<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-8501
HARTMARX CORPORATION
A DELAWARE CORPORATION IRS EMPLOYER NO. 36-3217140
101 NORTH WACKER DRIVE, CHICAGO, ILLINOIS 60606
TELEPHONE NO.: 312/372-6300
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock $2.50 par value per New York Stock Exchange
share
Chicago Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
10 7/8% Senior Subordinated Notes New York Stock Exchange
due January 15, 2002
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes
X
----
No
----
On February 20, 1996, 32,908,101 shares of the Registrant's common stock
were outstanding. The aggregate market value of common stock held by non-
affiliates of the Registrant was $126,446,000.
Certain portions of the Registrant's definitive proxy statement dated
February 28, 1996 for the Annual Meeting of Stockholders to be held April 17,
1996 are incorporated by reference into Part III of this report.
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<PAGE>
HARTMARX CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
ITEM NO. PAGE
-------- ----
PART I
<C> <S> <C>
1 Business............................................................ 1
2 Properties.......................................................... 4
3 Legal Proceedings................................................... 4
4 Submission of Matters to a Vote of Security Holders................. 5
Executive Officers of the Registrant................................ 5
PART II
Market for Registrant's Common Equity and Related Stockholder
5 Matters............................................................ 6
6 Selected Financial Data............................................. 7
Management's Discussion and Analysis of Financial Condition and
7 Results of Operations.............................................. 8
8 Financial Statements and Supplementary Data......................... 13
Changes in and Disagreements with Accountants on Accounting and
9 Financial Disclosure............................................... 31
PART III
10 Directors and Executive Officers of the Registrant.................. 31
11 Executive Compensation.............................................. 32
12 Security Ownership of Certain Beneficial Owners and Management...... 32
13 Certain Relationships and Related Transactions...................... 32
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form 8-K..... 32
</TABLE>
<PAGE>
PART I
ITEM 1--BUSINESS
General and Operating Segments
Hartmarx Corporation functions essentially as a holding company, overseeing
its various operating companies and providing them with resources and services
in the financial, administrative, legal, human resources, advertising and
other areas. The management of the respective operating subsidiaries has
responsibility for optimum use of the capital invested in them and for
planning their growth and development in coordination with the strategic plans
of Hartmarx and the other operating entities (collectively, the "Company").
Established in 1872, the Company believes it is the largest manufacturer and
marketer of men's suits, sportcoats and slacks ("men's tailored clothing") in
the United States. From this established position, Hartmarx has diversified
into men's and women's sportswear, including golfwear, and women's career
apparel.
Substantially all of the Company's products are sold to a wide variety of
retail channels under established brand names or the private labels of major
retailers. The Company owns two of the most recognized brands in men's
tailored clothing--Hart Schaffner & Marx(R), which was introduced in 1887, and
Hickey-Freeman(R), which dates from 1899. The Company also offers its products
under other brands which it owns such as Sansabelt(R), Racquet Club(R) and
Barrie Pace(R) and under exclusive license agreements for specified product
lines including Tommy Hilfiger(R), Jack Nicklaus(R), Bobby Jones(R), Austin
Reed(R), Perry Ellis(R), Daniel Hechter(R), Gieves & Hawkes(R), KM by
Krizia(TM), Nino Cerruti(R), Henry Grethel(R), Pierre Cardin(R) and
Fumagalli's(R). To broaden the distribution of the apparel sold under its
owned and licensed trademarks, the Company has also entered into over 30
license or sublicense agreements with third parties for specified product
lines to produce, market and distribute products in 16 countries outside the
United States. Additionally, the Company has commenced direct marketing
primarily in Europe and Asia, selling golfwear through distributors in 18
countries.
In 1992, the Company undertook a comprehensive operational and financial
restructuring (the "Restructuring") to refocus business operations around its
profitable core wholesale men's apparel businesses and to restructure its
balance sheet. As the final step in its previously announced strategy to exit
the retail business, the Company completed the disposition of its Kuppenheimer
operation, the vertically integrated factory-direct-to-consumer manufacturer
of popular priced men's tailored clothing whose products are sold exclusively
through Kuppenheimer operated retail stores, in July 1995. Kuppenheimer's
operating results, net of tax benefit, have been reflected as a discontinued
operation in the accompanying Consolidated Statement of Earnings for the year
ended November 30, 1995 and comparable amounts relating to prior years have
been reclassified.
The Company's operations currently consist of the following businesses--
Men's Apparel Group ("MAG") and Women's Apparel Group. MAG designs,
manufactures and markets men's tailored clothing, slacks and sportswear to
retailers for resale to consumers. The Women's Apparel Group is comprised of
International Women's Apparel ("IWA"), which markets women's career apparel to
department and specialty stores, and Barrie Pace, a direct mail catalog
marketer of women's apparel and accessories. The Operating Segment Information
on pages 30 through 31 in the accompanying Notes to Consolidated Financial
Statements further describes the Company's operations.
This 1995 Annual Report on Form 10-K contains forward looking statements
that are made in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such forward looking statements are
subject to risks and uncertainties. Exhibit 99 to this 1995 10-K Report
identifies important risk factors which could cause the Company's actual
financial results to differ materially from results forecast or estimated by
the Company in forward looking statements.
Products Produced and Services Rendered
The Company's merchandising strategy is to market a wide selection of men's
tailored clothing and sportswear and women's career apparel and sportswear
across a wide variety of fashion directions, price points
1
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and distribution channels. In 1995, tailored clothing represented
approximately 61% of the Company's total sales. Sportswear (which includes
golfwear) and slacks represented approximately 30% of sales and women's
apparel represented approximately 9% of sales.
As an integrated manufacturer and marketer, the Company is responsible for
the design, manufacture and sourcing of its apparel. Substantially all of its
men's tailored clothing and slacks are manufactured in 17 Company operated
facilities located in the United States, one factory in Costa Rica and one
factory in Mexico. The Company also utilizes domestic and foreign contract
manufacturers to produce its remaining products, principally men's and women's
sportswear, in accordance with Company specifications and production
schedules.
The Company's largest operating group, MAG, designs, manufactures and
markets on a wholesale basis substantially all of the Company's men's tailored
clothing through its Hart Schaffner & Marx ("HSM"), Hickey-Freeman and
Intercontinental Branded Apparel business units. Slacks and sportswear are
manufactured and marketed principally through the Trans-Apparel Group,
Biltwell and Bobby Jones business units. IWA designs and sources women's
career apparel and sportswear for department and specialty stores under owned
and licensed brand names. The Barrie Pace catalog features branded products
principally purchased from unaffiliated sources, directed towards the business
and professional woman. Approximately 20% of Barrie Pace sales are of products
purchased from affiliated companies.
Sources and Availability of Raw Materials
Raw materials, which include fabric, linings, thread, buttons and labels,
are obtained from domestic and foreign sources based on quality, pricing,
fashion trends and availability. The Company's principal raw material is
fabric, including woolens, cottons, polyester and blends of wool and
polyester. The Company procures and purchases its raw materials directly for
its owned manufacturing facilities and may also procure and retain ownership
of fabric relating to garments cut and assembled by contract manufacturers. In
other circumstances, fabric is procured by the contract manufacturer directly
but in accordance with the Company's specifications. For certain of its
product offerings, the Company and selected fabric suppliers jointly develop
fabric for the Company's exclusive use. Approximately 17% of the raw materials
purchased by the Company is imported from foreign mills. A substantial portion
of these purchases is denominated in United States dollars. Purchases from
Burlington Industries, Inc., the Company's largest fabric supplier, accounted
for 46% of the Company's total fabric requirements in fiscal 1995. No other
supplier accounts for over 6% of the Company's total raw material
requirements. As is customary in the industry, the Company has no long-term
contracts with its suppliers. The Company believes that a variety of
alternative sources of supply are available to satisfy its raw material
requirements.
Product lines are developed primarily for two major selling seasons, spring
and fall, with smaller lines for the summer and holiday seasons. The majority
of the Company's products are purchased by its customers on an advance order
basis, five to seven months prior to shipment. Seasonal commitments for a
portion of the expected requirements are made approximately three to five
months in advance of the customer order. Certain of the Company's businesses
maintain in-stock inventory programs on selected product styles giving
customers the capability to order electronically with resulting shipment
within 24 to 48 hours. Programs with selected fabric suppliers provide for
availability to support in-stock marketing programs. The normal production
process from fabric cutting to finished production is five to six weeks for
tailored suits and sportcoats and three to four weeks for tailored slacks. A
substantial portion of sportswear and women's apparel is produced by
unaffiliated contractors utilizing Company designs.
Competition and Customers
The Company emphasizes quality, fashion, brand awareness and service in
engaging in this highly competitive business. While no manufacturer of men's
clothing accounts for more than a small percentage of the total amount of
apparel produced by the entire industry in the United States, the Company
believes it is the
2
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largest domestic manufacturer and marketer of men's tailored clothing and
men's slacks with expected retail prices over $50. Its women's apparel sales
do not represent a significant percentage of total women's apparel sales. The
Company's customers include major United States department and specialty
stores (certain of which are under common ownership and control), value-
oriented retailers and direct mail companies. The Company's largest customer,
Dillard Department Stores, represented approximately 16%, 14% and 14% of
consolidated sales in 1995, 1994 and 1993, respectively. No other customer
exceeded 7% of net sales.
Trademarks, Licensing Agreements and Research
A significant portion of the Company's sales are of products carrying brands
and trademarks owned by the Company. As noted previously, the Company also
manufactures and markets products pursuant to exclusive license agreements
with others. While the terms and duration of these license agreements vary,
typically they provide for certain minimum payments and are subject to renewal
and renegotiation.
In the apparel industry, new product development is directed primarily
towards new fashion and design changes and does not require significant
expenditures for research. The Company's fixed assets include expenditures for
new equipment developed by others. The Company does not spend material amounts
on research activities relating to the development of new equipment.
Conditions Affecting the Environment
Regulations relating to the protection of the environment have not had a
significant effect on capital expenditures, earnings or the competitive
position of the Company. The making of apparel is not energy intensive and the
Company is not engaged in producing fibers or fabrics.
Employees
The Company presently has approximately 8,200 employees, of which
approximately 98% are employed in MAG. Most of the employees engaged in
manufacturing and distribution activities are covered by union contracts with
the Union of Needletrades, Industrial & Textile Employees. The Company
considers its employee relations to be satisfactory.
Seasonality
The men's tailored clothing business has two principal selling seasons,
spring and fall. Additional lines for the summer and holiday seasons are
marketed in men's and women's sportswear. Men's tailored clothing, especially
at higher price points, generally tends to be less sensitive to frequent
shifts in fashion trends, economic conditions and weather, as compared to
men's sportswear or women's career apparel and sportswear. While there is
typically little seasonality to the Company's sales on a quarterly basis,
seasonality can be affected by a variety of factors, including the mix of
advance and fill-in orders, the distribution of sales across retail trade
channels and overall product mix between traditional and fashion merchandise.
The Company generally receives orders from its wholesale customers
approximately five to seven months prior to shipment. Some of the Company's
operating businesses also routinely maintain in-stock positions of selected
inventory in order to fill customer orders on a quick response basis.
Sales and receivables are recorded when inventory is shipped, with payment
terms generally 30 to 60 days from the date of shipment. With respect to the
tailored clothing advance order shipments, customary industry trade terms are
60 days from the seasonal billing dates of February 15 and August 15. The
Company's borrowing needs are typically lowest in July and January. Financing
requirements begin to rise as inventory levels increase in anticipation of the
spring and fall advance order shipping periods. Peak borrowing levels occur in
late March and September, just prior to the collection of receivables from
men's tailored clothing advance order shipments.
3
<PAGE>
ITEM 2--PROPERTIES
The Company's principal executive and administrative offices are located in
Chicago, Illinois. Its principal office, manufacturing and distribution
operations are conducted at the following locations:
<TABLE>
<CAPTION>
APPROXIMATE EXPIRATION
FLOOR AREA DATE OF
IN SQUARE MATERIAL
LOCATION FEET PRINCIPAL USE LEASES
- -------- ----------- ------------- ----------
<S> <C> <C> <C>
Anniston, AL...................... 76,000 Manufacturing 1999
Buffalo, NY....................... 115,000 Manufacturing *
Buffalo, NY....................... 280,000 Office; manufacturing; warehousing 2015
Cape Girardeau, MO................ 171,000 Manufacturing; warehousing *
Chaffee, MO....................... 78,000 Manufacturing; warehousing 1999
Chicago, IL....................... 102,000 Executive and operating company offices 2004
Des Plaines, IL................... 361,000 Manufacturing; warehousing *
Easton, PA........................ 220,000 Office; warehousing *
Elizabethtown, KY................. 54,000 Manufacturing *
Farmington, MO.................... 65,000 Warehousing *
Farmington, MO.................... 75,000 Manufacturing 1999
Michigan City, IN
(2 locations).................... 420,000 Office; manufacturing; warehousing *
New York, NY...................... 68,000 Sales offices/showrooms 2000
Rector, AR........................ 52,000 Manufacturing *
Rochester, NY..................... 223,000 Office; manufacturing; warehousing *
Rochester, NY..................... 51,000 Warehousing 1997
St. Louis, MO
(2 locations).................... 88,000 Office; manufacturing 2000
Whiteville, NC.................... 105,000 Manufacturing *
Winchester, KY.................... 92,000 Manufacturing *
San Jose, Costa Rica.............. 72,000 Manufacturing *
Tolcayuca, Mexico................. 50,000 Manufacturing *
</TABLE>
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* Properties owned by the Registrant
The Company believes that its properties are well maintained and its
manufacturing equipment is in good operating condition and sufficient for
current production. For information regarding the terms of the leases and
rental payments thereunder, refer to the "Leases" note to the consolidated
financial statements on page 25 of this Form 10-K.
ITEM 3--LEGAL PROCEEDINGS
Spillyards Litigation. In September 1992, David Spillyards, represented to
be the holder of approximately 1,800 shares of common stock of the Company,
filed a class action complaint in the Circuit Court of Cook County, Illinois,
against the Company, its directors and former director Harvey A. Weinberg. The
complaint claimed that the Company's directors breached certain duties owed to
the Company's shareholders and sought certification as a class action, the
appointment of Mr. Spillyards' counsel as class counsel and related damages.
The complaint, which also included a derivative action, alleged that the
purpose of the sale of the Company's principal retail unit, HSSI, Inc.
("HSSI"), to HSSA Group, Ltd. ("HSSA"), was to benefit Mr. Weinberg (who was
also alleged to have been a director of the Company at the time of the
announcement of the sale). The complaint was subsequently amended to include
additional allegations pertaining to the ultimate sale of 5,714,286 shares of
common stock of the Company and a three-year warrant for 1,649,600 shares of
common stock of the Company to Traco International, N.V. (the "Traco
Agreement"). The complaint, as amended, was dismissed on November 30, 1992,
and Mr. Spillyards was given permission by the Court to file another amended
complaint, which was filed on December 28, 1992 (the "Second Amended
Complaint"). The Second Amended
4
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Complaint, denominated as a class action and derivative complaint, again
challenged certain aspects of the Traco Agreement and alleged that the Company
made certain misleading representations in its July 17, 1991 prospectus. After
the Company's motion to dismiss the Second Amended Complaint was granted on
June 24, 1993, Mr. Spillyards filed a Third Amended Complaint (purportedly
asserting new issues regarding the Traco Agreement), which was again dismissed
on September 29, 1993. Mr. Spillyards filed notices of appeal with the
Illinois Appellate Court on October 29, 1993, and December 23, 1993. The
appeals were consolidated by court order on February 8, 1994. Briefs have been
filed with the Appellate Court and oral arguments were heard September 19,
1995. On February 23, 1996, in a unanimous opinion, the Appellate Court
affirmed the dismissal, with prejudice, of the Third Amended Complaint. Mr.
Spillyards has twenty-one days after the date of the ruling to petition for a
rehearing before the Appellate Court or to petition for leave to appeal to the
Illinois Supreme Court.
After consultation with counsel, management of the Company believes that
there are meritorious defenses to the Spillyards Litigation referred to above
and that such action will not have a material adverse effect on the Company's
business or financial condition.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Executive Officers of the Registrant
Each of the executive officers of the Registrant listed below has served the
Registrant or its subsidiaries in various executive capacities for the past
five years, with the exception of Mrs. Allen. Each officer is elected annually
by the Board of Directors, normally for a one-year term and is subject to
removal powers of the Board.
<TABLE>
<CAPTION>
YEARS OF ELECTED TO
SERVICE WITH PRESENT
NAME POSITION AGE COMPANY POSITION
---- -------- --- ------------ ----------
<C> <S> <C> <C> <C>
Elbert O. Hand.......... Chairman and Chief 56 31 1992
Executive Officer
(Director since 1984)
Homi B. Patel........... President and Chief 46 16 1993
Operating Officer
(Director since January,
1994)
Mary D. Allen........... Executive Vice 50 1 1994
President, General
Counsel and Secretary
Glenn R. Morgan......... Executive Vice President 48 16 1995
and Chief Financial
Officer
Frank A. Brenner........ Vice President, 67 27 1983
Marketing Services
James E. Condon......... Vice President and 45 18 1995
Treasurer
Linda J. Valentine...... Vice President, 45 15 1993
Compensation and
Benefits
Andrew A. Zahr.......... Controller and Chief 52 23 1994
Accounting Officer
</TABLE>
Mary D. Allen became Executive Vice President, General Counsel and Secretary
in September, 1994. Prior to joining the Company, she was employed by JMB
Realty Corporation for seven years during which she served in various
capacities, most recently as senior vice president.
On August 31, 1995, Wallace L. Rueckel, formerly Executive Vice President
and Chief Financial Officer, terminated his employment with the Company, such
termination being deemed to be for good reason, as that term is defined under
his Employment Agreement with the Company, attached hereto as Exhibit 10-F-4.
Mr. Rueckel has received the benefits accorded him pursuant to that Agreement.
5
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PART II
ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Hartmarx common shares are traded on the New York and Chicago Stock
Exchanges. The quarterly composite price ranges of the Company's common stock
for the past three years were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- ------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter.......................... $6.375 $5.125 $7.375 $6.125 $8.25 $5.375
Second Quarter......................... 5.875 4.25 7.00 5.875 7.25 5.75
Third Quarter.......................... 6.875 4.75 6.625 5.375 6.75 5.125
Fourth Quarter......................... 6.625 4.50 6.00 5.00 7.75 5.75
</TABLE>
The most recent quarterly dividend paid was in November, 1991, in the amount
of $.15 per share. The current financing agreements restrict the payment of
dividends to 50% of consolidated net income, as defined, subject to a
cumulative maximum amount of $22.5 million. The current financing agreements
also contain various restrictive covenants pertaining to minimum net worth,
additional debt incurrence, capital expenditures, asset sales, operating
leases, and ratios relating to minimum accounts payable to inventory, maximum
funded debt to EBITDA and minimum fixed charge coverage, as well as other
customary covenants, representations and warranties, funding conditions and
events of default. The Company was in compliance with all covenants under
these agreements.
As of February 20, 1996, there were approximately 6,400 stockholders of the
Company's $2.50 par value common stock. The number of stockholders was
estimated by adding the number of registered holders furnished by the
Company's registrar and the number of participants in the Hartmarx Employee
Stock Ownership Plan.
On December 6, 1995, the Board of Directors of the Company approved the
extension of the benefits afforded by the Company's existing rights plan by
adopting a new stockholder rights plan. The new plan, like the existing plan,
is intended to promote continuity and stability, deter coercive or partial
offers which will not provide fair value to all stockholders and enhance the
Board's ability to represent all stockholders and thereby maximize stockholder
values.
Pursuant to the new Rights Agreement, dated as of December 6, 1995, by and
between the Company and First Chicago Trust Company of New York, as Rights
Agent, one Right has been issued for each outstanding share of common stock,
par value $2.50 per share, of the Company upon the expiration of the Company's
existing rights (January 31, 1996). Each of the new Rights will entitle the
registered holder to purchase from the Company one one-thousandth of a share
of Series A Junior Participating Preferred Stock, par value $1.00 per share,
at a price of $25 per Right. The Rights, however, will not become exercisable
unless and until, among other things, any person acquires 15% or more of the
outstanding common stock. If a person acquires 15% or more of the outstanding
common stock (subject to certain conditions and exceptions more fully
described in the Rights Agreement), each Right will entitle the holder (other
than the person who acquired 15% or more of the outstanding common stock) to
purchase common stock of the Company having a market value equal to twice the
exercise price of a Right. The new Rights are redeemable under certain
circumstances at $.01 per Right and will expire, unless earlier redeemed, on
January 31, 2006.
The foregoing summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights
Agreement, a copy of which is incorporated by reference as Exhibit 4-A to this
Annual Report on Form 10-K.
6
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ITEM 6--SELECTED FINANCIAL DATA
The following table summarizes data for the years 1991 through 1995. The
Company's complete annual financial statements and notes thereto for fiscal
1995 appear elsewhere herein.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
IN THOUSANDS, EXCEPT PER
SHARE DATA
FOR YEARS ENDED NOVEMBER 30
(A) 1995 1994 1993 1992 1991
--------------------------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net sales................... $595,272 $621,847 $606,148 $ 684,171 $705,035
Licensing and other income.. 6,429 7,277 5,823 3,478 989
Cost of sales............... 447,414 459,295 444,335 507,200 530,286
Operating expenses.......... 132,806 139,720 137,315 153,267 158,619
Restructuring charges....... -- -- -- 35,100 --
Earnings (loss) before
interest, taxes,
discontinued operations and
extraordinary charge....... 21,481 30,109 30,321 (7,918) 17,119
Interest expense............ 19,851 20,988 22,639 21,062 23,539
Earnings (loss) before
taxes, discontinued
operations and
extraordinary charge....... 1,630 9,121 7,682 (28,980) (6,420)
Tax (provision) benefit..... 19,800 9,992 (273) 870 2,315
Earnings (loss) before
discontinued operations and
extraordinary charge....... 21,430 19,113 7,409 (28,110) (4,105)
Discontinued operations, net
of tax..................... (18,283) 897 (1,189) (192,135) (34,260)
Net earnings (loss) before
extraordinary charge....... 3,147 20,010 6,220 (220,245) (38,365)
Extraordinary charge, net of
tax benefit................ -- (3,862) -- -- --
Net earnings (loss)......... 3,147 16,148 6,220 (220,245) (38,365)
Net earnings (loss) per
share:
continuing operations..... .66 .59 .24 (1.10) (.19)
discontinued operations... (.56) .03 (.04) (7.49) (1.55)
before extraordinary
charge................... .10 .62 .20 (8.59) (1.74)
after extraordinary
charge................... .10 .50 .20 (8.59) (1.74)
Cash dividends per share.... -- -- -- -- .60
Average number of common
shares and equivalents..... 32,631 32,243 31,375 25,629 22,056
<CAPTION>
BALANCE SHEET DATA
IN THOUSANDS, EXCEPT PER
SHARE DATA
AT NOVEMBER 30
------------------------
<S> <C> <C> <C> <C> <C>
Cash........................ $ 5,700 $ 2,823 $ 1,507 $ 22,356 $ 6,571
Accounts receivable......... 108,486 114,597 120,442 159,772 134,748
Inventories................. 154,898 183,347 193,818 216,751 404,995
Other current assets........ 10,409 11,670 21,948 30,894 32,318
Net properties.............. 44,624 51,543 56,477 66,846 149,656
Other assets/deferred taxes. 52,519 28,220 10,919 15,340 11,560
Total assets................ 376,636 392,200 405,111 511,959 739,848
Accounts payable, accrued
expenses and taxes......... 78,867 76,049 63,001 126,932 167,191
Total debt.................. 163,278 187,784 233,113 314,602 285,649
Shareholders' equity........ 134,491 128,367 108,997 70,425 287,008
Equity per share............ 4.11 3.95 3.41 2.72 11.32
<CAPTION>
OTHER DATA
IN THOUSANDS
FOR YEARS ENDED NOVEMBER 30
(A)
---------------------------
<S> <C> <C> <C> <C> <C>
Earnings before interest,
taxes, depreciation,
amortization, discontinued
operations and
extraordinary charge....... $ 30,069 $ 39,502 $ 39,917 $ 3,350 $ 29,594
Depreciation and
amortization of fixed
assets..................... 8,588 9,393 9,596 11,268 12,475
Capital expenditures........ 8,441 6,173 5,467 4,331 9,824
</TABLE>
- --------
(A) 1994 and prior years restated to reflect the Company's former retail
businesses (Kuppenheimer, HSSI and Country Miss retail), as discontinued
operations.
7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, along with the Financing and Taxes on Earnings footnotes to the
consolidated financial statements provide additional information relating to
the comparability of the information presented above.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated 1995 results for continuing operations reflected generally weak
apparel sales at retail along with inventory liquidations of several
competitors operating in bankruptcy, which adversely impacted sales and
profitability, most significantly of the moderately priced brands and private
label products. Despite the decline in pre-tax earnings from continuing
operations to $1.6 million in 1995 from $9.1 million in 1994 and $7.7 million
in 1993, total debt of $163.3 million at November 30, 1995 declined $24.5
million from 1994, attributable to both the disposition of the Kuppenheimer
business and from working capital reductions.
The Company's businesses currently consist of: (i) Men's Apparel Group
("MAG"), which designs, manufactures and markets men's tailored clothing on a
wholesale basis, principally through its Hart Schaffner & Marx,
Intercontinental Branded Apparel and Hickey-Freeman business units, and slacks
and sportswear (including golfwear) principally through its Trans-Apparel
Group, Biltwell and Bobby Jones business units; (ii) Women's Apparel Group,
comprised of International Women's Apparel ("IWA"), which markets women's
career apparel and sportswear to department and specialty stores under owned
and licensed brand names, and Barrie Pace, a direct mail business offering a
wide range of apparel and accessories to business and professional women
through its catalogs. In July, 1995, the Company completed the disposition of
its Kuppenheimer business, the vertically integrated factory-direct-to-
consumer manufacturer of popular priced men's tailored clothing whose products
are sold exclusively through Kuppenheimer operated retail stores. This
disposition completed the Company's previously announced strategy to eliminate
its retail businesses; accordingly, Kuppenheimer's operating results prior to
disposition, net of tax benefit, have been reflected as a discontinued
operation in the accompanying Consolidated Statement of Earnings for the year
ended November 30, 1995 and comparable amounts relating to prior years have
been reclassified. Discontinued operation also reflects the loss on
disposition of Kuppenheimer aggregating $18.1 million, net of tax benefit,
representing the loss on the sale of stock, expenses directly related to the
disposition and operating losses from the measurement date to the disposition
date.
RESULTS OF OPERATIONS
Consolidated 1995 sales from continuing operations were $595.3 million
compared to $621.8 million in 1994 and $606.1 million in 1993. The 4.3%
decline in 1995 compared to 1994 was principally attributable to the
moderately priced branded and private label product lines, as the higher price
point brands, such as Hickey-Freeman, Hart Schaffner & Marx and Bobby Jones,
achieved increases. The 2.6% increase in 1994 compared to 1993 was principally
attributable to the initial season introduction of Tommy Hilfiger tailored
clothing and slacks.
Consolidated 1995 pre-tax income from continuing operations decreased to
$1.6 million from $9.1 million in 1994 and $7.7 million in 1993. As discussed
below, results for 1995 and 1994 reflected recognition of non-cash income tax
benefits of $19.8 million and $10.0 million, respectively, associated with
operating loss carryforwards expected to be realized in future periods. After
considering this tax benefit, consolidated 1995 net earnings before
discontinued operation and extraordinary charge were $21.4 million or $.66 per
share compared to $19.1 million or $.59 per share in 1994 and $7.4 million or
$.24 per share in 1993. The loss on discontinued operation in 1995 aggregated
$18.3 million or $.56 per share, consisting of an $18.1 million loss on the
sale of Kuppenheimer and $.2 million operating loss incurred before
disposition. In 1994, Kuppenheimer's after-tax earnings were $.9 million or
$.03 per share following an after-tax loss of $1.2 million or $.04 per share
in 1993. Fiscal 1994 consolidated results included a $3.9 million or $.12 per
share extraordinary charge associated with the early repayment of loans
associated with the 1994 debt refinancing. After consideration of the
discontinued operation and extraordinary charge, net earnings were $3.1
million or $.10 per share in 1995, $16.1 million or $.50 per share in 1994 and
$6.2 million or $.20 per share in 1993.
