<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
- --------
For quarterly period ended May 31, 1995
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
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3217140
- --------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
- --------------------------------- -----
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code 312/372-6300
------------
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
------- --------
At June 30, 1995, there were 32,668,888 shares of the Company's common stock
outstanding.
<PAGE>
HARTMARX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Earnings for the three
months and six months ended May 31, 1995 and May 31,
1994. 3
Consolidated Balance Sheet as of May 31 1995,
November 30, 1994 and May 31, 1994. 4
Condensed Consolidated Statement of Cash Flows
for the six months ended May 31, 1995 and May 31,
1994. 6
Notes to Consolidated Financial Statements. 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 4. Results of Votes of Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(000'S OMITTED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $135,029 $138,078 $284,312 $286,622
Licensing and other income 1,351 1,655 2,647 3,142
-------- -------- -------- --------
136,380 139,733 286,959 289,764
-------- -------- -------- --------
Cost of goods sold 101,860 102,782 214,436 215,634
Selling, general and administrative expenses 34,080 35,761 67,027 69,850
-------- -------- -------- --------
135,940 138,543 281,463 285,484
-------- -------- -------- --------
Earnings before interest, taxes,
discontinued operation and
extraordinary charge 440 1,190 5,496 4,280
Interest expense 5,180 5,406 10,144 10,462
-------- -------- -------- --------
Loss before taxes, discontinued operation
and extraordinary charge (4,740) (4,216) (4,648) (6,182)
Tax benefit 1,750 165 1,716 265
-------- -------- -------- --------
Loss before discontinued operation
and extraordinary charge (2,990) (4,051) (2,932) (5,917)
-------- -------- -------- --------
Discontinued operation:
Operating earnings (loss),
net of tax benefit (260) 931 (183) 2,077
Loss on disposition,
net of $.4 million tax benefit (18,100) - (18,100) -
-------- -------- -------- --------
(18,360) 931 (18,283) 2,077
-------- -------- -------- --------
Net loss before extraordinary charge (21,350) (3,120) (21,215) (3,840)
Extraordinary charge, net of tax benefit - (3,862) - (3,862)
-------- -------- -------- --------
Net loss $(21,350) $ (6,982) $(21,215) $ (7,702)
======== ======== ======== ========
Earnings (loss) per share:
Continuing operations $ (.09) $ (.13) $ (.09) $ (.18)
Discontinued operation $ (.56) $ .03 $ (.56) $ .06
-------- -------- -------- --------
Before extraordinary charge $ (.65) $ (.10) $ (.65) $ (.12)
======== ======== ======== ========
After extraordinary charge $ (.65) $ (.22) $ (.65) $ (.24)
======== ======== ======== ========
Dividends per common share $ - $ - $ - $ -
======== ======== ======== ========
Average number of common shares
and common share equivalents 32,602 32,211 32,557 32,095
======== ======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
3
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(000'S OMITTED)
<TABLE>
<CAPTION>
May 31, Nov. 30, May 31,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 591 $ 2,823 $ 2,492
Accounts receivable, less allowance
of $7,612, $7,368 and $9,946
for doubtful accounts 94,441 114,597 101,606
Inventories 163,159 183,347 191,113
Prepaid expenses 9,268 6,672 21,683
Recoverable and deferred income taxes 6,862 4,998 6,370
-------- -------- --------
Total current assets 274,321 312,437 323,264
-------- -------- --------
OTHER ASSETS 15,562 16,403 15,834
-------- -------- --------
DEFERRED INCOME TAXES 11,817 11,817 -
-------- -------- --------
NET ASSETS OF DISCONTINUED OPERATION 11,825 - -
-------- -------- --------
PROPERTIES
Land 2,719 3,877 3,892
Buildings and building improvements 47,479 58,498 58,779
Furniture, fixtures and equipment 96,191 112,850 112,656
Leasehold improvements 18,445 27,964 29,453
-------- -------- --------
164,834 203,189 204,780
Accumulated depreciation and amortization (124,162) (151,646) (152,027)
-------- -------- --------
Net properties 40,672 51,543 52,753
-------- -------- --------
TOTAL ASSETS $354,197 $392,200 $391,851
======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
4
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
May 31, Nov. 30, May 31,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES
Notes payable $ 20,000 $ 20,000 $ 15,000
Current maturities of long term debt 654 699 700
Accounts payable and accrued expenses 73,902 76,049 83,368
-------- -------- --------
Total current liabilities 94,556 96,748 99,068
-------- -------- --------
LONG TERM DEBT, less current maturities
Notes payable 33,600 46,900 69,500
10 7/8% Senior Subordinated Notes, net 99,427 99,383 99,340
Industrial development bonds 17,557 20,352 20,453
Other debt, extending to 2003 286 450 651
-------- -------- --------
Total long term debt 150,870 167,085 189,944
-------- -------- --------
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value;
2,500,000 authorized and unissued - - -
Common shares, $2.50 par value; authorized
75,000,000; issued 32,642,549 in May 1995,
32,477,800 in November 1994 and
32,308,398 in May 1994 81,606 81,194 80,771
Capital surplus 76,488 76,063 75,591
Retained earnings (deficit) (38,446) (17,231) (41,081)
Unearned employee benefits (10,877) (11,659) (12,442)
-------- -------- --------
Total shareholders' equity 108,771 128,367 102,839
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $354,197 $392,200 $391,851
======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
5
<PAGE>
HARTMARX CORPORATION
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
Six Months Ended May 31,
------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1995 1994
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss, including discontinued operation
and extraordinary charge $(21,215) $ (7,702)
Reconciling items to adjust net income to
net cash provided by operating activities:
Depreciation and amortization 5,268 7,145
Changes in:
Receivables, inventories and prepaids 5,604 13,934
Other assets (28) (1,894)
Accounts payable and accrued expenses 6,122 18,700
Taxes on earnings (1,864) 352
Adjustment of properties to net realizable value 160 (172)
Anticipated loss on sale of discontinued operation 18,100 -
Cash provided by discontinued operation 621 -
Extraordinary charge - 3,862
-------- ---------
Net cash provided by operating activities 12,768 34,225
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,887) (2,269)
-------- ---------
Net cash used in investing activities (2,887) (2,269)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of 10 7/8% Sr. Sub. Notes, net - 96,572
Proceeds from issuance of Credit Facility, net - 132,727
Payment of borrowings under Override Agreement - (235,999)
Decrease in notes payable (13,300) (25,420)
Decrease in other long term debt (378) (394)
Proceeds from other equity transactions 1,619 1,543
-------- ---------
Net cash used in financing activities (12,059) (30,971)
-------- ---------
Net increase (decrease) in cash and cash equivalents (2,178) 985
Cash and cash equivalents at beginning of period 2,769 1,507
-------- ---------
Cash and cash equivalents at end of period $ 591 $ 2,492
======== =========
SUPPLEMENTAL CASH FLOW INFORMATION
Net cash paid (received) during period for:
Interest expense $ 8,600 $ 8,000
Income taxes 100 (400)
</TABLE>
(See accompanying notes to consolidated financial statements)
6
<PAGE>
HARTMARX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations and
financial position for the applicable period. Results of operations for any
interim period are not necessarily indicative of results for any other periods
or for the full year. These interim financial statements should be read in
conjunction with the financial statements and related notes contained in the
Annual Report on Form 10-K for the year ended November 30, 1994. Certain prior
year amounts have been reclassified to conform to the presentation in the
current period. As further described in Note 2, the results of operations
relating to Kuppenheimer have been reported as a discontinued operation.
