<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 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: 0-23214
---------------
SAMSONITE CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3511556
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 East 45th Avenue, Denver, CO 80239
- ---------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
(303) 373-2000
--------------------------------
(Registrant's telephone number, including area code)
-----------------------
(Former name, if changed since last report)
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.
X Yes No
---- ----
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
X Yes No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 20,371,068 shares of
common stock, par value $0.01 per share, as of December 2, 1997.
- --------------------------------------------------------------------------------
<PAGE>
FORM 10-Q
---------
CONTENTS
--------
<TABLE>
<CAPTION>
Page Number
-----------
PART I - FINANCIAL INFORMATION
---------------------
<S> <C>
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets as of October 31, 1997
and January 31, 1997............................................................... 1
Unaudited Consolidated Statements of Operations for the three months
ended October 31, 1997 and 1996.................................................... 3
Unaudited Consolidated Statements of Operations for the nine months
ended October 31, 1997 and 1996.................................................... 4
Unaudited Consolidated Statement of Stockholders' Equity
for the nine months ended October 31, 1997......................................... 5
Unaudited Consolidated Statements of Cash Flows for the nine months
ended October 31, 1997 and 1996.................................................... 6
Notes to Unaudited Consolidated Financial Statements............................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................... 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable
PART II - OTHER INFORMATION
-----------------
Item 1. Legal Proceedings.................................................................. 28
Item 2. Changes in Securities.............................................................. 28
Item 3. Defaults Upon Senior Securities.................................................... 28
Item 4. Submission of Matters to a Vote of Security Holders................................ 28
Item 5. Other Information.................................................................. 28
Item 6. Exhibits and Reports on Form 8-K................................................... 28
Signature ............................................................................... 29
Index to Exhibits............................................................................. 30
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of October 31, 1997 and January 31, 1997
(In thousands)
<TABLE>
<CAPTION>
October 31, January 31,
Assets 1997 1997
- ------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................ $ 15,766 9,343
Trade receivables, net of allowances for doubtful accounts
of $9,925 and $7,431 .......................................... 126,818 83,276
Notes and other receivables ...................................... 12,853 9,045
Inventories (Note 2) ............................................. 153,864 135,071
Deferred income tax assets ....................................... 31,773 36,365
Prepaid expenses and other current assets ........................ 14,448 13,012
Assets held for sale ............................................. 11,644 9,002
-------- --------
Total current assets .......................................... 367,166 295,114
Investments in affiliates ............................................ 2,665 2,989
Property, plant and equipment, net (Note 3) .......................... 141,754 143,959
Intangible assets, less accumulated amortization of $204,673 and
$203,039 (Note 4) ................................................ 118,526 127,655
Other assets and long-term receivables, net of allowances
for doubtful accounts of $706 and $5,556 ......................... 13,594 22,941
-------- --------
$643,705 592,658
======== ========
(Continued)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
as of October 31, 1997 and January 31, 1997
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
October 31, January 31,
Liabilities and Stockholders' Equity 1997 1997
- ------------------------------------ ----------- -----------
<S> <C> <C>
Current liabilities:
Short-term debt (Note 5) .............................................. $ 4,683 2,095
Current installments of long-term obligations (Note 5) ................ 6,408 22,862
Accounts payable ...................................................... 62,486 46,777
Accrued and other current liabilities ................................. 83,099 117,985
--------- ---------
Total current liabilities .......................................... 156,676 189,719
Long-term obligations, less current installments (Note 5) ................. 180,996 267,755
Deferred income tax liabilities ........................................... 28,499 30,921
Other noncurrent liabilities .............................................. 66,132 75,125
--------- ---------
Total liabilities .................................................. 432,303 563,520
--------- ---------
Minority interests in consolidated subsidiaries ........................... 6,672 4,140
Stockholders' equity (Notes 7 and 8):
Preferred stock ($.01 par value; 2,000,000 shares authorized;
no shares issued) .................................................. -- --
Common stock ($.01 par value; 60,000,000 shares authorized;
20,367,569 and 16,033,833 shares issued and
outstanding, respectively) ......................................... 204 160
Additional paid-in capital ............................................ 419,045 266,752
Accumulated deficit ................................................... (199,748) (235,870)
Foreign currency translation adjustment ............................... (14,474) (5,337)
Unearned compensation - restricted shares ............................. (297) (707)
--------- ---------
Total stockholders' equity ......................................... 204,730 24,998
--------- ---------
Commitments and contingencies (Note 1C and 6)
$ 643,705 592,658
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
for the three months ended October 31, 1997 and 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended October 31,
------------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales (Note 1F) .................................................. $ 211,104 203,817
Cost of goods sold (Note 3) .......................................... 121,245 123,413
--------- ---------
Gross profit ..................................................... 89,859 80,404
Selling, general and administrative expenses (Note 3) ................ 63,379 62,749
Amortization of intangible assets (Note 4) ........................... 1,831 2,217
Provision (credit) for restructuring operations (Note 1G) ............ (903) 10,670
--------- ---------
Operating income ................................................. 25,552 4,768
Other income (expense):
Interest income (Note 6(f)) ...................................... 1,456 373
Interest expense and amortization of debt issue costs ............ (4,672) (9,078)
Other - net (Note 6) ............................................. 14,183 11,921
--------- ---------
Income before income taxes, minority interest
and extraordinary item ........................................ 36,519 7,984
Income tax expense ................................................... (12,507) (4,203)
Minority interest in earnings of subsidiaries ........................ (493) (409)
--------- ---------
Income before extraordinary item ................................. 23,519 3,372
Extraordinary item - loss on extinguishment of debt,
net of income tax benefit of $4,023 (Note 5) ..................... (6,564) --
--------- ---------
Net income ....................................................... $ 16,955 3,372
========= =========
Net income per share - primary (Note 1E):
Income before extraordinary item .............................. $ 1.11 .22
Extraordinary loss ............................................ (.31) --
--------- ---------
Net income ................................................ $ .80 .22
========= =========
Net income per share - fully diluted (Note 1E):
Income before extraordinary item .............................. $ 1.11 .20
Extraordinary loss ............................................ (.31) --
--------- ---------
Net income ................................................ $ .80 .20
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
for the nine months ended October 31, 1997 and 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales (Note 1F) ...................................................... $ 560,210 553,124
Cost of goods sold (Note 3) .............................................. 321,855 335,363
--------- ---------
Gross profit ......................................................... 238,355 217,761
Selling, general and administrative expenses (Note 3) .................... 175,201 174,140
Amortization of intangible assets (Note 4) ............................... 5,485 29,622
Provision (credit) for restructuring operations (Note 1G) ................ (1,491) 10,670
--------- ---------
Operating income ..................................................... 59,160 3,329
Other income (expense):
Interest income (Note 6(f)) .......................................... 2,059 1,172
Interest expense and amortization of debt issue costs ................ (15,777) (27,112)
Other - net (Note 6) ................................................. 30,052 18,453
--------- ---------
Income (loss) before income taxes, minority interest and
extraordinary item ................................................ 75,494 (4,158)
Income tax expense ....................................................... (22,578) (8,603)
Minority interest in earnings of subsidiaries ............................ (607) (852)
--------- ---------
Income (loss) before extraordinary item .............................. 52,309 (13,613)
Extraordinary item - loss on extinguishments of debt, net of
income tax benefit of $9,921 (Note 5) ................................ (16,187) --
--------- ---------
Net income (loss) .................................................... $ 36,122 (13,613)
========= =========
Net income (loss) per share - primary (Note 1E):
Income (loss) before extraordinary item .............................. $ 2.49 (.85)
Extraordinary loss ................................................... (.77) --
--------- ---------
Net income (loss) .................................................... $ 1.72 (.85)
========= =========
Net income (loss) per share - fully diluted (Note 1E):
Income (loss) before extraordinary item .............................. $ 2.48 (.85)
Extraordinary loss ................................................... (.77) --
--------- ---------
Net income (loss) .................................................... $ 1.71 (.85)
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statement of Stockholders' Equity
for the nine months ended October 31, 1997
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Foreign Unearned
Additional Currency Compensation-
Preferred Common Paid-In Accumulated Translation Restricted
Stock Stock Capital Deficit Adjustment Shares
----- ----- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1997 $-- 160 266,752 (235,870) (5,337) (707)
Issuance of 3,300,000
shares of common stock in
public offering, net of
offering costs and
underwriting discount of
$8,303 (Note 8) -- 33 130,211 -- -- --
Issuance of 2,933 shares to
directors for services -- -- 130 -- -- --
Amortization of restricted
stock award to
compensation expense -- -- -- -- -- 410
Compensation expense
accrued for stock bonus
awards (Note 7) -- -- 532 -- -- --
Exercise of employee stock
options and related income
tax benefits, net of shares
exchanged (Notes 7 and 8) -- 11 21,420 -- -- --
Foreign currency
translation adjustment -- -- -- -- (9,137) --
Net income -- -- -- 36,122 -- --
---- ---- -------- -------- -------- ----
Balance, October 31, 1997 $-- 204 419,045 (199,748) (14,474) (297)
==== ==== ======== ======== ======== ====
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
for the nine months ended October 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1997 1996
---- ----
Cash flows provided by (used in) operating activities:
<S> <C> <C>
Net income (loss) ........................................................ $ 36,122 (13,613)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Loss on extinguishments of debt ....................................... 16,187 --
Depreciation and amortization of property,
plant and equipment ............................................... 16,032 16,615
Amortization of intangible assets ..................................... 5,485 29,622
Amortization of debt issue costs ...................................... 839 1,449
Provision for doubtful accounts ....................................... 3,820 2,073
Amortization of stock awards and stock issued for services ............ 1,072 576
Adjustment of allowances for contingencies from
previous operations ............................................... (5,299) --
Adjustment of allowance for loan to settlement trust .................. (4,850) --
Adjustment of liability for PBGC claims ............................... -- (11,100)
Changes in deferred taxes, net ........................................ 3,879 9,565
Changes in operating assets and liabilities:
Trade and other receivables ....................................... (50,705) (19,079)
Inventories ....................................................... (18,793) (23,402)
Prepaid expenses and other current assets ......................... (1,436) 1,850
Accounts payable .................................................. 15,709 5,760
Accrued liabilities ............................................... (11,038) 5,008
Other adjustments - net .................................................. 5,138 5,385
-------- --------
Net cash provided by operating activities ................................ $ 12,162 10,709
-------- --------
(Continued)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
for the nine months ended October 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows provided by (used in) investing activities:
Purchases of property, plant and equipment ......................... $ (26,447) (19,689)
Net cash received from (used in) previous operations ............... (3,098) 11,511
Other .............................................................. 4,579 4,601
--------- ---------
Net cash used in investing activities ........................... (24,966) (3,577)
--------- ---------
Cash flows provided by (used in) financing activities:
Proceeds from public stock offering, net of offering costs ......... 130,244 --
Proceeds from exercise of employee stock options and
sale of stock to officer ........................................ 7,504 1,199
Payment of note receivable for issuance of common stock ............ -- 10,000
Retirement of subordinated notes ................................... (137,199) --
Early retirement premiums and penalties on subordinated
notes and senior credit facility ................................ (17,556) --
Net borrowings (payments) of short-term debt ....................... 2,887 (16,026)
Net borrowings (payments) of long-term debt and
capital lease obligations ....................................... 40,330 (14,863)
Other, net ......................................................... 2,811 1,654
--------- ---------
Net cash provided by (used in) financing activities ............. 29,021 (18,036)
--------- ---------
Effect of exchange rate changes on cash and cash equivalents ........... (9,794) (1,130)
--------- ---------
Net increase (decrease) in cash and cash equivalents ............ 6,423 (12,034)
Cash and cash equivalents, beginning of period ......................... 9,343 15,179
--------- ---------
Cash and cash equivalents, end of period ............................... $ 15,766 3,145
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ........................... $ 14,331 19,381
========= =========
Cash paid during the period for income taxes, net .................. $ 5,172 1,885
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. GENERAL
A. Business
--------
Samsonite Corporation and Subsidiaries (the "Company") was formerly known
as Astrum International Corp. ("Astrum"). On July 14, 1995, Astrum merged
with its wholly-owned subsidiary, Samsonite Corporation, and changed its
name to Samsonite Corporation. The Company is engaged in the manufacture
and sale of luggage and related products throughout the world, primarily
under the Samsonite, American Tourister, and Lark brand names. The
principal customers of the Company are department/specialty retail
stores, mass merchants, catalog showrooms and warehouse clubs. The
Company also sells its luggage and other travel related products through
its Company-owned stores.
B. Basis of Presentation
---------------------
On May 25, 1993, the United States Bankruptcy Court for the Southern
District of New York confirmed the Amended Plan of Reorganization (the
"Plan") for Astrum. Pursuant to the terms of the Plan, which became
effective on June 8, 1993, Astrum completed a comprehensive financial
reorganization which reduced debt and annual interest expense (the
"Restructuring").
The Restructuring has been accounted for pursuant to the American
Institute of Certified Public Accountants Statement of Position 90-7,
entitled "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"). SOP 90-7 requires that assets and
liabilities be adjusted to their fair values ("fresh-start" values) and
that a new reporting entity be created. On June 30, 1993, for accounting
purposes, the Plan was consummated and SOP 90-7 was adopted. The
consolidated financial statements include the ongoing impact of
fresh-start reporting. The most significant fresh start adjustments
related to recording Reorganization Value in Excess of Identifiable
Assets, which has been fully amortized. In addition, the Company recorded
fresh start adjustments to reflect tradenames, licenses, patents and
other intangibles at their fair values.
C. Interim Financial Statements
----------------------------
The accompanying unaudited consolidated financial statements reflect all
adjustments, which are normal and recurring in nature, and which, in the
opinion of management, are necessary to a fair statement of the financial
position as of October 31, 1997 and results of operations for the
three-month and nine-month periods ended October 31, 1997 and 1996. These
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1997.
See Note 13 to the aforementioned consolidated financial statements
included in the 1997 Annual Report on Form 10-K for a description of
litigation, commitments and contingencies.
D. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ significantly
from those estimates.
8
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
E. Per Share Data
--------------
Primary income per share for the three-month and nine-month periods ended
October 31, 1997 is calculated by dividing income by the weighted average
number of shares outstanding of 20,365,000 and 20,229,000, respectively,
adjusted for the potentially dilutive effect of stock options and awards
of 778,000 shares and 768,000 shares, respectively. Fully diluted income
per share for the three-month and nine-month periods ended October 31,
1997 is calculated by dividing income by the weighted average number of
shares outstanding, adjusted for the fully dilutive effect of stock
options and awards of 834,000 shares and 851,000 shares, respectively.
Primary and fully diluted net income per share for the three months ended
October 31, 1996 was computed on the weighted average shares of common
stock outstanding, plus common equivalent shares using the modified
treasury stock method for stock options and stock awards, which was
17,303,000 shares for the period. Loss per share for the nine months
ended October 31, 1996 was calculated based on the weighted average
number of shares outstanding of 15,953,000 shares.
Effective for interim and annual periods ending after December 15, 1997,
earnings per share will be computed in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"). SFAS 128 requires the disclosure of "basic" earnings per
share and "diluted" earnings per share. Basic earnings per share is
computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding. Diluted earnings
per share is computed by dividing income available to common stockholders
by the weighted average number of shares outstanding increased for
potentially dilutive common shares outstanding during the period. The
dilutive effect of options, warrants, and their equivalents is calculated
using the treasury stock method.
Following is a reconciliation of pro forma basic and diluted earnings per
share for the three months ended October 31, 1997, as if the provisions
of SFAS 128 were effective for such period:
<TABLE>
<CAPTION>
Pro Forma Per
Basic Earnings per Share Income Shares Share Amount
------------------------ ------ ------ ------------
<S> <C> <C> <C>
Income before extraordinary item $23,519,000 20,365,000 $1.15
=====
Added dilutive effect of stock options and awards
Earnings per Share-Assuming Dilution -- 778,000
------------------------------------ ----------- -----------
Income before extraordinary item available to
common stockholders and shares including
assumed conversions $23,519,000 21,143,000 $1.11
=========== =========== =====
</TABLE>
F. Royalty Revenues
----------------
The Company licenses its brand names to certain unrelated third parties
as well as certain foreign subsidiaries and joint ventures. Net sales
include royalty revenues of $15,757,000 and $16,814,000 for the nine
months ended October 31, 1997 and 1996, respectively, and $7,179,000 and
$4,821,000 for the three months ended October 31, 1997 and 1996,
respectively. Royalty revenues for the three months ended October 31,
1997 includes revenues, net of capitalized intangible costs retired of
$4,277,000 and expenses of the sale, of $1,700,000 from the sale of
certain European trademark rights to the current European licensee.
Included in royalties for the nine months ended October 31, 1996 is
$4,000,000 from the sale of apparel tradename licenses in certain Asian
countries. An additional $500,000 was realized on this sale during the
three months ended October 31, 1997 when escrow restrictions on this part
of the proceeds lapsed.
9
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
G. Restructuring Reserves
----------------------
During the nine months ended October 31, 1997, the Company had charges
for cash expenditures of approximately $2,000,000 against its
restructuring reserves and adjusted restructuring reserves by $1,491,000
due to a change in accounting estimate for restructuring allowances. See
Note 3 to the consolidated financial statements in the 1997 Form 10-K for
a description of the reserves.
2. Inventories
Inventories consisted of the following :
<TABLE>
<CAPTION>
October 31, January 31,
1997 1997
-------------- ---------------
(In thousands)
<S> <C> <C>
Raw Materials................................... $ 43,436 38,532
Work in Process................................. 11,486 10,842
Finished Goods.................................. 98,942 85,697
-------- -------
$153,864 135,071
======== =======
</TABLE>
3. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
October 31, January 31,
1997 1997
---- ----
(In thousands)
<S> <C> <C>
Land................................................ $ 12,346 13,324
Buildings........................................... 58,806 62,561
Machinery, equipment and other...................... 131,502 121,875
-------- --------
202,654 197,760
Less accumulated amortization and depreciation...... (60,900) (53,801)
-------- --------
$141,754 143,959
======== ========
</TABLE>
Depreciation included in cost of goods sold and selling, general and
administrative expenses related to adjustments of assets and liabilities
to fair value in connection with the adoption of SOP 90-7 consisted of
the following:
<TABLE>
<CAPTION>
Three Months Ended October 31, Nine Months Ended October 31,
------------------------------ -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
"Fresh Start" Depreciation in
Cost of Goods Sold.................... $410 731 1,681 2,192
"Fresh Start" Depreciation in Selling,
General and Administrative
Expenses.............................. 90 162 371 487
--- ----- ----- -----
Total "Fresh Start" Depreciation.......... $500 893 2,052 2,679
=== ===== ===== =====
</TABLE>
Property and equipment revalued in connection with the adoption of SOP
90-7 are being depreciated over their respective estimated useful lives,
primarily ranging from two to six years.
10
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
4. Intangible Assets
Intangible assets, net of accumulated amortization, consisted of the
following:
<TABLE>
<CAPTION>
October 31, January 31,
1997 1997
---- ----
(In thousands)
<S> <C> <C>
Trademarks................................................. $109,431 115,838
Licenses, Patents and Other................................ 9,095 11,817
--------- ---------
$118,526 127,655
======= ========
</TABLE>
Amortization of intangible assets, including amortization related to the
adjustments of assets and liabilities to fair value in connection with
the adoption of SOP 90-7, consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
"Fresh Start" Amortization:
Amortization of Reorganization
Value in Excess of Identifiable Assets........... $ -- -- -- 22,947
Amortization of Tradenames,
Licenses and Patents............................. 1,607 1,993 4,820 5,981
------ ------ ------ --------
1,607 1,993 4,820 28,928
Other....................................................... 224 224 665 694
------- ------- ------- ---------
$1,831 2,217 5,485 29,622
===== ====== ====== =======
</TABLE>
"Fresh Start" amortization represents the expense arising from the adoption of
"fresh start" accounting in accordance with SOP 90-7. The reorganization value
in excess of identifiable assets was amortized over a three-year period which
ended June 1996; licenses, patents and other are amortized over a period ranging
from one to twenty-three years, and tradenames are amortized primarily over a
period of forty years.
5. Long-Term Obligations
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
October 31, January 31,
1997 1997
---- ----
(In thousands)
<S> <C> <C>
Series B Senior Subordinated Notes (a).................... $ 52,801 190,000
Senior Credit Facility (b)................................ 112,820 50,000
Capital lease obligations................................. 4,008 5,091
Other (c) ................................................ 22,458 47,621
--------- ---------
Total obligations...................................... 192,087 292,712
Less short-term debt and current installments of
long-term obligations.................................. (11,091) (24,957)
---------- ---------
$ 180,996 267,755
======== =======
</TABLE>
11
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
(a) The Series B Senior Subordinated Notes bear interest at 11 1/8% and have a
maturity date of July 15, 2005. During the three-month and nine-month
periods ended October 31, 1997, the Company retired $56,399,000 and
$137,199,000 principal amount of subordinated notes, respectively.
