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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1996
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 no. 1-5354
SWANK, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 04-1886990
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Hazel Street, Attleboro, Massachusetts 02703
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 222-3400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10
par value
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S- K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE>
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on March 6, 1997 was $3,793,341. Such aggregate
market value is computed by reference to the last sale price of the Common Stock
on such date.
The number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 16,509,523 shares of Common
Stock as of the close of business on March 13, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended December 31,1996 - Incorporated by reference into Part II of
this Form 10-K.
Portions of the Registrant's Proxy Statement relating to the Registrant's
1997 Annual Meeting of Stockholders - Incorporated by reference into Part
III of this Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS.
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Swank, Inc. (the "Company") was incorporated on April 17, 1936. The Company
is engaged in the manufacture, sale and distribution of men's and women's
fashion accessories under the names "Swank", "L'Aiglon", "Pierre Cardin",
"Geoffrey Beene", "Yves Saint Laurent", "Kenneth Cole", "Anne Klein", "Anne
Klein II", "Guess?" and "Colours by Alexander Julian", among others.
Products
- --------
The Company's principal product categories are described below:
Men's jewelry consists principally of cuff links, tie klips, chains and
tacs, bracelets, neck chains, vest chains, collar pins, key rings, money klips
and watches distributed under the names "Swank", "Guess?", "Pierre Cardin",
"Geoffrey Beene", "Yves Saint Laurent", "Kenneth Cole", "Colours by Alexander
Julian" and "L'Aiglon". Women's jewelry consists principally of necklaces,
earrings, pendants, chokers, bracelets, hair ornaments and scarf clips
distributed under the names "Anne Klein" and "Anne Klein II", "Pierre Cardin",
and "Guess?". The Company also manufactures women's jewelry (principally
necklaces, brooches, hair accessories and earrings) for private label
distribution.
Leather accessories consist primarily of belts, billfolds, wallets, key
cases, card holders and suspenders distributed under the names "Swank",
"Guess?", "L'Aiglon", "Pierre Cardin", "Geoffrey Beene", "Yves Saint Laurent",
and "Colours by Alexander Julian". The Company also manufactures leather items
for private label distribution.
As is customary in the fashion accessories industry, substantial
percentages of the Company's sales and earnings occur in the months of
September, October and November, during which the Company makes significant
shipments of its products to retailers for sale during the holiday season. The
Company's short-term bank borrowings are at a peak during the months of August,
September, October and November to enable the Company to (a) carry significant
amounts of inventory and accounts receivable and (b) provide more favorable
payment terms to its customers during this season.
The relative contributions to total net sales and gross profit from the
Company's principal product categories for the last three fiscal years and the
relative year-to-year changes in such contributions during such period are shown
in the following table:
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, Percentage Change
- ------------------------------ -----------------
1996 1995 1994 1996-95 1995-94
- -------- -------- -------- ------- -------
CONTRIBUTION TO NET SALES
<C> <C> <C> <C> <C>
$ 55,988 $ 59,271 $ 63,084 Men's and Women's Jewelry (6%) (6%)
72,967 74,786 68,764 Men's Leather Accessories (2%) 9%
3,687 6,045 11,648 Other* (39%) (48%)
- -------- -------- -------- ----- -----
$132,642 $140,102 $143,496 TOTAL NET SALES (5%) (2%)
======== ======== ======== ==== =====
CONTRIBUTION TO GROSS PROFIT
$ 26,054 $ 25,323 $ 31,678 Men's and Women's Jewelry 6% (20%)
30,325 27,335 28,162 Men's Leather Accessories 11% (3%)
1,867 1,670 4,534 Other* 12% (63%)
- -------- --------- --------- --- -----
$ 58,246 $ 54,328 $ 64,374 TOTAL GROSS PROFIT 7% (16%)
======== ========= ========= == =====
</TABLE>
* Includes a men's accessories (gifts) line which was discontinued during the
fourth quarter of fiscal 1995 and certain merchandise sold through factory
outlets.
Sales and Distribution
- ----------------------
The Company's customers are primarily major retailers within the United
States. Sales to the Company's two largest customers accounted for approximately
17% and 13% of consolidated net sales in 1996 and 19% and 12% in 1995,
respectively. Sales to one customer amounted to 11% of consolidated net sales
during 1994. No other customer accounted for more than 10% of consolidated net
sales during such fiscal years. Exports to foreign countries accounted for 9%,
7% and 5% of consolidated net sales in each of the Company's fiscal years ended
December 31, 1996, 1995 and 1994.
Approximately 96 salespeople and district managers are engaged in the sale
of products of the Company, working out of sales offices located in five major
cities throughout the United States. The Company has established separate sales
forces to handle the distribution to retailers of (a) women's jewelry and (b)
the remaining products of the Company. In certain foreign countries, the Company
has licensed or sub-licensed the production and sale of certain of its lines
under royalty arrangements.
In addition to the sale of the Company's products through wholesale
channels, the Company sells certain of its products at retail in 19
Company-operated factory outlet stores located in 13 states.
2
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Manufacturing
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Items manufactured by the Company accounted for approximately 65% of total
sales. The Company manufactures and/or assembles jewelry products at the
Company's plant in Attleboro, Massachusetts and manufactures leather goods at
the Company's plant in Norwalk, Connecticut. Raw materials are purchased in the
open market from a number of suppliers and are readily available.
Items not manufactured by the Company include certain jewelry and leather
items, watches, wallets and other accessories which are purchased domestically
or imported from countries in Europe, South America and the Far East.
Advertising Media and Promotion
- -------------------------------
Substantial expenditures on advertising and promotions are an integral part
of the Company's business. Approximately 7% of net sales was expended on
promotions in 1996, of which approximately 1% was for advertising media,
principally in national consumer magazines, trade publications, newspapers,
radio and television, and approximately 6% was for fixtures, displays,
point-of-sale materials, cooperative advertising and other in-store promotions.
