<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HARTMARX CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
LOGO
----------------
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS OF HARTMARX CORPORATION
TO BE HELD APRIL 13, 1995
To the Stockholders of HARTMARX CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HARTMARX
CORPORATION (the "Corporation") will be held at The Fairmont Hotel, 200 North
Columbus Drive, Chicago, Illinois, on Thursday, April 13, 1995, at 11:00 A. M.
for the following purposes:
(1) To elect Directors of the Corporation.
(2) To consider adopting the 1995 Incentive Stock Plan, a copy of which is
set forth in the attached Proxy Statement as Exhibit A.
(3) To consider adopting the 1995 Stock Plan for Non-Employee Directors, a
copy of which is set forth in the attached Proxy Statement as Exhibit
B.
(4) To consider ratifying the appointment of independent auditors.
(5) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed February 15, 1995, as the record date for
determination of stockholders entitled to notice of, and to vote at, the Annual
Meeting.
In order that the shares of the Corporation may be represented as fully as
possible at the Annual Meeting, every stockholder is requested to vote, date,
sign and mail the enclosed Proxy, as early as practicable, in the accompanying
postage-paid envelope addressed to Mary D. Allen, Secretary, HARTMARX
CORPORATION, 101 North Wacker Drive, Chicago, Illinois 60606. If you also
attend the Annual Meeting, you will have the opportunity to vote your shares in
person instead of having the Proxy counted.
A complete list of the stockholders entitled to vote at the Annual Meeting,
showing the address and number of shares registered in the name of each
stockholder, may be examined by any stockholder, for any purpose germane to the
meeting, during regular business hours between March 31, 1995 and April 13,
1995, at the office of Mrs. Kay C. Nalbach, Assistant Secretary of the
Corporation, 101 North Wacker Drive, Chicago, Illinois.
A Proxy Statement with respect to the Annual Meeting is attached hereto. The
Annual Report to Stockholders and the Annual Report on Form 10-K for the fiscal
year ended November 30, 1994, is enclosed herewith.
By Order of the Board of Directors
LOGO
MARY D. ALLEN, Secretary
Chicago, Illinois
February 28, 1995
<PAGE>
LOGO
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF HARTMARX CORPORATION
TO BE HELD APRIL 13, 1995
The Common Stock of HARTMARX CORPORATION (the "Corporation") is the only
security entitled to vote at the meeting. On February 15, 1995, the record date
for determining the stockholders entitled to vote at the meeting, the
Corporation had 32,527,540 shares of outstanding Common Stock, each share
entitled to one vote, held by approximately 6,900 stockholders (estimated by
adding the number of registered holders furnished by the Corporation's
registrar and the number of participants in the Hartmarx Employee Stock
Ownership Plan). All shares represented by valid Proxies received pursuant to
this solicitation will be voted, if the Proxies are not revoked prior thereto.
Any stockholder may revoke a Proxy at any time prior to the voting by
delivering to the Corporation's Secretary a signed notice specifying the number
of shares and clearly identifying the Proxy to be revoked or by attending the
Annual Meeting and voting in person by written ballot. The Corporation's
principal executive offices are located at 101 North Wacker Drive, Chicago,
Illinois 60606, telephone 312/372-6300.
The enclosed Proxy is solicited by the Corporation's Board of Directors (the
"Board"). The cost of preparing and mailing the proxy material will be paid by
the Corporation. The approximate mailing date for this material is February 28,
1995. The Corporation will, upon request, reimburse brokers, banks and trust
companies for the costs incurred in mailing the proxy material to their
customers who are beneficial owners of Common Stock of the Corporation
registered in the names of such brokers, banks and trust companies or their
nominees. In addition to solicitation by mail, officers and regular employees
of the Corporation may solicit Proxies by telephone or telegram or in person,
but will receive no additional compensation for such activities.
Votes cast by proxy or in person at the meeting will be tabulated by the
inspectors of election appointed by the Board for the meeting. The affirmative
vote of a plurality of the shares represented at the meeting is required to
elect directors, and the affirmative vote of a majority of such shares is
required to approve the 1995 Incentive Stock Plan and 1995 Stock Plan for Non-
Employee Directors and to ratify the appointment of auditors. Abstentions and
broker non-votes are each included in the determination of shares present and
voting for purposes of determining whether a quorum is present. On other
matters, abstentions are counted as votes cast, while broker non-votes are not
counted in determining whether a proposal has been approved.
ITEM (1)--ELECTION OF DIRECTORS
Votes will be cast pursuant to authority granted by the enclosed Proxy for
the election of the thirteen nominees named below as directors of the
Corporation. Each elected director's term of office will be for one year or
until a successor is duly elected and qualified. In the event any of these
nominees becomes unavailable for election for any reason, votes will be cast
pursuant to authority granted by the enclosed Proxy for such persons as may be
designated by the Board.
1
<PAGE>
INFORMATION ABOUT NOMINEES FOR DIRECTORS
The information shown below includes the principal business affiliations of
each nominee since 1990.
Shares
Held(1)
A. ROBERT ABBOUD, 65--Director since 1974 ------
37,469
(17,469)
Mr. Abboud is president of A. Robert Abboud and
Company, a private investment company. From April,
1988 to March, 1991, he was chairman and chief
executive officer of First City Bancorporation of
Texas, Inc. and its subsidiary, First City National
Bank of Houston. He is also a director of AAR
Corporation, First City Bancorporation of Texas,
Inc., Inland Steel Company and Alberto-Culver
Company. (2)
LETITIA BALDRIGE, 69--Director since 1986 16,379
(15,879)
Ms. Baldrige is a writer, public relations consultant
and president of Letitia Baldrige Enterprises, Inc.,
a management training company. She is also a director
of the Federal Home Loan Bank of Atlanta and Outlet
Communications, Inc.
JEFFREY A. COLE, 53--Director since 1990 26,229
(23,729)
Mr. Cole is chairman, chief executive officer and a
director of Cole National Corporation, a specialty
retailer, having served as president, chief executive
officer and director prior to 1991. He is also a
director of American Consumer Products, Inc. and
Victoria Financial Corporation.
RAYMOND F. FARLEY, 70--Director since 1981 48,896
(22,396)
Mr. Farley is retired as president and chief
executive officer of S. C. Johnson & Son, Inc. (SC
Johnson Wax). He served as president and chief
operating officer of SC Johnson Wax prior to
December, 1988. He is also a director of Johnson
Worldwide Associates, Inc., Kemper Corporation and
Snap-On Incorporated.
2
<PAGE>
Shares
Held(1)
------
ELBERT O. HAND, 55--Director since 1984 218,043
(168,506)
Mr. Hand is chairman and chief executive officer of
HARTMARX CORPORATION. He was president and chief
operating officer from 1987 to 1992. He is also a
director of Austin Reed PLC, London, England.
DONALD P. JACOBS, 67--Director since 1980 35,189
(27,794)
Mr. Jacobs is Dean of the J. L. Kellogg Graduate
School of Management and Professor of Finance at
Northwestern University. He is also a director of
Unicom Corporation, and its subsidiary, Commonwealth
Edison Company, First Chicago Corporation and its
subsidiary, The First National Bank of Chicago, Pet
Incorporated, UDC Homes, Inc., Unocal Corporation and
Whitman Corporation.
MILES L. MARSH, 47--Director since 1990 23,951
(22,451)
Mr. Marsh was chairman and chief executive officer of
Pet Incorporated, a producer of specialty foods,
until acquired by The Pillsbury Company, a subsidiary
of Grand Metropolitan PLC in February, 1995. Mr.
Marsh is currently employed by Pet as a special
advisor on the integration of Pet with Pillsbury.
From 1989 to 1991 he served as president, chief
operating officer and a director of Whitman
Corporation, a diversified holding company. He is
also a director of Bank of America Illinois, Evanston
Hospital and Whirlpool Corporation.
CHARLES MARSHALL, 65--Director since 1980 33,477
(12,962)
Mr. Marshall is retired as vice chairman of the board
and a director of American Telephone and Telegraph
Company, a communications company. He is also a
director of Ceridian Corporation, GATX Corporation,
Sonat, Inc., Sundstrand Corp. and Zenith Electronics
Corp.
CHARLES K. OLSON, 52--Director since 1992 5,300
(5,300)
Mr. Olson is executive vice president and managing
director of Dearborn Financial, Inc., an investment
advisory and financial consulting firm. (3)
3
<PAGE>
Shares
Held(1)
TALAT M. OTHMAN, 58--Director since 1992 ------
11,550
(11,550)
Mr. Othman is chairman, chief executive officer and a
director of Dearborn Financial, Inc., an investment
advisory and financial consulting firm. He is also a
director of Harken Energy Corporation and
Pathogenesis. (3)
HOMI B. PATEL, 45--Director since 1994 160,805
(100,273)
Mr. Patel is President and Chief Operating Officer of
HARTMARX CORPORATION. He was president of the Men's
Apparel Group in 1990 and chairman and chief
executive officer in 1991. He is also a director of
the Amalgamated Life Insurance Co.
STUART L. SCOTT, 56--Director since 1993 26,550
(11,550)
Mr. Scott is chairman and chief executive officer of
LaSalle Partners Limited, an international real
estate services firm. He was co-chairman from 1988 to
1993, and previously served in various executive
positions with LaSalle Partners. (4)
SAM F. SEGNAR, 67--Director since 1981 27,566
(25,729)
Mr. Segnar is retired as chairman and chief executive
officer of Enron Corp., an integrated gas pipeline
company, and also former chairman of both Vista
Chemical Company, an integrated producer of commodity
and specialty chemicals, and Collecting Bank, N.A. He
is also a director of Gulf States Utilities Co.,
Mapco, Inc., Seagull Energy Corp., Textron, Inc. and
ProBank, N.A.
4
<PAGE>
- --------
(1) Shares listed include shares of Common Stock beneficially owned, directly
or indirectly, as of February 15, 1995 and shares which may be acquired
within 60 days through exercise of stock options (shown in parentheses
under "Shares Held"). Shares beneficially owned, directly or indirectly,
and shares which may be acquired within 60 days through the exercise of
stock options (shown in parentheses) by the Named Executive Officers
included in the Summary Compensation Table (other than Messrs. Hand and
Patel) are as follows: Mr. Rueckel, 21,596 (14,000); Mr. Morgan, 33,061
(20,250); and Mr. Brenner, 18,055 (10,146). Each person has sole voting and
dispositive power with respect to the Shares held, except as follows: Mr.
Hand's total includes 200 shares held as custodian for the benefit of his
child and 100 shares held by his wife; Mr. Jacobs' total includes 3,000
shares held by his wife; and Mr. Rueckel's total includes 1,000 shares held
by his wife. No director or nominee beneficially owns as much as 1% of the
Corporation's Common Stock. All directors and executive officers of the
Corporation as a group (a total of 21 persons) beneficially own 790,215
shares of Common Stock (2.4% of all outstanding shares), including 530,129
shares (1.6%) that they have rights to acquire within 60 days through the
exercise of stock options.