Effective December 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112 ("FAS 112"), Employers' Accounting for
Postemployment Benefits. This statement requires the recognition of obligations
related to benefits provided by an employer to former or inactive employees
after employment but before retirement. As the Company's accounting practices
were substantially consistent with the provisions of FAS 112, adoption did not
impact either financial condition or results of operations.
NOTE 2
On May 9, 1995, the Company announced an agreement to sell the capital stock of
Kuppenheimer, its vertically integrated factory "direct-to-consumer" business.
Under the terms of the Agreement, the Company will receive $12.0 million cash at
closing, subject to defined adjustments based on actual working capital at the
closing date and an additional $2.0 million plus interest payable over the next
four years. In connection with the Company's ongoing guaranty of a $2.5 million
industrial development bond which will be retained by Kuppenheimer, the
purchaser will issue a separate $2.5 million note for the purchase of associated
real estate secured by a first mortgage on that property. Kuppenheimer's
operating results, net of tax benefit, have been classified as a discontinued
operation in the accompanying Consolidated Statement of Earnings for the three
and six months ended May 31, 1995, and comparable amounts relating to prior
periods have been reclassified. Discontinued operation also reflects a loss on
disposition of $18.1 million, net of tax benefit, representing the anticipated
loss on the sale
7
<PAGE>
of stock plus expenses directly related to the disposition and estimated
operating losses expected from the measurement date to the disposition date.
The accompanying Consolidated Balance Sheet as of May 31, 1995 reflects
Kuppenheimer's assets less liabilities, debt to be assumed, and the anticipated
loss on disposition as a separate caption entitled "Net Assets of Discontinued
Operation". The sale is anticipated to be completed in the Company's third
quarter.
NOTE 3
The calculation of earnings (loss) per share for each period is computed 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. None of the 2,500,000 authorized preferred shares for Hartmarx
Corporation have been issued.
NOTE 4
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 three year financing agreement ("Credit Facility") with
a group of lenders providing for maximum borrowings of $175 million secured by
eligible inventories, accounts receivable and the 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. The prior facility was terminated upon
completion of the Notes and Credit Facility transactions. The current financing
agreements contain various restrictive covenants pertaining to minimum net
worth, payment of dividends, 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. The Credit Facility was amended on July 6,
1995, which, among other things, resulted in lowering the effective borrowing
rate by at least 100 basis points, reducing various fees and administrative
charges, and extending the term through July 5, 2000.
8
<PAGE>
NOTE 5
Inventories at each date consisted of (000's omitted):
<TABLE>
<CAPTION>
May 31, Nov. 30, May 31,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
Raw materials $ 37,191 $ 42,296 $ 42,549
Work-in-process 25,567 29,015 30,265
Finished goods 100,401 112,036 118,299
-------- -------- --------
$163,159 $183,347 $191,113
======== ======== ========
</TABLE>
Inventories are stated at the lower of cost or market. Approximately 47%, 40%
and 43% of the Company's total inventories, primarily work-in-process and
finished goods, are valued using the last-in, first-out (LIFO) method at May 31,
1995, November 30, 1994 and May 31, 1994, respectively. The first-in, first-out
(FIFO) method is used for substantially all raw materials and the remaining
inventories.
9
<PAGE>
HARTMARX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In October 1994, the Company retained an investment bank to review alternative
strategies for Kuppenheimer, the Company's vertically integrated factory
"direct-to-consumer" business. As described in Note 2 in the accompanying Notes
to Consolidated Financial Statements, an agreement to sell the capital stock of
Kuppenheimer was announced on May 9, 1995. Closing of the transaction,
currently expected to occur in the Company's third quarter, is contingent upon
satisfaction of various conditions, including the completion of financing
arrangements by the purchaser. The anticipated disposition of Kuppenheimer has
been accounted for as a discontinued operation. Accordingly, Kuppenheimer's
results of operations through the measurement date, along with the anticipated
loss on disposition, are reflected as a discontinued operation in the
accompanying Consolidated Statement of Earnings and Kuppenheimer's results of
operations for the prior periods have been reclassified as a discontinued
operation. The accompanying May 31, 1995 Consolidated Balance Sheet reflects
Kuppenheimer's assets less liabilities and debt to be assumed, along with the
anticipated loss on disposition as a separate caption entitled "Net Assets of
Discontinued Operation". Proceeds from the $12 million cash to be received at
closing, subject to defined adjustments based on working capital, will be used
principally to reduce debt.
LIQUIDITY AND CAPITAL RESOURCES
November 30, 1994 to May 31, 1995
- ---------------------------------
Since November 30, 1994, net accounts receivable decreased $20.2 million or
17.6% to $94.4 million, reflecting the normal seasonal fluctuations in the Men's
Apparel Group. Inventories of $163.2 million declined $20.2 million or 11.0%,
principally due to the anticipated disposition of Kuppenheimer, partially
offset by seasonal increases in the Men's Apparel Group. Net properties
decreased $10.9 million to $40.7 million reflecting the anticipated disposition
of Kuppenheimer and depreciation exceeding additions; capital expenditures and
depreciation are each expected to approximate $10 million for fiscal 1995.
Total debt of $171.5 million (which excludes the $2.5 million industrial
development bond anticipated
10
<PAGE>
to be assumed by Kuppenheimer) declined $16.3 million and represented 61.2% of
total capitalization compared to 59.4% at November 30, 1994.
May 31, 1994 to May 31, 1995
- ----------------------------
Net accounts receivable declined $7.2 million or 7.1% to $94.4 million,
principally attributable to improved collection of receivables. The allowance
for doubtful accounts decreased $2.3 million to $7.6 million and represented
7.5% and 8.9% of gross receivables in 1995 and 1994, respectively, reflecting
the write off during 1994 of receivables previously reserved associated with the
1992 Restructuring. Inventories of $163.2 million declined $28.0 million or
14.6%, principally attributable to the anticipated disposition of Kuppenheimer;
tailored clothing inventories increased from expected second half business,
while women's inventories declined from marketing fewer wholesale product lines
compared to the prior year. Prepaid expenses of $9.3 million declined $12.4
million, principally attributable to converting several workers compensation
cash deposits to letter of credit arrangements and the timing of payment of
insurance related items. Net properties of $40.7 million declined $12.1
million, primarily attributable to the anticipated disposition of Kuppenheimer;
depreciation expense also exceeded capital additions. Accounts payable and
accrued expenses declined $9.5 million, principally attributable to the
anticipated disposition of Kuppenheimer. Total debt of $171.5 million (which
excludes the $2.5 million industrial development bond anticipated to be assumed
by Kuppenheimer) decreased $34.1 million and represented 61.2% of total
capitalization compared to 66.7% last year. The lower percentage this year
primarily reflected the repayment of debt from working capital reductions along
with higher equity from the trailing year earnings and the proceeds from stock
sales to employee benefit plans.
