SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
______
For quarterly period ended May 31, 1997
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
______ OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-8501
HARTMARX CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3217140
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 North Wacker Drive
Chicago, Illinois 60606
----------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 312/372-6300
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes ---X--- No ------
------- ------
At June 30, 1997, there were 33,742,181 shares of the Company's common
stock outstanding.
HARTMARX CORPORATION
INDEX
Page
Number
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Earnings for the
three months and six months ended May 31, 1997
and May 31, 1996. 3
Consolidated Balance Sheet as of May 31 1997,
November 30, 1996 and May 31, 1996. 4
Condensed Consolidated Statement of Cash Flows
for the six months ended May 31, 1997 and
May 31, 1996. 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 9
Part II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
HARTMARX CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(000's Omitted)
Three Months Ended May Six Months Ended May
31, 31,
------------------------- -----------------------
1997 1996 1997 1996
---------- ---------- --------- --------
<S> <C> <C> <C> <C>
Net sales $169,735 $134,253 $346,853 $285,112
Licensing and other income 793 990 1,612 2,204
---------- ---------- --------- --------
170,528 135,243 348,465 287,316
---------- ---------- --------- --------
Cost of goods sold 128,705 102,157 265,438 219,142
Selling, general and administrative 36,929 31,629 71,930 65,036
expenses
---------- ---------- --------- --------
165,634 133,786 337,368 284,178
---------- ---------- --------- --------
Earnings before interest, taxes and
extraordinary gain 4,894 1,457 11,097 3,138
Interest expense 4,379 4,262 8,412 8,513
---------- ---------- --------- --------
Earnings (loss) before taxes and
extraordinary gain 515 (2,805) 2,685 (5,375)
Tax (provision) benefit (195) 1,065 (1,020) 2,040
---------- ---------- --------- --------
Net earnings (loss) before 320 (1,740) 1,665 (3,335)
extraordinary gain
Extraordinary gain, net of tax - 64 - 725
provision
---------- ---------- --------- --------
Net earnings (loss) $320 $(1,676) $1,665 $(2,610)
========== ========== ========= ========
Earnings (loss) per share:
Before extraordinary gain $.01 $(.05) $.05 $(.10)
===== ====== ==== ======
After extraordinary gain $.01 $(.05) $.05 $(.08)
===== ====== ==== ======
Dividends per common share $ - $ - $ - $ -
===== ====== ==== ======
Average number of common shares and
common share equivalents 34,168 32,963 33,896 32,901
====== ====== ====== ======
</TABLE>
(See accompanying notes to consolidated financial statements)
<TABLE>
<CAPTION>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(000's Omitted)
May 31, Nov. 30, May 31,
1997 1996 1996
-------------- -------------- -------------
CURRENT ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $1,202 $2,844 $1,029
Accounts receivable, less allowance of
$9,745, $9,983 and $8,667 for
doubtful accounts 121,137 135,554 96,863
Inventories 184,926 165,913 155,766
Prepaid expenses 6,292 4,555 5,911
Recoverable and deferred income taxes 8,599 11,600 6,411
-------------- -------------- -------------
Total current assets 322,156 320,466 265,980
-------------- -------------- -------------
INVESTMENTS AND OTHER ASSETS 24,362 22,579 20,932
-------------- -------------- -------------
DEFERRED INCOME TAXES 43,285 43,285 31,081
-------------- -------------- -------------
PROPERTIES
Land 2,628 2,628 2,627
Buildings and building improvements 48,960 48,758 47,397
Furniture, fixtures and equipment 106,417 106,128 100,844
Leasehold improvements 16,443 16,767 17,756
-------------- -------------- -------------
174,448 174,281 168,624
Accumulated depreciation and amortization (133,242) (130,372) (123,980)
-------------- -------------- -------------
Net properties 41,206 43,909 44,644
-------------- -------------- -------------
TOTAL ASSETS $431,009 $430,239 $362,637
============== ============== =============
</TABLE>
(See accompanying notes to consolidated financial statements)
<TABLE>
<CAPTION>
HARTMARX CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
(000's Omitted)
May 31, Nov. 30, May 31,
1997 1997 1996
-------------- -------------- -------------
CURRENT LIABILITIES
<S> <C> <C> <C>
Notes payable $20,000 $20,000 $20,000
Current maturities of long term debt 60 100 194
Accounts payable and accrued expenses 98,329 99,745 77,859
-------------- -------------- -------------
Total current liabilities 118,389 119,845 98,053
-------------- -------------- -------------
LONG TERM DEBT, less current maturities 147,035 148,428 131,428
-------------- -------------- -------------
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value; - - -
2,500,000 authorized and unissued
Common shares, $2.50 par value;
authorized 75,000,000; issued
33,664,859 in May 1997; 33,365,317
in November 1996 and 32,986,825
in May 1996. 84,162 83,413 82,467
Capital surplus 77,851 77,355 76,672
Retained earnings (deficit) 12,136 10,471 (16,694)
Unearned employee benefits (8,564) (9,273) (9,289)
-------------- -------------- -------------
Total shareholders' equity 165,585 161,966 133,156
-------------- -------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $431,009 $430,239 $362,637
============== ============== =============
</TABLE>
(See accompanying notes to consolidated financial statements)
<TABLE>
<CAPTION>
HARTMARX CORPORATION
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
(000's Omitted)
Six Months Ended May 31
---------------------------------
Increase (Decrease) in Cash and Cash Equivalents 1997 1996
-------------- --------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net earnings (loss), including extraordinary gain $1,665 $(2,610)
Extraordinary gain, net of tax provision - (725)
Reconciling items to adjust net earnings (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 4,435 4,690
Changes in:
Receivables, inventories and prepaids (6,333) 8,315
Other assets (1,912) 760
Accounts payable and accrued expenses (1,416) (1,008)
Taxes and deferred taxes on earnings 3,001 527
-------------- --------------
Net cash provided by (used in) operating activities (560) 9,949
-------------- --------------
Cash Flows from Investing Activities:
Capital expenditures (1,566) (4,199)
-------------- --------------
Net cash used in investing activities (1,566) (4,199)
-------------- --------------
Cash Flows from Financing Activities:
Increase (decrease) in notes payable (1,400) 558
Purchase of $13.5 million 10 7/8% Sr. Sub. Notes, net - (11,879)
Decrease in other long term debt (70) (375)
Other equity transactions 1,954 1,275
-------------- --------------
Net cash provided by (used in) financing activities 484 (10,421)
-------------- --------------
Net decrease in cash and cash equivalents (1,642) (4,671)
Cash and cash equivalents at beginning of period 2,844 5,700
-------------- --------------
Cash and cash equivalents at end of period $1,202 $1,029
============== ==============
Supplemental Cash Flow Information
Net cash paid (received) during period for:
Interest expense $7,600 $8,500
Income taxes (200) (2,100)
</TABLE>
(See accompanying notes to consolidated financial statements)
HARTMARX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The accompanying financial statements are unaudited, but in the opinion
of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results
of operations and financial position for the applicable period. Results
of operations for any interim period are not necessarily indicative of
results for any other periods or for the full year. These interim
financial statements should be read in conjunction with the financial
statements and related notes contained in the Annual Report on Form 10-K
for the year ended November 30, 1996.