(2) On November 23, 1992, First City Bancorporation of Texas, Inc. ("First
City"), consented to an involuntary bankruptcy petition filed against it
following federal regulatory actions closing, and appointing the FDIC as
receiver of, First City's subsidiary banks. The Bankruptcy Court entered an
order permitting First City to operate as a debtor-in-possession under
Chapter 11 of the Bankruptcy Code and First City pursued legal challenges
to the seizure of its banks. In January, 1993, the FDIC announced the sale
of 20 of the seized banking operations at a premium significantly in excess
of earlier announced expectations. During 1994 First City and the FDIC
reached a definitive agreement reflecting a settlement of the litigation
between First City and the banking regulators which will provide First City
with an estimated $200 million in cash and assets, plus all surplus
proceeds from the various receiverships, upon consummation of a plan of
reorganization. A joint plan of reorganization incorporating the terms of
this settlement was filed by First City and certain of its creditors on
January 4, 1995, and a confirmation hearing on the plan is scheduled for
March, 1995.
(3) Messrs. Olson and Othman were elected, and are being nominated for
election, as directors pursuant to the provisions of a Stockholder's
Agreement entered into by the Corporation and Traco International, N.V.
("Traco"), in conjunction with Traco's December 31, 1992 acquisition of
5,714,286 shares of the Corporation's Common Stock at $5.25 per share
together with a currently exercisable warrant to purchase an additional
1,649,600 shares at $6.50 per share. In October and December, 1993, Traco
transferred 5,523,810 shares to Emerson Investment, Ltd. ("Emerson"), and
Emerson consented to be bound by the terms of the Stockholder's Agreement.
Dearborn Financial, Inc., is an affiliate of Traco and Emerson. On December
31, 1993, Traco granted Mr. Othman and Mr. Olson certain appreciation
rights in 100,000 and 50,000 shares, respectively, under Traco's
outstanding warrant. Messrs. Othman and Olson disclaim any beneficial
ownership of these securities (see "Ownership of Common Stock").
(4) Affiliates of LaSalle Partners Limited manage certain commercial real
estate in which subsidiaries of the Corporation lease offices and
showrooms, including the Corporation's principal executive offices. Mr.
Scott does not have a direct or indirect material interest in these
transactions.
Directors, officers and holders of more than 10% of the Corporation's Common
Stock are required to file reports of their transactions in the Corporation's
Common Stock with the Securities and Exchange Commission and the New York Stock
Exchange and to furnish copies of these reports to the Corporation. These
reports are to be filed within specified times after each reportable
transaction. Based solely on its review of the furnished copies of these
reports, the Corporation believes that all filing requirements were complied
with in fiscal 1994.
The Board held eight meetings, one of which was the annual meeting, in fiscal
1994. Mr. Cole missed two Board meetings and two committee meetings; all other
directors attended at least 75% of the meetings of the Board and committees on
which he or she served. Board committees are reconstituted annually at the
Annual Meeting of the Board immediately following the Annual Meeting of
Stockholders.
5
<PAGE>
The Audit Committee now consists of Mr. Scott, chairman, Mr. Cole, Mr.
Jacobs, Mr. Marshall, Mr. Olson and Mr. Segnar. It met two times in fiscal
1994. It maintains communications between the directors and independent
auditors and assists the Board with its responsibilities relating to corporate
accounting, integrity of financial controls and reporting practices. It reports
to the entire Board periodically on such matters as the Committee or the Board
may specify, approves all non-audit work which the independent auditors perform
for the Corporation and approves their fees.
The Compensation and Stock Option Committee (the "Compensation Committee") is
currently composed of Mr. Farley, chairman, Mr. Abboud, Mr. Jacobs, Mr. Marsh
and Mr. Othman. It met four times in fiscal 1994. It exercises the full powers
of the Board with respect to compensation paid to executives of the Corporation
and its subsidiaries. It also grants employee stock options and makes other
determinations needed for administration of employee stock option plans. It
approves management incentive (bonus) plans and determines from time to time
the standards of performance for bonus payments.
The Nominating Committee now consists of Ms. Baldrige, chairman, Mr. Marsh,
Mr. Marshall and Mr. Segnar. It met once in fiscal 1994. Its function is to
propose to the entire Board qualified nominees for election to fill vacancies
on the Board. Stockholders wishing to suggest qualified candidates for this
Committee's consideration should forward their suggestions to the Nominating
Committee, in care of Mrs. Kay C. Nalbach, Assistant Secretary, HARTMARX
CORPORATION, 101 North Wacker Drive, Chicago, Illinois 60606.
For fiscal 1994, each of the directors not employed by the Corporation was
entitled to receive a $17,500 annual retainer plus $750 for each Board meeting
attended and $600 for each committee meeting attended. Each committee chairman
was entitled to receive $2,500 annually in addition. Some of the directors had
the opportunity to defer payment of all or a portion of annual fees otherwise
payable from January 1, 1986 through 1989. Deferred fees earn interest from the
date of deferral at 110% of the seasoned Moody's Corporate Bond Index rate.
Upon termination of their service as a director, the Corporation agrees to pay
such deferred fees and interest ("Deferral Account"), either in a lump sum or
in installments. The deferral arrangements also provide for the Corporation's
payment of specified death benefits under certain circumstances. Each director
who has deferred fees is an unsecured general creditor of the Corporation with
respect to such Deferral Account. Some directors have withdrawn or converted
their Deferral Account into Director Stock Options exercisable for $1.00.
Director Stock Options ("DSOs") and Director Deferred Stock Awards ("DDSAs")
may be granted under the 1988 Stock Option Plan. Except as described below,
DSOs are generally identical to employee stock options but are granted only to
directors who are not employed by the Corporation or any of its subsidiaries
("Outside Directors"). The number of shares of Common Stock covered by DSOs
granted to a director in any twelve-month period ending each March 31 is
obtained by dividing the amount of the director's annual retainer by the fair
market value of a share on the date or dates of grant, but in no event can be
less than 1,000 shares. In addition, each Outside Director may choose to
receive, on each date of election to the Board, a DSO in lieu of all or part of
the annual retainer payable during such director's term of office. The number
of shares covered by such a DSO is obtained by dividing the unpaid retainer
amount by the excess of the fair market value of a share on such date over
$1.00; the purchase price of each covered share is $1.00. For shares covered by
these DSOs outstanding on a Common Stock dividend record date, the director
will be paid cash dividend equivalents based on the cash dividend (or cash
value of other property) that would have been received had such DSO shares been
issued and outstanding on the dividend record date. DDSAs consist of share
units credited to an account for each Outside Director, each unit representing
one share of Common Stock. Since 1988, each Outside Director is also granted
150 units on each date of election to the Board. DDSAs earn dividend
equivalents in the same manner as DSOs but such dividend equivalents are
credited to the director's account as additional units. Upon the director's
death, disability or termination of Board service, whole units become payable
6
<PAGE>
in shares of Common Stock and any fractional units become payable in cash.
Assuming adoption of the proposed 1995 Incentive Stock Plan and 1995 Stock Plan
for Non-Employee Directors, all remaining shares under the 1988 Stock Option
Plan will be transferred to the 1995 Incentive Stock Plan and no further shares
will be available under the 1988 Plan for issuance to the non-employee
directors.
EXECUTIVE OFFICER COMPENSATION
The following table shows the compensation for the past three fiscal years of
the Corporation for each of the Corporation's five most highly compensated
executive officers including the Chief Executive Officer (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------------ --------------------- ---------
Securities
Name and Restricted Underlying Long-Term
Principal Other Annual Stock Options/ Incentive All Other
Position Year Salary Bonus Compensation Awards(1) SARs(2) Payouts Compensation(3)
- ------------------------ ---- -------- -------- ------------ ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Elbert O. Hand, 1994 $522,083 $234,891 -- -- 70,000 -- $3,350
Chairman and Chief 1993 489,167 254,250 -- $264,258 30,000 -- 3,811
Executive Officer 1992 429,584 75,000 -- -- 137,759 $8,548(4) 6,328
Homi B. Patel, 1994 417,667 138,572 -- -- 60,000 -- 2,758
President and 1993 388,500 149,992 -- 157,997 25,000 -- 2,817
Chief Operating Officer 1992 350,000 65,622 -- -- 57,909 -- 2,572
Wallace L. Rueckel, 1994 218,334 82,515 -- -- 35,000 -- 1,798
Executive Vice 1993 150,000 89,316 92,296(5) 89,320 25,000 -- 720
President and Chief 1992(6) -- -- -- -- -- -- --
Financial Officer
Glenn R. Morgan 1994 160,542 44,848 -- -- 20,000 -- 1,775
Senior Vice 1993 145,917 48,544 -- 27,281 8,000 -- 1,555
President, Finance 1992 134,000 25,000 -- -- 3,374 -- 1,372
and Administration
Frank A. Brenner, 1994 152,229 28,066 -- -- 7,000 -- 1,708
Vice President, 1993 143,521 30,380 -- 17,946 4,000 -- 1,603
Marketing Services 1992 141,000 9,802 -- -- 3,218 -- 2,034
</TABLE>
- --------
(1) The dollar amount shown equals the number of shares of restricted stock
multiplied by the stock price on the grant date. This valuation does not
take into account the diminution in value attributable to the restrictions
placed on the shares. On January 4, 1993, the following restricted shares
were awarded in lieu of a portion of the executive officer's cash increase
in salary for fiscal 1993 and subject to his continued employment for one
year: Mr. Hand, 1,568; Mr. Patel, 1,254; Mr. Morgan, 471; and Mr. Brenner,
432. On November 30, 1993, the following restricted shares were awarded and
vest in one-third increments over three years, subject to the executive
officer's continued employment (unless otherwise specified in an employment
agreement): Mr. Hand, 36,322; Mr. Patel, 21,428; Mr. Rueckel, 12,760; Mr.
Morgan, 3,468; and Mr. Brenner, 2,170. The number and value of aggregate
restricted stock holdings at the end of fiscal year 1994 were: Mr. Hand,
24,214 ($130,150); Mr. Patel, 14,285 ($76,782); Mr. Rueckel, 8,506
($45,720); Mr. Morgan, 2,312 ($12,427); and Mr. Brenner, 1,446 ($7,772).
Dividends are paid on all shares of restricted stock at the same rate as on
unrestricted shares.
(2) On October 14, 1992, the Compensation Committee granted 326,500 stock
options at an exercise price of $5.25 to 144 employees who agreed to the
cancellation of all stock options granted between 1983 and 1991 (a total of
1,035,606 options). The Named Executive Officers agreed to cancellation of
their options.
7
<PAGE>
(3) These amounts represent the Corporation's contributions to the Hartmarx
Employee Stock Ownership Plan and premiums paid for term life insurance.
The amounts contributed to the Plan in 1994 were: Mr. Hand, $600; Mr.
Patel, $750; Mr. Rueckel, $750; Mr. Morgan, $1,005; and Mr. Brenner, $928.
The premiums for term life insurance in 1994 were: Mr. Hand $2,750; Mr.
Patel, $2,008; Mr. Rueckel, $1,048; Mr. Morgan, $770; and Mr. Brenner,
$780.
(4) Mr. Hand was granted a 5,645 share Restricted Stock Award on August 7,
1990, with vesting subject to his continued employment by the Corporation
until April 12, 1992 and the achievement of specified performance goals.