Redemption premiums totaling $8,593,000 and $17,277,000 were paid in
connection with the retirement of the notes and deferred financing costs of
$2,005,000 and $4,563,000 were written off during the three-month and nine-
month periods ended October 31, 1997, respectively. The redemption premiums
and the write-off of deferred financing costs related to the subordinated
notes are classified as part of the extraordinary item from loss on
extinguishment of debt, net of tax effects, in the accompanying statements
of operations for the three-month and nine month periods ended October 31,
1997.
(b) Effective June 12, 1997, the Company renegotiated its Senior Credit Facility
and entered into an amended and restated Senior Credit Facility agreement.
The new agreement provides for a $200.0 million revolving credit facility
("Revolving Credit Facility A") due June 12, 2002 and a $50.0 million
revolving credit facility ("Revolving Credit Facility B") due June 11, 1998.
The Revolving Credit Facility A is a multicurrency facility which allows for
loans of $140.0 million in U.S. dollars and $60.0 million in various
European currencies.
The following amounts were outstanding at October 31, 1997 under the Senior
Credit Facility:
Revolving Credit Facility A:
Borrowings $ 112.8 million
Letters of Credit $ 7.5 million
Revolving Credit Facility B $ --
The Senior Credit Facility is secured by 66% of the stock of the Company's
principal foreign subsidiaries. The agreement contains financial covenants
requiring the Company to maintain certain financial ratios and minimum
stockholders' equity. The agreement also contains covenants which limit the
incurrance of additional indebtedness, the payment of dividends, the
disposition of assets, and other restrictions. The agreement generally
allows the Company to pay dividends not to exceed 30% of its net income.
As a result of entering into the amended and restated Senior Credit
Facility, which has significantly different terms and conditions than the
previous facility, the Company charged to expense the balance of deferred
financing costs relating to the previous facility totaling $3,989,000 and
paid prepayment penalties of $279,000. The charge is recorded as part of the
extraordinary item from loss on extinguishment of debt, net of tax effects,
in the accompanying statement of operations for the nine months ended
October 31, 1997.
(c) Other obligations consist of various notes payable to banks by foreign
subsidiaries aggregating $18.7 million and a $3.8 million secured financing
arrangement with a foreign bank. Included in letters of credit outstanding
are approximately $5.7 million of standby letters of credit issued to secure
certain debt of foreign subsidiaries.
12
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
6. OTHER INCOME (EXPENSE) - NET
Other income (expense) - net consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended October 31, Nine Months Ended October 31,
------------------------------ -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
(In thousands)
Foreign currency transaction income (a).......... $ 806 362 6,001 2,469
Rental income.................................... 248 602 1,314 1,489
Favorable settlement of claims (b)............... (68) -- 2,060 3,802
Adjustment of allowances for contingencies
from previous operations (c)................... 3,841 -- 5,299
Adjustment of contingent tax accrual (d)......... 5,000 -- 12,700 --
Adjustment of liability or PBGC claims (e)....... -- 11,100 -- 11,100
Collection of loan to settlement trust (f)....... 4,850 -- 4,850 --
Other............................................ (494) (143) (2,172) (407)
------ ------ ------ ------
$14,183 11,921 30,052 18,453
====== ====== ====== ======
</TABLE>
(a) Foreign currency transaction income for the nine months ended October
31, 1997 includes approximately $1.7 million of unrealized exchange
gains related to open forward exchange contracts entered into to
reduce foreign exposure to currency fluctuations on certain foreign
operations.
(b) Other income for the nine months ended October 31, 1997 and 1996 of
$2,060,000 and $3,802,000, respectively, resulted from the favorable
settlement of certain of the claims against the Company described in
Note 13 to the consolidated financial statements in the 1997 Form 10-K
under Contingent Liability with Respect to the Old Notes.
Additionally, the Company has entered into a non-binding agreement-in-
principle to settle the remainder of these claims for approximately
$9.4 million. The Company provided adequate reserves at the time of
the Restructuring for such claims. Because these claims are currently
in the judicial process, final settlement will not take place for
several months.
(c) During the three months ended October 31, 1997, the Company recorded
other income of $3,841,000 resulting from the adjustment of an accrual
for potential environmental liability related to real estate used in
previous operations. By agreement with the purchasers of the real
estate, the Company's liability to them for environmental matters, for
which no claims were filed, terminated during the three months ended
October 31, 1997.
Additionally, during the nine months ended October 31, 1997, the
Company recorded other income of $1,458,000 for the adjustment of
allowances for factored receivables from previous operations which
were no longer necessary upon the settlement of the receivables for
which such allowances were established.
(d) Certain contingencies related to tax matters arising prior to and
accrued in conjunction with the Restructuring have been resolved; as a
result, the Company reduced the related accruals by $5,000,000 during
the three months ended October 31, 1997 and a total of $12,700,000 for
the nine months ended October 31, 1997. The resolution of such matters
did not result in any cash payment or additional liability for taxes.
13
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
(e) As described in Note 13 to the consolidated financial statements
included in the Company's Form 10-K Annual Report for the fiscal year
ended January 31, 1997 under Contingent Pension Liabilities, the
Company was contingently liable for the unfunded benefits of two
pension plans ("the Plans") which were part of a "controlled group"
(as defined by the Employee Retirement Income Security Act of 1974) of
companies, of which the Company was a part prior to the reorganization
of the Company in 1993. Effective August 1, 1997, the Company assumed
sponsorship of the Plans. On October 14, 1997, the Plans were merged
with an existing Company pension plan.
During the three months ended October 31, 1996, the Company adjusted
the liability accrued in 1993 for the Plans of $37.7 million by $11.1
million to $26.6 million using actuarial assumptions consistent with
sponsorship of the Plans as a result of entering into permanent
agreements giving the Company the right to assume sponsorship of the
Plans. See Note 13 to the Company's Form 10-K Annual Report for the
fiscal year ended January 31, 1997.
(f) As described in Note 13 to the consolidated financial statements
included in the Company's Form 10-K Annual Report for the fiscal year
ended January 31, 1997, under Obligations to Settlement Trust, the
Company had made loans of $4.8 million to a trust (the "Trust")
established for the benefit of the holders of certain classes of pre-
bankruptcy claims against the Company. The Company provided allowances
for the entire amount of these loans when they were made and has
accrued no interest on them. The Trust repaid the Company's loan
during the three months ended October 31, 1997 with interest of $1.4
million. As a result, the Company reversed the allowance for the loans
receivable and recorded the interest income. The Company believes it
is unlikely to be required to make any additional loans to the Trust.
7. EMPLOYEE STOCK OPTIONS
The Company has authorized 2,550,000 shares for the granting of options
under the 1995 Stock Option and Award Plan. See Note 9 to the consolidated
financial statements included in the 1997 Form 10-K for a description of
such plan. In addition, the Company has outstanding options and stock bonus
awards to current executives in connection with employment agreements.
At October 31, 1997, the Company had outstanding options for a total of
2,599,004 shares at options prices ranging from $10.875 to $47.875 per
share. Options for 602,765 shares were exercisable at October 31, 1997.
Options for 66,585 shares under the 1995 Stock Option and Award Plan were
exercised at an average exercise price of $12.78 per share during the nine
months ended October 31, 1997.
The Company has granted stock bonuses for a total of 116,667 shares to
certain officers payable if the officer remains continually employed by the
Company through the earlier of May 15, 1999 or one year after a change of
control event. The Company is recognizing compensation expense equal to the
fair market value at the date of the grant ($18.25 per share) over the
three-year vesting period.
14
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
8. PUBLIC STOCK OFFERING
On February 11, 1997, the Company completed the sale of 3,300,000 shares of
its common stock in a public offering and received net proceeds therefrom
of approximately $130.2 million. In addition, the former CEO exercised
options for 1,853,668 common shares and sold these shares in the public
offering. The Company received approximately $6.6 million in cash from the
exercise of these options. The total of the proceeds from the offering and
the exercise of the stock options of approximately $136.8 million has been
applied as follows: (i) $89.5 million to redeem and purchase in the market
$80.8 million principal amount of Series B Notes, including $8.7 million
for early redemption and market premiums (see Note 5), (ii) $45.0 million
to repay amounts outstanding on the term loan under the previous Senior
Credit Facility, and (iii) the remainder of the offering proceeds was
applied to accrued interest and to repay revolving credit borrowings under
the previous Senior Credit Facility.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED
TO THREE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR")
General. The Company analyzes its net sales and operations by the following
categories: (1) "European operations" which consist of its European
manufacturing and distribution operations whose reporting currency is the
Belgian franc, (2) "the Americas operations" which include sales, manufacturing,
and distribution operations in the United States, Mexico, Canada, Latin America
and (3) "International operations" which include the sales, manufacturing and
distribution operations in Singapore, India, China; exports to the Far East and
Middle East; and global licensing operations.
Results of European operations were translated from Belgian francs to U.S.
dollars in fiscal 1998 and fiscal 1997 at average rates of approximately 37.09
and 30.73 francs to the U.S. dollar, respectively. This decrease in the value of
the Belgian franc of 17.1% resulted in decreases in European reported sales,
cost of sales and other expenses in fiscal 1998 compared to fiscal 1997. The
most significant effects from the difference in exchange rates from last year to
the current year are noted in the following analysis and referred to as an
"exchange rate difference". The Company enters into forward foreign exchange
contracts and option contracts to reduce its economic exposure to fluctuations
in currency exchange rates for the Belgian franc and other foreign currencies.
Such instruments are marked to market at the end of each accounting period;
realized and unrealized gains and losses are recorded in other income (expense).
During fiscal 1998, the Company recorded net gains from such instruments of $0.8
million; during fiscal 1997, the Company recorded net gains on such instruments
of $0.4 million.
Net Sales. Consolidated net sales were $211.1 million in fiscal 1998 and $203.8
million in fiscal 1997, an increase of $7.3 million. Fiscal 1998 sales were
adversely affected by the large decrease in the value of the Belgian franc
relative to the U.S. dollar in fiscal 1998. Without the effect of the exchange
rate difference, fiscal 1998 sales would have increased by $21.9 million or
approximately 11%.
Sales from European operations decreased from $73.0 million in fiscal 1997 to
$70.5 million in fiscal 1998, a decrease of $2.5 million. Expressed in Belgian
francs, fiscal 1998 sales increased by 16.6%, or the U.S. constant dollar
equivalent of $12.1 million from fiscal 1997; however, the increase was more
than offset by a $14.6 million exchange rate difference. Sales of hardside
products were 9% above the prior year due primarily to the success of the new
Oyster II product. Softside product sales increased by approximately 23%.
Contributing to the increase in softside product sales were increases in
softside luggage, the new Trunk & Co. product line, and sales of
computer/business cases. Reversing the trend of the first two quarters, sales in
Germany and France showed improvement from the prior year, while sales also
improved in the remaining Western and Eastern European markets compared to the
prior year.
Sales from the Americas operations increased from $121.2 million in fiscal 1997
to $129.8 million in fiscal 1998, an increase of $8.6 million or 7%. The
increase was largely due to an increase in U.S. retail sales of $7.6 million or
37% from the prior year. The increase in retail sales is due to an increase in
both the number of stores and comparable store sales. Comparable store sales
increased by 12.7% from fiscal 1997. Management believes that comparable store
sales have increased due to better marketing efforts and improved brand and
product line availability in the retail stores. While in the prior year the
retail stores carried primarily American Tourister products, the stores now also
carry Samsonite products. U.S. wholesale revenues increased by $2.3 million from
fiscal 1997, or approximately 2.6%. Hardside sales were less than the prior year
by approximately 18% while softside sales were above the prior year by
approximately 9%. Approximately 27% of U.S. wholesale sales were from sales of
new products. U.S. wholesale sales were negatively affected by a snow storm
which shutdown shipping from the Denver warehouse for approximately two days in
October. In order to move excess or discontinued inventory, the Company sold
approximately $10 million of
16
<PAGE>
THREE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED
TO THREE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR")
(CONTINUED)
goods, net of returns allowances, to one customer. Sales from other Americas
operations, including Mexico, Canada and Latin America, were less than the prior
year by an aggregate of $1.3 million, primarily because of a decrease in
Canadian sales.
Sales from International operations increased from $9.6 million in fiscal 1997
to $10.8 million in fiscal 1998, an increase of $1.2 million. The increase is
due primarily to global licensing operation net revenues of $1.7 million
realized from the sale of a tradename to a European licensee which more than
offset a $0.5 million sales decline due to the transitioning of service
responsibility for the Middle East from the Americas to Europe.
Gross profit. Consolidated gross profit for fiscal 1998 increased from fiscal
1997 by $9.4 million. Gross margin increased by 3.2 percentage points, from
39.4% in fiscal 1997 to 42.6% in fiscal 1998. Excluding $1.1 million in non-
recurring production inefficiencies caused by completion of the October 31, 1996
restructuring, but not chargeable to the restructuring reserve, fiscal 1998
margins would have been 43.1%.
Gross margins from European operations increased slightly, from 37.9% in fiscal
1997 to 38.8% in fiscal 1998. The improvement is due to price increases on
selected product lines, lower costs from standardized global production sources,
and overhead savings from restructuring certain manufacturing operations.
Gross margins for the Americas increased from 39.5% in fiscal 1997 to 42.6% in
fiscal 1998. The primary causes of the improvement from the prior year were an
increase in U.S. wholesale margins from 36.8% to 41.4%, which resulted primarily
from price increases; product cost improvements from global sourcing and product
design improvements; a greater mix of higher margin retail sales versus
wholesale sales; and overhead savings from restructuring certain manufacturing
operations.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $0.6 million from fiscal 1997 to fiscal 1998. As a percent of
sales, SG&A was 30.0% in fiscal 1998 and 30.8% in fiscal 1997.
SG&A for European operations decreased by $1.9 million from fiscal 1997 to
fiscal 1998. The exchange rate difference caused SG&A to decrease by $3.7
million. The remaining increase of $1.8 million was due primarily to higher
variable and other selling expenses associated with the higher sales levels.
SG&A for the Americas operations increased by $2.3 million in fiscal 1998
compared to fiscal 1997. The components of this increase are as follows: SG&A
for U.S. wholesale operations was comparable to the prior year, at $25.7 million
for both fiscal years; SG&A for U.S. retail operations increased by $2.6
million; and SG&A for the other Americas operations and corporate headquarters
expenses were comparable ($0.3 million less) to the prior year. The increase in
SG&A of $2.6 million for U.S. retail operations is due to the increase in sales
volume and number of retail stores; as a percent of retail sales, retail SG&A
decreased from 44% in fiscal 1997 to 42% in fiscal 1998.
SG&A for International operations was comparable to the prior year, increasing
by $0.2 million.
Amortization of intangible assets. Amortization of intangible assets was less
than the prior year by $0.4 million because of certain intangibles becoming
fully amortized.
17
<PAGE>
THREE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED
TO THREE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR")
(CONTINUED)
Provisions for restructuring operations. The provision for restructuring
operations decreased from $10.7 million in fiscal 1997 to a credit of $0.9
million in fiscal 1998. The fiscal 1997 provision was made for the consolidation
of certain functions and operations in North America, Europe, and the Far East.
This restructuring has essentially been completed as of October 31, 1997 and the
credit of $0.9 million in the third quarter of fiscal 1998 results from the
reversal of excess reserves. Of the $10.7 million original restructuring
provision, approximately $1.3 million remains accrued at October 31, 1997 for
expenses yet to be incurred or restructuring matters yet to be completed.
Operating income. Operating income improved from $4.8 million in fiscal 1997 to
$25.6 million in fiscal 1998, an increase of $20.8 million. This increase is a
result of increased gross profit of $9.4 million from last year, the decrease in
the provision for restructuring of $11.6 million, the decrease in amortization
of intangibles of $0.4 million, and the increase in SG&A of $0.6 million.
Interest income. Interest income was $1.5 million in fiscal 1998 compared to
$0.4 million in the prior year. The increase resulted primarily from the receipt
of previously unaccrued interest of $1.4 million which was due on a $4.8 million
loan made by the Company to the settlement trust created in 1993 upon the
Company's reorganization. See Note 6(f) to the consolidated financial statements
included elsewhere herein.
Interest expense and amortization of debt issue costs. Interest expense and
amortization of debt issue costs decreased from $9.1 million in fiscal 1997 to
$4.7 million in fiscal 1998. The decrease was caused primarily by retirement of
indebtedness out of the proceeds of a public stock offering completed in the
first quarter of fiscal 1998, a lower interest rate on borrowings under the
senior credit facility which was refinanced in June 1997, and the interest
savings from the retirement of high interest rate subordinated debt financed by
lower rate bank borrowings. See Notes 5 and 8 to the consolidated financial
statements included elsewhere herein.
Other, net. See Note 6 to the consolidated financial statements included
elsewhere herein for a comparative analysis and discussion of other income
(expense).
The Company enters into forward exchange contracts to hedge its exposures to
fluctuations in exchange rates. Other income for fiscal 1998 includes income
from foreign currency transactions of $0.8 million. In fiscal 1997, such
transactions resulted in income of $0.4 million. The income recorded for the
three months ended October 31, 1997 results primarily from forward exchange
contracts selling forward the Belgian franc, which has declined significantly
against the U.S. dollar since the contracts were executed.
Other income for fiscal 1998 includes an adjustment for $5.0 million to reduce
the accrual for certain tax contingencies established in conjunction with the
Restructuring referred to in Note 1B to the consolidated financial statements
included elsewhere herein. The adjustment was made upon the resolution of these
contingencies. The resolution did not result in any cash payment or additional
liability for taxes.
The Company recorded other income of $3.8 million resulting from the adjustment
of an accrual for potential environmental liability, for which no claims were
filed, related to real estate used in previous operations. By agreement with the
purchasers of the real estate, the Company's liability to them for environmental
matters terminated during the three months ended October 31, 1997.
As described in Note 13 to the consolidated financial statements included in the
Company's Form 10-K Annual Report for the fiscal year ended January 31, 1997,
under Obligations to Settlement Trust, the Company had made loans of $4.8
million to a trust (the "Trust") established for the benefit of the holders of
certain classes of pre-bankruptcy claims against the Company. The Company
provided allowances for the entire amount of these loans when they were made and
has accrued no interest on them. The Trust repaid the Company's loan during the
three months ended October 31,
18
<PAGE>
THREE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED
TO THREE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR")
(CONTINUED)
1997 with interest of $1.4 million. As a result, the Company reversed the
allowance for the loans receivable and recorded the interest income. The Company
believes it is unlikely to be required to make any additional loans to the
Trust.
As described in Note 13 to the consolidated financial statements included in the
Company's Form 10-K Annual Report for the fiscal year ended January 31, 1997
under Contingent Pension Liabilities, the Company was contingently liable for
the unfunded benefits of two pension plans ("the Plans") which were part of a
"controlled group" (as defined by the Employee Retirement Income Security Act of
1974) of companies, of which the Company was a part prior to the reorganization
of the Company in 1993. Effective August 1, 1997, the Company assumed
sponsorship of the Plans and on October 14, 1997 the Plans were merged with an
existing Company pension plan. During the three months ended October 31, 1996,
the Company adjusted the liability accrued in 1993 for the Plans of $37.7
million by $11.1 million to $26.6 million using actuarial assumptions consistent
with sponsorship of the Plans as a result of entering into permanent agreements
giving the Company the right to assume sponsorship of the Plans.
Income taxes. Income tax expense increased from $4.2 million in fiscal 1997 to
$12.5 million in fiscal 1998. The increase in tax expense is due primarily to
higher consolidated pretax earnings in fiscal 1998. The difference between
expected income tax expense or benefit, computed by applying the U.S. statutory
rate to pretax income, and income tax expense recognized, results primarily
because of (i) the nondeductibility for tax purposes of amortization of
reorganization value in excess of identifiable assets, (ii) foreign income tax
expense provided on foreign earnings, (iii) nontaxable liability adjustments,
and (iv) state and local income taxes.
Extraordinary loss. The extraordinary loss of $6.6 million for the three months
ended October 31, 1997 resulted from premiums of $8.6 million on the early
retirement of $56.4 million principal amount of the Company's 11 % Series B
Senior Subordinated Notes bought in open market purchases, the write-off of
related deferred financing costs of $2.0 million, net of the tax effect of the
transactions. See Note 5(a) to the consolidated financial statements included
elsewhere herein.
Net income. Net income increased from $3.4 million in fiscal 1997 to $17.0
million in fiscal 1998. The increase in net income from the prior year of $13.6
million is caused by the effect of the increases in operating income and other
income and the decrease in interest expense, offset by the increase in income
tax expense and extraordinary loss.
