,500 --
-------- ------- ---------
Net cash used in investing activities.......... (7,124) (1,453) (9,546)
-------- ------- ---------
Cash Flows from financing activities:
Proceeds from issuance of 10 7/8% Sr. Sub.
Notes, net.................................... 96,572 -- --
Proceeds from new Credit Facility, net......... 132,727 -- --
Payment of borrowings under Override Agreement. (235,999) -- --
Decrease in notes payable...................... (43,020) -- --
Increase (decrease) in notes payable under
Override Agreement............................ -- (80,600) 30,796
Decrease in other long term debt............... (697) (840) (1,133)
Proceeds from equity sale...................... -- 29,880 --
Proceeds from other equity transactions........ 3,222 2,472 2,951
-------- ------- ---------
Net cash provided by (used in) financing
activities.................................... (47,195) (49,088) 32,614
-------- ------- ---------
Net increase (decrease) in cash and cash
equivalents................................... 1,316 (20,849) 15,785
Cash and cash equivalents at beginning of year. 1,507 22,356 6,571
-------- ------- ---------
Cash and cash equivalents at end of year....... $ 2,823 $ 1,507 $ 22,356
======== ======= =========
Supplemental cash flow information
Net cash paid (received) during the year for:
Interest expense............................. $ 16,700 $23,800 $ 22,200
Income taxes................................. 800 (6,900) (17,000)
</TABLE>
(See accompanying notes to consolidated financial statements)
19
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
PAR VALUE RETAINED UNEARNED
OF CAPITAL EARNINGS EMPLOYEE TREASURY
COMMON STOCK SURPLUS (DEFICIT) BENEFITS SHARES
------------ ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
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
employee 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, primarily to
employee benefit plans.. 823 898 10 3
Private placement of
common stock............ 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) --
Net earnings for the
year.................... 16,148
Issuance of 309,815
shares, primarily to
employee benefit plans.. 774 843
Stock options exercised
(7,079 shares including
6,250 shares issued upon
exercise of 6,250 $1.00
Director Stock Options). 18 22
Issuance of 209,442
shares for Restricted
Stock Awards............ 524 942 (1,466)
Allocation of unearned
employee benefits....... 1,565
------- ------- --------- -------- --------
Balance at November 30,
1994...................... $81,194 $76,063 $ (17,231) $(11,659) $ --
======= ======= ========= ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
20
<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 29% and 23% of the Company's inventories at November 30, 1994 and
1993, respectively, representing certain 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
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 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--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.
Retirement Plans--The Company and its subsidiaries maintain benefit plans
covering substantially all employees other than those covered by multi-employer
plans. Pension expense or income for the Company's principal defined benefit
plan is determined using the projected unit credit method. Pension 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--A contributory health insurance program is 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, if the Company
continues to make this program available. Effective December 1, 1993, the
Company adopted Statement of Financial Accounting
21
<PAGE>
Standards No. 106--Employers' Accounting for Postretirement Benefits Other Than
Pensions. This statement requires recognition of a liability for postretirement
benefits as the employee renders service, rather than as claims are paid or
incurred. Adoption of the statement had no impact on cash flows. Since the
required retiree contributions offset the cost of the available medical
program, no transition obligation existed at adoption and, accordingly, there
was no effect on either net income or shareholders' equity.
Other Post-Employment 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 of the statement will not have a material impact on its
results of operations or 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 32,243,000 in 1994, 31,375,000 in 1993 and 25,629,000 in
1992. 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. The warrant
expires on September 20, 1995.
FINANCING
On March 23, 1994, the Company issued $100 million principal amount of 10
7/8% Senior Subordinated Notes due January 15, 2002 ("Notes") in a public
offering, and also entered into a new three year financing agreement ("Credit
Facility") with a group of lenders providing for maximum borrowings of $175
million (including a $25 million letter of credit facility) secured by eligible
inventories, accounts receivable and the intangibles of the Company and its
subsidiaries. Proceeds from these two transactions ("1994 Refinancing") were
utilized to repay $236 million of borrowings then outstanding related to the
Company's principal lending facility then in effect. The prior facility was
terminated upon completion of the Notes and Credit Facility transactions.
Borrowing availability under the Credit Facility is being utilized for
general corporate purposes. Borrowings are subject to a borrowing base formula
based upon eligible accounts receivable and inventories at rates selected by
the Company which are either (i) LIBOR plus 2.50% or (ii) 1.5% over the base
rate of a major bank. The Credit Facility contains certain provisions for these
rates to decline upon the achievement of certain operating performance ratios.
Financing fees pertaining to the Notes and Credit Facility aggregated $5.9
million and are being amortized over the life of the respective agreements.
Certain other fees are also payable under the Credit Facility and Notes based
on services provided.
The Notes and Credit Facility contain various restrictive covenants
pertaining to minimum net worth, additional debt incurrence, capital
expenditures, asset sales, operating leases, 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 was in
compliance with the above noted covenants.
22
<PAGE>
Earlier in fiscal 1994, two industrial development bonds ("IDBs") aggregating
$15.5 million were refinanced. The $7.5 million IDB matures on July 1, 2014,
while the $8.0 million IDB is due on July 1, 2015. The effective interest rate
on these obligations is 7.5%. As a result of the 1994 Refinancing noted above,
the Company recorded an extraordinary charge of $3.9 million, net of a $.1
million tax benefit, in the second fiscal quarter of 1994 representing the loss
from early extinguishment of the prior debt.
At November 30, 1994 and 1993, long term debt, less current maturities,
comprised the following (000's omitted):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Notes payable.......................................... $ 66,900 $153,696
10 7/8% Senior Subordinated Notes, net................. 99,383 --
Industrial development bonds........................... 20,643 20,943
Other debt, extending to 2003.......................... 858 1,255
Notes payable to insurance companies................... -- 45,000
ESOP loan guarantee.................................... -- 12,219
-------- --------
187,784 233,113
Less--current maturities............................... 20,699 25,697
-------- --------
Long term debt......................................... $167,085 $207,416
======== ========
</TABLE>
Industrial development bonds, 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 $12.5 million at
November 30, 1994. Interest rates on the various borrowing agreements range
from 5.5% to 8.5% (average of 7.4% at November 30, 1994 and 4.4% at November
30, 1993). The two IDBs totaling $15.5 million refinanced during fiscal 1994
are callable by the Company beginning July 1, 2000 at a 3% premium, declining
to par on July 1, 2003.
Other long term debt includes installment notes and mortgages with interest
rates ranging from 8% to 11.5% per annum (average of 9.9% at November 30, 1994
and 10.2% at November 30, 1993).
Accrued interest included in the Other Accrued Expenses caption in the
accompanying balance sheet was $5.7 million at November 30, 1994 and $1.2
million at November 30, 1993.
The approximate principal reductions required during the next five fiscal
years, including reductions under the Credit Facility which expires in 1997,
are as follows: $.7 million in 1995; $.5 million in 1996; $67.0 million in
1997; $.1 million in 1998; $.1 million in 1999.
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. Prior to the 1994 Refinancing, the ESOP loan was guaranteed by the
Company and, accordingly, the amount outstanding had been included in the
Company's consolidated balance sheet as a liability and shareholders' equity
has been reduced for the amount representing unearned employee benefits. As
part of the 1994 Refinancing, the Company purchased the remaining interest in
the loan from the financial institution holding the ESOP note. Company
contributions to 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 unearned employee
benefits are correspondingly reduced.
Information related to loan repayments by the ESOP are as follows (000's
omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Principal payments.................................. $ 526 $ -- $ 342
Interest payments................................... 1,171 1,041 1,100
------ ------ ------
Total loan payments made by ESOP.................... $1,697 $1,041 $1,442
====== ====== ======
</TABLE>
As of November 30, 1994, 227,896 of the 620,155 shares of common stock have
been allocated to the accounts of the ESOP participants.
23
<PAGE>
NOTES PAYABLE
The following summarizes information concerning notes payable (000's
omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Outstanding at November 30..................... $66,900 $153,696 $234,296
Maximum month end balance during the year...... 158,635 206,196 234,296
Average amount outstanding during the year..... 112,900 174,300 213,000
Weighted daily average interest rate during the
year.......................................... 7.5% 7.9% 7.0%
Weighted average interest rate on borrowings at
November 30................................... 8.2% 8.0% 7.0%
</TABLE>
As more fully discussed in the Financing Note, in March 1994 the Company
entered into a new three year Credit Facility through March 22, 1997. At
November 30, 1994, $20 million of the aggregate $66.9 million of borrowings
outstanding was classified as current, representing expected seasonal
repayments within the fiscal 1995 year.
The Company enters into interest rate protection agreements from time to time
based on management's assessment of market conditions; however, none were in
effect at November 30, 1994. Payments made or received relating to the interest
rate protection agreements in effect during fiscal 1994, 1993 and 1992 were not
significant.
RESTRUCTURING CHARGES
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 of November 30, 1994, all
operational aspects of the Restructuring have been completed; accrued
restructuring charges of $3.6 million were included in the Other Accrued
Expenses caption in the accompanying balance sheet ($8 million at November 30,
1993) principally relating to remaining severance and other employee benefit
obligations.