The amount shown is the value at April 12, 1992 of the 1,410 shares that
vested in Mr. Hand pursuant to the achievement of his goals under this
Award.
(5) Amount shown for Mr. Rueckel includes relocation expenses totalling
$65,491, the cost of a leased automobile and financial counseling, and
amounts reimbursed for the payment of taxes. On April 28, 1993, the
Corporation loaned Mr. Rueckel $253,000 to assist in the purchase of a new
home, with interest accruing at six percent (6%). Total interest accrued of
$2,704 was forgiven by the Corporation and is included in the relocation
expense figure above. The loan was fully repaid prior to November 30, 1993.
(6) Mr. Rueckel's employment with the Corporation commenced on March 8, 1993.
EMPLOYMENT AGREEMENTS
Messrs. Hand, Patel and Rueckel each have employment agreements for a two
year term expiring December 31, 1996, under which each of them will receive
annual salaries at least equal to their respective 1993 annual salaries (with
increases to be determined by the Compensation Committee), and which provide
for participation in the Management Incentive Plan (MIP), described below, and
in any other fringe benefits, including any long term incentive plan, available
to key executives. In the event that any of these executives is discharged
without cause or resigns with good reason, which includes resignation due to a
change in duties or cancellation of his employment agreement prior to
expiration, the executive will be entitled to continuation of salary and fringe
benefits for 24 months (with fringe benefits continuing for 36 months in the
event of a change in control as described below). In addition, all unpaid
incentive compensation under the MIP (including all contingent compensation
which would have been payable for an uncompleted fiscal year; plus 66.67% of
the executive's maximum bonus opportunity under the MIP for such year) and all
unpaid incentive compensation under any long term incentive plan (including all
contingent compensation which would have been payable for uncompleted
performance periods) becomes immediately payable; and all stock options and
restricted stock granted to such executive under the Corporation's stock option
plans become immediately exercisable and fully vested, as the case may be. The
Corporation has also agreed to pay each executive severance benefits in the
event the executive's employment is terminated within 24 months following a
change in control of the Corporation for any reason other than (i) death,
disability or retirement, (ii) for cause, or (iii) resignation without good
reason. The severance payment, payable in lieu of the salary continuation
described above, would equal three times the executive's annual base salary as
of the date the executive's employment is terminated. In addition, all stock
options and restricted stock granted to such executive under the Corporation's
stock option plans would become immediately exercisable and fully vested, as
the case may be, and the executive would also be entitled to receive any unpaid
contingent or other incentive compensation in the same manner as described
above (except that the executive would receive an additional 133.34%, rather
than 66.67%, of his maximum bonus opportunity under the MIP for such year). In
the event that total severance benefits to be received by the executive in
connection with a change in control would be subject to any excise tax imposed
under Section 4999 of the Internal Revenue Code, then the severance payment is
subject to possible reduction to an amount necessary so that no portion would
be subject to such excise tax if the total payment with such a reduction, and
net of all taxes, would be greater than the total payment without reduction,
net of all taxes.
Messrs. Morgan and Brenner have each agreed to remain in the employ of the
Corporation, subject to the Corporation's agreement to pay them severance
benefits if such employment is terminated within
8
<PAGE>
24 months following an actual change in control for any reason other than (i)
death, disability or retirement, (ii) for cause, or (iii) resignation without
good reason. Generally, the severance payment, net of additional amounts agreed
to be paid by the Corporation, if necessary, in respect of any excise tax
imposed by Section 4999 of the Internal Revenue Code on such severance benefits
(and any federal, state and local taxes on such additional amounts), would
equal up to one and a half times the executive's average annual compensation
for the three calendar years immediately preceding the year in which the change
in control occurs if the executive is then under age 50, otherwise, up to two
times such average annual compensation; and each executive would also be
entitled to receive any appreciation in the value of Common Stock covered by
stock options theretofore granted to such executive under the Corporation's
stock option plans (whether or not then fully exercisable).
DEFERRED COMPENSATION ARRANGEMENTS
Messrs. Hand, Patel, Morgan and Brenner had the opportunity to defer payment
of up to 15% of their annual cash compensation otherwise payable from December
1, 1985 through 1989, and each has since withdrawn the principal portion of his
deferred amount. The deferral arrangements were amended in October, 1989, to
provide for the Corporation's payment of specified death benefits under certain
circumstances. None of these deferral arrangements are intended to constitute a
contract of employment or of continuing service, or to obligate the Corporation
in any manner to continue the services of any executive, who is no more than an
unsecured general creditor of the Corporation with respect to all deferred
amounts.
STOCK OPTION PLANS
The Corporation currently has a 1985 Stock Option Plan and a 1988 Stock
Option Plan to encourage directors, officers and other key employees of the
Corporation and its subsidiaries to acquire shares of the Corporation's Common
Stock, and to enable them to benefit from appreciation in the market price of
the shares, thereby gaining a greater personal interest in the continued
success and progress of Hartmarx Corporation as a whole. Each plan requires
employee stock option ("ESO") prices to be not less than fair market value at
grant date and that ESOs, generally, cannot be exercised for one year, and DSOs
(described previously) cannot be exercised for six months, after the grant
date. Stock appreciation rights, which may be granted in tandem with ESOs
granted under the Plans, enable recipients to receive a combination of shares
and a cash payment, which together equal the gain in market price from the
grant date to the exercise date, with the cash payment limited to one-half of
the gain. However, under certain circumstances, the entire gain attributable to
stock appreciation rights granted under the 1988 Plan may be paid in cash. The
1985 and 1988 Plans also authorize the grant of Restricted Stock Awards to
officers and other key employees. Full ownership of shares covered by an Award
are subject to the satisfaction of specified terms and conditions, such as
continued employment with the Corporation or the achievement of specified
performance goals. If the terms and conditions of the Award are not satisfied,
all or a portion of the shares covered by the Award will be forfeited. Assuming
adoption of the proposed 1995 Incentive Stock Plan, all remaining shares under
the 1985 and 1988 Plans will be transferred to the 1995 Incentive Stock Plan
and no further shares will be available under the 1985 and 1988 Plans for
issuance to employees.
The following tables provide information on the Named Executive Officers'
option grants in fiscal 1994, option exercises in fiscal 1994 and value of
unexercised options at November 30, 1994.
9
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option
Individual Grants Term(1)
- --------------------------------------------------------------------- ---------------
Percent
of Total
Options
Number of Granted
Securities to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted Year(2) ($/Share)(3) Date 5% ($) 10% ($)
---- ---------- --------- ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Elbert O. Hand.......... 40,000(4) 8.6 5.69 10/12/2004 143,200 362,800
30,000(5) 6.4 6.81 01/12/2004 128,400 325,500
Homi B. Patel........... 35,000(4) 7.5 5.69 10/12/2004 125,300 317,450
25,000(5) 5.3 6.81 01/12/2004 107,000 271,250
Wallace L. Rueckel...... 15,000(6) 3.2 5.69 10/12/2004 53,700 136,050
20,000(7) 4.3 6.81 01/12/2004 85,600 217,000
Glenn R. Morgan......... 10,000(4) 2.1 5.69 10/12/2004 35,800 90,700
10,000(5) 2.1 6.81 01/12/2004 42,800 108,500
Frank A. Brenner........ 3,000(4) 0.6 5.69 10/12/2004 10,740 27,210
4,000(5) 0.9 6.81 01/12/2004 17,120 43,400
</TABLE>
- --------
(1) The amounts shown above for each of the Named Executive Officers as
potential realizable values are based on arbitrarily assumed annualized
rates of stock price appreciation of 5% and 10% over the full ten year term
of the options, as required by applicable regulations of the Securities and
Exchange Commission. Actual gains, if any, on stock option exercises and
common stock holdings will be dependent on the future performance of the
Corporation and overall stock market conditions.
(2) The Corporation granted options representing 467,700 shares to employees in
fiscal 1994. No SARs were granted in tandem with these options.
(3) The exercise price may be paid by delivery of already owned shares and the
withholding obligations related to exercise may be paid by offset of the
underlying shares subject to certain conditions.
(4) These options were granted on October 13, 1994, and will become fully
exercisable on October 13, 1995, and are subject to termination between 90
days to three years following termination of employment in certain events.
(5) These options were granted on January 13, 1994 and became fully exercisable
on January 13, 1995, and are subject to termination between 90 days to
three years following termination of employment in certain events.
(6) These options were granted on October 13, 1994 and become exercisable in a
forty percent (40%) installment commencing October 13, 1995 and in
cumulative twenty percent (20%) installments thereafter, with full vesting
occurring on October 13, 1998, and are subject to termination between 90
days to three years following termination of employment in certain events.
(7) These options were granted on January 13, 1994 and become exercisable in
cumulative twenty percent (20%) installments commencing January 13, 1995,
with full vesting occurring on January 13, 1999, and are subject to
termination between 90 days to three years following termination of
employment in certain events.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value ($) of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
on Value Options at Nov. 30, 1994 Nov. 30, 1994
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Elbert O. Hand.......... 0 0 138,506/99,253 6,782/1,828
Homi B. Patel........... 0 0 75,273/67,636 3,142/477
Wallace L. Rueckel...... 0 0 5,000/55,000 0/0
Glenn R. Morgan......... 0 0 10,250/21,124 141/70
Frank A. Brenner........ 0 0 6,146/8,072 134/67
</TABLE>
PENSION PLAN
The Hartmarx Retirement Income Plan, a trusteed plan, provides for
contributions to be made by the Corporation and designated affiliates on an
actuarial basis, and provides for defined benefits in the event of retirement
after certain age and service requirements have been met. Survivor benefits are
also provided in the event of a participant's death after certain other age and
service requirements are met. Regular eligible employees of the Corporation or
a designated affiliate who participate in The Hartmarx Savings-Investment Plan,
a trusteed defined contribution plan, automatically participate in this Plan.
Normal retirement age under this Plan is 65 and early retirement at any time
after a vested participant attains age 55 results in actuarially reduced
benefits. Maximum benefits under this Plan are based upon 50% of the highest
average annual earnings (base salary, commissions, bonus and overtime), up to
$235,840 (reduced to $150,000 for annual earnings after 1993), paid to an
employee for any five consecutive years included within the final 10
consecutive years of employment by the Corporation (or subsidiary adopting the
Plan), less 50% of the primary Social Security benefit, for 30 years of
service, prorated downward to one-sixth of such benefits for the minimum of
five years normally required for vested rights.
The following table shows the estimated annual benefits payable upon
retirement at age 65 to participants in this Plan, in specified classifications
as to compensation and years of service. These single-life benefits are
actuarially reduced when the spouse is named as joint annuitant or if the
employee withdraws his or her pre-1984 contributions to the Plan prior to
retirement. In certain instances, benefits are subject to limitations imposed
by the Employee Retirement Income Security Act of 1974, as amended. The
Corporation has authorized additional non-qualified pension payments based upon
the benefits which could have been earned in accordance with the formula
described in the previous paragraph but for the application of such
limitations. Compensation covered by this Plan for the Named Executive Officers
generally corresponds with the earned salary, bonus and cash portion of any
long-term incentive payout shown in the Summary Compensation Table. Full years
of service credited under this Plan as of November 30, 1994, were 25 for Mr.