Effects of Reorganization and Restructuring on Results of Operations. As
described in Notes 1B and 1G to the consolidated financial statements included
elsewhere herein and in Item 6 to the Company's 1997 Annual Report on Form 10-K,
the results of operations include the ongoing effects of fresh-start reporting
and, for the nine months ended October 31, 1997 and 1996, the effects of a
restructuring and certain other expenses associated with the restructuring. Due
to the significance of these items, management believes that it is useful to
isolate their impact on net income and operating income as shown below. This
information does not represent and should not be considered an alternative to
net income, any other measure of performance as determined by generally accepted
accounting principles or as an indicator of operating performance. The
information presented may not be comparable to similar presentations reported by
other companies.
19
<PAGE>
THREE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED
TO THREE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR")
(CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended October 31,
----------------------------------------
Impact on Net Income 1997 1996
- -------------------- ---- ----
(In thousands, except per share amounts)
<S> <C> <C>
Fresh Start Amortization and Depreciation............................... $ 2,107 2,886
Provision (Credit) for Restructuring Operations......................... (903) 10,670
Certain Other Expenses Associated with the Restructuring
and Management Changes................................................ -- 1,600
Tax Benefit............................................................. (458) (6,214)
------- ------
After-Tax Impact on Net Income.......................................... 746 8,942
======= ======
Impact on Net Income Per Share - Primary................................ $ .04 .52
======= ======
Impact on Operating Income
- --------------------------
Operating income........................................................ $25,552 4,768
Fresh Start Amortization and Depreciation............................... 2,107 2,886
Provision (Credit) for Restructuring Operations......................... (903) 10,670
Certain Other Expenses Associated with the Restructuring
and Management Changes................................................ -- 1,600
------- ------
Operating Income Before Fresh Start Amortization
and Depreciation, Provision (Credit) for Restructuring Operations
and Certain Other Expenses Associated with the Restructuring and
Management Changes.................................................... $26,756 19,924
======= ======
</TABLE>
20
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
NINE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED TO
NINE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR")
General. Results of European operations were translated from Belgian francs to
U.S. dollars in fiscal 1998 and fiscal 1997 at average rates of approximately
35.47 and 30.73 francs to the U.S. dollar, respectively. This decrease in the
value of the Belgian franc of 13% resulted in decreases in European reported
sales, cost of sales and other expenses in fiscal 1998 compared to fiscal 1997.
The most significant effects from the difference in exchange rates from last
year to the current year are noted in the following analysis and referred to as
an "exchange rate difference". The Company enters into forward foreign exchange
contracts and option contracts to reduce its economic exposure to fluctuations
in currency exchange rates for the Belgian franc and other foreign currencies.
Such instruments are marked to market at the end of each accounting period;
realized and unrealized gains and losses are recorded in other income. During
fiscal 1998, the Company had net gains from such instruments of $6.0 million;
during fiscal 1997, the Company had net gains on such instruments of $2.5
million.
Net Sales. Consolidated net sales increased from $553.1 million in fiscal 1997
to $560.2 million in fiscal 1998, an increase of $7.1 million. Fiscal 1998 sales
were adversely affected by the large decrease in the value of the Belgian franc
compared to the U.S. dollar in fiscal 1998. Without the effect of the exchange
rate difference, fiscal 1998 sales would have increased by $38.1 million or
approximately 7%.
Sales from European operations decreased from $207.3 million in fiscal 1997 to
$201.0 million in fiscal 1998, a decrease of $6.3 million. Expressed in Belgian
francs, fiscal 1998 sales increased by 11.9%, or the U.S. constant dollar
equivalent of $24.7 million from fiscal 1997; however, the increase was more
than offset by a $31.0 million exchange rate difference. Sales in the Company's
largest markets of Germany and France were less than the prior year because of
weak economies, but showed improvement during the third quarter. Strong sales in
the remaining Western and Eastern European countries has been primarily
responsible for the year-to-year growth. Sales of hardside products are up 4%
from the prior year and sales of softside products are up 22% from the prior
year.
Sales from the Americas operations increased from $311.0 million in fiscal 1997
to $332.0 million in fiscal 1998, an increase of $21.0 million or 6.3%. The
increase was largely due to an increase in U.S. retail sales of $23.2 million or
44% from the prior year. Comparable store sales increased by 17.1% from fiscal
1997. U.S. wholesale revenues of $226.2 million were approximately equal to the
prior year. Sales from other Americas operations, including Mexico, Canada and
Latin America, were less than the prior year by an aggregate of $2.2 million.
Sales from International operations decreased from $34.8 million in fiscal 1997
to $27.2 million in fiscal 1998, a decrease of $7.6 million. Revenues from
export and emerging markets decreased by $5.3 million from fiscal 1997. The
decrease is due to the transitioning of responsibility to service the Middle
East from the Americas division to the European division and distributor
transitions in Hong Kong and Korea. Royalties from global licensing operations
decreased by $2.3 million from the prior year. Fiscal 1997 results included $4.0
million from the sale of trademarks while fiscal 1998 results included net
revenues of $0.5 million from the fiscal 1997 sale which was realized upon the
lapse of escrow restrictions and $1.7 million from a sale of European rights to
a trademark to a European licensee. The licensee also received an option for a
three-year term to purchase the U.S. rights to the trademark for $9 million.
Should the Company decide to offer these trademark rights for sale during the
option term, the option agreement provides for certain adjustments to the option
price based on the Company's offering price.
Gross profit. Consolidated gross profit for fiscal 1998 increased from fiscal
1997 by $20.6 million. Gross margin increased by 3.1 percentage points, from
39.4% in fiscal 1997 to 42.5% in fiscal 1998.
Gross margins from European operations increased by 1.9 percentage points, from
38.8% in fiscal 1997 to 40.7% in fiscal 1998. The improvement is due to price
increases in selected product lines and lower costs from standardized global
production sources.
21
<PAGE>
NINE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED TO
NINE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR") (CONTINUED)
Gross margins for the Americas increased 4.6 percentage points from 38.2% in
fiscal 1997 to 42.8% in fiscal 1998. U.S. wholesale margins increased from 35.7%
to 41.8%, primarily as a result of price increases and product cost improvements
from global sourcing and product design improvements. Margins in the Americas
also benefited from a higher mix of retail versus wholesale sales compared to
the prior year.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $1.1 million from fiscal 1997 to fiscal 1998. As a percent of
sales, SG&A was 31.5% in fiscal 1997 and 31.3% in fiscal 1998.
SG&A for European operations decreased by $5.4 million from fiscal 1997 to
fiscal 1998. The exchange rate difference caused SG&A to decrease by $7.9
million. The remaining increase of $2.5 million was due primarily to higher
variable and other selling expenses related to the higher sales levels.
SG&A for the Americas operations increased by $6.4 million in fiscal 1998
compared to fiscal 1997. The components of the increase are as follows: SG&A for
U.S. wholesale operations increased by $1.2 million in fiscal 1998 compared to
fiscal 1997; SG&A for U.S. retail operations increased by $7.0 million; and SG&A
for the other Americas operations and corporate headquarters expenses were less
than prior year by $1.8 million.
. The net increase of $1.2 million in U.S. wholesale SG&A was caused by various
factors including increases in the provision for doubtful accounts and sales
promotions and incentives, net of various expense decreases including
workforce costs and warranty expense.
. The increase in SG&A of $7.0 million for U.S. retail operations is due to the
increase in sales volume and number of retail stores; as a percent of retail
sales, retail SG&A decreased from 47.5% in fiscal 1997 to 42.2% in fiscal
1998.
. The decrease in SG&A for other Americas operations and corporate headquarters
of $1.8 million from the prior year was primarily due to severance costs in
the prior year and the effect of the changed management and corporate
overhead structure.
SG&A for International operations in fiscal 1998 was comparable ($0.1 million
higher) to fiscal 1997.
Amortization of intangible assets. The Company recorded significant intangible
assets as a result of its reorganization in 1993. See the comparative analysis
of amortization of intangibles included elsewhere herein under Effects of
Reorganization and Restructuring on Results of Operations.
Reorganization value in excess of identifiable assets became fully amortized as
of June 30, 1996, which generally accounts for the decrease in amortization of
intangible assets from $29.6 million in fiscal 1997 to $5.5 million in fiscal
1998.
Operating income (loss). Operating income increased by $55.8 million from fiscal
1997 to fiscal 1998. This is a result of increased gross profit of $20.6
million, the decrease in amortization of intangibles of $24.1 million, the
decrease in restructuring provisions of $12.2 million, net of the increase in
SG&A of $1.1 million.
Interest income. Interest income increased from the prior year by $0.9 million,
primarily as a result of interest income received in the third quarter of fiscal
1998 on the loan to the settlement trust - see discussion of Results of
Operations for the Three Months Ended October 31, 1997 under Interest income
included elsewhere herein.
22
<PAGE>
NINE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED TO
NINE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR") (CONTINUED)
Interest expense and amortization of debt issue costs. Interest expense and
amortization of debt issue costs decreased from $27.1 million in fiscal 1997 to
$15.8 million in fiscal 1998. The decrease was caused primarily by retirement of
indebtedness out of the proceeds of a public stock offering completed in the
first quarter of fiscal 1998, a lower interest rate on borrowings under the
senior credit facility which were refinanced in June 1997, and the interest
savings from retirement of high interest rate subordinated debt financed by
lower rate bank borrowings. See Notes 5 and 8 to the consolidated financial
statements included elsewhere herein.
Other, net. See Note 6 to the consolidated financial statements included
elsewhere herein for a comparative analysis and discussion of other income
(expense).
The Company has entered into certain forward exchange contracts to hedge its
exposures to changes in exchange rates. Other income for fiscal 1998 includes
income from foreign currency transactions of $6.0 million. In fiscal 1997, such
transactions resulted in income of $2.5 million. The income recorded for the
nine months ended October 31, 1997 results primarily from forward exchange
contracts selling forward the Belgian franc which has declined significantly
against the U.S. dollar since the contracts were executed. Of the income
recorded through October 31, 1997, approximately $1.7 million is unrealized; the
ultimate realization of this amount is subject to fluctuations in the exchange
rate of the U.S. dollar against the Belgian franc.
Other income for the nine months ended October 31, 1997 includes $2.1 million
from favorable settlement of claims for interest on overdue installments of
interest accruing prior to the commencement of the bankruptcy of the Company's
predecessor in 1993. Additionally, the Company has entered into a non-binding
agreement-in-principle to settle the remainder of these claims for approximately
$9.4 million. The Company has $10.3 million accrued for such claims at October
31, 1997. Because these claims are in the judicial process, final settlement
will not take place for several months.
Other income from the adjustment of allowances for contingencies from previous
operations of $5.3 million includes (i) $3.8 million from the adjustment of an
accrual for potential environmental liability related to real estate used in
previous operations, for which no claims were filed, which terminated by
agreement with the purchasers of the real estate during the three months ended
October 31, 1997, and (ii) $1.5 million for the adjustment of allowances for
factored receivables from previous operations which were no longer necessary
upon the settlement of the receivables.
Other income for fiscal 1998 includes adjustments totaling $12.7 million to
reduce accruals for certain tax contingencies established in conjunction with
the Restructuring referred to in Note 1B to the consolidated financial
statements included elsewhere herein. The adjustment was made upon the
resolution of these contingencies. The resolution did not result in any cash
payment or additional liability for taxes.
See Note 6(f) to the consolidated financial statements included elsewhere herein
for a discussion of other income from the collection of a $4.8 million loan to
the settlement trust.
Income taxes. Income tax expense increased from $8.6 million in fiscal 1997 to
$22.6 million in fiscal 1998. The increase in tax expense is due primarily to
higher consolidated pretax earnings in fiscal 1998. The difference between
expected income tax expense or benefit, computed by applying the U.S. statutory
rate to pretax income (loss), and income tax expense recognized, results
primarily because of (i) the nondeductibility for tax purposes of amortization
of reorganization value in excess of identifiable assets, (ii) foreign income
tax expense provided on foreign earnings, (iii) nontaxable liability
adjustments, and (iv) state and local income taxes. Income tax expense was
reduced by approximately $1.8 million for the effect of the implementation of a
foreign tax planning strategy.
23
<PAGE>
NINE MONTHS ENDED OCTOBER 31, 1997 ("FISCAL 1998" OR "CURRENT YEAR") COMPARED TO
NINE MONTHS ENDED OCTOBER 31, 1996 ("FISCAL 1997" OR "PRIOR YEAR") (CONTINUED)
Extraordinary loss. The extraordinary loss of $16.2 million for the nine months
ended October 31, 1997 resulted from (1) the payment of $17.3 million of
redemption premiums and the write-off of deferred financing costs of $4.6
million related to the early retirement of $137.2 million principal amount of
the Company's 11 1/8% Series B Senior Subordinated Notes, (2) the payment of
$0.3 million early retirement fees and write-off of $3.9 million of deferred
financing costs related to the refinancing of the previous senior credit
facility, (3) and the tax benefit from the aforementioned transactions of $9.9
million. See Note 5 to the consolidated financial statements included elsewhere
herein.
Net income (loss). The Company had a net loss in fiscal 1997 of $13.6 million
and net income in fiscal 1998 of $36.1 million. The increase in the net income
from the prior year of $49.7 million is caused by the effect of the increases in
operating income and other income and the decrease in interest expense, offset
by the increase in income tax expense and extraordinary loss.
Effects of Reorganization and Restructuring on Results of Operations. As
described in Notes 1B and 1G to the consolidated financial statements included
elsewhere herein and in Item 6 to the Company's 1997 Annual Report on Form 10-K,
the results of operations include the ongoing effects of fresh-start reporting
and, for the nine months ended October 31, 1997 and 1996, the effects of a
restructuring and certain other expenses associated with the restructuring. Due
to the significance of these items, management believes that it is useful to
isolate their impact on net income (loss) and operating income (loss) as shown
below. This information does not represent and should not be considered an
alternative to net income, any other measure of performance as determined by
generally accepted accounting principles or as an indicator of operating
performance. The information presented may not be comparable to similar
presentations reported by other companies.
<TABLE>
<CAPTION>
Nine Months Ended October 31,
----------------------------------------
Impact on Net Income (Loss) 1997 1996
- --------------------------- ---- ----
(In thousands, except per share amounts)
<S> <C> <C>
Fresh Start Amortization and Depreciation................................ $ 6,872 31,607
Provision (Credit) for Restructuring Operations.......................... (1,491) 10,670
Certain Other Expenses Associated with the Restructuring
and Management Changes................................................. -- 4,200
Tax Benefit.............................................................. (2,045) (9,648)
------- ------
After-Tax Impact on Net Income (Loss).................................... $ 3,336 36,829
======= ======
Impact on Net Income (Loss) Per Share.................................... $ 0.16 2.26
======= ======
Impact on Operating Income
- --------------------------
Operating income (loss).................................................. $59,160 3,329
Fresh Start Amortization and Depreciation................................ 6,872 31,607
Provision (Credit) for Restructuring Operations.......................... (1,491) 10,670
Certain Other Expenses Associated with the Restructuring
and Management Changes................................................. -- 4,200
------- ------
Operating Income Before Fresh Start Amortization
and Depreciation, Provision (Credit) for Restructuring Operations
and Certain Other Expenses Associated with the Restructuring and
Management Changes..................................................... $64,541 49,806
======= ======
</TABLE>
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
One measure of liquidity is commonly referred to as Operating Cash Flow.
Operating Cash Flow is defined as operating income adjusted for noncash
operating expenses, including amortization and depreciation. The Company
believes that Operating Cash Flow provides useful information regarding the
Company's ability to incur and service debt, but that it should not be
considered a substitute for operating income or cash flow from operations
determined in accordance with generally accepted accounting principles. Other
companies may calculate Operating Cash Flow in a different manner and the
Company's presentation of Operating Cash Flow may not be comparable to similar
presentations reported by other companies. Operating Cash Flow does not take
into consideration substantial costs of doing business, such as interest
expense, and should not be considered in isolation from or as a substitute for
other measures of performance. Operating Cash Flow does not represent funds
available for discretionary use by the Company because these funds are required
for debt service, capital expenditures to replace fixed assets, and other
commitments and contingencies. Operating Cash Flow for the nine months ended
October 31, 1997 and 1996 was computed as follows:
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Operating income............................................. $59,160 3,329
Fresh start amortization and depreciation.................... 6,872 31,607
------- ------
Operating income before fresh start amortization and
depreciation................................................ 66,032 34,936
Other amortization and depreciation.......................... 14,645 14,630
------- ------
Operating Cash Flow.......................................... $80,677 49,566
======= ======
</TABLE>
Operating Cash Flow has been reduced for the effects of a provision for
restructuring operations and certain other expenses associated with the
restructuring as follows:
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Operating Cash Flow.......................................... $80,677 49,566
Effect of provision (credit) for restructuring operations.... (1,491) 10,670
Certain other expenses associated with the restructuring..... -- 4,200
and management team changes................................. ------- ------
Operating Cash Flow adjusted for the effect of restructuring
and management changes...................................... $79,186 64,436
======= ======
</TABLE>
Operating Cash Flow, as adjusted for the effects of restructuring and management
changes, increased from $64.4 million in fiscal 1997 to $79.2 million in fiscal
1998, an increase of $14.8 million, primarily as a result of the increase in
operating income described under Results of Operations. The Company believes
that the current level of Operating Cash Flow is adequate to support borrowings
under its existing credit facilities and service the Company's Series B Senior
Subordinated Notes and other long-term obligations.
Another measure of liquidity is net cash from operating activities, as reflected
in the consolidated statements of cash flows included elsewhere herein. Net cash
provided by operating activities of $12.2 million in fiscal 1998 and $10.7
million in fiscal 1997, reflects net cash from operations of the Company
available or used for the Company's liquidity needs, after taking into
consideration the substantial costs of doing business not reflected in Operating
Cash Flow.
25
<PAGE>
Cash flows provided by operating activities increased by $1.5 million in fiscal
1998 from fiscal 1997. Cash flow used for working capital and other operating
assets increased by $38.1 million, while cash flows from net income, adjusted
for nonoperating and noncash charges, increased by $36.6 million.
Cash flow used in investing activities increased from $3.6 million in fiscal
1997 to $25.0 million in fiscal 1998. Capital expenditures were $19.7 million in
fiscal 1997 compared to $26.4 million in fiscal 1998 primarily because of new
warehouse and factory construction in Europe and India in fiscal 1998. In fiscal
1997, cash was provided by liquidating assets in previous operations of $11.5
million while in fiscal 1998 cash of $3.1 million was used to liquidate certain
obligations remaining related to previous operations. It is expected that the
Company will continue to use cash to fund obligations related to previous
operations totaling approximately $8 million through calendar 2000.
Cash flows provided by financing activities increased by $47.1 million in fiscal
1998 from fiscal 1997. On February 11, 1997, the Company completed the sale of
3,300,000 shares of its common stock in a public offering and received net
proceeds therefrom of approximately $130.2 million. In addition, the Company's
former Chief Executive Officer exercised stock options for which the Company
received approximately $6.6 million. The total of the proceeds from the offering
and the exercise of the stock options of approximately $136.8 million has been
applied as follows: (i) the Company has retired $80.8 million principal amount
of its 11 1/8% Series B Senior Subordinated Notes (the "Notes") for $89.5
million (which included contractual and market redemption premiums of $8.7
million), (ii) the Company paid $45.0 million on the term loan portion of the
previous U.S. Senior Credit Facility, and (iii) the remainder of the offering
proceeds was applied to accrued interest and to repay revolving credit
borrowings under the previous Senior Credit Facility. In addition to the Notes
retired out of the proceeds from the public offering, the Company has retired an
additional $56.4 million principal amount of the Notes for $65.0 million
(including market premiums of $8.6 million). These retirements were financed by
borrowings under the new Senior Credit Facility. Long-term bank debt increased
by $40.3 million for the nine months ended October 31, 1997 and short-term bank
debt increased by $2.9 million.
Effective June 12, 1997, the Company renegotiated its Senior Credit Facility and
entered into an amended and restated Senior Credit Facility agreement. The new
agreement provides for a $200.0 million revolving credit facility ("Revolving
Credit Facility A") due June 12, 2002 and a $50.0 million revolving credit
facility ("Revolving Credit Facility B") due June 11, 1998. Revolving Credit
Facility A is a multicurrency facility which allows for loans of $140.0 million
in U.S. dollars and $60.0 million in various European currencies. The new Senior
Credit Facility has lower interest rates and annual fees than the previous
agreement, an extended maturity date, and less restrictive financial covenants.