RESULTS OF OPERATIONS
Second Quarter 1995 Compared to Second Quarter 1994
- ---------------------------------------------------
Consolidated sales of $135.0 million for continuing operations declined $3.0
million or 2.2% from $138.1 million in 1994. Men's Apparel Group sales were
approximately the same as 1994, as increases from the Tommy Hilfiger, Bobby
Jones and Hickey-Freeman brands were offset by lower sales of moderately priced
private label tailored clothing and in-stock sales of slacks. Sales in the
women's businesses, which comprised approximately 9% of consolidated sales in
1995 and 10% in 1994, declined approximately $2.5 million, reflecting the
discontinuance of several unprofitable wholesale lines and a soft market in the
Barrie Pace catalog business.
11
<PAGE>
The consolidated gross margin percentage to sales was 24.6% compared to 25.6%
last year, principally reflecting lower gross margin rates in the moderately
priced private label tailored clothing and slack segments. Consolidated
selling, general and administrative expenses declined $1.7 million to $34.1
million and represented 25.2% of sales compared to 25.9% last year. The current
period included a non-recurring $3.7 million charge related to the settlement of
1992 licensing program disputes, partially offset by a $2.8 million gain on the
sale of a former production site. Earnings before interest, taxes and
depreciation ("EBITDA") for continuing operations were $2.7 million in 1995
compared to $3.5 million in 1994. Earnings before interest expense and taxes
("EBIT") for continuing operations were $.4 million in 1995 compared to $1.2
million last year. Both EBITDA and EBIT were about even with 1994 after
excluding the effect of the non-recurring items mentioned above. Interest
expense declined $.2 million to $5.2 million, attributable to lower average
borrowings as interest rates were higher; interest expense included amortization
of financing fees of $.4 million in 1995 and $.5 million in 1994.
The pre-tax loss from continuing operations was $4.7 million in 1995 compared to
a loss of $4.2 million in 1994; excluding the effect of the licensing settlement
and the building sale gain, pre-tax results were slightly improved compared to
the prior year. After reflecting a federal and state tax benefit of $1.7
million in 1995 and a state benefit of $.2 million in 1994, the consolidated
loss for 1995 before discontinued operation and extraordinary charge was $3.0
million or $.09 per share compared to a loss of $4.1 million or $.13 per share
in 1994. The discontinued operation in 1995 consisted of an operating loss of
$.3 million, net of $.1 million tax benefit, plus the anticipated loss on
disposition of $18.1 million. The decline in Kuppenheimer's operating results
to a pre-tax loss of $.4 million from earnings of $1.0 million in 1994 reflected
fewer stores and a comparable store sales decrease of approximately 12%. The
1994 extraordinary charge of $3.9 million or $.12 per share was associated with
the early repayment of loans in connection with the Company's debt refinancing.
Six Months 1995 Compared to Six Months 1994
- -------------------------------------------
First half consolidated sales for continuing operations were $284.3 million
compared to $286.6 million in 1994. Men's Apparel Group sales improved
slightly, as the increases in the branded lines were offset by declines in the
private label products. Sales in the women's businesses, comprising
approximately 8% of total sales in 1995 compared to 9% in 1994, declined
approximately $2.6 million, reflecting the discontinuance of several
unprofitable wholesale lines.
12
<PAGE>
The consolidated gross margin percentage to sales was 24.6% compared to 24.8%.
Gross margin rates were approximately even in the Men's Apparel Group branded
lines, but declined for private label products reflecting industry wide
conditions. Gross margins in the women's businesses improved, attributable to
International Women's Apparel, which was adversely affected last year by
markdowns and losses associated with discontinuing unprofitable wholesale
product lines. Selling, general and administrative expenses declined $2.8
million to $67.0 million and represented 23.6% of sales compared to 24.4% last
year. The lower percentage to sales reflected a decrease in operating expenses
at the Men's Apparel Group. The ratio in the women's business increased,
attributable to Barrie Pace from higher postage and paper costs. EBITDA for
continuing operations was $10.0 million compared to $8.9 million last year and
EBIT was $5.5 million in 1995 compared to $4.3 million in 1994. Both EBITDA
and EBIT for 1995 were unfavorably impacted by the $.9 million non-recurring
items described previously, which affected the current year expense to sales
ratio by .3%. Interest expense declined $.3 million to $10.1 million, primarily
attributable to lower average borrowings as interest rates were higher compared
to 1994; interest expense included amortization of financing fees of $.8 million
in 1995 and $1.0 million in 1994.
The pre-tax loss from continuing operations was $4.6 million compared to a loss
of $6.2 million in 1994. After reflecting a federal and state tax benefit of
$1.7 million in 1995 and a state tax benefit of $.3 million in 1994, the
consolidated loss for 1995 before discontinued operation and extraordinary
charge was $2.9 million or $.09 per share compared to a loss of $5.9 million or
$.18 per share in 1994. The discontinued operation in 1995 consisted of an
operating loss of $.2 million, net of tax benefit of $.1 million, plus the
anticipated loss on disposition of $18.1 million. The decline in Kuppenheimer's
operating results to a pre-tax loss of $.3 million in 1995 compared to earnings
of $2.2 million in 1994 reflected fewer stores and a comparable store sales
decline of approximately 12%. The loss before discontinued operation and
extraordinary charge was $2.9 million or $.09 per share in 1995 compared to $5.9
million or $.18 per share in 1994. The net loss after discontinued operation
and the extraordinary charge was $21.2 million or $.65 per share in 1995
compared to $7.7 million or $.24 per share in 1994.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Dior Proceedings. As previously announced, Hart Schaffner & Marx (HSM)
reached a conclusion in June 1995 on all outstanding disputes related to the
1992 termination of the licensing arrangement between Christian Dior, Inc.