Note 2
The calculation of earnings (loss) per share for each period is computed
based on the weighted average number of common shares outstanding. When
dilutive, stock options are included as share equivalents using the
treasury stock method. None of the 2,500,000 authorized preferred shares
for Hartmarx Corporation have been issued.
The provisions of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (FAS 128), are effective for the Company's fiscal
year commencing December 1, 1997. There would have been no change in the
earnings per share as reflected in the accompanying Consolidated
Statement of Earnings had FAS 128 been effective in the periods ended May
31, 1997 and May 31, 1996.
Note 3
Long-term debt comprised the following (000's omitted):
May 31, Nov. 30, May 31,
1997 1996 1996
--------- --------- ---------
Notes payable $62,000 $63,400 $47,700
10 7/8% Senior Subordinated Notes, 84,946 84,909 86,079
net
Industrial development bonds 17,444 17,487 17,559
Other debt 2,705 2,732 284
--------- --------- ---------
167,095 168,528 151,622
Less - current 20,060 20,100 20,194
--------- --------- ---------
Long term debt $147,035 $148,428 $131,428
========= ========= =========
During fiscal 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 then 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. Credit 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 the
extension of the term from March 1997 to July 2000. The Credit Facility
contains 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.
During the first half of 1996, the Company purchased $13.5 million face
value of its Notes (including $3.5 million in the second quarter) at a
discount, resulting in an extraordinary gain, net of $.4 million tax
provision, of $.7 million or $.02 per share.
Note 4
Inventories at each date consisted of (000's omitted):
May 31, Nov. 30, May 31,
1997 1996 1996
----------- ----------- -----------
Raw materials $57,097 $49,248 $42,203
Work-in-process 27,897 25,151 23,085
Finished goods 99,932 91,514 90,478
----------- ----------- -----------
$184,926 $165,913 $155,766
=========== =========== ===========
Inventories are stated at the lower of cost or market. At May 31, 1997,
November 30, 1996 and May 31, 1996, approximately 48%, 49% and 43% 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.
HARTMARX CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
November 30, 1996 to May 31, 1997
- ---------------------------------
Since November 30, 1996, net accounts receivable decreased $14.4 million
or 10.6% to $121.1 million reflecting the normal seasonal fluctuations in
the Men's Apparel Group. Inventories of $184.9 million increased $19.0
million or 11.5% in anticipation of higher Fall season sales. Net
properties of $41.2 million declined $2.7 million as depreciation expense
exceeded capital additions for the six months. Capital expenditures and
depreciation expense for the full year are each anticipated to be
approximately $8.5 million. Total debt of $167.1 million declined $1.4
million and represented 50.2% of total capitalization compared to 51.0%
at November 30, 1996.
May 31, 1996 to May 31, 1997
- ----------------------------
On November 26, 1996, a wholly-owned subsidiary of the Company purchased
substantially all of the license rights, current assets, properties and
operations of the Plaid Clothing Group, Inc. and its subsidiaries
("Plaid") pursuant to an Asset Purchase Agreement. The increases in
accounts receivable, inventories and accounts payable and accrued
expenses from May 31, 1996 result largely from this acquisition.
Net accounts receivable increased $24.3 million to $121.1 million; the
increase was $8.4 million or 8.7%, excluding the amount related to the
Plaid asset purchase, principally attributable to the higher sales. The
allowance for doubtful accounts increased $1.0 million to $9.7 million
primarily attributable to Plaid. Inventories of $184.9 million increased
$29.2 million; the increase was $2.6 million or 1.7% excluding the amount
related to the Plaid asset purchase. Net properties of $41.2 million
declined $3.4 million, primarily reflecting depreciation expense
exceeding capital additions. Accounts payable and accrued expenses of
$98.3 million increased $20.5 million, primarily attributable to the
Plaid acquisition. Total debt of $167.1 million increased $15.5 million,
reflecting the $27 million paid for the Plaid assets, partially offset by
the trailing year earnings and working capital reductions; debt
represented 50.2% of total capitalization at May 31, 1997 compared to
53.2% at May 31, 1996.
Results of Operations
Second Quarter 1997 Compared to Second Quarter 1996
- ---------------------------------------------------
Consolidated sales of $169.7 million increased $35.5 million or 26.4%;
the increase was 7.9% excluding the revenues attributable to the Plaid
brands. Men's Apparel Group sales increased approximately 27.3%, which
included the Plaid brands. The businesses positioned in the upper end of
the tailored clothing market experienced a 20% sales increase while the
businesses which market moderately priced clothing continued to operate
in a difficult environment and experienced a 2% sales decline and reduced
profitability. Golfwear revenues increased over 18%. Sales in the women's
businesses increased 17% and represented approximately 8% of consolidated
sales in 1997 and 9% in 1996.
The consolidated gross margin percentage to sales was 24.2% compared to
23.9% last year, as ratios improved in both the men's and women's
businesses. Consolidated selling, general and administrative expenses
were $36.9 million compared to $31.6 million last year and represented
21.8% of sales compared to 23.6% last year. Earnings before interest,
taxes and extraordinary gain increased $3.4 million to $4.9 million.
Interest expense of $4.4 million increased by $.1 million and included
amortization of financing fees of $.3 million in both periods.
Consolidated pre-tax earnings were $.5 million in 1997 compared to a loss
of $2.8 million in 1996. After reflecting the applicable tax provision or
benefit, consolidated earnings were $.3 million or $.01 per share
compared to a loss of $1.7 million or $.05 per share in 1996.