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's costs of administering the program as agent for the purchaser were
included in the licensing and other income caption in the accompanying
Consolidated Statement of Earnings for fiscal 1992. The agreement terminated
effective October 10, 1992.
INVENTORIES
Inventories at fiscal year end were as follows (000's omitted):
<TABLE>
<CAPTION>
NOVEMBER 30
--------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Raw materials.................................. $ 42,296 $ 44,370 $ 52,018
Work in process................................ 29,015 26,468 29,657
Finished goods................................. 112,036 122,980 135,076
-------- -------- --------
$183,347 $193,818 $216,751
======== ======== ========
</TABLE>
The excess of current cost over LIFO costs for certain inventories was $32.7
million at November 30, 1994, $35.0 million at November 30, 1993 and $38.7
million at November 30, 1992.
24
<PAGE>
TAXES ON EARNINGS
The net tax provision (benefit) is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------ -------
<S> <C> <C> <C>
Federal....................................... $ (375) $2,435 $(8,262)
State and local............................... 325 256 (286)
-------- ------ -------
Total current............................... (50) 2,691 (8,548)
-------- ------ -------
Federal....................................... 3,975 (320) 1,943
State and local............................... -- (66) --
-------- ------ -------
Total deferred.............................. 3,975 (386) 1,943
-------- ------ -------
Change in valuation allowance................. (13,360) (2,115) --
-------- ------ -------
Total tax provision (benefit)............... $ (9,435) $ 190 $(6,605)
======== ====== =======
</TABLE>
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 (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- ---------
<S> <C> <C> <C>
Income (loss) from continuing operations... $ 10,575 $ 6,410 $(226,850)
======== ======= =========
Tax (benefit) provision computed at
statutory rate............................ $ 3,596 $ 2,179 $ (77,129)
State and local taxes on earnings, net of
federal tax benefit....................... 217 122 (286)
Change in valuation allowance.............. (13,360) (2,115) 69,870
Other--net................................. 112 4 940
-------- ------- ---------
Total tax (benefit) provision............ $ (9,435) $ 190 $ (6,605)
======== ======= =========
</TABLE>
A substantial portion of the Company's deferred tax assets are reserved
through the establishment of a tax valuation allowance. The valuation allowance
was recorded upon consideration of the operating losses incurred during the
1990-1992 fiscal years and related uncertainty associated with realization of
the tax benefit of net operating loss carryforwards, which is ultimately
dependent upon the generation of future earnings by the Company. The net tax
assets recorded consider amounts recoverable from carrying back operating
losses to prior years, amounts expected to be realized through future earnings
and available tax planning realization strategies (such as the ability to adopt
the FIFO inventory valuation method for those inventories currently valued
under the LIFO valuation method).
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 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 $48.1 million, alternative minimum tax credit carryforwards
("AMT") 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.
25
<PAGE>
In fiscal 1994 and 1993, $4.0 million and $2.1 million, respectively, of the
valuation allowance offsetting the deferred tax asset associated with pre-tax
income for financial reporting, was reversed. In the fourth quarter of 1994,
the Company further reevaluated its deferred income tax asset and reversed $9.4
million of additional valuation allowance related to this asset. The valuation
allowance offsetting the deferred tax asset will continue to be evaluated in
future periods.
At November 30, 1994, the Company had a net deferred tax asset of $16.4
million comprised of deferred tax assets of $92.9 million less deferred tax
liabilities aggregating $21.0 million and a $55.5 million valuation allowance.
The principal deferred tax assets included $5.5 million attributable to TRA
items, net operating loss carryforwards of $64.4 million, AMT credit
carryforwards of $4.7 million, and $17.5 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 $4.0 million and $7.4 million related to
employee benefits, principally pensions.
As of November 30, 1994, the Company had approximately $184 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 carryforwards expire from
2007 to 2009. Foreign tax credit carryforwards of $.7 million are also
available, which expire in 1995 and 1996. The $4.7 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.
At November 30, 1994, total minimum rentals under noncancellable operating
leases are as follows (000's omitted):
<TABLE>
<CAPTION>
YEARS AMOUNT
----- -------
<S> <C>
1995............................. $15,840
1996............................. 12,806
1997............................. 10,538
1998............................. 7,281
1999............................. 5,571
Thereafter....................... 11,555
-------
Total minimum rentals due........ $63,591
=======
</TABLE>
Rental expense, including rentals under short term leases, comprised the
following (000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Minimum rentals................................ $24,677 $28,440 $58,742
Contingent rentals............................. 177 112 2,418
Sublease income................................ (409) (570) (896)
------- ------- -------
Total rental expense........................... $24,445 $27,982 $60,264
======= ======= =======
</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.
26
<PAGE>
EMPLOYEE BENEFITS
Pension Plans
The Company participates with other companies in the apparel industry in
making collectively-bargained payments 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 $9 million in
1994, $8 million in 1993 and $10 million in 1992.
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 nominal in 1994 and
1993, and $.3 million in 1992. 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.
Pension data covering the principal plan for the three years ended November
30, 1994 included the following components in accordance with Statement of
Financial Accounting Standards No. 87--Employers' Accounting for Pensions
(000's omitted):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the
period...................................... $(4,309) $(4,150) $(4,869)
Interest cost on projected benefit
obligation.................................. (7,467) (7,607) (7,554)
Return on plan assets........................ (179) 17,452 15,674
Net amortization and deferral................ 15,376 (3,235) (1,438)
------- ------- -------
Net periodic pension income.................. $ 3,421 $ 2,460 $ 1,813
======= ======= =======
</TABLE>
The above amounts do not include periodic pension expense related to the
benefits provided on an unfunded basis of $1.5 million in 1994, $.6 million in
1993, and $.3 million in 1992.
In 1992 pursuant to the Restructuring, the Company sold HSSI 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, 1994, the plan assets included 519,612 shares of
the Company's stock with a market value of $2.8 million.
27
<PAGE>
The following sets forth the funded status of the principal pension plan at
November 30 (000's omitted):
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.................................. $ (90,790) $ (95,341)
Non-vested benefits.............................. (606) (949)
--------- ---------
Accumulated benefit obligation................... (91,396) (96,290)
Effect of projected future compensation levels... (10,867) (16,992)
--------- ---------
Projected benefit obligation....................... (102,263) (113,282)
Plan assets, at fair value......................... 127,522 135,013
--------- ---------
Plan assets in excess of projected benefit
obligation........................................ 25,259 21,731
Unrecognized net loss.............................. 2,998 4,653
Unrecognized prior service cost.................... (1,389) 516
Unrecognized net transition asset.................. (3,817) (7,270)
--------- ---------
Prepaid pension cost............................. $ 23,051 $ 19,630
========= =========
</TABLE>
The weighted average discount rate used in determining the projected benefit
obligation was 8% in 1994 and 7% in 1993. The assumed rate of increase in
future compensation levels was 5.5% in 1994 and 1993, and the expected long
term rate of return on the Company sponsored plan assets was 8.75% in 1994 and
1993.
Savings Investment and Employee Stock Ownership Plans
The Company offers a qualified defined contribution plan, the Hartmarx
Savings-Investment Plan ("SIP"), which is a combined salary reduction plan
under Section 40l(k) of the Internal Revenue Code and an after-tax savings
plan. 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 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,
although participants age 55 and over can elect investments from among several
investment alternatives. While employee contributions up to 16% of earnings are
permitted, contributions in excess of 6% are not subject to an employer
contribution. The employer contribution is one-fourth of the first 1%
contributed by the employee plus one-twentieth thereafter. The Company's
expense related to the ESOP is based upon the principal and interest payments
on the ESOP loan, the dividends, if any, 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 $2.3
million in 1994, $2.2 million in 1993 and $2.1 million in 1992. At November 30,
1994, the assets of SIP and ESOP funds had a market value of approximately
$36.6 million, of which approximately $13.5 million was invested in 2,503,713
shares of the Company's common stock.
Health Care and Post Retirement 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 cost of the retiree program.
Statement of Financial Accounting Standards No. 106--Employers' Accounting for
Post Retirement Benefits Other Than Pensions was adopted by the Company on
December 1, 1993. Since the required contributions by the retirees offset the
cost of the available medical program, no transition obligation existed at
adoption and there was no effect on either net income or shareholders' equity.
28
<PAGE>
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. The warrant expires on September 20, 1995. 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 that could result in acquiring 15 percent or more, of the
Company's 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 $.05 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.
STOCK OPTION PLANS AND RESTRICTED STOCK
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 majority of the
options granted under the 1988 Stock Option Plan have exercise provisions
similar to the other plans; the remaining grants, which consist of the October
1992 regrants, become exercisable in cumulative one-third installments on each
of the
29
<PAGE>
first three anniversaries of the grant date. Under certain circumstances, the
vesting may be accelerated. All options expire ten years after date of grant
under the Plans.
The 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 ("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 1994, 55,781
DSO and DDSA were granted, 6,250 DSO were exercised and 207,248 DSO and DDSA
were outstanding at November 30, 1994.