("Dior") and HSM. These disputes, described in the Company's 1994 Annual Report
on Form 10-K for the year ended November 30, 1994 and February 28, 1995
Quarterly Report on Form 10-Q, were all settled, in connection with which HSM
paid $3.7 million and withdrew its arbitration proceeding against Dior. This
resolution was reflected in the Company's results for the second quarter ended
May 31, 1995.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
The annual meeting of the stockholders of the Registrant was held on
April 13, 1995. The Directors listed in the Registrant's Proxy Statement for
the Annual Meeting of Stockholders dated February 28, 1995 were elected for one
year terms with voting for each as follows:
<TABLE>
<CAPTION>
Director For Abstentions
-------- --- -----------
<S> <C> <C>
A. Robert Abboud 29,084,260 993,043
Letitia Baldrige 29,327,565 749,738
Jeffrey A. Cole 29,363,174 714,129
Raymond F. Farley 29,402,874 674,429
Elbert O. Hand 29,069,665 1,007,638
Donald P. Jacobs 29,386,320 690,983
Miles L. Marsh 29,423,964 653,339
Charles Marshall 29,392,655 684,648
Charles K. Olson 29,414,341 662,962
Talat M. Othman 29,405,869 671,434
Homi B. Patel 29,084,369 992,934
Stuart L. Scott 29,091,938 985,365
Sam F. Segnar 29,385,195 692,108
</TABLE>
14
<PAGE>
The 1995 Incentive Stock Plan and 1995 Stock Plan for Non-Employee Directors
were ratified with votes as follows:
<TABLE>
<CAPTION>
1995 Stock
1995 Plan for
Incentive Non-Employee
Stock Plan Directors
---------- -----------
<S> <C> <C>
For adoption 22,822,511 22,610,344
Against adoption 3,345,351 3,495,989
Abstaining 349,404 410,933
Broker non-votes 3,560,037 3,560,037
</TABLE>
The reappointment of Price Waterhouse LLP as independent auditors was ratified
with 29,754,155 shares for, 165,531 shares opposed and 157,617 shares
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 4-E-2 Amendment No. 2 dated March 20, 1995
to the Credit Agreement.
Exhibit 4-E-3 Amendment No. 3 dated July 6, 1995
to the Credit Agreement.
Exhibit 27 Financial Data Schedules
(b) A Form 8-K was filed May 15, 1995 announcing the sale of Kuppenheimer
Manufacturing Company, Inc. to Kupp Acquisition Corp., subject to certain
conditions, including the purchaser having obtained financing for the
acquisition.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARTMARX CORPORATION
July 14, 1995 By: /s/WALLACE L. RUECKEL
--------------------------------
Wallace L. Rueckel
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
July 14, 1995 By: /s/GLENN R. MORGAN
--------------------------------
Glenn R. Morgan
Senior Vice President,
Finance and Administration
(Principal Accounting Officer)
16
<PAGE>
EXECUTION
HARTMARX CORPORATION
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this ``AMENDMENT'') is dated as
of March 20, 1995 and entered into by and among HARTMARX CORPORATION, a Delaware
corporation (``BORROWER''), the LENDERS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to as a ``LENDER'' and collectively as ``LENDERS''),
GENERAL ELECTRIC CAPITAL CORPORATION as Managing Agent and Collateral Agent for
Lenders (``MANAGING AGENT'') and THE BANK OF NEW YORK and BANKAMERICA BUSINESS
CREDIT, INC. as co-agents and, for purposes of Section 4 hereof, the GUARANTORS
IDENTIFIED ON THE SIGNATURE PAGES HEREOF, (collectively the ``GUARANTORS''), and
is made with reference to that certain Credit Agreement dated as of March 23,
1994, among Borrower, Lenders and Agent, as amended by that certain First
Amendment to Credit Agreement dated as of August 24, 1994 (the ``CREDIT
AGREEMENT''; capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Credit Agreement).
R E C I T A L S
- - - - - - - -
WHEREAS, Borrower and Lenders desire to amend the Credit Agreement as set
forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1
AMENDMENT
1.1 AMENDMENTS TO THE CREDIT AGREEMENT.
----------------------------------
A new subsection 7.4(viii) is hereby added to the Credit Agreement as
follows:
``(viii) Borrower and its Subsidiaries may guaranty Operating Leases
and Capital Leases permitted pursuant to subsection 7.9.''
<PAGE>
SECTION 2
BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment, Borrower
represents and warrants to Lenders that after giving effect to this Amendment in
the manner contemplated by Section 4.6 of this Amendment, each of the following
is true and correct:
(a) no event has occurred and is continuing which constitutes an Event
of Default or Potential Event of Default;
(b) the representations and warranties of Borrower and the other
Credit Parties contained in the Credit Agreement and the other Loan
Documents are true and correct on and as of the date hereof and as of the
Effective Date (as defined below) to the same extent as though made on and
as of the date hereof and as of the Effective Date except to the extent
such representations and warranties specifically relate to an earlier date,
in which case they are true and correct in all material respects as of such
earlier date;
(c) each of Borrower and the other Credit Parties has performed all
agreements on its part to be performed prior to the date hereof as set
forth in the Credit Agreement and the other Loan Documents;
(d) Borrower and the Guarantors have all requisite corporate power and
authority to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement;
(e) the execution of this Amendment has been duly authorized by all
necessary corporate action on the part of Borrower and the Guarantors; and
(f) the execution and delivery by Borrower and the Guarantors of this
Amendment does not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Borrower, the Guarantors or
any of their respective Subsidiaries, the Certificate of Incorporation of
Borrower, the Guarantors or any of their respective Subsidiaries or any
order, judgment or decree of any court or other agency of government
binding on Borrower, the Guarantors or any of their respective
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any Contractual
Obligation of Borrower, the Guarantors or any of their respective
Subsidiaries, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Borrower, the Guarantors or
any of their respective Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Collateral Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Borrower, the
Guarantors or any of their respective Subsidiaries.
2
<PAGE>
SECTION 3
GUARANTORS
Each of the Guarantors hereby consents to this Amendment and agrees
that each Loan Document to which it is a party shall continue in full force and
effect and shall be valid and enforceable and shall not be impaired or affected
by the execution of this Amendment and is hereby ratified and confirmed
SECTION 4
MISCELLANEOUS
4.1 REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN
DOCUMENTS.
(i) On and after the Effective Date, each reference in the Credit
Agreement to ``this Agreement'', ``hereunder'', ``hereof'', ``herein'' or
words of like import referring to the Credit Agreement, and each reference
in the other Loan Documents to the ``Credit Agreement'', ``thereunder'',
``thereof'' or words of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement as amended hereby;
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed; and
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any
Agent or any Lender under, the Credit Agreement or any of the other Loan
Documents.
4.2 FEES AND EXPENSES. Borrower acknowledges that all costs, fees and
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Managing Agent and its counsel with respect to this Amendment and the documents
and transactions contemplated hereby shall be for the account of Borrower.
4.3 HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
4.4 APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO COMMON LAW CONFLICTS OF LAWS PRINCIPLES.
3
<PAGE>
4.5 COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
4.6 EFFECTIVENESS. This Amendment shall become effective (such date being
the ``EFFECTIVE DATE'') upon the execution of a counterpart hereof by Requisite
Lenders, the Borrower and the Guarantors and receipt by Borrower and Managing
Agent of written or telephone notification of such execution and authorization
of delivery thereof.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
HARTMARX CORPORATION
By:
---------------------------------------------
Name: Wallace L. Rueckel
Title: Executive Vice President and Chief Financial
Officer
S-1
<PAGE>
GUARANTORS:
AMERICAN APPAREL BRANDS, INC.