Six Months 1997 Compared to Six Months 1996
- -------------------------------------------
Consolidated sales increased $61.7 million or 21.7% to $346.9 from $285.1
million in 1996; the revenue increase associated with the Plaid brands
acquired represented 16.6%. Men's Apparel Group sales increased
approximately 21%, primarily attributable to the Plaid brands. The
Hickey-Freeman and Hart Schaffner & Marx businesses positioned at the
upper end of the tailored clothing market had a combined 14% revenue
increase. The businesses which market moderately priced clothing
continued to operate in a difficult environment and experienced a 4%
sales decline and reduced profitability. Women's Apparel Group revenues,
which represented 8% of consolidated sales in each year, increased
approximately 25%.
The consolidated gross margin percentage to sales improved to 23.5% from
23.1% last year. The Men's Apparel Group gross margin rate was lower, as
improvements in the businesses in the higher price point categories were
offset by declines in the moderately priced product categories. Gross
margins in the Women's Apparel Group improved, primarily attributable to
International Women's Apparel. Consolidated selling, general and
administrative expenses were $71.9 million compared to $65.0 million in
1996 and represented 20.7% of sales in 1997 compared to 22.8% of sales in
1996.
Earnings before interest, taxes and extraordinary gain (EBIT) were $11.1
million in 1997 compared to $3.1 million last year; EBIT represented 3.2%
of sales in 1997 compared to 1.1% in 1996. The improvement was primarily
attributable to the higher sales, improved gross margin ratio and lower
operating expense ratio to sales. The Women's Apparel Group represented
approximately one-half of the increase with the remainder reflecting
improvement in the higher priced point businesses. Interest expense
declined slightly to $8.4 million from $8.5 million last year and
included amortization of financing fees of $.5 million in each year.
Consolidated pre-tax earnings were $2.7 million compared to a pre-tax
loss of $5.4 million last year. After reflecting the applicable tax
provision or benefit, consolidated earnings were $1.7 million compared to
a loss of $3.3 million in the year earlier period. The prior period
results also included an extraordinary gain, net of $.4 million tax
provision, of $.7 million related to public market purchases of $13.5
million face value of the Company's 10 7/8% Senior Subordinated
Debentures.
Part II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders
The annual meeting of the stockholders of the Registrant was held on
April 18, 1997. The Directors listed in the Registrant's Proxy Statement
for the Annual Meeting of Stockholders dated February 28, 1997 were
elected for one year terms with voting for each as follows:
Director For Abstentions
-------- --- -----------
A. Robert Abboud 30,302,886 812,645
Samawal A. Bakhsh 27,489,872 3,625,659
Jeffrey A. Cole 30,588,654 526,877
Raymond F. Farley 30,554,567 560,964
Elbert O. Hand 30,543,013 572,518
Donald P. Jacobs 30,541,953 573,578
Charles Marshall 30,568,826 546,705
Homi B. Patel 30,554,464 561,067
Michael B. Rohlfs 30,572,737 542,794
Stuart L. Scott 30,577,719 537,812
The reappointment of Price Waterhouse LLP as independent auditors was
ratified with 30,905,490 shares for, 112,118 shares opposed and 97,923
shares abstaining.
Item 5. Other Information
Frederick G. Wohlschlaeger joined the Registrant as Senior Vice
President, General Counsel and Secretary, effective July 1, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10-A-1 Employment Agreement dated July 1, 1997
between the Company and Frederick G.
Wohlschlaeger
Exhibit 10-A-2 Severance Agreement dated July 1, 1997
between the Company and Frederick G.
Wohlschlaeger
Exhibit 27 Financial Data Schedules
(b) No reports on Form 8-K were filed in the second quarter of 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARTMARX CORPORATION
July 14, 1997 By: /s/ GLENN R. MORGAN
-------------------------
Glenn R. Morgan
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
July 14, 1997 By: /s/ ANDREW A. ZAHR
-----------------------------
Andrew A. Zahr
Controller
(Principal Accounting Officer)
EXHIBIT 10-A-1
--------------
EMPLOYMENT AGREEMENT
--------------------
This Agreement entered into as of the 1st day of July, 1997,
by and between HARTMARX CORPORATION, a Delaware corporation
("Company"), and FREDERICK G. WOHLSCHLAEGER ("Executive").
WITNESSETH THAT:
---------------
WHEREAS, the parties hereto desire to enter into this
Agreement pertaining to the terms of Executive's employment by
the Company; and
WHEREAS, the Company and the Executive intend to enter into
a Severance Agreement ("Severance Agreement"), coincident
herewith; and
WHEREAS, upon the execution of this Agreement by the Company
and Executive the terms and conditions of this Agreement shall
control and govern the employment relationship between the
Company 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. Agreement Period. The Company hereby employs Executive
and Executive hereby agrees to remain in the employ of the
Company for an employment term ("Agreement Period") beginning on
July 1, 1997, and continuing in effect through December 31, 1998;
provided, however, that the Agreement Period shall automatically
be extended for two additional years unless, not later than July
15, 1998, the Company or the Executive shall have given notice
not to extend this Agreement; and further; provided, however,
that if the Executive's employment is terminated following a
Change in Control (as defined in the Severance Agreement), the
Agreement Period shall terminate upon such termination of
employment and the Executive's rights with respect to such
termination of employment shall be governed by the provisions of
the Severance Agreement. While Executive is employed by the
Company during the Agreement Period, the Company shall use its
best efforts to have the Board of Directors elect Executive to
the offices of Senior Vice President, General Counsel and
Secretary of the Company.
2. Performance of Duties. While employed by the Company
Executive shall devote all his full working time, attention and
energies during normal business hours to the performance of his
duties for the Company and its subsidiaries and shall perform his
duties faithfully and efficiently, subject to the direction of
the Company Board of Directors; provided, however, that Executive
may become a director of other corporations and engage in
charitable, civic, professional and other similar pursuits to the
extent that such activities do not interfere with his duties
hereunder.
3. Compensation. As compensation for the performance by
Executive of his obligations hereunder:
(a) Base Salary. During the Agreement Period the
Company shall pay Executive an annual base salary of not less
than $185,000 ("Base Salary"). Base Salary shall be paid in
accordance with the Company's customary payroll practices. Base
Salary may be increased at the discretion of the Compensation and
Stock Option Committee of the Company Board of Directors (the
"Committee") and once so increased shall not thereafter be
decreased, except for across-the-board reductions similarly
affecting all executives of the Company.