Hand, 14 for Mr. Patel, 1 for Mr. Rueckel, 13 for Mr. Morgan, and 17 for Mr.
Brenner.
<TABLE>
<CAPTION>
Average Annual Earnings Years of Credited Service
(Highest 5 Years of Last -------------------------------------------------
10 years) 5 10 15 20 25 30 or more
------------------------ ------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
$200,000................ 15,468 30,935 46,403 61,871 77,338 92,806
250,000................ 19,634 39,269 58,903 78,537 98,172 117,806
300,000................ 23,801 47,602 71,403 95,204 119,005 142,806
350,000................ 27,968 55,935 83,903 111,871 139,838 167,806
400,000................ 32,134 64,269 96,403 128,537 160,672 192,806
450,000................ 36,301 72,602 108,903 145,204 181,505 217,806
500,000................ 40,468 80,935 121,403 161,871 202,338 242,806
550,000................ 44,634 89,269 133,903 178,537 223,172 267,806
600,000................ 48,801 97,602 146,403 195,204 244,005 292,806
650,000................ 52,968 105,935 158,903 211,871 264,838 317,806
700,000................ 57,134 114,269 171,403 228,537 285,672 342,806
800,000................ 65,468 130,935 196,403 261,871 327,338 392,806
900,000................ 73,801 147,602 221,403 295,204 369,005 442,806
</TABLE>
11
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
EXECUTIVE COMPENSATION PROGRAM
Compensation Committee Approach
The Compensation and Stock Option Committee (the "Compensation Committee"),
which is composed of five independent directors of the Corporation, sets
executive compensation levels and establishes and administers short-term and
long-term incentive programs based upon a set of guiding principles. These
principles, which are designed to align executive compensation with
management's execution of business strategies and initiatives as well as the
achievement of long-term financial performance and growth in shareholder
values, are as follows:
. Integration of the elements of the compensation package into a reward program
which will attract and retain key executives critical to the long-term
success of the Corporation.
. Awarding of short-term incentives on terms closely tied to operating unit
performance and based upon the achievement of business goals for the
performance period.
. Alignment of executive and shareholder interests through a stock-based long-
term incentive program which will reward executives for enhancement of
shareholder values.
In determining the appropriate levels of executive compensation for fiscal
1994, the Compensation Committee took into account both the Corporation's
financial performance for the year and the executive group's successful
achievement of restored profitability. Future compensation will continue to be
closely tied to performance and its impact on the growth in shareholder value.
The total compensation program consists of three components:
Base Salary
The base salaries and salary ranges for executives are determined in relation
to competitive market data provided in national executive compensation surveys
and subject to periodic review by independent compensation consultants.
Compensation surveys utilized include the Hay Executive Compensation Report
containing information on over 5,000 executives in nearly 400 industrial
organizations (39% nondurable manufacturing, 27% durable manufacturing, 33%
non-manufacturing) ranging in sales from less than $150 million to over $5
billion and the American Apparel Manufacturers' Association Management
Compensation Study based upon information from 29 apparel manufacturing
companies ranging in sales from less than $100 million to over $1 billion. The
latter survey includes compensation data from all Peer Group companies in the
Performance Graph except Spring Industries. Salary ranges are reviewed on an
annual basis and adjusted as warranted to maintain a competitive position of
slightly above the median survey results.
Salaries are reviewed on an annual basis and salary changes are based upon
individual performance and position in salary ranges within the context of an
annual salary budget. The salary budget is determined in relation to
competitive market data provided in national salary planning surveys and the
financial performance of the Corporation and its operating units. Salary
planning surveys utilized include those conducted by the American Compensation
Association, Hewitt Associates, William M. Mercer, Sibson & Company, Towers
Perrin and The Wyatt Company. If the financial performance of the Corporation
achieves sales and earnings targeted in the business plan, the overall salary
budget is established at the survey national average and is allocated to
operating units based upon the level of achievement of their individual
business plans.
In fiscal 1993, sales and earnings were achieved in accordance with the
business plan and a competitive overall salary budget of 4.1% was administered
for 1994. Better performing operating units had higher salary budgets while
those with lower performance had less, or in some cases, none. Actual salary
increases averaged 3.9% throughout the Corporation. Above average salary
increases were
12
<PAGE>
awarded in January to Mr. Patel, Mr. Rueckel, Mr. Morgan and Mr. Brenner in
recognition of their individual contributions to restoring the profitability of
the Corporation. The employment agreements for Messrs. Patel and Rueckel
provide for annual salaries at least equal to their respective 1993 annual
salaries with increases to be determined by the Compensation Committee. In
addition, a promotional increase was awarded in July to Mr. Morgan, elected
Senior Vice President of Finance and Administration, in recognition of his
increased responsibilities. The salary of the Chief Executive Officer is
separately discussed below.
Salaries for the Named Executive Officers remain somewhat below average
competitive levels, with the competitiveness of the overall compensation
package significantly dependent upon the reward opportunities created by
achievement of objectives under the Corporation's short-term and long-term
incentive plans.
Short-Term Incentives
Executives are eligible for annual bonuses under the Management Incentive
Plan (MIP). Incentive opportunities are determined in relation to competitive
market data as provided in the aforementioned national executive compensation
surveys and subject to periodic review by independent consultants. Awards are
based upon the achievement of financial goals established for individual
operating units and on a consolidated basis in accordance with the
Corporation's business plan. Individual awards for Corporate executives are
based upon the achievement of both consolidated and operating unit goals
weighted according to sales volume. Operating unit executives are measured on
the goals appropriate to the unit within which they report with unit heads also
accountable for consolidated goals. For fiscal 1994, Corporate executives were
measured on Consolidated Pre-Tax Income and operating unit sales-weighted Pre-
Tax Income and Inventory Turnover goals. Operating unit executives were
measured on Pre-Tax Income, Sales and Inventory Turnover goals with unit heads
also measured on Consolidated Pre-Tax Income. No bonuses would have been earned
if the Corporation had not achieved positive income results. Bonuses were paid
for 1994 to 60 executives, averaging 26.3% of salaries and 61.1% of maximum
incentive opportunities.
Long-Term Incentives
Executives are eligible for awards of stock options and/or restricted stock
under the Corporation's Stock Option Plans. Awards are determined in relation
to competitive practice and an individual's position. In 1993 and 1994, awards
were proportionately reduced within the constraints of limited shares remaining
available for grant under the Corporation's Stock Option Plans. The amount and
terms of the options already held by the Named Executive Officers were not
considered in determining the size of awards. As reflected in the Table of
Option Grants In The Last Fiscal Year, two stock option grants were awarded to
each of the Named Executive Officers at an exercise price equal to the fair
market value of the Corporation's stock on the dates of the grants.
Chief Executive Officer Compensation
The Compensation Committee increased the salary of the Chief Executive
Officer 5.0% to $525,000 on January 1, 1994. The determination of the Chief
Executive Officer's salary was based upon the salary range for the position,
the salary budget established for 1994 and considering his leadership in
achieving marked improvement in the financial performance of the Corporation.
Mr. Hand's salary remains below average when compared to other Chief Executive
Officers of organizations in the same sales volumes as reported in the national
surveys analyzed. His fiscal 1994 MIP bonus award was based upon the
achievement of Consolidated Pre-Tax Income and sales-weighted individual
operating unit achievement of Pre-Tax Income and Inventory Turnover goals. As
described above, the Chief Executive Officer received two stock option grants
from the Corporation's Stock Option Plans for 1994. These awards were in
recognition of Mr. Hand's contributions to restoring profitability as well as
to provide an incentive for future performance and the enhancement of
shareholder value.
13
<PAGE>
The Compensation Committee has reviewed the provisions of the Omnibus Budget
Reconciliation Act of 1993 as they relate to limitations on tax deductibility
for certain compensation exceeding $1 million for Named Executive Officers.
Based upon proposed regulations issued by the Internal Revenue Service, the
Committee believes that gains from the exercise of outstanding stock options or
future options will be exempted from this deduction limitation. This includes
options which may be granted pursuant to the 1995 Incentive Stock Plan, adopted
by the Board and being presented to the Shareholders for their approval. It is
currently intended that any amendment to the Corporation's Stock Option Plans
which may be necessary in the future in order to preserve this exemption will
be prepared and proposed for shareholder approval as and when required.
It is the intention of the Committee, to the extent consistent with sound
compensation policy and incentive program design, that compensation for the
Named Executive Officers be provided in such a way as to remain tax deductible
for the Corporation. It is possible, however, that certain types of
compensation awarded to members of the executive group would not qualify as
wholly deductible under the new tax law if otherwise in excess of the general
deduction limitation. The Committee will continue to review and respond to the
new tax law and developing regulations as appropriate.
COMPENSATION AND STOCK OPTION COMMITTEE
Raymond F. Farley, Chairman
A. Robert Abboud Miles L. Marsh Donald P. Jacobs Talat M. Othman
PERFORMANCE GRAPH
TOTAL CUMULATIVE SHAREHOLDER RETURN FOR FIVE-YEAR PERIOD ENDING NOVEMBER 30,
1994
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HARTMARX, S&P 500 INDEX AND PEER GROUP
<CAPTION>
Measurement Period S&P
(Fiscal Year Covered) HARTMARX 500 INDEX PEER GROUP
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
11/30/89 $100.00 $100.00 $100.00
FYE 11/30/90 $ 36.85 $ 96.43 $ 66.09
FYE 11/30/91 $ 41.46 $116.13 $ 85.79
FYE 11/30/92 $ 32.16 $137.56 $ 99.63
FYE 11/30/93 $ 40.03 $151.42 $ 98.02
FYE 11/30/94 $ 30.73 $153.04 $ 96.62
</TABLE>
The Peer Group consists of: Crystal Brands, Inc., Genesco, Inc., Hartmarx
Corporation; Oxford Industries, Inc.; Russell Corporation; and Spring
Industries. However, due to the suspension of trading on its stock on 9/30/94
following its filing for bankruptcy, Crystal Brands, Inc. has been excluded
from peer group returns for 1994.
14
<PAGE>
ITEM (2)--1995 INCENTIVE STOCK PLAN
The Board of Directors has approved, and recommends that the stockholders
adopt, the 1995 Incentive Stock Plan (the "1995 Incentive Plan"). The Board
believes that the 1995 Incentive Plan will aid the Corporation in attracting
and retaining key personnel of outstanding ability and will promote the
interests of the Corporation and its stockholders by providing key employees
with an opportunity to acquire a proprietary interest in the Corporation and
thereby to develop a stronger incentive to put forth maximum effort for the
continued success and growth of the Corporation and its subsidiaries. The Board
also notes that there are only a nominal amount of shares available for grant
under existing plans. The 1995 Incentive Plan has been designed so that certain
stock awards to senior executives will constitute performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
The affirmative vote of the majority of the shares of Common Stock voting at
the meeting is required for adoption of the 1995 Incentive Plan. If approved,
the 1995 Incentive Plan will become effective immediately. The material
provisions of the 1995 Incentive Plan and other information relating to the
Plan are described below.