8
<PAGE>
The following summarizes sales and earnings before interest and taxes
("EBIT") for the Company's continuing business groups (in millions):
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER
30,
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Sales:
Men's Apparel Group............................. $547.1 $569.6 $553.9
Women's Apparel Group........................... 48.2 52.2 52.2
------ ------ ------
Total......................................... $595.3 $621.8 $606.1
====== ====== ======
EBIT:
Men's Apparel Group............................. $ 32.1 $ 46.3 $ 43.2
Women's Apparel Group........................... (1.3) (4.1) (2.9)
Other and adjustments........................... (9.3) (12.1) (10.0)
------ ------ ------
Total......................................... $ 21.5 $ 30.1 $ 30.3
====== ====== ======
</TABLE>
MAG sales were $547 million in 1995, $570 million in 1994 and $554 million
in 1993. The decrease in 1995 compared to 1994 reflected the generally weak
retail environment for apparel and inventory liquidations of several
competitors operating in bankruptcy, which primarily affected the sales and
margins in moderately priced branded and private label product lines. The
businesses positioned in the upper end of the tailored clothing market, which
include the Hickey-Freeman and Hart Schaffner & Marx brands, produced a 4%
sales increase. Sales of Bobby Jones golfwear, also marketed at the upper end
price points, increased significantly. Sales in each year were also impacted
by the declining volume with The Hastings Group, Inc. ("Hastings"), the
successor business to HSSI, Incorporated, which was sold by Hartmarx in
September, 1992. Sales to Hastings declined to $15 million in 1995 from $27
million in 1994 and $36 million in 1993. The sales improvement in 1994
compared to 1993 reflected the initial season introduction of Tommy Hilfiger
tailored clothing and slacks, along with increases in other brands which more
than offset the impact of the reduction in sales to Hastings. MAG EBIT was $32
million in 1995 compared to $46 million in 1994 and $43 million in 1993. The
decline in 1995 EBIT compared to 1994 primarily reflected the lower sales, the
industry-wide conditions adversely affecting gross margins and LIFO expense of
$2.1 million in 1995 compared to LIFO income of $2.3 million in 1994. The EBIT
improvement in 1994 compared to 1993 primarily reflected higher sales.
Tailored clothing represented the most significant contributor to earnings in
each year.
Women's Apparel Group sales, comprising approximately 8% of the consolidated
total in each year, aggregated $48 million in 1995 and $52 million in 1994 and
1993. Sales at IWA decreased in 1995, principally attributable to two product
lines discontinued in 1994. Barrie Pace catalog sales declined slightly in
1995, after increasing in 1994. Women's Apparel Group loss before interest and
taxes was $1 million in 1995, $4 million in 1994 and $3 million in 1993. The
IWA business operated at a breakeven in 1995 after incurring losses in the
preceding two years principally associated with the two unprofitable product
lines now discontinued. The Barrie Pace business had a small loss in 1995
following lower earnings in 1994 than in 1993, as 1995 and 1994 results were
unfavorably impacted by lower relative response rates on an increased number
and size of catalogs distributed and higher postage and paper costs.
Gross Margins. The consolidated gross margin percentage of sales was 24.8%
in 1995, 26.1% in 1994 and 26.7% in 1993. Gross margins reflected LIFO expense
of $2.1 million in 1995 compared to income of $2.3 million in 1994 and $3.6
million in 1993. LIFO expense produced an unfavorable impact on consolidated
gross margin of .4% in 1995 compared to a favorable impact on consolidated
gross margin of .4% in 1994 and .6% in 1993. The MAG gross margin percentage
declined in 1995 compared to 1994; 1994 gross margin rates were approximately
even with 1993. The 1995 reduction compared to 1994 was principally
attributable to the moderately priced and private label tailored clothing
product lines which have been those most susceptible to the industry margin
pressures. The gross margin percentage of sales was also influenced by the
effect of LIFO as described above. In the women's businesses, the gross margin
ratio improved in 1995, principally from inventory dispositions in 1994
associated with discontinued product lines in the IWA business; however,
margins declined
9
<PAGE>
in the catalog business due to a greater proportion of units sold at less than
full price. Women's gross margin ratio in 1994 was unfavorable compared to
1993, principally attributable to inventory dispositions in the IWA business.
Selling, Administrative and Occupancy Expenses. Selling, administrative and
occupancy expenses declined to $133 million in 1995 from $140 million in 1994
and $137 million in 1993, and also decreased as a percentage of sales to 22.3%
in 1995 from 22.5% in 1994 and 22.7% in 1993. Operating expenses declined from
the lower sales in both MAG and the Women's Apparel Group in 1995 compared to
1994, but also from expense reduction programs effected in continuing
businesses. Operating expenses in 1995 were unfavorably impacted by a non-
recurring $3.7 million charge related to the settlement in 1995 of 1992
licensing program disputes, partially offset by a $2.8 million gain on the
sale of a former production site, which together adversely affected the
current year expense to sales ratio by .2%. In 1994, MAG expenses declined and
Women's Apparel Group expenses experienced a small increase, resulting from
additional catalogs and pages distributed in 1994 compared to 1993 and lower
relative response rates.
Advertising expenditures, including costs related to the Barrie Pace
catalog, were $22 million in 1995 compared to $19 million in 1994 and $17
million in 1993, representing 3.6%, 3.0% and 2.9% of consolidated sales,
respectively. The increase in each year reflected higher expenditures in MAG
related to the introduction of new brands and increased advertising for the
higher priced branded products, along with costs associated with distributing
more catalogs in the Barrie Pace business.
Statement of Financial Accounting Standards No. 112, Employers' Accounting
for Post-Employment Benefits, was adopted by the Company effective December 1,
1994. This statement requires the recognition of obligations related to
benefits provided by an employer to former or inactive employees after
employment but before retirement. As the Company's accounting practices were
substantially consistent with the provision of this statement, adoption did
not impact financial condition or results of operations. In 1995, the Company
adopted Emerging Issues Task Force 93-6 relating to ESOP accounting. Adoption
of this statement had no material effect on either net income or shareholders'
equity. Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123), is effective for the Company's fiscal
year beginning December 1, 1996. The Company has concluded it will comply with
FAS 123 by appropriate footnote disclosure of the effect of stock options.
Licensing and Other Income. This caption is principally comprised of income
generated from licensing and aggregated $6.4 million in 1995, $7.3 million in
1994 and $5.8 million in 1993. The decline in 1995 from 1994 principally
related to the 1994 sale of certain international license rights. The increase
in 1994 from 1993 was primarily attributable to the non-recurring sale of
license rights noted above.
Interest Expense. Interest expense was $20 million in 1995, $21 million in
1994 and $23 million in 1993. The decline in each year was principally
attributable to lower average borrowings, primarily from working capital
reductions and cash earnings, partially offset by higher rates in 1995. The
1994 Refinancing, as described in the Liquidity and Capital Resources caption
below, lengthened maturities by shifting $115 million of borrowings from rates
variable with changes in the prime rate to fixed rate debt averaging close to
11%. The Company's weighted average short term borrowing rate was 8.5% in
1995, 7.5% in 1994 and 7.9% in 1993. Interest expense included non-cash
amortization of financing fees and expenses of $1.4 million in 1995, $1.7
million in 1994 and $2.0 million in 1993. The effective interest rate for all
borrowings, including amortization costs, was 10.4% in 1995, 9.6% in 1994 and
9.0% in 1993.
Income Taxes. The recorded tax provision or benefit in each year was
determined in accordance with Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("FAS 109"). FAS 109 requires, among other
things, the recognition of deferred tax assets, including the future benefit
associated with operating loss carryforwards, a periodic evaluation of the
likelihood that the deferred tax assets are realizable and the establishment
of a valuation allowance, in certain circumstances, to offset deferred tax
assets to the extent realization is not considered more likely than not.
10
<PAGE>
Approximately $2 million of the valuation allowance offsetting the deferred
tax asset was reversed during 1993 associated with 1993 pre-tax income for
financial reporting; the 1993 effective tax rate of 3% was applicable to state
income taxes. During fiscal 1995 and 1994, the Company reevaluated its
deferred tax asset and reversed a portion of its valuation allowance,
resulting in a recognized tax benefit of $19.8 million and $10.0 million,
respectively. Among the factors considered in the recognition were:
. a history of sustained profitability of the core MAG businesses, even
during the 1990-1992 loss years which had been caused principally by the
businesses subsequently sold or discontinued pursuant to the 1992
Restructuring;
. a third year of consolidated profitability in 1995 following the
operating losses during the 1990-1992 period;
. the Company's income prospects after consideration of the available
operating loss carryforwards, the substantial portion of which do not
expire until the 2007-2010 period;
. termination of litigation related to a business sold in 1992, which
eliminated the possibility of a large contingent liability in the event
of an adverse ruling;
. the expected impact of temporary differences between taxable income and
income reported for financial statement purposes.
After giving effect to the benefit from the recognition of a portion of
future operating loss carryforwards, the remaining valuation reserve at
November 30, 1995 was $34.9 million. Upon the determination that the
realization of some or all of the remaining reserved tax asset is more likely
than not, earnings for the applicable year and shareholders' equity would be
increased accordingly. (Also see "Liquidity and Capital Resources" for further
discussion of deferred tax assets and remaining operating loss carryforwards.)
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1994, the Company replaced its $307 million borrowing
facility, originally due to mature on December 30, 1995, with $100 million of
public subordinated debentures, a $175 million Revolving Credit Facility with
a nine member lending group and the private placement of $15.5 million of
industrial development bonds issued by development authorities in prior years
and maturing in 2015. The 1994 Refinancing accomplished several of the
Company's objectives, including extending maturities, reducing the level of
borrowings subject to interest rate variability and establishing a separate
working capital facility providing greater flexibility in addressing the
Company's seasonal borrowing requirements.
The Credit Facility is secured by inventories, accounts receivable and
intangibles of the Company and its subsidiaries. Facility amendments in July
1995, November 1995 and January 1996, among other things, resulted in a
reduction in the fees, administrative charges and effective borrowing rates,
adjustment of certain covenants and extension of the term from March 1997 to
July 2000. The Facility contains certain restrictions on the operation of the
Company's business, including covenants pertaining to capital expenditures,
asset sales, operating leases, minimum net worth and incurrence of additional
indebtedness, ratios relating to minimum accounts payable to inventory,
maximum funded debt to EBITDA and minimum fixed charge coverage, as well as
other customary covenants, representations and warranties, and events of
default. The Company was in compliance with the above noted covenants.
Net cash provided by operating activities was $22 million in 1995 compared
to $56 million in 1994 and $30 million in 1993. The decline in 1995 compared
to 1994 was principally attributable to a smaller reduction in working capital
than in 1994 and the lower earnings. The improvement in 1994 compared to 1993
was principally attributable to higher earnings and a reduction in working
capital requirements. At November 30, 1995, net accounts receivable of $108.5
million declined $6.1 million or 5.3% compared to November 30, 1994,
principally reflecting the lower sales. The allowance for doubtful accounts
was $7.9 million compared to $7.4 million last year, representing 6.8% of
gross receivables in 1995 compared to 6.0% in 1994. The increase reflected
increased exposure of certain retail customers. Inventories of $154.9 million
at November 30, 1995 declined $28.4 million or 15.5% compared to November 30,
1994 principally attributable to the disposition of Kuppenheimer. Inventory
turn in continuing businesses declined slightly.
11
<PAGE>
Recoverable and deferred income taxes at November 30, 1995 aggregated $38.0
million compared to $16.8 million at November 30, 1994. The balance at
November 30, 1995 reflected a valuation allowance of $34.9 million ($55.5
million in 1994) principally related to tax assets associated with prior
years' operating losses. As discussed previously under "Income Taxes", the
Company has evaluated and will continue to evaluate the necessity for the
valuation allowance taking into consideration such factors as earnings trends
and prospects, anticipated reversal of temporary differences between financial
and taxable income, the expiration or limitations of operating loss
carryforwards and available tax planning strategies (including the ability to
adopt the FIFO inventory method for those inventories currently valued under
the LIFO valuation method). Future reversals of the valuation allowance in
whole or in part represent a contingent asset which would increase earnings
and shareholders' equity. Approximately $31.1 million of the total deferred
income taxes has been classified as non-current, principally associated with
the benefit recognized attributable to expected utilization of future
operating loss carryforwards. At November 30, 1995, the Company had
approximately $186 million of federal tax operating loss carryforwards
available to offset future taxable income.
At November 30, 1995, net properties of $44.6 million declined $6.9 million
from November 30, 1994, principally attributable to the disposition of
Kuppenheimer. Capital additions for continuing businesses during 1995 were
$8.4 million compared to $6.2 million in 1994. Depreciation expense for
continuing businesses was $8.6 million in 1995 and $9.4 million in 1994.
Capital additions during the next several years are expected to be principally
funded from cash generated from operating activities. The capital expenditure
limitations contained in the Company's current borrowing agreements are not
expected to result in delaying capital expenditures otherwise planned by the
Company.
Total debt of $163.3 million at November 30, 1995 excludes the $2.5 million
industrial development bond assumed by Kuppenheimer and declined $24.5 million
compared to November 30, 1994, principally from cash generated from operating
activities and the proceeds from the disposition of Kuppenheimer. The $10
million of notes payable classified as current at November 30, 1995 reflects
anticipated debt reduction during fiscal 1996 under the Company's long term
borrowing arrangements. Total debt, including short term borrowings and
current maturities, represented 55% of the total $298 million capitalization
at November 30, 1995, compared to 59% at November 30, 1994, with the
improvement principally resulting from the debt reduction. Total borrowing
availability was approximately $108 million at November 30, 1995.
Shareholders' equity of $134.5 million at November 30, 1995 represented
$4.11 book value per share compared to $3.95 book value per share at November
30, 1994. The $6.1 million increase during 1995 reflected the net earnings for
the year, ongoing equity sales to employee benefit plans and recognition of
previously unearned employee benefits principally associated with the
Company's employee stock ownership plan. Dividends have not been paid since
1991 and no dividends are anticipated to be declared during fiscal 1996. The
current Credit Facility restricts, but does not prohibit, the payment of
dividends.
Considering the impact of inflation, the current value of net assets would
be higher than the Company's $134 million book value after reflecting the
Company's use of LIFO inventory method and increases in the value of the
properties since acquisition. Earnings would be lower than reported, assuming
higher depreciation expense without a corresponding reduction in taxes.
OUTLOOK
The current industry-wide conditions in this difficult retail environment,
characterized by generally weak sales of apparel at retail, increasing
retailer bankruptcies, and wholesale pricing pressures especially in the
moderately priced tailored clothing segment, are not anticipated to improve
for at least the first half of fiscal 1996. The Company's largest customers,
which include leading department, specialty and value retailers, are believed
to be financially strong and annualized 1996 volume is expected to be
comparable to 1995 levels. However, consolidated 1996 sales volume will likely
be less than 1995 due to reductions from customers who have filed bankruptcy,
which include, among others, Hastings, in October 1995, and Barney's and
Today's Man in January 1996. Hastings is being liquidated and its $16 million
sales volume in 1995 will be lost. The Company has resumed shipments with
other companies in bankruptcy on a debtor-in-possession post-petition basis
but
12
<PAGE>
cannot determine at this time the sales which will ultimately result with
these customers during 1996. Regardless of these current conditions, cost
reduction actions are being implemented by continuing emphasis towards
lowering product costs by expanding off-shore sourcing capabilities, reducing
selling, administrative and general expenses in both the Corporate and
subsidiary entities, and debt reduction.
From a product perspective, emphasis on the Company's core manufacturing and
marketing businesses comprising the Men's Apparel Group will continue,
typified by product line and brand extensions closely associated with existing
strengths and competencies. The Company delivered the initial tailored
clothing line under the Perry Ellis and Daniel Hechter labels in Fall, 1995.
Also in 1995, a suits separates program was introduced into a limited number
of Sears stores and additional Sears stores are expected to participate in the
Spring, 1996 season. The golf inspired collections marketed by the Bobby Jones
division of Hickey-Freeman and the Jack Nicklaus division were augmented by
the introduction of women's golf lines marketed under these brand labels.
These products, along with the "Jack Nicklaus Signature" sportswear line
distributed principally to department stores, collectively contributed to a
39% golfwear sales increase in 1995 vs. 1994 and increased sales volume is
anticipated for 1996. Hickey-Freeman sportswear, with emphasis on casual
dressing for the affluent Hickey-Freeman core customer, will encompass a
separately designed line of sportcoats, slacks, sweaters and shirts for its
initial product introduction in the Fall of 1996. Also in current development
is a casual presentation of Hart Schaffner & Marx sportswear which will be
offered for 1997 deliveries. In the Women's Apparel Group, the Austin Reed
women's line of tailored coats, pants and dresses will be augmented by a more
moderately priced Hawksley & Wight line with initial shipments commencing for
the Spring, 1996 season.
The Company continually assesses its borrowing availability and requirements
under its Revolving Credit Facility, along with the interest rates payable
under its various borrowing arrangements. During the first quarter of 1996,
the Company acquired $10 million face value of its 10 7/8% subordinated
debentures through open market purchases. These purchases will result in a
gain of approximately $.7 million, net of a $.4 million tax provision, which
will be reflected as an extraordinary item in the first quarter of fiscal 1996
ending February 29, 1996. Based on the various interest rates in effect as of
November 30, 1995, the purchases consummated to-date will result in annualized
interest savings of approximately $.3 million. Under the amended terms of the
Company's Revolving Credit Facility, approximately $10 million of additional
debenture repurchases are allowable.
While industry conditions are unfavorable currently, the combination of the
Company's well regarded and time-honored brands, anticipated product line
extensions, and continuing emphasis on cost control and debt reduction
covering all aspects of operations should collectively contribute to a
stronger performance upon improvement of the current external environment.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Accountants...................................... 14
Consolidated Statement of Earnings for the three years ended November
30, 1995.............................................................. 16
Consolidated Balance Sheet at November 30, 1995 and 1994............... 17
Consolidated Statement of Cash Flows for the three years ended November
30, 1995.............................................................. 18
Consolidated Statement of Shareholders' Equity for the three years
ended November 30, 1995............................................... 19
Notes to Consolidated Financial Statements............................. 20
Financial Statement Schedules
Schedule VIII--Valuation and Qualifying Accounts..................... F-1
Schedules and notes not included have been omitted because they are not
applicable or the required information is included in the consolidated
financial statements and notes thereto.
Supplementary Data:
Quarterly Financial Summary (unaudited)................................ 31
</TABLE>
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board
of Directors of Hartmarx Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Hartmarx Corporation and its subsidiaries at November 30, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended November 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Hartmarx Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 9, 1996
14
<PAGE>
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management of Hartmarx Corporation is responsible for the preparation of the
Company's financial statements. These financial statements have been prepared
in accordance with generally accepted accounting principles and necessarily
include certain amounts based on management's reasonable best estimates and
judgments, giving due consideration to materiality.
In fulfilling its responsibility, management has established cost-effective
systems of internal controls, policies and procedures with respect to the
Company's accounting, administrative procedures and reporting practices which
are believed to be of high quality and integrity. Such controls include
approved accounting, control and business practices and a program of internal
audit. The Company's business ethics policy, which is regularly communicated
to all key employees of the organization, is designed to maintain high ethical
standards in the conduct of Company affairs. Although no system can ensure
that all errors or irregularities have been eliminated, management believes
that the internal accounting controls in place provide reasonable assurance
that assets are safeguarded against loss from unauthorized use or disposition,
that transactions are executed in accordance with management's authorization,
and that financial records are reliable for preparing financial statements and
maintaining accountability for assets.
The Audit and Finance Committee of the Board of Directors meets periodically
with the Company's independent public accountants, management and internal
auditors to review auditing and financial reporting matters. This Committee is
responsible for recommending the selection of independent accountants, subject
to ratification by shareholders. Both the internal and independent auditors
have unrestricted access to the Audit and Finance Committee, without Company
management present, to discuss audit plans and results, their opinions
regarding the adequacy of internal accounting controls, the quality of
financial reporting and other relevant matters.
15
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(000'S OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER
30,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $595,272 $621,847 $606,148
Licensing and other income....................... 6,429 7,277 5,823
-------- -------- --------
601,701 629,124 611,971
-------- -------- --------
Cost of goods sold............................... 447,414 459,295 444,335
Selling, general and administrative expenses..... 132,806 139,720 137,315
-------- -------- --------
580,220 599,015 581,650
-------- -------- --------
Earnings before interest, taxes, discontinued
operation and extraordinary charge.............. 21,481 30,109 30,321
Interest expense................................. 19,851 20,988 22,639
-------- -------- --------
Earnings before taxes, discontinued operation and
extraordinary charge............................ 1,630 9,121 7,682
Tax (provision) benefit.......................... 19,800 9,992 (273)
-------- -------- --------
Earnings before discontinued operation and
extraordinary charge............................ 21,430 19,113 7,409
-------- -------- --------
Discontinued operation:
Operating earnings (loss), net of tax benefit.. (183) 897 (1,189)
Loss on disposition, net of $.4 million tax
benefit....................................... (18,100) -- --
-------- -------- --------
(18,283) 897 (1,189)
-------- -------- --------
Net earnings before extraordinary charge......... 3,147 20,010 6,220
Extraordinary charge, net of $120 tax benefit.... -- (3,862) --
-------- -------- --------
Net earnings..................................... $ 3,147 $ 16,148 $ 6,220
======== ======== ========
Earnings per share:
Continuing operations.......................... $ .66 $ .59 $ .24
Discontinued operation......................... $ (.56) $ .03 $ (.04)
-------- -------- --------
Before extraordinary charge.................... $ .10 $ .62 $ .20
======== ======== ========
After extraordinary charge..................... $ .10 $ .50 $ .20
======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
16
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
(000'S OMITTED)
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1995 1994
ASSETS --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............................. $ 5,700 $ 2,823
Accounts receivable, less allowance for doubtful
accounts of $7,920 in 1995 and $7,368 in 1994......... 108,486 114,597
Inventories............................................ 154,898 183,347
Prepaid expenses....................................... 3,471 6,672
Recoverable and deferred income taxes.................. 6,938 4,998
--------- ---------
Total current assets................................. 279,493 312,437
--------- ---------
INVESTMENTS AND OTHER ASSETS............................. 21,438 16,403
--------- ---------
DEFERRED INCOME TAXES.................................... 31,081 11,817
--------- ---------
PROPERTIES
Land................................................... 2,626 3,877
Buildings and building improvements.................... 47,837 58,498
Furniture, fixtures and equipment...................... 98,626 112,850
Leasehold improvements................................. 18,963 27,964
--------- ---------
168,052 203,189
Accumulated depreciation and amortization.............. (123,428) (151,646)
--------- ---------
Net properties....................................... 44,624 51,543
--------- ---------
TOTAL ASSETS............................................. $ 376,636 $ 392,200
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable.......................................... $ 10,000 $ 20,000
Current maturities of long term debt................... 497 699
Accounts payable....................................... 33,877 38,455
Accrued payrolls....................................... 17,276 19,818
Other accrued expenses................................. 27,714 17,776
--------- ---------
Total current liabilities............................ 89,364 96,748
--------- ---------
LONG TERM DEBT, less current maturities.................. 152,781 167,085
--------- ---------
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value; 2,500,000 authorized
and unissued.......................................... -- --
Common shares, $2.50 par value; authorized 75,000,000;
issued 32,759,797 in 1995 and 32,477,800 in 1994...... 81,899 81,194
Capital surplus........................................ 76,771 76,063
Retained earnings (deficit)............................ (14,084) (17,231)
Unearned employee benefits............................. (10,095) (11,659)
--------- ---------
Shareholders' equity................................... 134,491 128,367
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $ 376,636 $ 392,200
========= =========
</TABLE>
(See accompanying notes to consolidated financial statements)
17
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(000'S OMITTED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER
30,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from operating activities:
Net earnings including discontinued operation
and extraordinary
charge........................................ $ 3,147 $ 16,148 $ 6,220
Reconciling items to adjust net earnings to net
cash provided by operating activities:
Depreciation and amortization................ 9,987 13,771 16,061
Changes in:
Accounts receivable........................ 5,608 5,845 42,330
Inventories................................ (2,044) 10,471 12,901
Prepaid expenses........................... 1,718 7,402 1,773
Other assets............................... (5,103) (3,152) 3,156
Accounts payable and accrued expenses...... 11,087 11,381 (61,763)
Taxes and deferred taxes................... (21,204) (10,093) 7,113
Adjustment of properties to net realizable
value....................................... -- -- 1,901
Loss on sale of discontinued operation......... 18,100 -- --
Cash provided by discontinued operation........ 392 -- --
Extraordinary charge........................... -- 3,862 --
-------- -------- --------
Net cash provided by operating activities........ 21,688 55,635 29,692
-------- -------- --------
Cash Flows from investing activities:
Cash received re disposition, net of subsidiary
cash.......................................... 12,000 -- 4,500
Capital expenditures........................... (8,441) (7,124) (5,953)
Cash paid for acquisitions..................... (3,380) -- --
-------- -------- --------
Net cash provided by (used in) investing
activities.................................... 179 (7,124) (1,453)
-------- -------- --------
Cash Flows from financing activities:
Proceeds from issuance of 10 7/8% Sr. Sub.
Notes, net.................................... -- 96,572 --
Proceeds from Credit Facility financing........ -- 132,727 --
Payment of borrowings under prior financing
agreement..................................... -- (235,999) --
Decrease in notes payable...................... (21,310) (43,020) (80,600)
Decrease in other long term debt............... (657) (697) (840)
Proceeds from equity sale...................... -- -- 29,880
Proceeds from other equity transactions........ 2,977 3,222 2,472
-------- -------- --------
Net cash used in financing activities.......... (18,990) (47,195) (49,088)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................... 2,877 1,316 (20,849)
Cash and cash equivalents at beginning of year. 2,823 1,507 22,356
-------- -------- --------
Cash and cash equivalents at end of year....... $ 5,700 $ 2,823 $ 1,507
======== ======== ========
Supplemental cash flow information
Net cash paid (received) during the year for:
Interest expense............................. $ 19,000 $ 16,700 $ 23,800
Income taxes................................. 1,400 800 (6,900)
</TABLE>
(See accompanying notes to consolidated financial statements)
18
<PAGE>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(000'S OMITTED)
<TABLE>
<CAPTION>
PAR VALUE RETAINED UNEARNED
OF COMMON CAPITAL EARNINGS EMPLOYEE TREASURY
STOCK SURPLUS (DEFICIT) BENEFITS SHARES
--------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1992... $70,266 $63,810 $(17,758) $(12,496) $(33,397)
Net earnings for the year.... 6,220
Issuance of 329,482 shares,
primarily to employee
benefit plans............... 823 898 10 3
Private placement of common
stock....................... 8,789 9,548 (21,851) 33,394
Allocation of unearned
employee benefits........... 738
------- ------- -------- -------- --------
Balance at November 30, 1993... 79,878 74,256 (33,379) (11,758) --
Net earnings for the year.... 16,148
Issuance of 309,815 shares,
primarily to employee
benefit plans............... 774 843
Stock options exercised
(7,079 shares including
6,250 shares issued upon
exercise of 6,250 $1.00
Director Stock Options)..... 18 22
Issuance of 209,442 shares
for Restricted Stock Awards. 524 942 (1,466)
Allocation of unearned
employee benefits........... 1,565
------- ------- -------- -------- --------
Balance at November 30, 1994... 81,194 76,063 (17,231) (11,659) --
Net earnings for the year.... 3,147
Issuance of 278,160 shares,
primarily to employee
benefit plans............... 695 697
Stock options exercised
(3,837 shares issued upon
exercise of 3,837 $1.00
Director Stock Options)..... 10 11
Allocation of unearned
employee benefits........... 1,564
------- ------- -------- -------- --------
Balance at November 30, 1995... $81,899 $76,771 $(14,084) $(10,095) $ --
======= ======= ======== ======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
19
<PAGE>
HARTMARX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation--The Company and its subsidiaries ("the
Company") are engaged in the manufacturing and marketing of quality men's and
women's apparel to independent retailers and through catalogs. The
consolidated financial statements include the accounts of the Company and all
subsidiaries. During 1995, the Company acquired a slack manufacturing facility
in Mexico and a coat and slack manufacturing factory in Costa Rica. The
activities of these facilities since the respective date of acquisition, which
were not significant, are included in the accompanying financial statements.
All significant intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform to
the current year's presentation.
Revenue Recognition--Sales are recognized at the time the order is shipped.
Catalog sales are net of expected returns and exclude sales taxes.
Cash and Cash Equivalents--The Company considers as cash equivalents all
highly liquid investments with an original maturity of three months or less.
Inventories--Inventories are stated at the lower of cost or market. At
November 30, 1995 and 1994, approximately 42% and 40% of the Company's total
inventories, respectively, are valued using the last-in, first-out (LIFO)
method, representing certain work in process and finished goods. The first-in,
first-out (FIFO) method is used for substantially all raw materials and the
remaining inventories.
Property, Plant and Equipment--Properties are stated at cost. Additions,
major renewals and betterments are capitalized; maintenance and repairs which
do not extend asset lives are charged against earnings. Profit or loss on
disposition of properties is reflected in earnings and the related asset costs
and accumulated depreciation are removed from the respective accounts.
Depreciation is generally computed on the straight line method based on useful
lives of 20 to 45 years for buildings, 5 to 20 years for building improvements
and 3 to 15 years for furniture, fixtures and equipment. Leasehold
improvements are amortized over the terms of the respective leases.
Intangibles--Intangible assets are included in "Investments and Other
Assets" at cost, less amortization, which is provided on a straight-line basis
over their economic lives, usually 10 years or less.