(b) Management Incentive Plan. Executive shall
participate in the Company Management Incentive Plan (the "MIP")
and/or any successor plan.
(c) Long Term Incentive Plan. Executive shall
participate in any long-term incentive plan maintained by the
Company ("LTI Plan") for such period of time as such plan may be
in effect.
(d) Participation in Benefit Plans. During the
Agreement Period the Executive shall be eligible to participate
in all savings, retirement and welfare benefit plans and programs
now or hereafter applicable to any other senior executives of the
Company on a basis no less favorable than is made available to
any other senior executive of the Company.
(e) Perquisites. During the Agreement Period, the
Company shall make available to the Executive all perquisites
that are made available to Company's senior executives.
4. Termination. The Executive's employment hereunder may
be terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. The Company may terminate the
Executive's employment hereunder for "Disability". Any question
as to the existence of the Disability shall be determined in
accordance with the Company's disability plan.
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement,
the Company shall have "Cause" to terminate the Executive's
employment hereunder upon the Executive's:
(i) conviction for the commission of a felony; or
(ii) willful failure to substantially perform his
duties hereunder; or
(iii) willful or grossly negligent conduct that is
demonstrably and materially injurious to the
Company or its affiliates; or
(iv) material breach of this Agreement, including
but not limited to Section 7 hereof.
Notwithstanding the foregoing, no event shall
constitute "Cause" unless the Company shall have notified
Executive in writing of the conduct allegedly constituting Cause
and the Executive shall have failed to correct such conduct
within thirty (30) days of the date of his receipt of such
written notice from the Company.
(d) Good Reason. The Executive may terminate his
employment hereunder for Good Reason. Good Reason shall mean the
occurrence (without the Executive's written consent) of any one
of the following acts by the Company, or failures by the Company
to act:
(i) failure of the Board of Directors of the Company
to elect Executive to the office(s) described in
Section 1 hereof; or
(ii) [Intentionally omitted]
(iii) any change in (i) the provisions of the Company's
bylaws describing, or (ii) the relative duties and
responsibilities of, the office of Senior Vice
President, General Counsel and Secretary; or
(iv) the assignment to Executive of any duties
inconsistent with Executive's status as Senior
Vice President, General Counsel and Secretary or a
substantial adverse alteration in the nature or
status of Executive's responsibilities; or
(v) any reduction by the Company in Executive's Base
Salary, except for across-the-board salary
reductions similarly affecting all executives of
the Company; or
(vi) the failure by the Company 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 the Company, within seven
(7) days of the date such compensation is due; or
(vii) the taking of any action by the Company which
directly or indirectly causes Executive to cease
to be eligible to participate in all savings,
retirement and welfare benefit plans and programs
applicable to any other senior executives of the
Company on a basis no less favorable than is made
available to any other senior executive of the
Company; the failure of the Company to make
available to the Executive all perquisites that
are made available to Company's senior executives;
the failure by the Company 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 the
Company to provide Executive with the number of
paid vacation days to which Executive may then be
entitled; except (as to all of the foregoing) for
changes (including termination) in such benefits
and/or policies similarly affecting all executives
of the Company; or
(viii) the relocation of the Executive's principal place
of employment to a location more than 50 miles
from the Executive's principal place of employment
as of the date hereof or the Company's requiring
the Executive to be based anywhere other than such
principal place of employment (or permitted
relocation thereof) except for required travel on
the Company's business to an extent substantially
consistent with the Executive's present business
travel obligations; or
(ix) the giving notice by the Company of its decision
not to extend this Agreement, in accordance with
Section 1; or any purported termination of the
Executive's employment by the Company other than
in accordance with this Agreement.
Notwithstanding the foregoing, no event shall
constitute "Good Reason" unless the Executive shall have notified
the Company in writing of the conduct allegedly constituting Good
Reason and the Company shall have failed to correct such conduct
within thirty (30) days of the date of its receipt of such
written notice from the Executive.
5. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other
than termination pursuant to Section 4(a) hereof) shall be
communicated by written Notice of Termination to the other party
hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific provision in this Agreement relied
upon and shall identify in reasonable detail the reason for
termination of the Executive's employment under the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall
mean (i) if the Executive's employment is terminated by his
death, the date of his death, (ii) if the Executive's employment
is terminated pursuant to Section 4(b) above, the date thirty
(30) days after Notice of Termination (provided that the
Executive shall not have returned to the performance of his
duties on a permanent full-time basis during such thirty (30) day
period), (iii) if the Executive's employment is terminated
pursuant to Section 4(c) or 4(d) above, the date thirty (30) days
after Notice of Termination and (iv) if the Executive's
employment is terminated for any other reason, the date specified
in the Notice of Termination which shall be not more than 30 days
from the date of such Notice.
6. Compensation Upon Termination.
-----------------------------
(a) Termination due to Death or Disability. If the
Executive's employment is terminated by his death or Disability,
except as provided in Section 6(d) below, the Company shall have
no further obligations to Executive under this Agreement.
(b) Termination By Company without Cause or By
Executive for Good Reason. Upon termination of Executive's
employment hereunder during the Agreement Period by the Company
without Cause or by Executive for Good Reason hereunder, then, in
lieu of any further salary, bonus, or LTI Plan payments for
periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive:
(i) The Company shall continue to pay to
Executive Base Salary as of the Date of Termination
(without giving effect to any decrease therein which
constitutes the basis, or one of the bases, upon which
the Notice of Termination is based), for a period of
twenty-four (24) months (the "Severance Period"),
payable semi-monthly or more frequently, in arrears,
commencing on the Date of Termination; provided,
however, that if a Change in Control occurs during the
Severance Period, the Company shall pay the Executive
by no later than 5 days following the Change in Control
a lump sum in cash equal to the sum of the remaining
payments that would have been payable to the Executive
hereunder had no Change in Control occurred, and
payments hereunder shall terminate.
(ii) The Company shall pay the Executive a lump
sum in cash, within 10 days of the Date of Termination,
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 with respect to any fiscal year ending
prior to the year in which the Date of Termination
occurs.