At October 31, 1997, the Company had working capital of $210.5 million compared
to $105.4 million at January 31, 1997, an increase of $105.1 million. Current
assets increased by $72.1 million primarily due to an increase in receivables of
$43.5 million and an increase in inventories of $18.8 million. Receivables
increased due to sales seasonality and due to a higher sales level in the last
part of the quarter in the U.S. wholesale business. Inventories are seasonally
higher at October 31 than at January 31; in addition, the Company has added new
product lines and new stores which contributed to the increase in inventories.
Additionally, the Company's U.S. wholesale sales were less than planned during
the three months ended October 31, 1997, leading to higher inventories. Current
liabilities decreased by $33.0 million from January 31, 1997 primarily due to a
decrease in current maturities of long-term obligations of $16.4 million, a
decrease in accrued liabilities of $34.9 million, and other increases in
accounts payable and short-term debt totaling $18.3 million.
The Company's cash flow from operations together with amounts available under
its credit facilities were sufficient to fund fiscal 1998 operations, scheduled
payments of principal and interest on indebtedness and capital expenditures.
Management of the Company believes that cash flow from operations and available
borrowings under its credit facilities and new credit facilities in emerging
markets will be adequate to fund operating requirements and expansion plans
during the next 12 months. In addition, management currently believes the
Company will be able to meet long-term cash flow obligations from cash provided
by operations and other existing resources.
26
<PAGE>
The Company's principal foreign operations are located in Western Europe, the
economies of which are not considered to be highly inflationary. Effective
February 1, 1997, the Company changed its functional currency from the peso to
the U.S. dollar for its primary Mexican subsidiary as a result of organizational
changes resulting in a significant portion of the Mexican subsidiary's
operations, cash flow and financing being transacted in U.S. dollars. The
Company enters into foreign exchange contracts in order to hedge its exposure on
certain foreign operations through the use of forward delivery commitments.
During the past several years, the Company's most effective hedge against
foreign currency changes has been the foreign currency denominated debt balances
maintained in respect to its foreign operations. Geographic concentrations of
credit risk with respect to trade receivables are not significant as a result of
the diverse geographic areas covered by the Company's operations.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARD
- ---------------------------------------------
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, Earnings Per share ("SFAS 128") which will be
effective for interim and annual periods ending after December 15, 1997 and
changes the computation and disclosure requirements for earnings per share. Had
earnings per share been reported under the provisions of SFAS 128 for the three
months ended October 31, 1997, basic earnings per share before extraordinary
item would have been $1.15 per share and earnings per share before extraordinary
item assuming dilution would have been $1.11 per share. See Note 1E to the
consolidated financial statements included elsewhere herein for further
discussion of the effects of SFAS 128.
27
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
- ---------------------------
Item I - Legal Proceedings
-----------------
Reference is made to Note 13 to the consolidated financial statements included
in the Company's Form 10-K Annual Report for the fiscal year ended January 31,
1997 which describes litigation, commitments and contingencies. See Note 6 to
the consolidated financial statements included elsewhere herein for a
description of subsequent events related to certain of the matters described in
the aforementioned Note 13.
The Company and certain of its subsidiaries are subject to or are defendants in
various other claims and actions arising in the ordinary course of business.
While it is not possible to predict the outcome of such other claims or actions,
it is management's opinion that, after discussion with legal counsel, the
ultimate disposition of these other claims and actions will not have a material
adverse effect on the Company's consolidated financial position, results of
operations or liquidity.
Item 2 - Changes in Securities
---------------------
None.
Item 3 - Defaults Upon Senior Securities
-------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5 - Other Information
-----------------
None.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) See Exhibit Index.
(b) Reports on Form 8-K.
None.
28
<PAGE>
SIGNATURE
---------
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.
SAMSONITE CORPORATION
(REGISTRANT)
BY /s/ Thomas R. Sandler
-------------------------------------------
Name: Thomas R. Sandler
Title: Senior Vice President, Chief
Financial Officer,
Treasurer, and Secretary
Date: December 3, 1997
-----------------------
29
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company./1/
3.2 Certificate of Ownership and Merger dated July 14, 1995./2/
3.3 By-Laws of the Company./1/
4.1 Indenture, dated as of July 14, 1995, between the Company and United
States Trust Company of New York./2/
4.2 Registration Rights Agreement dated July 14, 1995, by and among the
Company, Donaldson, Lufkin & Jenrette Securities Corporation, and
Bear, Sterns & Co., Inc./2/
4.3 Specimen of Notes described in the Indenture./2/
10.1 First Amendment, dated as of August 26, 1997, to the Amended and
Restated Multicurrency Revolving Credit Agreement, dated as of June
12, 1997, between the Company, Samsonite Europe N.V. and BankBoston,
N.A., Generale Bank N.V., Credit Lyonnais New York Branch, and other
lending institutions.
10.2 Trademark Purchase and Assignment Agreement, dated as of October 31,
1997, between the Company's subsidiary, McGregor L.L.C. and McGregor
International Licensing N.V.
10.3 Trademark Option Agreement, dated as of October 31, 1997, between
the Company's subsidiary, McGregor L.L.C. and McGregor International
Licensing N.V.
10.4 Amended and Restated Employment Agreement, dated as of October 1,
1997, between the Company and John P. Murtagh.
10.5 Amended and Restated Stock Option Agreement, dated as of October 1,
1997, between the Company and John P. Murtagh.
27 Financial Data Schedule.
- -----------------------
/1/ Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1996 (File No. 0-23214).
/2/ Incorporated by reference from the Registration Statement on Form S-4
(Registration No. 33-95642).
30
<PAGE>
EXHIBIT 10.1
------------
- --------------------------------------------------------------------------------
FIRST AMENDMENT
TO AMENDED AND RESTATED MULTICURRENCY REVOLVING CREDIT AGREEMENT
- --------------------------------------------------------------------------------
First Amendment dated as of August 26, 1997 to Amended and Restated
Multicurrency Revolving Credit Agreement (this "Amendment"), by and among (a)
SAMSONITE CORPORATION, a Delaware corporation (the "Company"), (b) SAMSONITE
EUROPE N.V., a corporation organized under the laws of Belgium ("Samsonite
Europe") and (c) BANKBOSTON, N.A. (formerly known as The First National Bank of
Boston), GENERALE BANK N.V., CREDIT LYONNAIS NEW YORK BRANCH and the other
lending institutions listed on Schedule 1 to the Credit Agreement (as
----------
hereinafter defined) (collectively, the "Lenders"), amending certain provisions
of the Amended and Restated Multicurrency Revolving Credit Agreement dated as of
June 12, 1997 (as the same may be amended, modified, supplemented, and in effect
from time to time, the "Credit Agreement") by and among the Company, Samsonite
Europe, the Lenders, BANKBOSTON, N.A. as administrative agent for the Agents (as
hereinafter defined) and the Lenders (the "Administrative Agent"), GENERALE BANK
N.V. as documentation agent for the Agents and the Lenders (the "Documentation
Agent"), CREDIT LYONNAIS NEW YORK BRANCH, as syndication agent for the Agents
and the Lenders (the "Syndication Agent"), BANKBOSTON, N.A. as competitive bid
agent for the Agents and the Lenders (the "Competitive Bid Agent"), GENERALE
BANK N.V. as foreign agent for the Agents and the Lenders (the "Foreign Agent")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANQUE NATIONALE DE
PARIS and KREDIETBANK N.V. as co-agents (the "Co-Agents", and, collectively with
the Administrative Agent, the Documentation Agent, the Syndication Agent, the
Competitive Bid Agent and the Foreign Agent, the "Agents"), and GENERALE BANK
N.V. as fronting bank for the Lenders (the "Fronting Bank"). Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.
WHEREAS, the Company and the Lenders have agreed to modify certain terms
and conditions of the Credit Agreement as specifically set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
(S)1. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the satisfaction of the
---------- -- --- ------ ---------
applicable conditions precedent set forth in (S)2 hereof, the Credit Agreement
is hereby amended as follows:
-1-
<PAGE>
(S)1.1 DEFINITIONS. The definition of "Open Market Purchases" is
-----------
hereby amended by (a) deleting the amount "$50,000,000" which appears in
such definition and substituting in place thereof the amount "$65,000,000";
and (b) deleting the percentage "113%" which appears in such definition and
substituting in place thereof the percentage "118%".
(S)1.2 EURODOLLAR RATE LOANS. Section 2.8.3 of the Credit Agreement
---------------------
is hereby amended by deleting the words "more than four (4) Eurodollar Rate
Loans" which appear in the second sentence of (S)2.8.3 and substituting in
place thereof the words "more than ten (10) Eurodollar Rate Loans".
(S)1.3 RESTRICTIONS ON INVESTMENTS. Section 10.3 of the Credit
---------------------------
Agreement is hereby amended by (a) deleting the word "and" which appears at
the end of the text of (S)10.3(w); (b) inserting the word "and" immediately
after the text and the semicolon in (S)10.3(x) and (c) inserting
immediately after the end of the text of (S)10.3(x) the following:
(y) by the Company in any Person that is not a
Subsidiary and which is in a Related Business, which do not exceed,
in the aggregate, after the date hereof over the term of this Credit
Agreement on a cumulative basis $8,000,000, provided, (i) such
--------
Investment is made by the Company to either (1) purchase capital
stock of such Person or (2) make a loan to such Person and (ii) the
Company and such Person have made arrangements satisfactory to the
Company which limits the use of the proceeds of such Investments by
such Person for purposes satisfactory to the Company.
(S)1.4 EVENTS OF DEFAULT. Section 14.1(j) of the Credit Agreement is
-----------------
hereby amended by inserting immediately following the words "or the
Subordinated Debt shall be (or shall be required at such time to be)
prepaid, redeemed or repurchased in whole or in part" (before the semi-
colon) the words ", except as otherwise expressly permitted pursuant to
(S)10.8 hereof".
(S)2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective
----------------------------
upon the date of receipt by the Administrative Agent of one or more counterparts
of this Amendment, duly executed by the Company, Samsonite Europe and the
Majority Lenders (such date being hereinafter referred to as the "Amendment
Date").
(S)3. REPRESENTATIONS AND WARRANTIES. Each of the Company and Samsonite
------------------------------
Europe hereby repeats, on and as of the date hereof and the Amendment Date, each
of the representations and warranties made by it in (S)8 of the Credit Agreement
(except to the extent of changes resulting from matters contemplated or
permitted by the Credit Agreement and the other Loan Documents, changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date), provided, that all references
--------
therein to the Credit Agreement shall refer to such Credit Agreement as amended
hereby. In addition, each of the Company and Samsonite
-2-
<PAGE>
Europe hereby represents and warrants that the execution and delivery by the
Company and Samsonite Europe of this Amendment and the performance by each of
the Company and Samsonite Europe of all of its respective agreements and
obligations under this Amendment and the Credit Agreement as amended hereby are
within the corporate power and authority of the Company and Samsonite Europe, as
the case may be, and have been duly authorized by all necessary corporate action
on the part of the Company and Samsonite Europe, and each further represents and
warrants that the execution and delivery by each of the Company and Samsonite
Europe, as the case may be, of this Amendment and the performance by the Company
and Samsonite Europe, as the case may be, of the transactions contemplated
hereby will not contravene any term or condition set forth in any agreement or
instrument to which the Company or Samsonite Europe is a party or by which the
Company or Samsonite Europe is bound, including, in the case of the Company, but
not limited to, the Subordinated Indenture.
(S)4. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
------------ ---
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Amendment shall be read and construed as a single
agreement. This Amendment shall constitute one of the Loan Documents, and the
obligations of the Borrowers under this Amendment shall constitute Obligations
for all purposes of the Loan Documents. All references in the Credit Agreement,
the Loan Documents or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.
(S)5. NO WAIVER. Nothing contained herein shall constitute a waiver of,
---------
impair or otherwise adversely affect any Obligations, any other obligation of
the Company or Samsonite Europe or any rights of the Agents or the Lenders
consequent thereon.
(S)6. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(S)7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO
CONFLICT OF LAWS).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment under
seal by their respective officers thereunto duly authorized.
[Signature Pages Follow]
-4-
<PAGE>
Signature Pages for Borrowers
--------- ----- --- ---------
Each of the undersigned Borrowers hereby consents and agrees to all of the
provisions of the foregoing Amendment:
The Company: SAMSONITE CORPORATION
--- -------
By: /s/ Thomas R. Sandler
------------------
Name: Thomas R. Sandler
Title: CFO
Samsonite Europe: SAMSONITE EUROPE N.V.
----------------
By: /s/ Thomas R. Sandler
------------------
Name: Thomas R. Sandler
Title: Director
-5-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
BANKBOSTON, N.A.
By: /s/ Gretchen Troiano
-----------------
Name: Gretchen Troiano
Title: Vice President
-6-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
GENERALE BANK N.V.
By: /s/ E. Matthews
------------
Name: E. Matthews
Title: Senior Vice President
By: /s/ S. Del Rosario
---------------
Name: S. Del Rosario
Title: Senior Vice president
-7-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
-----------------
Name: Robert Ivosevich
Title: Senior Vice President
-8-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Kevin C. Leader
----------------
Name: Kevin C. Leader
Title: Vice president
-9-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
THE BANK OF NEW YORK
By: /s/ Robert Lak
-----------
Name: Robert Lak
Title: Vice President
-10-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION
By: /s/ Randall Schmidt
----------------
Name: Randall Schmidt
Title: Vice President
-11-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
BANQUE NATIONALE DE PARIS
By: /s/ Olive Bettles
--------------
Name: Olive Bettles
Title: Senior Vice President & Manager
By: /s/ Mylene Dao
-----------
Name: Mylene Dao
Title: Assistant Vice President
-12-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Dan Dobrjansky
---------------
Name: Dan Dobrjansky
Title: Assistant Vice President
By: /s/ John D. Sykes
--------------
Name: John D. Sykes
Title: Assistant Vice President
-13-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
KREDIETBANK N.V.
By: /s/ Robert Snauffer
----------------
Name: Robert Snauffer
Title: Vice President
By: /s/ Robert M. Surdham, Jr.
-----------------------
Name: Robert M. Surdham, Jr.
Title: Vice President
-14-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
ISTITUTO BANCARIO SAN PAOLO DI
TORINO SPA
By: /s/ Carlo Persico
--------------
Name: Carlo Persico
Title: Deputy General Manager
By: /s/ K. Douglas Knapp
-----------------
Name: K. Douglas Knapp
Title: Vice President
-15-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Richard A. Erbert
------------------
Name: Richard A. Erbert
Title: Vice President
-16-
<PAGE>
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the foregoing Amendment:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Wanda Headrick
---------------
Name: Wanda Headrick
Title: Vice President
-17-
<PAGE>
EXHIBIT 10.2
------------
TRADEMARK PURCHASE AND ASSIGNMENT AGREEMENT
-------------------------------------------
This Trademark Purchase and Assignment Agreement (the "Agreement") is made
as of October 31, 1997 (the "Effective Date"), between McGregor II, LLC, a
Delaware limited liability company, successor to McGregor Corporation, a New
York corporation ("McGregor"), and McGregor International Licensing N.V., a
Netherlands Antilles corporation ("MIL").
RECITALS
A. McGregor is the owner of the trademark registrations listed on Exhibit
-------
A (the "Trademark Registrations").
- -
B. MIL wishes to acquire McGregor's rights in the trademarks referred to
in the Trademark Registrations for the countries listed on Exhibit B attached
---------
hereto (the "Territory"), and McGregor wishes to sell such rights to MIL on the
terms and conditions set forth below. In addition, MIL desires to enter into a
consulting agreement for McGregor's services in connection with recording of the
transfer of Trademark Registrations in various countries in the Territory.
AGREEMENT
THEREFORE, in consideration of the payment of the purchase price by MIL to
McGregor and the promises and agreements herein contained, the sufficiency of
which consideration is hereby acknowledged, MIL and McGregor hereby agree as
follows:
1. ASSIGNMENT. McGregor hereby sells, assigns, conveys and transfers to MIL
McGregor's entire right, title and interest in and to the Trademark
Registrations and the trademarks as referred to in the Trademark Registrations,
in the Territory (and not elsewhere), together with all goodwill associated
therewith, for use and registration by MIL in the Territory (but not elsewhere)
(collectively, the "Transferred Trademarks"), but expressly reserving unto
McGregor the Excluded Registrations set forth on Exhibit C attached hereto (the
---------
"Excluded Registrations") and all other rights in and to the trademarks referred
to in the Trademark Registrations outside the Territory, including without
limitation, the goodwill associated therewith.
2. PURCHASE PRICE. The purchase price for the Transferred Trademarks is
US$5,000,000 which is payable by MIL to McGregor as follows (the "Purchase
Price"):
a. prior to the Effective Date, McGregor has been paid a deposit in the
amount of US$50,000, which is credited against the Purchase Price;
b. the balance of the Purchase Price in the amount of US$4,950,000 shall
be paid to McGregor on the Effective Date in immediately available
funds by wire transfer pursuant to wiring instructions furnished by
McGregor.
-1-
<PAGE>
3. PURCHASE OF STOCK. On or before January 25, 1998 (the "Stock Purchase
Date"), MIL shall cause Emergo Fashion Group, B.V., a Netherlands corporation
("Emergo") to pay to McGregor
-2-
<PAGE>
Dfl 247,500 plus interest at the rate of 6% per annum from April 15, 1997
through the Stock Purchase Date, for the purchase by Emergo of the "Preferred
Stock." For purposes of this Agreement, "Preferred Stock" shall mean the 21,312
cumulative preferred shares of Emergo owned by McGregor as of the Effective
Date. Payment for the Preferred Stock shall be made by wire transfer pursuant
to wiring instructions furnished by McGregor.
4. TRANSITIONAL CONSULTING AGREEMENT. On the Effective Date, MIL and McGregor
shall enter into the Transitional Consulting Agreement in the form attached
hereto as Exhibit D.
---------
5. EQUILINK AGREEMENT. The Transferred Trademarks are transferred subject to
the terms and conditions of that certain Settlement Agreement between McGregor-
Doniger Inc., The Brunswick Corporation, and The Equilink Corporation, dated
April 9, 1981, as amended, and its related documents and agreements (the
"Equilink Agreement"), a copy of which is attached hereto as Exhibit E. MIL
---------
shall comply with and agrees to be bound, without exception, by all obligations
of McGregor, as successor to McGregor-Doniger Inc., under the Equilink Agreement
with respect to the Transferred Trademarks, and shall indemnify and hold
harmless McGregor, its affiliates, parents, subsidiaries and assigns and their
respective officers, directors, employees, and agents from and against any and
all damages, liabilities, claims, costs and expenses, including without
limitation, attorneys' fees incurred by McGregor and resulting from MIL's
failure to comply with or breach of its obligations under this Paragraph 5.
6. MCGREGOR'S RESERVATION OF RIGHTS. McGregor expressly retains and reserves
(for itself and its successors, assigns and licensees):
a. all right, title, interest and ownership in and to the trademarks
referred to in the Trademark Registrations, including without
limitation, the goodwill associated therewith, outside of the
Territory; and
b. the right to sell any products bearing the Transferred Trademarks to
post exchanges and military installations of the United States
located in the Territory to the extent that McGregor's current
licensees are granted such rights pursuant to license agreements, the
term of which has commenced prior to the Effective Date, and
provided, however, that any license agreements commencing on or after
the Effective Date shall not include the right to sell products
bearing the Transferred Trademarks to post exchanges and military
installations of the United States located in the Territory.
7. RESTRICTION ON SOFTSIDE SALES. MIL covenants and guarantees in perpetuity
that:
a. sales of unstructured softside luggage or bags bearing the
Transferred Trademarks will not exceed 1.5% of MIL's gross sales of
all products bearing the Transferred Trademarks during any twelve-
month period;
-3-
<PAGE>
b. MIL will not manufacture, advertise, market or sell hardside luggage
or bags bearing the Transferred Trademarks in the Territory; and
c. MIL will use its best efforts to maintain in full force and effect in
the Territory the Trademark Registrations with respect to Class 18 of
the International Classification of Goods and Services for the
Purpose of the Registration of Marks Under the Nice Convention
("International Class"); provided, however that MIL shall be relieved
of liability under this Paragraph 7.c. with respect to any country or
countries in the Territory where MIL is unable to show sufficient
proof of use to maintain such Trademark Registrations, as result of
the restrictions set forth in Paragraphs 7.a. and 7.b. hereof.
8. MCGREGOR'S COVENANTS. McGregor covenants and agrees that it:
a. will not contest MIL's full and complete ownership of the Transferred
Trademarks in the Territory for any product, including the rights to
use, license the use of and/or register the Transferred Trademarks in
the Territory for any product, subject to the covenants and
guarantees in Paragraph 7 hereof;
b. will not use, other than as set forth in Paragraph 10.b. hereof, or
seek to register the Transferred Trademarks in the Territory for any
product;
c. will not contest, or file an opposition to, the acquisition by MIL,
at its sole cost and expense, of any trademarks owned by Sterling
McGregor Limited in the Territory; and
d. will not manufacture, advertise, market or sell any products bearing
the Excluded Registrations in the Territory.