Impairment of Long-Lived Assets--If facts and circumstances indicate that
the cost of fixed assets or other assets may be impaired, an evaluation of
recoverability would be performed by comparing the estimated future
undiscounted cash flows associated with the asset to the asset's carrying
value to determine if a write-down to market value or discounted cash flow
value would be required.
Income Taxes--Deferred tax assets and liabilities are determined based on
the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Advertising Costs--Advertising expenditures relating to the manufacturing
and marketing businesses are expensed in the period the advertising initially
takes place. Direct response advertising costs, consisting primarily of
catalog preparation, printing and postage expenditures, are amortized over the
period during which the benefits are expected. Recognition of advertising
costs is in conformance with the provisions of The American Institute of
Certified Public Accountants Statement of Position 93-7, "Reporting of
Advertising Costs". Advertising costs of $21.7 million in 1995, $18.8 million
in 1994 and $17.4 million in 1993 are included in the accompanying Statement
of Earnings. Prepaid expenses at November 30, 1995 includes deferred
advertising costs of $2.1 million ($5.1 million at November 30, 1994), which
will be reflected as an expense during the quarterly period benefited.
Retirement Plans--The Company and its subsidiaries maintain benefit plans
covering substantially all employees other than those covered by multi-
employer plans. Pension expense or income for the Company's
20
<PAGE>
principal defined benefit plan is determined using the projected unit credit
method. Pension expense under each multi-employer plan is based upon a
percentage of the employer's union payroll established by industry-wide
collective bargaining agreements; such pension expenses are funded as accrued.
Retiree Medical Program--A contributory health insurance program is made
available to non-union retired employees and eligible dependents.
Approximately 170 retired employees are currently participating. Employees who
were participating in and eligible to receive medical benefits under the
Hartmarx Group Life Insurance, Medical and Dental Plan, and were also
participating in the Hartmarx Savings-Investment Plan and the Hartmarx
Retirement Income Plan at the time of retirement are eligible to participate
in the Plan. Effective December 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106--Employers' Accounting for
Postretirement Benefits Other Than Pensions. This statement requires
recognition of a liability for postretirement benefits as the employee renders
service, rather than as claims are paid or incurred. Adoption of the statement
had no impact on cash flows. Since the required retiree contributions offset
the cost of the available medical program, no transition obligation existed at
adoption and, accordingly, there was no effect on either net income or
shareholders' equity.
Other Post-Employment Benefits--Effective December 1, 1994, the Company
adopted Statement of Financial Accounting Standards No. 112--Employers'
Accounting for Postemployment Benefits. This statement requires the
recognition of obligations related to benefits provided by an employer to
former or inactive employees after employment but before retirement. As the
Company's accounting practices were substantially consistent with the
provisions of this statement, adoption did not impact financial condition or
results of operations.
Stock Options--When stock options are exercised, common stock is credited
for the par value of shares issued and capital surplus is credited with the
consideration in excess of par. For stock appreciation rights, compensation
expense is recognized on the aggregate difference between the market price of
the Company's stock and the option price only when circumstances indicate that
the right, and not the option, will be exercised. Compensation expense related
to restricted stock awards is recognized over the vesting period. For director
stock options and director deferred stock awards, compensation expense is
recognized at the date the option is granted or the award is made to the
outside director. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS 123), is effective for the
Company's fiscal year beginning December 1, 1996. The Company has concluded it
will comply with FAS 123 by appropriate footnote disclosure of the effect of
stock options.
Per Share Information--The computation of earnings or loss per share in each
year is based on the weighted-average number of common shares outstanding.
When dilutive, stock options and warrants are included as share equivalents
using the treasury stock method. The number of shares used in computing the
earnings per share was 32,631,000 in 1995, 32,243,000 in 1994 and 31,375,000
in 1993. The three year warrant to purchase 1,649,600 shares of common stock
of the Company at an exercise price of $6.50 per share was not exercised prior
to its expiration on September 20, 1995. This warrant had been issued in
connection with the 1992 sale of 5,714,286 shares of common stock of the
Company to Traco International, N.V.
SALE OF SUBSIDIARY
On July 27, 1995, the Company completed the sale of the capital stock of
Kuppenheimer, its vertically integrated factory direct-to-consumer business.
Under the terms of the Agreement, the Company received $12 million cash at
closing and is expected to receive an additional $2 million plus interest
payable over the next four years. In connection with the Company's ongoing
guaranty of a $2.5 million industrial development bond retained by
Kuppenheimer, the purchaser has issued a separate $2.5 million note for the
purchase of associated real estate secured by a first mortgage on that
property. Kuppenheimer's operating results, net of tax benefit, have been
reflected as a discontinued operation in the accompanying Consolidated
Statement of Earnings for the year ended November 30, 1995, and comparable
amounts relating to prior years have been reclassified, in
21
<PAGE>
accordance with Accounting Principles Board Opinion No. 30. Discontinued
operation also reflects a loss on disposition of $18.1 million, net of tax
benefit, representing the loss on the sale of stock, expenses directly related
to the disposition and operating losses from the measurement date to the
disposition date.
FINANCING
On March 23, 1994, the Company issued $100 million principal amount of 10
7/8% Senior Subordinated Notes due January 15, 2002 ("Notes") in a public
offering, and also entered into a new three year financing agreement ("Credit
Facility") with a group of lenders providing for maximum borrowings of $175
million (including a $25 million letter of credit facility) secured by
eligible inventories, accounts receivable and the intangibles of the Company
and its subsidiaries. Proceeds from these two transactions ("1994
Refinancing") were utilized to repay $236 million of borrowings then
outstanding related to the Company's principal lending facility then in
effect. The prior facility was terminated upon completion of the Notes and
Credit Facility transactions. The Credit Facility was amended in July 1995 and
November 1995, which among other things, resulted in the lowering of the
effective borrowing rate, a reduction in fees and administrative charges,
adjustment of certain covenants, and extension of the term from March 1997 to
July 2000.
Borrowing availability under the Credit Facility is being utilized for
general corporate purposes. Borrowings are subject to a borrowing base formula
based upon eligible accounts receivable and inventories at rates selected by
the Company which are either (i) LIBOR plus 1.50% or (ii) the prime rate of a
major bank. Financing fees pertaining to the Notes and Credit Facility, as
amended, are being amortized over the life of the respective agreements.
Certain other fees are also payable under the Credit Facility and Notes based
on services provided.
The Notes and Credit Facility contain various restrictive covenants
pertaining to minimum net worth, additional debt incurrence, capital
expenditures, asset sales, operating leases, and ratios relating to minimum
accounts payable to inventory, maximum funded debt to EBITDA and minimum fixed
charge coverage, as well as other customary covenants, representations and
warranties, funding conditions and events of default. The Company was in
compliance with the above noted covenants.
In fiscal 1994, two industrial development bonds ("IDBs") aggregating $15.5
million were refinanced. The $7.5 million IDB matures on July 1, 2014, while
the $8.0 million IDB is due on July 1, 2015. The effective interest rate on
these obligations is 7.5%.
As a result of the 1994 Refinancing noted above, the Company recorded an
extraordinary charge of $3.9 million, net of a $.1 million tax benefit, in the
second fiscal quarter of 1994 representing the loss from early extinguishment
of the prior debt.
At November 30, 1995 and 1994, long term debt, less current maturities,
comprised the following (000's omitted):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Notes payable.......................................... $ 45,590 $ 66,900
10 7/8% Senior Subordinated Notes, net................. 99,470 99,383
Industrial development bonds........................... 17,853 20,643
Other debt, extending to 2003.......................... 365 858
-------- --------
163,278 187,784
Less--current.......................................... 10,497 20,699
-------- --------
Long term debt......................................... $152,781 $167,085
======== ========
</TABLE>
Industrial development bonds, which mature on varying dates through 2015,
were issued by development authorities for the purchase or construction of
various manufacturing facilities having a carrying value of $11.3 million at
November 30, 1995. Interest rates on the various borrowing agreements range
from 5.5% to 8.5% (average of 7.5% at November 30, 1995 and 7.4% at November
30, 1994). The two IDBs totaling $15.5 million are callable by the Company
beginning July 1, 2000 at a 3% premium, declining to par on July 1, 2003.
22
<PAGE>
Other long term debt includes installment notes and mortgages with interest
rates ranging from 8% to 11.5% per annum (average of 8.7% at November 30, 1995
and 9.9% at November 30, 1994).
Accrued interest included in the Other Accrued Expenses caption in the
accompanying balance sheet was $5.2 million at November 30, 1995 and $5.7
million at November 30, 1994.
The approximate principal reductions required during the next five fiscal
years, including reductions under the Credit Facility which expires in 2000,
are as follows: $.5 million in 1996; $.1 million in 1997; $.1 million in 1998;
$.1 million in 1999; $45.7 million in 2000.
On December 1, 1988 The Hartmarx Employee Stock Ownership Plan ("ESOP")
borrowed $15 million from a financial institution and purchased from the
Company 620,155 shares of treasury stock at the market value of $24.19 per
share. Prior to the 1994 Refinancing, the ESOP loan was guaranteed by the
Company and, accordingly, the amount outstanding had been included in the
Company's consolidated balance sheet as a liability and shareholders' equity
has been reduced for the amount representing unearned employee benefits. As
part of the 1994 Refinancing, the Company purchased the remaining interest in
the loan from the financial institution holding the ESOP note. Company
contributions to the ESOP are used to repay loan principal and interest. The
common stock is allocated to ESOP participants as the loan principal and
interest is repaid or accrued and amounts reflected as unearned employee
benefits are correspondingly reduced.
Information related to loan repayments by the ESOP are as follows (000's
omitted):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Principal payments.................................. $ 911 $ 526 $ --
Interest payments................................... 1,133 1,171 1,041
------ ------ ------
Total loan payments made by ESOP.................... $2,044 $1,697 $1,041
====== ====== ======
</TABLE>
As of November 30, 1995, 271,481 of the 620,155 shares of common stock have
been allocated to the accounts of the ESOP participants.
NOTES PAYABLE
The following summarizes information concerning notes payable (000's
omitted):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Outstanding at November 30................... $45,590 $66,900 $153,696
Maximum month end balance during the year.... 93,821 158,635 206,196
Average amount outstanding during the year... 72,300 112,900 174,300
Weighted daily average interest rate during
the year.................................... 8.5% 7.5% 7.9%
Weighted average interest rate on borrowings
at November 30.............................. 7.5% 8.2% 8.0%
</TABLE>
The Company has entered into interest rate protection agreements from time
to time based on management's assessment of market conditions; however, none
were in effect at November 30, 1995 and 1994. In 1995, no payments were made
or received relating to interest rate protection agreements and payments made
or received relating to the interest rate protection agreements in effect
during fiscal 1994 and 1993 were not significant.
INVENTORIES
Inventories at fiscal year end were as follows (000's omitted):
<TABLE>
<CAPTION>
NOVEMBER 30
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Raw materials.................................. $ 39,617 $ 42,296 $ 44,370
Work in process................................ 21,687 29,015 26,468
Finished goods................................. 93,594 112,036 122,980
-------- -------- --------
$154,898 $183,347 $193,818
======== ======== ========
</TABLE>
23
<PAGE>
The excess of current cost over LIFO costs for certain inventories was $34.8
million at November 30, 1995, $32.7 million at November 30, 1994 and $35.0
million at November 30, 1993.
TAXES ON EARNINGS
The net tax provision (benefit) is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Federal..................................... $ (833) $ (375) $ (659)
State and local............................. 106 231 273
-------- -------- -------
Total current........................... (727) (144) (386)
-------- -------- -------
Federal..................................... 1,527 3,512 3,182
State and local............................. -- -- --
-------- -------- -------
Total deferred.......................... 1,527 3,512 3,182
-------- -------- -------
Change in valuation allowance............... (20,600) (13,360) (2,523)
-------- -------- -------
Total tax provision (benefit)........... $(19,800) $ (9,992) $ 273
======== ======== =======
</TABLE>
The difference between the tax benefit reflected in the accompanying
statement of earnings and the amount computed by applying the federal statutory
tax rate to the pre-tax income, taking into account the applicability of
enacted tax rate changes, is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Income from continuing operations........... $ 1,630 $ 9,121 $ 7,682
======== ======== =======
Tax provision computed at statutory rate.... $ 554 $ 3,101 $ 2,612
State and local taxes on earnings, net of
federal tax benefit........................ 70 155 180
Change in valuation allowance............... (20,600) (13,360) (2,523)
Other--net.................................. 176 112 4
-------- -------- -------
Total tax (benefit) provision............... $(19,800) $ (9,992) $ 273
======== ======== =======
</TABLE>
A portion of the Company's deferred tax assets are reserved through the
establishment of a tax valuation allowance. The valuation allowance was
originally recorded upon consideration of the operating losses incurred during
the 1990-1992 fiscal years and related uncertainty associated with realization
of the tax benefit of operating loss carryforwards, which is ultimately
dependent upon the generation of future earnings by the Company. The net tax
assets recorded consider amounts recoverable from carrying back operating
losses to prior years, amounts expected to be realized through future earnings
and available tax planning realization strategies (such as the ability to adopt
the FIFO inventory valuation method for those inventories currently valued
under the LIFO valuation method).
In fiscal 1995, 1994 and 1993, $.8 million, $3.4 million and $2.5 million,
respectively, of the valuation allowance offsetting the deferred tax asset
associated with pre-tax income for financial reporting, was reversed. The
Company reevaluated its deferred income tax asset and reversed additional
valuation allowance related to this asset of $19.8 million and $10.0 million in
the fourth quarters of 1995 and 1994, respectively. The valuation allowance
offsetting the deferred tax asset will continue to be evaluated in future
periods.
At November 30, 1994, the Company had a net deferred tax asset of $16.4
million comprised of deferred tax assets of $92.9 million less deferred tax
liabilities aggregating $21.0 million and a $55.5 million valuation allowance.
The principal deferred tax assets included $5.5 million attributable to Tax
Reform Act of 1986 ("TRA") items (allowance for bad debts, accrued vacation and
capitalization of certain inventory costs for tax purposes), operating loss
carryforwards of $64.4 million, alternative minimum tax credit carryforwards
24
<PAGE>
("AMT") of $4.7 million, and $17.5 million attributable to expenses deducted
in the financial statements not currently deductible for tax purposes.
Deferred tax liabilities included excess tax over book depreciation of $4.0
million and $7.4 million related to employee benefits, principally pensions.
At November 30, 1995, the Company had a net deferred tax asset of $35.7
million comprised of deferred tax assets of $94.0 million less deferred tax
liabilities aggregating $23.4 million and a $34.9 million valuation allowance.
The principal deferred tax assets included $4.3 million attributable to TRA
items, operating loss carryforwards of $65.0 million, AMT credit carryforwards
of $4.8 million, and $19.4 million attributable to expenses deducted in the
financial statements not currently deductible for tax purposes. Deferred tax
liabilities included excess tax over book depreciation of $2.4 million and
$10.2 million related to employee benefits, principally pensions.
As of November 30, 1995, the Company had approximately $186 million of tax
operating loss carryforwards available to offset future income tax
liabilities. In general, such carryforwards must be utilized within fifteen
years of incurring the net operating loss; the loss carryforwards expire from
2007 to 2010. Foreign tax credit carryforwards of $.4 million are also
available, which expire in 1996. The $4.8 million of AMT tax credit
carryforwards can be carried forward indefinitely.
LEASES
The Company and its subsidiaries lease office, manufacturing,
warehouse/distribution, showroom and outlet stores, automobiles, computers and
other equipment under various noncancellable operating leases. A number of the
leases contain renewal options ranging up to 10 years.
At November 30, 1995, total minimum rentals under noncancellable operating
leases are as follows (000's omitted):
<TABLE>
<CAPTION>
YEARS AMOUNT
----- -------
<S> <C>
1996............................. $ 6,109
1997............................. 5,610
1998............................. 4,866
1999............................. 4,559
2000............................. 3,499
Thereafter....................... 8,748
-------
Total minimum rentals due........ $33,391
=======
</TABLE>
Rental expense for continuing operations, including rentals under short term
leases, comprised the following (000's omitted):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Minimum rentals................................ $11,679 $13,212 $12,962
Sublease income................................ (577) (409) (570)
------- ------- -------
Total rental expense........................... $11,102 $12,803 $12,392
======= ======= =======
</TABLE>
Most leases provide for additional payments of real estate taxes, insurance,
and other operating expenses applicable to the property, generally over a base
period level. Total rental expense includes such base period expenses and the
additional expense payments, as part of the minimum rentals.
EMPLOYEE BENEFITS
Pension Plans
The Company participates with other companies in the apparel industry in
making collectively-bargained payments to pension funds, which are not
administered by the Company, covering most of its union employees.
25
<PAGE>
The contribution rate of applicable payroll is based on the actuarially
recommended amount necessary to fund the costs of the benefits. Pension costs
relating to multi-employer plans for continuing operations were approximately
$8.5 million in 1995, $8.7 million in 1994 and $7.6 million in 1993. The
Multi-Employer Pension Plan Amendment Act of 1980 ("the Act") amended ERISA to
establish funding requirements and obligations for employers participating in
multi-employer plans, principally related to employer withdrawal or
termination of such plans. The present value of accumulated benefits of one
multi-employer plan is substantially in excess of the plan assets available
for such benefits; if current actuarial assumptions are realized, including
those relating to contractions in contributions by participating employers,
the ratio of assets to liabilities would increase so that plan assets would
eventually be sufficient to cover the accumulated benefit obligation. Under
the provisions of the Act, if the plan terminates or the Company withdraws
from the plan prior to the achievement of a fully funded status, the Company
could be subject to a substantial withdrawal liability, as defined.
The principal Company sponsored pension plan is a non-contributory defined
benefit pension plan covering substantially all eligible non-union employees.
Certain of the Company's subsidiaries have other defined benefit and
contribution plans, in which the aggregate expense was nominal in 1995, 1994
and 1993. Under the principal pension plan, retirement benefits are a function
of years of service and average compensation levels during the highest five
consecutive salary years occurring during the last ten years before
retirement. To the extent that the calculated retirement benefit under the
formula specified in the plan exceeds the maximum allowable under the
provisions of the tax regulations, the excess is provided on an unfunded
basis. Under the provisions of the Omnibus Budget Reconciliation Act of 1993,
the annual compensation limit that can be taken into account for computing
benefits and contributions under qualified plans was reduced from $235,840 to
$150,000, effective as of January 1, 1994, subject to indexing increases in
subsequent years.
It is the Company's policy to fund the plans on a current basis to the
extent deductible under existing tax laws and regulations. Such contributions
are intended to provide for benefits attributed to service to date and also
for those expected to be earned in the future.
Pension data covering the principal plan for the three years ended November
30, 1995 included the following components in accordance with Statement of
Financial Accounting Standards No. 87--Employers' Accounting for Pensions
(000's omitted):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the
period..................................... $ (3,250) $(4,309) $(4,150)
Interest cost on projected benefit
obligation................................. (7,851) (7,467) (7,607)
Return on plan assets....................... 33,058 (179) 17,452
Net amortization and deferral............... (18,534) 15,376 (3,235)
-------- ------- -------
Net periodic pension income................. $ 3,423 $ 3,421 $ 2,460
======== ======= =======
</TABLE>
The above amounts are prior to consideration of the periodic pension expense
related to the benefits provided on an unfunded basis of $.9 million in 1995,
$1.5 million in 1994, and $.6 million in 1993.
The Company sold its Kuppenheimer business in July 1995 and the accrual of
further pension benefits related to Kuppenheimer employees ceased as of the
sale date. This event qualified as a curtailment under the provisions of
Statement of Financial Accounting Standards No. 88. The projected benefit
obligation exceeded the accumulated benefit obligation for employees of
Kuppenheimer and, accordingly, a pre-tax pension gain of $1.5 million was
recorded and included in the determination of the loss on sale of discontinued
operation.
Plan assets consist primarily of publicly traded common stocks and corporate
debt instruments, and units of certain trust funds administered by the Trustee
of the plan. At November 30, 1995, the plan assets included 519,612 shares of
the Company's stock with a market value of $2.3 million.
26
<PAGE>
The following sets forth the funded status of the principal pension plan at
November 30 (000's omitted):
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.................................. $ (98,213) $ (90,790)
Non-vested benefits.............................. (418) (606)
--------- ---------
Accumulated benefit obligation................... (98,631) (91,396)
Effect of projected future compensation levels... (12,499) (10,867)
--------- ---------
Projected benefit obligation....................... (111,130) (102,263)
Plan assets, at fair value....................... 153,053 127,522
--------- ---------
Plan assets in excess of projected benefit
obligation...................................... 41,923 25,259
Unrecognized net (gain) loss..................... (12,568) 2,998
Unrecognized prior service cost.................. (1,044) (1,389)
Unrecognized net transition asset................ (364) (3,817)
--------- ---------
Prepaid pension cost........................... $ 27,947 $ 23,051
========= =========
</TABLE>
The weighted average discount rate used in determining the projected benefit
obligation was 7.25% in 1995 and 8% in 1994. The assumed rate of increase in
future compensation levels was 5.5% in 1995 and 1994, and the expected long
term rate of return on the Company sponsored plan assets was 8.75% in 1995 and
1994.
Savings Investment and Employee Stock Ownership Plans
The Company offers a qualified defined contribution plan, the Hartmarx
Savings-Investment Plan ("SIP"), which is a combined salary reduction plan
under Section 401(k) of the Internal Revenue Code and an after-tax savings
plan. Eligible participants in SIP can invest from 1% to 16% of earnings among
several investment alternatives, including a Company stock fund. Employees
participating in this plan automatically participate in the ESOP.
Participation in SIP is required to earn retirement benefits under the
Company's principal pension plan. An employer contribution is made through the
ESOP, based on the employee's level of participation, and invested in common
stock of the Company, although participants age 55 and over can elect
investments from among several investment alternatives. While employee
contributions up to 16% of earnings are permitted, contributions in excess of
6% are not subject to an employer contribution. The employer contribution is
one-fourth of the first 1% contributed by the employee plus one-twentieth
thereafter. The Company's expense related to the ESOP is based upon the
principal and interest payments on the ESOP loan, the dividends, if any, on
unallocated ESOP shares, and the cost and market value of shares allocated to
employees' accounts. The Company's annual expense, which approximates the
Company's annual contributions, was $2.1 million in 1995, $2.3 million in 1994
and $2.2 million in 1993. At November 30, 1995, the assets of SIP and ESOP
funds had a market value of approximately $37.4 million, of which
approximately $9.8 million was invested in 2,167,085 shares of the Company's
common stock.
In 1995, the Company adopted Emerging Issues Task Force 93-6 relating to
ESOP accounting. Adoption of this statement had no material effect on either
net income or shareholders' equity.
Health Care and Post Retirement Benefits
Certain of the Company's subsidiaries make contributions to multi-employer
union health and welfare funds pursuant to collective bargaining agreements.
These payments are based upon wages paid to the Company's active union
employees.
Health and insurance programs are also made available to non-union active
and retired employees and their eligible dependents. Retirees, who elect to
receive the coverage, make contributions which offset the cost of the retiree
program. Statement of Financial Accounting Standards No. 106--Employers'
Accounting for Post
27
<PAGE>
Retirement Benefits Other Than Pensions was adopted by the Company on December
1, 1993. Since the required contributions by the retirees offset the cost of
the available medical program, no transition obligation existed at adoption
and there was no effect on either net income or shareholders' equity.
STOCK PURCHASE RIGHTS
A dividend of one Right per common share was distributed to stockholders of
record January 31, 1986, and effective July 12, 1989, September 20, 1992 and
December 30, 1992, the Agreement governing the Rights was amended. Each common
share, adjusted for the May, 1986 3-for-2 stock split, represents .6667 Right.
Each Right, expiring January 31, 1996, represents a right to buy from the
Company 1/100th of a share of Series B Junior Participating Preferred Stock,
$1.00 par value, at a price of $120. This dividend distribution of the Rights
was not taxable to the Company or its stockholders.
Separate certificates for Rights will not be distributed, nor will the
Rights be exercisable, unless a person or group acquires 15 percent or more,
or announces an offer that could result in acquiring 15 percent or more, of
the Company's common shares. Following an acquisition of 15 percent or more of
the Company's common shares (a "Stock Acquisition"), each Right holder, except
the 15 percent or more stockholder, has the right to receive, upon exercise,
common shares valued at twice the then applicable exercise price of the Right
(or, under certain circumstances, cash, property or other Company securities),
unless the 15 percent or more stockholder has offered to acquire all of the
outstanding shares of the Company under terms that a majority of the
independent directors of the Company have determined to be fair and in the
best interest of the Company and its stockholders. Similarly, unless certain
conditions are met, if the Company engages in a merger or other business
combination following a Stock Acquisition where it does not survive or
survives with a change or exchange of its common shares or if 50 percent or
more of its assets, earning power or cash flow is sold or transferred, the
Rights will become exercisable for shares of the acquiror's stock having a
value of twice the exercise price (or, under certain circumstances, cash or
property). The Rights are not exercisable, however, until the Company's right
of redemption described below has expired.
Generally, Rights may be redeemed for $.05 each (in cash, common shares or
other consideration the Company deems appropriate) until the earlier of (i)
the tenth day following public announcement that a 15 percent or greater
position has been acquired in the Company's stock or (ii) the final expiration
of the Rights. In connection with the December 1992 sale of 5.7 million shares
of common stock and three year warrant to purchase an additional 1.6 million
shares ("Stock Sale"), the Agreement governing the Rights was amended to
exclude the Stock Sale from qualifying as an event which would give rise to
the distribution or exercisability of the Rights. Until exercise, a Right
holder, as such, has no rights as a stockholder of the Company.
On December 6, 1995, the Company's Board of Directors approved a new
Stockholder Rights Plan, declaring a dividend of one new Right for each
outstanding share of Common Stock, to be effective upon the expiration of the
existing Rights on January 31, 1996. The new Rights, which have a ten-year
term, represent a Right to purchase from the Company 1/1000th of a share of
Series A Junior Participating Preferred Stock, $1.00 par value, at a price of
$25 per Right. As in the current plan, Rights would not be distributed unless
a person or group acquires or announces an offer that would result in
acquiring 15 percent or more of the Company's common shares. Other provisions
of the new Rights Plan are similar to the current plan as described above,
except that the redemption price has been changed to $.01 per Right and
certain constraints on the Board's amendment powers have been eliminated.
STOCK OPTION PLANS AND RESTRICTED STOCK
The Company has in effect stock option plans under which officers, key
employees and directors may be granted options to purchase the Company's
common stock at prices equal or exceeding the fair market value at date of
grant. Generally, options under the 1982 and 1985 Stock Option Plans are
exercisable to the extent of 25% each year (cumulative) from the second
through the fifth year, and expire ten years after date of grant; however, all
or any portion of the shares granted are exercisable during the period
beginning one year after date of grant for participants employed by the
Company for at least five years. Options granted under the 1988 Stock Option
Plan have exercise provisions similar to the other plans, although some grants
become exercisable in
28
<PAGE>
cumulative one-third installments on each of the first three anniversaries of
the grant date. No additional grants may be made under the 1982 and 1985
Plans, and no additional grants will be made under the 1988 Plan. Following
the stockholder adoption of the 1995 Incentive Stock Plan ("1995 Plan"),
shares covered by grants or awards under the terms of the 1982, 1985 or 1988
Plans which terminate, lapse or are forfeited on or after April 13, 1995, will
be added to the aggregate number of shares authorized under the 1995 Plan and
will be made available for grants under the 1995 Plan. Options granted under
the 1995 Plan are evidenced by agreements that set forth the terms, conditions
and limitations for such grants, including the term of the award, limitations
or exercisability, and other provisions as determined by the Compensation and
Stock Option Committee of the Board of Directors. Under certain circumstances,
the vesting may be accelerated under options granted under the various plans.
The 1988 Plan and the 1995 Plan also provide for the discretionary grant of
stock appreciation rights in conjunction with the option, which allows the
holder a combination of stock and cash equal to the gain in market price from
the grant until its exercise. Under certain circumstances, the entire gain
attributable to rights granted under the 1988 Plan may be paid in cash; the
cash payment under the 1995 Plan is limited to one-half the gain. When options
and stock appreciation rights are granted in tandem, the exercise of one
cancels the other. The 1995 Plan provides for the discretionary grant of
restricted stock awards which allows the holder to obtain full ownership
rights subject to terms and conditions specified at the time each award is
granted.
The 1995 Stock Plan for Non-Employee Directors ("Director Plan") provides
for an annual grant of Director Stock Options ("DSO") to non-employee members
of the Board of Directors at market value on the date of grant, similar to
grants available under the 1988 plan. In addition, each non-employee director
may make an irrevocable election to receive a DSO in lieu of all or part of
his or her retainer. The number of whole shares to be granted is based on the
unpaid annual retainer divided by the market value of a share on such date
minus one dollar and the exercise price is $1. Each non-employee director is
also eligible for an annual grant of a Director Deferred Stock Award ("DDSA")
equal to 150 DDSA units, with a unit equal to one share of the Company's
common stock; DDSA units are payable in shares of common stock upon death,
disability or termination of service. Dividend equivalents may be earned on
qualifying DSO and DDSA units and allocated to directors' respective accounts
in accordance with the terms of the Director Plan. During fiscal 1995, 66,963
DSO and DDSA were granted, and 3,837 DSO were exercised. At November 30, 1995,
270,374 DSO and DDSA were outstanding and 258,037 shares were available for
future DSO and DDSA. At November 30, 1994, 207,248 DSO and DDSA under the 1988
Plan were outstanding.