Stock options outstanding at November 30, 1994 included 251,846 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 859,120 shares were exercisable at
November 30, 1994 at prices ranging from $5.25 to $30.81. At November 30, 1994,
1,451,800 shares were reserved for options outstanding and 7,358 shares were
available for future stock options and/or restricted stock awards (496,181 at
November 30, 1993).
Information regarding stock option activity for the three years ended
November 30, 1994 is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER SHARE
---------- ---------------
<S> <C> <C>
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
Granted.................................... 467,700 $5.56 to $ 6.81
Exercised.................................. (829) $5.25
Expired or terminated...................... (40,862) $5.25 to $30.25
----------
Balance at November 30, 1994................. 1,451,800 $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.
30
<PAGE>
OPERATING SEGMENT INFORMATION
The Company is engaged in the business of manufacturing and marketing of
men's and women's apparel to unaffiliated retailers and directly to consumers
through owned retail stores and catalogs. The Company's businesses currently
comprise the following groups: Men's Apparel Group, which designs, manufactures
and markets tailored clothing, slacks and sportswear to retailers for resale to
consumers; Women's Apparel Group, comprised of Barrie Pace, a direct mail
catalog marketer of apparel and accessories, and International Women's Apparel,
which markets women's career apparel and sportswear to department and specialty
stores; and Kuppenheimer ("Kupp"), 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. The largest customer
represents approximately 13% and 12% of consolidated sales in 1994 and 1993,
respectively.
Information on the Company's operations for the three years ended November
30, 1994 is summarized as follows (in millions):
<TABLE>
<CAPTION>
1994
---------------------------------------
MEN'S WOMEN'S
APPAREL APPAREL
GROUP GROUP KUPP ADJ. CONSOL.
------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $569.7 $52.2 $ 95.8 -- $717.7
Earnings (loss) before
taxes.................. 46.3 (4.1) 1.7 (33.3) 10.6
Gross assets at year
end.................... 294.0 25.1 41.3 31.8 392.2
Depreciation and
amortization........... 8.6 .6 2.6 .2 12.0
Property additions...... 5.2 .2 .9 .8 7.1
<CAPTION>
1993
---------------------------------------
MEN'S WOMEN'S
APPAREL APPAREL
GROUP GROUP KUPP ADJ. CONSOL.
------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $553.9 $52.3 $125.8 -- $732.0
Earnings (loss) before
taxes.................. 43.2 (2.9) (1.0) (32.9) 6.4
Gross assets at year
end.................... 293.7 31.2 61.8 18.4 405.1
Depreciation and
amortization........... 8.8 .7 4.5 .1 14.1
Property additions...... 5.2 .2 .5 -- 5.9
<CAPTION>
1992
-------------------------------------------------
MEN'S WOMEN'S
APPAREL APPAREL
GROUP GROUP KUPP OTHER ADJ. CONSOL.
------- ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $630.4 $32.7 $136.8 $307.3 (53.3) $1,053.9
Earnings (loss) before
taxes.................. 37.2 1.7 (12.2) (200.4) (53.2) (226.9)
Gross assets at year
end.................... 354.9 18.9 78.9 13.1 46.2 512.0
Depreciation and
amortization........... 10.5 .5 5.6 10.0 .3 26.9
Property additions...... 3.9 .2 4.1 1.3 -- 9.5
</TABLE>
Men's Apparel Group sales include $4.6 million in 1993 and $36.3 million in
1992 related to businesses subsequently sold or discontinued. Men's Apparel
Group and Women's Apparel Group sales in 1992 include $51.1 million and $2.2
million, respectively, of intersegment sales to HSSI, the Company's retail
specialty store business prior to its September, 1992 disposition. Earnings
(loss) before taxes for 1992 include pre-tax restructuring charges of $190.8
million, principally attributable to the disposition and liquidation of retail
operations. The "Other" column for 1992 reflects sales of retail businesses of
approximately $252 million
31
<PAGE>
related to HSSI and $55 million to Country Miss, which were sold or
discontinued as a result of the 1992 Restructuring; the loss before taxes
includes both the operating losses and restructuring charges applicable to
these businesses.
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.
Sales under the "Adjustment" column represent intergroup sales, if any,
during the respective period. Adjustments of earnings before taxes consist of
interest expense and general corporate expenses. Adjustments of gross assets
are for cash, recoverable and deferred income taxes, 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 1994 and 1993 is as follows (000's omitted):
<TABLE>
<CAPTION>
SECOND
FIRST QUARTER THIRD FOURTH
QUARTER (1) QUARTER QUARTER
-------- -------- -------- --------
1994
----
<S> <C> <C> <C> <C>
Sales............................... $177,891 $164,020 $196,105 $179,690
Gross profit........................ 50,203 49,390 53,213 59,336
Net earnings (loss) before
extraordinary charge............... (720) (3,120) 3,515 20,335
Net earnings (loss)................. (720) (6,982) 3,515 20,335
Net earnings (loss) per share:
before extraordinary charge........ (.02) (.10) .11 .63
after extraordinary charge......... (.02) (.22) .11 .63
<CAPTION>
1993
----
<S> <C> <C> <C> <C>
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>
- --------
(1) The net loss for the second quarter of 1994 includes $3.9 million or $.12
per share extraordinary charge related to early extinguishment of debt.
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 contained under the caption "Information About Nominees For
Directors" on pages 2 to 7 of the Proxy Statement for the 1995 Annual Meeting
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 contained under the caption "Executive Officer Compensation" on
pages 7 to 11 and "Information about Nominees for Directors" on pages 2 to 7 of
the Proxy Statement for the 1995 Annual Meeting is incorporated herein by
reference.
32
<PAGE>
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained in the Proxy Statement for the 1995 Annual Meeting
under the captions "Information About Nominees for Directors" on pages 2 to 7
and "Ownership of Common Stock" on pages 21 to 22 is incorporated herein by
reference.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained in the Proxy Statement for the 1995 Annual Meeting
under the caption "Information About Nominees for Directors" on pages 2 to 7 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 15 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 15 are filed
as part of this Annual Report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consent of Independent Accountants....................................... F-1
(a)(3) Index to Exhibits................................................. 34
</TABLE>
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the quarter ended
November 30, 1994.
33
<PAGE>
HARTMARX CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
AND
APPLICABLE
SECTION OF
601 OF REG-
ULATION S-K
-----------
<C> <S> <C>
*3-A Restated Certificate of Incorporation (Exhibit 3-A to
Form 10-K for the year ended November 30, 1993), (1).
*3-A-1 Certificate of Stock Designation for Series B Junior
Participating Preferred Stock (Exhibit 3-A-1 to Form 10-
K for the year ended November 30, 1993), (1).
*3-A-2 Certificate of Amendment for increase in authorized
shares of Common Stock (Exhibit 3-A-2 to Form 10-K for
the year ended November 30, 1993), (1).
*3-A-3 Certificate of Amendment adding Article Fourteenth
limiting director liability as provided under Delaware
General Corporation Law (S) 102(b)(7) (Exhibit 3-A-3 to
Form 10-K for the year ended November 30, 1993), (1).
*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.
*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-D Indenture, dated as of March 15, 1994, between the
Company and Bank One Wisconsin Trust Company, N.A.,
Trustee, relating to the 10 7/8% Senior Subordinated
Notes due 2002 of Hartmarx Corporation (Exhibit 4-D to
Form 10-Q for the quarter ended February 28, 1994), (1).
*4-E Credit Agreement, dated as of March 23, 1994, among the
Company, the Lenders listed therein and General Electric
Capital Corporation, as Managing Agent and Collateral
Agent (Exhibit 4-E to Form 10-Q for the quarter ended
February 28, 1994), (1).
*4-E-1 Amendment No. 1 dated August 26, 1994 to the Credit
Agreement (Exhibit 4-E-1 to Form 10-Q for the quarter
ended August 31, 1994), (1).
*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. **
*10-B-2 1985 Stock Option Plan, as amended (Exhibit 10-B-2 to
Form 10-K for the year ended November 30, 1993), (1). **
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
AND
APPLICABLE
SECTION OF
601 OF REG-
ULATION S-K
-----------
<C> <S> <C>
*10-C-2 Description of Hartmarx Management Incentive Plan
(Exhibit 10-C-2 to Form 10-K for the year ended November
30, 1993), (1). **
*10-D-1 Form of Deferred Compensation Agreement, as amended,
between the Company and Directors Abboud, Baldrige,
Farley, Jacobs, Marshall and Segnar (Exhibit 10-D-1 to
Form 10-K for the year ended November 30, 1993), (1). **
10-D-2 Form of First Amendment to Director Deferred
Compensation Agreement between the Company and Directors
Abboud, Baldrige, Farley, Jacobs, Marshall and Segnar.
**
*10-E-1 Form of Deferred Compensation Agreement, as amended,
between the Company and Messrs. Hand, Patel, Morgan and
Brenner (Exhibit 10-E-1 to Form 10-K for the year ended
November 30, 1993), (1). **
10-E-2 Form of First Amendment to Executive Deferred
Compensation Agreement between the Company and Messrs.