(iii) The Company shall pay the Executive as
bonuses any amount which would have been payable to
Executive under the MIP for the full fiscal year in
which Executive was terminated and for the full fiscal
year following such year. Such payments will be made
within five days of the date on which MIP payments are
made to other MIP participants after the close of each
fiscal year and will include the cash value, determined
without regard to any restrictions on the sale thereof,
of restricted stock. If a Change in Control occurs
prior to either of these two payments, then, in lieu of
any further bonus payments, the Company shall pay
Executive, no later than 10 days following the Change
in Control, a lump sum in cash calculated at the Step-1
level for the then current fiscal year for each MIP
bonus payment not yet made.
(iv) The Company shall pay the Executive a lump
sum in cash, within 10 days of the Date of Termination,
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 with respect to any performance
period ending prior to the 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 with respect to any performance periods under
the LTI Plan which are not completed as of the Date of
Termination, calculated based on the assumption that
the Company's 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 (B) above shall be payable to
Executive regardless of whether the Company actually
achieves the performance level upon which the
calculation of such amount is based.
(v) During the Severance Period the Company shall
arrange to provide the Executive with life, disability,
accident and health insurance benefits ("Welfare
Benefits") substantially similar in all material
respects to those which the Executive is receiving
immediately prior to the Date of Termination (without
giving effect to any decrease therein which constitutes
the basis, or one of the bases, upon which the Notice
of Termination is based). If the Executive receives,
or becomes eligible to receive, Welfare Benefits from
another source, then the Welfare Benefits otherwise
receivable by the Executive pursuant to this Section
6(b)(v) shall be reduced to the extent of such other
Welfare Benefits received by, or made available to, the
Executive during the Severance Period (and any such
Welfare Benefits received by or made available to the
Executive shall be reported to the Company by the
Executive). Nothing herein shall be deemed to limit
Executive's rights, if any, to thereafter participate
in any retiree medical plan then in effect.
(vi) During the Severance Period, the Company
shall arrange to provide the Executive with such
material perquisites as are provided to the Executive
immediately prior to the Date of Termination (without
giving effect to any decrease therein which constitutes
the basis, or one of the bases, upon which the Notice
of Termination is based).
(vii) Effective as of the Date of Termination,
all stock options (whether or not then fully
exercisable) granted to Executive under any of the
Company's stock option plans prior to the Date of
Termination shall become immediately exercisable and
Executive shall be entitled to exercise any or all of
such options at any time prior to the respective
expiration dates of such options as set forth in the
grant document evidencing same.
(viii) Effective as of the Date of Termination,
all restricted stock granted to Executive prior to the
date Executive's employment with the Company is
terminated shall become fully vested and all
restrictions thereon shall lapse.
(ix) At the time and in the manner such benefits
are otherwise payable, the Executive shall receive
payment of the incremental qualified and supplemental
defined benefit pension benefits Executive would have
earned had Executive's employment continued during the
Severance Period, had he received credit for service
for the Severance Period for all purposes under the
applicable plans, and had the Executive received
compensation during the Severance Period of salary, at
the annual rate equal to the Executive's Base Salary in
effect immediately prior to the Date of Termination
(without giving effect to any decrease therein which
constitutes the basis, or one of the bases, upon which
the Notice of Termination is based), and MIP bonuses
actually paid during the Severance Period. Anything in
the applicable plan to the contrary notwithstanding,
the Executive's benefit (as increased hereunder) under
any supplemental defined benefit plan maintained by the
Company ("SERP Benefit") 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 Hartmarx Retirement Income Plan
("RIP"); provided, however, that if the Executive
elects to receive payment of RIP benefits in the form
of a joint and survivor annuity, the SERP Benefit shall
be paid in the form of a joint and survivor annuity,
calculated so that the value of such SERP Benefit is
the actuarial equivalent of the SERP Benefit payable in
the form of a single life annuity. Notwithstanding the
foregoing, in the event of a Change in Control then the
Executive's SERP Benefit as of such date shall be paid
to him in a lump sum within 10 days of the Change in
Control or the Date of Termination, as applicable.
(c) Termination by the Company for Cause or By
Executive Other than for Good Reason. If the Executive's
employment shall be terminated by the Company for Cause or by the
Executive other than for Good Reason, then, subject to Section
6(d) below, the Company shall have no obligations to Executive
under this Agreement.
(d) Additional Payments. Following any termination of
Executive's employment, the Company shall pay the Executive all
unpaid amounts, if any, to which the Executive is entitled as of
the Date of Termination under any compensation plan or program of
the Company, at the time such payments are due. In addition,
within ten days of the Date of Termination, the Company shall pay
the Executive, or his legal representative or estate, as
applicable, any amounts accrued but not paid pursuant to Sections
3(a), 3(b) and 3(c) in respect of periods ending prior to the
Date of Termination.
7. Confidentiality; Nondisparagement. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
trade secrets, confidential information, and knowledge or data
relating to the Company and its affiliates which shall have been
obtained by the Executive during the Executive's employment by
the Company and which shall not have been or now or hereafter
have become public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of this
Agreement). The Executive shall not, without the prior written
consent of the Company, or as may otherwise be required by law or
legal process, communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the Company
and those designated by the Company. In addition, the Executive
shall not disparage, discredit or otherwise publicly criticize
the Company or its affiliates or engage in any act, directly or
indirectly, for purposes of disparaging, ridiculing or bringing
scorn upon the Company, any affiliate thereof, or any of their
respective officers, directors, businesses, tradenames or
trademarks. In the event of a breach or threatened breach of
this Section 7, the Executive agrees that the Company shall be
entitled to injunctive relief in a court of appropriate
jurisdiction to remedy any such breach or threatened breach, the
Executive acknowledging that damages would be inadequate and
insufficient. Any termination of the Executive's employment,
Agreement Period or of this Agreement shall have no effect on the
continuing operation of this Section 7.
8. 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.
9. 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 the Company at its principal
executive offices, to the attention of its Chief Executive
Officer, or to Executive at the last address filed by him in
writing with the Committee, as the case may be.
10. Nonalienation. The interests of Executive under this
Agreement are not subject to the claims of his creditors, other
than the Company and its subsidiaries, and may not otherwise be
voluntarily or involuntarily assigned, alienated or encumbered.
11. Successors. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and
assigns and upon any person acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or
substantially all of the Company's assets and business.
12. 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.