SHARES AVAILABLE
The 1995 Incentive Plan authorizes a total of 1,500,000 shares of Common
Stock of the Corporation ("Shares") to be granted as options, Stock
Appreciation Rights ("SARs") and Restricted Stock Awards ("RSAs"); however, no
more than 500,000 Shares may be subject to RSAs. The aggregate number of Shares
represented by awards granted to any single individual will not exceed 500,000
shares over any consecutive three year period. Shares which are currently
available for grant or become available for grant under the 1985 Stock Option
Plan (the "1985 Plan") and the 1988 Stock Option Plan (the "1988 Plan") of the
Corporation will be added to the aggregate number of Shares authorized under
this Plan and all subsequent grants will be made pursuant to the terms of this
Plan. As of November 30, 1994, 7,358 shares were available for grant under the
1985 and 1988 Plans.
Shares which are subject to awards that are forfeited, expire or are canceled
will remain available for the granting of other awards. If an individual
tenders any Shares as full or partial payment to the Corporation in connection
with any exercise of a stock option, the number of Shares available under the
Plan will increase by the number of Shares tendered. If an individual settles
an SAR in cash, the Shares covered by such award will remain available for
other awards under the Plan. In addition, any Shares that are issued by the
Corporation, and any awards that are granted through the assumption of, or in
substitution for, outstanding awards previously granted by an acquired entity
will not be counted against the Shares available for awards under the Plan. All
shares available under the 1995 Incentive Plan are subject to adjustments that
may be made for a merger, recapitalization, stock dividend, stock split or
other similar change affecting the number of outstanding Shares.
ADMINISTRATION
The Plan will be administered by a Committee of the Board of Directors
comprised of not less than three non-employee members who will qualify to
administer the Plan as contemplated by Rule 16b-3 under the Securities and
Exchange Act of 1934 (the "1934 Act") and Section 162(m) of the Code. The
Committee will have full and exclusive power to interpret the Plan and to adopt
such rules, regulations and guidelines for carrying out the Plan as it deems
necessary or proper, including, but not limited to, selecting award recipients,
establishing all award terms and conditions, amending award terms and
conditions and adopting procedures and regulations governing such awards.
ELIGIBILITY
Awards may be granted to key employees of the Corporation and its
subsidiaries, as selected from time to time by the Committee, who, in the
opinion of the Committee, are in a position to make a significant
15
<PAGE>
contribution to the success of the Corporation and in consideration of
competitive practices. Eligible employees include officers of the Corporation
who are directors but directors who are not employees of the Corporation will
not be eligible to receive awards under this Plan. Employees may also include
employees of an entity acquired by or merged into the Corporation pursuant to
the assumption, replacement or substitution of awards previously issued by such
entity.
TYPES OF AWARDS
Awards may be granted singly, in combination or in tandem and may be the
payment form for grants or rights under any other employee or compensation plan
of the Corporation, including any long term incentive plan which the
Corporation may subsequently adopt.
Options granted under the Plan may be in the form of incentive stock options
("ISOs") which comply with Section 422 of the Code, provided, however, that the
number of Shares covered by awards in the form of ISOs will not exceed
1,000,000. ISOs are, generally, identical to other options but have different
tax consequences to the optionee and the Corporation. The purchase price per
Share for each stock option will be not less than 100% of the fair market value
on the date of grant. Fair market value is defined for all purposes under the
Plan as the average of the high and low prices of a Share as reported in The
Wall Street Journal or similar readily available public source. Shares covered
by stock options may be purchased at the time of exercise by cash payment or
such other method permitted by the Committee. The Committee may grant stock
options that provide for the grant of a subsequent restoration stock option if
the exercise price has been paid for by tendering Shares to the Corporation.
SARs will be payable in cash, Shares or a combination of both and will be
equal to the excess of the fair market value of a specified number of Shares on
the exercise date over the fair market value of such Shares on the grant date,
except that SARs granted retroactively in tandem with or in substitution for a
stock option will be valued no lower that the fair market value on the date
such stock option was granted.
RSAs may be made in Shares or denominated in units equivalent in value to
Shares and will be subject to such conditions and restrictions as are
established by the Committee.
The Committee may provide that any awards under the Plan earn dividend or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to an individual's account.
The benefits and amounts to be received under the Plan are not presently
determinable as no awards, contingent on Stockholder approval of the Plan, have
been made, and the Plan grants the Committee broad discretion in determining
the nature, size and terms of awards. However, if the new Plan is approved, it
is likely that the Committee will continue to make awards of options to a group
of eligible employees selected annually from key employees of the Corporation
and its subsidiaries. In addition, the Committee has also studied, but has not
finalized, a new stock-based long term incentive plan for a significantly
smaller group of the Corporation's most senior executives which would provide
for larger individual grants based on performance criteria, including growth in
stockholder value, over a longer term.
PAYMENTS
Payment of the awards may be in the form of cash, Shares, other awards or
combinations thereof as the Committee will determine and with such restrictions
as the Committee may impose. The Committee also may require or permit
participants to elect to defer the issuance of Shares or the settlement of
awards in cash under such rules and procedures as it may establish under the
Plan.
16
<PAGE>
RESTRICTIONS ON TRANSFERABILITY
Awards granted under the Plan will not be transferable or assignable, except
on the death of the grantee, by will or the laws of descent and distribution,
or in certain other limited circumstances which are permitted by the Committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the 1995 Incentive
Plan provided that no such termination or amendment may, without the consent of
the individual to whom any award will have been previously granted, adversely
affect the rights of such individual under such award and, provided further
that the Committee may not, without further shareholder approval, materially
increase the number of Shares available for issuance or cause the Plan to fail
to comply with Rule 16b-3 of the 1934 Act or Section 162(m) of the Code. The
term of the Plan is indefinite.
FEDERAL INCOME TAX TREATMENT
Under the present Code, the Federal income tax consequences of the grant and
exercise of options to purchase Shares, and the sale of such Shares, will
depend upon whether or not the option is an incentive stock option. No tax is
imposed on the grantee, and no deduction is available to the Corporation, at
the time of grant of an option or an SAR. Upon the exercise of an option (other
than an incentive stock option) or an SAR, generally the grantee will be
treated as receiving compensation (and the Corporation will be entitled to a
deduction) equal to the excess of the fair market value of the related shares
at the time of exercise over the exercise price. If Shares are delivered by the
optionee in exercise of an option (other than an incentive stock option), no
amount will be includable in the optionee's gross income with respect to the
number of shares received, up to the number delivered, and the optionee's basis
in the number of shares so acquired will be the same as his basis in the number
of shares delivered; the fair market value of any additional shares so received
will be includable in the optionee's gross income and this amount will become
the basis for those shares. According to proposed regulations issued by the
Internal Revenue Service, the fair market value of any additional shares
received upon the exercise of an incentive stock option by delivery of Shares
would not be includable in the optionee's gross income and the optionee's basis
for such additional shares will be zero.
Upon the exercise of an incentive stock option no tax is imposed on the
optionee, and no deduction is available to the Corporation, if the optionee was
an employee of the Corporation or a subsidiary within three months prior to the
date of exercise (or within one year if the optionee is disabled), and does not
sell the shares thereby acquired less than two years from the date of grant or
one year from the date of exercise. If a deceased optionee's estate exercises
an incentive stock option, the employment and holding periods are inapplicable.
However, the excess of the fair market value of incentive stock option shares
at the time of exercise over the option price for such shares will be an item
of tax preference for the optionee at the time of exercise, and upon the sale
of such shares following expiration of the applicable holding period, the
excess of the sales proceeds over the exercise price will be treated as a long
term capital gain to the optionee, and no tax deduction will be available for
the Corporation. Except as discussed above, if an optionee sells such shares
prior to the expiration of the applicable holding periods (or if the option is
otherwise disqualified from receiving incentive stock option treatment), the
federal income tax consequences of the grant and exercise of the incentive
stock option and the sale of such shares will be the same as those applicable
to other options for both the optionee and the Corporation.
Ownership of shares covered by RSAs granted under the Plan will be subject to
a "substantial risk of forfeiture" within the meaning of the Code. The grantee
will be treated as receiving compensation (and the Corporation will be entitled
to a deduction) equal to the fair market value of the shares on the date
17
<PAGE>
such restrictions lapse. Any payments to the grantee in respect of dividends
otherwise payable on shares still subject to restrictions under the Plan will
also be treated as compensation and a corresponding deduction will be available
to the Corporation. Under certain circumstances, however, an RSA will be
taxable and a corresponding deduction will be available to the Corporation at
the time the RSA is granted. In this event, payments to the grantee in respect
of dividends will not be deductible by the Corporation. The difference between
the amount received upon the sale or other transfer of shares previously
subject to restrictions and the fair market value on the date the restrictions
lapse (or the date of the grant of the RSA) will be treated as a long-term or
short-term capital gain or loss under the Code depending upon the length of
time such shares are held after the RSA is first taxable to the grantee.
The February 15, 1995 closing price of the Corporation's Common Stock on the
New York Stock Exchange-Composite Transactions was $5.75.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE ADOPTION OF THE 1995 INCENTIVE STOCK PLAN
ITEM (3)--1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has approved, and recommends that the stockholders
adopt the 1995 Stock Plan for Non-Employee Directors (the "1995 Directors
Plan"). The Board believes that the 1995 Directors Plan will promote the
interests of the Corporation and its stockholders by providing an incentive to
non-employee directors to serve on the Corporation's Board of Directors and to
devote the significant amount of time required to participate actively in the
work of the Board. In addition, the opportunity to acquire a proprietary
interest in the Corporation will aid in attracting and retaining highly
qualified individuals who are not employees for service as members of the
Board.
The affirmative vote of the majority of the shares of Common Stock voting at
the meeting is required for adoption of the 1995 Directors Plan. If approved,
the Plan will become effective immediately. The material provisions of the 1995
Directors Plan and other information relating to the Plan are described below.
SHARES AVAILABLE
The 1995 Directors Plan authorizes a total of 325,000 shares of Common Stock
of the Corporation ("Shares") to be granted as Director Stock Options ("DSOs")
and Director Deferred Stock Awards ("DDSAs")
Shares which are subject to awards that are forfeited, expire or are canceled
will remain available for the granting of other awards. If an individual
tenders any Shares as full or partial payment to the Corporation in connection
with any exercise of a stock option, the number of Shares available under the
Plan will increase by the number of Shares tendered. All shares available under
the 1995 Directors Plan are subject to adjustments that may be made for a
merger, recapitalization, stock dividend, stock split or other similar change
affecting the number of outstanding Shares.
ADMINISTRATION
The Plan is intended to meet the requirements of Rule 16b-3(c)(2)(ii) adopted
under the 1934 Act by requiring no discretionary action by any administrative
body with respect to any transaction under the Plan. Questions of
interpretation will be resolved by the members of the Board who are not
eligible to participate in this Plan.
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ELIGIBILITY
All active members of the Board who are not employees of the Corporation or
any of its subsidiaries or affiliates ("Outside Directors") as of the date of
the grant will be eligible to participate in the Plan. If all of the proposed
nominees for director are elected at this meeting, there will be eleven persons
eligible to participate in this Plan.