9. MIL'S COVENANTS. MIL covenants and agrees that it:
a. will not contest McGregor's full and complete ownership of the
trademarks referred to in the Trademark Registrations outside the
Territory for any product, including the rights to use, license the
use of and/or register such trademarks for any product; and
b. will not use, other than as set forth in Paragraph 10.a. hereof, or
seek to register the Transferred Trademarks outside the Territory for
any product, or use the trade name "McGregor" outside the Territory.
10. CROSS LICENSES TO MANUFACTURE.
a. To the extent of McGregor's rights in the Transferred Trademarks
outside the Territory, McGregor, for itself, its successors and
assigns, hereby grants to MIL and MIL's successors, assigns and
licensees a nonterminable, non-exclusive, royalty free license, in
perpetuity, to manufacture or have manufactured outside the Territory
-4-
<PAGE>
(other than in those countries for those products identified on
Exhibit F attached hereto) any and all products bearing the
---------
Transferred Trademarks, provided that such products are sold and
marketed only in the Territory. It is understood and agreed by MIL
that McGregor makes no representation or warranty that McGregor holds
rights in the Transferred Trademarks outside the Territory and
McGregor shall have no liability to MIL, its successors, assigns or
licensees arising from the manufacture of products bearing the
Transferred Trademarks outside the Territory.
b. To the extent of MIL's rights in the Transferred Trademarks in the
Territory, MIL, for itself, its successors and assigns, hereby grants
to McGregor and McGregor's successors, assigns and licensees a
nonterminable, non-exclusive, royalty free license, in perpetuity, to
manufacture or have manufactured in the Territory any and all
products bearing the Transferred Trademarks, provided that such
products are sold and marketed only outside the Territory. It is
understood and agreed by McGregor that MIL makes no representation or
warranty that MIL holds rights in the Transferred Trademarks in the
Territory and MIL shall have no liability to McGregor, its
successors, assigns or licensees arising from the manufacture of
products bearing the Transferred Trademarks in the Territory.
c. MIL and McGregor do hereby consent to the use by the other of the
trade name, "McGregor" in their respective business or corporate
names in the Territory, including without limitation, the
subsidiaries, divisions or affiliates of either party.
11. COOPERATION; COSTS AND EXPENSES. After payment of the Purchase Price and
upon the request of MIL, McGregor shall execute and deliver to MIL all
documentation required to perfect the transfer of the Transferred Trademarks in
the trademark registries in the Territory; provided, however, that McGregor
shall not be required to incur any out-of-pocket expenses except as otherwise
provided in this Paragraph 11. Subject to the foregoing, MIL shall be
responsible for preparation of all documentation required to perfect the
transfer of the Trademark Registrations (including documentation necessary to
transfer the registrations from McGregor's predecessors in interest) and shall
pay all costs incurred in connection therewith, except that McGregor shall
reimburse MIL in an amount not to exceed US$50,000 for costs which are supported
by adequate documentation and incurred by MIL solely in connection with
preparing documentation and recording the transfer of the Trademark
Registrations from McGregor's predecessors in interest to McGregor II, LLC,
where such documentation and recording are required by the trademark registries
of the countries included in the Territory. Each party shall execute and
deliver to the other party any further documentation reasonably requested to
effect or confirm the transfers and agreements contemplated by this Agreement.
12. MCGREGOR'S REPRESENTATIONS AND WARRANTIES. McGregor warrants and
represents to MIL that as of the Effective Date:
a. McGregor is a limited liability company duly organized and in good
standing under the laws of the State of Delaware, country of the
United States of America. McGregor has full right and authority to
enter into this Agreement and to
-5-
<PAGE>
consummate the transaction contemplated hereby. All requisite
corporate action has been taken by McGregor in connection with the
entering into of this Agreement and the instruments referenced herein
and the consummation of the transaction contemplated hereby. Each of
the persons signing this Agreement on behalf of McGregor is duly
authorized to do so.
b. Any and all consents and approvals which may be required in order for
McGregor to enter into this Agreement or consummate the transaction
contemplated hereby have been obtained. This Agreement and all
documents required hereby to be executed by McGregor are and shall be
valid, legally binding obligations of and enforceable against
McGregor, its successors and assigns in accordance with their terms.
Neither the execution of this Agreement nor the consummation of the
transaction contemplated hereby will be in violation of any judgment,
order, permit, writ, injunction or decree of any court, commission,
bureau or agency to which McGregor is subject or by which McGregor is
bound, or constitute a breach or default under any agreement or other
obligation to which McGregor is a party or otherwise bound.
c. To the best of McGregor's knowledge, it is the owner of all right,
title and interest in the Trademark Registrations and the Trademark
Registrations are valid and in good standing; provided, however, that
MIL acknowledges that all products encompassed by the International
Classes listed on Exhibit A hereof are not necessarily included in
---------
the Trademark Registrations. Notwithstanding the foregoing, McGregor
makes no warranty as to the accuracy of the record owner and chain of
title information on file with the respective trademark registries.
McGregor's duty of cooperation under Paragraph 11 hereof, however,
includes cooperating, as is reasonably necessary, in MIL's efforts to
record itself as the new record owner of the Trademark Registrations.
d. McGregor represents that there is no outstanding indebtedness
incurred by McGregor for which a valid lien or other security
interest could be filed against the Trademark Registrations in the
respective trademark registries. McGregor's duty of cooperation under
Paragraph 11 hereof, however, includes cooperating, as is reasonably
necessary, to obtain the release of any lien which may be filed in
the trademark registries with respect to the Trademark Registrations
securing indebtedness incurred by McGregor.
e. To the best of McGregor's knowledge, there is no past due fee or
payment owing in the respective trademark registries relating to the
Trademark Registrations. McGregor agrees, however, that should any
payment or fee incurred prior to the Effective Date become known to
McGregor or MIL, McGregor will pay such fee to the respective
trademark registry or to MIL as mutually agreed by the parties.
f. To the best of McGregor's knowledge, there are no pending
infringement actions against the Transferred Trademarks in the
Territory, except as set forth on Exhibit
-------
-6-
<PAGE>
G attached hereto. For the purposes hereof, "pending" shall mean that
-
such proceeding has been commenced with the appropriate governmental
body, all applicable parties to such proceeding have been properly
served, and such proceeding has not been resolved. To the actual
knowledge of the current officers, directors and employees of
McGregor, there are no threatened infringement actions against the
Transferred Trademarks in the Territory, except as set forth on
Exhibit G, and there are not any known facts which would provide the
---------
basis for such infringement action.
g. With respect to the representations and warranties set forth in
Paragraphs 12.c. through 12.f. hereof, MIL, its successors and
assigns, will not hold McGregor, nor will McGregor be, liable for any
breach or violation thereof unless MIL notifies McGregor in writing
of such breach or violation on or before August 31, 2002, and no suit
based on such representations and warranties shall be filed or
otherwise commenced after October 31, 2002.
13. MIL'S REPRESENTATIONS AND WARRANTIES. MIL represents and warrants to
McGregor that as of the Effective Date:
a. MIL is a corporation duly organized and in good standing under the
laws of the Netherlands Antilles. MIL has full right and authority to
enter into this Agreement and to consummate the transaction
contemplated hereby. All requisite corporate action has been taken by
MIL in connection with the entering into of this Agreement and the
instruments referenced herein and the consummation of the transaction
contemplated hereby. Each of the persons signing this Agreement on
behalf of MIL is duly authorized to do so.
b. Any and all consents and approvals which may be required in order for
MIL to enter into this Agreement or consummate the transaction
contemplated hereby have been obtained. This Agreement and all
documents required hereby to be executed by MIL are and shall be
valid, legally binding obligations of and enforceable against MIL,
its successors and assigns in accordance with their terms. Neither
the execution of this Agreement nor the consummation of the
transaction contemplated hereby will be in violation of any judgment,
order, permit, writ, injunction or decree of any court, commission,
bureau or agency to which MIL is subject or by which MIL is bound, or
constitute a breach or default under any agreement or other
obligation to which MIL is a party or otherwise bound.
c. MIL warrants that to the best of its and Emergo's knowledge, there
are no pending infringement actions against the Transferred
Trademarks in the Territory, except as set forth on Exhibit H
---------
attached hereto. For the purposes hereof, "pending" shall mean that
such proceeding has been commenced with the appropriate governmental
body, all applicable parties to such proceeding have been properly
served, and such proceeding has not been resolved. MIL further
warrants that to the actual knowledge of the current officers,
directors and employees of MIL and Emergo, there are no threatened
infringement actions against the Transferred Trademarks in the
Territory,
-7-
<PAGE>
except as set forth on Exhibit H, and there are not any known facts
---------
which would provide the basis for such infringement action. With
respect to representations and warranties set forth in this Paragraph
13.c., McGregor, its successors and assigns, will not hold MIL, nor
will MIL be, liable for any breach or violation thereof unless
McGregor notifies MIL in writing of such breach or violation on or
before August 31, 2002, and no suit based on such representation and
warranty shall be filed or otherwise commenced after October 31,
2002.
14. ASSIGNMENT OF EXISTING LICENSE. Emergo, as licensee, and McGregor, as
licensor, are parties to that certain License Agreement, dated as of October 11,
1994, as amended by letters dated October 24, 1995, and November 1, 1995, a memo
dated April 2, 1996, and the Fourth Amendment to License Agreement dated July 2,
1997 (collectively, the "License"). McGregor shall assign its rights and
interests in the License to MIL as of the Effective Date, except McGregor shall
retain its rights under those obligations of Emergo under the License which are
set forth in the Amendment, Assignment and Assumption of License Agreement
executed concurrently herewith.
15. MISCELLANEOUS.
a. This Agreement shall be governed by the substantive laws of the State
of New York, applicable to agreements fully executed and performed in
said state. With respect to any action commenced by McGregor against
MIL or by MIL against McGregor for any breach hereof or otherwise
commenced with respect hereof, each of the parties hereby irrevocably
and unconditionally submits to personal jurisdiction and venue in the
Federal courts in the Southern District of New York, New York and, if
the Federal court does not have subject matter jurisdiction over such
action or for any reason fails or refuses to accept or hear such
action, to personal jurisdiction and venue in the State courts in New
York, New York. Each of the parties agrees that it will not bring any
action in any other jurisdiction. The parties consent to service of
process by certified mail, return receipt requested. For the purposes
of this Paragraph 15, "final judgment" means a final judgment from
which no appeal or right of appeal exists in any U.S. Federal or New
York state court. A final judgment against a party in any such action
or proceeding shall be conclusive, and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of
which shall be conclusive evidence of the fact and the amount of
indebtedness or liability of or other remedy awarded against such
party therein described. In addition, a non-final judgment may be
enforced in other jurisdictions to the extent enforceable by law.
b. All notices, payments, and statements which are required or may be
given, shall be in writing, in the English language, and either:
i. personally delivered;
ii. sent via certified air mail with a return receipt requested; or
iii sent via electronic means which produces a written record of
the notice given.
-8-
<PAGE>
Notices shall be addressed as follows:
If to McGregor:
Global Licensing Company
Division of McGregor II, LLC
430 Park Avenue, 10th Floor
New York, New York 10022
Facsimile #: 212-307-8121
Attention: Executive Vice President of
Global Licensing Company
If to MIL:
Oyens Trust (Curacao) N.V.
P.O. Box 4895
Curacao, Netherlands Antilles
Attention: Mrs. A.M.C. de Vreede
With a copy to:
Emergo Fashion Group B.V.
Hoofdstraat 23-25
3971 KA Driebergen-Rijsenburg
Netherlands
Facsimile #:31-3435-20701
Attention: President
Notices shall be effective upon receipt. The notice, addresses, phone
numbers, facsimile numbers and contacts may be changed by giving
notice in accordance with this Agreement.
c. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. Either party may
assign its rights and obligations under this Agreement without
obtaining the consent of the other party, provided that the
transferee expressly agrees in writing to assume and be bound by the
obligations and conditions of this Agreement. Any such sale,
assignment or transfer not in compliance with the foregoing shall be
null and void.
d. If either party wishes to issue an official press release or other
formal public announcement to any public or trade media concerning
the contents or fact of this Agreement, then such party shall first
consult with the other party and both parties shall then cooperate to
specify and mutually agree upon the contents, time and place of such
press release or public announcement.
e. This Agreement contains the entire agreement of the parties hereto
respecting the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, communications and
discussions, whether oral or written, of the parties hereto,
pertaining to such subject matter. No amendment, supplement,
modification
-9-
<PAGE>
or waiver of this Agreement shall be binding unless set forth in
writing and signed by the parties hereto.
f. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision, nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided in a written document signed by the parties hereto.
g. This Agreement may be executed in counterparts, each of which, or any
combination of which when signed and delivered by all of the parties,
shall be deemed an original, but all of which when taken together
shall constitute one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on October 31,
----------
1997, effective as of the Effective Date.
ATTEST: McGREGOR II, LLC
/s/ Gregory W. O'Connor By: /s/ Thomas R. Sandler
- ------------------------------- -----------------------------
Asst Secretary Name: Thomas R. Sandler
Gregory W. O'Connor ---------------------------
Title: President
--------------------------
McGREGOR INTERNATIONAL
LICENSING N.V.
By: /s/ Mrs. A.M.C. de Vreede
- ------------------------------- -----------------------------
Secretary Name: Oyens Trust (Curacao) NV
---------------------------
Title: Managing Director
--------------------------
GUARANTEE
Samsonite Corporation, a Delaware corporation, guarantees the performance by
McGregor II, LLC ("McGregor") of: (i) McGregor's obligations of cooperation and
of reimbursement of costs as set forth in the Paragraph 11 of the Trademark
Purchase and Assignment Agreement, of even date herewith, between McGregor and
McGregor International Licensing N.V. (the "Agreement"); and (ii) payment of
damages, if any, awarded by a court of competent jurisdiction and arising solely
from the breach by McGregor of McGregor's obligations set forth in Paragraph (i)
of this Guarantee or the warranties and representations set forth in Paragraph
12 of the Agreement.
Dated as of October 31, 1997
SAMSONITE CORPORATION,
a Delaware corporation
By: /s/ Thomas R. Sandler
------------------------------
Print Name: Thomas R. Sandler
----------------------
Title: Sr. Vice President & CFO
---------------------------
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<PAGE>
EXHIBIT 10.3
------------
TRADEMARK OPTION AGREEMENT
--------------------------
This Trademark Option Agreement (the "Agreement") is made as of October 31,
1997 (the "Effective Date") between McGregor II, LLC, a Delaware limited
liability company, successor to McGregor Corporation, a New York corporation
("McGregor"), and McGregor International Licensing N.V., a Netherlands Antilles
corporation ("MIL").
RECITALS
A. McGregor is the owner of the trademark registrations listed on Exhibit
-------
A (the "Trademark Registrations").
- -
B. MIL wishes to acquire an option to purchase McGregor's rights in the
trademarks referred to in the Trademark Registrations for the countries listed
on Exhibit B attached hereto (the "Territory"), and McGregor wishes to grant
---------
such rights to MIL on the terms and conditions set forth below.
C. As of the Effective Date, McGregor has sold to MIL all of its right,
title and interest in and to certain trademarks which are similar to the
trademarks subject to this Agreement for the countries listed on Exhibit C
---------
attached hereto (the "MIL Territory").
D. All the countries of the world not included in the MIL Territory or
the Territory shall be collectively referred to in this Agreement as the
"McGregor Territory."
AGREEMENT
THEREFORE, in consideration of the promises and agreements herein contained
and for other good and valuable consideration, the sufficiency of which is
hereby acknowledged, MIL and McGregor agree as follows:
1. GRANT OF OPTION. McGregor grants to MIL an option (the "Option") to
purchase McGregor's entire right, title and interest in and to the Trademark
Registrations and the trademarks as referred to in the Trademark Registrations,
together with all goodwill associated therewith, for use and registration by MIL
in the Territory (but not elsewhere) (collectively, the "Option Marks"), but
expressly reserving unto McGregor the Excluded Registrations set forth on
Exhibit D attached hereto (the "Excluded Registrations") and all other rights in
- ---------
and to the trademarks referred to in the Trademark Registrations in the McGregor
Territory, including without limitation, the goodwill associated therewith.
2. OPTION TERM. The term of this Agreement shall commence on the Effective
Date and shall terminate on the third anniversary thereof, unless sooner
terminated pursuant to Paragraph 5 or Paragraph 11 hereof (the "Option Term").
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<PAGE>
3. OPTION PRICE. The purchase price for the Option Marks shall be
US$9,000,000, subject to adjustment as provided in Paragraph 5 hereof (the
"Option Price").
4. EXERCISE. Except as provided in Paragraph 5 hereof, MIL may exercise the
Option at any time during the Option Term by giving written notice to McGregor
of such exercise. From and after MIL's exercise of the Option, MIL shall be
obligated to buy, and McGregor shall be obligated to sell, the Option Marks on
the terms and conditions set forth herein. If MIL has not exercised the Option
on or before the expiration or earlier termination of the Option Term, this
Agreement and the Option shall terminate and be of no further force and effect.
Upon expiration or termination of the Option Term, if MIL has not exercised the
Option, MIL shall execute and deliver to McGregor any documentation reasonably
requested by McGregor to release all claims of MIL to any right, title and
interest in the remaining Option Marks.
5. PUT.
a. During the Option Term, McGregor shall be entitled to offer the Option
Marks, or any of them, for sale on any terms and conditions, subject to
the provisions of this Paragraph 5. If , from time to time during the
Option Term, McGregor desires to sell all or any of the Option Marks,
either separately or in combination with all or any other assets of
McGregor or any of its affiliates, McGregor shall establish a price for
the Option Marks which shall not be less than US$3,000,000 (the "Offer
Price"). McGregor shall notify MIL of McGregor's desire to sell the
Option Marks at the Offer Price. For a period of thirty days after
MIL's receipt of such notice (the "Offer Period"), MIL may elect to
exercise the Option for: (i) a purchase price of US$5,000,000 if the
Offer Price is equal to or less than US$5,000,000; (ii) a purchase
price equal to the Offer Price if the Offer Price is greater than
US$5,000,000 but less than US$9,000,000; or (iii) US$9,000,000 if the
Offer Price is equal to or greater than US$9,000,000.
b. On or before the expiration of the Offer Period, MIL shall notify
McGregor whether MIL elects to exercise its Option to purchase the
Option Marks. If MIL fails to notify McGregor within the Offer Period
whether MIL elects to exercise the Option, MIL shall be deemed to have
elected not to exercise the Option. If, during the Offer Period, MIL
elects to exercise the Option pursuant to the terms of Paragraph 5.a.,
MIL shall be required to purchase the Option Marks strictly in
accordance with the terms and conditions of this Agreement, except that
the Option Price shall be amended to be the applicable purchase price
under Paragraphs 5.a.(i), 5.a.(ii) or 5.a.(iii) hereof. If MIL elects,
or is deemed to have elected, not to exercise the Option during the
Option Period, then McGregor, for a period of 90 days thereafter, shall
be entitled to sell the Option Marks, or any portion thereof,
separately or in combination with any other assets, on any terms as
McGregor, in its sole and absolute discretion, shall determine, except
that the purchase price for the Option Marks, or portion of the
purchase price allocable to the Option Marks if the Option Marks are
sold in combination with other assets of McGregor, shall not be less
than the Offer Price. If, on or before the expiration of such 90-day
period, McGregor has consummated a sale which includes all of the
Option Marks, this Agreement shall
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<PAGE>
terminate and be of no further force and effect. If, on the expiration
of such 90-day period, McGregor has not consummated a sale which
includes all the Option Marks,
-3-
<PAGE>
the Option shall continue in effect until the expiration of the Option
Term, except that the Option Marks shall be deemed amended to exclude
the trademarks which have been sold during such 90-day period, if any,
and McGregor shall have the right to continue its efforts to sell the
Option Marks, subject to the provisions of this Paragraph 5.
6. CONFIDENTIALITY; MIL'S INVESTIGATIONS.
a. Both during and following expiration of the Option Term, MIL shall
neither divulge to, nor use for the benefit of, any third party any of
the information it receives from McGregor under or related to this
Agreement, including without limitation, the existence and terms and
conditions of this Agreement, except to the extent disclosure is
required by law or except to the extent that such information, in the
form in which it is received is:
(i) known to MIL prior to its receipt from McGregor;
(ii) available to the general public either when received from
McGregor or thereafter, except if it became available through
the fault of MIL;
(iii) received by MIL from a third party who can disclose such
information free of confidentiality obligations; or
(iv) independently developed by MIL.