Competition
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The businesses in which the Company is engaged are highly competitive. The
Company competes with, among others, David Donahue in men's jewelry; Rolfs,
Mundy and retail private label programs in small leather goods; Trafalgar,
Salant, Humphrey, Textan and private label programs in men's belts; and Monet,
Carol Lee and Victoria Creations in women's jewelry. The ability of the Company
to continue to compete will depend largely upon its ability to create new
designs and products, to make improvements on its present products and to offer
the public high quality merchandise at popular prices.
Patents, Trademarks and Licenses
- --------------------------------
The Company owns the rights to various patents, trademarks, trade names and
copyrights and has exclusive licenses in the United States for, among other
things, (i) men's and women's leather accessories and costume jewelry under the
name "Pierre Cardin", (ii) leather accessories under the name "L'Aiglon", (iii)
women's jewelry under the names "Anne Klein" and "Anne Klein II", (iv) men's
jewelry and leather accessories under the names "Yves Saint Laurent", "Geoffrey
Beene" and "Colours by Alexander Julian", (v) leather accessories and men's and
women's jewelry under the name "Guess?" and (vi) men's jewelry under the name
"Kenneth Cole". The Company's "Pierre Cardin", "Yves Saint Laurent", "Anne
Klein", "Anne Klein II" and "Guess?" licenses may be considered material to the
Company's business. The "Pierre Cardin" license provides for royalty payments
not exceeding 5% of sales. The "Anne Klein" and "Anne Klein II" license provides
for royalty payments not exceeding 6% of sales. The "Guess?" license provides
for royalty payments not exceeding 7% of sales. The "Yves Saint Laurent" license
provides for royalty payments not exceeding 8% of sales. The license agreements
generally specify minimum royalties and minimum advertising and promotion
expenditures. The Company's licenses to
3
<PAGE>
distribute "Pierre Cardin" jewelry and leather accessories expire December 31,
1999. The Company's "Anne Klein" and "Anne Klein II" license expires December
31, 1999. The Company's "Guess?" license expires June 30, 1997. The Company's
"Yves Saint Laurent" license expires December 31, 2001.
Employees
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The Company has approximately 1,230 employees, of whom approximately 850
are production employees. None of the Company's employees are represented by
labor unions and management believes its relationship with its employees to be
satisfactory.
ITEM 2. PROPERTIES.
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The Company's main administrative office is located in a three-story
building, containing approximately 193,000 square feet, on a seven-acre site
owned by the Company in Attleboro, Massachusetts. The Company manufactures
and/or assembles jewelry products at this facility.
The Company's national and international sales offices are located in
leased premises at 90 Park Avenue, New York City. The leases of such premises
expire in 2000. Branch offices are also located in leased premises in New York,
Beverly Hills, Chicago, Atlanta and Dallas; the leases for such premises expire
from 1997 to 2000.
The Company also leases a warehouse containing approximately 242,000 square
feet in Taunton, Massachusetts which is used for the distribution of men's and
women's jewelry, leather goods and other accessories. One of the Company's
factory stores is also located at the Taunton location. The lease for these
premises expires in 2001.
Men's belts and other leather accessories are manufactured in premises
consisting of a manufacturing plant and office space in a 126,500 square foot
building, located on approximately seven and one-half acres, owned by the
Company in Norwalk, Connecticut.
The Company's manufacturing and distribution facilities are equipped with
modern machinery and equipment, substantially all of which is owned by the
Company. In management's opinion, the Company's properties, machinery and
equipment are adequate for the conduct of the respective businesses to which
they relate.
The Company presently operates 18 additional factory outlet stores at
locations other than those described above. These stores have leases with terms
not in excess of five years and contain in the aggregate approximately 38,400
square feet.
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
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(a) On June 7, 1990, the Company received notice from the United States
Environmental Protection Agency ("EPA") that it, along with fifteen others, had
been identified as a Potentially Responsible Party ("PRP") in connection with
the release of hazardous substances at a Superfund site located in
Massachusetts. This notice does not constitute the commencement of a proceeding
against the Company nor necessarily indicate that a proceeding against the
Company is contemplated. The Company, along with six other PRP's, has entered
into an Administrative Order on Consent pursuant to which, inter alia, they have
undertaken to conduct a remedial investigation/feasibility study (the "RI/FS")
with respect to the alleged contamination at the site.
It is the position of the PRPs who have undertaken to perform the RI/FS at
the Massachusetts Superfund site that the remedial investigation has been
completed. The PRP Group's accountant's records reflect group expenses,
independent of legal fees, in the amount of $1,919,710 as of December 31, 1996.
The Company's share of costs for the RI/FS is being allocated on an interim
basis at 12.5177%.
The Massachusetts Superfund site is adjacent to a municipal landfill that
is in the process of being closed under Massachusetts law. Due to the proximity
of the municipal landfill to the site and the composition of waste at this site,
the issues are under discussion regarding the site among state and federal
agencies and the United States Department of Energy.
In September 1988, the Company received notice from the Department of
Pollution Control and Ecology of the State of Arkansas that the Company,
together with numerous other companies, had been identified as a PRP in
connection with the release or threatened release of hazardous substances from
the Diaz Refinery, Incorporated site in Diaz, Arkansas. The Company has advised
the State of Arkansas that it intends to participate in negotiations with the
Department of Pollution Control and Ecology through the committees formed by the
PRPs. The Company has not received further communications regarding the Diaz
site.
In September 1991, the Company entered into a judicial consent decree
relating to the Western Sand and Gravel site located in Burrillville and North
Smithfield, Rhode Island. The consent decree was entered on August 28, 1992 by
the United States District Court for the District of Rhode Island. The most
likely scenario cost estimates for remediation of the ground water at the site
range from approximately $2.8 million to approximately $7.8 million. Based on
current participation, the Company's share is 7.98% of approximately 75% of the
costs. The Company and certain other participants have commenced litigation
against non-settling PRPs to seek to obtain reimbursement for their respective
shares of the remediation costs.