Stock options outstanding at November 30, 1995 included 100,722 shares
granted in tandem with stock appreciation rights. Options for 1,191,724 shares
were exercisable at November 30, 1995 at prices ranging from $5.25 to $30.81.
At November 30, 1995, 2,264,168 shares were reserved for options outstanding
and 701,563 shares were available for future stock options and/or restricted
stock awards (7,358 at November 30, 1994).
Information regarding stock option activity for the three years ended
November 30, 1995 is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Balance at November 30, 1992 888,441 $5.25 to $30.81
Granted...................................... 368,000 $6.88 to $7.06
Expired or terminated........................ (230,650) $5.25 to $30.81
---------
Balance at November 30, 1993................... 1,025,791 $5.25 to $30.81
Granted...................................... 467,700 $5.56 to $6.81
Exercised.................................... (829) $5.25
Expired or terminated........................ (40,862) $5.25 to $30.25
---------
Balance at November 30, 1994................... 1,451,800 $5.25 to $30.81
Granted...................................... 994,500 $5.25
Expired or terminated........................ (182,132) $5.25 to $30.81
---------
Balance at November 30, 1995................... 2,264,168 $5.25 to $30.81
=========
</TABLE>
29
<PAGE>
LEGAL PROCEEDINGS
The Company is involved in certain litigation as described in "Item 3--Legal
Proceedings". The Company believes that it has meritorious defenses to the
action against the Company referred to under such caption and that such action
will not have a material adverse effect on the Company's financial condition.
OPERATING SEGMENT INFORMATION
The Company is engaged in the business of manufacturing and marketing of
men's and women's apparel. The Company's businesses currently consist of the
following groups: Men's Apparel Group, which designs, manufactures and markets
tailored clothing, slacks and sportswear to retailers for resale to consumers;
and Women's Apparel Group, comprised of International Women's Apparel, which
markets women's career apparel and sportswear to department and specialty
stores, and Barrie Pace, a direct mail catalog marketer of apparel and
accessories. The largest customer represented approximately 16% and 14% of
consolidated sales in 1995 and 1994, respectively. The Kuppenheimer business
was sold in July 1995 and is reflected in the accompanying statement of
earnings as a discontinued operation.
Information on the Company's operations for the three years ended November
30, 1995 is summarized as follows (in millions):
<TABLE>
<CAPTION>
1995
-------------------------------
MEN'S WOMEN'S
APPAREL APPAREL
GROUP GROUP ADJ. CONSOL.
------- ------- ------ -------
<S> <C> <C> <C> <C>
Sales..................................... $547.1 $48.2 $ -- $595.3
Earnings (loss) before taxes.............. 32.1 (1.3) (29.2) 1.6
Gross assets at year end.................. 294.0 19.5 63.1 376.6
Depreciation and amortization............. 7.7 0.6 0.3 8.6
Property additions........................ 7.5 0.1 0.8 8.4
<CAPTION>
1994
-------------------------------
MEN'S WOMEN'S
APPAREL APPAREL
GROUP GROUP ADJ. CONSOL.
------- ------- ------ -------
<S> <C> <C> <C> <C>
Sales..................................... $569.6 $52.2 $ -- $621.8
Earnings (loss) before taxes.............. 46.3 (4.1) (33.1) 9.1
Gross assets at year end.................. 294.0 25.1 73.1 392.2
Depreciation and amortization............. 8.6 .6 0.2 9.4
Property additions........................ 5.2 .2 1.7 7.1
<CAPTION>
1993
-------------------------------
MEN'S WOMEN'S
APPAREL APPAREL
GROUP GROUP ADJ. CONSOL.
------- ------- ------ -------
<S> <C> <C> <C> <C>
Sales..................................... $553.9 $52.2 $ -- $606.1
Earnings (loss) before taxes.............. 43.2 (2.9) (32.6) 7.7
Gross assets at year end.................. 293.7 31.2 80.2 405.1
Depreciation and amortization............. 8.8 .7 0.1 9.6
Property additions........................ 5.2 .2 .5 5.9
</TABLE>
Men's Apparel Group 1993 sales include $4.6 million related to businesses
subsequently sold or discontinued.
Operating expenses incurred by the Company in generating sales are charged
against the respective segment's sales; indirect operating expenses are
allocated to the segments benefited. Segment results exclude any allocation of
general corporate expense, interest expense or income taxes.
30
<PAGE>
Amounts included in the "adjustment" column for earnings before taxes
consist of interest expense for continuing operations and general corporate
expenses. Adjustments of gross assets are for cash, recoverable and deferred
income taxes, corporate properties, investments and other assets, and gross
assets related to Kuppenheimer at November 30, 1994 and 1993. Adjustments of
depreciation and amortization and net property additions are for corporate
properties and property additions related to Kuppenheimer for 1994 and 1993.
QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
Selected quarterly financial and common share information for each of the
four quarters in fiscal 1995 and 1994 is as follows (000's omitted):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER(1) QUARTER QUARTER
---- -------- ---------- -------- --------
<S> <C> <C> <C> <C>
Sales............................ $149,283 $135,029 $166,659 $144,301
Gross profit..................... 36,707 33,169 39,203 38,779
Net earnings (loss) before
discontinued operation.......... 58 (2,990) 2,175 22,187
Net earnings (loss).............. 135 (21,350) 2,175 22,187
Earnings (loss) per share:
continuing operations.......... -- (.09) .07 .68
discontinued operation......... -- (.56) -- --
net............................ -- (.65) .07 .68
<CAPTION>
1994
----
<S> <C> <C> <C> <C>
Sales............................ $148,544 $138,078 $177,358 $157,867
Gross profit..................... 35,692 35,296 44,024 47,540
Net earnings (loss) before
discontinued operation and
extraordinary charge............ (1,866) (4,051) 4,481 20,549
Net earnings (loss) before
extraordinary charge............ (720) (3,120) 3,515 20,335
Net earnings (loss).............. (720) (6,982) 3,515 20,335
Earnings (loss) per share:
continuing operations.......... (.05) (.13) .14 .63
discontinued operation......... .03 .03 (.03) --
before extraordinary charge.... (.02) (.10) .11 .63
after extraordinary charge..... (.02) (.22) .11 .63
</TABLE>
- --------
(1) The second quarter of 1995 includes a loss of $18.3 million or $.56 per
share related to the disposition of Kuppenheimer.
The second quarter of 1994 includes a $3.9 million or $.12 per share
extraordinary charge related to early extinguishment of debt.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Information About Nominees For
Directors" on pages 2 to 6 of the Proxy Statement for the 1996 Annual Meeting
is incorporated herein by reference.
Information on Executive Officers of the Registrant is included as a
separate caption in Part I of this Form 10-K Annual Report.
31
<PAGE>
ITEM 11--EXECUTIVE COMPENSATION
Information contained under the caption "Executive Officer Compensation" on
pages 7 to 11 and "Information about Nominees for Directors" on pages 2 to 6
of the Proxy Statement for the 1996 Annual Meeting is incorporated herein by
reference.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained in the Proxy Statement for the 1996 Annual Meeting
under the captions "Information About Nominees for Directors" on pages 2 to 6
and "Ownership of Common Stock" on pages 15 to 16 is incorporated herein by
reference.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained in the Proxy Statement for the 1996 Annual Meeting
under the caption "Information About Nominees for Directors" on pages 2 to 6
is incorporated herein by reference.
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Financial statements for Hartmarx Corporation listed in the Index to
Financial Statements and Supplementary Data on page 13 are filed as part of
this Annual Report.
(a)(2) Financial Statement Schedules
Financial Statement Schedules for Hartmarx Corporation listed in the
Index to Financial Statements and Supplementary Data on page 13 are filed
as part of this Annual Report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consent of Independent Accountants....................................... F-1
(a)(3) Index to Exhibits................................................. 33
</TABLE>
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the quarter ended
November 30, 1995.
32
<PAGE>
HARTMARX CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. AND
APPLICABLE
SECTION OF
601 OF
REGULATION
S-K
----------
<C> <S>
*3-A Restated Certificate of Incorporation (Exhibit 3-A to Form 10-K
for the year ended November 30, 1993), (1).
*3-A-1 Certificate of Amendment for increase in authorized shares of
Common Stock (Exhibit 3-A-2 to Form 10-K for the year ended
November 30, 1993), (1).
*3-A-2 Certificate of Amendment adding Article Fourteenth limiting
director liability as provided under Delaware General
Corporation Law (S)102(b)(7) (Exhibit 3-A-3 to Form 10-K for
the year ended November 30, 1993), (1).
3-A-3 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock.
3-B By-laws of the Company, as amended to the date hereof.
*4-A Rights Agreement, dated as of December 6, 1995, between the
Company and First Chicago Trust Company of New York, as Rights
Agent, which includes as Exhibit A the Certificate of
Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock and as Exhibit B the form of
Rights Certificate (Exhibit 4.1 to Form 8-K filed December 29,
1995), (1).
*4-B Indenture, dated as of March 15, 1994, between the Company and
Bank One Wisconsin Trust Company, N.A., Trustee, relating to
the 10 7/8% Senior Subordinated Notes due 2002 of Hartmarx
Corporation (Exhibit 4-D to Form 10-Q for the quarter ended
February 28, 1994), (1).
4-B-1 Instrument of Resignation, Appointment and Acceptance, dated
July 31, 1995, accepting the resignation of Bank One Wisconsin
Trust Company, N.A. and appointing Bank One Columbus, N.A. as
successor Paying Agent, Registrar and Trustee under the
Indenture.
*4-C Credit Agreement, dated as of March 23, 1994, among the
Company, the Lenders listed therein and General Electric
Capital Corporation, as Managing Agent and Collateral Agent
(Exhibit 4-E to Form 10-Q for the quarter ended February 28,
1994), (1).
*4-C-1 Amendment No. 1 dated August 26, 1994 to the Credit Agreement
(Exhibit 4-E-1 to Form 10-Q for the quarter ended August 31,
1994), (1).
*4-C-2 Amendment No. 2 dated March 20, 1995 to the Credit Agreement
(Exhibit 4-E-2 to Form 10-Q for the quarter ended May 31,
1995), (1).
*4-C-3 Amendment No. 3 dated July 6, 1995 to the Credit Agreement
(Exhibit 4-E-3 to Form 10-Q for the quarter ended May 31,
1995), (1).
4-C-4 Amendment No. 4 dated November 30, 1995 to the Credit
Agreement.
4-C-5 Amendment No. 5 dated January 30, 1996 to the Credit Agreement.
*9-A Stockholders Agreement, dated as of September 20, 1992, between
the Company and Traco International, N.V. (Exhibit 9-A to Form
10-K for the year ended November 30, 1992), (1).
9-A-1 Amendment to Stockholders Agreement, dated as of December 30,
1992.
*10-A 1995 Incentive Stock Plan (Exhibit A to Proxy Statement of the
Company relating to the 1995 Annual Meeting), (1). **
</TABLE>
33
<PAGE>
<TABLE>
<C> <S> <C>
*10-A-1 1995 Stock Plan for Non-Employee Directors (Exhibit B to
Proxy Statement of the Company relating to the 1995 Annual
Meeting), (1). **
*10-B Description of Hartmarx Management Incentive Plan
(Information to be included under the caption "REPORT OF
THE COMPENSATION AND STOCK OPTION COMMITTEE--Executive
Compensation Program--Short-Term Incentives" on page 13 in
the Proxy Statement of the Company relating to the 1996
Annual Meeting), (1). **
*10-C Description of Hartmarx Long Term Incentive Plan
(Information to be included under the caption "REPORT OF
THE COMPENSATION AND STOCK OPTION COMMITTEE--Executive
Compensation Program--Long-Term Incentives" on page 13 in
the Proxy Statement of the Company relating to the 1996
Annual Meeting), (1). **
*10-D-1 Form of Deferred Compensation Agreement, as amended,
between the Company and Directors Abboud, Baldrige,
Farley, Jacobs, Marshall and Segnar (Exhibit 10-D-1 to
Form 10-K for the year ended November 30, 1993), (1).**
*10-D-2 Form of First Amendment to Director Deferred Compensation
Agreement between the Company and Directors Abboud,
Baldrige, Farley, Jacobs, Marshall and Segnar (Exhibit 10-
D-2 to Form 10-K for the year ended November 30, 1994),
(1). **
*10-E-1 Form of Deferred Compensation Agreement, as amended,
between the Company and Messrs. Hand, Patel, Morgan and
Brenner (Exhibit 10-E-1 to Form 10-K for the year ended
November 30, 1993), (1). **
*10-E-2 Form of First Amendment to Executive Deferred Compensation
Agreement between the Company and Messrs. Hand, Patel,
Morgan and Brenner (Exhibit 10-E-2 to Form 10-K for the
year ended November 30, 1994), (1). **
*10-F-1 Employment Agreement between the Company and Elbert O.
Hand (Exhibit 10-F-1 to
Form 10-K for the year ended November 30, 1992), (1). **
*10-F-2 Employment Agreement between the Company and Homi B. Patel
(Exhibit 10-F-2 to
Form 10-K for the year ended November 30, 1992), (1). **
*10-F-3 Employment Agreement between the Company and Carey M.
Stein (Exhibit 10-F-3 to
Form 10-K for the year ended November 30, 1992), (1). **
*10-F-4 Employment Agreement between the Company and Wallace L.
Rueckel. (Exhibit 10-F-7 to Form 10-K for the year ended
November 30, 1993), (1). **
*10-F-5 Employment Agreement between the Company and Mary D. Allen
(Exhibit 10-F-8 to
Form 10-K for the year ended November 30, 1994), (1). **
10-F-6 Employment Agreement between the Company and Glenn R.
Morgan. **
*10-G-1 Form of Severance Agreement between the Company and
Executive Officers Frank A. Brenner and James E. Condon
(Exhibit 10-F-5 to Form 10-K for the year ended November
30, 1993), (1). **
*10-G-2 Form of Amendment to Severance Agreement between the
Company and Executive Officers Frank A. Brenner and James
E. Condon (Exhibit 10-F-6 to Form 10-K for the year ended
November 30, 1994), (1). **
*10-H Form of Indemnity Agreement between the Company and
Directors Abboud, Bakhsh, Baldrige, Cole, Farley, Hand,
Jacobs, Marsh, Marshall, Othman, Patel, Rohlfs, Scott and
Segnar (Exhibit 10-G-1 to Form 10-K for the year ended
November 30, 1993), (1). **
10-I Deferred Compensation Plan effective January 1, 1996. **
*10-J Stock Purchase Agreement, dated as of May 8, 1995, among
the Company, Kupp Acquisition Corp. and Kuppenheimer
Manufacturing Company, Inc. (Exhibit 2 to Form 8-K filed
August 11, 1995), (1). **
</TABLE>
34
<PAGE>
<TABLE>
<C> <S> <C>
12 Statement of Computation Ratios.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants included on page F-1 of
this Form 10-K.
24 Powers of Attorney, as indicated on page 36 of this Form
10-K.
27 Financial Data Schedules.
99 Forward Looking Statements.
</TABLE>
- --------
* Exhibits incorporated herein by reference. (1) File No. 1-8501
**Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K.
35
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Hartmarx Corporation
(Registrant)
/s/ Glenn R. Morgan /s/ Mary D. Allen
By: _________________________________ and By: _____________________________
Glenn R. Morgan Mary D. Allen
Executive Vice President and Executive Vice President,
Chief Financial Officer Secretary and General Counsel
Date: February 27, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
Elbert O. Hand* Homi B. Patel*
- ------------------------------------- -------------------------------------
Elbert O. Hand Homi B. Patel
Chairman, Chief Executive President, Chief Operating
Officer, Director Officer, Director
A. Robert Abboud* Charles Marshall*
- ------------------------------------- -------------------------------------
A. Robert Abboud, Director Charles Marshall, Director
Samawal A. Bakhsh* Talat M. Othman*
- ------------------------------------- -------------------------------------
Samawal A. Bakhsh, Director Talat M. Othman, Director
Letitia Baldrige* Michael B. Rohlfs*
- ------------------------------------- -------------------------------------
Letitia Baldrige, Director Michael B. Rohlfs, Director
Jeffrey A. Cole* Stuart L. Scott*
- ------------------------------------- -------------------------------------
Jeffrey A. Cole, Director Stuart L. Scott, Director
Raymond F. Farley* Sam F. Segnar*
- ------------------------------------- -------------------------------------
Raymond F. Farley, Director Sam F. Segnar, Director
Donald P. Jacobs* Glenn R. Morgan*
- ------------------------------------- -------------------------------------
Donald P. Jacobs, Director Glenn R. Morgan
Executive Vice President,
Miles L. Marsh* Chief Financial Officer
- -------------------------------------
Miles L. Marsh, Director Andrew A. Zahr
-------------------------------------
/s/ Glenn R. Morgan Andrew A. Zahr
By: _________________________________ Controller and
Glenn R. Morgan Principal Accounting Officer
/s/ Mary D. Allen
By: _________________________________
Mary D. Allen
- --------
*Pursuant to Power of Attorney
Date: February 27, 1996
36
<PAGE>
HARTMARX CORPORATION
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR FISCAL YEARS ENDED NOVEMBER 30, 1995, 1994, AND 1993
(000'S OMITTED)
<TABLE>
<CAPTION>
RESERVE FOR DOUBTFUL ACCOUNTS
FISCAL YEAR ENDED NOVEMBER 30,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year................ $ 7,368 $ 9,914 $ 16,022
Charged to costs and expenses............... 2,783 2,591 3,868
Deductions from reserves (1)................ (2,231) (5,137) (9,976)
---------- ---------- ----------
Balance at end of year...................... $ 7,920 $ 7,368 $ 9,914
========== ========== ==========
</TABLE>
- --------
(1) Notes and accounts written off as uncollectible, net of recoveries of
accounts previously written off as uncollectible.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Commission File Nos. 33-58653 and 33-42202) of
Hartmarx Corporation of our report dated January 9, 1996 appearing on page 14
of this Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 26, 1996
F-1
<PAGE>
EXHIBIT 3-A-3
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
HARTMARX CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officers of Hartmarx Corporation, a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation, as amended, of the said Corporation, the
said Board of Directors on December 6, 1995 adopted the following resolution
creating a series of 165,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:
BE IT FURTHER RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, as amended, a series of Preferred Stock
of the Corporation be and it is hereby created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of
<PAGE>
such series, and the qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 165,000.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Junior Participating Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the last day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $0.01 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $2.50 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after December 6, 1995 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common
2
<PAGE>
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series A
Junior Participating Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in Paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares
of Series A Junior Participating Preferred Stock entitled to receive a
quarterly
3
<PAGE>
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
4
<PAGE>
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period") which
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Preferred Stock (including
holders of the Series A Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders
of Series A Junior Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that such voting right shall not be
exercised unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not affect the
exercise
5
<PAGE>
by the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two (2) Directors or, if
such right is exercised at an annual meeting, to elect two (2) Directors.
If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall
have the right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After the
holders of the Preferred Stock shall have exercised their right to elect
Directors in any default period and during the continuance of such period,
the number of Directors shall not be increased or decreased except by vote
of the holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or pari passu with the
Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the Chairman,
the President, a Vice-President or the Secretary of the Corporation.
Notice of such meeting and of any annual meeting at which
6
<PAGE>
holders of Preferred Stock are entitled to vote pursuant to this Paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him or her at his or her last address as
the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Paragraph (C)(iii),
no such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to
be entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in Paragraph (C)(ii) of this Section 3)
be filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class of stock which elected the Director
whose office shall have become vacant. References in this
7
<PAGE>
Paragraph (C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill vacancies
as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of Directors
shall be such number as may be provided for in the certificate of
incorporation or by-laws irrespective of any increase made pursuant to the
provisions of Paragraph (C)(ii) of this Section 3 (such number being
subject, however, to change thereafter in any manner provided by law or in
the certificate of incorporation or by-laws). Any vacancies in the Board
of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Pre-
8
<PAGE>
ferred Stock outstanding shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any
9
<PAGE>
shares of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in writing
or by publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount equal to 1,000 times the Exercise Price,
plus an amount equal
10
<PAGE>
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation Preference,
no additional distributions shall be made to the holders of shares of Series A
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
11
<PAGE>
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately
12
<PAGE>
prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or more of
the outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
Section 10. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
13
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 31st day of
January, 1996.
HARTMARX CORPORATION
---------------------------------
Name: Glenn R. Morgan
Title: Executive Vice
President and Chief
Financial Officer
Attest:
- ---------------------------
Secretary
14
<PAGE>
EXHIBIT 3-B
BY-LAWS
OF
HARTMARX CORPORATION
(Formed under the laws of the State of Delaware)
As Adopted by the Board of Directors to February 21, 1996
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. A meeting of the stockholders for the
election of directors and the transaction of only such other business as is
properly brought before the meeting in accordance with these By-Laws shall be
held annually on a day between April 1 and April 20, inclusive, to be designated
by the Board of Directors and in the absence of such designation, on the first
Monday in April, or, if it be a public holiday, on the next succeeding business
day.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board, or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, no
earlier than December 15 and no later than February 15 immediately preceding the
annual meeting of stockholders. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 1, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 2. Special Meetings. Special meetings of the stockholders
may be called by the Board of Directors or, subject to the control of the Board,
by the Chairman, or in his absence, the President.
<PAGE>
Section 3. Place of Meetings. Meetings of stockholders shall be
held at such place, within or without the State of Delaware, as may be fixed by
the Board of Directors. If no place is so fixed, such meetings shall be held at
the office of the Corporation in the City of Chicago, in the State of Illinois.
Section 4. Notice of Meetings. Notice of each meeting of
stockholders shall be given in writing and shall state the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called.
Notice of a special meeting shall indicate that it is being issued by or at the
direction of the person or persons calling or requesting the meeting.
If, at any meeting, action is proposed to be taken which would, if
taken, entitle objecting stockholders to receive payment for their shares of
stock, the notice shall include a statement of that purpose and to that effect.
A copy of the notice of each meeting shall be given, personally or by
first class mail, not less than ten nor more than sixty days before the date of
the meeting, to each stockholder entitled to vote at such meeting. If mailed,
such notice is given when deposited in the United States mail, with postage
thereon prepaid, directed to the stockholder at his address as it appears on the
record of stockholders, or, if he shall have filed with the Secretary of the
Corporation a written request that notices to him be mailed to some other
address, then directed to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if the adjournment is for more than thirty (30) days, or if after the
adjournment, the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record on the new record date entitled to notice under the preceding paragraphs
of this Section 4.
Section 5. Waiver of Notice. Notice of any meeting need not be
given to any stockholder who submits a signed waiver of notice, in person or by
proxy, whether before or after the meeting. The attendance of any stockholder at
a meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 6. Inspectors of Election. The Board of Directors shall, in
advance of any stockholders' meeting, appoint one or more inspectors to act at
the meeting or any adjournment thereof and to make a written report thereof. The
Board of Directors may designate one or more alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute his duties of inspector with
strict impartiality and according to the best of his ability.
2
<PAGE>
The inspector(s) shall ascertain the number of shares outstanding and
the voting power of each, determine the shares represented at the meeting, the
existence of a quorum and the validity of proxies and ballots, count all votes
and ballots, determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspector(s),
certify their determination of the number of shares represented at the meeting
and their count of all votes and ballots, and do such other acts as are proper
to conduct the election or vote with fairness to all stockholders. The
inspector(s) may appoint or retain other persons or entities to assist the
inspector(s) in the performance of the duties of the inspector(s). Any record or
certificate made by the inspectors shall be prima facie evidence of the facts
stated and of the vote as certified by said inspector(s).
Section 7. List of Stockholders at Meetings. The Secretary shall
provide a complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 8. Qualification of Voters. Unless otherwise provided in
the Certificate of Incorporation, every stockholder of record shall be entitled
at every meeting of stockholders to one vote for every share of stock standing
in his name on the record of stockholders.
Treasury shares as of the record date and shares held as of the record
date by another domestic or foreign corporation of any type or kind, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as trustee or into the name of his
nominee.
Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such officer, agent or proxy as the By-Laws
of such corporation may provide, or, in the absence of such provision, as the
board of directors of such corporation may determine.
3
<PAGE>
A stockholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
Section 9. Quorum of Stockholders. The holders of not less than
one-third of the shares of stock entitled to vote thereat shall constitute a
quorum at a meeting of stockholders for the transaction of any business,
provided that when a specified item of business is required to be voted on by a
class or series, voting as a class, the holders of not less than one-third of
the shares of such class or series of stock shall constitute a quorum for the
transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any stockholders.
The stockholders who are present in person or by proxy and who are
entitled to vote may, by a majority of votes cast, adjourn the meeting despite
the absence of a quorum.
Section 10. Proxies. Every stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy.
Every proxy must be signed by the stockholder or his attorney-in-fact.
No proxy shall be valid after the expiration of three years from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the stockholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the stockholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
Section 11. Vote of Stockholders. Directors shall, except as
otherwise required by law, be elected by a plurality of the votes cast at a
meeting of stockholders by the holders of shares entitled to vote in the
election.
Whenever any corporate action, other than the election of directors,
is to be taken by vote of the stockholders, it shall, except as otherwise
required by law or the Certificate of Incorporation or the By-Laws, be
authorized by a majority of the votes cast at a meeting of stockholders by the
holders of shares entitled to vote thereon.
Section 12. Fixing Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more
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than sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to any other action.
When a determination of stockholders of record entitled to notice of
or to vote at any meeting of stockholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date for the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors. The
business of the Corporation shall be managed by the Board of Directors. Each
director shall be at least twenty-one years of age.
Section 2. Number of Directors. Effective February 21, 1996, the
number of directors constituting the entire Board of Directors through the
current terms of the incumbent directors, shall be fourteen; thereafter, the
number shall be ten. A majority of the total number of directors authorized by
this By-Law may amend this By-Law, to change the number of directors, provided,
however, that no decrease in the number of directors shall shorten the term of
an incumbent director.
Section 3. Election and Term of Directors. At each annual meeting
of stockholders, directors shall be elected to hold office until the next annual
meeting and until their successors have been elected and qualified.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors. Nominations for the
election of directors may be made by the Board of Directors or by a committee
appointed by the Board of Directors, or by any stockholder entitled to vote in
the election of directors generally, provided that such stockholder has given
actual written notice of such stockholder's nomination or nominations to the
Secretary of the Corporation (a) with respect to an election to be held at an
annual meeting of stockholders, no earlier than December 15 and no later than
February 15 immediately preceding the annual meeting of stockholders, and (b)
with respect to an election to be held at a special meeting of stockholders for
the election of directors, no later than the close of business on the fifteenth
day following (i) the date on which notice of such meeting is first given to
stockholders or (ii) the date on which public disclosure of such meeting is
first made, whichever is earlier.
Each such notice shall set forth: (a) the name and record address of
the stockholder who intends to make the nomination and the name, age, business
address and residence address of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice and stating the number of shares held by such stockholder; (c) a
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description of all arrangements or understandings involving any stockholder,
each such nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
stockholder or relating to the Corporation or its securities or to such
nominee's service as a director if elected; (d) such other information regarding
such nominee proposed by such stockholder as would be required to be disclosed
in solicitations for proxies for election of Directors pursuant to Rule 14a
under the Securities Exchange Act of 1934, as amended; and (e) the consent of
each nominee to serve as a director of the Corporation if so elected. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 4. Quorum of Directors and Action by the Board. A majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business, and, except where otherwise provided in these By-Laws, the vote of
a majority of the directors present at a meeting at the time of such vote, if a
quorum is then present, shall be the act of the Board.
Section 5. Meetings of the Board. An annual meeting of the Board of
Directors shall be held in each year directly after the annual meeting of
stockholders. Regular meetings of the Board shall be held at such times as may
be fixed by the Board. Special meetings of the Board may be held at any time
upon the call of the Chairman, or in his absence, the President, or upon the
call of any two directors.
Meetings of the Board of Directors shall be held at such places as may
be fixed by the Board for annual and regular meetings and in the notice of
meeting for special meetings.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given to each
director either by mail not later than noon, Chicago time, on the third day
prior to the meeting or by telegram, written message or orally to the director
not later than noon, Chicago time, on the day prior to the meeting. Notices are
deemed to have been given: by mail, when deposited in the United States mail; by
telegram at the time of filing; and by messenger at the time of delivery.
Notices by mail, telegram or messenger shall be sent to each director at the
address designated by him for that purpose, or, if none has been so designated,
at his last known residence or business address.
Notice of a meeting of the Board of Directors need not be given to any
director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose of any
meeting of the Board of Directors.