Such information may be disclosed to MIL's personnel and financial
advisors on a need only basis. MIL shall inform such persons of the
confidential and proprietary nature of the information and will ensure
that all persons so informed understand their obligations to maintain
the confidential and proprietary nature of such information.
b. From time to time during the Option Term, upon not less than seven
days' notice, McGregor shall make available to MIL for its inspection
and review McGregor's files relating to the Option Marks and shall
provide copies of the then existing license agreements relating to the
Option Marks for the Territory. MIL shall conduct its inspection and
review of the Option Mark files in the office of McGregor where such
records are kept. Without the prior written approval of McGregor, in
its sole discretion, MIL shall not contact in any way any of
McGregor's licensees to discuss any aspect of their licenses or
business regarding the Option Marks. MIL acknowledges that McGregor's
relationships with its licensees are of critical business importance
and shall not adversely affect such relationships in any way.
7. CLOSING. The closing of the sale of the Option Marks (the "Closing") will
be consummated as follows:
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<PAGE>
a. The Closing will occur on the ninetieth day following MIL's exercise
of the Option, or such earlier date as may be mutually agreed to by
the parties (the "Closing Date"). The Closing will take place at a
time and place in New York, New York, mutually agreed to by MIL and
McGregor on the Closing Date.
b. MIL shall pay the Option Price to McGregor on the Closing Date in
immediately available funds by wire transfer to the account designated
by McGregor.
c. McGregor and MIL shall execute and deliver an assignment agreement
which shall assign the Option Marks to MIL, shall be in form and
substance reasonably satisfactory to both parties and shall contain,
inter alia, the following provisions:
(i) The Option Marks shall be transferred subject to the terms and
conditions of that certain Settlement Agreement between
McGregor-Doniger Inc., The Brunswick Corporation, and The
Equilink Corporation, dated April 9, 1981, as amended, and its
related documents and agreements (the "Equilink Agreement"), a
copy of which is attached hereto as Exhibit E. MIL shall comply
---------
with, and agree to be bound by, without exception, all
obligations of McGregor, as successor to McGregor-Doniger Inc.,
under the Equilink Agreement with respect to the Option Marks,
and shall indemnify and hold harmless McGregor, its affiliates,
parents, subsidiaries and assigns and their respective officers,
directors, employees and agents from and against all damages,
liabilities, claims, costs and expenses, including without
limitation, attorneys' fees, incurred by McGregor and arising
after the Effective Date as a result of MIL's failure to comply
with or breach of the foregoing obligations.
(ii) The Option Marks shall be transferred subject to the terms and
conditions of McGregor's then existing licenses for the Option
Marks and any other written contractual agreements made with
respect to the Option Marks for the Territory, such as
representation agreements (collectively, "Existing Contracts"),
excluding, however, any agreements for the sale of the Option
Marks and any agreements securing indebtedness of McGregor. MIL
shall assume and agree to perform the obligations of McGregor
accruing from and after the Closing Date under the Existing
Contracts, and shall indemnify and hold harmless McGregor, its
affiliates, parents, subsidiaries and assigns and their
respective officers, directors, employees, and agents from and
against all damages, liabilities, claims, costs and expenses,
including without limitation, attorneys' fees, incurred by
McGregor and resulting from MIL's failure to comply with or
breach of the foregoing obligations.
(iii) The Option Marks shall be transferred subject to the terms and
conditions of the Agreement, dated as of July 1, 1993, between
McGregor Industries, Inc. and McGregor II, LLC, as successor to
McGregor Corporation, a copy of which is attached hereto as
Exhibit F (the "Canada Agreement); provided that
---------
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<PAGE>
McGregor has obtained consent to the assignment of the Canada
Agreement and Canada has not been deleted from the Territory.
MIL shall comply with, and agree to be bound by, without
exception, all obligations of McGregor, as successor to McGregor
Corporation, under the Canada Agreement, and shall indemnify and
hold harmless McGregor, its affiliates, parents, subsidiaries and
assigns and their respective officers, directors, employees and
agents from and against all damages, liabilities, claims, costs
and expenses, including without limitation, attorneys' fees,
incurred by McGregor and resulting from MIL's failure to comply
with or breach of the foregoing obligations.
(iv) The Option Mark "Drizzler" shall be transferred subject to the
terms and conditions of the Letter Agreement, dated October 8,
1990, between Drizzler Inc. and McGregor II, LLC, as successor to
McGregor Corporation, a copy of which is attached hereto as
Exhibit G (the "Drizzler Agreement"). MIL shall comply with, and
---------
agree to be bound by, without exception, all obligations of
McGregor, as successor to McGregor Corporation, under the
Drizzler Agreement, and shall indemnify and hold harmless
McGregor, its affiliates, parents, subsidiaries and assigns and
their respective officers, directors, employees and agents from
and against all damages, liabilities, claims, costs and expenses,
including without limitation, attorneys' fees, incurred by
McGregor and resulting from MIL's failure to comply with or
breach of the foregoing obligations.
(v) McGregor shall retain and reserve (for itself and its successors,
assigns and licensees): all rights and ownership in and to the
Option Marks, including without limitation, the goodwill
associated therewith, in the McGregor Territory; and the right to
sell any products bearing the Option Marks to post exchanges and
military installations of the United States located in the
Territory to the extent that McGregor's then existing licensees
in the McGregor Territory are granted such rights pursuant to
their license agreements, the terms of which have commenced prior
to the Closing Date and provided, however, that any new license
agreements which are entered into after the Closing Date shall
not include the right to sell products bearing the Option Marks
to post exchanges and military installations of the United States
located in the Territory.
(vi) MIL shall covenant and guarantee in perpetuity that: (1) sales of
unstructured softside luggage or bags bearing the Option Marks
shall not exceed 1.5% of MIL's gross sales of all products
bearing the Option Marks during any twelve-month period; and (2)
MIL shall not manufacture, advertise, market or sell hardside
bags or luggage bearing the Option Marks in the Territory; and
(3) MIL shall use its best efforts to maintain in full force and
effect in the Territory the Trademark Registrations with respect
to Class 18 of the International Classification of Goods and
Services for the Purpose of the
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<PAGE>
Registration of Marks Under the Nice Convention ("International
Class"); provided, however, that MIL shall be relieved of
liability under this Paragraph 7.c.(vi)(3) with respect to any
country or countries in the Territory where MIL is unable to
show sufficient proof of use as a result of the restriction set
forth in Paragraphs 7.c.(vi)(1) and 7.c.(vi)(2) hereof.
(vii) McGregor shall covenant and agree that it will not contest
MIL's full and complete ownership of the Option Marks in the
Territory for any product, including the rights to use, license
the use of and/or register the Option Marks in the Territory
for any product; and that it will not use, other than as set
forth in Paragraph 7.c.(x) hereof, or seek to register the
Option Marks in the Territory for any product, subject to the
covenants and guarantees in Paragraph 7.c.(vi) hereof.
(viii) MIL shall covenant and agree that it will not contest
McGregor's full and complete ownership of the trademarks
referred to in the Trademark Registrations in the McGregor
Territory for any product, including the rights to use, license
the use of and/or register such trademarks for any product; and
will not use, other than as set forth in Paragraph 7.c.(ix)
hereof, or seek to register the Transferred Trademarks in the
McGregor Territory, or use the "McGregor" trade name in the
McGregor Territory.
(ix) To the extent of McGregor's rights in the Option Marks in the
McGregor Territory and to the extent permitted by its licenses
of the Option Marks in the McGregor Territory, McGregor, for
itself, its successors and assigns, shall grant to MIL and
MIL's successors, assigns and licensees a nonterminable, non-
exclusive, royalty free license, in perpetuity, to manufacture
or have manufactured in the McGregor Territory any and all
products bearing the Option Marks, provided that such products
are sold and marketed only outside the McGregor Territory. It
is understood and agreed by MIL that McGregor will make no
representation or warranty that McGregor holds rights in the
Option Marks in the McGregor Territory and McGregor shall have
no liability to MIL, its successors, assigns or licensees
arising from the manufacture of products bearing the Option
Marks in the McGregor Territory.
(x) To the extent of MIL's rights in the Option Marks in the
Territory, MIL, for itself, its successors and assigns, hereby
grants to McGregor and McGregor's successors, assigns and
licensees a nonterminable, non-exclusive, royalty free license,
in perpetuity, to manufacture or have manufactured in the
Territory any and all products bearing the Option Marks,
provided that such products are sold and marketed only outside
the Territory. It is understood and agreed by McGregor that MIL
makes no representation or warranty that MIL holds rights in
the Option Marks in the Territory and MIL shall have no
liability to
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<PAGE>
McGregor, its successors, assigns or licensees arising from the
manufacture of products bearing the Option Marks in the
Territory.
(xi) Upon payment of the Option Price, McGregor shall execute and
deliver to MIL all documentation required to perfect the
transfer of the Option Marks in the trademark registries in the
Territory; provided, however, that McGregor shall not be
required to incur any out-of-pocket expenses related thereto.
Subject to the foregoing, MIL shall be responsible for
preparation of all documentation required to perfect the
transfer of the Trademark Registrations (including
documentation necessary to transfer the registrations from
McGregor's predecessors in interest) and shall pay all costs
incurred in connection therewith.
(xii) MIL and McGregor do hereby consent to the use by the other of
the trade name "McGregor" in their respective business or
corporate names in the Territory, including without limitation,
the subsidiaries, divisions or affiliates of either party.
d. On the Closing Date, McGregor shall deliver to MIL the original copies
of its files relating to the Trademark Registrations and the Existing
Contracts.
e. All royalty or other payments payable to McGregor and all expenses
payable by McGregor under the Existing Contracts shall be prorated to
the Closing Date.
f. MIL and McGregor shall execute and deliver such other documents and
shall take such other action at Closing as may be necessary or
appropriate to carry out their respective obligations under this
Agreement.
g. If necessary, the parties agree to attend a pre-closing at least one
day prior to the Closing Date at the location designated for the
Closing for the purpose of finalizing the documentation so that all
that remains to be accomplished on the Closing Date is the transfer of
funds and delivery of documents.
8. MCGREGOR BUSINESS. During the Option Term, McGregor shall be entitled to
enter into new licensing arrangements with respect to the Option Marks, to
amend, extend or terminate any license agreements at any time and otherwise to
conduct its licensing business and manage the Option Marks on any basis which it
deems advisable in its sole discretion. To the extent that McGregor is unable
to renew or maintain in effect any Trademark Registration(s) or deems it
advisable not to do so, Exhibit A hereof shall be amended accordingly on or
---------
prior to the Closing Date to delete such registration.
9. MCGREGOR'S WARRANTIES. McGregor warrants and represents to MIL that as of
the Effective Date:
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<PAGE>
a. McGregor is a limited liability company duly organized and in good
standing under the laws of the state of Delaware, country of the
United States of America. McGregor has full right and authority to
enter into this Agreement and to consummate the transaction
contemplated hereby. All requisite corporate action has been taken by
McGregor in connection with the entering into of this Agreement and
the instruments referenced herein and the consummation of the
transaction contemplated hereby. Each of the persons signing this
Agreement on behalf of McGregor is duly authorized to do so.
b. All consents and approvals which may be required in order for McGregor
to enter into this Agreement or consummate the transaction
contemplated hereby have been obtained. This Agreement and all
documents required hereby to be executed by McGregor are and shall be
valid, legally binding obligations of and enforceable against
McGregor, its successors and assigns in accordance with their terms.
Neither the execution of this Agreement nor the consummation of the
transaction contemplated hereby will be in violation of any judgment,
order, permit, writ, injunction or decree of any court, commission,
bureau or agency to which McGregor is subject or by which McGregor is
bound, or constitute a breach or default under any agreement or other
obligation to which McGregor is a party or otherwise bound.
c. To the best of McGregor's knowledge, it is the owner of all right,
title and interest in the Trademark Registrations and the Trademark
Registrations are valid and in good standing; provided, however, that
MIL acknowledges that all products encompassed by the International
Classes listed on Exhibit A hereof are not necessarily included in the
---------
Trademark Registrations. Notwithstanding the foregoing, McGregor makes
no warranty as to the accuracy of the record owner and chain of title
information on file with the respective trademark registries.
McGregor's duty of cooperation after Closing under Paragraph 7.c.(xi)
hereof, however, includes cooperating, as is reasonably necessary, in
MIL's efforts to record itself as the new record owner of the
Trademark Registrations.
d. McGregor represents that there is no outstanding indebtedness incurred
by McGregor for which a valid lien or other security interest could be
filed against the Trademark Registrations in the respective trademark
registries. McGregor's duty of cooperation after Closing under
Paragraph 7.c.(xi) hereof, however, includes cooperating, as is
reasonably necessary, to obtain the release of any lien which may be
filed in the trademark registries with respect to the Trademark
Registrations securing indebtedness incurred by McGregor.
e. To the best of McGregor's knowledge, there is no past due fee or
payment owing in the respective trademark registries relating to the
Trademark Registrations. McGregor agrees, however, that should any
payment or fee incurred prior to the Effective Date become known to
McGregor or MIL, McGregor will pay such fee to the respective
trademark registry or to MIL as mutually agreed by the parties.
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<PAGE>
f. To the best of McGregor's knowledge, there are no pending infringement
actions against the Transferred Trademarks in the Territory, except as
set forth on Exhibit H attached hereto. For the purposes hereof,
---------
"pending" shall mean that such proceeding has been commenced with the
appropriate governmental body, all applicable parties to such
proceeding have been properly served, and such proceeding has not been
resolved. To the actual knowledge of the current officers, directors
and employees of McGregor, there are no threatened infringement
actions against the Transferred Trademarks in the Territory, except as
set forth on Exhibit H attached hereto, and there are not any known
---------
facts which would provide the basis for any infringement actions.
At Closing, McGregor shall deliver to MIL a certificate pursuant to which
McGregor shall reaffirm the foregoing representations and warranties as of
the Closing Date, provided that such certificate may reflect any changes to
the representations and warranties set forth in Paragraphs 9.c. through
9.f. of which McGregor has become aware prior to the Closing Date. During
the Option Term, MIL shall notify McGregor of any breach or violation of
the foregoing representations and warranties discovered by MIL, and
McGregor shall have the right to deliver to MIL supplemental statements to
the foregoing representations and warranties which McGregor has discovered
to date. With respect to representations and warranties set forth in
Paragraphs 9.c. through 9.f. hereof, MIL, its successors and assigns will
not hold McGregor liable, and McGregor shall not be liable, for any breach
or violation thereof unless MIL notifies McGregor in writing of such breach
or violation on or before August 31, 2002, and no suit based on such
representations and warranties shall be filed or otherwise commenced after
October 31, 2002.
10. MIL'S WARRANTIES. MIL represents and warrants to McGregor that as of the
Effective Date:
a. MIL is a corporation duly organized and in good standing under the
laws of the Netherlands. MIL has full right and authority to enter
into this Agreement and to consummate the transaction contemplated
hereby. All requisite corporate action has been taken by MIL in
connection with the entering into of this Agreement and the
instruments referenced herein and the consummation of the transaction
contemplated hereby. Each of the persons signing this Agreement on
behalf of MIL is duly authorized to do so.
b. All consents and approvals which may be required in order for MIL to
enter into this Agreement or consummate the transaction contemplated
hereby have been obtained. This Agreement and all documents required
hereby to be executed by MIL are and shall be valid, legally binding
obligations of and enforceable against MIL, its successors and assigns
in accordance with their terms. Neither the execution of this
Agreement nor the consummation of the transaction contemplated hereby
will be in violation of any judgment, order, permit, writ, injunction
or decree of any court, commission, bureau or agency to which MIL is
subject or by which MIL is bound, or constitute a breach or default
under any agreement or other obligation to which MIL is a party or
otherwise bound.
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<PAGE>
At Closing, MIL shall deliver to McGregor a certificate pursuant to
which MIL shall reaffirm the foregoing representations and warranties
as of the Closing Date.
11. CROSS DEFAULT. Concurrently herewith, MIL and McGregor have entered into
that certain Transitional Consulting Agreement, of even date, which provides,
among other things, for certain payments to McGregor in connection with the
trademarks purchased with respect to the MIL Territory. If MIL fails to make
any payments due to McGregor under the Transitional Consulting Agreement and
does not cure such failure within fifteen days after receipt of notice from
McGregor, McGregor, in addition to all other remedies available to it in law or
at equity, may terminate this Agreement.
12. MISCELLANEOUS.
a. This Agreement shall be governed by the substantive laws of the State
of New York, applicable to agreements fully executed and performed in
said state. With respect to any action commenced by McGregor against
MIL or by MIL against McGregor for any breach hereof or otherwise
commenced with respect hereof, each of the parties hereby irrevocably
and unconditionally submits to personal jurisdiction and venue in the
Federal courts in the Southern District of New York, New York and, if
the Federal court does not have subject matter jurisdiction over such
action or for any reason fails or refuses to accept or hear such
action, to personal jurisdiction and venue in the State courts in New
York, New York. Each of the parties agrees that it will not bring any
action in any other jurisdiction. The parties consent to service of
process by certified mail, return receipt requested. For the purposes
of this Paragraph 12, "final judgment" means a final judgment from
which no appeal or right of appeal exists in any U.S. Federal or New
York state court. A final judgment against a party in any such action
or proceeding shall be conclusive, and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of
which shall be conclusive evidence of the fact and the amount of
indebtedness or liability of or other remedy awarded against such
party therein described. In addition, a non-final judgment may be
enforced in other jurisdictions to the extent enforceable by law.
b. All notices, payments, and statements which are required or may be
given under this Agreement, shall be in writing, in the English
language, and either:
(i) personally delivered;
(ii) sent via certified airmail with a return receipt requested; or
(iii) sent via electronic means which produces a written record of
the notice given.
Notices shall be addressed as follows:
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<PAGE>
If to McGregor:
Global Licensing Company
Division of McGregor II, LLC
430 Park Avenue, 10th Floor
New York, New York 10022
Facsimile Number: (212) 307-8121
Attention: Executive Vice President of
Global Licensing Company
If to MIL:
Oyens Trust (Curacao) N.V.,
P.O. Box 4895
Curacao, Netherlands Antilles
Attention: Mrs. A.M.C. de Vreede
With a copy to:
Emergo Fashion Group B.V.
Hoofdstraat 23-25
3971 KA Driebergen-Rijsenburg
Netherlands
Facsimile Number: 31-3435-20701
Attention: President
Notices shall be effective upon receipt. Addresses and fax numbers
may be changed by giving notice in accordance with this Agreement.
c. This Agreement is personal to MIL. MIL shall have no power or
authority to assign, transfer, or encumber its interest in this
Agreement, whether voluntarily or by operation by law. Any attempted
assignment in violation of this Paragraph 12.c. shall be void.
McGregor may assign its rights and obligations under this Agreement
without obtaining the consent of Licensee.
d. If either party wishes to issue an official press release or other
formal public announcement to any public or trade media concerning the
contents or fact of this Agreement, then such party shall first
consult with the other party and both parties shall then cooperate to
specify and mutually agree upon the contents, time and place of such
press release or public announcement.
e. This Agreement contains the entire agreement of the parties hereto
respecting the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, communications and
discussions, whether oral or written, of the parties hereto,
pertaining to such subject matter. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless set
forth in writing and signed by the parties hereto.
f. This Agreement may be executed in counterparts, each of which (or any
combination of which) when signed and delivered by all of the parties
shall be deemed an original, but all of which when taken together
shall constitute one agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on October
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31, 1997, effective as of the Effective Date.
- ---
ATTEST: McGREGOR II, LLC
/s/ Gregory W. O'Connor By: /s/ Thomas R. Sandler
- ------------------------ ------------------------------
Asst Secretary Name: Thomas R. Sandler
Gregory W. O'Connor ----------------------------
Title: President
---------------------------
McGREGOR INTERNATIONAL LICENSING
N.V.
By: /s/ Mrs. A.M.C. de Vreede
- ------------------------ ------------------------------
Secretary Name: Oyens Trust (Curacao) N.V.
----------------------------
Title: Managing Director
---------------------------
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<PAGE>
EXHIBIT 10.4
------------
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), is
effective as of October 1, 1997 (the "Effective Date"), by and between SAMSONITE
CORPORATION, a Delaware corporation (the "Company"), and JOHN P. MURTAGH (the
"Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desired to retain the services of the Executive
to oversee the restructuring of the Company and to perform other related duties
and therefore entered into an Employment Agreement with Executive dated August
1, 1996, (the "Original Agreement") and
WHEREAS, this restructuring of the Company and other related duties
have been substantially completed, and
WHEREAS, the parties hereto mutually agree that the role of the
Executive will therefore change to reflect new duties and responsibilities for
the Company,
THEREFORE, in consideration of the foregoing and of the premises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that the Original Agreement is hereby
amended and restated to read in its entirety as follows:
1. EMPLOYMENT
----------
The Company agrees to employ the Executive and the Executive agrees to
serve the Company on the terms and conditions set forth herein.