13. Applicable Law. The provisions of this Agreement shall
be construed in accordance with the laws of the State of
Illinois.
14. Counterpart. The Agreement may be executed in two or
more counterparts, any one of which shall be deemed the original
without reference to the others.
15. Attorney's Fees. Company shall reimburse Executive for
all reasonable legal fees and costs and other fees and expenses
which Executive may incur in respect of any dispute or
controversy arising under or in connection with this Agreement;
provided, however, that the Company shall not reimburse such
legal fees and costs and other fees and expenses if the fact
finder determines that the action brought by the Executive was
frivolous.
16. 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.
17. 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. The Company 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 the Company.
18. Mitigation. Executive shall not be required to
mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and, except as provided in Section
6(b)(v), no payment otherwise required hereunder shall be reduced
on account of) other employment.
IN WITNESS WHEREOF, Executive has hereunto set his hand, and
the Company 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 Assistant Secretary, all as of the day and
year first above written.
/s/ FREDERICK G. WOHLSCHLAEGER
------------------------------------
FREDERICK G. WOHLSCHLAEGER
Attest: HARTMARX CORPORATION
/s/ GLENN R. MORGAN By: /s/ E.O. HAND
---------------------- ------------------------------
Glenn R. Morgan E.O. Hand, Chairman and Chief
Assistant Secretary Executive Officer
EXHIBIT 10-A-2
--------------
SEVERANCE AGREEMENT
-------------------
This Agreement entered into as of the 1st day of July, 1997,
by and between HARTMARX CORPORATION, a Delaware corporation
("Company"), and FREDERICK G. WOHLSCHLAEGER ("Executive").
WITNESSETH THAT:
---------------
WHEREAS, the Company recognizes that, as is the case
with many publicly held corporations, the possibility of a Change
in Control exists and that such possibility, and the uncertainty
and questions which it may raise among management, may result in
the departure or distraction of management personnel to the
detriment of the Company and its stockholders; and
WHEREAS, the Company has determined that appropriate
steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management,
including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control; and
WHEREAS, the Company and the Executive intend to enter into
an Employment Agreement ("Employment Agreement"), coincident
herewith.
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. Agreement Period. The Agreement Period shall commence
on the date hereof and shall continue in effect through December
31, 1998; provided, however, that commencing on January 1, 1998
and each January 1 thereafter, the Agreement Period shall
automatically be extended for one additional year unless, not
later than July 15 of the preceding year, the Company or the
Executive shall have given notice not to extend this Agreement;
and further provided, however, that if a Change in Control shall
have occurred during the Agreement Period, the Agreement Period
shall continue in effect for a period of not less than
twenty-four (24) months beyond the month in which such Change in
Control occurred.
2. Nature of the Agreement. In order to induce the
Executive to remain in the employ of the Company, the Company
agrees, under the conditions described herein, to pay the
Executive the severance payments and benefits described herein.
Except as provided in Section 7 hereof and Section 11 hereof, no
amount or benefit shall be payable under this Agreement unless
Executive is employed at the time of the Change in Control and
there shall have been a termination of the Executive's employment
with the Company following the Change in Control and during the
Agreement Period.
3. Change in Control; Definitions. A Change in Control
shall mean the occurrence of any of the following:
(i) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power
of the Company's then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (A)
of paragraph (iii) below; or
(ii) 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 the Company
("Board") (together with any new directors whose
election by the Board or whose nomination for election
by the shareholders of the Company was approved by a
vote of at least 66 2/3% of the directors of the Company
then still in office who were either directors at the
beginning of such period or whose election or
nomination for election was previously so approved)
cease for any reason to constitute a majority of the
Board then in office; or
(iii) there is consummated a merger or
consolidation of the Company (or any direct or indirect
subsidiary of the Company) with any other corporation,
other than (A) a merger or consolidation which would
result in the voting securities of the Company
outstanding immediately prior to such merger or
consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent
thereof) at least 75% of the combined voting power of
the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately
after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, 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
(iv) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the
Company or there is consummated an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets, other than a
sale or disposition by the Company of all or
substantially all of the Company's assets to an entity
at least 75% of the combined voting power of the voting
securities of which are owned by Persons in
substantially the same proportions as their ownership
of the Company immediately prior to such sale.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur in the event of a Management Change in
Control. A Management Change in Control shall mean a Change in
Control pursuant to which Executive (alone or with others)
acquires or retains, directly or indirectly, the power to direct
or cause the direction of the management and policies of the
Company (whether through the ownership of voting securities, by
contract, or otherwise) and which is directly or indirectly
attributable to a public announcement by Executive (or others
acting in concert with Executive) of an intention to take actions
which, if consummated, would constitute such Management Change in
Control. In addition, no "Change in Control" shall be deemed to
have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record
holders of the common stock of the Company immediately prior to
such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which
owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
"Person" shall mean any person (as defined in Section
3(a)(9) of the Securities Exchange Act (the "Exchange Act"), as
such term is modified in Sections 13(d) and 14(d) of the Exchange
Act) other than (1) any employee plan established by the Company,
(2) the Company or any of its affiliates (as defined in Rule
12b-2 promulgated under the Exchange Act), (3) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (4) a corporation owned, directly or indirectly,
by stockholders of the Company in substantially the same
proportions as their ownership of the Company.
"Beneficial Owner" shall mean beneficial owner as
defined in Rule 13d-3 under the Exchange Act.
4. Termination. The Executive's employment hereunder may
be terminated under the following circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. The Company may terminate the
Executive's employment hereunder for "Disability". Any question
as to the existence of the Disability shall be determined in
accordance with the Company's disability plan.
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement,
the Company shall have "Cause" to terminate the Executive's
employment hereunder upon the Executive's:
(i) conviction for the commission of a felony; or
(ii) willful failure to substantially perform his
duties hereunder; or
(iii) willful or grossly negligent conduct that is
demonstrably and materially injurious to the
Company or its affiliates.
Notwithstanding the foregoing, no event shall
constitute "Cause" unless the Company shall have notified
Executive in writing of the conduct allegedly constituting Cause
and the Executive shall have failed to correct such conduct
within thirty (30) days of the date of his receipt of such
written notice from the Company.