(b) No material pending legal proceedings were terminated during the
three-month period ended December 31, 1996.
5
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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Not applicable.
Executive Officers of the Registrant
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The executive officers of the Company are as follows:
Name Age Title
- -------------- --- ----------------------------------
Marshall Tulin 78 Chairman of the Board and Director
John A. Tulin 50 President and Director
Richard S. Blum 60 Senior Vice President - International Sales
Christopher F. Wolf 48 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
Melvin Goldfeder 60 Senior Vice President - Special Markets
Division
James E. Tulin 45 Senior Vice President - Merchandising and
Director
Lewis Valenti 57 Senior Vice President - Women's Division
Eric P. Luft 41 Senior Vice President - Men's Division
Paul Duckett 56 Senior Vice President - Distribution and Retail
Store Operations
Richard V. Byrnes, Jr. 37 Senior Vice President - Operations
There are no family relationships among any of the persons listed above or
among such persons and the directors of the Company except that John A. Tulin
and James E. Tulin are the sons of Marshall Tulin.
6
<PAGE>
Marshall Tulin has served as Chairman of the Board since October 1995. He
joined the Company in 1940, was elected a Vice President in 1954 and President
in 1957. Mr. Tulin has served as a director of the Company since 1956.
John A. Tulin has served as President and Chief Executive Officer of the
Company since October 1995. Mr. Tulin joined the Company in 1971, was elected a
Vice President in 1974, Senior Vice President in 1979 and Executive Vice
President in 1982. He has served as a director since 1975.
Richard S. Blum has been Senior Vice President-International Sales since
October 1995. For more than five years prior to October 1985, Mr. Blum served as
a Senior Vice President of the Company.
Christopher F. Wolf joined the Company as Senior Vice President, Chief
Financial Officer, Treasurer and Secretary in October 1996. Prior to joining the
Company, Mr. Wolf was a partner in the accounting firm of Coopers & Lybrand
L.L.P. for more than the preceding five years.
Melvin Goldfeder has been Senior Vice President-Special Markets Division
since October 1995. For more than five years prior to October 1995, Mr.
Goldfeder served as a Senior Vice President of the Company.
James E. Tulin has been Senior Vice President-Merchandising since October
1995. For more than five years prior to October 1995, Mr. Tulin served as a
Senior Vice President of the Company. Mr. Tulin has been a director of the
Company since 1985.
Lewis Valenti has been Senior Vice President-Women's Division since October
1995. For more than five years prior to October 1995, Mr. Valenti served as a
Senior Vice President of the Company.
Eric P. Luft has been Senior Vice President-Men's Division since October
1995. Mr. Luft served as a Divisional Vice President of the Men's Products
Division from June 1989 until January 1993, when he was elected a Senior Vice
President of the Company.
Paul Duckett has been Senior Vice President-Distribution and Retail Store
Operations since October 1995. For more than five years prior to October 1995,
Mr. Duckett served as a Senior Vice President of the Company.
Richard V. Byrnes, Jr. has been Senior Vice President-Operations since
October 1995. Mr. Byrnes joined the Company in December 1991 as a Divisional
Vice President of the Crestline Division and was elected a Vice President in
April 1994. Prior to joining the Company, Mr. Byrnes was a consultant with the
accounting firm of Coopers & Lybrand L.L.P.
Each officer of the Company serves, at the pleasure of the Board of
Directors, for a term of one year and until his successor is elected and
qualified.
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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The information called for by this Item 5 with respect to market
information and the number of holders of the Registrant's Common Stock is
incorporated herein by reference to the caption "Market for the Company's Common
Stock and Related Stockholder Matters" on page 15 of the Company's Annual Report
to Stockholders for the year ended December 31, 1996 (the "1996 Annual Report"),
which is Exhibit 13 to this Annual Report on Form 10-K.
The Company's financing agreements with its lenders prohibit the payment of
cash dividends on the Company's Common Stock (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Report). The Company has not paid any cash dividends on its Common Stock in
the last ten years and has no current expectation that cash dividends will be
paid in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
------------------------
The information called for by this Item 6 is incorporated herein by
reference to the information under the caption "Financial Highlights" on page 1
of the Company's 1996 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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The information called for by this Item 7 is incorporated herein by
reference to the information under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 2-5 of the
Company's 1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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The information called for by this Item 7 is incorporated herein by
reference to the information under the following captions on pages 6-15 of the
Company's 1996 Annual Report:
o Consolidated Balance Sheets as of December 31, 1996 and 1995.
o Consolidated Statements of Operations for each of the three years
ended December 31, 1996, 1995 and 1994.
o Consolidated Statements of Changes in Stockholders' Equity for each of
the three years ended December 31, 1996, 1995 and 1994.
8
<PAGE>
o Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1996, 1995 and 1994.
o Notes to Consolidated Financial Statements.
o Report of Independent Accountants
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
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None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
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The information called for by this Item 10 (except for information as to
the Company's executive officers, which information appears following Part I in
this Annual Report on Form 10-K under the caption "Executive Officers of the
Registrant") is incorporated herein by reference to the Company's definitive
proxy statement relating to the Company's 1997 Annual Meeting of Stockholders
filed pursuant to Regulation 14A under the Securities Act of 1934, as amended
(the "1997 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
The information called for by this Item 11 is incorporated herein by
reference to the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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The information called for by this Item 12 is incorporated herein by
reference to the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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The information called for by this Item 13 is incorporated herein by
reference to the 1997 Proxy Statement.
9
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
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(a) Documents filed as part of this Report
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1. Financial Statements filed as part of this Report:
The financial statements of the Company included on pages 6-15 of
the 1996 Annual Report are incorporated herein by reference to
Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules filed as part of this Report:
The following financial statement schedule and the Report of
Independent Accountants thereon are submitted herewith in
response to Item 14(d) of Part IV of this Annual Report on Form
10-K:
Report of Independent Accountants on Financial Statement Schedule
Financial Statement Schedule for years ended December 31, 1996,
1995 and 1994:
II. Valuation and Qualifying Accounts
(b) Current Reports on Form 8-K during the quarter ended December 31, 1996
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No reports on Form 8-K were filed by the Company during the last fiscal
quarter of the period covered by this Report.