Hand, Patel, Morgan and Brenner. **
*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-5 Form of Severance Agreement between the Company and
Executive Officers Frank A. Brenner, James E. Condon and
Glenn R. Morgan (Exhibit 10-F-5 to Form 10-K for the
year ended November 30, 1993), (1). **
10-F-6 Form of Amendment to Severance Agreement between the
Company and Executive Officers Frank A. Brenner, James
E. Condon and Glenn R. Morgan. **
*10-F-7 Employment Agreement between the Company and Wallace L.
Rueckel. (Exhibit
10-F-7 to Form 10-K for the year ended November 30,
1993), (1). **
10-F-8 Employment Agreement between the Company and Mary D.
Allen. **
*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
(Exhibit 10-G-1 to Form 10-K for the year ended November
30, 1993), (1).
12 Statement of Computation Ratios.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants included on page F-1
of this Form 10-K.
24 Powers of Attorney, as indicated on page 36 of this Form
10-K.
27 Financial Data Schedules.
</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.
35
<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, Finance
and Administration
Date: February 27, 1995
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* Wallace L. Rueckel*
- ------------------------------------ ------------------------------------
Miles L. Marsh, Director Wallace L. Rueckel
Executive Vice President, Principal
/s/ Wallace L. Rueckel Financial Officer
By:_________________________________
Wallace L. Rueckel Glenn R. Morgan*
------------------------------------
/s/ Mary D. Allen Glenn R. Morgan
By:_________________________________ Senior Vice President
Mary D. Allen Principal Accounting Officer
- --------
* Pursuant to Power of Attorney
Date: February 27, 1995
36
<PAGE>
HARTMARX CORPORATION
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED NOVEMBER 30, 1994, 1993, AND 1992
(000'S OMITTED)
<TABLE>
<CAPTION>
RESERVE FOR DOUBTFUL
ACCOUNTS FISCAL YEAR
ENDED NOVEMBER 30,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year......................... $ 9,914 $16,022 $15,153
Charged to costs and expenses........................ 2,591 3,868 6,813
Deductions from reserves (1)......................... (5,137) (9,976) (5,944)
------- ------- -------
Balance at end of year............................... $ 7,368 $ 9,914 $16,022
======= ======= =======
</TABLE>
- --------
(1) Notes and accounts written off as uncollectible, net of recoveries of
accounts previously written off as uncollectible.
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 9, 1995 appearing on page 16 of this
Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 27, 1995
F-1
<PAGE>
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, January 13, 1994 and April 14, 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.
<PAGE>
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.
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
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<PAGE>
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 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.
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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.
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.
4
<PAGE>
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.
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.
5
<PAGE>
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 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.
6
<PAGE>
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 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.
7
<PAGE>
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.
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
Compensation 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 Management
Operations Committee of the Board of Directors will consist of one or more
directors, each of whom shall also be an employee or officer of the Corporation.
The Board of Directors shall establish from time to time by resolution the
composition, functions and responsibilities of the Management Operations
Committee.
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.
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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 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.
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.
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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 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.
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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.
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
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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 Assistant
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.
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.
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ARTICLE V
FORMS OF CERTIFICATES AND LOSS
AND TRANSFER OF STOCK
Section 1. Forms of Stock Certificates. The shares of stock of the
Corporation 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:
(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
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(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.
____________________________________
Glenn R. Morgan, Assistant Secretary
14
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EXHIBIT 4-A-1
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of July 12, 1989, to the Rights Agreement dated as
of January 17, 1986 (the "Rights Agreement"), among Hartmarx Corporation, a
Delaware corporation (the "Company"), The First National Bank of Chicago, a
national banking association, and First Chicago Trust Company of New York, a New
York corporation (the "Co-Rights Agents").
WHEREAS, the Company and The First National Bank of Chicago, as Rights
Agent entered into the Rights Agreement specifying the terms of the Rights (as
defined therein);
WHEREAS, the Company and the Co-Rights Agents desire to amend the Rights
Agreement in accordance with Section 26 of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth in the Rights Agreement and this Amendment, the parties hereby agree
as follows:
1. Section 1(a) of the Rights Agreement is amended to change the
reference to "20%" therein to "15%".
2. Section 1(c) of the Rights Agreement is amended to add at the end of
said section the following:
<PAGE>
"; provided, however, that nothing in this paragraph (c) shall cause a
person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition."
3. Section 1(1) of the Rights Agreement is amended to delete therefrom
the reference to "(A), (B) or (C)".
4. Section 3(a)(ii) of the Rights Agreement is amended to delete
therefrom the word "day" and substitute therefor the phrase "Business Day (or
such later date as may be determined by the Company's Board of Directors)" and
to delete therefrom the phrase "the Beneficial Owner of 30% or more of the
shares of Common Stock then outstanding" and substitute therefor the words "an
Acquiring Person".
5. Section 3(c) of the Rights Agreement is amended to add to the legend
set forth therein immediately following the words "dated as of January 17, 1986"
the phrase ", as amended".
6. Section 7(c) of the Rights Agreement is amended to add to the first
sentence thereof immediately following the words "Purchase Price" the
parenthetical clause "(as such amount may be reduced pursuant to Sec-
2
<PAGE>
tion 11(a)(iii) hereof)" and to add at the end of said section:
"The Company reserves the right to require, prior to the occurrence of
an event described in Section 11(a)(ii) or Section 13(a), that, upon
any exercise of Rights, a minimum number of Rights be exercised so that
only whole shares of Preferred Stock will be issued."
7. Section 11(a)(ii) of the Rights Agreement is amended to read in its
entirety as follows:
"In the event any Person (other than any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or together with its
Affiliates and Associates, shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing
such Person to become an Acquiring Person is a transaction set forth
in Section 13(a) hereof, or is an acquisition of shares of Common Stock
pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a
majority of the members of the Board of Directors who are not officers
of the Company and who are not representatives, nominees, Affiliates or
Associates of an Acquiring Person, after receiving advice from one or
more investment banking firms, to be (a) at a price which is fair to
stockholders (taking into account all factors which such members of the
Board deem relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold or an
orderly basis designed to realize maximum value) and (b) otherwise in
the best interests of the Company and its stockholders,
then presumably following five (5) days after the date of the occurrence of an
event described in this Section 11(a)(ii), proper provision shall be made so
that each
3
<PAGE>
holder of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of shares
of Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-hundredths of a share of Preferred Stock for
which a Right was exercisable immediately prior to the first occurrence of an
event set forth in this Section 11(a)(ii) and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by 50%
of the current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares")."
8. Section 11(a)(iii) of the Rights Agreement is amended to read in its
entirety as follows:
"In the event that the number of shares of Common Stock which is
authorized by the Company's Restated Certificate of Incorporation but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company shall: (A) determine the excess of (1)
the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess,
the "Spread"), and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of
preferred stock which the Board of Directors of the Company has deemed
to have the same value as shares of Common Stock (such shares of
preferred stock referred to herein as "common stock equivalents")),
(4) debt securities of the Company, (5) other as-
4
<PAGE>
sets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the
advice of a nationally recognized investment banking firm selected by
the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of an event described in Section
11(a)(ii) and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended
to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares
(such period, as it may be extended, referred to herein as the
"Substitution Period"). To the extent that the Company determines that
some action need be taken pursuant to the first and/or second sentences
of this Section 11(a)(iii), the Company (x) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any
5
<PAGE>
such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the value
of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the value of any "common stock
equivalent" shall be deemed to have the same value as the Common Stock
on such date."
9. Section 11(n) of the Rights Agreement is amended to read in its
entirety as follows:
"The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than
a subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related
transactions, assets, earning power or cash flow aggregating more than
50% of the assets, earning power or cash flow of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof, if (x)
at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish
or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of
6
<PAGE>
Rights previously owned by such Person or any of its Affiliates and
Associates."
10. Section 13 of the Rights Agreement is amended as follows:
(a) to add immediately following the word "Person" in
subsections (a)(x) and (a)(y) thereof and to substitute for the parenthetical
clause "(other than the Company or any Subsidiary of the Company)" in subsection
(a)(z) thereof, the parenthetical clause "(other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof)";
(b) to add to subsection (a)(z) thereof immediately following
the words "assets or earning power" each time they appear therein, the words
"or cash flow";
(c) to add to the first sentence of subsection (a) thereof
immediately following the words "then, and in each case" the parenthetical
clause "(except as may be contemplated by Section 13(d) hereof)";
(d) to delete the reference in subsection (a) thereof to
"Section 11(a)(ii)(A), (B) or (C) hereof" and to substitute therefor the
phrase "Section 11(a)(ii) hereof";
(e) to delete from subsection (a) thereof the word "and"
immediately following the reference to
7
<PAGE>
"(iv)" therein and to add at the end of said subsection the phrase "; and (v)
the provisions of Section 11(a)(ii) hereof shall be of no effect following the
first occurrence of any event described in this Section 13(a)";
(f) to add at the end of subsection (b) thereof the following:
"If, for any reason, the Rights cannot be exercised for Common Stock of the
Company or such Principal Party, then a holder of Rights will have the
right to exchange his Rights for cash from the Company or such Principal
Party in an amount equal to the number of shares of such Common Stock he
would otherwise be entitled to purchase times 50% of the then current
market price, as determined pursuant to this Section 11(d)(i), of such
stock of such Principal Party or the Company. If, for any reason,
including, without limitation, if such Principal Party is an individual,
private partnership or private company, the foregoing formulation cannot be
applied to determine the cash amount into which the Rights are
exchangeable, then the Board of Directors of the Company, based upon the
advice from one or more investment banking firms, shall determine such
amount reasonably and with utmost good faith to the holders of Rights. Any
such determination shall be binding and final."