(d) Good Reason. The Executive may terminate his
employment hereunder for Good Reason. Good Reason shall mean the
occurrence, after a Change in Control, (without the Executive's
written consent) of any one of the following acts by the Company,
or failures by the Company to act:
(i) failure of the Board of Directors of the Company
to elect Executive to the office(s) held by the
Executive immediately prior to the Change in
Control; or
(ii) [Intentionally omitted]
(iii) any change in (i) the provisions of the Company's
bylaws describing, or (ii) the relative duties and
responsibilities of, the office of Senior Vice
President, General Counsel and Secretary; or
(iv) the assignment to Executive of any duties
inconsistent with Executive's status as Senior
Vice President, General Counsel and Secretary or a
substantial adverse alteration in the nature or
status of Executive's responsibilities; or
(v) any reduction by the Company in the Executive's
annual base salary as in effect immediately prior
to the Change in Control or as the same may be
increased from time to time; or
(vi) the failure by the Company 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 the Company, within seven
(7) days of the date such compensation is due; or
(vii) the failure by the Company to continue in effect
any compensation plan in which the Executive
participates immediately prior to the Change in
Control which is material to the Executive's total
compensation, including but not limited to stock
option, restricted stock, stock appreciation
right, incentive compensation, bonus and other
plans, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has
been made with respect to such plan; or the
failure by the Company to continue the Executive's
participation therein (or in such substitute or
alternative plan) on a basis not materially less
favorable, both in terms of the amount or timing
of payment of benefits provided and the level of
the Executive's participation relative to other
participants, as existed immediately prior to the
Change in Control; or
(viii) the failure by the Company to continue to provide
the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the
Company's pension, savings, life insurance,
medical, health and accident, or disability plans
in which the Executive was participating
immediately prior to the Change in Control, the
taking of any action by the Company which would
directly or indirectly materially reduce any of
such benefits or deprive the Executive of any
material perquisite or fringe benefit enjoyed by
the Executive immediately prior to the Change in
Control, or the failure by the Company to provide
the Executive with the number of paid vacation
days to which the Executive is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation
policy in effect immediately prior to the Change
in Control; or
(ix) the relocation of the Executive's principal place
of employment to a location more than 50 miles
from the Executive's principal place of employment
as of the date hereof or the Company's requiring
the Executive to be based anywhere other than such
principal place of employment (or permitted
relocation thereof) except for required travel on
the Company's business to an extent substantially
consistent with the Executive's business travel
obligations immediately prior to the Change in
Control; or
(x) any purported termination of the Executive's
employment by the Company other than in accordance
with this Agreement; for purposes of this
Agreement, no such purported termination shall be
effective.
Notwithstanding the foregoing, no event shall
constitute "Good Reason" unless the Executive shall have notified
the Company in writing of the conduct allegedly constituting Good
Reason and the Company shall have failed to correct such conduct
within thirty (30) days of the date of its receipt of such
written notice from the Executive.
5. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other
than termination pursuant to Section 4(a) hereof) shall be
communicated by written Notice of Termination to the other party
hereto in accordance with Section 9. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific provision in this Agreement relied
upon and shall identify in reasonable detail the reason for
termination of the Executive's employment under the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall
mean (i) if the Executive's employment is terminated by his
death, the date of his death, (ii) if the Executive's employment
is terminated pursuant to Section 4(b) above, the date thirty
(30) days after Notice of Termination (provided that the
Executive shall not have returned to the performance of his
duties on a permanent full-time basis during such thirty (30) day
period), (iii) if the Executive's employment is terminated
pursuant to Section 4(c) or 4(d) above, the date thirty (30) days
after Notice of Termination and (iv) if the Executive's
employment is terminated for any other reason, the date specified
in the Notice of Termination which shall be not more than 30 days
from the date of such Notice.
6. Compensation Upon Termination.
-----------------------------
(a) Termination due to Death or Disability. If the
Executive's employment is terminated after a Change in Control
and during the Agreement Period by his death or Disability,
except as provided in Section 6(d) below, the Company shall have
no further obligations to Executive under this Agreement.
(b) Termination By Company without Cause or By
Executive for Good Reason. Upon termination of Executive's
employment after a Change in Control and during the Agreement
Period by the Company without Cause or by Executive for Good
Reason hereunder, then, in lieu of any further salary, bonus, or
LTI Plan payments for periods subsequent to the Date of
Termination and in lieu of any severance benefit otherwise
payable to the Executive:
(i) The Company shall pay to the Executive a lump
sum cash severance payment, within 5 days of the Date
of Termination, equal to three times the higher of the
Executive's annual base salary as of the Date of
Termination and the Executive's annual base salary in
effect immediately prior to the Change in Control.
(ii) The Company shall pay the Executive a lump
sum in cash, within 10 days of the Date of Termination,
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 with respect to any fiscal year ending
prior to the year in which the Date of Termination
occurs; plus (B) three times the 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 with respect to the year in which
the Date of Termination occurs, calculated based on the
assumption that the Company achieves its "Step-1"
target level (as defined in the MIP) for such year
(annual bonus based on such assumption, "Step-1
Bonus"). The amount set forth in item (B) above shall
be payable to Executive regardless of whether the
Company actually achieves the performance levels upon
which the calculation of such amount is based.
(iii) The Company shall pay the Executive a lump
sum in cash, within 10 days of the Date of Termination,
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 with respect to any performance
period ending prior to the 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 with respect to any performance periods under
the LTI Plan which are not completed as of the Date of
Termination, calculated based on the assumption that
the Company's 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 (B) above shall be payable to
Executive regardless of whether the Company actually
achieves the performance level upon which the
calculation of such amount is based.
(iv) During a period of thirty-six (36) months
(the "Severance Period") the Company shall arrange to
provide the Executive with life, disability, accident
and health insurance benefits ("Welfare Benefits")
substantially similar in all material respects to those
which the Executive is receiving immediately prior to
the Date of Termination (without giving effect to any
adverse amendment to, or elimination of, such benefits
made after a Change in Control). If the Executive
receives, or becomes eligible to receive, Welfare
Benefits from another source, then the Welfare Benefits
otherwise receivable by the Executive pursuant to this
Section 6(b)(iv) shall be reduced to the extent of such
other Welfare Benefits received by, or made available
to, the Executive during the Severance Period (and any
such Welfare Benefits received by or made available to
the Executive shall be reported to the Company by the
Executive). Nothing herein shall be deemed to limit
Executive's rights, if any, to thereafter participate
in any retiree medical plan then in effect.