(c) Exhibits
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Exhibit Description
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3.01 Restated Certificate of Incorporation of the Company dated
May 1,1987, as amended to date. (The first exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31,1995, File No. 1-5354, is incorporated
herein by reference).
10
<PAGE>
3.02 By-Laws of the Company, as amended to date. (Exhibit 3.02 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31,1995, File No. 1-5354, is incorporated
herein by reference).
4.01 Form of Certificate of Designation of the Series A
Participating Preferred Stock and Series B Participating
Preferred Stock. (Exhibit A to Annex 1 to the Proxy
Statement/Prospectus contained in the Company's Registration
Statement, File No.33-19501, filed on January 4, 1988, is
incorporated herein by reference).
4.02 Second Amended and Restated Credit Agreement dated as of May
24, 1996 between the Company, each of the banks which is a
signatory thereto and The Chase Manhattan Bank (National
Associations), as Agent (in such capacity, the "Agent").
(Exhibit 4.02 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, File No.
1-5354, is incorporated herein by reference).
4.03 Amended and Restated Security Agreement dated as of May 24,
1996 between the Company and the Agent. (Exhibit 4.03 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5354, is incorporated
herein by reference).
4.04 Amended and Restated Security Agreement dated as of May 24,
1996 between Swank Sales International (V.I.), Inc. and the
Agent. (Exhibit 4.04 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, File No.
1-5354, is incorporated herein by reference).
4.05 Open End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing (Connecticut) dated as
of December 22,1992 ("Connecticut Mortgage") between the
Company and the Agent. (Exhibit 4.06 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1992, File No. 1-5354, is incorporated herein by reference).
4.05.1 Modification and Confirmation of the Connecticut Mortgage
dated as of July 20, 1995. (The fourth exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30,1995, File No.1-5354, is incorporated herein
by reference).
4.05.2 Second Modification and Confirmation of the Connecticut
Mortgage dated as of May 24,1996. (Exhibit 4.05.2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No.1-5354, is incorporated
herein by reference).
4.06 Open End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing (Massachusetts) dated
as of December 22, 1992 ("Massachusetts Mortgage") between
the Company and the Agent. (Exhibit 4.07 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-5354, is incorporated herein
by reference).
11
<PAGE>
4.06.1 Modification and Confirmation of the Massachusetts Mortgage
dated as of July 20, 1995. (The fifth exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, File No. 1-5354, is incorporated herein
by reference).
4.06.2 Second Modification and Confirmation of the Massachusetts
Mortgage dated as of May 24, 1996. (Exhibit 4.06.2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5354, is incorporated
herein by reference).
4.07 Revolving Credit and Security Agreement dated as of May 24,
1996 between the Company, each of the lenders which is a
signatory thereto and IBJ Schroder Bank & Trust Company, as
Lender, ACM Agent and Co-Agent. (Exhibit 4.07 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5354, is incorporated
herein by reference).
4.08.1 Mortgage and Security Agreement (Massachusetts), dated as of
May 24, 1996, in the maximum principal amount of
$25,000,000, made by the Company to IBJ Schroder Bank &
Trust Company, as ACM Agent for itself and as agent for
ratable benefit of the Lenders. (Exhibit 4.08.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31,1995, File No. 1-5354, is incorporated
herein by reference).
4.08.2 Open End Mortgage,Assignment of Rents and Security Agreement
(Connecticut), dated as of May 24, 1996, in the maximum
principal amount of $25,000,000, made by the Company to IBJ
Schroder Bank & Trust Company, as ACM Agent for itself and
as agent for ratable benefit of the Lenders. (Exhibit 4.08.2
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, File No. 1-5354, is
incorporated herein by reference).
4.08.3 FSC Security Agreement dated May 24, 1996 between Swank
International (V.I.), Inc. and IBJ Schroder Bank and Trust
Company, as Agent. (Exhibit 4.08.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995, File No. 1-5354, is incorporated herein by reference).
4.08.4 Pledge and Security Agreement dated as of May 24,1996
between the Company and IBJ Schroder Bank and Trust Company,
as ACM Agent. (Exhibit 4.08.4 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995,
File No. 1-5354, is incorporated herein by reference).
10.01 Employment Agreement dated June 20, 1991 between the Company
and Marshall Tulin. (Exhibit 10.01 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1991, File No. 1-5354, is incorporated herein by
reference).+
10.01.1 Amendment dated as of September 1, 1993 to Employment
Agreement between the Company and Marshall Tulin. (Exhibit
10.01.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, File No. 1-5354, is
incorporated herein by reference).+
12
<PAGE>
10.01.2 Amendment effective as of October 30, 1995 to Employment
Agreement between the Company and Marshall Tulin.*+
10.02 Employment Agreement dated as of January 1, 1990 between the
Company and John Tulin. (Exhibit 10-03 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, File No. 1-5354, is incorporated herein
by reference).+
10.02.1 Amendments dated as of September 1, 1993 and September 2,
1993, respectively, between the Company and John Tulin.