ANNISTON SPORTSWEAR CORPORATION
BILTWELL COMPANY, INC.
BRIAR, INC.
C.M. CLOTHING, INC.
C.M. OUTLET CORP.
CHICAGO TROUSER COMPANY, LTD.
COUNTRY MISS, INC.
COUNTRY MISS INTERNATIONAL LIMITED
COUNTRY SUBURBANS, INC.
DIRECT ROUTE MARKETING CORPORATION
E-TOWN SPORTSWEAR CORPORATION
FAIRWOOD-WELLS, INC.
GLENEAGLES, INC.
HENRY GRETHEL APPAREL, INC.
HANDMACHER FASHIONS FACTORY OUTLET, INC.
HANDMACHER-VOGEL, INC.
HARTMARX INTERNATIONAL, INC.
HART SCHAFFNER & MARX
HART SERVICES, INC.
THOS. HEATH CLOTHES, INC.
HGA LICENSING, INC.
HICKEY-FREEMAN CO., INC.
HIGGINS, FRANK & HILL, INC.
HMXUS, INC.
HOOSIER FACTORIES, INCORPORATED
HSM UNIVERSITY, INC.
INTERCONTINENTAL APPAREL, INC.
INTERNATIONAL WOMEN'S APPAREL, INC.
JAYMAR-RUBY, INC.
JRSS, INC.
KUPPENHEIMER MANUFACTURING COMPANY,
INC.
KUPPENHEIMER MEN'S CLOTHIERS DADEVILLE,
INC.
MEN'S QUALITY BRANDS, INC.
NATIONAL CLOTHING COMPANY, INC.
106 REAL ESTATE CORP.
RECTOR SPORTSWEAR CORPORATION
ROBERTS INTERNATIONAL CORPORATION
SALHOLD, INC.
SEAFORD CLOTHING CO.
SOCIETY BRAND, LTD.
S-2
<PAGE>
ROBERT SURREY, INC.
TAILORED TREND, INC.
THORNGATE, LTD.
THORNGATE UNIFORMS, INC.
TRADE FINANCE INTERNATIONAL LIMITED
UNIVERSAL DESIGN GROUP, LTD.
WALTON MANUFACTURING COMPANY
M. WILE & COMPANY, INC.
WINCHESTER CLOTHING COMPANY
YORKE SHIRT CORPORATION
By: /s/ Wallace L. Rueckel
---------------------------------------
Name: Wallace L. Rueckel
Title: Vice President of each of the foregoing (except
for Country Miss International Limited) and a
Director of Country Miss International Limited
S-3
<PAGE>
LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION,
individually, as Managing Agent and as Collateral Agent
By: /s/ William Brasse
-----------------------------------------
Title: Senior Vice President--Commercial Finance
-----------------------------------------
S-4
<PAGE>
THE BANK OF NEW YORK,
Individually, as Co-Agent and as Issuing Lender for the
Letters of Credit (other than the Existing Letters of
Credit)
By:
-----------------------------------
Title: Assistant Vice President
-----------------------------------
S-5
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC.
Individually and as Co-Agent
By:
---------------------------------
Title:
---------------------------------
S-6
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Issuing Lender for Existing Letters
of Credit
By:
-----------------------------------------
Title:
-----------------------------------------
S-7
<PAGE>
MANUFACTURERS AND TRADERS TRUST COMPANY
By:
---------------------------------
Title: VICE PRESIDENT
---------------------------------
S-8
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------------
Title: Vice President
--------------------------------
S-9
<PAGE>
THE NORTHERN TRUST COMPANY
By:
---------------------------------
Title: Vice President
---------------------------------
S-10
<PAGE>
CHEMICAL BANK
By:
------------------------------
Title: MANAGING DIRECTOR
------------------------------
S-11
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By:
-------------------------------------
Title:
-------------------------------------
S-12
<PAGE>
EXECUTION
HARTMARX CORPORATION
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this ``AMENDMENT'') is dated as
of June 30, 1995 and entered into by and among HARTMARX CORPORATION, a Delaware
corporation (``BORROWER''), the LENDERS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to as a ``LENDER'' and collectively as ``LENDERS''),
GENERAL ELECTRIC CAPITAL CORPORATION as Managing Agent and Collateral Agent for
Lenders (``MANAGING AGENT'') and THE BANK OF NEW YORK and BANKAMERICA BUSINESS
CREDIT, INC. as co-agents and, for purposes of Section 3 hereof, the GUARANTORS
IDENTIFIED ON THE SIGNATURE PAGES HEREOF, (collectively the ``GUARANTORS''), and
is made with reference to that certain Credit Agreement dated as of March 23,
1994, among Borrower, Lenders and Agent, as amended by the First Amendment to
Credit Agreement dated as of August 26, 1994 among Borrower, Lenders and Agent
and by the Second Amendment to Credit Agreement dated as of March 20, 1995 among
Borrower, Lenders and Agent (the ``CREDIT AGREEMENT''; capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement). Unless otherwise indicated, Section and subsection
references contained herein shall be to the corresponding Sections and
subsections of the Credit Agreement.
R E C I T A L S
- - - - - - - -
WHEREAS, Borrower and Lenders desire to amend the Credit Agreement as set
forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1
AMENDMENT
1.1 AMENDMENTS TO THE CREDIT AGREEMENT.
----------------------------------
A. DEFINITIONS. Section 1.1 of the Credit Agreement is amended by adding
thereto the following definitions, which shall be inserted in proper
alphabetical order:
<PAGE>
`` `ACQUISITION' means the acquisition, from a willing seller, by
purchase or otherwise of all or a significant portion of the business,
property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person; provided that a Joint Venture shall be considered
an Acquisition if it would be included on a consolidated balance sheet or
income statement with Borrower in accordance with GAAP.
`ACQUISITION AUDIT' shall have meaning given such term in Section
7.7(vii).
`ACQUISITION FUND AMOUNT' shall have the meaning given such term in
Section 7.7(vii).
`EXCESS CASH FLOW' means, for any period, Consolidated Adjusted EBITDA
for such period minus (x) the taxes actually paid by Borrower and its
subsidiaries during such period to the extent not already deducted in the
calculation of Consolidated Net Income for such period minus (y) the
Consolidated Debt Service for such period minus (z) Consolidated Capital
Expenditures for such period.
`INTEREST COVERAGE RATIO' means, for any period, the ratio of (i)
Consolidated Adjusted EBITDA for such period to (ii) Consolidated Cash
Interest Expense for such period.
`THIRD AMENDMENT EFFECTIVE DATE' means the date as of which the Third
Amendment to this Credit Agreement becomes effective in accordance with its
terms.''