2. TERM
----
This Agreement shall have a term (the "Term") beginning on the
Effective Date hereof and expiring on February 1, 1998.
3. POSITION AND DUTIES
-------------------
(a) The Executive shall serve as Vice President - Special Projects and
shall perform such duties and services prescribed herein and as may be
prescribed from time to time by the President and Chief Executive Officer (the
"CEO") and/or the Board of Directors of the Company or any duly authorized
committee thereof (the "Board"). The
<PAGE>
Executive shall perform such duties, under the supervision and direction of the
Board, to the best of his ability and in a diligent and proper manner. The
Executive shall report directly to the President and Chief Executive Officer.
(b) Nothing in this Agreement shall affect the Executive's duty of
loyalty and duty of care to the Company and its subsidiaries as provided under
applicable state laws.
4. COMPENSATION AND RELATED MATTERS
--------------------------------
(a) Salary. During the Executive's employment hereunder, the Company
------
shall pay to the Executive a salary ("Base Salary") in equal installments in
accordance with normal payroll practices of the Company but not less frequently
than monthly. The Base Salary shall be payable at the rate of $50,000 per
annum, starting as of the Effective Date, provided that if the Company requests
the Executive's services for more than five (5) days per month, the Executive
shall be compensated for those additional days in the amount of $900 per day.
The payments of Base Salary hereunder shall not in any way limit or reduce any
other obligation of the Company hereunder, and no other compensation, benefit or
payment hereunder shall in any way limit or reduce the obligation of the Company
to pay the Executive's Base Salary hereunder. The Board, at any time and from
time to time, may increase (but not reduce) the Base Salary payable under this
Agreement, and increase in the Base Salary shall become effective at the time
indicated by the Board without the need for an amendment to this Agreement.
(b) Relocation. The Company shall have no obligation to pay any
----------
relocation expenses for the Executive.
(c) Expenses. The Executive shall be entitled to receive prompt reim-
--------
bursement from the Company of all reasonable expenses incurred by the Executive
in performing services hereunder, in accordance with the policies and procedures
established by the Company from time to time. The Executive shall furnish the
Company with evidence that such expenses were incurred as the Company may from
time to time reasonably request.
(d) Other Benefits. The Executive shall be entitled to participate in
--------------
all of the Company's employee pension plans, welfare benefit plans, tax-deferred
savings plans, or other benefit arrangements (including any insurance or trust
arrangements maintained generally for the benefit of the Company's directors and
officers) and in which the senior executives of the Company who receive equity-
based compensation are entitled to participate (collectively, the "Company
Plans"), on the same basis as other senior executives of the Company who receive
equity-based compensation. Without limiting the generality of
2
<PAGE>
the foregoing, if the Board so determines, the Executive shall be entitled to
participate in any supplemental executive retirement plan or excess benefit plan
(a "SERP") that the Company may maintain from time to time for the benefit of
its senior executive officers who receive equity-based compensation provided
that Executive's participation shall be on the same terms and conditions as such
senior executives, all as determined by the Board. The Company and the Executive
agree that nothing in this Agreement shall preclude the Company from amending or
terminating any such employee benefit plan, policy or practice, whether now or
hereinafter in effect.
(e) Incentive Bonus. The Executive shall be eligible to receive an
---------------
annual incentive bonus (the "Incentive Bonus") in respect of the fiscal year
ending January 31, 1998. The Incentive Bonus shall be calculated on the terms
hereafter set forth in this Section 4(f). The Incentive Bonus may, subject to
the conditions set forth below, equal up to 100% of the Executive's Base Salary.
Except as provided in Section 4(f)(v) below, the Executive's Incentive Bonus
shall consist of a Target Bonus and a Project Bonus (each as defined below),
determined as follows:
(i) A portion of the Incentive Bonus (the "Target Bonus") in an
amount equal to one-half of the EBIT Attainment Percentage (as defined
below) multiplied by the Base Salary of the Executive shall be payable to
the Executive, provided that the Target Bonus shall not be paid if the EBIT
Attainment Percentage is less than eighty percent (80%). The "EBIT
Attainment Percentage" shall mean the percentage that is established as
follows: if the EBIT (as defined below) of the Company for the fiscal year
ending January 31, 1998 is
(A) less than the Minimum EBIT Target (as defined below), then
the EBIT Attainment Percentage shall equal zero percent (0%);
(B) equal to the Minimum EBIT Target, the EBIT Attainment Per-
centage shall equal eighty percent (80%);
(C) greater than the Minimum EBIT Target but less than the Annual
EBIT Target (as defined below), the EBIT Attainment Percentage shall
equal the sum of (x) eighty percent (80%) plus (y) the product of ten
percent (10%) multiplied by a fraction, the numerator of which shall
be the excess of (I) the EBIT of the Company over (II) the Minimum
EBIT Target and the denominator of which shall be the excess of the
Annual EBIT Target over the Minimum EBIT Target; or
(D) equal to or greater than the Annual EBIT Target, the EBIT At-
tainment Percentage shall equal ninety percent (90%).
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<PAGE>
(E) greater than the Annual EBIT Target but less than the Maximum
EBIT Target (as defined below), the EBIT Attainment Percentage shall
equal the sum of (x) ninety percent (90%) plus (y) the product of ten
percent (10%) multiplied by a fraction, the numerator of which shall
be the excess of (I) the EBIT of the Company over (II) the Annual EBIT
Target and the denominator of which shall be the excess of the Maximum
EBIT Target over the Annual EBIT Target; or
(F) equal to or greater than the Maximum EBIT Target, the EBIT
Attainment percentage shall equal one hundred percent (100%).
(ii) The Board shall determine the "Annual EBIT Target" and the
"Minimum EBIT Target", and the "Maximum EBIT Target" for the fiscal year
ending January 31, 1998, and promptly after such targets have been
determined, the Board shall give the Executive written notice thereof. The
Annual EBIT Target, Minimum EBIT Target, and Maximum EBIT Target determined
by the Board shall be reasonably achievable in the good faith judgment of
the Board. The Board shall have the right, acting unilaterally and in good
faith, to adjust the Annual EBIT Target, the Minimum EBIT Target,and the
Maximum EBIT Target upon the occurrence of any acquisition, disposition or
other significant event that occurs after such targets have been
determined. For purposes of this Section 4(f), "EBIT" shall mean the
Company's consolidated earnings (excluding extraordinary gains and losses
and gains or losses from the sale of fixed assets outside of the ordinary
course of business) from continuing operations before interest and taxes
for the fiscal year ending January 31, 1998, and EBIT shall be determined
on the same basis as the Annual EBIT Target, the Minimum EBIT Target, and
the Maximum EBIT Target. Notwithstanding the foregoing, EBIT shall be
equitably adjusted by the Board (solely for the purposes of Section
4(f)(i)) to the extent that the Company's business was not conducted in the
ordinary course in accordance with past practices.
(iii) A portion of the Incentive Bonus in a target amount equal to a
maximum of fifty percent (50%) of the Base Salary of the Executive (the
"Project Bonus") shall be payable to the Executive to the extent that the
Board determines that the Executive has satisfactorily completed certain
projects (the "Annual Projects") established by the Board in accordance
with this subparagraph (iii); provided that the Board may award a Project
Bonus between eighty percent (80%) and one hundred percent (100%)of the
target amount based upon its evaluation of the manner in which the
Executive completes the Annual Projects. The Company shall determine the
Annual Projects for the fiscal year ending January 31, 1998 and promptly
after such projects have been determined, the Board shall give the Execu-
tive written notice thereof. The Annual Projects determined by the Board
shall be
4
<PAGE>
reasonably achievable in the good faith judgment of the Board. The
Executive acknowledges that the Annual Projects established by the Board
may not be measured by financial results or other quantifiable standards
and may depend on subjective judgments by the Board, and the Executive
agrees that the determination of the Board as to the extent to which such
Annual Projects have been satisfactorily completed shall be conclusive for
all purposes, provided that such determination shall be made in good faith.
(iv) The Incentive Bonus (including the Target Bonus and the Project
Bonus) shall be paid not more than 30 days after a determination by the
Board that applicable performance goals have been met, and such
determination shall be made not later than 10 days following the filing of
a Form 10-K for the Company, or if the Company is not required to file a
Form 10-K, not later than 10 days following the date upon which the
Company's audited financial statements first become available.
(A) Vacation and Other Absences. Executive shall not receive any
---------------------------
paid vacation days.
(B) Services Furnished. The Company shall have no obligation to
------------------
provide the Executive with office space or secretarial assistance or other
services.
5. 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. If the Board determines in good faith, based on
----------
medical evidence acceptable to it, that the Executive has become physically or
mentally disabled or incapacitated during his employment hereunder for a
continuous period of ninety (90) days to such an extent that he shall be unable
to perform his duties hereunder then, notwithstanding the provisions of
Section 2, the Company may, after the expiration of said ninety (90) day period
and during the continuance of such disability or incapacity, give to the
Executive a Notice of Termination (as defined in Section 5(e) hereof) of the
Executive's employment hereunder and such employment shall terminate on the date
provided in Section 5(f) hereof.
5
<PAGE>
(c) Termination by the Company. The Company may terminate the
--------------------------
Executive's employment hereunder at any time with or without Cause. For
purposes of this Agreement, the Company shall have "Cause" to terminate the
Executive's employment hereunder upon (A) the engaging by the Executive in
willful misconduct that is materially injurious to the Company, (B) the
embezzlement or misappropriation of funds or property of the Company by the
Executive or the conviction of the Executive of a felony or the entrance of a
plea of guilty by the Executive to a felony or (C) the failure or refusal by the
Executive to devote his full business time and attention (as described in
Section 3(b) of this Agreement) to the performance of his duties and
responsibilities hereunder or any other breach by the Executive of this
Agreement in any material respect if such breach has not been cured by the
Executive within thirty (30) days after the Preliminary Notice (as defined
below) has been given to the Executive. For purposes of this paragraph, no act,
or failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company. The
Executive shall not be deemed to have been terminated for Cause, unless the
Company shall have given the Executive (i) notice (the "Preliminary Notice")
setting forth, in reasonable detail the facts and circumstances claimed to
provide a basis for termination for Cause, (ii) a reasonable opportunity for the
Executive, together with his counsel, to be heard before the Board and (iii) a
Notice of Termination stating that, in the good faith judgement of the Board,
the Executive was guilty of conduct set forth in clauses (A), (B) or (C) above,
and specifying the particulars thereof in reasonable detail. Upon receipt of
the Preliminary Notice, the Executive shall have thirty (30) days in which to
appear before the Board with counsel, or take such other action as he may deem
appropriate, and such thirty (30) day period is hereby agreed to as a reasonable
opportunity for the Executive to be heard.
(d) Termination by the Executive. The Executive may voluntarily
----------------------------
terminate his employment hereunder at any time with or without Good Reason. For
purposes of this Agreement, "Good Reason" shall mean, so long as the Executive
has not been guilty of the conduct set forth in clauses (A), (B) or (C) of
Section 5(c) hereof, (i) a failure by the Company to comply with any material
provision of this Agreement that has not been cured within thirty (30) days
after written notice of such noncompliance has been given by the Executive to
the Company or (ii) the assignment to the Executive by the Company (without the
consent of the Executive) of duties inconsistent with the Executive's position,
duties or responsibilities as Vice President-Special Projects, including, but
not limited to, any material reduction in such position, duties or
responsibilities or material change in his title. The Executive's election to
terminate under this Section 5(d) shall be made by giving Notice of Termination
not later than 60 days from, as applicable, the date that the Company fails to
cure under (i) above, or the assignment of duties under (ii) above.
6
<PAGE>
(e) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than termination pursuant
to Section 5(a) hereof) shall be communicated by written Notice of Termination
to the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances, if any, claimed to provide a basis for termination
of the Executive's employment under the provision so indicated.
(f) Date of Termination. Except to the extent otherwise herein pro-
-------------------
vided, "Date of Termination" shall mean (i) if the Executive's employment is
terminated pursuant to Section 5(a), the date of his death, (ii) if the
Executive's employment is terminated pursuant to Section 5(b) or (c), the date
of or a later date specified in the Notice of Termination, (iii) if the
Executive's employment is terminated pursuant to Section 5(d), the date on which
the Notice of Termination is given and (iv) if this Agreement is continued in
effect to the end of the Term, the last day of the Term. Except as provided in
and subject to Section 6 hereof, the Company shall not have any obligation to
Executive for salary continuation, severance or termination pay upon termination
of this Agreement.
6. COMPENSATION UPON TERMINATION
-----------------------------
(a) If the Executive's employment is terminated (i) by the Company
for Cause, (ii) by the Executive other than for Good Reason, or (iii) by reason
of the Executive's death or disability (pursuant to Section 5(b) hereof), then
the Company shall pay the Executive his full Base Salary through the Date of
Termination (to the extent not otherwise paid through the Date of Termination)
at the rate in effect immediately prior to the Date of Termination, provided
that if the Executive's employment hereunder terminates by reason of his death,
the Company shall continue to make salary payments at the rate of the Base
Salary then in effect in respect of the month following the date of death. In
addition, notwithstanding any provision to the contrary in this Agreement, the
Executive shall continue to participate in, and shall receive all accrued
benefits to which the Executive is entitled under, all of the Company Plans,
through the Date of Termination, provided that the Executive shall not be
entitled to any portion of the Incentive Bonus unless such bonus shall be
payable pursuant to Section 4(f) on or before the Date of Termination. With
respect to the Incentive Bonus, if the Date of Termination occurs after the end
of the Fiscal Year and prior to the determination of whether the performance
goals for the Fiscal Year were met, such Incentive Bonus shall be payable, if it
is determined that such goals were met, in accordance with the provisions of
Section 4(f) hereof.
(b) If the Executive's employment is terminated (i) by the Company
without Cause (other than for disability pursuant to Section 5(b) hereof), or
(ii) by the Executive for Good Reason, then the Company shall pay to the
Executive, as severance pay
7
<PAGE>
in a lump sum, not later than the fifth day following the Date of Termination,
to the extent not otherwise paid through the Date of Termination, the
Executive's full Base Salary through the Date of Termination.
In addition to the foregoing, until such time as the Executive becomes eligible
for coverage under a program maintained or sponsored by a subsequent employer of
the Executive (not including self-employment), the Company shall, at the
Company's expense, allow the Executive to continue to participate, for the
remainder of the Term, to the same extent and upon the same terms as the
Executive participated in such plans immediately prior to the termination of his
employment, in the Company's medical reimbursement and other welfare benefit
plans in which the Executive was entitled to participate immediately prior to
the Date of Termination; provided that the Executive's continued participation
in such plan shall be continued pursuant to this sentence only to the extent
permissible under the general terms and provisions of such plans and applicable
law.
7. LEGAL FEES; REIMBURSEMENT OF CERTAIN EXPENSES
---------------------------------------------
The Company shall promptly reimburse the Executive for the reasonable
legal fees and expenses incurred by the Executive in connection with enforcing
or defending any right or benefit of the Executive pursuant to this Agreement
or instruments related thereto; provided that the Company shall have no
obligation to reimburse the Executive for any such fees and expenses unless the
resolution of any action taken by the Executive to enforce such right is in
favor of the Executive. In addition, the Company hereby agrees that the amount
of any such legal fees and expenses reimbursed to the Executive in connection
with enforcing any right or benefit provided to the Executive by the Company
pursuant to or in accordance with this Agreement shall not be taken into account
by the Company in determining the aggregate compensation paid or payable to the
Executive under this Agreement.
8. INDEMNIFICATION
---------------
The Company shall indemnify the Executive (and his legal
representatives), unless expressly prohibited by applicable law, against all
losses, claims, damages, liabilities, costs, charges and expenses incurred or
sustained by him or his legal representatives in connection with any action,
suit or proceeding to which he (or his legal representatives) may be made a
party by reason of his being or having been a director, officer or employee of
the Company (including payment of expenses in advance of the final disposition
of the proceeding). The Company further agrees, upon demand by the Executive,
promptly to reimburse the Executive for, or pay, any loss, claim, damage,
liability or expense, unless expressly prohibited by applicable law, to which
the Company has agreed to indemnify the Executive pursuant to Sections 7 and 8
hereof. If any action, suit or proceeding is brought
8
<PAGE>
or threatened against the Executive in respect of which indemnity may be sought
against the Company pursuant to the foregoing, the Executive shall notify the
Company promptly in writing of the institution of such action, suit or
proceeding. Such action, suit or proceeding shall be defended by and be under
the exclusive control of the Company and its counsel; except that the Executive
shall have the right to designate separate counsel, acceptable to the Executive
in his sole discretion, and, to the extent of a conflict of interest with the
Company, the right to direct, control and supervise the Executive's defense of
such action, suit or proceeding.
9. TAXES
-----
The Company shall deduct from all amounts payable under this Agreement
all federal, state, local and other taxes required by law to be withheld with
respect to such payments.
10. CONFIDENTIALITY AND NONCOMPETITION
----------------------------------
(a) Unless otherwise required by law or judicial process, the
Executive shall keep confidential all confidential information known to the
Executive concerning the Company and its businesses during his employment with
the Company and for the shorter of three (3) years following the termination of
the Executive's employment with the Company or until such information is
publicly disclosed by the Company or otherwise becomes publicly disclosed other
than through the Executive's actions; provided, that the Executive shall provide
notice to the Company in advance of any disclosure required by law or judicial
process in a timely manner to permit the Company to oppose such compelled
disclosure.
(b) The Executive agrees that during his employment with the Company
and for a period of one (1) year thereafter (unless such employment is
terminated by the Company pursuant to Section 5(c) without Cause or by the
Executive pursuant to Section 5(d) with Good Reason, provided that the Company
does not contest that such termination was for Good Reason), he shall not,
directly or indirectly, as a principal, officer, director, employee or in any
other capacity whatsoever, without the prior written consent of the Company,
engage in, or be or become interested or acquire any ownership of any kind in,
or become associated with, or make loans or advance property to any person
engaged in or about to engage in, any business activity that is in substantial
competition (in excess of 15% of net sales of the business) with any of the
businesses engaged in by the Company during the Term in any of the geographic
areas in which such businesses are then conducted by the Company or have been
conducted by the Company during the twelve months preceding the termination of
the Executive's employment. Nothing in this Agreement shall prevent the
Executive from making or holding any investment in any amount in securities
9
<PAGE>
traded on any national securities exchange or traded in the over the counter
market, provided said investments do not exceed one percent (1%) of the issued
and outstanding stock of any one such corporation.
11. SUCCESSORS; BINDING AGREEMENT
-----------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any successor of the Company, including, without limitation, any
corporation or corporations acquiring directly or indirectly all or a
substantial portion of the stock, business or assets of the Company, whether by
merger, consolidation, sale or otherwise (and such successor shall thereafter be
deemed the "Company" for the purposes of this Agreement).
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amounts would be
still payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided hereunder, shall be paid in accordance with the terms
of this Agreement to the Executive's devisee, legatee, or other beneficiary or,
if there be no such beneficiary, to the Executive's estate.
12. NOTICE
------
For purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given (i) when hand delivered, (ii) when sent if sent
by overnight mail, overnight courier or facsimile transmission or (iii) when
mailed by United States certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
-------------------
John P. Murtagh
3511 Northwest 61st Circle
Boca Raton, FL 33496
If to the Company:
-----------------
Samsonite Corporation
11200 East Forty-Fifth Avenue
Denver, Colorado 80239
Attention: Board of Directors
10
<PAGE>
c/o Corporate Secretary
(with a copy to the attention of General
Counsel at the same address)
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
13. SURVIVORSHIP
------------
The respective rights and obligations of the parties hereunder set
forth in Sections 6, 7, 8, 9, and 10 of this Agreement shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.
14. REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants that (a) it is fully authorized
and empowered to enter into this Agreement and that its Board has approved the
terms of this Agreement, (b) the execution of this Agreement and the performance
of its obligations under this Agreement shall not violate or result in a breach
of the terms of any material agreement to which the Company is a party or by
which it is bound, (c) no approval by any governmental authority or body is
required for it to enter into this Agreement, and (d) this Agreement is valid,
binding and enforceable against the Company in accordance with its terms, except
to the extent affected or limited by applicable bankruptcy laws or other
statutes governing the rights of creditors generally and any regulations or
interpretations thereof. The Executive represents and warrants that his
execution of this Agreement and his performance of his duties and
responsibilities under this Agreement shall not violate or result in a breach of
the terms of any material agreement to which he is a party or by which he is
bound.
15. MISCELLANEOUS
-------------
(a) Entire Agreement. The parties hereto agree that this Agreement
----------------
and the Amended and Restated Stock Option Agreement dated October 1, 1997
contain the entire understanding and agreement between them, and supersede all
prior understandings and agreements between the parties respecting the
employment by the Company of the Executive, including the Employment Agreement
effective as of August 1, 1996, by and between Samsonite Corporation and John P.