(Exhibit 10.02.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31,1993, File No. 1-5354,
is incorporated herein by reference).+
10.02.2 Amendment dated as of January 1,1997 to Employment Agreement
between the Company and John Tulin.*+
10.03 Employment Agreement dated as of March 1, 1989 between the
Company and James Tulin. (Exhibit 10.05 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-5354, is incorporated herein
by reference).+
10.03.1 Amendment dated as of January 4,1990 to Employment Agreement
between the Company and James Tulin. (Exhibit 10.05 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, File No. 1-5354, is incorporated
herein by reference).+
10.03.2 Amendment dated as of September 1, 1993 to Employment
Agreement between the Company and James Tulin. (Exhibit
10.03.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31,1993, File No. 1-5354, is
incorporated herein by reference).+
10.03.3 Amendment dated as of January 1,1997 to Employment Agreement
between the Company and James Tulin.*+
10.04 Amended and Restated 1981 Incentive Stock Option Plan of the
Company.*+
10.05 1987 Incentive Stock Option Plan of the Company.*+
10.06 1987 Incentive Share Plan of the Company. (Annex 2 to the
Proxy Statement/Prospectus contained in the Company's
Registration Statement, File No. 33-19501, filed on January
4, 1988, is incorporated herein by reference).+
10.07 Form of Termination Agreement effective January 1, 1996
between the Company and each of the Company's officers
listed on Schedule A thereto. (Exhibit 10.07 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5354, is incorporated
herein by reference).+
13
<PAGE>
10.08 Termination Agreement effective October 1, 1996 between the
Corporation and Christopher Wolf.*+
10.09 Deferred Compensation Plan of the Company dated as of
January 1, 1987. (Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1988, File No. 1-5354, is incorporated herein by
reference).+
10.10 Employment Agreement dated as of January 15,1992, as
amended, between the Company and Richard Byrnes. (Exhibit
10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31,1994, File No. 1-5354, is
incorporated herein by reference).+
10.11 Agreement dated as of July 14, 1981 between the Company and
Marshall Tulin, John Tulin and Raymond Vise as investment
managers of the Company's pension plans. (Exhibit 10.12(b)
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1981, File No. 1-5354, is
incorporated herein by reference).
10.12 The New Swank, Inc. Retirement Plan Trust Agreement dated as
of January 1, 1994 among the Company and Marshall Tulin,
John Tulin and Raymond Vise, as co-trustees. (Exhibit 10.12
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, File No. 1-5354, is
incorporated herein by reference).
10.13 Plan of Recapitalization of the Company dated as of
September 28, 1987, as amended (Exhibit 2.01 to
Post-Effective Amendment No.1 to the Company's S-4
Registration Statement, File No.33-19501, filed on February
9, 1988, is incorporated herein by reference).
10.14 Key Employee Deferred Compensation Plan. (Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-5354, is incorporated
herein by reference).+
10.14.1 First Amendment effective January 1, 1997 to Key Employee
Deferred Compensation Plan.*+
10.15 1994 Non-Employee Director Stock Option Plan. (Exhibit 10.15
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, File No. 1-5354, is
incorporated herein by reference).+
10.15.1 Stock Option Contracts dated as of December 31, 1994 between
the Company and each of Mark Abramowitz and Raymond Vise.
(Exhibit 10.15.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, File No.
1-5354, is incorporated herein by reference).+
14
<PAGE>
10.15.2 Stock Option Contract dated as of April 20, 1995 between the
Company and Raymond Vise. (The third exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, File No. 1-5354, is incorporated
herein by reference).+
10.15.3 Stock Option Contract dated as of April 20, 1995 between the
Company and Mark Abramowitz. (The fifth exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, File No. 1-5354, is incorporated
herein by reference).+
10.15.4 Stock Option Contract dated December 12, 1995 between the
Company and John J. Macht. (Exhibit 10.15.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, File No. 1-5354,is incorporated herein by
reference).+
10.15.5 Stock Option Contracts dated as of July 31, 1996 between the
Company and each of Mark Abramowitz, Raymond Vise and John
J. Macht.*+
10.16 Stock Option Contract dated as of October 1,1996 between the
Company and Christopher F. Wolf.*+
10.17 Employment Agreement dated as of October 1, 1996, between
the Company and Christopher F. Wolf. *+
10.18 Letter Agreement effective August 1, 1996 between the
Company and John J. Macht.*
11.01 Statement Re Computation of Earnings Per Share.*
13 1996 Annual Report to Stockholders.*
21.01 Subsidiaries of the Company. (Exhibit 22.01 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-5354, is incorporated herein
by reference).
23.01 Consent of independent accountants.*
27 Financial Data Schedule.*
- ---------------------------
*Filed herewith.
+Management contract or compensatory plan or arrangement.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Stockholders of Swank, Inc.
Attleboro, Massachusetts
Our report on the consolidated financial statements of Swank, Inc. has been
incorporated by reference in this Form 10-K from page 15 of the 1996 Annual
Report to Stockholders of Swank, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index on page 10 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 18,1997
<PAGE>
SWANK, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------ ----------- ----------- ----------- -----------
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END
DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS OF PERIOD
----------- --------- ------- ---------- ---------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
Reserve for Receivables
- -----------------------
Allowance for doubtful accounts $ 1,050,000 $ 631,000 (G) $ 200,000 (A) $ 1,481,000
Allowance for cash discounts 91,000 1,368,000 (H) 1,283,000 (B) 176,000
Allowance for customer returns 4,504,000 6,528,000 (F) 6,206,000 (C) 4,826,000
Allowance for cooperative advertising 652,000 1,094,000 (G) 1,209,000 (D) 537,000
Allowance for in-store markdowns 2,800,000 6,120,000 (G) 5,477,000 (E) 3,443,000
----------- ----------- --- ----------- --- -----------
Total 9,097,000 15,741,000 14,375,000 10,463,000
=========== =========== =========== ===========
Reserve for inventory obsolescence 0 574,000 0 574,000
- ---------------------------------- =========== =========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts 1,100,000 805,000 (G) 855,000 (A) 1,050,000
Allowance for cash discounts 500,000 1,517,000 (H) 1,926,000 (B) 91,000
Allowance for customer returns 4,661,000 9,255,000 (F) 9,412,000 (C) 4,504,000
Allowance for cooperative advertising 703,000 1,227,000 (G) 1,278,000 (D) 652,000
Allowance for in-store markdowns 2,520,000 6,121,000 (G) 5,841,000 (E) 2,800,000
----------- ----------- --- ----------- --- -----------
9,484,000 18,925,000 19,312,000 9,097,000
=========== =========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts 900,000 213,000 (G) 13,000 (A) 1,100,000
Allowance for cash discounts 470,000 1,409,000 (H) 1,379,000 (B) 500,000
Allowance for customer returns 4,959,000 7,436,000 (F) 7,734,000 (C) 4,661,000
Allowance for cooperative advertising 505,000 1,314,000 (G) 1,116,000 (D) 703,000
Allowance for in-store markdowns 1,785,000 5,741,000 (G) 5,006,000 (E) 2,520,000
----------- ----------- --- ----------- --- -----------
8,619,000 16,113,000 15,248,000 9,484,000
=========== =========== =========== ===========
</TABLE>
(A) Bad debts charged off as uncollectible, net of recoveries.