B. BORROWING BASE. In Section 1.1, the definition of ``Borrowing Base''
is amended by adding the following sentence to the end thereof:
``Any of the foregoing to the contrary notwithstanding, the percentage of
the Dollar value of Eligible Accounts and Eligible Inventory which at any
time of determination is the subject of an Acquisition Audit shall, at all
times until such Acquisition Audit is completed to Collateral Agent's
satisfaction, be equal to 50% of the applicable percentage of the Dollar
Value of Eligible Accounts and Eligible Inventory not subject to an
Acquisition Audit.''
C. TERM. In Section 1.1, the definition of ``Commitment Termination
Date'' is amended as follows:
`` `COMMITMENT TERMINATION DATE' means the date which is the five year
anniversary of the Third Amendment Effective Date.''
D. RATE OF INTEREST. Section 2.2A is amended and restated as follows:
``A. RATE OF INTEREST. Subject to the provisions of subsections 2.2E
and 2.6, each Revolving Loan shall bear interest on the unpaid principal
amount thereof from the date made through maturity (whether by acceleration
or otherwise) at a rate
2
<PAGE>
determined by reference to the Index Rate or the Adjusted LIBOR Rate, as
the case may be. Subject to the provisions of subsection 2.7, each Swing
Line Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a
rate determined by reference to the Index Rate. The applicable basis for
determining the rate of interest with respect to any Revolving Loan shall
be selected by Borrower initially at the time a Notice of Borrowing is
given with respect to such Revolving Loan pursuant to subsection 2.1B. The
basis for determining the interest rate with respect to any Revolving Loan
may be changed from time to time pursuant to subsection 2.2D. If on any day
a Revolving Loan is outstanding with respect to which notice has not been
delivered to Managing Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then
for that day that Loan shall bear interest determined by reference to the
Index Rate.
Subject to the provisions of subsections 2.2E and 2.6, the Loans shall
bear interest through maturity as follows:
(i) if an Index Rate Loan, then at the Index Rate; or
(ii) if a LIBOR Rate Loan, then at the sum of the Adjusted LIBOR
Rate plus the Applicable Margin per annum.
The `APPLICABLE MARGIN' for each LIBOR Rate Loan shall be the
percentage set forth below based upon the Interest Coverage Ratio for the
four consecutive fiscal quarters of Borrower ending on the last day of the
most recently reported fiscal quarter of Borrower:
<TABLE>
<CAPTION>
===========================================
APPLICABLE
MARGIN FOR
INTEREST COVERAGE LIBOR RATE
RATIO LOANS
===========================================
<S> <C>
Less than 2.50:1.00 1.50%
- -------------------------------------------
Greater than or equal
to 2.50:1.00 but less
than
3.50:1.00 1.25%
- -------------------------------------------
Greater than or equal
to 3.50:1.00 1.00%
===========================================
</TABLE>
The Applicable Margin shall be adjusted, to the extent required, on
the date of delivery of each Compliance Certificate delivered pursuant to
subsection 6.1(iv) such adjustment to remain in effect until the next date
of delivery of a Compliance
3
<PAGE>
Certificate (and related financial information required at such time
pursuant to subsection 6.1) pursuant to subsection 6.1(iv); provided that
with respect to the period from the Closing Date through the first
anniversary of the Third Amendment Effective Date, the Applicable Margin
for LIBOR Rate Loans shall be 1.50%, but immediately thereafter shall
adjust to the rate that would otherwise be applicable in accordance with
the foregoing; provided further that without limiting any Event of Default
or Potential Event of Default that may result therefrom, in the event
Borrower does not deliver any Compliance Certificate required pursuant to
subsection 6.1(iv) by the date specified therefor, then the Applicable
Margin shall automatically be adjusted to the highest rate set forth above
during the period commencing on the date such Compliance Certificate was
required to be delivered and expiring on the actual date of delivery
thereof.''
E. COMMITMENT FEES. Section 2.3A is amended by deleting the reference to
``1/2 of 1%'' contained therein and substituting ``3/8 of 1%'' therefor.
F. ANNUAL ADMINISTRATIVE FEE. Section 2.3B is amended by deleting the
reference to ``$75,000'' contained therein and substituting ``$50,000''
therefor.
G. COLLATERAL AGENT FEE. Section 2.3C is amended by deleting the
reference to ``$100,000'' contained therein and substituting ``$50,000''
therefor.
H. ISSUANCE OF LETTERS OF CREDIT. Section 3.1A(ii) is amended by
deleting the reference to ``$25,000,000'' contained therein and substituting
``$35,000,000'' therefor.
I. LETTER OF CREDIT FEES.
(i) Section 3.2(iii)(b) is amended by deleting the reference to
``0.75%'' contained therein and substituting ``0.50%'' therefor.
(ii) Paragraph (iv) of Section 3.2 is amended by deleting the period
at the end thereof and substituting a semi-colon therefor.
(iii) Section 3.2 is further amended by inserting after paragraph
(iv) thereof the following:
``provided that upon the occurrence of and during the continuation of
(i) any Event of Default under subsection 8.1, 8.6, or 8.7 or (ii) any
other Event of Default and upon notice to Borrower from Managing Agent
or Requisite Lenders the percentage rate used to calculate fees
payable under clause (i)(b), (ii)(b) or (iii)(b) of this subsection
3.2 shall be increased by two percentage points.''
4
<PAGE>
J. INVESTMENTS.
(i) The first paragraph of Section 7.3 is amended to read in its
entirety as follows:
``Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person,
including any Joint Venture, except:''
(ii) Section 7.3 is further amended by amending paragraph (viii) to
read in its entirety as follows:
``(viii) Borrower and its Subsidiaries may make investments in
Joint Ventures not constituting Acquisitions; provided that, the
aggregate of such Investments does not exceed $7,500,000 at any time
(whether in the form of cash or fair market value of property
contributed to such ventures or distributed in respect of such
acquisitions);''
(iii) Section 7.3 is further amended by amending paragraph (x) to
read in its entirety as follows:
``(x) Borrower and its Subsidiaries may make and own Investments
permitted by subsection 7.5; and''
K. REDEMPTION OR REPURCHASE OF SUBORDINATED NOTES. Section 7.5 is
amended by adding the following at the end thereof:
``and (vi) in addition to transactions permitted by clause (iii) above, use
cash on hand to redeem or repurchase the Senior Subordinated Notes in an
aggregate principal amount not to exceed $15,000,000 in the aggregate on a
cumulative basis since the Third Amendment Effective Date.''
L. FINANCIAL STATEMENTS AND OTHER REPORTS. Section 6.1(xiii) is amended
by (i) deleting the phrase ``30 days prior to'' therefrom and (ii) adding the
words ``for the next succeeding two Fiscal Years and on an annual basis for each
remaining Fiscal Year'' immediately following the words ``month by month basis''
contained therein.
M. FINANCIAL COVENANTS.
(i) Minimum Consolidated Debt Service Coverage Ratio. Section 7.6A is
amended by adding the phrase ``and thereafter'' immediately following the
reference to ``Fourth Quarter 1996'' set forth in the table therein.