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A majority of directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of any adjournment of
a meeting to another time or place shall be given, in the manner described
above, to the directors who were not present at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
Section 5.1. Participation in Meetings of the Board or Committees
Thereof by Means of Telephone or Similar Equipment. Any one or more members of
the Board of Directors, the Executive Committee, or any other Committee of the
Board may participate in a meeting of such Board or Committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
Section 5.2. Action of the Board or Committees Thereof by Unanimous
Written Consent. Any action required or permitted to be taken by the Board of
Directors, the Executive Committee, or any other Committee of the Board of
Directors may be taken without a meeting if all members of the Board or of the
Committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
Board or Committee shall be filed with the minutes of the proceedings of the
Board or Committee.
Section 6. Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Board of Directors or to the
Chairman or the Secretary of the Corporation. Such resignation shall take effect
at the time specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it effective.
Section 7. Removal of Directors. Any or all of the directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors at a meeting of the stockholders or
by the unanimous written consent of all stockholders entitled to vote.
Section 8. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason may be filled by
vote of a majority of the directors then in office, although less than a quorum
exists. A director elected to fill a vacancy shall be elected to hold office for
the unexpired term of his predecessor.
Section 9. Compensation of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any
capacity.
Section 10. Indemnification.
(a) General Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil,
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criminal, administrative or investigative, and any appeal therefrom
(hereinafter, collectively, a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is, was or had
agreed to become a director of the Corporation or is, was or had agreed to
become an officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, shall be indemnified and held harmless
by the Corporation to the fullest extent permitted under the General Corporation
Law of the State of Delaware (the "DGCL"), as the same now exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than the DGCL permitted the Corporation to provide prior to such
amendment), against all expenses, liabilities and losses (including attorneys'
fees, judgments, fines, excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
there with; provided, that a person seeking indemnity in connection with a
proceeding (or part thereof) initiated by such person against the Corporation or
any director, officer, employee or agent of the Corporation shall not be
entitled to the foregoing indemnification unless the Corporation has joined in
or consented to such proceeding (or part thereof).
(b) Expenses. Expenses, including attorneys' fees, incurred by a
person referred to in paragraph (a) of this Section 10 in defending or otherwise
being involved in a proceeding shall be paid by the Corporation in advance of
the final disposition of such proceeding, including any appeal therefrom, upon
receipt of an undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation.
(c) Non-Exclusivity of Rights. The rights conferred on any person by
this Section 10 shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise. The Board of Directors shall have the authority, by
resolution, to provide for such other indemnification of directors, officers,
employees or agents as it shall deem appropriate.
(d) Insurance. The Corporation may purchase and maintain insurance to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expenses, liabilities or losses, whether or not the Corporation
would have the power to indemnify such person against such expenses, liabilities
or losses under the DGCL.
(e) Enforceability. The provisions of this Section 10 shall be
applicable to all proceedings commenced after its adoption, whether such arise
out of events, acts, omissions or circumstances which occurred or existed prior
or subsequent to such adoption, and shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person. This Section 10 shall be deemed to
grant each person who, at any time that this Section 10 is in effect, serves or
agrees to serve in any capacity which entitles him or her to indemnification
hereunder rights against the Corporation to enforce
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the provisions of this Section 10, and any repeal or other modification of this
Section 10 or any repeal or modification of the DGCL or any other applicable law
shall not limit any rights of indemnification then existing or arising out of
events, acts, omissions or circumstances occurring or existing prior to such
repeal or modification, including, without limitation, the right to
indemnification for proceedings commenced after such repeal or modification to
enforce this Section 10 with regard to acts, omissions, events or circumstances
occurring or existing prior to such repeal or modification.
(f) Severability. If this Section 10 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and officer of the
Corporation as to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any proceeding,
whether civil, criminal, administrative or investigative, including an action by
or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Section 10 that shall not have been invalidated and
to the full extent permitted by applicable law.
Section 11. Executive Committee. The Board of Directors, by
resolution adopted by a majority of the entire Board, may designate from among
its members an Executive Committee, consisting of four or more directors, which
shall have all the authority of the Board, except that the Executive Committee
shall have no authority as to the following matters:
(1) Amending the Certificate of Incorporation;
(2) Adopting an agreement of merger or consolidation;
(3) Recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and
assets;
(4) Recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution;
(5) Amending the By-Laws of the Corporation;
(6) Declaring a dividend; or
(7) Authorizing the issuance of stock.
The Board of Directors may designate one or more directors (who may or
may not be officers and employees of the Corporation) as alternate members of
the Executive Committee, who may replace any absent member or members for all
purposes, including the constituting of a quorum at any meeting of such
Committee.
Three members of the Executive Committee shall constitute a quorum for
the transaction of business, and the vote of a majority of the members present
at a meeting at the time of such vote if a quorum is then present, shall be the
act of such Committee. Meetings of
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the Executive Committee may be called by any member of the Executive Committee,
and notices thereof shall be given to each member of the Executive Committee in
the same manner as notices to directors are provided for in the case of notices
of special meetings of the Board of Directors, but notice may in any case be
waived.
The Executive Committee shall serve at the pleasure of the Board of
Directors.
Section 12. Audit and Finance Committee. The Audit and Finance
Committee of the Board of Directors will consist of three or more directors,
none of whom shall be an officer or employee of the Corporation. The number of
members of the Committee will be determined each year at the annual meeting of
the Board of Directors.
The Audit and Finance Committee will maintain, through regularly
scheduled meetings, communications between the directors and independent
accountants and will provide assistance to the Board in fulfilling its fiduciary
and statutory responsibilities related to corporate accounting, integrity of
financial controls, and reporting practices. The Committee will also review the
financial policies and procedures of the Corporation and oversee and make
recommendations to the Board concerning the Corporation's investment and
dividend policies and methods of financing corporate operations. The Committee
will also have overall oversight responsibility for the investment and
management of the assets of the Corporation's pension plans, the appointment of
investment managers and plan trustees and the operation of the various benefits
committees. The Committee will make periodic reports to the entire Board on such
matters as the Committee or the Board may specify.
Section 13. Compensation and Stock Option Committee. The
Compensation and Stock Option Committee of the Board of Directors will consist
of three or more directors, none of whom shall be an officer or employee of the
Corporation. The number of members of the Committee will be determined each year
at the annual meeting of the Board of Directors.
The Compensation and Stock Option Committee will exercise the full
powers of the entire Board with respect to fixing the compensation to be paid
from time to time to all officers and employees of the Corporation and its
subsidiaries whose compensation is above the minimum level determined by the
Committee from time to time to be appropriate for control by directors of the
Corporation. The Committee will also grant all stock options and make other
determinations necessary or advisable for the administration of all stock option
plans and similar plans. The Committee will make periodic reports to the entire
Board on such matters as the Committee or the Board may specify.
Section 14. Nominating and Governance Committee. The Nominating and
Governance Committee of the Board of Directors will consist of three or more
directors. The number of members of the Committee will be determined each year
at the annual meeting of the Board of Directors.
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The Nominating and Governance Committee will review and make
recommendations to the entire Board concerning the qualifications and selection
of candidates for election as directors and officers of the Corporation. The
Committee will also advise and make recommendations to the Board on all matters
pertaining to directorship and corporate governance practices and the
Corporation's position and practices on significant issues of corporate public
responsibility.
Section 15. Management Operations Committee. The Management
Operations Committee of the Board of Directors will consist of one or more
directors, each of whom shall also be an employee or officer of the Corporation.
The Board of Directors shall establish from time to time by resolution the
composition, functions and responsibilities of the Management Operations
Committee.
Section 16. Other Committees. The Board of Directors, by resolution
adopted by a majority of the entire Board, may designate from among its members
committees other than those described in the foregoing By-Laws. Any such
Committee of which a majority of the members shall not be officers or employees
of the Corporation may be authorized by the resolution establishing it to have
all of the authority of the Board with respect to matters delegated to it by
said resolution. No resolution establishing and delegating authority to a
committee pursuant to this section shall confer authority as to any of the
matters listed in Section 11 of this Article, Paragraphs (1) - (6) inclusive.
ARTICLE III
OFFICERS
Section 1. Officers. The officers of the Corporation shall consist
of a Chairman, a President, a Secretary and a Treasurer. In addition, the Board
of Directors may elect one or more Executive Vice Presidents, Senior Vice
Presidents, or Vice Presidents, a General Counsel, a Controller, Assistant
Secretaries, Assistant Treasurers, Assistant General Counsels, group officers,
divisional officers and such other officers as the Board of Directors may
determine, and the respective provisions of these By-Laws with respect to the
duties and powers of such additional officers shall be applicable only during
any time such additional officers shall be elected and acting. The Chairman
shall be a member of the Board of Directors. Other officers of the Corporation
may, but need not, be members of the Board of Directors. Any two or more offices
may be held by the same person, except the offices of Chairman and Secretary, or
President and Secretary.
Section 2. Term of Office and Removal. All officers of the
Corporation shall be elected annually by the Board of Directors as soon as may
be practicable after the annual election of directors. Vacancies may be filled,
or new offices created and filled, at any meeting of the Board of Directors.
Each officer elected by the Board of Directors shall hold office for the term
for which he is elected, and until his successor has been elected and qualified.
Unless
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otherwise provided in the resolution of the Board of Directors electing an
officer, his term of office shall extend to and expire at the meeting of the
Board following the next annual meeting of stockholders. Any officer may be
removed by the Board, with or without cause, at any time. Removal of an officer
without cause shall be without prejudice to his contract rights, if any, and the
election of an officer shall not of itself create contract rights.
Section 3. Powers and Duties. The officers of the Corporation shall
have such authority and perform such duties in the management of the
Corporation, as may be prescribed in these By-Laws or by the Board of Directors
and, to the extent not so prescribed, they shall have such authority and perform
such duties in the management of the Corporation, subject to the control of the
Board, as generally pertain to their respective offices. Securities of other
corporations held by the Corporation may be voted by any officer designated by
the Board and, in the absence of any such designation, by the Chairman, the
President, any Vice President, the Secretary or the Treasurer. The Board may
require any officer, agent or employee to give security for the faithful
performance of his duties.
Section 4. Books to be Kept. The Corporation shall keep (a) correct
and complete books and records of account, (b) minutes of the proceedings of the
stockholders, Board of Directors, Executive Committee and any other committees
of directors, and (c) a current list of the directors and officers and their
residence addresses; and the Corporation shall also keep at its office in the
State of Illinois, or at the office of its transfer agent or registrar in the
State of Illinois, if any, a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
The Board of Directors may determine whether and to what extent and at
what times and places and under what conditions and regulations any accounts,
books, records or other documents of the Corporation, other than the stock
ledger and list of stockholders, shall be open to inspection, and no creditor,
security holder or other person shall have any right to inspect any accounts,
books, records or other documents of the Corporation except as conferred by the
Statute or as so authorized by the Board or an officer of the Corporation.
Section 5. Checks, Notes, etc. All checks and drafts on, and
withdrawals from, the Corporation's accounts with banks or other financial
institutions, and all bills of exchange, notes and other instruments for the
payment of money, drawn, made, indorsed, or accepted by the Corporation, shall
be signed on its behalf by the person or persons thereunto authorized by, or
pursuant to resolution of, the Board of Directors.
ARTICLE IV
DUTIES OF OFFICERS
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Section 1. Chairman. The Chairman shall preside at all meetings of
the stockholders and of the Board of Directors, and shall have such other duties
and powers as may be assigned to him by the Board of Directors or the Executive
Committee.
Section 2. President. The President shall have such duties and
powers as may be assigned to him by the Board of Directors or the Executive
Committee. In the absence of the Chairman, he shall preside at meetings of the
stockholders and of the Board of Directors.
Section 3. Vice Presidents. The Vice Presidents, which shall
include any Executive Vice Presidents or Senior Vice Presidents, shall have such
duties and powers as may be assigned to them by the Chairman, the President, the
Board of Directors or the Executive Committee.
Section 4. Secretary. The Secretary shall: (a) keep the minutes of
meetings of the stockholders, the Board of Directors and the Executive Committee
in one or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these By-Laws or as required by
law; (c) be custodian of the corporate record books and of the seal of the
Corporation, and see that the seal of the Corporation is affixed to all
documents, the execution of which on behalf of the Corporation under its seal is
duly authorized in accordance with the provisions of these By-Laws; and (d) in
general perform all duties incident to the office of the Secretary and such
other duties as from time to time may be assigned to him by the Board of
Directors, the Executive Committee, the Chairman or the President.
Section 5. General Counsel. The General Counsel shall give legal
counsel and advice to the Board of Directors and its committees. He shall be the
chief attorney at law for the Corporation and its subsidiaries, shall be the
head of the Corporation's Legal Department, and shall select, engage and approve
payment of fees to attorneys retained to represent the Corporation or its
subsidiaries in litigation or otherwise.
Section 6. Treasurer. The Treasurer shall have charge and custody
of all funds and securities of the Corporation. He shall deposit or invest all
monies and other valuable effects of the Corporation in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or the Executive Committee or in such short-term investments as he
shall select with the approval of the Chairman or the President. He shall
disburse funds of the Corporation as may be ordered by the Board of Directors or
the Executive Committee, taking proper vouchers for such disbursements. He shall
render to the Chairman, the President, the Board of Directors and the Executive
Committee, whenever any thereof may require it, an account of his transactions
as Treasurer and of the financial position of the Corporation.
Section 7. Controller. The Controller shall be the chief accounting
officer of the Corporation. He shall, when proper, approve all bills for
purchases, payrolls and similar instruments providing for disbursement of money
by the Corporation, for payment by the Treasurer. He shall be in charge of and
maintain books of account and accounting records of the Corporation. He shall
perform such other acts as are usually performed by the controller of a
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corporation. He shall render to the Chairman, the President, the Board of
Directors and the Executive Committee, such reports as any thereof may require.
Section 8. Assistant Secretaries, Assistant Treasurers and Assistant
General Counsels. The Assistant Secretaries, Assistant Treasurers and Assistant
General Counsels shall have such duties and powers as may be assigned by the
Secretary, the Treasurer or the General Counsel respectively, or by the
Chairman, the President, the Board of Directors or the Executive Committee.
Section 9. Divisional and Group Officers. The divisional officers
and group officers shall have such duties and powers with respect to their
divisions or groups as may be assigned to them by the Chairman, the President,
the Board of Directors or the Executive Committee.
ARTICLE V
FORMS OF CERTIFICATES AND LOSS
AND TRANSFER OF STOCK
Section 1. Forms of Stock Certificates. The shares of stock of the
Corporation shall be represented by certificates, in such forms as the Board of
Directors may prescribe, signed by the Chairman, the President or a Vice
President, and the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer, and may be sealed with the seal of the Corporation or a
facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation or its employee. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of issue.
Each certificate representing shares of stock shall state upon the
face thereof:
(1) That the Corporation is formed under the laws of the State of
Delaware;
(2) The name of the person or persons to whom issued; and
(3) The number and class of stock, and the designation of the series,
if any, which such certificate represents.
Section 2. Transfers of Stock. Shares of stock of the Corporation
shall be transferable on the stock ledger upon presentment to the Corporation or
a transfer agent of a certificate or certificates representing the shares of
stock requested to be transferred, with proper endorsement on the certificate or
on a separate accompanying document, together with such
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evidence of the payment of transfer taxes and compliance with other provisions
of law as the Corporation or its transfer agent may require.
Section 3. Lost, Stolen or Destroyed Stock Certificates. No
certificate for shares of stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed or wrongfully taken, except
if and to the extent required by the Board of Directors, upon:
(1) Production of evidence of loss, destruction or wrongful taking;
(2) Delivery of a bond indemnifying the Corporation and its agents
against any claim that may be made against it or them on account
of the alleged loss, destruction or wrongful taking of the
replaced certificate or the issuance of the new certificate; and
(3) Compliance with such other reasonable requirements as may be
imposed.
ARTICLE VI
OTHER MATTERS
Section 1. Corporate Seal. The Board of Directors may adopt a
corporate seal, alter such seal at pleasure, and authorize it to be used by
causing it or a facsimile to be affixed or impressed or reproduced in any other
manner.
Section 2. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of December in each year and end on the thirtieth day of
November in each year.
Section 3. Amendments. By-Laws of the Corporation may be adopted,
amended or repealed by vote of the holders of the shares of stock at the time
entitled to vote in the election of any directors. By-Laws may also be adopted,
amended or repealed by the Board of Directors, but any By-Law adopted by the
Board may be amended or repealed by the stockholders entitled to vote thereon as
hereinabove provided.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of stockholders for the election of directors
the By-Law so adopted, amended or repealed, together with a concise statement of
the changes made.
-----------------------------------
Mary D. Allen, Secretary
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EXHIBIT 4-B-1
EXECUTION
INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, dated as of July
___, 1995, among HARTMARX CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware, having its principal office at 101
North Wacker Drive, Chicago, Illinois 60606 (the "Company"), BANK ONE, COLUMBUS,
NA, a national banking association having its principal Corporate Trust Office
at 100 East Broad Street, Columbus, Ohio 42371 ("Bank One"), and BANK ONE
WISCONSIN TRUST COMPANY, NA, a national banking association having its principal
office at 831 North Grand Avenue, Waukesha, Wisconsin 53186 ("Wisconsin Trust").
WHEREAS, the Company issued $100,000,000 principal amount of its 10 7/8%
Senior Subordinated Notes due January 15, 2002 (the "Notes"), under an Indenture
dated as of March 15, 1994 (the "Indenture"), between the Company and Wisconsin
Trust, as the Trustee (the "Trustee"); and
WHEREAS, the Company appointed Wisconsin Trust as paying agent (the "Paying
Agent"), as registrar (the "Registrar") and as the Trustee under the Indenture;
and
WHEREAS, the Indenture provides that the Trustee may at any time resign by
giving written notice thereof to the Company; and
WHEREAS, the Trustee represents that it gave the Company a written notice
of its resignation as Trustee, a copy of which is annexed hereto and marked as
Exhibit A; and
<PAGE>
WHEREAS, the Indenture further provides that, if the Trustee shall resign,
the Company shall promptly appoint a successor Trustee; and
WHEREAS, the Company, pursuant to the terms of the Indenture and this
Agreement, has accepted the resignation of Wisconsin Trust, as Paying Agent,
Registrar and Trustee, and appointed Bank One as successor Paying Agent,
Registrar and Trustee; and
WHEREAS, the Indenture provides that the successor Trustee shall execute,
acknowledge and deliver to the Company and to the resigning Trustee an
instrument accepting such appointment and thereupon the resignation of the
Trustee shall become effective and such successor Trustee without any further
act, deed or conveyance, shall become vested with all rights, powers, duties and
obligations of the resigning Trustee; and
WHEREAS, the Indenture further provides that no successor Trustee shall
accept appointment as such unless at the time it is qualified and eligible under
the Indenture; and
WHEREAS, Bank One is qualified, eligible and willing to accept such
appointment as successor Trustee; and
WHEREAS, the Indenture further provides that the successor Trustee shall
mail notice of its succession to Securityholders; and
WHEREAS, the successor Trustee, simultaneously with the execution and
delivery of this Instrument, has caused the notice required pursuant to the
Indenture, a form of which is annexed hereto and marked as Exhibit B, to be
mailed to the Securityholders as therein required.
2
<PAGE>
NOW, THEREFORE, THIS INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE,
WITNESSETH: that for and in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby covenanted, declared and decreed by the Company, the
successor Trustee and the Trustee as follows:
1. The resignation of Wisconsin Trust, as Trustee, and its discharge from
the trust created by the Indenture shall be effective as of the date hereof upon
the execution and delivery of this Instrument by all the parties hereto.
2. The Company, in the exercise of the authority vested in it by the
Indenture hereby appoints Bank One as successor Trustee with all rights, powers,
trusts, duties and obligations under the Indenture, such appointment to be
effective as of the date hereof upon the execution and delivery of this
Instrument by all the parties hereto.
3. Bank One hereby represents that it is qualified and eligible under the
provisions of the Indenture, including but not limited to Section 7.10 thereof,
to be appointed successor Trustee, and hereby accepts its appointment as
successor Trustee, effective as of the date hereof upon the execution and
delivery of this Instrument by all parties hereto, and hereby assumes the
rights, powers, trusts, duties and obligations of the Trustee under the
Indenture, subject to all terms and provisions therein contained. Bank One
further agrees that it will send the notice required to be sent to
Securityholders pursuant to Section 7.8 of the Indenture.
4. Wisconsin Trust hereby grants, gives, bargains, sells, remises,
releases, coveys, confirms, assigns, transfers
3
<PAGE>
and sets over to Bank One as such successor Trustee and its successors and
assigns, all rights, title and interest of Wisconsin Trust in and to the trust
estate and all rights, powers, and trusts, under the Indenture; and Wisconsin
Trust does hereby pay over, assign and deliver to Bank One as such successor
Trustee any and all money, if any, and property, if any, held by Wisconsin Trust
as Trustee; and the Company for the purpose of more fully and certainly vesting
in and confirming to Bank One as such successor Trustee said estate, properties,
rights, powers and duties, at the request of Bank One, joins in the execution
hereof.
5. Notwithstanding the resignation of Wisconsin Trust, as Trustee under
the Indenture, the Company shall remain obligated under the Indenture to
compensate, reimburse and indemnify Wisconsin Trust in connection with its
Trusteeship under the Indenture, as more specifically required by Section 7.7 of
the Indenture.
6. This Instrument may be executed in any number of counterparts, each of
which shall be an original but such counterparts shall together constitute but
one and the same Instrument.
7. This Instrument shall be governed by and construed in accordance with
the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of laws of
another jurisdiction would be required thereof.
8. Capitalized terms used by not defined herein shall have the meanings
specified in the Indenture.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Instrument of
Resignation, Appointment and Acceptance to be duly executed and their respective
seals to the affixed hereunto and duly attested all as of the day and year first
above written.
HARTMARX CORPORATION
By_________________________
Wallace L. Rueckel,
Executive Vice President
and Chief Financial Officer
[Seal]
ATTEST:
_________________________
Mary D. Allen, Secretary
5
<PAGE>
BANK ONE, COLUMBUS, NA
as successor Trustee
By:_________________________
Name:
Authorized Signatory
[Corporate Seal]
ATTEST:
_________________________
Authorized Signatory
BANK ONE WISCONSIN TRUST
COMPANY, NA,
as resigning Trustee,
By:_________________________
Name:
Authorized Signatory
[Corporate Seal]
ATTEST:
_________________________
Authorized Signatory
6
<PAGE>
EXHIBIT 4-C-4
EXECUTION
HARTMARX CORPORATION
FOURTH AMENDMENT TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of
November 30, 1995 and entered into by and among HARTMARX CORPORATION, a Delaware
corporation ("BORROWER"), the LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to as a "LENDER" and collectively as "LENDERS"), GENERAL
ELECTRIC CAPITAL CORPORATION as Managing Agent and Collateral Agent for Lenders
("MANAGING AGENT") and THE BANK OF NEW YORK and BANKAMERICA BUSINESS CREDIT,
INC. as co-agents ("CO-AGENTS") and, for purposes of Section 3 hereof, the
GUARANTORS IDENTIFIED ON THE SIGNATURE PAGES HEREOF, (collectively the
"GUARANTORS"), and is made with reference to that certain Credit Agreement dated
as of March 23, 1994, among Borrower, Lenders and Agent, as amended by the First
Amendment to Credit Agreement dated as of August 26, 1994 among Borrower,
Lenders and Agent, by the Second Amendment to Credit Agreement dated as of March
20, 1995 among Borrower, Lenders and Agent and by the Third Amendment to Credit
Agreement dated as of June 30, 1995 among Borrower, Lenders, Managing Agent,
Co-Agents and consented to by Guarantors (the "CREDIT AGREEMENT"; capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement). Unless otherwise indicated, Section and
subsection references contained herein shall be to the corresponding Sections
and subsections of the Credit Agreement.
R E C I T A L S
- - - - - - - -
WHEREAS, Borrower and Lenders desire to amend the Credit Agreement as set
forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
<PAGE>
SECTION 1
AMENDMENT
1.1 AMENDMENTS TO THE CREDIT AGREEMENT.
A. Minimum Consolidated Debt Service Coverage Ratio. Section 7.6A of the
Credit Agreement is amended by deleting the ratio "1.40:1.00" immediately
adjacent to the reference to "Fourth Quarter 1995" set forth in the table
therein and by substituting the ratio "1.00:1.00" therefor.
B. Maximum Consolidated Leverage Ratio. Section 7.6B of the Credit
Agreement is amended by deleting the ratio "5.50:1.00" immediately adjacent to
the reference to "Fourth Quarter 1995" set forth in the table therein and by
substituting the ratio "6.50:1.00" therefor.
SECTION 2
BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment, Borrower
represents and warrants to Lenders that after giving effect to this Amendment in
the manner contemplated by Section 4.6 of this Amendment, each of the following
is true and correct:
(a) no event has occurred and is continuing which constitutes an Event of
Default or Potential Event of Default;
(b) the representations and warranties of Borrower and the other Credit
Parties contained in the Credit Agreement and the other Loan Documents are true
and correct on and as of the date hereof and as of the Effective Date (as
defined below) to the same extent as though made on and as of the date hereof
and as of the Effective Date except to the extent such representations and
warranties specifically relate to an earlier date, in which case they are true
and correct in all material respects as of such earlier date;
(c) each of Borrower and the other Credit Parties has performed all
agreements on its part to be performed prior to the date hereof as set forth in
the Credit Agreement and the other Loan Documents;
(d) each of Borrower and the Guarantors has all requisite corporate power
and authority to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement;
(e) the execution of this Amendment has been duly authorized by all
necessary corporate action on the part of Borrower and the Guarantors; and
2
<PAGE>
(f) the execution and delivery by Borrower and the Guarantors of this
Amendment does not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Borrower, the Guarantors or any of
their respective Subsidiaries, the Certificate of Incorporation of Borrower, the
Guarantors or any of their respective Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on Borrower, the
Guarantors or any of their respective Subsidiaries, (ii) conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any Contractual Obligation of Borrower, the Guarantors or any of
their respective Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Borrower, the
Guarantors or any of their respective Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of Collateral Agent on behalf of
Lenders), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Borrower, the
Guarantors or any of their respective Subsidiaries.
SECTION 3
GUARANTORS
Each of the Guarantors hereby consents to this Amendment and agrees that
each Loan Document to which it is a party shall continue in full force and
effect and shall be valid and enforceable and shall not be impaired or affected
by the execution of this Amendment and is hereby ratified and confirmed.
SECTION 4
MISCELLANEOUS
4.1 REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS.
(i) On and after the Effective Date, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby;
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect and
are hereby ratified and confirmed; and
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of any Agent or any Lender
under, the Credit Agreement or any of the other Loan Documents.
3
<PAGE>
4.2 FEES AND EXPENSES.
Borrower acknowledges that all costs, fees and expenses as described in
subsection 10.2 of the Credit Agreement incurred by Managing Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Borrower.
4.3 HEADINGS.
Section and subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
4.4 APPLICABLE LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
COMMON LAW CONFLICTS OF LAWS PRINCIPLES.
4.5 COUNTERPARTS.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
4.6 EFFECTIVENESS.
This Amendment shall become effective (such date being the "EFFECTIVE
DATE") upon the execution of a counterpart hereof by Requisite Lenders, the
Borrower and the Guarantors and receipt by Borrower and Managing Agent of
written or telephone notification of such execution and authorization of
delivery thereof.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
HARTMARX CORPORATION
By:
----------------------------------------------------
Glenn R. Morgan
Executive Vice President and
Chief Financial Officer
GUARANTORS:
AMERICAN APPAREL BRANDS, INC.
ANNISTON SPORTSWEAR CORPORATION
BLLTWELL COMPANY, INC.
BRIAR, INC.
C.M. CLOTHING, INC.
C.M. OUTLET CORP.
CHICAGO TROUSER COMPANY, LTD.
COUNTRY MISS, INC.
COUNTRY MISS INTERNATIONAL LIMITED
COUNTRY SUBURBANS, INC.
DIRECT ROUTE MARKETING CORPORATION
E-TOWN SPORTSWEAR CORPORATION
FAIRWOOD-WELLS, INC.
GLENEAGLES, INC.
TAG APPAREL, INC. (FORMERLY KNOWN AS HENRY GRETHEL
APPAREL, INC.)
HANDMACHER FASHIONS FACTORY OUTLET, INC.
HANDMACHER-VOGEL, INC.
HARTMARX INTERNATIONAL, INC.
HART SCHAFFNER & MARX
HART SERVICES, INC.
THOS. HEATH CLOTHES, INC.
TAG LICENSING, INC. (FORMERLY KNOWN AS HGA
LICENSING, INC.)
HICKEY-FREEMAN CO., INC.
S-1
<PAGE>
HIGGINS, FRANK & HILL, INC.
NOVAPPAREL, INC. (FORMERLY KNOWN AS HMXUS, INC.)
HOOSIER FACTORIES, INCORPORATED
HSM UNIVERSITY, INC.
INTERCONTINENTAL APPAREL, INC.
INTERNATIONAL WOMEN'S APPAREL, INC.
JAYMAR-RUBY, INC.
JRSS, INC.
KUPPENHEIMER MEN'S CLOTHIERS DADEVILLE, INC.