TYPES OF AWARDS
Each Outside Director will be granted as of the date of his or her election
to the Board, DSOs equal to the greater of 1,000 or the number of whole Shares
determined by dividing such director's annual retainer fee by the fair market
value of a Share on the date of grant. Fair market value is defined for all
purposes under this Plan as the average of the high and low prices of a Share
as reported in The Wall Street Journal or similar readily available public
source. In addition, each Outside Director may choose to receive, on each date
of his or her election to the Board, a DSO grant in lieu of all or part of the
retainer fee payable during such director's term of office. The number of
shares covered by such a DSO will be obtained by dividing the unpaid retainer
amount by the excess of the fair market value of a share on such date over
$1.00; the purchase price of each covered share would then be $1.00. A DSO will
expire along with all rights to purchase shares thereunder ten years after the
date such option is granted. The purchase price of each Share subject to a DSO
will be equal to the fair market value of the Share on the grant date and will
not be less than the par value thereof (except for DSOs with a $1.00 purchase
price). DSO's will be exercisable in full six months after the date of grant or
earlier in the event of the director's death disability or termination of
service on the Board. Payment of DSOs may be in the form of cash, Shares or
combinations thereof as permitted by the Corporation.
DDSAs will consist of credits of share units ("Units") to an account
established for each Outside Director. Each Unit will represent the equivalent
of one Share. Each Outside Director will be granted 150 DDSA Units on each date
of his or her election to the Board. Upon a director's death, disability or
termination of service on the Board, all Units in his or her account will be
paid in Shares equal to the number of whole Units. Any fractional Unit will be
paid in cash.
DIVIDEND EQUIVALENTS
For shares covered by DSOs granted in lieu of retainer fees and outstanding
on a dividend record date, the director will receive a cash payment equal to
the amount of dividends that would have been paid had such Shares been issued
and outstanding. Dividend equivalents earned on DDSA Units will be credited to
each account as Units or fractional Units. For dividends paid in forms other
than cash, the director will receive the cash value of such property.
RESTRICTIONS ON TRANSFERABILITY
Awards granted under the Plan will not be transferable or assignable, except
on the death of the grantee, by will or the laws of descent and distribution,
or in certain other limited circumstances which may be permitted by Rule 16b-3
under the 1934 Act.
AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the 1995 Directors
Plan provided that (i) no such termination or amendment may, without the
consent of the individual to whom any award will have been previously granted,
adversely affect the rights of such individual under such award and (ii) the
Plan may not be amended more than once every six months and only to the extent
such amendment is permitted by Rule 16b-3, or its successor, under the 1934
Act.
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FEDERAL INCOME TAX TREATMENT
No tax is imposed on the grantee, and no deduction is available to the
Corporation, at the time of grant of a DSO. Upon the exercise of a DSO,
generally the grantee will be treated as receiving compensation (and the
Corporation will be entitled to a deduction) equal to the excess of the fair
market value of the related shares at the time of exercise over the exercise
price. Dividend equivalents paid to a DSO grantee will also be treated as
compensation and a corresponding deduction will be available to the
Corporation. If Shares are delivered by the optionee in exercise of an option,
no amount will be includable in the optionee's gross income with respect to the
number of shares received, up to the number delivered, and the optionee's basis
in the number of shares so acquired will be the same as his basis in the number
of shares delivered; the fair market value of any additional shares so received
will be includable in the optionee's gross income and this amount will become
the basis for those shares.
Under current law, taxation of DDSAs and of related dividend equivalents is
deferred until distribution of the director's account at which point the fair
market value of such account will be treated as compensation to the director
and the Corporation will be entitled to a corresponding tax deduction.
The February 15, 1995 closing price of the Corporation's Common Stock on the
New York Stock Exchange-Composite Transactions was $5.75.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE ADOPTION OF THE 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
NEW PLAN BENEFITS
1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS(1)
<TABLE>
<CAPTION>
Name and Position Dollar Value($) Number of Units
- ----------------- --------------- ---------------
<S> <C> <C>
Non-Employee Director Group (11)................ $10,312(2) 55,781
</TABLE>
- --------
(1) The total of actual benefits to be received under the new plan are not
determinable since a portion of the options to be awarded depends, in part,
on annual elections made by each Non-Employee Director. As the provisions
for awards under the proposed new plan, including the elective portion,
are, in all material respects, the same as the provisions relating to Non-
Employee Directors under the Corporation's 1988 Stock Option Plan, the
information above provides the amounts actually received or allocated to
the Group for the last completed fiscal year pursuant to the 1988 Plan.
(2) This amount represents the fair market value at the date of grant of
Director Deferred Stock Award units ("DDSAs," as described more fully in
the narrative preceding this table) awarded to the Group at the date of
election to the Board in 1994. All other categories of options are granted
at fair market value, and consequently, had no dollar value at the date of
grant. One category of options, upon an irrevocable election by any Non-
Employee Director on the date of election to the Board to receive such
options in lieu of all or part of his or her Retainer, allows for all but
$1.00 of the exercise price to be paid out of deferred compensation at the
time of exercise.
ITEM (4)--APPOINTMENT OF AUDITORS
Stockholders will be asked to ratify the appointment of Price Waterhouse,
certified public accountants, as independent auditors of the accounts of the
Corporation and its subsidiaries for the 1995 fiscal year. Price Waterhouse has
been regularly engaged in this capacity by the Corporation for over 80 years. A
representative of Price Waterhouse will attend the Annual Meeting where he will
have the opportunity to make a statement if he so desires and will be available
to respond to appropriate questions. Stockholder ratification is not required;
however, the Corporation considers such ratification to be a
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desirable practice and if the affirmative vote is less than a majority of the
shares voting on the ratification question, the Board would reconsider the
appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS
OWNERSHIP OF COMMON STOCK
Beneficial owners of more than five percent of the Corporation's Common
Stock, as shown by information received by the Corporation, are listed below:
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
------------------------------------------
Voting Power Investment Power
Name and Address of ---------------- ---------------- Percent
Beneficial Owner Sole Shared Sole Shared of Class
------------------- --------- ------ --------- ------ --------
<S> <C> <C> <C> <C> <C>
Abdullah Taha Bakhsh
c/o Traco,
P.O. Box 459,
Jeddah, Saudi Arabia........................... 7,173,410 7,173,410 20.99(1)
Bank of America Illinois,
Trustee of the Corporation's
Savings-Investment Plan and ESOP,
231 S. LaSalle Street,
Chicago, Illinois 60690........................ -- -- -- -- -- (2)
Norwest Corporation
Norwest Center,
Sixth and Marquette,
Minneapolis, Minnesota 55479................... 2,420,528 16,000 2,663,903 8,000 8.21(3)
Sasco Capital, Inc.
10 Sasco Hill Road
Fairfield, Connecticut 06430................... 1,351,600 2,657,500 8.17(4)
</TABLE>
- --------
(1) The aggregate amount beneficially owned at December 31, 1994 was 7,173,410
shares, including a currently exercisable warrant to purchase 1,649,600
shares at $6.50 per share (the "Warrant"). 5,523,810 shares are held of
record by Emerson Investments, Ltd. ("Emerson") and the Warrant is held of
record by Traco International N.V. ("Traco"). According to Schedule 13D
filed with the Corporation, Traco is wholly-owned by Mr. Abdullah Taha
Bakhsh who represents therein that he has sole power to direct the vote and
disposition of the shares Traco has the right to acquire through the
Warrant. Emerson has represented to the Corporation that it is wholly-owned
by Mr. Bakhsh and that Mr. Bakhsh has sole power to direct the vote and
disposition of Emerson's 5,523,810 shares. The Corporation and Traco have
entered into a Stockholder's Agreement which, among other things, allows
Traco to designate certain individuals to be nominated for election as
directors of the Corporation, and for a period of not more than three years
ending September 20, 1995, limits Traco's ability to acquire additional
shares of the Corporation, limits Traco's ability to transfer its shares
and the Warrant, and places restrictions on Traco's ability to vote the
shares it holds. Emerson has agreed to be bound by the terms of the
Stockholder's Agreement. In addition to the shares set forth in the table
above, 190,476 shares are held of record by Williamson Investments, Ltd.
("Williamson"). Williamson has also agreed to be bound by the terms of the
Stockholder's Agreement and has represented to the Corporation that it is
wholly owned by Mr. Abdel Mohsen Y Abu Shukhaidem and that Mr. Shukhaidem
has sole power to direct the vote and disposition of Williamson's 190,476
shares.
(2) Bank of America Illinois acts as Trustee of The Hartmarx Savings-Investment
Plan and the Hartmarx Employee Stock Ownership Plan ("ESOP"). At December
31, 1994, the Trustee held 1,750,336
21
<PAGE>
shares (5.4%) for the Savings-Investment Plan and 746,608 shares (2.3%) for
the ESOP. The Trustee votes all shares held by the respective Plan Trusts
proportionally as directed by participants' instructions, except that shares
held in certain participant sub-accounts in the ESOP are voted only as
directed by participants' instructions.
(3) The aggregate amount beneficially owned at December 31, 1994 was 2,672,128
shares. Norwest Corporation ("Norwest") has represented to the Corporation
that these shares are held in a fiduciary or representative capacity, and
that for purposes of the reporting requirements of the Securities Exchange
Act of 1934, Norwest and its subsidiaries are deemed to be beneficial
owners of such shares; however, Norwest and its subsidiaries have expressly
disclaimed that they are, in fact, the beneficial owners of such shares.
(4) The aggregate amount beneficially owned at December 31, 1994 was 2,657,500
shares.
PROPOSALS BY SECURITY HOLDERS
Any proposal which a security holder intends to call upon the Corporation to
include in its 1996 Proxy Statement must be received at the principal office of
the Corporation no later than October 31, 1995.
OTHER MATTERS
The Board knows of no other business to be presented at the meeting, but if
other matters do properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the Proxy in accordance with their
best judgment on such matters.
By Order of the Board of Directors
LOGO
MARY D. ALLEN, Secretary
Chicago, Illinois
February 28, 1995
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<PAGE>
EXHIBIT A
1995 INCENTIVE STOCK PLAN
HARTMARX CORPORATION
1. PURPOSE OF THE PLAN
The purpose of the 1995 Incentive Stock 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
with opportunities to acquire a proprietary interest in the Company and thereby
develop a stronger incentive to put forth maximum effort for the success and
growth of the Company and its subsidiaries. In addition, the opportunity to
acquire a proprietary interest in the Company will aid in attracting and
retaining key personnel of outstanding ability.
2. AVAILABLE SHARES OF COMMON STOCK
(a) Limitations--Subject to the provisions of Section 2(c) of the Plan, the
aggregate number of shares of Common Stock of the Company ("Shares") subject to
options, Stock Appreciation Rights ("SARs") and Restricted Stock Awards
("RSAs") which may be issued to participants under the Plan shall be 1,500,000
Shares, provided that no more than 500,000 of such shares shall be granted as
RSAs. Shares which are currently available for grant or become available for
grant under the existing stock option plans of the Company will be added to the
aggregate number of shares authorized under this Plan, and all subsequent
grants will be made pursuant to this Plan. The aggregate number of Shares that
may be represented by awards granted to any single individual under the Plan
shall not exceed 500,000 Shares within any consecutive three year period of
time. Further, the aggregate number of Shares that may be covered by awards
made in the form of Incentive Stock Options ("ISOs") intended to comply with
Section 422 of the Code shall not exceed 1,000,000.