(B) Cash discounts taken by customers.
(C) Customer returns.
(D) Credits issued to customers for cooperative advertising.
(E) Credits issued to customers for in-store markdowns.
(F) Net reduction of sales and cost of sales.
(G) Located in selling and administrative.
(H) Located in net sales.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 27, 1997 SWANK, INC.
(Registrant)
By: /s/ Christopher F. Wolf
-----------------------------
Christopher F. Wolf
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ----------------- ---------------------- ---------------
/s/ John A. Tulin President and Director March 27, 1997
- ----------------------- (principal executive
John A. Tulin officer)
/s/ Christopher F. Wolf Senior Vice President, March 27, 1997
- ----------------------- Chief Financial Officer,
Christopher F. Wolf Treasurer and Secretary
(principal financial and
accounting officer)
/s/ Mark Abramowitz Director March 27, 1997
- -----------------------
Mark Abramowitz
/s/ John J. Macht Director March 27, 1997
- -----------------------
John J. Macht
16
<PAGE>
Signature Title Date
- ------------------- ------------------- -----------------
/s/ James E. Tulin Director March 27, 1997
- -----------------------
James E. Tulin
/s/ Marshall Tulin Director March 27, 1997
- -----------------------
Marshall Tulin
/s/ Raymond Vise Director March 27, 1997
- -----------------------
Raymond Vise
17
<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996
--------------------------------
SWANK, INC.
--------------------------------
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page No.
- ----------- ----------- --------
3.01 Restated Certificate of Incorporation of the
Company dated May 1, 1987, as amended to date.
(The first exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended March
31, 1995, File No. 1-5354, is incorporated herein
by reference).
3.02 By-Laws of the Company, as amended to date.
(Exhibit 3.02 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1995, File No. 1- 5354, is incorporated herein by
reference).
4.01 Form of Certificate of Designation of the Series A
Participating Preferred Stock and Series B
Participating Preferred Stock. (Exhibit A to Annex
1 to the Proxy Statement/Prospectus contained in
the Company's Registration Statement, File
No.33-19501, filed on January 4, 1988, is
incorporated herein by reference).
4.02 Second Amended and Restated Credit Agreement dated
as of May 24, 1996 between the Company, each of
the banks which is a signatory thereto and The
Chase Manhattan Bank (National Association), as
Agent (in such capacity, the "Agent"). (Exhibit
4.02 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, File
No. 1-5354, is incor porated herein by reference).
4.03 Amended and Restated Security Agreement dated as
of May 24, 1996 between the Company and the Agent.
(Exhibit 4.03 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1995, File No. 1-5354, is incorporated herein by
reference).
4.04 Amended and Restated Security Agreement dated as
of May 24, 1996 between Swank Sales International
(V.I.), Inc. and the Agent. (Exhibit 4.04 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, File No.
1-5354, is incorporated herein by reference).
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
4.05 Open End Indenture of Mortgage, Assignment of
Rents, Security Agreement and Fixture Filing
(Connecticut) dated as of December 22, 1992
("Connecticut Mortgage") between the Company and
the Agent. (Exhibit 4.06 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-5354, is incor
porated herein by reference).
4.05.1 Modification and Confirmation of the Connecticut
Mortgage dated as of July 20, 1995. (The fourth
exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995, File No.
1-5354, is incor porated herein by reference).
4.05.2 Second Modification and Confirmation of the
Connecticut Mortgage dated as of May 24, 1996.
(Exhibit 4.05.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1995, File No. 1-5354, is incor porated herein by
reference).
4.06 Open End Indenture of Mortgage, Assignment of
Rents, Security Agreement and Fixture Filing
(Massachusetts) dated as of December 22, 1992
("Massachusetts Mortgage") between the Company and
the Agent. (Exhibit 4.07 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-5354, is
incorporated herein by reference).
4.06.1 Modification and Confirmation of the Massachusetts
Mortgage dated as of July 20, 1995. (The fifth
exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995, File No.
1-5354, is incor porated herein by reference).
4.06.2 Second Modification and Confirmation of the
Massachusetts Mortgage dated as of May 24, 1996.
(Exhibit 4.06.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1995, File No. 1-5354, is incorporated herein by
reference).
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
4.07 Revolving Credit and Security Agreement dated as
of May 24, 1996 between the Company, each of the
lenders which is a signatory thereto and IBJ
Schroder Bank & Trust Company, as Lender, ACM
Agent and Co-Agent. (Exhibit 4.07 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5354, is
incorporated herein by reference).
4.08.1 Mortgage and Security Agreement (Massachusetts),
dated as of May 24, 1996, in the maximum principal
amount of $25,000,000, made by the Company to IBJ
Schroder Bank & Trust Company, as ACM Agent for
itself and as agent for ratable benefit of the
Lenders. (Exhibit 4.08.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995, File No. 1-5354, is
incorporated herein by reference).
4.08.2 Open End Mortgage, Assignment of Rents and
Security Agreement (Connecticut), dated as of May
24, 1996, in the maximum principal amount of
$25,000,000, made by the Company to IBJ Schroder
Bank & Trust Company, as ACM Agent for itself and
as agent for ratable benefit of the Lenders.