(g) to add at the end thereof following new subsection 13(d):
"(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock which complies
with the provisions of Section
8
<PAGE>
11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer, and (iii) the form of consideration
being offered to the remaining holders of shares of Common Stock pursuant to
such transaction is the same as the form of consideration paid pursuant to
such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire."
11. Section 23(a) of the Rights Agreement is amended by inserting at
the end of said section the following:
"The Company may, at its option, pay the Redemption Price in cash, shares of
Common Stock (based on the "current market price", as defined in Section
11(d) hereof, of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors."
12. Section 30 of the Rights Agreement is amended by inserting at the
end of said section the following:
"Without limiting the foregoing, if any provision requiring that a
determination be made by less than the entire board (or at a time or with the
concurrence of a group of directors consisting of less than the entire Board) is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, such determination shall then be made by the Board in
accordance with applicable law and the Company's Restated Certificate of
Incorporation and By-Laws, as they may be amended from time to time."
9
<PAGE>
13. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended hereby.
14. The foregoing amendment shall be effective as of the date hereof
and, except as set forth herein, the Rights Agreement shall remain in full force
and effect and shall be otherwise unaffected hereby.
15. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and their respective corporate seals to be hereunto affixed, all
as of the day and year first above written.
HARTMARX CORPORATION THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Rights
Agent
By /s/ Jerome Dorf By /s/ Laurence A. Woods
-------------------------- --------------------------
Name: JEROME DORF Name: LAURENCE A. WOODS
Title: SENIOR VICE PRESIDENT Title: VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
FIRST CHICAGO TRUST
COMPANY OF NEW YORK,
as Co-Rights Agent
By /s/ Laurence A. Woods
--------------------------
Name: LAURENCE A. WOODS
Title: VICE PRESIDENT
10
<PAGE>
EXHIBIT 10-B-1
HARTMARX CORPORATION
1988 STOCK OPTION PLAN
AS RECOMMENDED FOR ADOPTION AT THE
APRIL 13, 1988 ANNUAL MEETING OF STOCKHOLDERS
1. Purpose of the Plan
The purpose of this 1988 Stock Option Plan (the "Plan") is to
promote the interests of Hartmarx Corporation, a Delaware corporation (the
"Company"), and its stockholders by providing key employees of the Company and
its subsidiaries and members of the Company's Board of Directors (the "Board")
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 and directors of outstanding ability.
2. Shares Subject to the Plan
The aggregate number of shares of Common Stock of the Company
subject to options, Stock Appreciation Rights ("SARs"), Restricted Stock Awards
("RSAs") and Director Deferred Stock Awards ("DDSAs") which may be granted
under the Plan shall not exceed 1,300,000 shares, provided, however, that no
more than 260,000 of such shares shall be granted as RSAs. Options granted
under this Plan will be either Employee Stock Options ("ESOs") or Director
Stock Options ("DSOs"). If any option, SAR or award granted under this Plan
lapses, terminates or is forfeited for any reason, the shares covered by such
option, SAR or award may again be made subject to options, SARs or awards
granted under the Plan, but this does not apply to any shares for which a cash
payment is made pursuant to Section 9 below. Shares issued with respect to
options, SARs or awards granted under the Plan may be 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 $2.50 per share, shall be
delivered unless Section 16 shall be applicable.
3. Administration
The Plan shall be generally administered by a Compensation and
Stock Option Committee (the "Compensation Committee") comprised of not less
than three directors appointed by the Board. The Compensation Committee will
not include any employee of the Company or any subsidiary. Except with respect
to DSOs and DDSAs, the Compensation 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, SARs and awards to be
issued under the Plan, to permit or require the acceleration of the exercise of
such options and SARs 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. A Management Operations Committee (the
"Management Committee") comprised of not less than three directors appointed by
the Board shall have similar authority with respect to DSOs and DDSAs. The
Management Committee will not include any member of the Compensation Committee.
4. Eligibility
ESOs, SARs and RSAs 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, and as the
Committee may determine. Except for DSOs and DDSAs, no person who is not an
employee of the Company or a subsidiary or is or shall have been a member of
the Compensation Committee shall be eligible to receive an option, right or
award under the Plan and no member of the Management Committee shall be
eligible to receive DSOs or DDSAs.
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5. Granting of Options to Employees
Subject to the terms and conditions of the Plan, the Compensation
Committee may, from time to time and as of any date or dates prior to April 13,
1998 as shall be specified by such Committee, grant to such eligible employees
as such Committee may determine, ESOs to purchase such number of shares of
Common Stock of the Company, on such terms and conditions as such Committee may
determine, including the granting of an ESO with an SAR pursuant to Section 9(a)
below. More than one such option may be granted to the same employee.
6. Option Price for Employees
Except as provided in Section 8, the purchase price of each share of
Common Stock subject to an ESO shall be fixed by the Compensation Committee, but
shall not be less than 100% of the Fair Market Value of the share at the time
such option is granted and shall not be less than the par value thereof.
7. Option Period for Employees
Except as provided in Section 8, each ESO granted under the Plan shall
expire and all rights to purchase shares or exercise an SAR thereunder shall
cease ten years after the date such option is granted or on such date prior
thereto as the Compensation Committee shall specify at the time of grant. No ESO
shall permit the purchase of any shares or the exercise of an SAR thereunder
during the first year after the date such 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 Compensation Committee. Neither the transfer of
employment of an individual to whom an ESO, SAR or RSA 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 Compensation Committee,
shall be deemed a termination of employment for purposes of the Plan.
Unless otherwise specified by the Compensation Committee at the time
of grant, the optionee shall have the right to elect to exercise an ESO as to
all or any portion of the shares covered by such option at any time during the
period which begins one year after any individual grant and ends with its
expiration date, and this right shall also apply to the exercise of any SARs
which may apply to some or all of such exercisable shares.
8. Incentive Stock Options
ESOs may be granted as "incentive stock options" ("ISOs"), as defined
in Section 422A of the Internal Revenue Code of 1986 (the "Code"). Except as
otherwise permitted by 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 any applicable limitations
imposed by the Code (as determined at the date or dates of grant). The purchase
price for each 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, and no ISO granted to such an employee shall be
exercisable more than five years after the date of such grant. The right 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 qoverned by rules set forth herein or by the Compensation
Committee.
9. Stock Appreciation Rights
(a) In the Compensation Committee's discretion, individual ESO grants
may, when made, include the grant of an SAR which permits the optionee to either
(i) exercise such 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
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<PAGE>
date of grant to the date of exercise with respect to the remaining portion of
the exercisable shares; or (ii) 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 grant being equal to the
gain in market price from the date of grant to the date of exercise. With
respect to alternative (ii) above, the Compensation Committee shall never grant
an SAR in conjunction with an ESO 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 Compensation Committee may elect to purchase all, or any portion of, such
shares at the date of exercise.
(b) The Compensation Committee may also, in its discretion, grant
SARs related to shares of Common Stock of the Company and which generally will
have the same terms and conditions as described in Sections 6 and 7 above, but
which are unrelated to ESOs. SARs not related to such options shall entitle the
grantee to receive a payment in cash or in shares of Common Stock or in a
combination of cash and shares equal in value to the gain in the market price of
the Company's Common Stock from the date of grant of such SAR to the date of
exercise with respect to the shares represented by such SAR; subject however to
the Compensation Committee, in its sole discretion, (i) setting a maximum limit
on the amount of gain that may be realized upon exercise of any such SAR and
(ii) specifying such other terms and conditions regarding the exercise of such
SAR or the benefits to be derived therefrom.
10. Restricted Stock Awards
The Compensation Committee may, from time to time and as of any date
prlor to April 13, 1998, grant RSAs to eligible employees hereunder. In the
Compensation Committee's discretion, an RSA may also entitle the grantee to
receive dividends, if any, on the shares subject to the RSA. Each RSA 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 Compensation Committee shall
specify in writing at the time the RSA is granted. No RSA shall convey
unrestricted ownership rights of any shares to a grantee before the first
anniversary of the date the RSA is granted, except in the case of the grantee's
death, disability or retirement (or otherwise with the consent of the
Compensation Committee).
All rights of a grantee to shares and undistributed dividends
covered by an RSA shall be forfeited (unless the Compensation Committee shall
determine that such forfeiture should not occur) if the conditions or
restrictions specified in the RSA 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 RSA may not be transferred by a grantee,
except by will or applicable laws of descent.