MEN'S QUALITY BRANDS, INC.
NATIONAL CLOTHING COMPANY, INC.
106 REAL ESTATE CORP.
RECTOR SPORTSWEAR CORPORATION
ROBERTS INTERNATIONAL CORPORATION
SALHOLD, INC.
SEAFORD CLOTHING CO.
SOCIETY BRAND, LTD.
ROBERT SURREY, INC.
TAILORED TREND, INC.
THORNGATE UNIFORMS, INC.
TRADE FINANCE INTERNATIONAL LIMITED
UNIVERSAL DESIGN GROUP, LTD.
M. WILE & COMPANY, INC.
WINCHESTER CLOTHING COMPANY
YORKE SHIRT CORPORATION
By:
-----------------------------------------------------
Glenn R. Morgan
Vice President of each of the foregoing (except for
Country Miss International Limited) and a Director of
Country Miss International Limited
S-2
<PAGE>
LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION,
individually, as Managing Agent and as Collateral Agent
By:
--------------------------------------------------------
Title:
-------------------------------------------------------
S-3
<PAGE>
THE BANK OF NEW YORK,
individually, as Co-Agent and as Issuing Lender for the
Letters of Credit (other than the Existing Letters of
Credit)
By:
---------------------------------------------------
Title:
--------------------------------------------------
S-4
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC.,
individually and as Co-Agent
By:
--------------------------------------------------------
Title:
-------------------------------------------------------
S-5
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Issuing Lender for Existing Letters of
Credit
By:
----------------------------------------------------
Title:
----------------------------------------------------
S-6
<PAGE>
MANUFACTURERS AND TRADERS TRUST COMPANY
By:
-------------------------------------------------
Title:
---------------------------------------------------
S-7
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------------------------------
Title:
---------------------------------------------------
S-8
<PAGE>
THE NORTHERN TRUST COMPANY
By:
----------------------------------------------------
Title:
---------------------------------------------------
S-9
<PAGE>
CHEMICAL BANK
By:
----------------------------------------------------
Title:
---------------------------------------------------
S-10
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By:
----------------------------------------------------
Title:
---------------------------------------------------
S-11
<PAGE>
EXHIBIT 4-C-5
HARTMARX CORPORATION
FIFTH AMENDMENT TO CREDIT AGREEMENT
This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as
of January 30, 1996 and entered into by and among HARTMARX CORPORATION, a
Delaware corporation ("BORROWER"), the LENDERS LISTED ON THE SIGNATURE PAGES
HEREOF (each individually referred to as a "LENDER" and collectively as
"LENDERS"), GENERAL ELECTRIC CAPITAL CORPORATION as Managing Agent and
Collateral Agent for Lenders ("MANAGING AGENT") and THE BANK OF NEW YORK and
BANKAMERICA BUSINESS CREDIT, INC. as co-agents ("CO-AGENTS") and, for purposes
of Section 3 hereof, the GUARANTORS IDENTIFIED ON THE SIGNATURE PAGES HEREOF,
(collectively the "GUARANTORS"), and is made with reference to that certain
Credit Agreement dated as of March 23, 1994, among Borrower, Lenders and Agent,
as amended by the First Amendment to Credit Agreement dated as of August 26,
1994 among Borrower, Lenders and Agent, by the Second Amendment to Credit
Agreement dated as of March 20, 1995 among Borrower, Lenders and Agent, by the
Third Amendment to Credit Agreement dated as of June 30, 1995 among Borrower,
Lenders, Managing Agent, Co-Agents and consented to by Guarantors and by the
Fourth Amendment to Credit Agreement dated as of November 30, 1995 by and among
Borrower, Lenders, Managing Agent, Co-Agents and consented to by Guarantors (the
"CREDIT AGREEMENT"; capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement). Unless
otherwise indicated, Section and subsection references contained herein shall be
to the corresponding Sections and subsections of the Credit Agreement.
R E C I T A L S
- - - - - - - -
WHEREAS, Borrower and Lenders desire to amend the Credit Agreement as set
forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1
AMENDMENT
1.1 AMENDMENTS TO THE CREDIT AGREEMENT.
A. Rate of Interest. Section 2.2.A. of the Credit Agreement is amended
by deleting the third paragraph and the fourth paragraph thereof in their
entirety and substituting the following therefor:
<PAGE>
"The "APPLICABLE MARGIN" for each LIBOR Rate Loan for any fiscal quarter
shall be the percentage which is set forth below next to the most recent fiscal
quarter of Borrower for which a Compliance Certificate is (or should have been)
delivered pursuant to subsection 6.1(iv) ("CALCULATION QUARTER") based upon the
Consolidated Debt Service Coverage Ratio for the four consecutive fiscal
quarters of Borrower ending on the last day of the Calculation Quarter; provided
that notwithstanding anything to the contrary contained herein, the Applicable
Margin shall be 1.75% until the earlier of (i) the date of delivery of a
Compliance Certificate pursuant to subsection 6.1(iv) for the second fiscal
quarter of 1996 of Borrower or (ii) the date such Compliance Certificate should
have been delivered pursuant to subsection 6.1(iv) for the second fiscal quarter
of 1996 of Borrower in the event that such Compliance Certificate is not timely
delivered.
<TABLE>
<CAPTION>
APPLICABLE
MARGIN FOR
CONSOLIDATED DEBT SERVICE LIBOR RATE
FISCAL QUARTER COVERAGE RATIO LOANS
<S> <C> <C>
- ------------------------------------------------------------------------------
First Quarter 1996 Not applicable 1.75%
- ------------------------------------------------------------------------------
Second Quarter 1996 Less than 0.76:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 0.76:1.00 but less
than 0.84:1.00 1.875%
---------------------------------------------------------
Greater than or equal to 0.84:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
Third Quarter 1996 Less than 0.92:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 0.92:1.00 but less
than 1.02:1.00 1.875%
---------------------------------------------------------
Greater than or equal to 1.02:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
Fourth Quarter 1996 Less than 1.00:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 1.00:1.00 but less
than 1.11:1.00 1.875%
---------------------------------------------------------
Greater than or equal to 1.11:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
First Quarter 1997 Less than 1.22:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 1.22:1.00 but less
than 1.36:1.00 1.875%
---------------------------------------------------------
Greater than or equal to 1.36:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE
MARGIN FOR
CONSOLIDATED DEBT SERVICE LIBOR RATE
FISCAL QUARTER COVERAGE RATIO LOANS
<S> <C> <C>
- ------------------------------------------------------------------------------
Second Quarter 1997 Less than 1.10:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 1.10:1.00 but less
than 1.20:1.00 1.875%
---------------------------------------------------------
Greater than or equal to 1.20:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
Third Quarter 1997 Less than 1.20:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 1.20:1.00 but less
than 1.30:1.00 1.875%
---------------------------------------------------------
Greater than or equal to 1.30:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
Fourth Quarter 1997
and thereafter Less than 1.30:1.00 2.00%
---------------------------------------------------------
Greater than or equal to 1.30:1.00 but less 1.875%
than 1.40:1.00
---------------------------------------------------------
Greater than or equal to 1.40:1.00 but less
than 1.50:1.00 1.75%
---------------------------------------------------------
Greater than or equal to 1.50:1.00 1.50%
- ------------------------------------------------------------------------------
</TABLE>
For Libor Rate Loans initiated, or converted or continued pursuant to a
Notice of Conversion/Continuation or a telephonic request for conversion or
continuation, at or after the delivery of the applicable Compliance Certificate,
the Applicable Margin shall be adjusted, to the extent required, on the date of
delivery of such Compliance Certificate delivered pursuant to subsection
6.1(iv); provided that the Consolidated Debt Service Coverage Ratios and
Applicable Margins set forth above for any Calculation Quarter shall continue in
effect until the earlier of (i) the date of delivery of a Compliance Certificate
pursuant to subsection 6.1(iv) for the fiscal quarter of Borrower next
succeeding such Calculation Quarter or (ii) the date such Compliance Certificate
should have been delivered pursuant to subsection 6.1(iv) for such fiscal
quarter of Borrower next succeeding such Calculation Quarter in the event such
Compliance Certificate is not timely delivered, at which time such fiscal
quarter of Borrower next succeeding such Calculation Quarter shall be deemed to
be the Calculation Quarter for purposes hereof; provided further that without
limiting any Event of Default or Potential Event of Default that may result
therefrom, in the event Borrower does not deliver any Compliance Certificate
required pursuant to subsec tion 6.1(iv) by the date specified therefor, then
the Applicable Margin shall automatically be adjusted to 2.00%, commencing on
the date such Compliance
3
<PAGE>
Certificate was required to be delivered and expiring on the actual date of
delivery thereof."
B. Prepayments and Reductions from Asset Sales. (i) Subsection 2.4A(iii)
of the Credit Agreement is amended by deleting the first sentence thereof and
substituting the following sentence therefor:
"No later than the second Business Day following the date of receipt
by Borrower or any of its Subsidiaries of (i) Net Cash Proceeds of any
Asset Sale equal to or greater than $500,000 in the aggregate, Borrower
shall prepay the Loans in an amount equal to the amount of such Net Cash
Proceeds which is the highest integral multiple of $100,000 and (ii) Net
Cash Proceeds of any Asset Sale, the Revolving Loan Commitments shall be
permanently reduced to the extent required by the proviso set forth
below."
(ii) Subsection 2.4A(iii) of the Credit Agreement is further amended by
deleting the proviso thereto and substituting the following therefor:
" ; provided, however, that the Revolving Loan Commitments shall only be
reduced in an amount equal to the Net Cash Proceeds of an Asset Sale only
to the extent that such amount (or portion thereof) would otherwise be
required to be applied to payment, redemption or repurchase in respect of
the Senior Subordinated Notes."
C. Minimum Consolidated Debt Service Coverage Ratio. Section 7.6A of the
Credit Agreement is amended by amending and restating the table set forth
therein as follows:
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
DEBT SERVICE
FISCAL QUARTER COVERAGE RATIO
<S> <C>
---------------------------------------------------------
Second Quarter 1994 1.10:1.00
---------------------------------------------------------
Third Quarter 1994 1.10:1.00
---------------------------------------------------------
Fourth Quarter 1994 1.10:1.00
---------------------------------------------------------
First Quarter 1995 1.30:1.00
---------------------------------------------------------
Second Quarter 1995 1:30:1.00
---------------------------------------------------------
Third Quarter 1995 1:40:1.00
---------------------------------------------------------
Fourth Quarter 1995 1.00:1.00
---------------------------------------------------------
First Quarter 1996 0.70:1.00
---------------------------------------------------------
Second Quarter 1996 0.67:1.00
---------------------------------------------------------
Third Quarter 1996 0.82:1.00
---------------------------------------------------------
Fourth Quarter 1996 0.89:1.00
---------------------------------------------------------
First Quarter 1997 1.00:1.00
---------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
DEBT SERVICE
FISCAL QUARTER COVERAGE RATIO
<S> <C>
---------------------------------------------------------
Second Quarter 1997 1.00:1.00
---------------------------------------------------------
Third Quarter 1997 1.10:1.00
---------------------------------------------------------
Fourth Quarter 1997 1.20:1.00
---------------------------------------------------------
First Quarter 1998 and thereafter 1.50:1.00
---------------------------------------------------------
</TABLE>
D. Maximum Consolidated Leverage Ratio. Section 7.6B of the Credit
Agreement is amended by amending and restating the table set forth therein as
follows:
<TABLE>
<CAPTION>
Fiscal Quarter Maximum Consolidated Leverage Ratio
<S> <C>
---------------------------------------------------------
Second Quarter 1994 6.25:1.00
---------------------------------------------------------
Third Quarter 1994 6.25:1.00
---------------------------------------------------------
Fourth Quarter 1994 6.25:1.00
---------------------------------------------------------
First Quarter 1995 6.00:1.00
---------------------------------------------------------
Second Quarter 1995 6.00:1.00
---------------------------------------------------------
Third Quarter 1995 5.50:1.00
---------------------------------------------------------
Fourth Quarter 1995 6.50:1.00
---------------------------------------------------------
First Quarter 1996 9.00:1.00
---------------------------------------------------------
Second Quarter 1996 8.50:1.00
---------------------------------------------------------
Third Quarter 1996 8.50:1.00
---------------------------------------------------------
Fourth Quarter 1996 7.50:1.00
---------------------------------------------------------
First Quarter 1997 7.50:1.00
---------------------------------------------------------
Second Quarter 1997 7.00:1.00
---------------------------------------------------------
Third Quarter 1997 7.00:1.00
---------------------------------------------------------
Fourth Quarter 1997 6.00:1.00
---------------------------------------------------------
First Quarter 1998 and thereafter 5.50:1.00
---------------------------------------------------------
</TABLE>
E. Consolidated Capital Expenditures. Section 7.8 of the Credit Agreement
is amended by amending and restating the table set forth therein as follows:
<TABLE>
<CAPTION>
Fiscal Year Maximum Consolidated Capital Expenditures
<S> <C>
---------------------------------------------------------
1994 $15,000,000
---------------------------------------------------------
1995 $16,000,000
---------------------------------------------------------
1996 $15,000,000
---------------------------------------------------------
1997 $16,000,000
---------------------------------------------------------
1998 $17,000,000
---------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------
<S> <C>
1999 $18,000,000
---------------------------------------------------------
</TABLE>
SECTION 2
BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment, Borrower
represents and warrants to Lenders that after giving effect to this Amendment in
the manner contemplated by Section 4.6 of this Amendment, each of the following
is true and correct:
(a) no event has occurred and is continuing which constitutes an Event of
Default or Potential Event of Default;
(b) the representations and warranties of Borrower and the other Credit
Parties contained in the Credit Agreement and the other Loan Documents are true
and correct on and as of the date hereof and as of the Effective Date (as
defined below) to the same extent as though made on and as of the date hereof
and as of the Effective Date except to the extent such representations and
warranties specifically relate to an earlier date, in which case they are true
and correct in all material respects as of such earlier date;
(c) each of Borrower and the other Credit Parties has performed all
agreements on its part to be performed prior to the date hereof as set forth in
the Credit Agreement and the other Loan Documents;
(d) each of Borrower and the Guarantors has all requisite corporate power
and authority to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement;
(e) the execution of this Amendment has been duly authorized by all
necessary corporate action on the part of Borrower and the Guarantors; and
(f) the execution and delivery by Borrower and the Guarantors of this
Amendment does not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Borrower, the Guarantors or any of
their respective Subsidiaries, the Certificate of Incorporation of Borrower, the
Guarantors or any of their respective Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on Borrower, the
Guarantors or any of their respective Subsidiaries, (ii) conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any Contractual Obligation of Borrower, the Guarantors or any of
their respective Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Borrower, the
Guarantors or any of their respective Subsidiaries (other than any Liens created
under any of the Loan Documents in favor of
6
<PAGE>
Collateral Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Borrower, the Guarantors or any of their respective Subsidiaries.
SECTION 3
GUARANTORS
Each of the Guarantors hereby consents to this Amendment and agrees that
each Loan Document to which it is a party shall continue in full force and
effect and shall be valid and enforceable and shall not be impaired or affected
by the execution of this Amendment and is hereby ratified and confirmed.
SECTION 4
MISCELLANEOUS
4.1 REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS.
(i) On and after the Effective Date, each reference in the Credit Agreement
to "this Agreement", "hereunder", "hereof", "herein" or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement", "thereunder", "thereof" or words of
like import referring to the Credit Agreement, shall mean and be a reference to
the Credit Agreement as amended hereby;
(ii) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed; and
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of any Agent or any
Lender under, the Credit Agreement or any of the other Loan Documents.
4.2 FEES AND EXPENSES.
Borrower acknowledges that all costs, fees and expenses as described in
subsection 10.2 of the Credit Agreement incurred by Managing Agent and its
counsel with respect to this Amendment and the documents and transactions
contemplated hereby shall be for the account of Borrower.
7
<PAGE>
4.3 HEADINGS.
Section and subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
4.4 APPLICABLE LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
COMMON LAW CONFLICTS OF LAWS PRINCIPLES.
4.5 COUNTERPARTS.
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
4.6 EFFECTIVENESS.
This Amendment shall become effective (such date being the "EFFECTIVE
DATE") upon the execution of a counterpart hereof by Requisite Lenders, the
Borrower and the Guarantors and receipt by Borrower and Managing Agent of
written or telephone notification of such execution and authorization of
delivery thereof.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
HARTMARX CORPORATION
By: _______________________________________________
Glenn R. Morgan
Executive Vice President and
Chief Financial Officer
GUARANTORS:
AMERICAN APPAREL BRANDS, INC.
ANNISTON SPORTSWEAR CORPORATION
BLLTWELL COMPANY, INC.
BRIAR, INC.
C.M. CLOTHING, INC.
C.M. OUTLET CORP.
CHICAGO TROUSER COMPANY, LTD.
COUNTRY MISS, INC.
COUNTRY MISS INTERNATIONAL LIMITED
COUNTRY SUBURBANS, INC.
DIRECT ROUTE MARKETING CORPORATION
E-TOWN SPORTSWEAR CORPORATION
FAIRWOOD-WELLS, INC.
GLENEAGLES, INC.
TAG APPAREL, INC. (FORMERLY KNOWN AS HENRY GRETHEL
APPAREL, INC.)
HANDMACHER FASHIONS FACTORY OUTLET, INC.
HANDMACHER-VOGEL, INC.
HARTMARX INTERNATIONAL, INC.
HART SCHAFFNER & MARX
HART SERVICES, INC.
THOS. HEATH CLOTHES, INC.
TAG LICENSING, INC. (FORMERLY KNOWN AS HGA LICENSING,
INC.)
HICKEY-FREEMAN CO., INC.
HIGGINS, FRANK & HILL, INC.
S-1
<PAGE>
NOVAPPAREL, INC. (FORMERLY KNOWN AS HMXUS, INC.)
HOOSIER FACTORIES, INCORPORATED
HSM UNIVERSITY, INC.
INTERCONTINENTAL APPAREL, INC.
INTERNATIONAL WOMEN'S APPAREL, INC.
JAYMAR-RUBY, INC.
JRSS, INC.
KUPPENHEIMER MEN'S CLOTHIERS DADEVILLE, INC.
MEN'S QUALITY BRANDS, INC.
NATIONAL CLOTHING COMPANY, INC.
106 REAL ESTATE CORP.
RECTOR SPORTSWEAR CORPORATION
ROBERTS INTERNATIONAL CORPORATION
SALHOLD, INC.
SEAFORD CLOTHING CO.
SOCIETY BRAND, LTD.
ROBERT SURREY, INC.
TAILORED TREND, INC.
THORNGATE UNIFORMS, INC.
TRADE FINANCE INTERNATIONAL LIMITED
UNIVERSAL DESIGN GROUP, LTD.
M. WILE & COMPANY, INC.
WINCHESTER CLOTHING COMPANY
YORKE SHIRT CORPORATION
By: _______________________________________________
Glenn R. Morgan
Vice President of each of the foregoing (except
for Country Miss International Limited) and a
Director of Country Miss International Limited
S-2
<PAGE>
LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION,
individually, as Managing Agent and as Collateral Agent
By: _______________________________________________
Title: ____________________________________________
S-3
<PAGE>
THE BANK OF NEW YORK,
individually, as Co-Agent and as Issuing Lender for
the Letters of Credit (other than the Existing Letters
of Credit)
By: _______________________________________________
Title: ____________________________________________
S-4
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC.,
individually and as Co-Agent
By: _______________________________________________
Title: ____________________________________________
S-5
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Issuing Lender for Existing
Letters of Credit
By: _______________________________________________
Title: ____________________________________________
S-6
<PAGE>
MANUFACTURERS AND TRADERS TRUST COMPANY
By: _______________________________________________
Title: ____________________________________________
S-7
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By: _______________________________________________
Title: ____________________________________________
S-8
<PAGE>
THE NORTHERN TRUST COMPANY
By: _______________________________________________
Title: ____________________________________________
S-9
<PAGE>
CHEMICAL BANK
By: _______________________________________________
Title: ____________________________________________
S-10
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By: _______________________________________________
Title: ____________________________________________
S-11
<PAGE>
EXHIBIT 9-A-1
AMENDMENT TO STOCKHOLDER'S AGREEMENT
------------------------------------
AMENDMENT, dated as of December 30, 1992, by and between Hartmarx
Corporation, a Delaware corporation ("Hartmarx") and Traco International, N.V.,
a Netherlands Antilles corporation ("Traco").
WHEREAS, Hartmarx and Traco have entered into a certain Securities Purchase
Agreement, dated as of September 20, 1992, and a certain Stockholder's
Agreement, dated as of September 20, 1992 (the "Stockholder's Agreement");
WHEREAS, Hartmarx and Traco wish to amend the Stockholder's Agreement; and
WHEREAS, Section 8 of the Stockholder's Agreement provides that the
Stockholder's Agreement may be amended by written agreement of Hartmarx and
Traco.
NOW THEREFORE, Hartmarx and Traco hereby amend the Stockholder's Agreement
as follows:
Section 1. Section 2(a) of the Stockholder's Agreement is deleted and
restated in its entirety as follows:
(a) During the Agreement Period (as defined in Section 6 hereof), except
(1) in connection with the consummation of the transactions contemplated by the
Purchase Agreement, (2) as a result of the exercise of the Warrant, (3) by way
of stock dividend, stock split or other like distributions made with respect to
Shares held by the Stockholder, (4) as specifically permitted by the terms of
this Agreement, (5) during the pendency pursuant to Section 14(d) of the
Exchange Act of a bona fide, fully financed tender offer by any Person (other
than the Stockholder, its Affiliates, the Company, its Affiliates and any
employee benefit plan of the Company), if upon the consummation of such tender
offer such Person would beneficially own more than 20% of the Company's then
outstanding Voting Securities, and if the consummation of such tender offer is
not conditioned upon any actions being taken by the Board of Directors of the
Company, (6) in the event that any Person (other than the Stockholder, its
<PAGE>
Affiliates, the Company, its Affiliates and any employee benefit plan of the
Company) becomes the beneficial owner of more than 20% of the Company's then
outstanding Voting Securities or proposes to become such a beneficial owner and
such proposal is approved by or recommended by the Board of Directors of the
Company, (7) in the event that the Company has entered into a definitive merger
agreement or a definitive agreement for the sale of all or substantially all of
its assets (in either case with a party other than an Affiliate of the Company),
(8) in an Anti-dilution Transaction (as defined in Section 6 hereof) or (9) with
the prior written approval of the Company, the Stockholder will not, and will
cause each of its Affiliates (other than Lending Affiliates, as defined in
Section 6 hereof) not to, acquire, offer or propose to acquire, or agree to
acquire, directly or indirectly, by purchase or otherwise (including by
operation of law), or otherwise become the beneficial owner (as defined in Rule
13d-3 of the Commission under Section 13(d) of the Exchange Act) with respect
to, any equity securities or Voting Securities of the Company, or direct or
indirect rights or options to acquire (through purchase, exchange, conversion or
otherwise) any equity securities or Voting Securities of the Company.
Notwithstanding the foregoing, the Stockholder may transfer Voting Securities to
(A)(i) an Affiliate or (ii) to any Person which is a client of Dearborn
Financial, Inc. identified to and satisfactory to the Company, in either case
(A)(i) or (A)(ii), who has agreed in writing satisfactory to the Company to be
bound by the terms of this Agreement (a "Permitted Entity") or (B) any Person (a
"Stockholder Group Investor") which may be deemed a member of a group (the
"Stockholder Group") with the Stockholder (as "group" is used within the meaning
of Section 13(d)(3) of the Exchange Act) with respect to the equity securities
or Voting Securities of the Company provided, (i) that upon the consummation of
such transfer, the Stockholder Group Investors, together with any Affiliates
(other than the Stockholder or any other Stockholder Group Investors) of the
Stockholder Group Investors and any group (other than the Stockholder Group)
with respect to the equity securities or Voting Securities of the Company of
which the Stockholder Group Investors or such Affiliates may be a member, do not
beneficially own (or hold as pledgee) in the aggregate five percent (5%) or more
of the combined voting power of the then outstanding Voting Securities and (ii)
in the reasonable judgment of the Stockholder, the Stockholder Group Investor
shall not have the intention of performing any action which may reasonably be
expected to have an adverse effect on the Company.
<PAGE>
The Company will give the Stockholder and each Permitted Entity notice of
any issuance of securities by the Company which would give rise to the right of
the Stockholder or each Permitted Entity to enter into an Anti-dilution
Transaction.
Section 2. Stockholder Group Investor
The term "and Stockholder Group Investors" shall be added after the term
"Permitted Entities" in (a) the 6th line of Section 2(b)(iii), (b) in the 4th
line of Section 2(b)(iv), (c) in the 2nd line of the last full paragraph of
Section 2(b), (d) in the 13th line of Section 4(a), (e) in the 5th line of the
definition of "Agreement Period" in Section 6, and (f) in the 3rd line of the
definition of "Third Person" in Section 6. The term "or Stockholder Group
Investor" shall be added after the term "Permitted Entity" in the 3rd line of
the definition of "Lending Affiliate" in Section 6. The term "beneficial" shall
be added after the term "percentage" in the 8th line of the definition of
"Anti-dilution Transaction" in Section 6.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed, all as of the day and year first above written.
TRACO INTERNATIONAL, N.V.
By:
------------------------------
Name:
Title:
HARTMARX CORPORATION
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10-F-6
EMPLOYMENT AGREEMENT
--------------------
This Agreement entered into as of the 31st day of August, 1995, by and
between HARTMARX CORPORATION, a Delaware corporation ("Hartmarx"), and GLENN R.
MORGAN ("Executive").
WITNESSETH THAT:
----------------
WHEREAS, the parties hereto desire to enter into this Agreement pertaining
to the terms of Executive's employment by Hartmarx; and
WHEREAS, upon the execution of this Agreement by Hartmarx and Executive the
terms and conditions of this Agreement shall control and govern the employment
relationship between Hartmarx and Executive.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, it is hereby covenanted and agreed by the parties hereto as
follows:
1. Employment Period. Hartmarx hereby employs Executive and Executive
hereby agrees to remain in the employ of Hartmarx for an approximate 16 month
consecutive term beginning on August 31, 1995, and continuing in effect through
December 31, 1996 (the "Agreement Period"). While Executive is employed by
Hartmarx during the Agreement
<PAGE>
Period, Hartmarx shall use its best efforts to have the Board of Directors elect
Executive to the office(s) of Executive Vice President and Chief Financial
Officer of Hartmarx.
2. Performance of Duties. While he is employed by Hartmarx Executive
agrees that he shall devote his best efforts and full business time exclusively
to the business affairs of Hartmarx and its subsidiaries and shall perform his
duties faithfully and efficiently, subject to the direction of the Hartmarx
Board of Directors; provided, however, that Executive may become a director of
other corporations and engage in charitable, civic, professional and other
similar pursuits to the extent that such activities do not interfere with him
devoting his best efforts to his duties to Hartmarx.
3. Compensation. Subject to the terms and provisions of this Agreement,
during the Agreement Period, Executive shall be compensated for his services by
Hartmarx as follows:
(a) Executive's annual base salary shall not be less than his annual
base salary as of the date hereof (i.e., $200,000) and shall be
payable semi-monthly or more frequently, in arrears, subject to
all normal deductions and withholdings. Such annual base salary
may be increased at the discretion of
2
<PAGE>
the Compensation and Stock Option Committee of the Hartmarx Board
of Directors (the "Committee").
(b) Executive shall be entitled to a bonus in accordance with the
terms and conditions of the Hartmarx Management Incentive Plan
(the "MIP") and/or any successor plan.
(c) Executive shall be a participant in the Hartmarx Long Term
Incentive Plan (the "LTI Plan") for such period of time as it may
be in effect and in any successor to that plan.
4. Participation in Benefit Plans. The payments and participation
provided in Paragraph 3 hereof are in addition to any benefits to which
Executive shall be, or may become, entitled under any group hospitalization,
health, dental care, vacation or sick-leave plan, salary continuance or
disability plan, life or other insurance or death benefit plan, travel or
accident insurance arrangement, auto and/or liability insurance plan, auto lease
arrangement, or executive contingent compensation plan, including, without
limitation, any capital accumulation and termination pay programs, restricted or
stock purchase plan, retirement income or pension plan, or other present or
future group employee benefit plan or program of Hartmarx which key executives
are or shall become eligible; and Executive shall be eligible to receive during
the Agreement Period, all benefits and emoluments for which key executives are
eligible under every such plan, program or arrangement of Hartmarx, to the
extent permissible under the general terms
3
<PAGE>
and provisions of such plans or programs and in accordance with the provisions
hereof (all of such benefits and emoluments being hereinafter referred to as
"Fringe Benefits").
5. Noncompete and Confidentiality. Provided Hartmarx is not in default
hereunder, Executive shall not, during the Agreement Period:
(a) engage in any competitive activities, unless Executive is
discharged or resigns due to the occurrence of any of the events
set forth in Paragraph 7 hereof;
(b) disparage, discredit or otherwise publicly criticize Hartmarx or
any subsidiary thereof; or
(c) engage in any act, directly or indirectly, for purposes of
disparaging, ridiculing or bringing scorn upon Hartmarx, any
subsidiary thereof, or any of their respective officers,
directors, businesses, tradenames or trademarks.