(Exhibit 4.08.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1995, File No. 1-5354, is incorporated herein by
reference).
4.08.3 FSC Security Agreement dated May 24, 1996 between
Swank International (V.I.), Inc. and IBJ Schroder
Bank and Trust Company, as Agent. (Exhibit 4.08.2
to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, File No.
1-5354, is incor porated herein by reference).
4.08.4 Pledge and Security Agreement dated as of May 24,
1996 between the Company and IBJ Schroder Bank and
Trust Company, as ACM Agent. (Exhibit 4.08.4 to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, File No.
1-5354, is incor porated herein by reference).
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
10.01 Employment Agreement dated June 20, 1991 between
the Company and Marshall Tulin. (Exhibit 10.01 to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, File No.
1-5354, is incorporated herein by reference).+
10.01.1 Amendment dated as of September 1, 1993 to
Employment Agreement between the Company and
Marshall Tulin. (Exhibit 10.01.1 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-5354, is
incorporated herein by reference).+
10.01.2 Amendment effective as of October 30, 1995 to
Employment Agreement between the Company and
Marshall Tulin.*+
10.02 Employment Agreement dated as of January 1, 1990
between the Company and John Tulin. (Exhibit 10-03
to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, File No.
1-5354, is incorporated herein by reference).+
10.02.1 Amendments dated as of September 1, 1993 and
September 2, 1993, respectively, between the
Company and John Tulin. (Exhibit 10.02.1 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, File No.
1-5354, is incorporated herein by reference).+
10.02.2 Amendment dated as of January 1, 1997 to
Employment Agreement between the Company and John
Tulin.*+
10.03 Employment Agreement dated as of March 1, 1989
between the Company and James Tulin. (Exhibit
10.05 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988, File
No. 1-5354, is incorporated herein by reference).+
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
10.03.1 Amendment dated as of January 4, 1990 to
Employment Agreement between the Company and James
Tulin. (Exhibit 10.05 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1989, File No. 1-5354, is
incorporated herein by reference).+
10.03.2 Amendment dated as of September 1, 1993 to
Employment Agreement between the Company and James
Tulin. (Exhibit 10.03.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-5354, is
incorporated herein by reference).+
10.03.3 Amendment dated as of January 1, 1997 to
Employment Agreement between the Company and James
Tulin.*+
10.04 Amended and Restated 1981 Incentive Stock Option
Plan of the Company.*+
10.05 1987 Incentive Stock Option Plan of the Company.*+
10.06 1987 Incentive Share Plan of the Company. (Annex 2
to the Proxy Statement/Prospectus contained in the
Company's Registration Statement, File No.
33-19501, filed on January 4, 1988, is
incorporated herein by reference).+
10.07 Form of Termination Agreement effective January 1,
1996 between the Company and each of the Company's
officers listed on Schedule A thereto. (Exhibit
10.07 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, File
No. 1-5354, is incorporated herein by reference).+
10.08 Termination Agreement effective October 1, 1996
between the Corporation and Christopher Wolf.*+
10.09 Deferred Compensation Plan of the Company dated as
of January 1, 1987. (Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
31, 1988, File No. 1-5354, is incorporated herein
by reference).+
10.10 Employment Agreement dated as of January 15, 1992,
as amended, between the Company and Richard
Byrnes. (Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994, File No. 1-5354, is
incorporated herein by reference).+
10.11 Agreement dated as of July 14, 1981 between the
Company and Marshall Tulin, John Tulin and Raymond
Vise as investment managers of the Company's
pension plans. (Exhibit 10.12(b) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1981, File No. 1-5354, is
incorporated herein by reference).
10.12 The New Swank, Inc. Retirement Plan Trust
Agreement dated as of January 1, 1994 among the
Company and Marshall Tulin, John Tulin and Raymond
Vise, as co-trustees. (Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File No.
1-5354, is incorporated herein by reference).
10.13 Plan of Recapitalization of the Company dated as
of September 28, 1987, as amended (Exhibit 2.01 to
Post-Effective Amendment No.1 to the Company's S-4
Registration Statement, File No.33-19501, filed on
February 9, 1988, is incorporated herein by
reference).
10.14 Key Employee Deferred Compensation Plan. (Exhibit
10.17 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, File
No. 1- 5354, is incorporated herein by
reference).+
10.14.1 First Amendment effective January 1, 1997 to Key
Employee Deferred Compensation Plan.*+
10.15 1994 Non-Employee Director Stock Option Plan.
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
(Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994, File No. 1-5354, is incorporated herein by
reference).+
10.15.1 Stock Option Contracts dated as of December 31,
1994 between the Company and each of Mark
Abramowitz and Raymond Vise. (Exhibit 10.15.1 to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File No.
1-5354, is incorporated herein by reference).+
10.15.2 Stock Option Contract dated as of April 20, 1995
between the Company and Raymond Vise. (The third
exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, File
No. 1-5354, is incorporated herein by reference).+
10.15.3 Stock Option Contract dated as of April 20, 1995
between the Company and Mark Abramowitz. (The
fifth exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995,
File No. 1-5354, is incorporated herein by
reference).+
10.15.4 Stock Option Contract dated December 12, 1995
between the Company and John J. Macht. (Exhibit
10.15.5 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995,
File No. 1-5354, is incorporated herein by
reference).+
10.15.5 Stock Option Contracts dated as of July 31, 1996
between the Company and each of Mark Abramowitz,
Raymond Vise and John J. Macht.*+
10.16 Stock Option Contract dated as of October 1, 1996
between the Company and Christopher F. Wolf.*+
10.17 Employment Agreement dated as of October 1, 1996,
between the Company and Christopher F. Wolf. *+
10.18 Letter Agreement effective August 1, 1996 between
the Company and John J. Macht.*
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
11.01 Statement Re Computation of Earnings Per Share.*
13 1996 Annual Report to Stockholders.*
21.01 Subsidiaries of the Company. (Exhibit 22.01 to the
Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, File No.