11. Director Stock Options
(a) Subject to the terms and conditions of the Plan, the Management
Committee may, from time to time and as of any date or dates prior to April 13,
1998, grant DSOs to members of the Board who are neither employed by the Company
or any subsidiary nor a member of the Management Committee (an "Outside
Director"). If granted, DSOs granted to a director in any twelve consecutive
calendar month period ending each March 31 will cover 1,000 shares of the
Company's Common Stock or, if greater, the number of whole shares of the
Company's Common Stock as shall be determined by dividing such director's
Retainer for such period by the Fair Market Value of a share on the date or
dates of grant.
(b) The Management Committee may also grant a DSO to each Outside
Director on each date of his or her election to the Board, provided, that prior
to such date the director has irrevocably chosen to receive such a DSO in lieu
of all or part of his or her Retainer. The number of shares covered by a DSO
shall be equal to the nearest number of whole shares determined in accordance
with the following formula:
Retainer Amount to be Received as a DSO Number
--------------------------------------- = of Shares
Fair Market Value minus $1.00
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(c) Each Outside Director may also elect to convert the right to
receive all or part of the balance in such director's Deferred Benefit Account
to a DSO. The director's "Deferred Benefit Account" is the account maintained by
the Company pursuant to such director's January l, 1986 Deferred Compensation
Agreement with the Company. The number of DSO shares resulting from such
conversion shall be determined using the following formula:
Amount of Deferred Benefit Account Converted Number
------------------------------------------------------- = of Shares
Fair Market Value as of the conversion date minus $1.00
(d) Unless Section 16 shall be applicable, the purchase price of each
share of Common Stock subject to a DSO shall be fixed by the Management
Committee, but shall not be less than 100% of the Fair Market Value of the share
at the time such option is granted and shall not be less than the par value
thereof, except that the purchase price of each such share subject to a DSO
granted under Sections ll(b) or 11(c) shall be $1.00. DSOs shall expire and
all rights to purchase shares thereunder shall cease ten years after the date
such option is granted. DSOs shall be exercisable in full not less than six
months after the date of grant. Notwithstanding the foregoing, a DSO shall
become exercisable in full upon the director's death, disability or termination
of service on the Board (or otherwise with the consent of the Management
Committee).
12. Director Deferred Stock Awards
DDSAs shall consist of credits of share units ("Units") to a deferred
stock award account established for each eligible director. Each Unit shall
represent the equivalent of one share of Common Stock of the Company. Each
Outside Director shall be granted one hundred fifty (150) DDSA Units as of
January 14, 1988 and, thereafter on each date of his or her election to the
Board. Dividend equivalents earned on DDSAs will be credited as additional Units
as provided in Section 13. Upon a director's death, disability or termination of
service on the Board, all Units in his or her deferred stock award account,
including Units arising from dividend equivalents, shall be paid to the director
in shares of Common Stock of the Company equal in number to the total number of
whole Units in his or her account. Any fractional Unit shall be paid in
cash equal to the fair market value of such fractional Unit as determined
consistent with the method used to determine the Dividend Equivalent Crediting
Price in Section 13. Neither DDSAs nor dividend equivalents credited thereon may
be transferred by a director, except by will or applicable laws of descent.
13. Dividend Equivalents
Shares covered by outstanding DSOs granted under Sections 11(b) and
11(c) and shares represented by DDSA Units may earn dividend equivalents.
(a) For shares covered by an eligible DSO outstanding on a dividend
record date for Common Stock of the Company, the optionee shall receive a cash
payment equal to the amount of dividends that would have been paid had such
option shares been issued and outstanding on such dividend record date. When
dividends offered on Common Stock of the Company are not to be paid in cash, the
dividend equivalent amount shall be determined as follows:
(i) Where the dividend has been offered in Common Stock of the
Company, the dividend equivalent shall be the amount resulting
from multiplying the Dividend Equivalent Crediting Price times the
number of shares (including any fractional share) that would have
been issued to the optionee had the option shares been issued and
outstanding on the dividend record date.
(ii) Where the dividend has been offered in property other than cash
or Common Stock of the Company, the dividend equivalent shall
consist of a cash payment to the optionee equal to the market
value (as the Management Committee shall determine in its absolute
discretion) of the property which would have been payable to the
optionee had the option shares been issued and outstanding on the
dividend record date.
A-4
<PAGE>
(b) Dividend equivalents earned on DDSA Units shall be credited to
each director's deferred stock award account as Units or fractional Units. The
dividend equivalent amount shall be determined as follows when dividends are not
paid in shares of Common Stock:
(i) Where the dividend has been offered in cash, the number of
corresponding Units or fractional Units to be credited to the
director's deferred stock award account shall equal the quotient
obtained by dividing the cash dividend which would have been
payable on the shares represented by Units already credited to the
director's deferred stock award account by the Dividend Equivalent
Crediting Price.
(ii) Where the dividend has been offered in property other than cash
or Common Stock of the Company, the number of corresponding Units
or fractional Units to be credited to the director's deferred
stock award account shall equal the quotient obtained by dividing
the fair market value (as the Management Committee shall determine
in its absolute discretion) of the property which would have been
payable on the shares represented by the Units already credited to
the director's deferred stock award account by the Dividend
Equivalent Crediting Price.
As used in this Plan:
"Retainer" is the cash amount which the director will be entitled
to receive for serving as a director from the last date of his or
her election to the Board until the next Annual Meeting of the
Stockholders of the Company, but shall not include DDSAs granted
under this Plan, fees for attendance at meetings of the Board and
fees associated with service on any Committee of the Board or
with any other services to be provided to the Company.
Unless otherwise determined by the appropriate Committee granting
an option under this Plan, "Fair Market Value" is 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 either the option grant date or,
if no sale has been made on such exchange on such date, on the
last preceding day on which any sale shall have been made; and
"Dividend Equivalent Crediting Price" is such Fair Market Value
on a dividend payment date.
14. Transferability and Termination of Options and SARs
Unless the rules of the Plan provide otherwise, during the lifetime
of an individual to whom an option or SAR is granted, only such individual may
exercise such option or SAR, and with respect to ESOs and SARs, 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 such ESO
or SAR was granted. An option or SAR may be exercised following the optionee's
death or termination of employment or service on the Board, as applicable,
subject to the rules of the Plan then in effect. An option or SAR may not be
transferred by a grantee, except by will or applicable laws of descent. In no
event shall any option or SAR 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.
15. Exercise of Options and SARs
A person entitled to exercise an option or SAR 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 or SAR is being exercised, accompanied by payment in full of the purchase
price, if any, 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
fractional shares shall be issued, and 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, SAR or award to an
individual shall give such individual no rights as a stockholder except as to
shares actually issued.
A-5
<PAGE>
16. Changes 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, SARs or
awards may be granted under the Plan and the terms of any outstanding options,
SARs or awards shall be equitably adjusted by the Compensation Committee in the
case of employees and by the Management Committee in the case of Outside
Directors.
17. Withholding
An option, SAR or award may provide that the grantee may deliver to
the Company (or authorize the Company to retain from shares issued or to be
issued pursuant to such option, SAR or award) whole shares of Common Stock of
the Company to satisfy the Company's or such grantee's obligation, if any, to
withhold or to pay, respectively, an amount required to be withheld under
applicable income tax laws with respect to the exercise of such option or SAR or
the payment of such award.
18. Written Agreements
All options, SARs and awards granted under the Plan shall be evidenced
by written agreements or notifications in such form or forms as the Compensation
Committee or Management Committee (whichever is applicable) may from time to
time determine.
19. 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 16
hereof) increase the total number of shares of Common Stock of the Company which
may be made subject to options, SARs or awards granted under the Plan, change
the minimum purchase price of any option or the terms of any SAR, increase the
maximum period during which options or SARs 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 ESOs, SARs or RSAs to employees who are
then or have ever been members of the Compensation Committee. No amendment of
the Pian shall, without the consent of the holder of the option, SAR or award
alter or impair any option, SAR or award previously granted under the Plan.
20. Effective Date and Stockholder Approval of Plan
The Plan shall become effective on April 13, 1988, subject to approval
and ratification of the Plan, at the Annual Meeting of Stockholders of the
Company held on April 13, 1988, by the affirmative vote of the majority of the
shares of Common Stock of the Company voting at the meeting.
A-6
<PAGE>
EXHIBIT 10-D-2
FIRST AMENDMENT
TO
DIRECTOR DEFERRED COMPENSATION AGREEMENT
----------------------------------------
THIS AGREEMENT made and entered into as of January 16, 1990, by and between
HARTMARX CORPORATION (the "Company") and Raymond F. Farley ("Director").
WHEREAS, the Company and Director are parties to a Director Deferred
Compensation Agreement dated as of January 1, 1986 (the "Agreement"); and
WHEREAS, the Company and Director desire to amend the Agreement in certain
particulars.
NOW THEREFORE, in consideration of the premises and for such other good
and valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the Company and Director hereby agree as follows:
1. Section 1.11 of the Agreement is amended in its entirety to read as
follows:
"Change in Control" means the sale of the Company or substantially all
of the Company's assets, in any form whatsoever, including any 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
<PAGE>
of 1934, as amended, other than a trustee or other fiduciary holding 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. The last sentence of Section 3.1 is amended by deleting the period at
the end thereof and adding the following thereto:
"unless such Normal Benefit Date occurs prior to Director's 70th
birthday and after a Change in Control of the Company".