5
<PAGE>
(ii) Maximum Consolidated Leverage Ratio. Section 7.6B is amended by
adding the phrase ``and thereafter'' immediately after the reference to
``Fourth Quarter 1996'' set forth in the table therein.
(iii) Minimum Consolidated Net Worth. Section 7.6C is amended by
amending and restating the table set forth therein as follows:
<TABLE>
<CAPTION>
===================================
`` MINIMUM
FISCAL QUARTER CONSOLIDATED
NET WORTH
===================================
<S> <C>
Second Quarter 1994 $ 95,000,000
-----------------------------------
Third Quarter 1994 $ 95,000,000
-----------------------------------
Fourth Quarter 1994 $ 95,000,000
======================-------------
First Quarter 1995 $105,000,000
===================================
Second Quarter 1995 $105,000,000
-----------------------------------
Third Quarter 1995 $105,000,000
-----------------------------------
Fourth Quarter 1995 $105,000,000
======================-------------
First Quarter 1996 $115,000,000
===================================
Second Quarter 1996 $115,000,000
-----------------------------------
Third Quarter 1996 $115,000,000
-----------------------------------
Fourth Quarter 1996 $115,000,000
======================-------------
First Quarter 1997 $125,000,000
===================================
Second Quarter 1997 $125,000,000
-----------------------------------
Third Quarter 1997 $125,000,000
-----------------------------------
Fourth Quarter 1997 $125,000,000
======================-------------
First Quarter 1998 $135,000,000
===================================
Second Quarter 1998 $135,000,000
-----------------------------------
Third Quarter 1998 $135,000,000
-----------------------------------
Fourth Quarter 1998 $135,000,000
======================-------------
First Quarter 1999 $145,000,000
-----------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
===================================
`` MINIMUM
FISCAL QUARTER CONSOLIDATED
NET WORTH
===================================
<S> <C>
Second Quarter 1999 $145,000,000
-----------------------------------
Third Quarter 1999 $145,000,000
-----------------------------------
Fourth Quarter 1999 $145,000,000
======================-------------
First Quarter 2000 $155,000,000
===================================
Second Quarter 2000 $155,000,000 ''
===================================
</TABLE>
(iv) Minimum Consolidated Trade Support Ratio. Section 76D is hereby
amended by amending and restating the table set forth therein as follows:
<TABLE>
<CAPTION>
===================================
`` MINIMUM
FISCAL QUARTER CONSOLIDATED
FOR TRADE SUPPORT
EACH FISCAL YEAR RATIO
===================================
<S> <C>
First Quarter 10.0%
-----------------------------------
Second Quarter 10.0%
-----------------------------------
Third Quarter 8.0%
-----------------------------------
Fourth Quarter 10.0% ''
===================================
</TABLE>
N. ACQUISITIONS. Section 7.7(vii) is amended and restated as follows:
``(vii) Borrower may make an Acquisition if:
(A) no Event of Default or Potential Event of Default has
occurred and is continuing, or would result therefrom;
(B) the acquired business is in the same line of business as
Borrower;
(C) after giving effect to such Acquisition, the aggregate of all
Acquisitions made by Borrower since the Third Amendment Effective Date
will not exceed the Acquisition Fund Amount (as defined below) as of
the date of such Acquisition;
7
<PAGE>
(D) Managing Agent shall have received an Officer's Certificate
from Borrower, in form and substance satisfactory to Managing Agent,
demonstrating in reasonable detail that after giving effect to such
Acquisition, the projected excess of the lesser of (i) the Revolving
Loan Commitments or (ii) the Borrowing Base, over the Total
Utilization of Revolving Commitments shall not be less than
$15,000,000 on any day during the one-year period beginning on the
date of such Acquisition; and
(E) Lender shall receive a fully perfected first priority
security interest in the Collateral of the acquired business and all
provisions of subsection 6.11 applicable to such Acquisition shall
have been satisfied.
On or before the 90th day following the consummation of any such
Acquisition, Collateral Agent (and/or outside consultants selected by
Collateral Agent) shall, at Borrower's expense, conduct a comprehensive
audit, testing and review (an `ACQUISITION AUDIT') of all Eligible Accounts
and Eligible Inventory to be included in the Borrowing Base which are the
subject of such Acquisition and such audit, testing and review with respect
to such other Collateral which is the subject of such Acquisition may be
conducted in Collateral Agent's discretion. For the purpose of this Section
7.7(vii), the `ACQUISITION FUND AMOUNT' as of any date shall be equal to
the sum of (w) $20,000,000 plus (x) the amount not greater than $10,000,000
received by Borrower in return for its sale of Kuppenheimer Manufacturing
Company, Inc. assets pursuant to Section 7.7(iv) plus (y) 40% of aggregate
cumulative Excess Cash Flow (without duplication) since the Third Amendment
Effective Date calculated as of the most recent complete and reported
fiscal quarter of Borrower, commencing with the fiscal quarter ended August
31, 1995.
O. CONSOLIDATED CAPITAL EXPENDITURES. Section 7.8 is amended by adding the
following to the table set forth therein:
<TABLE>
<CAPTION>
=================================================
`` MAXIMUM CONSOLIDATED
FISCAL YEAR CAPITAL EXPENDITURES
=================================================
<S> <C>
1997 $18,000,000
-------------------------------------------------
1998 $19,000,000
-------------------------------------------------
1999 $20,000,000 ''
=================================================
</TABLE>
SECTION 2
BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment, Borrower
represents and warrants to Lenders that after giving effect to this Amendment in
the manner contemplated by Section 4.6 of this Amendment, each of the following
is true and correct:
8
<PAGE>
(a) no event has occurred and is continuing which constitutes an Event
of Default or Potential Event of Default;
(b) the representations and warranties of Borrower and the other
Credit Parties contained in the Credit Agreement and the other Loan
Documents are true and correct on and as of the date hereof and as of the
Effective Date (as defined below) to the same extent as though made on and
as of the date hereof and as of the Effective Date except to the extent
such representations and warranties specifically relate to an earlier date,
in which case they are true and correct in all material respects as of such
earlier date;
(c) each of Borrower and the other Credit Parties has performed all
agreements on its part to be performed prior to the date hereof as set
forth in the Credit Agreement and the other Loan Documents;
(d) Borrower and the Guarantors have all requisite corporate power and
authority to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement;
(e) the execution of this Amendment has been duly authorized by all
necessary corporate action on the part of Borrower and the Guarantors; and
(f) the execution and delivery by Borrower and the Guarantors of this
Amendment does not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Borrower, the Guarantors or
any of their respective Subsidiaries, the Certificate of Incorporation of
Borrower, the Guarantors or any of their respective Subsidiaries or any
order, judgment or decree of any court or other agency of government
binding on Borrower, the Guarantors or any of their respective
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any Contractual
Obligation of Borrower, the Guarantors or any of their respective
Subsidiaries, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Borrower, the Guarantors or
any of their respective Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Collateral Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Borrower, the
Guarantors or any of their respective Subsidiaries.