For the purpose of this Paragraph 5, the term "competitive activities" shall
mean engaging directly or indirectly, anywhere, in any business or activity,
whether as an individual, partner or employee, or as an officer, director or
stockholder of a corporation which substantially competes with the business or
activities of Hartmarx or any of its
4
<PAGE>
subsidiaries; provided, that shareholdings aggregating less than 5% of the
outstanding shares of any publicly held company shall not constitute
"competitive activities."
During and after the Agreement Period, Executive will not divulge or
appropriate to his own use or to the use of others or maliciously divulge any
trade or confidential or proprietary information pertaining to the business of
Hartmarx or of any of its subsidiaries.
Executive acknowledges that Hartmarx would be irreparably injured by a
violation of the provisions of this Paragraph 5 and agrees that Hartmarx shall
be entitled to an injunction restraining Executive from any actual or threatened
breach of this Paragraph 5 and to any other appropriate equitable remedy without
any bond or other security being required.
6. Discharge. If Executive is discharged by Hartmarx other than for
"Cause" (as hereinafter defined), or resigns due to the occurrence of any of the
events set forth in Paragraph 7 hereof:
(a) Executive shall be entitled to receive from Hartmarx (provided
Executive shall not be in breach of any provision of this Agreement
applicable to him after such discharge or resignation):
5
<PAGE>
(i) The then applicable salary provided for in Paragraph 3(a)
hereof for a period of twenty-four (24) consecutive months,
payable semi-monthly or more frequently, in arrears, commencing
on the date Executive's employment with Hartmarx is terminated.
(ii) The balance, if any, as of the date Executive's employment with
Hartmarx is terminated, of Executive's deferred compensation
account under any deferred compensation agreement between
Executive and Hartmarx.
(iii) An amount equal to the sum of (A) any unpaid incentive
compensation (including the cash value, determined without
regard to any restrictions on the sale thereof, of restricted
stock) allocated or awarded to Executive under the MIP for any
fiscal year ending prior to the year in which Executive's
employment with Hartmarx is terminated; plus (B) any amount
payable under the MIP (including the cash value, determined
without regard to any restrictions on the sale thereof, of
restricted stock) for the year in which Executive's employment
with Hartmarx is terminated calculated based on the assumption
that Hartmarx' actual results from the beginning of such year
to the date of termination (expressed as a percentage of
6
<PAGE>
achievement of projected or budgeted results for the same
period) would continue at the same rate until the end of the
year in which Executive's employment with Hartmarx is
terminated, plus (C) an amount equal to the bonus compensation
(including the cash value, determined without regard to any
restrictions on the sale thereof, of restricted stock) which
would be payable under the MIP for the year in which
Executive's employment is terminated calculated based on the
assumption that Hartmarx achieves its "Step-1" target level (as
defined in the MIP) for such year; plus (D) an additional
amount equal to the amount calculated in (C) above in the event
of the termination of Executive's employment after a Change in
Control (as defined herein). The amounts set forth in item (B),
(C) and (D) above shall be payable to Executive regardless of
whether Hartmarx actually achieves the performance levels upon
which the calculation of such amounts are based .
(iv) An amount equal to the sum of (A) any unpaid incentive
compensation (including the cash value, determined without
regard to any restrictions on the sale thereof, of restricted
stock) allocated or awarded to Executive under the LTI Plan for
any fiscal
7
<PAGE>
year ending prior to such date of termination; plus (B) a pro
rata portion of the aggregate value of all contingent incentive
compensation (including the cash value, determined without
regard to any restrictions on the sale thereof, of restricted
stock) awards to Executive for all uncompleted periods under
the LTI Plan, to the extent covered under the performance goals
for the performance period(s) in which such date of termination
occurs; plus (C) the aggregate value of all incentive
compensation (including the cash value, determined without
regard to any restrictions on the sale thereof, of restricted
stock) awards which would have been payable to Executive under
the LTI Plan for such performance period(s), calculated based
on the assumption that Hartmarx' results from the beginning of
such performance period(s) to the date of termination would
continue at the same rate until the originally intended
completion date(s) of such performance period(s). The amount
set forth in item (C) above shall be payable to Executive
regardless of whether Hartmarx actually achieves the
performance level upon which the calculation of such amount is
based.
8
<PAGE>
(v) All Fringe Benefits (other than group medical/dental insurance)
for a period of twenty-four (24) consecutive months (or thirty-
six (36) months in the event of the termination of Executive's
employment after a Change in Control), commencing on the date
Executive's employment with Hartmarx is terminated; plus
(subject to Executive's continued payment of his share of any
premium with respect thereof) group medical/dental insurance
coverage equivalent to that provided at the time Executive's
employment with Hartmarx is terminated, until the earlier of
(A) the date twenty-four (24) months (or thirty-six (36) months
in the event of the termination of Executive's employment after
a Change in Control) after the date Executive's employment with
Hartmarx is terminated, or (B) the date covered medical/dental
benefits for Executive and Executive's dependents are payable
under any comparable medical insurance policy furnished to
Executive by a subsequent employer. Following the expiration of
the twenty-four or thirty-six month period (whichever is
applicable) described in the preceding sentence, Executive
shall be permitted to participate in any medical (including
dental and vision) plans maintained by Hartmarx in
9
<PAGE>
which he was participating immediately prior to his termination
of employment (if permitted under the terms of and/or policies
governing such plans and by applicable law) at his own cost
(i.e., without Hartmarx subsidization) until the earlier of his
sixty-fifth (65th) birthday or the commencement of his
employment (by other than Hartmarx). Nothing herein shall be
deemed to limit Executive's rights, if any, to thereafter
participate in any retiree medical plan then in effect.
The payments, if any, due in respect of items (ii), (iii) and (iv)
above shall be made not later than five (5) days after the date Executive's
employment with Hartmarx is terminated.
(b) In addition to Executive's entitlement to receive the aforesaid
payments and Fringe Benefits:
(i) All stock options (whether or not then fully exercisable)
granted to Executive under any of Hartmarx's stock option plans
prior to the date Executive's employment with Hartmarx is
terminated shall become immediately exercisable and Executive
shall be entitled to exercise any or all of such options at any
time prior to the respective expiration dates
10
<PAGE>
of such options (as set forth in the grant document
evidencing same);
(ii) All restricted stock granted to Executive prior to the date
Executive's employment with Hartmarx is terminated (and all
restricted stock to be awarded pursuant to Paragraph 6 hereof)
shall become fully vested and all restrictions thereon shall
lapse; and
(iii) The number of full and partial calendar months between the date
Executive's employment with Hartmarx is terminated and the date
that all payments due Executive pursuant to Paragraph 6(a)(i)
hereof are made (but not less than twenty-four (24) months, or,
in the event of the termination of Executive's employment after
a Change in Control, thirty-six (36) months) shall be counted
in determining the number of Executive's Years of Service for
benefit accrual purposes under the Hartmarx Retirement Income
Plan (RIP). In addition, any supplemental annual retirement
benefit theretofore authorized to be paid to Executive due to
ERISA limitations (SERP) shall be payable to Executive in the
form of a single life annuity, monthly, at the same times and
for the same duration as Executive's benefit payments from RIP.
In the event Executive shall elect to receive
11
<PAGE>
payment of his RIP benefits in the form of a joint and survivor
annuity, said supplemental annual benefit shall be paid in the
same form, and the amount of such annual income payable to
Executive and to his surviving spouse shall be adjusted so that
the value of such supplemental benefit is the actuarial
equivalent of the benefit which would otherwise be payable if
paid in the form of a single life annuity. Notwithstanding the
foregoing, in the event that Hartmarx thereafter elects to pay
a SERP benefit payable to any chief executive officer of
Hartmarx in the form of a discounted lump sum payment,
Executive shall have the option to receive his SERP benefit
paid in a similar manner.
For all purposes of this Agreement, the term "Cause" shall include any
material breach of this Agreement by Executive and/or any action or failure to
act on the part of Executive involving material malfeasance, nonfeasance (not
due to disability) or gross negligence having a material adverse effect on
Hartmarx.
7. Resignation for Good Reason. Executive may treat any of the following
events as a termination of his employment by Hartmarx without Cause, with the
consequences provided in Paragraph 6 hereof:
12
<PAGE>
(a) without Cause (as defined in Paragraph 6 hereof), the Board of
Directors of Hartmarx determines not to elect Executive to the
office(s) stated in Paragraph 1 hereof;
(b) [intentionally omitted]
(c) the provisions of Hartmarx' bylaws describing, or the relative duties
and responsibilities of, the office of Executive Vice President, Chief
Financial Officer are changed without Executive's consent;
(d) the assignment to Executive of any duties inconsistent with
Executive's status as Executive Vice President, Chief Financial
Officer of Hartmarx or a substantial adverse alteration in the nature
or status of Executive's responsibilities;
(e) any reduction by Hartmarx in Executive's annual base salary as in
effect on the date hereof or as the same may be increased from time to
time, except for across-the-board salary reductions similarly
affecting all executives of Hartmarx;
(f) the failure by Hartmarx, without Executive's consent, to pay to
Executive any portion of Executive's current compensation, or to pay
to Executive any portion of an installment of deferred compensation
under any deferred compensation program of Hartmarx, within seven (7)
days of the date such compensation is due; or
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(g) the failure by Hartmarx to continue to provide Executive with Fringe
Benefits substantially similar to those enjoyed by Executive under any
of Hartmarx' pension, life insurance, medical, health and accident, or
disability plans in which Executive was participating as of the date
hereof; the taking of any action by Hartmarx which would directly or
indirectly materially reduce or deprive Executive of any material
Fringe Benefit enjoyed by Executive or any beneficiary of Executive as
of the date hereof or to which Executive is entitled pursuant to this
Agreement; the failure by Hartmarx to calculate Executive's annual
bonus compensation, if any, using at least the valuation and number of
accountability points used to determine the bonus opportunity in any
previous year during the Agreement Period for any corporate officer
position held by Executive; or the failure by Hartmarx to provide
Executive with the number of paid vacation days to which Executive may
then be entitled on the basis of years of service with Hartmarx in
accordance with Hartmarx' normal vacation policy in effect as of the
date hereof; except (as to all of the foregoing) for changes
(including termination) in such benefits and/or policies similarly
affecting all executives of Hartmarx.
(h) [intentionally omitted]
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Executive's right to treat any of the foregoing events as a termination of
his employment shall be exercised by notice given to Hartmarx after the
occurrence of such event.
8. Change in Control. Hartmarx further agrees to pay the severance
benefit described in this Paragraph 8 (the "Severance Payment") in the event of
Executive's termination of employment at any time during the twenty-four (24)
month period next following a Change in Control for any reason other than (i)
Executive's death, disability or retirement; (ii) by Hartmarx for Cause; or
(iii) by Executive for other than the occurrence of any of the events set forth
in Paragraph 7 hereof.
The Severance Payment shall be a lump sum payment equal to three (3) times
the annual base salary payable to Executive pursuant to Paragraph 3 hereof as of
the date Executive's employment with Hartmarx is terminated and shall be paid to
Executive, in lieu of any amounts otherwise payable under Paragraph 6(a)(i)
hereof, not later than five (5) days after the date Executive's employment with
Hartmarx is terminated. Executive shall also continue to be entitled to all
other payments, Fringe Benefits and entitlements set forth in Paragraphs
6(a)(ii)-(v) and Paragraphs 6(b)(i)-(iii) hereof in accordance with the
provisions of said Paragraphs.
A Change in Control shall be deemed to have occurred during the Agreement
Period if:
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(a) any person, as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, other than a trustee or
other fiduciary holding securities under an employee benefit plan of
Hartmarx, is or becomes the beneficial owner, as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended, directly or
indirectly, of securities of Hartmarx representing 25% or more of the
combined voting power of Hartmarx' then outstanding securities; or
(b) during any period of two consecutive years (not including any period
prior to the date of this Agreement), individuals who at the beginning
of such period constitute the Board of Directors of Hartmarx ("Board")
and any new director whose election by the Board or nomination for
election by the stockholders of Hartmarx was approved by a vote of at
least two-thirds (2/3) of the directors who were directors at the
beginning of the period, cease for any reason to constitute a majority
thereof; or
(c) the business of Hartmarx is disposed of pursuant to a partial or
complete liquidation of Hartmarx, a sale of all or substantially all
of its assets (including stock of its subsidiaries), or otherwise.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur in the event of a Management
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Change in Control. A Management Change in Control shall mean a Change in
Control pursuant to which Executive (alone or with others) acquires or retains,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the Company (whether through the ownership of voting
securities, by contract, or otherwise) and which is directly or indirectly
attributable to a public announcement by Executive (or others acting in concert
with Executive) of an intention to take actions which, if consummated, would
constitute such Management Change in Control.
Notwithstanding any other provision of this Agreement, in the event that
any payment or benefit received or to be received by Executive in connection
with the termination of the Executive's employment after a Change in Control
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with Hartmarx, any person whose actions result in a Change in
Control or any person affiliated with Hartmarx or such person, all such payments
and benefits, including the Severance Payment, being hereinafter called "Total
Payments") would be subject, in whole or part, to any excise tax (the "Excise
Tax") imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), then the Severance Payment shall be reduced to the extent
necessary so that no portion of the Total Payments is subject to the Excise Tax
(after taking into account any reduction in the Total Payments provided by
reason of section 280G of the Code in such other
17
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plan, arrangement or agreement), provided, however, that there shall be no
reduction to the Severance Payment unless (A) the net amount of such Total
Payments, as so reduced, and after deduction of the net amount of federal, state
and local income tax on such reduced Total Payments is greater than (B) the
excess of (i) the net amount of such Total Payments, without reduction, but
after deduction of the net amount of federal, state and local income tax on such
Total Payments, over (ii) the amount of Excise Tax to which the Executive would
be subject in respect of such Total Payments. For purposes of determining
whether and the extent to which the Total Payments will be subject to the Excise
Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing prior to the date Executive's
employment with Hartmarx is terminated shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account which in the opinion
of tax counsel selected by Executive does not constitute a "parachute payment"
within the meaning of section 28OG(b)(2) of the Code, (including by reason of
section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no
portion of such Total Payments shall be taken into account which constitutes
reasonable compensation for services actually rendered (within the meaning of
section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in
section 280G(b)(3) of the Code) allocable to such reasonable compensation, and
(iii) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be
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determined by Executive in accordance with the principles of sections 280G(d)(3)
and (4) of the Code. Prior to the payment of the Severance Payment as provided
in Paragraph 8 hereof, Hartmarx shall provide the Executive with its calculation
of the amounts referred to in this paragraph and such supporting materials as
are reasonably necessary for the Executive to evaluate Hartmarx' calculations.
If the Executive objects to Hartmarx' calculations, Hartmarx shall pay to the
Executive such portion of the Severance Payments (up to 100% thereof) as the
Executive determines is necessary to result in the Executive receiving the
greater of clauses (A) and (B) of this paragraph.
9. Amendment. This Agreement may be amended in writing by mutual
agreement of the parties without the consent of any other person and, during the
life of Executive, no person, other than the parties hereto, shall have any
rights under or interest in this Agreement or the subject matter hereof.
10. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and, if sent by registered mail, to
Hartmarx at its principal executive offices, to the attention of its General
Counsel, or to Executive at the last address filed by him in writing with the
Committee, as the case may be.
11. Nonalienation. The interests of Executive under this Agreement are
not subject to the claims of his
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creditors, other than Hartmarx and its subsidiaries, and may not otherwise be
voluntarily or involuntarily assigned, alienated or encumbered.
12. Successors. This Agreement shall be binding upon, and inure to the
benefit of, Hartmarx and its successors and assigns and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of Hartmarx's assets and business.
13. Prior Agreements. This Agreement cancels any agreements entered into
between the parties hereto prior to the day and year first above written.
14. Severability. If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall to the full
extent consistent with law continue in full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held so invalid, and the rest of such
provision, together with all other provisions of this Agreement, shall to the
full extent consistent with law continue in full force and effect.
15. Applicable Law. The provisions of this Agreement shall be construed
in accordance with the laws of the State of Illinois.
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16. Counterparts. The Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
17. Attorney's Fees. Hartmarx will pay or reimburse Executive for all
legal fees and expenses incurred to obtain any benefit (including but not
limited to the Severance Payment) to be provided to Executive pursuant to this
Agreement.
18. Beneficiaries. If Executive should die while any amount is payable to
him hereunder, such amount shall be paid to Executive's devisee, legatee or
other designee or, if there is no such designee, to Executive's estate.
19. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in Chicago, Illinois in accordance
with the rules of the American Arbitration Association then in effect. Hartmarx
and the Executive shall each be entitled to select one arbitrator, with the two
selected arbitrators choosing the third arbitrator. Judgment may be entered on
the arbitrators' award in any court having jurisdiction. The expense of such
arbitration shall be borne by Hartmarx.
20. Mitigation. In no event shall the payments to be made and the
benefits to be provided by Hartmarx under this Agreement be reduced by
Executive's receipt of any
21
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compensation or benefits from other employment following the termination of
Executive's employment with Hartmarx.
IN WITNESS WHEREOF, Executive has hereunto set his hand, and Hartmarx has
caused these presents to be executed in its name and on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, all as of
the day and year first above written.
_________________________
Glenn R. Morgan
Attest: HARTMARX CORPORATION
_______________________ By:______________________
Mary D. Allen, E.O. Hand, Chairman
Secretary and Chief Executive
Officer
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EXHIBIT 10-I
HARTMARX CORPORATION
DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1996
<PAGE>
HARTMARX CORPORATION
DEFERRED COMPENSATION PLAN
I. PURPOSE
II. DEFINITIONS
III. ELIGIBILITY AND PARTICIPATION LIMITS
IV. BENEFITS
V. CLAIM FOR BENEFITS PROCEDURE
VI. ADMINISTRATION
VII. AMENDMENT AND TERMINATION
VIII. MISCELLANEOUS
<PAGE>
HARTMARX CORPORATION
DEFERRED COMPENSATION PLAN
I. PURPOSE
The purpose of the Hartmarx Deferred Compensation Plan is to provide a means
whereby Hartmarx may afford certain employees and senior management with an
opportunity to build additional financial security, by providing a vehicle to
defer Salary and Bonus amounts. Deferrals of Salary and Bonus will be credited
with interest based on the Company's incremental short-term borrowing cost, in
accordance with the Plan, and paid to the Participant (or his or her
Beneficiary) as described herein. By providing a means whereby Salary and Bonus
may be deferred into the future, the Plan will aid in attracting and retaining
managers of exceptional ability, provide them with additional financial security
at the time of Retirement and supplement other Company-sponsored benefits in the
event of death or Disability.
II. DEFINITIONS
2.1 "Administration Committee" means the Plan Administration Committee
appointed pursuant to Article VI to manage and administer the Plan.
2.2 "Agreement" means the Hartmarx Deferral Election
Agreement, executed between a Participant and the Company, whereby a Participant
agrees to participate in the Plan and to defer a portion of his or her Salary or
Bonus (as the case may be) or both, pursuant to the provisions of the Plan, and
the Company agrees to pay benefits in accordance with the provisions of the Plan
and Agreement. Subject to the limitations of Section 3.3, a Participant may file
an Agreement for each Plan Year in accordance with Section 3.2.
2.3 "Beneficiary" means the person, persons or trust designated Beneficiary
pursuant to Section 4.11.
2.4 "Board of Directors" and "Board" mean the Board of Directors of the
Company.
2.5 "Bonus" means the gross annual bonus amount(s), if any, payable to a
Participant from the Company's Management Incentive Plan or successor plan(s)
then in effect, otherwise payable in cash during the Plan Year, and considered
"wages" for FICA and federal income tax withholding. For purposes of this
Section, Bonus amounts considered shall exclude reimbursements or other expense
allowances (whether or not includable in gross income, and including but not
limited to car allowances), (cash or noncash) fringe benefits (including but
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not limited to contest prizes), moving expenses, deferred compensation (other
than Participant contributions made under this Plan), welfare benefits
(including but not limited to imputed income on life insurance coverage, unused
and/or accrued vacation pay and severance pay), and any distribution of stock
(excluding proceeds from any stock options, stock appreciation rights, or any
other stock or equity based management incentive plan). Bonus amounts
considered shall include any amounts by which the Participant's Bonus is reduced
by a bonus reduction or similar arrangement under any qualified plan described
in IRC 401(k) or any cafeteria plan (as described in IRC 125) maintained by the
Company.
2.6 "Change of Control" means the first to occur of any of the following
events:
(a) Any Person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
beneficial owner, as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities; or
(b) During any period of two consecutive years, individuals who at the
beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the stockholders of the
Company was approved by a vote of at least two-thirds of the directors who
were directors at the beginning of the period, cease for any reason to
constitute a majority thereof; or
(c) The business of the Company is disposed of pursuant to a partial
or complete liquidation of the Company, a sale of all or substantially all
of its assets (including stock of its subsidiaries), or otherwise.
2.7 "Committee" means the Compensation and Stock Option Committee of the
Board, or successor thereto, as determined by the Board.
2.8 "Company" means Hartmarx Corporation, a Delaware corporation, its
successors and assigns, and any affiliated companies which grant participation
hereunder to an employee with the Company's consent.
2.9 "Compensation" means cash remuneration paid pursuant to this Plan
for services rendered prior to the date paid.
2.10 "Deferred Benefit Account" and "Account" mean the separate bookkeeping
accounting record(s) maintained by the Company for each Participant, pursuant to
Articles III and IV. Deferred Benefit Account(s) shall be utilized solely as a
bookkeeping device for the measurement and determination of the amounts to be
paid to the Participant pursuant to this Plan, and shall be subject to Section
8.2 hereof.
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<PAGE>
2.11 "Determination Date" means the date on which the amount of a
Participant's Deferred Benefit Account is determined as provided in
Article IV. The last day of each calendar quarter and the date of a
Participant's Termination of Service shall be a Determination Date.
2.12 "Disability" shall have the same meaning and be determined in
the same manner as in the Hartmarx Long Term Disability Plan. In the
absence of such a plan, "Disability" or "Disabled" shall mean a permanent
impairment of the physical or mental condition of a Participant, which, in the
sole discretion of the Company, prevents Participant from performance of the
usual duties of employment attendant to the Participant's function with the
Company. The determination of the Company as to a Disability shall be made on
the basis of such medical and other competent evidence as the Company shall deem
relevant, and shall be binding on Participant.
2.13 "ERISA Funded" means that the Plan does not meet the "unfunded"
criterion of the exceptions to the application of Parts 2 through 4 of Subtitle
B of Title I of the Employee Retirement Income Security Act of 1974 (ERISA).
2.14 "Interest Crediting Rate" and "Interest" mean, for the then
applicable Plan Year, the average rate of interest incurred by the Company for
incremental short-term borrowing during the immediately preceding fiscal year of
the Company. If such rate of interest cannot be determined, or is no longer
available, the Interest Crediting Rate shall be determined by the Committee.
2.15 "IRC" means the Internal Revenue Code of 1986, as amended.
2.16 "Participant" means an employee of the Company who is eligible to
participate in the Plan in accordance with Section 3.1, and who enters into an
Agreement with the Company.
2.17 "Plan" means the Hartmarx Deferred Compensation Plan, as amended from
time to time.
2.18 "Plan Effective Date" means January 1, 1996.
2.19 "Plan Year" means the calendar year.
2.20 "Retirement Date" and "Retirement" mean the date of termination of
service of a Participant for reasons other than death or Disability after he
or she (i) attains age fifty-five (55) and has five (5) Years of Service; (ii)
has attained age 65; or (iii) terminates under circumstances which the
Committee, in its sole discretion, elects to treat as a Retirement for purposes
of the Plan.
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2.21 "Salary" for purposes of the Plan shall be the total of the
Participant's base salary paid during a Plan Year, and considered "wages"
for FICA and federal income tax withholding, but before any deferral made
pursuant to this or any other plan. For purposes of this Section, Salary
amounts considered shall exclude reimbursements or other expense
allowances (whether or not includable in gross income, and including but
not limited to car allowances), (cash or noncash) fringe benefits
(including but not limited to contest prizes), moving expenses, deferred
compensation (other than Participant contributions made under this Plan),
welfare benefits (including but not limited to imputed income on life
insurance coverage, unused and/or accrued vacation pay and severance
pay), and any distribution of stock (excluding proceeds from any stock
options, stock appreciation rights, or any other stock or equity based
management incentive plan). Salary amounts considered shall include any
amounts by which the Participant's Salary is reduced by a salary reduction or
similar arrangement under any qualified plan described in IRC 401(k) or any
cafeteria plan (as described in IRC 125) maintained by the Company.
2.22 "Tax Funded" means that the interest of a Participant in the
Plan will be includable in the gross income of the Participant for
federal income tax purposes prior to actual receipt of Plan benefits by
the Participant.
2.23 "Termination of Service" means the Participant's ceasing his or
her employment with the Company for any reason whatsoever, whether
voluntarily or involuntarily, other than by Retirement or Disability.
III. ELIGIBILITY AND PARTICIPATION LIMITS
3.1 Eligibility and Participation. Eligibility to participate in the
Plan shall be limited to employees of the Company who meet all of the
following conditions:
(a) Each employee must be a participant in the Company's
Management Incentive Plan, or be designated as eligible upon approval
of the Committee; and
(b) Each employee designated eligible to participate must file
an Agreement with the Company in accordance with Section 3.2.
An employee who meets all of the requirements of this Section shall become a
Participant in the Plan. Except as otherwise provided in Section 3.4, once an
employee becomes a Participant in the Plan, he or she shall remain a Participant
until all benefit payments, if any, to the Participant (or his or her
Beneficiary) have been made.
3.2 Deferral of Salary and Bonus. Eligible employees of the Company who
elect to participate in the Plan must file an Agreement with the Company to
participate in the Plan,
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and to defer Salary, Bonus, or both, prior to the beginning of the Plan Year in
which the Salary or Bonus is to be earned and paid. For the Plan Year beginning
January 1, 1996, a Participant must elect to defer his or her Bonus otherwise
payable during calendar year 1996 prior to the end of the 1995 fiscal year.
Provided that the provisions of Section 3.5 are not applicable, an eligible
employee who fails to file an Agreement before the beginning of a Plan Year may
file an Agreement to defer Salary, Bonus, or both, with respect to a subsequent
Plan Year. A Participant's Agreement shall be subject to all of the limitations
of Section 3.3.
3.3 Deferral Limitations. A Participant's Agreement to participate in the
Plan and to defer Salary, Bonus, or both, shall be subject to the following
limitations:
(a) A Participant may elect to defer no less than five percent (5%)
and no more than fifteen percent (15%) of Salary, in increments of one
percentage point (1%); and
(b) A Participant's Agreement to defer up to one hundred percent
(100%) of Bonus shall be in increments of ten percentage points (10%);
and
(c) Any Agreement to defer Salary, Bonus, or both, may not apply to a
Plan Year after the 2000 Plan Year, and
(d) The Agreement shall be irrevocable upon acceptance by the Company.
3.4 Suspension of Agreement to Defer. A Participant's Agreement to
defer Salary, Bonus, or both, shall be suspended in the event that the
Committee, in its sole discretion, reasonably determines that a Participant
ceases to continue to meet the eligibility requirements of the Plan. In
determining a Participant's eligibility to continue to defer Salary, Bonus, or
both, the Committee shall consider that a Participant's Salary has been reduced,
that he or she has had a material reduction in job responsibility, job
description, or job duties, and such other factors as it, in its sole
discretion, deems to be applicable to the Participant's continued participation
in the Plan. A Participant whose Agreement has been suspended in accordance with
this Section shall not be deemed to have incurred a Termination of Service, and
his or her Deferred Benefit Account shall continue to be maintained under the
terms of the Plan.
3.5 Timing of Deferral Credits. The amount of Salary or Bonus that a
Participant elects to defer in the Agreement shall cause an equivalent reduction
in his or her Salary or Bonus payment, and shall be credited to the
Participant's Deferred Benefit Account throughout the Plan Year as the
Participant is paid (or would have been paid) the non-deferred portion of his or
her Salary or Bonus in each Plan Year.
5
<PAGE>
IV. BENEFITS
4.1 Determination of Account. As of each Determination Date, each
Participant's Deferred Benefit Account shall consist of:
(a) The balance of the Participant's Deferred Benefit Account as of
the immediately preceding Determination Date, plus
(b) The Participant's Salary or Bonus deferred pursuant to Section
3.2, and credited to a Participant's Account since the immediately
preceding Determination Date in accordance with Section 3.5, less
(c) All benefit payment(s) made to the Participant (or his or her
Beneficiary) from such Account in accordance with this Article IV
since the preceding Determination Date, plus
(d) Interest credited on the average daily balance of the Deferred
Benefit Account as of the Determination Date and since the last
preceding Determination Date, after the Account has been adjusted for
any additions or distributions to be credited or deducted.