(b) Usage and Replenishment--Shares subject to an award under the plan which
is forfeited, expires, or is canceled shall remain available for the granting
of other awards. Any Shares tendered, either actually or by attestation, by a
person as full or partial payment made to the Company in connection with any
exercise of a stock option under the Plan shall increase the number of Shares
available under the Plan. In instances where an SAR or an award granted
pursuant to Section 6(c) of the Plan is settled in cash, the Shares covered by
such award shall remain available for awards under the Plan. Likewise, cash
dividends and dividend equivalents paid in cash in conjunction with outstanding
awards shall not be counted against the Shares available for issuance under the
Plan. Further, any Shares that are issued by the Company, and any awards that
are granted through the assumption of, or in substitution for, outstanding
awards previously granted by an acquired entity shall not be counted against
the Shares available for awards under the Plan.
Any Shares issued under the Plan may consist in whole or in part of
authorized and unissued shares or of treasury shares of Common Stock, and no
fractional Shares shall be issued under the Plan. Cash may be paid in lieu of
any fractional Shares in settlements of awards under the Plan.
(c) Adjustments--In the event of any stock dividend, stock split, combination
or exchange of equity securities, merger, consolidation, recapitalization,
spin-off or other distribution (other than normal cash dividends) of Company
assets to stockholders, or any other change affecting Shares or share price,
such proportionate adjustments, if any, as the Committee in its discretion may
deem appropriate to reflect such changes shall be made with respect to: (a) the
limitations on the numbers of Shares that may be issued and represented by
awards under the Plan as set forth in Section 2(a); (b) the number of Shares
under each outstanding award made under the Plan; and (c) the exercise price
per Share for any outstanding stock options, SARs or similar awards under the
Plan.
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<PAGE>
3. PLAN ADMINISTRATION
(a) Committee--The Committee (the "Committee") of the Board of Directors (the
"Board") of the Company designated by the Board shall be responsible for
administering the Plan. The Committee shall be comprised of three or more non-
employee members of the Board who shall qualify to administer the Plan as
contemplated by both Rule 16b-3 under the Securities and Exchange Act of 1934
(the "1934 Act"), and Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Each member of the Committee shall serve for such term as
the Board may determine, subject to removal by the Board at any time.
(b) Committee Authority--The Committee shall have full and exclusive power to
interpret the Plan and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or proper, all of which power
shall be executed in the best interests of the Company and in keeping with the
objectives of the Plan. This power includes, but is not limited to, selecting
award recipients, establishing all award terms and conditions, adopting
modifications, amendments, procedures and regulations governing awards, and to
make all other determinations necessary or advisable for the administration of
this Plan. The Committee may delegate such non-discretionary administrative
duties under the Plan as it shall deem necessary and advisable. All decisions
made by the Committee shall be final and binding on all persons affected by
such decisions.
4. ELIGIBILITY
Awards may be granted under the Plan to those key employees of the Company as
the Committee may from time to time select. This may include employees of an
entity acquired by or merged into the Company pursuant to the assumption,
replacement or substitution of awards previously issued by such entity. In no
event may an award be granted under the Plan to any person who is not an
employee, except in circumstances involving the grant of an award made in
tandem with or replacement of an earlier award made under the Plan to a former
employee of the Company. For purposes of participation in the Plan, the term
"Company" shall include any entity that is directly or indirectly controlled by
the Company or any entity, including an acquired entity, in which the Company
has a significant equity interest, as determined by the Committee.
5. FAIR MARKET VALUE
"Fair Market Value" for all purposes under the Plan shall mean the average of
the high and low prices of a Share as reported in The Wall Street Journal or
similar readily available public source for the date in question. If no trading
of Shares occurred on such date, the average price of a Share as reported for
the preceding day on which sales of Shares were made shall be used.
6. AWARDS
(a) General--The Committee shall determine the type or types of award(s) to
be made to each participant. Awards may be granted singly, in combination or in
tandem. Awards also may be made in combination or in tandem with, in
replacement of, as alternatives to, or as the payment form for grants or rights
under any other employee or compensation plan of the Company including the plan
of any acquired entity. The types of awards that may be granted under the Plan
are:
(b) Stock Options--A stock option shall represent a right to purchase a
specified number of Shares during a specified period as determined by the
Committee. The purchase price per Share for each stock option shall be not less
than 100% of the Fair Market Value on the date of grant. A stock option may be
in the form of an ISO which, in addition to being subject to the applicable
terms, conditions, and limitations established by the Committee, complies with
all applicable provisions of Section 422 of the Code, and any rules and
regulations promulgated thereunder. The Shares covered by a stock option may be
24
<PAGE>
purchased at the time of the exercise by cash payment or such other method
permitted by the Company, including (i) tendering (either actually or by
attestation) Shares valued at the Fair Market Value at the date of exercise;
(ii) authorizing a third party to sell the Shares (or a sufficient portion
thereof) acquired upon exercise of a stock option, and assigning the delivery
to the Company of a sufficient amount of the sale proceeds to pay for all the
Shares acquired through such exercise and any tax withholding obligations
resulting from such exercise; or (iii) any combination of the above. The
Committee may grant stock options that provide for the grant of a subsequent
restoration stock option if the exercise price has been paid for by tendering
Shares to the Company. Any restoration stock option will cover the number of
Shares tendered in exercising the predecessor option and may include the number
of shares withheld to settle appropriate tax withholding, with the stock option
purchase price set at the then-current Fair Market Value, and will not extend
beyond the remaining term of the original option.
(c) Stock Appreciation Rights--An SAR shall represent a right to receive a
payment, in cash, Shares or as a combination, equal to the excess of the Fair
Market Value of a specified number of Shares on the date the SAR is exercised
over the Fair Market Value on the date the SAR was granted as set forth in the
applicable award agreement, except if an SAR is granted retroactively in tandem
with or in a substitution for a stock option, the designated Fair Market Value
in the applicable award agreement may be no lower than the Fair Market Value on
the date such stock option was granted. The Committee shall never grant an SAR
in conjunction with a stock option which permits more than one-half of the gain
in the 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 the SAR is
granted by the Committee may elect to purchase all, or any portion of, such
shares at the date of exercise.
(d) Restricted Stock Awards--An RSA shall represent an award made in Shares
or denominated in units equivalent in value to Shares. All or part of any RSA
will be subject to conditions and restrictions established by the Committee,
and set forth in the award agreement, which may include, but are not limited
to, continuous service with the Company, and/or the achievement of performance
goals which may be measured based on absolute Company or business unit
performance or based on comparative performance with other companies. Among the
performance measures that may be used are total stockholders' return, earnings
and revenue growth, and performance ratios such as profit return on assets,
stockholders' equity or revenues.
7. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that any awards under the Plan earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a participant's account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
Shares or share equivalents.
8. PAYMENTS AND PAYMENT DEFERRALS
Payment of awards may be in the form of cash, Shares, other awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee also may require or permit
participants to elect to defer the issuance of Shares or the settlement of
awards in cash under such rules and procedures as it may establish under the
Plan. It also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting of
dividend equivalents where the deferral amounts are denominated in share
equivalents.
9. TRANSFERABILITY
Awards granted under the Plan that are intended to qualify under Rule 16b-3
promulgated under the 1934 Act ("Rule 16b-3") shall not be transferable or
assignable other than by will or the laws of descent
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<PAGE>
and distribution, or as may otherwise be permitted by Rule 16b-3. Awards
granted under the Plan that are not intended to qualify under Rule 16b-3 shall
not be transferable or assignable other than by will or the laws of descent and
distribution, except that the Committee may provide for the transferability of
particular awards: (a) by gift or other transfer to (i) any trust or estate in
which the original award recipient or such person's spouse or other immediate
relative has a substantial beneficial interest or (ii) a spouse or other
immediate relative; (b) pursuant to a qualified domestic relations order; and
(c) as may otherwise be permitted by Rule 16b-3; provided, however, that any
award so transferred shall continue to be subject to all the terms and
conditions contained in the agreement evidencing such award. And, if so
permitted by the Committee, a participant may designate a beneficiary or
beneficiaries to exercise the rights of the participant and receive any
distribution under the Plan upon the death of the participant.
10. CHANGE-IN-CONTROL
The Committee may provide for appropriate adjustments (including the
acceleration of vesting) and settlements of awards, either at the time an award
is granted or at a subsequent date, either in contemplation of or in the event
that the Company undergoes a change in control or is not to be the surviving
corporation in a merger or consolidation with another corporation, or in the
event of a liquidation or reorganization of the Company.
11. AWARD AGREEMENTS
Awards under the Plan shall be evidenced by agreements that set forth the
terms, conditions and limitations for each award, which may include the term of
the award, the provisions applicable in the event the participant's employment
terminates, and any Company authority to amend, modify, suspend, cancel or
rescind any award. The Committee need not require the execution of any such
agreement, in which case acceptance of the award by the respective participant
shall constitute agreement by the participant to the terms of the award.
12. PLAN AMENDMENT
The Committee may terminate or amend the Plan or any portion thereof at any
time, including but not limited to amendments to the Plan necessary to comply
with the requirements of Section 16(b) of the 1934 Act, except that the
Committee may not materially increase the maximum number of Shares which may be
issued under the Plan, extend the maximum period during which any award may be
exercised, decrease the minimum option price to less than the Fair Market Value
of the underlying security on the date of the grant of the option or change the
employees or class of employees eligible to participate in the Plan without
stockholder approval as required by Rule 16b-3 of the 1934 Act. The termination
or any modification or amendment of the Plan shall not, without the consent of
a participant, adversely affect his or her rights under an award previously
granted. Notwithstanding the foregoing, stockholder approval under this Section
12 shall only be required at such time as Rule 16b-3 of the 1934 Act, as such
Rule may be amended from time to time, shall require the approval of the
stockholders of the Corporation to any material amendment to any employee
benefit plan of the Corporation or as necessary to continue to qualify
compensation payable under the Plan for purposes of section 162(m) of the Code.
13. TAX WITHHOLDING
The Company shall have the right to deduct from any settlement of an award
made under the Plan, including the delivery or vesting of Shares, a sufficient
amount to cover withholding of any federal, state or local taxes required by
law or such greater amount of withholding as the Committee shall determine from
time to time, or to take such other action as may be necessary to satisfy any
such withholding obligations. If the Committee permits or requires Shares to be
used to satisfy required tax withholding, such Shares shall be valued at the
Fair Market Value as of the tax recognition date for such award.
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<PAGE>
14. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements of
awards received by participants under the Plan shall not be deemed a part of a
participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Company benefit plan or severance program.
Further, the Company may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary.
15. REGULATORY APPROVALS
The implementation of the Plan, the granting of any award under the Plan, and
the issuance of Shares upon the exercise or settlement of any award shall be
subject to the Company's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the awards granted
under it or the Shares issued pursuant to it.