Murtagh and the Stock Option Agreement of the same date, and that the provisions
of this Agreement may not be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the parties hereto.
No waiver by either party hereto at any time of any breach by the other
11
<PAGE>
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
(b) Waiver. No waiver by either party hereto at any time of any
------
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
(c) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of New
York without giving effect to the conflict of laws principles thereof.
16. VALIDITY
--------
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision or provisions of this Agreement, which shall remain in full force
and effect.
17. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused its name to be subscribed
to this Agreement by its duly authorized representative and the Executive has
executed this Agreement as of the date and the year first above written.
SAMSONITE CORPORATION
By: /s/ Richard R. Nicolosi
--------------------------------
Print Name: Richard R. Nicolosi
------------------------
Title: President & CEO
-----------------------------
12
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/s/ John P. Murtagh
--------------------------------------
John P. Murtagh
13
<PAGE>
EXHIBIT 10.5
------------
AMENDED AND RESTATED STOCK OPTION AGREEMENT
-------------------------------------------
THIS AMENDED AND RESTATED AGREEMENT ("Agreement"), dated as of the 1st
day of October, 1997, by and between SAMSONITE CORPORATION, a Delaware
corporation (the "Company"), and John P. Murtagh (the "Employee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, as an essential inducement to the Employee entering into the
Employment Agreement (the "Employment Agreement"), dated as of August 1, 1996,
by and between the Company and the Employee, the Company granted to the Employee
a right to acquire shares of common stock, par value $.01 per share ("Common
Stock"), of the Company according to the terms and conditions contained in a
Stock Option Agreement, dated as of August 1, 1996 (the "Original Agreement")
and to provide additional incentives to the Employee to increase the long-term
value of the Company and further align his interests with those of the
stockholders of the Company; and
WHEREAS, the Employment Agreement is being amended as of October 1,
1997 to amend the Employee's duties and compensation, among other changes;
NOW, THEREFORE, in consideration of the premises and covenants herein
set forth and other good and valuable consideration, the Company and the
Employee hereby agree that the Original Agreement is hereby amended and restated
to read in its entirety as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by
-------------------------------
the Compensation Committee (the "Committee") of the Board of Directors of the
Company on August 1, 1996, and pursuant to the Company's 1995 Stock Option and
Incentive Award Plan (as Amended in 1996) (the "Plan"), the Company, subject to
the terms and conditions of this Agreement, hereby confirms that the Employee
has been granted, effective August 1, 1996 (the "Date of Grant"), as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase from the Company an
aggregate of 100,000 shares of Common Stock (the "Options"). The Options shall
vest as provided in Section 4 hereof and shall be subject to adjustment as
provided in Section 6 hereof. The Options shall constitute Nonqualified Stock
Options under the Plan.
2. Exercise Price. The initial exercise price per share (the
--------------
"Exercise Price") for the Options shall be $18.250.
1
<PAGE>
3. Non-transferability of Options. The Options may not be assigned,
------------------------------
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process otherwise than by
will or by the laws of descent and distribution, and the Options may be
exercised during the lifetime of the Employee only by him.
4. Term and Exercise of Options. The Options shall remain
----------------------------
outstanding (subject to the vesting and exercisability provisions provided
herein) during a period of six (6) years beginning on the Date of Grant (the
"Option Term"). One-half (1/2) of Options shall vest on January 31, 1997 and
one-half shall vest on January 31, 1998, so long as the Emplo yee remains
continually employed by the Company from the date hereof through such date of
vesting. Except as otherwise provided in Section 5 hereof, Options that have
vested shall remain exercisable in whole at any time or in part and from time to
time until the earlier to occur of the expiration of the Option Term and the
expiration of one year after the date of the termination of the Employee's
employment with the Company. The Employee shall not have any rights to
dividends or any other rights of a stockholder of the Company with respect to
any shares of Common Stock underlying the Options until such shares have been
issued to him upon the exercise of the Options.
(a) Accelerated Vesting of Options. Notwithstanding any provision
------------------------------
hereof to the contrary, if a Change of Control (as defined below) occurs at any
time prior to February 1, 1998, then, as of the Change of Control Date (as
defined below), all of the unvested Options shall become vested.
(b) Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following meanings:
"Change of Control Date." "Change of Control Date" means the date on
----------------------
which a Change of Control occurs.
"Change of Control." "Change of Control" means (i) any sale, transfer
-----------------
or other conveyance (whether directly, or indirectly through a merger,
consolidation or similar transaction), or series of related sales, transfers or
other conveyances, of the outstanding capital stock of the Company pursuant to
which any person (or group of affiliated persons) other than an Excluded Person,
becomes the beneficial owner of more than 50% of the outstanding Common Stock or
(ii) any sale, transferor other conveyance of all or substantially all of the
Company's assets to any person (or group of affiliated persons) other than to an
Excluded Person. For purposes of the foregoing definition, "Excluded Person"
means and includes (A) Apollo Investment Fund, L.P. ("Apollo"), any of its
affiliates, and, so long as Apollo or an affiliate of Apollo controls the right
to vote the securities in question, any partner, shareholder or trustee of any
of them, (B) any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company and (C) the Company or any subsidiary of the Company.
2
<PAGE>
5. Termination. The Employee's rights with respect to the Options
-----------
upon death or the termination of his employment with the Company are as follows:
(a) Cause. If the Employee is terminated from his employment with
-----
the Company for Cause (as defined in Employment Agreement) in accordance with
Section 5(c) of the Employment Agreement, then all the Options (whether vested
or unvested) shall automatically terminate and be cancelled (without any action
on the part of the Company) on the date upon which Preliminary Notice is given
to the Employee pursuant to Section 5(c) of the Employment Agreement, provided
that the Employee's employment is thereafter terminated in accordance with the
provisions of Section 5(c) of the Employment Agreement.
(b) Disability. If the Employee is terminated from his employment
----------
with the Company by reason of disability in accordance with Section 5(b) of the
Employment Agreement, then all unvested Options shall automatically terminate
and be cancelled (without any action on the part of the Company) on the
effective date of such termination. All Options that have vested prior to such
date shall remain exercisable until the earlier to occur of (i) the first
anniversary of such date and (ii) the expiration of the Option Term.
(c) Death. If the Employee dies while employed by the Company, then
-----
all unvested Options shall automatically terminate and be cancelled (without any
action on the part of the Company) on the date of death. Following the
Employee's death, his executors, administrators, legatees or distributees may
exercise the Options that have vested prior to the date of death until the
earlier to occur of (i) the first anniversary of such date and (ii) the
expiration of the Option Term.
(d) Other Terminations of Employment.
--------------------------------
(i) If the Employee's employment is terminated by the Employee
other than for Good Reason (as defined in the Employment Agreement), then all
unvested Options shall automatically terminate and be cancelled (without any
action on the part of the Company) on the date of such termination. All Options
that have vested prior to such date shall remain exercisable until the earlier
to occur of (A) the ninetieth day following such date and (B) the expiration of
the Option Term.
(ii) If Employee's employment is terminated (A) other than for a
reason described in paragraphs (a), (b) or (c) above, or (B) by the Employee
validly for Good Reason and pursuant to Section 5(d) of the Employment
Agreement, then, as of the date of such termination, all the Options that have
not become vested on or prior to the date of such termination shall become
vested as of such date. All Options that have vested on or prior to such date
shall remain exercisable until the earliest to occur of (C) the ninetieth day
following such date and (D) the expiration of the Option Term.
3
<PAGE>
(e) Termination Date. For purposes of Sections 5(a), (b), (d) and
(f) hereof, the date of termination of the Employee's employment shall be the
Date of Termination (as defined in the Employment Agreement).
(f) Extension After Certain Terminations. If the Employee's
------------------------------------
employment with the Company is terminated other than for a reason described in
paragraph (a), (b), (c) or (d)(i) above, and the Employee dies or becomes
disabled within ninety (90) days after such termination of employment, then the
Employee's executors, administrators, legatees or distributees may exercise the
Options, to the extent vested and exercisable as of the Date of Termination
until the earlier to occur of (i) the first anniversary of the date of death or
disability and (ii) the expiration of the Option Term.
6. Certain Adjustments. The number and kind of securities that may
-------------------
be purchased upon the exercise of the Options and the Exercise Price shall be
subject to adjustment from time to time upon the occurrence of any of the
following events after the date hereof:
(a) Recapitalization, Capital Reorganization, Reclassification,
-----------------------------------------------------------
Consolidation, Merger or Sale. In case of any recapitalization or capital
- -----------------------------
reorganization of the Company or any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and that does not result in any reclassification of
or change in the outstanding Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination)), or in case of any sale or transfer
to another corporation of the property of the Company as an entirety or
substantially as an entirety, the Employee shall thereafter have the right to
acquire upon exercise of the Options, in lieu of each share of Common Stock
theretofore issuable upon exercise of the Options, the kind and amount of
shares of capital stock, other securities, money and/or property receivable in
respect of each share of Common Stock upon such recapitalization,
reorganization, reclassification, consolidation, merger, sale or transfer. The
provisions of this paragraph (a) shall similarly apply to successive
recapitalizations, reorganizations, reclassifications, consolidations,
mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company shall
------------------------------------
subdivide or combine its outstanding shares of Common Stock, (i) in case of
subdivision of shares, the Exercise Price shall be proportionately reduced (as
at the effective date of such subdivision or, if the Company shall take a record
of holders of its Common Stock for the purpose of so subdividing, as at the
applicable record date, whichever is earlier) to reflect the increase in the
total number of shares of Common Stock outstanding as a result of such
subdivision, or (ii) in the case of a combination of shares, the Exercise Price
shall be proportionately increased (as at the effective date of such combination
or, if the Company shall take a record of holders of
4
<PAGE>
its Common Stock for the purpose of so combining, as at the applicable record
date, whichever is earlier) to reflect the reduction in the total number of
shares of Common Stock outstanding as a result of such combination. In the event
that an adjustment pursuant to this paragraph (b) is made as of the record date
for purposes of any subdivision or combination and such subdivision or
combination is not so made, the Exercise Price shall again be adjusted to be the
Exercise Price that would then be in effect if such record date had not been
fixed.
(c) Certain Dividends and Distributions. If the Company shall pay a
-----------------------------------
dividend on, or make any other distribution to the holders of, its outstanding
Common Stock in shares of its Common Stock, the Exercise Price shall be
adjusted, as of the date the Company shall take a record of the holders of
Common Stock for the purpose of receiving such dividend or other distribution
(or if no such record is taken, as of the date of such payment or other
distribution), to that price determined by multiplying the Exercise Price in
effect immediately prior to such record date (or if no such record is taken,
immediately prior to such payment or other distribution), by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; provided, that if
--------
the foregoing adjustment is made to the Exercise Price as of a record date for
such dividend or other distribution and such dividend or distribution is not so
paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price that would then be in effect if such record date had not been fixed.
(d) Adjustment Number of Shares. Upon each adjustment and
---------------------------
readjustment of the Exercise Price pursuant to paragraph (b) or (c) of this
Section 6, the number of shares of Common Stock then issuable upon exercise of
the Options shall be adjusted, to the nearest 1/10th of a whole share, to the
product obtained by multiplying such number of shares issuable upon exercise of
the Options immediately prior to such adjustment in the Exercise Price by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment and the denominator of which shall be the Exercise Price
immediately thereafter.
7. Method of Exercise of Options. (a) Subject to the terms and
-----------------------------
conditions of this Agreement, the Options shall be exercisable by notice (an
"Exercise Notice") and payment to the Company in accordance with the procedure
prescribed herein; provided, that the aggregate Exercise Price with respect to
--------
any one such exercise shall not be less than $100,000 unless such exercise
represents an exercise of all Options that are vested and exercisable as of the
date of such exercise. If the Employee fails to accept delivery of and pay for
all or any part of the number of shares specified in the Exercise Notice upon
tender or delivery thereof, his right to exercise the Options with respect to
such undelivered shares may be terminated in the sole discretion of the Board or
the Committee.
5
<PAGE>
(b) Each Exercise Notice shall: (i) state the number of shares in
respect of which they are being exercised, (ii) be accompanied by payment as
provided in paragraph (c) below, and (iii) be signed by the person or persons
entitled to exercise such Options. If such Options are being exercised by any
person or persons other than the Employee, the Exercise Notice shall be
accompanied by proof, satisfactory to the Company and its counsel, of the right
of such person or persons to exercise such Options.
(c) Subject to Section 11 hereof, payment of the Exercise Price shall
be made by delivering to the Company any one or a combination of the following:
(i) a certified or bank cashier's check payable to the Company or its order or a
wire transfer directly to an account specified by the Company, (ii) one or more
certificates evidencing shares of Common Stock owned by the Employee immediately
prior to such exercise, together with a duly executed stock power, having an
aggregate Fair Market Value (as defined below) on the date on which the Exercise
Notice is given equal to the aggregate Exercise Price or (iii) a copy of
irrevocable instructions to a registered broker/dealer to deliver promptly to
the Company an amount of proceeds from the sale of shares of Common Stock to be
issued pursuant to the Options being exercised or of a loan made with respect to
shares of Common Stock to be issued pursuant to the Options being exercised
sufficient, in either case, to pay the Exercise Price.
(d) The certificate or certificates representing shares of Common
Stock to be issued upon exercise of the Options shall be registered in the name
of the person or persons exercising such Options (or, if such Options are
exercised by the Employee and if the Employee so requests in the applicable
Exercise Notice, shall be registered in the name of the Employee and his spouse
jointly, with right of survivorship) but only upon compliance with all the
provisions of this Agreement, and such certificate or certificates shall be
delivered within 10 days after receipt of payment and completion of such
compliance by the Employee; provided, that in the case of clause (iii) of the
--------
first sentence of Section 7(c), the Company shall not be required to make
delivery of the certificate or certificates until payment is actually received
from such broker/dealer.
(e) The Company shall have no obligation to issue or deliver
fractional shares of Common Stock upon exercise of the Options but may, in its
sole discretion, elect to do so. In lieu of issuing any such fractional share
the Company shall pay to the person exercising the Options, promptly following
such exercise, an amount in cash equal to the Fair Market Value, as of the date
of exercise, of such fraction of a share. The "Fair Market Value" per share of
Common Stock as of any date of determination, shall mean (i) the closing sales
price per share of Common Stock, on the national securities exchange on which
such stock is principally traded, on the next preceding date on which there was
a sale of such stock on such exchange, or (ii) if the shares of Common Stock are
not listed or admitted to trading on any such exchange, the closing price as
reported by the NASDAQ Stock Market for the last preceding date on which there
was a sale of such stock on such exchange, or (iii) if the shares of Common
Stock are not then listed on a national securities exchange or on the NASDAQ
6
<PAGE>
Stock Market, the average of the highest reported bid and lowest reported asked
prices for the shares of Common Stock as reported by the National Association of
Securities Dealers, Inc. Automated Quotations ("NASDAQ") system for the last
preceding date on which such bid and asked prices were reported, or (iv) if the
shares of Common Stock are not then listed on any securities exchange or prices
therefor are not then quoted in the NASDAQ system, such value as determined in
good faith by the Board (or any duly authorized committee thereof).
8. No Right To Continued Employment. Nothing in this Agreement
--------------------------------
shall confer upon the Employee the right to continue in the employ of the
Company or to be entitled to any right or benefit not set forth in this
Agreement or to interfere with or limit in any way the right of the Company to
terminate the Employee's employment.
9. Withholding Taxes. The Company shall have the right to require
-----------------
the Employee (or such other person, if any, who has the right to exercise the
Options) to pay to the Company in cash the amount of any federal, state, local
and foreign income and other taxes that the Company may be required to withhold
before delivering to the Employee (or such other person) a certificate or
certificates representing shares of Common Stock issuable hereunder.
Notwithstanding the foregoing sentence, subject to Section 11 hereof, the
Employee may elect to cause Common Stock issuable upon the exercise of any of
the Options, having a Fair Market Value on the day immediately preceding the
date on which such certificates are delivered equal to the amount of such
withholding obligation, to be withheld by the Company in satisfaction of such
obligation.
10. Approval of Counsel. Any exercise of the Options and the
-------------------
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, the requirements of
any stock exchange upon which the Common Stock may then be listed and any
applicable state securities or "blue sky" laws.
11. Resale of Common Stock. Upon any sale or transfer of the Common
----------------------
Stock purchased upon exercise of the Options, the Employee shall deliver to the
Company an opinion of counsel satisfactory to the Company to the effect that
either (a) the sale of the Common Stock to be so sold or transferred has been
registered under the Securities Act or (b) such Common Stock may then be sold
without registration under the Securities Act and applicable state securities
laws.
The certificates evidencing the shares of Common Stock issued upon
exercise of the Options shall bear a legend to the following effect (unless the
Company requires otherwise):
7
<PAGE>
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS, IN THE OPINION OF COUNSEL
FOR THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
12. Registration Rights. The Company has filed a registration
-------------------
statement on Form S-8 registering the Common Stock underlying the Options, in
order to permit the public resale thereof by the Employee. The Company's
obligation to maintain such registration shall apply only to the extent that an
effective registration statement is then required for the public sale by the
Employee of the Common Stock underlying the Options.
13. Notices. For the purposes of this Agreement, notices, demands
-------
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given (i) when hand delivered, (ii) when
sent if sent by overnight mail, overnight courier or facsimile transmission or
(iii) (unless otherwise specified) when mailed by United States registered mail,
return receipt requested, postage prepaid, addressed as follows:
Samsonite Corporation
11200 East Forty-Fifth Avenue
Denver, Colorado 80239-3018
Attention: Board of Directors
c/o Corporate Secretary
with a copy to each member of the Committee who is not an officer or an employee
of the Company at the address specified by each such director to which notice of
meetings of the Board of Directors is to be sent or to such other address as any
party may have furnished to the others in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
All notices to the Employee or other person or persons then entitled
to exercise the Options shall be addressed to the Employee or such other person
or persons at the then current address of the Employee contained in the employee
payroll records of the Company.
Anyone to whom a notice may be given under this Agreement may
designate a new address by notice to that effect.
14. Benefits of Agreement. This Agreement shall inure to the benefit
---------------------
of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee and, to the limited
extent set forth herein, the Employee's heirs,
8
<PAGE>
legal representatives and successors. No other person shall have any rights
under this Agreement.
15. Severability. In the event that any one or more provisions of
------------
this Agreement shall be deemed to be illegal or unenforceable, such illegality
or unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions herein, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
16. Entire Agreement. The parties hereto agree that this Agreement
----------------
contains the entire understanding and agreement between them, and supersedes
all prior understandings and agreements between the parties respecting the
subject matter hereof, and that the provisions of this Agreement may not be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the parties hereto. The parties acknowledge and
agree that the Original Agreement is null and void and of no further effect as
of the Effective Date hereof.
17. Waiver. No waiver by either party hereto at any time of any
------
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
18. Governing Law. This Agreement shall be construed and governed in
-------------
accordance with the laws of the State of New York, without regard to the
conflicts of law principles thereof.
19. Incorporation by Reference. The incorporation herein of any
--------------------------
terms by reference to another document shall not be affected by the termination
of any agreement set forth in such other document or the invalidity of any
provision thereof.
20. Time Periods. Any action required to be taken under this
------------
Agreement within a certain number of days shall be taken within that number of
calendar days; provided, that if the last day for taking such action falls on a
--------
weekend or a holiday, the period during which such action may be taken shall be
automatically extended to the next business day.
21. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an authorized officer and the Employee has hereunto set his hand all
as of the day, month and year first above written.
9
<PAGE>
SAMSONITE CORPORATION Employee:
By: /s/ R. R. Nicolosi /s/ John P. Murtagh
--------------------- ----------------------
Name: John P.Murtagh
Title:
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED OCTOBER
31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 15,766
<SECURITIES> 0
<RECEIVABLES> 136,743
<ALLOWANCES> 9,925
<INVENTORY> 153,864
<CURRENT-ASSETS> 367,166
<PP&E> 202,654
<DEPRECIATION> (60,900)
<TOTAL-ASSETS> 643,705
<CURRENT-LIABILITIES> 156,676
<BONDS> 180,996
0
0
<COMMON> 204
<OTHER-SE> 204,526
<TOTAL-LIABILITY-AND-EQUITY> 643,705
<SALES> 560,210
<TOTAL-REVENUES> 560,210
<CGS> 321,855
<TOTAL-COSTS> 321,855
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,820
<INTEREST-EXPENSE> 15,777
<INCOME-PRETAX> 75,494
<INCOME-TAX> 22,578
<INCOME-CONTINUING> 52,309
<DISCONTINUED> 0
<EXTRAORDINARY> (16,187)
<CHANGES> 0
<NET-INCOME> 36,122
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.71
</TABLE>