(v) During the Severance Period, the Company shall
arrange to provide the Executive with such material
perquisites as are provided to the Executive
immediately prior to the Date of Termination (without
giving effect to any adverse amendment to, or
elimination of, such perquisites made after a Change in
Control).
(vi) Effective as of the Date of Termination, all
stock options (whether or not then fully exercisable)
granted to Executive under any of the Company's stock
option plans prior to the Date of Termination shall
become immediately exercisable and Executive shall be
entitled to exercise any or all of such options at any
time prior to the respective expiration dates of such
options as set forth in the grant document evidencing
same.
(vii) Effective as of the Date of Termination, all
restricted stock granted to Executive prior to the date
Executive's employment with the Company is terminated
shall become fully vested and all restrictions thereon
shall lapse.
(viii) The Executive shall receive payment of the
incremental qualified and supplemental defined benefit
pension benefits Executive would have earned had
Executive's employment continued during the Severance
Period, had he received credit for service for the
Severance Period for all purposes under the applicable
plans, and had the Executive received compensation
during the Severance Period of salary, at the annual
rate equal to the Executive's Base Salary in effect
immediately prior to the Date of Termination (without
giving effect to any decrease therein following the
Change in Control), and bonus, at the annual rate equal
to the Step-1 Bonus. Anything in the applicable plan
to the contrary notwithstanding, the net present value
of the Executive's benefit (as increased hereunder)
under any supplemental defined benefit plan maintained
by the Company ("SERP Benefit") shall be paid to the
Executive in a lump sum in cash by no later than 10
days following the Date of Termination.
(c) Termination by the Company for Cause or By
Executive Other than for Good Reason. If the Executive's
employment shall be terminated after a Change in Control and
during the Agreement Period by the Company for Cause or by the
Executive other than for Good Reason, then, subject to Section
6(d) below, the Company shall have no obligations to Executive
under this Agreement.
(d) Additional Payments. Following any termination of
Executive's employment following the Change in Control and during
the Agreement Period, (i) the Company shall pay the Executive all
unpaid amounts, if any, to which the Executive is entitled as of
the Date of Termination under any compensation plan or program of
the Company, at the time such payments are due, (ii) within ten
days of the Date of Termination, the Company shall pay the
Executive, or his legal representative or estate, as applicable,
the Executive's full salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of
Termination is given, together with all compensation and benefits
payable to the Executive through the Date of Termination under
the terms of the Company's compensation and benefit plans,
programs or arrangements and (iii) the Company shall pay to the
Executive the Executive's normal post-termination compensation
and benefits as such payments become due (such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements).
7. Excise Taxes. If any of the payments or benefits
received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment
(whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person whose
actions result in a Change in Control or any Person affiliated
with the Company or such Person) (such payments or benefits,
being hereinafter referred to as the "Total Payments") will be
subject to any excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income
and employment taxes and Excise Tax upon the Gross-Up payment,
shall be equal to the Total Payments. For purposes of
determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to
the Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), such payments or benefits
(in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b)(4)(A) of the Code, (ii)
all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation
for services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the base amount allocable
to such reasonable compensation, or are otherwise not subject to
the Excise Tax, and (iii) the value of any noncash benefits or
any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3)
and (4) of the Code. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay
federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's
residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 7), net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the
Excise Tax is finally determined to be less than the amount taken
into account hereunder in calculating the Gross-Up Payment, the
Executive shall repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income and employment
taxes imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a
reduction in Excise Tax and/or a federal, state or local income
or employment tax deduction) plus interest on the amount of such
repayment at 120% of the rate provided in section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the
Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect to
such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence
or amount of liability for Excise Tax with respect to the Total
Payments.
8. 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.
9. 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 the Company at its principal
executive offices, to the attention of its Chief Executive
Officer, or to Executive at the last address filed by him in
writing with the Committee, as the case may be.
10. Nonalienation. The interests of Executive under this
Agreement are not subject to the claims of his creditors, other
than the Company and its subsidiaries, and may not otherwise be
voluntarily or involuntarily assigned, alienated or encumbered.
11. Successors. In addition to any obligations imposed by
law upon any successor to the Company, the Company will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
12. 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.
13. Applicable Law. The provisions of this Agreement shall
be construed in accordance with the laws of the State of
Illinois.
14. Counterpart. The Agreement may be executed in two or
more counterparts, any one of which shall be deemed the original
without reference to the others.
15. Attorney's Fees. The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive
in disputing in good faith any issue hereunder relating to the
termination of the Executive's employment, in seeking in good
faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to
the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments
shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably
may require.
16. 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.
17. 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. The Company 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 the Company.
18. Mitigation. Executive shall not be required to
mitigate damages or the amount of any payment provided for under
this Agreement by seeking (and, except as provided in Section
6(b)(iv), no payment otherwise required hereunder shall be
reduced on account of) other employment.
IN WITNESS WHEREOF, Executive has hereunto set his hand, and
the Company 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 Assistant Secretary, all as of the day and
year first above written.
/s/ FREDERICK G. WOHLSCHLAEGER
------------------------------------
FREDERICK G. WOHLSCHLAEGER
Attest: HARTMARX CORPORATION
/s/ GLENN R. MORGAN By: /s/ E.O. HAND
----------------------- ------------------------------
Glenn R. Morgan E.O. Hand, Chairman and Chief
Assistant Secretary Executive Officer
<TABLE> <S> <C>
<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>
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<PERIOD-TYPE> 6-MOS
<CASH> 1,202
<SECURITIES> 0
<RECEIVABLES> 121,137
<ALLOWANCES> (9,745)
<INVENTORY> 184,926
<CURRENT-ASSETS> 322,156
<PP&E> 174,448
<DEPRECIATION> (133,242)
<TOTAL-ASSETS> 431,009
<CURRENT-LIABILITIES> 118,389
<BONDS> 147,035
0
0
<COMMON> 84,162
<OTHER-SE> 81,423
<TOTAL-LIABILITY-AND-EQUITY> 431,009
<SALES> 346,853
<TOTAL-REVENUES> 348,465
<CGS> 265,438
<TOTAL-COSTS> 337,368
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,412
<INCOME-PRETAX> 2,685
<INCOME-TAX> 1,020
<INCOME-CONTINUING> 1,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,665
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
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