4.2 Vesting. A Participant shall be one hundred percent (100%) vested in
the amount of Salary and Bonus deferred and credited to his or her Deferred
Benefit Account, including interest attributable thereto.
4.3 Retirement Benefit. Upon a Participant's Retirement Date, the
Company shall pay to the Participant, as Compensation earned prior to
Retirement, a benefit equal to the value of his or her Deferred Benefit Account,
determined under Section 4.1 as of the Determination Date coincident with or
immediately following such Retirement Date. The form of benefit payment shall be
as provided in Section 4.8. Upon and after such Retirement Date, the Participant
shall immediately cease to be eligible for any benefit provided under Section
4.4, 4.5, 4.6 or 4.7 of the Plan.
4.4 Termination Benefit. Upon Termination of Service of the Participant
before his or her Retirement Date for reasons other than his or her death or
Disability, the Company shall pay to the Participant, as Compensation earned
prior to his or her Termination of Service, a benefit equal to the value of his
or her Deferred Benefit Account, determined under Section 4.1 as of the date of
Termination of Service. Unless otherwise directed by the Committee, the
termination benefit shall be payable in a lump sum. Upon a Termination of
Service, the Participant shall immediately cease to be eligible for any benefit
provided under Section 4.3, 4.5, 4.6 or 4.7 of the Plan.
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<PAGE>
4.5 Death Benefit. Upon the death of the Participant prior to his or
her Termination of Service, the Company shall pay to the Beneficiary of
the deceased Participant, as Compensation earned prior to his or her
death, a benefit equal to the value of the Participant's Deferred Benefit
Account, vested in accordance with Section 4.2, determined under Section
4.1 as of the Determination Date coincident with or next following the
Participant's date of death. The death benefit shall be paid in a lump
sum. Upon a Participant's death, he or she shall immediately cease to be
eligible for any benefit provided under Section 4.3, 4.4, 4.6 or 4.7 of
the Plan.
4.6 Disability Benefit. In the event of the Disability of a Participant
prior to his or her Retirement Date, the Company shall pay to the Disabled
Participant, as Compensation earned prior to his or her Disability, a benefit
equal to the value of his Deferred Benefit Account, determined under Section
4.1. Such benefit shall be payable in annual installments, as provided in
Section 4.8, until the earliest of the following events:
(a) The Participant ceases to be Disabled and resumes employment with
the Company;
(b) The Participant ceases to be Disabled and does not resume
employment with the Company. If the Participant has attained his
Retirement Date, he shall be entitled to the benefits provided for in
Section 4.3. If the Participant has not attained his Retirement Date,
the remaining value of his or her Deferred Benefit Account, if any,
shall be paid in a lump sum as a Termination Benefit in the manner
provided in Section 4.4.
(c) The Participant dies. The Deferred Benefit Account balance
remaining shall be paid in a lump sum as provided in Section 4.5; or
(d) The Participant's Deferred Benefit Account balance reaches zero.
If a Disability occurs during the period elected in the Agreement, the Disabled
Participant's Agreement shall be suspended, and further deferrals shall not be
required during the period of Disability. Upon a written request by a
Participant filed with the Committee, the Committee may, in its sole discretion,
pay a Disability benefit equal to the value of the Disabled Participant's
Deferred Benefit Account in a single lump sum payment.
4.7 Emergency Benefit. In the event that the Committee, upon written
petition of the Participant, determines, in it sole discretion, that the
Participant has suffered a severe financial hardship, the Company shall pay to
the Participant, as soon as practicable following such determination, as
Compensation earned prior to the severe financial hardship, a benefit equal to
the amount necessary to meet the severe financial hardship not in excess of the
value of the Participant's Deferred Benefit Account. For purposes of this
Section, a severe
7
<PAGE>
financial hardship is an unexpected need for cash arising from an illness,
casualty loss, sudden financial reversal or other such unforeseeable occurrence.
Cash needs arising from events such as the purchase of a house or education
expenses for children, shall not be considered to be the result of a severe
financial hardship. For purposes of this Section, the criteria for establishing
and determining a severe financial hardship shall be made in accordance with IRC
401(k)(2)(b), and Internal Revenue Service Regulation 1.401(k)-1(d)(2)(iii)-
(iv).
4.8 Form of Benefit Payment. Upon the happening of an event described
in Section 4.3 or 4.6, the Company shall pay to the Participant (or his or her
Beneficiary) the amount calculated in accordance with this Section in annual
installments payable in substantially equal amounts, calculated and determined
as follows:
(a) An annual installment payment shall be determined for the
Participant's Deferred Benefit Account. The amount of the installment
payment shall be a fixed amount calculated to amortize the unpaid
balance of the Deferred Benefit Account balance in ten (10) equal
annual installments (or, in the Committee's sole discretion, in fewer
than ten (10) annual installments), and shall be based on the Interest
Crediting Rate in effect at the time payments commence. The Committee
shall recompute the amount of the installment each year to reflect
actual changes in the Interest Crediting Rate. Installment benefit
payments shall cease when the Deferred Benefit Account balance reaches
zero, or with the final payment determined hereunder.
(b) Unless an annual payment is the final annual installment payment,
each annual installment payment shall be at least equal to $5,000.
Notwithstanding the amortization method described in Section 4.8(a)
immediately above, in the event an installment payment determined
under Section 4.8(a) is less than $5,000, the annual installment
payment shall be $5,000. Annual installment payments in the amount of
$5,000 shall continue until the amount of the installment is
recomputed, as provided above, or until the remaining Account balance
is less than $5,000. Once the Account balance is less than $5,000, the
subsequent annual payment, which shall be the final payment, shall
equal the remaining Deferred Benefit Account balance.
Upon the death of a Participant after the commencement of payment of benefits in
accordance with Section 4.3, the Deferred Benefit Account remaining shall be
paid to the Beneficiary in a lump sum. Upon a written request of a Disabled
Participant, the Committee may, in its sole discretion, pay the value of a
Disabled Participant's Deferred Benefit Account in a lump sum.
8
<PAGE>
Upon a written request by a Participant filed with the Committee at least one
year prior to January 1st of the year a retirement benefit would otherwise
commence under this Plan, the Company shall pay the value of his or her Deferred
Benefit Account in a lump sum or in fewer than ten (10) annual installments, as
requested by the Participant.
4.9 Withholding: Employment Taxes. To the extent required by the law
in effect at the time payments are made, the Company shall withhold any taxes
required to be withheld by the federal, or any state or local government.
4.10 Commencement of Payments. Unless otherwise provided, payments under
this Plan shall commence or be made as soon as practicable following the
Participant's Termination of Service, Retirement, or Disability, but in no event
later than ninety (90) days following receipt of notice by the Committee of an
event which entitles a Participant (or a Beneficiary) to payments under this
Plan. The date of each subsequent annual installment shall be on the same
Determination Date each year, unless otherwise determined by the Committee in
its sole discretion.
4.11 Recipients of Payments: Designation of Beneficiary. All payments to
be made by the Company under the Plan shall be made to the Participant during
his or her lifetime, provided that if the Participant dies prior to the
commencement or completion of such payments, then all subsequent payments under
the Plan shall be made by the Company to the Beneficiary or Beneficiaries
determined in accordance with this Section 4.11. The Participant shall designate
a Beneficiary by filing a written notice of such designation with the Committee
in such form as the Committee requires, and may change such designation without
the consent of such Beneficiary or Beneficiaries by filing a new designation in
writing with the Committee. (In community property states, the spouse of a
married Participant shall join in any designation of a Beneficiary other than
the spouse.) If no designation shall be in effect at the time when any benefits
payable under this Plan shall become due, the Beneficiary shall be the
Beneficiary designated by the Participant in the 401(k) Plan, and otherwise
shall be the executor(s) or administrator(s) of the deceased Participant's
estate.
4.12 Facility of Payment. Any benefit payable hereunder to any person
under a legal disability, or to any person who, in the judgement of the
Committee, is unable to properly administer his or her financial affairs, may be
paid to the legal representative of such person, or may be applied for the
benefit of such person in a manner which the Committee may select.
V. CLAIM FOR BENEFITS PROCEDURE
5.1 Claim for Benefits. Any claim for benefits under the Plan shall be
made in writing to the Committee. If such claim for benefits is wholly or
partially denied by the Committee, the Committee shall, within a reasonable
period of time, but not later than sixty (60) days after
9
<PAGE>
receipt of the claim, notify the claimant of the denial of the claim. Such
notice of denial shall be in writing and shall contain:
(a) The specific reason or reasons for denial of the claim;
(b) A reference to the relevant Plan provisions upon which the
denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim, together with an
explanation of why such material or information is necessary; and
(d) An explanation of the Plan's claim review procedure.
5.2 Request for Review of a Denial of a Claim for Benefits. Upon the
receipt by the claimant of written notice of denial of the claim, the claimant
may within ninety (90) days file a written request to the Committee, requesting
a review of the denial of the claim, which review shall include a hearing if
deemed necessary by the Committee. In connection with the claimant's appeal of
the denial of his or her claim, he or she may review relevant documents and may
submit issues and comments in writing.
5.3 Decision Upon Review of Denial of Claim for Benefits. The Committee
shall render a decision on the claim review promptly, but no more than sixty
(60) days after the receipt of the claimant's request for review, unless special
circumstances (such as the need to hold a hearing) require an extension of time,
in which case the sixty (60) day period shall be extended to one hundred-twenty
(120) days. Such decision shall:
(a) Include specific reasons for the decision;
(b) Be written in a manner calculated to be understood by the
claimant; and
(c) Contain specific references to the relevant Plan provisions
upon which the decision is based.
The decision of the Committee shall be final and binding in all respects on both
the Company and the claimant.
VI. ADMINISTRATION
6.1 Plan Administration Committee. The Plan shall be administered by the
Plan Administration Committee of the Company, which shall be the Administration
Committee of
10
<PAGE>
the Plan. The Administration Committee may assign duties to an officer or other
employees of the Company and delegate such duties as it sees fit.
6.2 General Rights, Powers and Duties of Administration Committee. The
Plan Administration Committee shall be responsible for the management, operation
and administration of the Plan. In addition to any powers, rights, and duties
set forth elsewhere in the Plan, it shall have the following powers and duties
to:
(a) Adopt, alter, and repeal such rules, regulations, guidelines, and
practices consistent with the provisions of the Plan as it deems necessary
for the proper and efficient administration of the Plan;
(b) Administer the Plan in accordance with its terms and any rules and
regulations it establishes;
(c) Maintain records concerning the Plan sufficient to prepare
reports, returns and other information required by the Plan or by law;
(d) Construe and interpret the Plan, and to resolve all questions
arising under the Plan;
(e) Direct the Company to pay benefits under the Plan, and to give such
other directions and instructions as may be necessary for the proper
administration of the Plan;
(f) Employ or retain agents, attorneys, actuaries, accountants or other
persons who may also be employed by or represent the Company; and
(g) Be responsible for the preparation, filing, and disclosure on
behalf of the Plan of such documents and reports as are required by any
applicable federal or state law.
6.3 Information to be Furnished to Administration Committee. The records
of the Company shall be determinative of each Participant's period of
employment, age, Termination of Service and reason therefor, Disability, leave
of absence, reemployment, personal data, and Salary and Bonus. Participants and
their Beneficiaries shall furnish to the Administration Committee such evidence,
data or information, and execute such documents as the Administration Committee
requests.
6.4 Responsibility. No member of the Administration Committee or the
Committee shall be liable to any person for any action taken or omitted in
connection with the administration of this Plan unless attributable to his or
her own fraud or willful misconduct; nor shall the Company be liable to any
person for any such action unless attributable to fraud or willful misconduct on
the part of a director, officer or employee of the Company. Further, the
11
<PAGE>
Company shall hold harmless and defend any individual in the employment of the
Company and any Director of the Company against any claim, action or liability
asserted against him or her in connection with any action or failure to act
regarding the Plan, except as and to the extent such liability may be based upon
the individual's own willful misconduct or fraud. This indemnification shall
not duplicate, but may supplement, any coverage available under any applicable
insurance coverage.
VII. AMENDMENT AND TERMINATION
7.1 Termination or Amendment. The Plan may be terminated, or amended in
whole or in part, by the Committee at any time. Notice of termination or of
any material amendment shall be given in writing to each Participant and each
Beneficiary of a deceased Participant.
(a) No amendment shall retroactively decrease the balance of a
Participant's Deferred Benefit Account or retroactively decrease the
Interest Crediting Rate used prior to the date of the amendment.
(b) The Committee reserves the right to terminate the Plan in its sole
discretion. In its discretion, the Committee may consider termination of
the Plan due to any one or more of a change in the tax law (or regulations
relating thereto), employee benefit law (or regulations relating thereto),
a Change of Control of the Company, or a change of the financial condition
of the Company, any one of which as determined by the Committee in its sole
discretion, adversely and materially affects the economics of the Plan for
the Company or for Participants.
7.2 Special Termination. Any other provision of the Plan to the contrary
notwithstanding, the Plan shall terminate if the Plan is held to be ERISA Funded
or Tax Funded by a federal court, and appeals from that holding are no longer
timely or have been exhausted. The Company may terminate the Plan if it
determines, based on a legal opinion which is satisfactory to the Company, that
either judicial authority or the opinion of the U.S. Department of Labor,
Treasury Department or Internal Revenue Service (as expressed in proposed or
final regulations, advisory opinions or ruling, or similar administrative
announcements) creates a significant risk that the Plan will be held to be ERISA
Funded or Tax Funded, and failure to so terminate the Plan could subject the
Company or the Participants to material penalties. Upon any such termination,
the Company may:
(a) Transfer the rights and obligations of the Participants and the
Company to a new plan established by the Company, which is not deemed to be
ERISA Funded or Tax Funded, but which is similar in all other respect to
this Plan, if the Company determines that it is possible to establish such
a Plan;
12
<PAGE>
(b) If the Company, in its sole discretion, determines that it is not
possible to establish the Plan in (a) above, each Participant shall be paid
a lump sum benefit equal to the value of the vested portion of his or her
Deferred Benefit Account;
(c) Pay a lump sum benefit equal to the value of the vested portion of
the Participant's Deferred Benefit Account to the extent that a federal
court has held that the interest of the Participant in the Plan is
includable in the gross income of the Participant for federal income tax
purposes prior to actual payment of Plan benefits. The value of any amount
remaining in the Participant's Deferred Benefit Account shall be remain as
an obligation of the Company, to be paid to the Participant as provided in
the Plan;
(d) Pay to a Participant a lump sum benefit equal to the vested
portion of a Participant's Deferred Benefit Account if, based on a legal
opinion satisfactory to the Company, there is a significant risk that such
Participant will be determined not to be part of a "select group of
management or highly compensated employees" for purposes of ERISA.
Any benefit payable under this Section shall be payable in a lump sum as soon as
practicable following the Company's determination that the Plan is, or is likely
to be held to be, ERISA Funded or Tax Funded, but in no event later than ninety
(90) days following receipt of notice by the Committee that the Plan is ERISA
Funded or Tax Funded, or at such other date as may be determined by the
Committee in its sole discretion.
VIII. MISCELLANEOUS
8.1 Separation of Plan: No Implied Rights. The Plan shall not operate to
increase any benefit payable to or on behalf of a Participant (or his or her
Beneficiary) from any other Plan maintained by the Company. Neither the
establishment of the Plan nor any amendment thereof shall be construed as giving
any Participant, Beneficiary, or any other person any legal or equitable right
unless such right shall be specifically provided for in the Plan or conferred by
specific action of the Company in accordance with the terms and provisions of
the Plan. Except as expressly provided in this Plan, the Company shall not be
required or be liable to make any payment under this Plan.
8.2 No Right to Company Assets. Neither the Participant nor any other
person shall acquire by reason of the Plan any right in or title to any assets,
funds or property of the Company whatsoever, including without limiting the
generality of the foregoing, any specific funds, assets or other property which
the Company, in its sole discretion, may set aside in anticipation of a
liability hereunder. Any benefits which become payable hereunder shall be paid
from the general assets of the Company. The Participant shall have only a
contractual right to the amounts, if any, payable hereunder, unsecured by any
asset of the Company.
13
<PAGE>
Nothing contained in the Plan constitutes a guarantee by the Company that the
assets of the Company shall be sufficient to pay any benefits to any person.
8.3 No Employment Rights. Nothing herein shall constitute a contract of
employment or of continuing service or in any manner obligate the Company to
continue the services of the Participant, or obligate the Participant to
continue in the service of the Company, or as a limitation of the right of the
Company to discharge any of its employees, with or without cause. Nothing herein
shall be construed as fixing or regulating the Salary, Bonus, or other
remuneration payable to the Participant.
8.4 Offset. If, at the time payments or installments of payments are to be
made hereunder, the Participant or the Beneficiary or both are indebted or
obligated to the Company, then the payments remaining to be made to the
Participant or the Beneficiary or both may, at the discretion of the Company, be
reduced by the amount of such indebtedness or obligation, provided, however,
that an election by the Company not to reduce any such payment or payments shall
not constitute a waiver of its claim, or prohibit or otherwise impair the
Company's right to offset future payments for such indebtedness or obligation.
8.5 Protective Provisions. In order to facilitate the payment of benefits
hereunder, each employee designated eligible shall cooperate with the Company by
furnishing any and all information requested by the Company, including taking
such physical examinations as the Company may deem necessary, and taking such
other actions as may be requested by the Company. If the employee refuses to
cooperate, he or she shall not become a Participant in the Plan and the Company
shall have no further obligation to him or her under the Plan. In such event,
the Participant or his or her Beneficiary shall receive a benefit equal to his
or her deferral, including interest, paid in accordance with Section 4.4.
8.6 Non-Assignability. Neither the Participant nor any other person shall
have any voluntary or involuntary right to commute, sell, assign, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are expressly declared to be unassignable and non-transferrable
except by will or in accordance with the laws of descent and distribution. No
part of the amounts payable shall be, prior to actual payment, subject to
seizure or sequestration for the payment of any debts, judgements, alimony or
separate maintenance owed by the Participant or any other person, or be
transferrable by operation of law in the event of the Participant's or any other
person's bankruptcy or insolvency.
8.7 Notice. Any notice required or permitted to be given under the Plan
shall be sufficient if in writing and hand delivered, or sent by registered or
certified mail to the last known address of the Participant if to the
Participant, or, if given to the Company, to the principal office of the
Company, directed to the attention of the Committee. Such notice shall
14
<PAGE>
be deemed given as of the date of delivery, or, if delivery is made by mail, as
the date shown on the postmark or the receipt for registration or certification.
8.8 Governing Laws. The Plan shall be construed and administered according
to the laws of the State of Illinois.
IN WITNESS WHEREOF, the Company has adopted the Hartmarx Deferred Compensation
Plan as of the Plan Effective Date.
HARTMARX CORPORATION
By __________________________________
Its __________________________________
Date ____________________________________
15
<PAGE>
EXHIBIT 12
HARTMARX CORPORATION
STATEMENT OF COMPUTATION OF RATIOS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Earnings (loss) from continuing
operations before provision for
income taxes per Consolidated
Statement of Earnings $ 1,630 $ 5,139 $ 7,682 ($28,980) $ 6,420
Add:
Interest Expense /(a)/ 20,001 21,214 22,869 21,135 23,793
Portion of rents representative
of the interest factor/ (a) (b)/ 6,114 8,054 9,327 20,088 22,865
----------------------------------------------
Income as adjusted $27,745 $34,407 $39,878 $ 12,243 $53,078
==============================================
Fixed charges:
Interest expense /(a)/ 20,001 21,214 22,869 21,135 23,793
Portion of rents representative
of the interest factor /(a) (b)/ 6,114 8,054 9,327 20,088 22,825
----------------------------------------------
Fixed charges $26,115 $29,268 $32,196 $ 41,223 $46,618
==============================================
Ratio of earnings to fixed charges 1.06 1.18 1.24 * 1.14
==============================================
* Coverage shortfall - - - $ 28,980 -
==============================================
</TABLE>
(a) Includes amounts related to discontinued operations.
(b) Represents one-third of rent expense which management believes represents a
reasonable approximation of the interest component of rent expense.
<PAGE>
EXHIBIT 21
SUBSIDIARIES
Jurisdiction in
Name which Incorporated
---- ------------------
HARTMARX CORPORATION (Registrant)............................. Delaware
Direct Route Marketing Corporation....................... New Hampshire
Hart Schaffner & Marx.................................... New York
American Apparel Brands, Inc........................ New York
National Clothing Company, Inc...................... New York
Winchester Clothing Company......................... Kentucky
Hickey-Freeman Co., Inc.................................. New York
International Women's Apparel, Inc....................... Texas
Jaymar-Ruby, Inc. (d/b/a Trans-Apparel Group)............ Indiana
Anniston Sportswear Corporation..................... Indiana
E-Town Sportswear Corporation.................. Kentucky
Rector Sportswear Corporation.................. Arkansas
Biltwell Company, Inc............................... Missouri
Men's Quality Brands, Inc................................ New York
M. Wile & Company, Inc. (d/b/a Intercontinental
Branded Apparel)....................................... New York
Intercontinental Apparel, Inc....................... Delaware
Novapparel, Inc.......................................... Delaware
Universal Design Group, Ltd.............................. New York
------------------------------------------------------------------
The names of 33 subsidiaries are omitted, as such subsidiaries, considered
in the aggregate as a single subsidiary, would not constitute a significant
subsidiary. The Registrant owns, directly or indirectly, 100% of the voting
securities of both the named and unnamed subsidiaries. All of the above
subsidiaries (including unnamed subsidiaries) are included in the consolidated
financial statements of the Registrant and its subsidiaries.
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of HARTMARX CORPORATION, a Delaware corporation, do hereby constitute
and appoint GLENN R. MORGAN and MARY D. ALLEN, or either of them, his true and
lawful attorney in fact and agent, with full power and authority of substitution
and resubstitution, to sign in the name and on behalf of the undersigned, as
directors and officers of said corporation, the corporation's FORM 10-K Annual
Report, and any and all subsequent amendments thereto, and to file the same or
cause to be filed the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and do hereby
grant unto each said attorney in fact and agent full power to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they or either of them might
or could do in person, hereby ratifying and confirming all that each said
attorney in fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney
this 10th day of January, 1996.
___________________________________ ____________________________________
ELBERT O. HAND HOMI B. PATEL
Chairman, Chief Executive President, Chief Operating
Officer, Director Officer, Director
____________________________________ ____________________________________
A. ROBERT ABBOUD, Director CHARLES MARSHALL, Director
____________________________________ ____________________________________
SAMAWAL A. BAKHSH, Director TALAT M. OTHMAN, Director
____________________________________ ____________________________________
LETITIA BALDRIGE, Director MICHAEL B. ROHLFS, Director
- ------------------------------------ ------------------------------------
JEFFREY A. COLE, Director STUART L. SCOTT, Director
____________________________________ ____________________________________
RAYMOND F. FARLEY, Director SAM F. SEGNAR, Director
____________________________________ ____________________________________
DONALD P. JACOBS, Director GLENN R. MORGAN
Executive Vice President,
Principal Financial Officer
____________________________________ _____________________________________
MILES L. MARSH, Director ANDREW A. ZAHR
Controller, Principal
Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Statement of Earnings and the Consolidated Balance Sheet and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<CASH> 5,700
<SECURITIES> 0
<RECEIVABLES> 108,486
<ALLOWANCES> (7,920)
<INVENTORY> 154,898
<CURRENT-ASSETS> 279,493
<PP&E> 168,052
<DEPRECIATION> (123,428)
<TOTAL-ASSETS> 376,636
<CURRENT-LIABILITIES> 89,364
<BONDS> 152,781
<COMMON> 81,899
0
0
<OTHER-SE> 52,592
<TOTAL-LIABILITY-AND-EQUITY> 376,636
<SALES> 595,272
<TOTAL-REVENUES> 601,701
<CGS> 447,414
<TOTAL-COSTS> 580,220
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,851
<INCOME-PRETAX> 1,630
<INCOME-TAX> 19,800
<INCOME-CONTINUING> 21,430
<DISCONTINUED> (18,283)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,147
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
<PAGE>
EXHIBIT 99
FORWARD LOOKING STATEMENTS
Written and oral statements provided by the Company from time to time may
contain certain forward looking information, as that term is defined by the
Private Securities Litigation Reform Act of 1995 (the "Act") and in releases
made by the Securities and Exchange Commission ("SEC"). The cautionary
statements which follow are being made pursuant to the provisions of the Act and
with the intention of obtaining the benefits of the "safe harbor" provisions of
the Act. While the Company believes that the assumptions underlying such forward
looking information are reasonable based on present conditions, forward looking
statements made by the Company are not guarantees of future performance and
actual results may differ materially from those in the forward looking
statements as a result of various factors. Accordingly, the Company has
identified important factors which could cause the Company's actual financial
results to differ materially from any such results which might be projected,
forecast or estimated by the Company in written or oral forward looking
statements:
. The overall retail economy in the United States could affect retailers'
expectations of future apparel product sales. A more pessimistic evaluation
compared to 1995 could adversely affect both the advance order and in-stock
product lines marketed by the Company.
. Several customer bankruptcies in the second half of 1995 and first quarter of
1996 have unfavorably impacted the expected sales of the Company's products
to these customers, compared to 1995 amounts. The Company's sales and
earnings could be further adversely impacted to the extent that the financial
strength of its other existing or new retail customers worsens.
. The Company's largest customer represented approximately 16%, 14% and 14% of
consolidated sales in fiscal 1995, 1994 and 1993, respectively. The Company's
second largest customer in 1995 represented approximately 7% of consolidated
sales. The Company believes it maintains an excellent business relationship
with these customers and sales volume for 1996 is anticipated to approximate
recent historical levels. However, an unanticipated decline in sales with the
Company's largest customers would adversely affect profitability as it would
be difficult to immediately replace this business with new customers or
increase volume with other existing customers.
. The trend towards more casual dressing in the workplace could reduce the
demand for the Company's tailored clothing products, especially for tailored
suits. While the Company markets several sportswear and casual product lines,
consumer receptiveness to the Company's casual and sportswear products may be
less than anticipated.
. Sales derived from products which utilize licensed brand names represent an
important current component of the Company's overall revenue and
profitability. The Company also serves as a licensing agent for several of
its principal licensors. While the Company believes the relationships with
its principal licensors to be favorable and the termination
<PAGE>
of any single licensing agreement would not have a material adverse effect on
its business taken as a whole, the long-term prospects of the Company assume
the continuation of existing licensing arrangements and ongoing consumer
acceptance of the products sold under these licensed brands.
. The Company competes with numerous established manufacturers and distributors
of apparel products, both foreign and domestic. The Company's financial
results may be negatively impacted if its existing or new products are less
favorably received by retailers and consumers due to competitors' pricing
activities in the marketplace, which could reduce the Company's ability to
generate sufficient margins.
. The Company has recently acquired foreign sourcing facilities in Mexico and
Costa Rica. Factory re-engineering and workforce expansion are in process in
order to provide capabilities for anticipated unit requirements. The
Company's sales and earnings would be adversely affected to the extent that
the quantities and/or quality of the Mexican and Costa Rican sourced
production falls short of that anticipated by the Company. Also,
unanticipated political or economic disruptions in these countries and/or
currency fluctuations could adversely impact overall Company profitability
related to these production facilities.
. Substantially all of the Company's men's and women's sportswear, women's
career wear and a portion of its tailored suits, sportcoats and slack
production are manufactured utilizing independent contractors. The Company is
dependent upon the contractors' ability to deliver such products on a timely
basis. Labor, delivery, or transportation difficulties regarding contractor
sourced products which result in delays not readily controllable by the
Company could negatively affect operating profits.
. Fabric purchases from the Company's largest supplier approximated 46% of the
total fabric requirements in fiscal 1995. As is customary in the industry,
there are no long-term contracts with fabric suppliers. The Company believes
that there are alternative sources of supply available to satisfy its raw
material requirements. However, a prolonged, unanticipated disruption of
scheduled deliveries from this or other suppliers would adversely affect
production scheduling and ultimately the Company's ability to meet customer
delivery dates.
. During 1995, the Company's variable rate debt (based on the Prime or LIBOR
rates in effect from time to time) averaged approximately $72 million under
its Revolving Credit Facility. The Company anticipates that such variable
borrowings will be approximately the same during 1996 at rates averaging
approximately 8%. An unexpected increase in total borrowings and/or in the
borrowing rates under the Revolving Credit Facility would adversely affect
profitability. In January, 1996, one rating agency placed the Company on
"credit watch with negative implications" which could later result in a
reduced credit rating. While the Company does not contemplate issuing new
public debt or equity in 1996, a credit rating reduction could adversely
affect the marketability of the Company's outstanding public debt and
accessibility to capital markets for new debt or equity.
<PAGE>
. The Company is not aware of and has assumed no significant adverse impact of
pending or threatened litigation matters.
. The Company has assumed that no major acquisitions or divestitures will occur
during 1996.
Had the Act become effective at a different time, certain of the factors noted
above would have been discussed in an earlier SEC filing. The above noted review
of factors pursuant to the Act should not be construed as exhaustive or as any
admission regarding the adequacy of disclosures made by the Company prior to the
effective date of the Act.