3. Section 3.2 of the Agreement is amended in its entirety to read as
follows:
"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) $196,000. Payment of said death benefit,
together with interest on any unpaid portion thereof using the Death Interest
Yield, shall be as provided in Sections
2
<PAGE>
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."
4. The last sentence of Section 5.1 of the Agreement is amended by
deleting the period at the end thereof and adding the following thereto:
"; and no such amendment following a Change in Control of the
Company shall decrease the value of the death benefit described in Section 3.2
hereof."
5. Section 5.2 of the Agreement is amended by adding the following
sentence thereto:
"Notwithstanding the foregoing, in the event of any such termination
of this Agreement following a Change in Control of the Company, upon the death
of Director, the Company also agrees to pay Director's Beneficiary the death
benefit described in Section 3.2 hereof."
6. Subparagraphs (i) and (ii) of the first Paragraph of Section 5.3 of
the Agreement are amended in their entirety, effective January 1, 1989, to read
as follows:
"(i) the consolidated current assets of the Company and its
subsidiaries (taken as a whole) is less than 150% 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 long term debt of the Company and its
subsidiaries (taken as a whole), excluding
3
<PAGE>
current maturities thereof, exceeds 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"
7. The last paragraph of Section 5.3 of the Agreement is amended by
adding the following sentence thereto:
"Notwithstanding the foregoing, in the event of the termination of
this Agreement pursuant to this Section 5.3 following a Change in Control of
the Company, upon the death of the Director, the Company also agrees to pay
Director's Beneficiary the death benefit described in Section 3.2 hereof."
8. The following new Section 5.4 is added to the Agreement:
"5.4 Change in Control. Notwithstanding any other provision of this
Agreement, if there is a Change in Control of the Company, this Agreement shall
be terminated in its entirety and the Company shall pay to the Director (or his
Beneficiary) a lump sum payment of his Deferred Benefit Account determined under
Section 2.4 hereof using the Termination Interest Yield on or before the fifth
(5th) day following such Change in Control and, upon the death of a Director,
the Company agrees to pay Director's Beneficiary the death benefit described in
Section 3.2 hereof.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
on the date first above written.
DIRECTOR HARTMARX CORPORATION
/s/ Raymond F. Farley /s/ Harvey A. Weinberg
- --------------------- -------------------------
5
<PAGE>
HARTMARX CORPORATION
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
BENEFICIARY ELECTION FORM
Raymond Francis Farley ###-##-####
- ------------------------------------- ----------------------
Name Social Security Number
I have designated my beneficiary or beneficiaries and the method of payment to
such below. Such designation of beneficiary and method of payment shall be
applicable to the sums, if any, payable to my beneficiaries under the Executive
Deferred Compensation Agreement.
January 28, 1992 /s/ Raymond F. Farley
- ------------------ -----------------------------------
Date Employee's Signature
DESIGNATION OF BENEFICIARY
I designate the following as beneficiary or beneficiaries to receive, in
accordance with the method indicated, any payments to which my beneficiary or
beneficiaries may be entitled under the Executive Compensation Agreement, in the
event of my death either prior to or after my retirement, subject to my right at
any time to change such beneficiary or beneficiaries as provided under the Plan.
(Note: If your beneficiary is a trust, please state the name and address of the
trustee.)
X Method No. 1 - 100% to the first person then living on the date a payment
- ----- is due in the following list of beneficiaries. If this method is used,
name the beneficiaries in the order of your preference and leave the
"Share of Payment" blank.
_____ Method No. 2 - Designation of two or more beneficiaries, i.e., to the
persons designated in the proportions indicated. In the event of the
death of any one or more of such persons, the shares of such person or
persons shall be apportioned to the beneficiaries then living in
proportion to the shares for each. If this method is used, name each of
the beneficiaries and show the "Share of Payment" for each beneficiary.
_____ Method No. 3 - Designation of a primary beneficiary and two or more
contingent beneficiaries, i.e., 100% to the person first named if
surviving; if not, to the remaining persons designated in the proportions
indicated. In the event of the death of any one or more such persons, the
shares of such person or persons shall be apportioned to the
beneficiaries then living in proportion to the shares provided for each.
If this method is used, name each of the beneficiaries and show for the
primary beneficiary (for example, your wife) 100% and also the "Share of
Payment" for each contingent beneficiary.
% Share of
BENEFICIARIES Payment
Name Norman James Farley ###-##-####
- ------------------------------------- ---------------------------- ----------
Social Security Number
Address P. O. Box 731 Stockholm, New Jersey 07460
- ------------------------------------- ---------------------------- ----------
Street City & State
Name Gwen E. Farley ###-##-####
- ------------------------------------- ---------------------------- ----------
Social Security Number
Address 1660 No. LaSalle-Apt. 3412 Chicago, Illinois 60614
- ------------------------------------- ---------------------------- ----------
Street City & State
Name
- ------------------------------------- ---------------------------- ----------
Social Security Number
Address
- ------------------------------------- ---------------------------- ----------
Street City & State
<PAGE>
EXHIBIT 10-E-2
FIRST AMENDMENT
TO
EXECUTIVE DEFERRED COMPENSATION AGREEMENT
-----------------------------------------
THIS AGREEMENT made and entered into as of November 1, 1989 by and between
HARTMARX CORPORATION (the "Company") and E. O. Hand ("Executive").
WHEREAS, the Company and Executive are parties to an Executive Deferred
Compensation Agreement dated as of December 1, 1985 (the "Agreement"); and
WHEREAS, the Company and Executive desire to amend the Agreement in certain
particulars.
NOW, THEREFORE, in consideration of the premises and for such other good and
valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the Company and Executive hereby agree as follows:
1. Section 1.13 of the Agreement is deleted in its entirety.
2. The last sentence of Section 3.3 is amended in its entirety to read as
follows:
"Upon such Termination of Service, Executive shall immediately cease to
be eligible for any benefits under Section
1
<PAGE>
3.2 of this Agreement and, if such Termination of Service occurs prior to a
Change in Control of the Company, Executive shall immediately cease to be
eligible for any benefits under Section 3.4 of this Agreement."
3. Section 3.4 of the Agreement is amended in its entirety to read as
follows:
"Death. Except as otherwise provided in Sections 3.2 or 3.3 hereof,
upon the death of Executive, 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 using the Retirement Interest Yield; or (ii) $1,331,538. Payment
of said death benefit, together with interest on any unpaid portion thereof
using the Termination Interest Yield, shall be as provided in Sections 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."
4. Section 3.5 of the Agreement is amended in its entirety to read as
follows:
"By giving notice to the Committee not later than December 31, 1989,
Executive may reduce, on a prospective basis only, the percentage of his
Compensation to be deferred hereunder for the 1989 Deferral Year; provided,
however, that in the event of such reduction, the Company shall promptly
distribute to
2
<PAGE>
Executive such portion of this Deferred Benefit Account (including interest
calculated under Section 2.4 hereof using the Termination Interest Yield)
which is in excess of the balance in such Deferred Benefit Account as of
December 31, 1988."
5. The last sentence of Section 5.1 of the Agreement is amended by
deleting the period at the end thereof and adding the following thereto:
"; and no such amendment following a Change In Control of the Company
shall decrease the value of the death benefit described in Section 3.4
hereof."
6. Section 5.2 of the Agreement is amended by adding the following
sentence thereto:
"Notwithstanding the foregoing, in the event of any such termination of
this Agreement following a Change in Control of the Company, upon the death of
Executive, the Company also agrees to pay Executive's Beneficiary the death
benefit described in Section 3.4 hereof."
7. Subparagraphs (i) and (ii) of the first Paragraph of Section 5.3 of the
Agreement are amended in their entirety, effective January 1, 1989, to read as
follows:
"(i) the consolidated current assets of the Company and its
subsidiaries (taken as a whole) is less than 150% of the sum of (a) the
consolidated current liabilities of the Company and its subsidiaries, plus (b)
the current liabilities of others
3
<PAGE>
which are guaranteed by the Company or any such subsidiary, at such date; or
(ii) the consolidated long term debt of the Company and its
subsidiaries (taken as a whole), excluding current maturities thereof, exceeds
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"
8. The last paragraph of Section 5.3 of the Agreement is amended by adding
the following sentence thereto:
"Notwithstanding the foregoing, in the event of the termination of this
Agreement pursuant to this Section 5.3 following a Change in Control of the
Company, upon the death of Executive, the Company also agrees to pay
Executive's Beneficiary the death benefit described in Section 3.4 hereof."
9. Section 5.4 is amended by deleting the period at the end thereof and
adding the following thereto:
"and, upon the death of Executive, the Company agrees to pay
Executive's Beneficiary the death benefit described in Section 3.4 hereof."
4
<PAGE>
10. The first sentence of Section 6.11 of the Agreement is amended by
deleting the period at the end thereof and adding the following thereto:
"and the death benefit described in Section 3.4 hereof (if such service
is terminated following a Change in Control of the Company)."