SECTION 3
GUARANTORS
Each of the Guarantors hereby consents to this Amendment and agrees that
each Loan Document to which it is a party shall continue in full force and
effect and shall be valid and
9
<PAGE>
enforceable and shall not be impaired or affected by the execution of this
Amendment and is hereby ratified and confirmed.
SECTION 4
MISCELLANEOUS
4.1 REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS.
-------------------------------------------------------------------------
(i) On and after the Effective Date, each reference in the Credit Agreement
to ``this Agreement'', ``hereunder'', ``hereof'', ``herein'' or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to the ``Credit Agreement'', ``thereunder'', ``thereof'' or words of
like import referring to the Credit Agreement, shall mean and be a reference to
the Credit Agreement as amended hereby;
(ii) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed; and
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of any Agent or any Lender
under, the Credit Agreement or any of the other Loan Documents.
4.2 FEES AND EXPENSES.
-----------------
(i) Borrower acknowledges that all costs, fees and expenses as described in
subsection 10.2 of the Credit Agreement incurred by Managing Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Borrower.
(ii) Borrower agrees to pay to Managing Agent, for distribution to each
Lender in proportion to that Lender's Pro Rata Share, an amendment fee equal to
0.15% of the Revolving Loan Commitments, payable upon execution and delivery of
this Third Amendment by all parties thereto.
4.3 HEADINGS.
--------
Section and subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
10
<PAGE>
4.4 APPLICABLE LAW.
--------------
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
COMMON LAW CONFLICTS OF LAWS PRINCIPLES.
4.5 COUNTERPARTS.
------------
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
4.6 EFFECTIVENESS.
-------------
This Amendment shall become effective (such date being the ``EFFECTIVE
DATE'') upon (i) the execution of a counterpart hereof by all Lenders, the
Borrower and the Guarantors and receipt by Borrower and Managing Agent of
written or telephone notification of such execution and authorization of
delivery thereof and (ii) payment of the fees described in Section 4.2(ii)
hereof.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
HARTMARX CORPORATION
By:
----------------------------------
Wallace L. Rueckel
Executive Vice President and
Chief Financial Officer
GUARANTORS:
AMERICAN APPAREL BRANDS, INC.
ANNISTON SPORTSWEAR CORPORATION
BILTWELL COMPANY, INC.
BRIAR, INC.
C.M. CLOTHING, INC.
C.M. OUTLET CORP.
CHICAGO TROUSER COMPANY, LTD.
COUNTRY MISS, INC.
COUNTRY MISS INTERNATIONAL LIMITED
COUNTRY SUBURBANS, INC.
DIRECT ROUTE MARKETING CORPORATION
E-TOWN SPORTSWEAR CORPORATION
FAIRWOOD-WELLS, INC.
GLENEAGLES, INC.
HENRY GRETHEL APPAREL, INC.
HANDMACHER FASHIONS FACTORY OUTLET,
INC.
HANDMACHER-VOGEL, INC.
HARTMARX INTERNATIONAL, INC.
HART SCHAFFNER & MARX
HART SERVICES, INC.
THOS. HEATH CLOTHES, INC.
HGA LICENSING, INC.
HICKEY-FREEMAN CO., INC.
HIGGINS, FRANK & HILL, INC.
NOVAPPAREL, INC. (FORMERLY KNOWN AS HMXUS,
INC.)
S-1
<PAGE>
HOOSIER FACTORIES, INCORPORATED
HSM UNIVERSITY, INC.
INTERCONTINENTAL APPAREL, INC.
INTERNATIONAL WOMEN'S APPAREL, INC.
JAYMAR-RUBY, INC.
JRSS, INC.
KUPPENHEIMER MANUFACTURING COMPANY,
INC.
KUPPENHEIMER MEN'S CLOTHIERS DADEVILLE,
INC.
MEN'S QUALITY BRANDS, INC.
NATIONAL CLOTHING COMPANY, INC.
106 REAL ESTATE CORP.
RECTOR SPORTSWEAR CORPORATION
ROBERTS INTERNATIONAL CORPORATION
SALHOLD, INC.
SEAFORD CLOTHING CO.
SOCIETY BRAND, LTD.
ROBERT SURREY, INC.
TAILORED TREND, INC.
THORNGATE, LTD.
THORNGATE UNIFORMS, INC.
TRADE FINANCE INTERNATIONAL LIMITED
UNIVERSAL DESIGN GROUP, LTD.
WALTON MANUFACTURING COMPANY
M. WILE & COMPANY, INC.
WINCHESTER CLOTHING COMPANY
YORKE SHIRT CORPORATION
By:
------------------------------------------------
Wallace L. Rueckel
Vice President of each of the foregoing (except
for Country Miss International Limited) and a
Director of Country Miss International Limited
S-2
<PAGE>
LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION,
individually, as Managing Agent and as Collateral Agent
By:
------------------------------------------
Title:
------------------------------------------
S-3
<PAGE>
THE BANK OF NEW YORK,
individually, as Co-Agent and as Issuing Lender for the
Letters of Credit (other than the Existing Letters of
Credit)
By:
---------------------------------------
Title:
---------------------------------------
S-4
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC.,
individually and as Co-Agent
By:
-------------------------------------
Title:
-------------------------------------
S-5
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Issuing Lender for Existing Letters
of Credit
By:
----------------------------------------
Title:
----------------------------------------
S-6
<PAGE>
MANUFACTURERS AND TRADERS TRUST COMPANY
By:
-------------------------------------
Title:
-------------------------------------
S-7
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------------------
Title:
--------------------------------------
S-8
<PAGE>
THE NORTHERN TRUST COMPANY
By:
--------------------------------------
Title:
--------------------------------------
S-9
<PAGE>
CHEMICAL BANK
By:
--------------------------------------
Title:
--------------------------------------
S-10
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By:
-----------------------------------
Title:
-----------------------------------
S-11
<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> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<CASH> 591
<SECURITIES> 0
<RECEIVABLES> 94,441
<ALLOWANCES> (7,612)
<INVENTORY> 163,159
<CURRENT-ASSETS> 274,321
<PP&E> 164,834
<DEPRECIATION> (124,162)
<TOTAL-ASSETS> 354,197
<CURRENT-LIABILITIES> 94,556
<BONDS> 150,870
<COMMON> 81,606
0
0
<OTHER-SE> 27,165
<TOTAL-LIABILITY-AND-EQUITY> 354,197
<SALES> 284,312
<TOTAL-REVENUES> 286,959
<CGS> 214,436
<TOTAL-COSTS> 281,463
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,144
<INCOME-PRETAX> (4,648)
<INCOME-TAX> 1,716
<INCOME-CONTINUING> (2,932)
<DISCONTINUED> (18,283)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,215)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