16. FUTURE RIGHTS
No person shall have any claim or rights to be granted an award under the
Plan, and no participant shall have any rights under the Plan to be retained in
the employ of the Company. Likewise, participation in the Plan will not in any
way affect the Company's right to terminate the employment of the participant
at any time with or without cause.
17. GOVERNING LAW
The validity, construction and effect of the Plan and any actions taken or
relating to the Plan shall be determined in accordance with the laws of the
State of Illinois and applicable federal law.
18. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a participant,
including, without limitation, the estate of such participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the participant's creditors. However, no award
or other interest in the Plan may be assigned, pledged or otherwise alienated,
except to the extent permitted in accordance with Section 9 of the Plan and the
applicable award agreement.
19. EFFECTIVE DATE AND STOCKHOLDER APPROVAL OF PLAN
The Plan shall become effective as of April 13, 1995, subject to the approval
and ratification of the Plan at the Annual Meeting of Stockholders of the
Company held April 13, 1995, by the affirmative vote of the majority of the
Shares voting at the meeting. The Plan shall remain in effect until terminated
by the Board. If the Plan is terminated, the terms of the Plan and rights of
participants shall continue to apply to all awards made prior to such
termination.
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EXHIBIT B
1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
HARTMARX CORPORATION
1. PURPOSE OF THE PLAN
The purpose of the 1995 Stock Plan for Non-Employee Directors (the "Plan") is
to promote the interests of Hartmarx Corporation, a Delaware corporation (the
"Company") and its stockholders by providing non-employee directors of the
Company 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. In addition, the opportunity to acquire a
proprietary interest in the Company will aid in attracting and retaining highly
qualified individuals who are not employees of the Company for service as
members of the Board of Directors.
2. AVAILABLE SHARES OF COMMON STOCK
a) Limitations--The aggregate number of shares of Common Stock of the Company
("Shares") subject to Director Stock Options ("DSOs") and Director Deferred
Stock Awards ("DDSAs") which may be issued to participants under the Plan shall
be 325,000 Shares.
b) Usage and Replenishment--Shares subject to an award under the Plan which
is forfeited, expires, or is canceled shall remain available for the granting
of other awards. Any Shares tendered, either actually or by attestation, by a
director as full or partial payment made to the Company in connection with any
exercise of a stock option under the Plan shall increase the number of Shares
available under the Plan. Any Shares issued under the Plan may consist in whole
or in part of authorized and unissued shares or of treasury shares of Common
Stock, and no fractional Shares shall be issued under the Plan. Cash may be
paid in lieu of any fractional Shares in settlements of awards under the Plan.
c) Adjustments--The Board, as it deems appropriate to meet the intent of the
Plan, may make such adjustments to the number of Shares available under the
Plan and to any outstanding DSOs and DDSAs, provided such adjustments are
consistent with the effect on other stockholders arising from any corporate
restructuring or similar action. Such actions may include, but are not limited
to, any stock dividend, stock split, combination or exchange of shares, merger,
consolidation, recapitalization, spin-off or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other changes
affecting the common stock. The Board may also, when similarly appropriate,
make such adjustment in the exercise price of outstanding DSOs and DDSAs as it
deems necessary to preserve the rights of participants under the Plan.
3. PLAN ADMINISTRATION
The Plan is intended to meet the requirements of Rule 16b-3(c)(2)(ii) adopted
under the Securities and Exchange Act of 1934 (the "1934 Act") and accordingly
is intended to be self governing. To this end, the Plan is intended to require
no discretionary action by any administrative body with regard to any
transaction under the Plan. If any questions of interpretation arise, they
shall be resolved by the members of the Board of Directors who are not eligible
to participate in this Plan.
4. ELIGIBILITY
All active members of the Company's Board of Directors who are not employees
of the Company or any of its subsidiaries or affiliates ("Outside Directors")
as of the date of a grant shall be eligible to participant in the Plan.
5. FAIR MARKET VALUE
"Fair Market Value" for all purposes under the Plan shall mean the average of
the high and low prices of a Share as reported in The Wall Street Journal or
similar readily available public source for the
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date in question. If no trading of Shares occurred on such date, the average
price of a Share as reported for the preceding day on which sales of Shares
were made shall be used. "Dividend Equivalent Crediting Price" is such Fair
Market Value on a dividend payment date.
6. DIRECTOR STOCK OPTIONS
a) Subject to the terms and conditions of the Plan, each Outside Director
shall be granted a DSO as of each date of his or her election to the Board. The
number of Shares subject to a DSO granted to a director each date shall be
equal to the greater of 1,000 or the number of whole Shares as shall be
determined by dividing such director's Retainer for such period by the Fair
Market Value of a Share on the date of grant.
b) DSOs shall also be granted to each Outside Director on each date of his or
her election to the Board, to the extent that the director has irrevocably
chosen to receive a DSO in lieu of all or part of his or her Retainer. This
irrecovable choice must be made consistent with the requirements for exemption
under Rule 16b-3 promulgated under the 1934 Act. The number of shares covered
by such 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
Fair Market Value minus $1.00 Shares
c) A DSO shall represent a right to purchase a specified number of Shares
during a period which shall expire along with all rights to purchase shares
thereunder ten years after the date such option is granted. The purchase price
of each Share subject to a DSO shall equal 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 Share subject to a DSO granted
under Section 6(b) shall be $1.00. DSOs shall be exercisable in full 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 and shall remain exercisable for a period of three years.
The Shares covered by a stock option may be purchased at the time of the
exercise by cash payment or such other method permitted by the Company,
including (i) tendering (either actually or by attestation) Shares valued at
the Fair Market Value at the date of exercise; (ii) authorizing a third party
to sell the Shares (or a sufficient portion thereof) acquired upon exercise of
a stock option, and assigning the delivery to the Company of a sufficient
amount of the sale proceeds to pay for all the Shares acquired through such
exercise and any tax withholding obligations resulting from such exercise; or
(iii) any combination of the above.
7. 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. Each Outside Director shall be granted one hundred
fifty (150) DDSA Units 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 8. 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 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 8.
8. DIVIDEND EQUIVALENTS
Shares covered by outstanding DSOs granted under Section 6(b) and Shares
represented by DDSA Units may earn dividend equivalents.
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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 fair market value (as the
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.
(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:
(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 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 for the Board or with any other services to be provided by the
Company.
9. TRANSFERABILITY
Awards granted under the Plan shall not be transferable or assignable other
than by will or the laws of descent and distribution, and as may otherwise be
permitted by Rule 16b-3 promulgated under the 1934 Act; provided, however, that
any award so transferred shall continue to be subject to all the terms and
conditions contained in the agreement evidencing such award.
10. AWARD AGREEMENTS
Awards under the Plan shall be evidenced by written agreements or such other
appropriate documentation as the Board shall prescribe.
11. PLAN AMENDMENT
The Board may suspend or amend the Plan if deemed to be in the best interests
of the Company and its stockholders; provided, however, that (i) no such
amendment may impair any participant's right
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regarding any outstanding DSO or DDSA without his or her consent, and (ii) the
Plan may not be amended more than once every six months, and only to the extent
such amendment is permitted by Rule 16b-3(c)(2)(ii)(B), or its successor, under
the 1934 Act.
12. REGULATORY APPROVALS
The implementation of the Plan, the granting of any award under the Plan, and
the issuance of Shares upon the exercise or settlement of any award shall be
subject to the Company's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the awards granted
under it or the Shares issued pursuant to it.
13. FUTURE RIGHTS
Neither the Plan nor any action taken pursuant to the Plan shall constitute
or be evidence of any agreement or understanding, expressed or implied, that
the Company shall retain a participant for any period of time, or at any
particular rate of compensation as a member of the Board. Nothing in this Plan
shall in any way limit or affect the right of the Board or the stockholders of
the Company to remove any Participant from the Board or otherwise terminate his
or her service as a member of the Board.
14. GOVERNING LAW
The validity, construction and effect of the Plan and any actions taken or
relating to the Plan shall be determined in accordance with the laws of the
State of Illinois and applicable federal law.
15. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a participant,
including, without limitation, the estate of such participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the participant's creditors. However, no award
or other interest in the Plan may be assigned, pledged or otherwise alienated,
except to the extent permitted in accordance with Section 9 of the Plan and the
applicable award agreement.
16. EFFECTIVE DATE AND STOCKHOLDER APPROVAL OF PLAN
The Plan shall become effective as of April 13, 1995, subject to the approval
and ratification of the Plan at the Annual Meeting of Stockholders of the
Company held April 13, 1995 by the affirmative vote of the majority of the
Shares voting at the meeting. The Plan shall remain in effect until terminated
by the Board. If the Plan is terminated, the terms of the Plan and the rights
of participants shall continue to apply to all outstanding DSOs and DDSAs
granted prior to such termination.
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LOGO
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PROXY SOLICITED BY THE BOARD OF DIRECTORS OF HARTMARX CORPORATION
Elbert O. Hand, Homi B. Patel, Mary D. Allen, and each of them, is hereby
appointed, with full power of substitution, to represent the undersigned at the
Annual Meeting of Stockholders of HARTMARX CORPORATION on April 13, 1995, and at
any adjournment thereof, with the full power to vote all of the shares of stock
which the undersigned is entitled to vote:
(1) ELECTION OF DIRECTORS
__ FOR all nominees listed below (except as marked to the contrary below):
----------------------------------------
A. Robert Abboud Elbert O. Hand Charles Marshall Homi B. Patel
Letitia Baldrige Donald P. Jacobs Charles K. Olson Stuart L. Scott
Jeffrey A. Cole Miles L. Marsh Talat M. Othman Sam F. Segnar
Raymond F. Farley
To withhold authority to vote for any individual nominees write names in the
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space below.
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___________________________________________________________________________
__ WITHHOLD AUTHORITY to vote for all nominees listed above.
(2) TO ADOPT the 1995 Incentive Stock Plan (Item (2) of Notice of Annual
Meeting). -----------------------------
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__ FOR __ AGAINST __ ABSTAIN
(3) TO ADOPT the 1995 Stock Plan for Non-Employee Directors (Item (3) of
Notice of Annual Meeting). ------------
--------------------------
__ FOR __ AGAINST __ ABSTAIN
(Continued, and to be signed, on other side)
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(4) TO RATIFY the appointment of independent auditors (Item (4) of Notice
of Annual Meeting).
__ FOR __ AGAINST __ ABSTAIN
(5) TO TRANSACT such other business as may properly come before the
meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE STOCKHOLDER BUT IF NO CHOICE
IS SPECIFIED IT WILL BE VOTED FOR ELECTION OF THE ABOVE NOMINEES FOR DIRECTORS
AND IN FAVOR OF THE PROPOSALS SET FORTH IN ITEMS (2), (3) and (4).
Dated this ___ day of ____________, 1995
______________________________ (Seal) ______________________________ (Seal)
(Signature of Stockholder) (Signature of Stockholder)
- -------------------------- --------------------------
Signature must agree with name as shown above. For shares held in joint
tenancy, each of the joint tenants is requested to sign.
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GRAPHICS APPENDIX
1. PHOTOS OF THE DIRECTORS AND NOMINEES FOR DIRECTORS APPEAR TO THE LEFT OF EACH
RESPECTIVE NAME ON PAGES 2, 3 AND 4.