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the date first above written.
EXECUTIVE HARTMARX CORPORATION
/s/ Elbert O. Hand /s/ Harvey Weinberg
- -------------------------- ---------------------------
5
<PAGE>
EXHIBIT 10-F-6
Harvey Weinberg Hartmarx Corporation
Vice Chairman and 101 North Wacker Drive
Chief Executive Officer Chicago, Illinois 60606
312 372-6300
October 23, 1989
Mr. James E. Condon
Vice President and Treasurer
Hartmarx Corporation
101 North Wacker Drive
Chicago, Illinois 60606
Dear Jim:
The Board of Directors of Hartmarx Corporation ("Hartmarx") has authorized an
amendment to your November 30, 1987 agreement with Hartmarx ("Agreement") in
order to clarify its provisions pertaining to the "gross-up" of any sums payable
to you which may become subject to an excise tax imposed under the Federal
Internal Revenue Code.
Accordingly, upon your acceptance of this amendment (by signing and returning
the enclosed copy of this letter to Carey Stein) the second sentence of the last
paragraph beginning on page 3 of your Agreement is hereby amended in its
entirety to read as follows:
"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 plus any other payments or benefits treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code."
All other terms and conditions of the Agreement are continued in full force
and effect.
AGREED AND ACCEPTED: HARTMARX CORPORATION
/s/ James E. Condon By: /s/ Harvey A. Weinberg
- -------------------------- --------------------------
(Executive) Its CEO
--------------------------
<PAGE>
EXHIBIT 10-F-8
EMPLOYMENT AGREEMENT
--------------------
This Agreement entered into as of the 12th day of September, 1994, by and
between HARTMARX CORPORATION, a Delaware corporation ("Hartmarx"), and MARY D.
ALLEN ("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:
<PAGE>
1. Employment Period. Hartmarx hereby employs Executive and Executive
hereby agrees to remain in the employ of Hartmarx for an approximate 27 1/2
month consecutive term beginning on September 12, 1994, and continuing in effect
through December 31, 1996 (the "Agreement Period"). 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, Secretary and General Counsel of Hartmarx.
2. Performance of Duties. While she is employed by Hartmarx Executive
agrees that she shall devote her best efforts and full business time exclusively
to the business affairs of Hartmarx and its subsidiaries and shall perform her
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 her
devoting her best efforts to her duties to Hartmarx.
2
<PAGE>
3. Compensation. Subject to the terms and provisions of this Agreement,
during the Agreement Period, Executive shall be compensated for her services by
Hartmarx as follows:
(a) Executive's annual base salary shall not be less than her 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.
3
<PAGE>
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 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").
4
<PAGE>
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.
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
5
<PAGE>
any publicly held company shall not constitute "competitive activities."
During and after the Agreement Period, Executive will not divulge or
appropriate to her 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:
(a) Executive shall be entitled to receive from Hartmarx (provided Executive
shall not be in breach of any provision of this Agreement applicable to her
after such
6
<PAGE>
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
7
<PAGE>
with Hartmarx is terminated calculated based on the 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
8
<PAGE>
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
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
9
<PAGE>
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.
(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 her 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
10
<PAGE>
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 she was participating
immediately prior to her termination of employment (if permitted under
the terms of and/or policies governing such plans and by applicable
law) at her own cost (i.e., without Hartmarx subsidization) until the
earlier of her sixty-fifth (65th) birthday or the commencement of her
employment (by other than Hartmarx). Nothing herein shall be deemed to
limit Executive's rights,
11
<PAGE>
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
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
12
<PAGE>
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 payment of her RIP
benefits in the form of a joint
13
<PAGE>
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 her 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 her 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.
14
<PAGE>
7. Resignation for Good Reason. Executive may treat any of the following
events as a termination of her employment by Hartmarx without Cause, with the
consequences provided in Paragraph 6 hereof:
(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, Secretary and General Counsel are changed without
Executive's consent;
(d) the assignment to Executive of any duties inconsistent with
Executive's status as Executive Vice President, Secretary and
General Counsel 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
15
<PAGE>
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 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
16
<PAGE>
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) in such benefits and/or policies similarly
affecting all executives of Hartmarx.
(h) [intentionally omitted]
Executive's right to treat any of the foregoing events as a termination of
her 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
17
<PAGE>
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 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:
18
<PAGE>
(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 were directors at the
beginning of the period, cease for any reason to constitute a majority
thereof; or
19
<PAGE>
(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 Executive) 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
20
<PAGE>
of this Agreement or any other plan, arrangement or agreement with 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
21
<PAGE>
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 constitute a "parachute payment" within the meaning of
section 28OG(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
22
<PAGE>
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.
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 Chief
Executive Officer, or to Executive at the last address filed by her 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 her creditors, other than Hartmarx and its
subsidiaries, and may not otherwise be voluntarily or involuntarily assigned,
alienated or encumbered.
23
<PAGE>
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 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.
24
<PAGE>
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
her 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 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
25
<PAGE>
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 her 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.
______________________________
Mary D. Allen
Attest: HARTMARX CORPORATION
_______________________ By:___________________________
Glenn R. Morgan, E.O. Hand, Chairman and
Assistant Secretary Chief Executive Officer
26
<PAGE>
EXHIBIT 12
HARTMARX CORPORATION
STATEMENT OF COMPUTATION OF RATIOS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income per consolidated
statement of earnings $16,148 $ 6,220 $(220,245) $(38,365) $(61,545)
Add:
Income taxes (9,555) 190 (6,605) (21,630) (33,265)
Interest expense 21,214 22,869 21,135 23,793 28,952
Portion of rents representative
of the interest factor (a) 8,054 9,327 20,088 22,865 23,138
Subtract:
Undistributed earnings of
non-consolidated affiliate - - - - 4,903
--------------------------------------------------
Income as adjusted $35,861 $38,606 $(185,627) $(13,337) $(37,817)
==================================================
Fixed charges:
Interest expense $21,214 $22,869 $ 21,135 $ 23,793 $ 28,952
Portion of rents representative
of the interest factor (a) 8,054 9,327 20,088 22,825 23,138
--------------------------------------------------
Fixed Charges $29,268 $32,196 $ 41,223 $ 46,618 $ 52,090
==================================================
Ratio of earnings to fixed charges 1.23 1.20 * * *
==================================================
* Coverage shortfall - - $ 226,850 $ 59,995 $ 89,907
==================================================
</TABLE>
(a) Represents one-third of rent expense which management believes
represents a reasonable approximation of the interest component of
rent expense.
<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
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>
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.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of HARTMARX CORPORATION, a Delaware corporation, do hereby constitute
and appoint WALLACE L. RUECKEL and MARY D. ALLEN, or either of them, his true
and lawful attorney in fact and agent, with full power and authority of
substitution and resubstitution, to sign in the name and on behalf of the
undersigned, as directors and officers of said corporation, the corporation's
FORM 10-K Annual Report, and any and all subsequent amendments thereto, and to
file the same or cause to be filed the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and do hereby grant unto each said attorney in fact and agent full power to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they or either
of them might or could do in person, hereby ratifying and confirming all that
each said attorney in fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney
this 10th day of January, 1995.
- ------------------------------ ----------------------------------
ELBERT O. HAND HOMI B. PATEL
Chairman, Chief Executive President, Chief Operating
Officer, Director Officer, Director
______________________________ ----------------------------------
A. ROBERT ABBOUD, Director CHARLES K. OLSON, Director
______________________________ ----------------------------------
LETITIA BALDRIGE, Director TALAT M. OTHMAN, Director
______________________________ ----------------------------------
JEFFREY A. COLE, Director STUART L. SCOTT, Director
______________________________ ----------------------------------
RAYMOND F. FARLEY, Director SAM F. SEGNAR, Director
______________________________ ----------------------------------
DONALD P. JACOBS, Director WALLACE L. RUECKEL
Executive Vice President,
Principal Financial Officer
______________________________ ----------------------------------
MILES L. MARSH, Director GLENN R. MORGAN
Sr. Vice President
Principal Accounting Officer
______________________________
CHARLES MARSHALL, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<CASH> 2,823
<SECURITIES> 0
<RECEIVABLES> 114,597
<ALLOWANCES> (7,368)
<INVENTORY> 183,347
<CURRENT-ASSETS> 312,437
<PP&E> 203,189
<DEPRECIATION> (151,646)
<TOTAL-ASSETS> 392,200
<CURRENT-LIABILITIES> 96,748
<BONDS> 167,085
<COMMON> 81,194
0
0
<OTHER-SE> (28,890)
<TOTAL-LIABILITY-AND-EQUITY> 392,200
<SALES> 717,706
<TOTAL-REVENUES> 725,118
<CGS> 505,564
<TOTAL-COSTS> 693,329
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,214
<INCOME-PRETAX> 10,575
<INCOME-TAX> 9,435
<INCOME-CONTINUING> 20,010
<DISCONTINUED> 0
<EXTRAORDINARY> (3,862)
<CHANGES> 0
<NET-INCOME> 16,148
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