1-5354, is incorporated herein by reference).
23.01 Consent of independent accountants.*
27 Financial Data Schedule.*
- ---------------------------
*Filed herewith.
+Management contract or compensatory
EXHIBIT 10.01.2
<PAGE>
Swank, Inc.
90 Park Avenue
New York, New York 10016
Effective as of October 30, 1995
Mr. Marshall Tulin
Paine Road
Hewlett, New York 11557
Dear Mr. Tulin:
Reference is hereby made to the Agreement dated as of June 20, 1991 between
Swank, Inc. (the "Corporation") and you concerning your employment by the
Corporation as amended by letter agreements dated as of January 1, 1992 and
September 1, 1993 between the Corporation and you (as amended, the "Existing
Employment Agreement"). This letter will serve to confirm our agreement to amend
the Existing Employment Agreement as of the date hereof as follows:
1. Paragraph 1 of the Existing Employment Agreement is hereby deleted in
its entirety and the following new paragraph is hereby inserted in its place:
"1. The Corporation hereby agrees to employ Tulin and Tulin hereby
agrees to accept such employment and to serve the Corporation as its
chairman of the board for a term commencing on October 30, 1995 and
ending on June 30, 1998."
2. The words "incident to the position of chief executive officer" are
hereby deleted from the first clause of Paragraph 2 of the Existing Employment
Agreement and the following is hereby inserted in their place:
", consistent with the position of chairman of the board, as
determined from time to time by the Board of Directors of the
Corporation"
3. This letter may be executed in any number of counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
and the same agreement.
4. This letter shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without regard to principles
of conflicts or choice of law.
5. Except as modified and amended by this letter, the Existing Employment
Agreement (including, without limitation, Section 4 thereof, which provides,
among other things, for the payment of a salary to Marshall Tulin at the rate of
$360,000 per annum) shall remain and continue in full force and effect on and
after the date hereof.
<PAGE>
If the foregoing correctly sets forth our understanding and agreement,
kindly countersign this letter in the space provided below.
Very truly yours,
SWANK, INC.
By: /s/ Christopher F. Wolf
-----------------------
Title: Chief Financial Officer
ACCEPTED AND AGREED:
/s/ Marshall Tulin
- ------------------
Marshall Tulin
-2-
EXHIBIT 10.02.2
<PAGE>
Swank, Inc.
90 Park Avenue
New York, New York 10016
As of January 1, 1997
Mr. John A. Tulin
1196 Elinore Road
Hewlett, New York 11557
Dear Mr. Tulin:
Reference is hereby made to the Agreement dated as of January 1, 1990
between Swank, Inc. (the "Corporation") and you concerning your employment by
the Corporation as amended by letter agreements dated as of January 1, 1992 and
September 1, 1993 between the Corporation and you (as amended, the "Existing
Employment Agreement"). This letter will serve to confirm our agreement to amend
the Existing Employment Agreement as of the date hereof as follows:
1. Paragraph 1 of the Existing Employment Agreement is hereby deleted in
its entirety and the following new paragraph is hereby inserted in its place:
"1. The Corporation hereby agrees to employ Tulin and Tulin hereby
agrees to accept such employment and to serve the Corporation as its
president and chief executive officer for a term commencing on January
1, 1997 and ending on December 31, 1998."
2. (a) Subsection (d) of Paragraph 4 of the Existing Employment Agreement
is hereby deleted in its entirety and the following new subsection (d) is hereby
inserted in its place:
"(d) for the period beginning January 1, 1993 and ending January 31,
1997 a base salary at the rate of $220,000 per annum, and"
(b) A new subsection (e) to Paragraph 4 of the Existing Employment
Agreement is hereby added and shall read as follows:
"(e) for the period beginning February 1, 1997 and ending December 31,
1998 a base salary at the rate of $300,000 per annum, payable in such
installments as shall be mutually agreed upon, and such additional
compensation, if any, as the Board of Directors of the Corporation
shall from time to time determine."
3. This letter may be executed in any number of counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
and the same agreement.
<PAGE>
4. This letter shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without regard to principles
of conflicts or choice of law.
5. Except as modified and amended by this letter, the Existing Employment
Agreement shall remain and continue in full force and effect on and after the
date hereof.
If the foregoing correctly sets forth our understanding and agreement,
kindly countersign this letter in the space provided below.
Very truly yours,
SWANK, INC.
By: /s/ Christopher F. Wolf
------------------------
Name: Christopher F. Wolf
Title: Chief Financial Officer
ACCEPTED AND AGREED:
/s/ John A. Tulin
- -----------------
John A. Tulin
-2-
EXHIBIT 10.03.3
<PAGE>
Swank, Inc.
90 Park Avenue
New York, New York 10016
As of January 1, 1997
Mr. James E. Tulin
180 Pond Crossing
Lawrence, New York 11559
Dear Mr. Tulin:
Reference is hereby made to the Agreement dated as of March 1, 1989 between
Swank, Inc. (the "Corporation") and you concerning your employment as a Senior
Vice President of the Corporation as amended by letter agreements dated January
4, 1990, as of January 1, 1992 and September 1, 1993 between the Corporation and
you (as amended, the "Existing Employment Agreement"). This letter will serve to
confirm our agreement to amend the Existing Employment Agreement as of the date
hereof as follows:
1. (a) Subsection (e) of Paragraph 4 of the Existing Employment Agreement
is hereby deleted in its entirety and the following new subsection (e) is hereby
inserted in its place:
"(e) for the period beginning January 1, 1993 and ending January 31,
1997 a base salary at the rate of $190,000 per annum, and"
(b) A new subsection (f) to Paragraph 4 of the Existing Employment
Agreement is hereby added to read as follows:
"(f) for the period beginning February 1, 1997 and ending February 28,
1998 a base salary at the rate of $240,000 per annum, payable in such
installments as shall be mutually agreed upon, and such additional
compensation, if any, as the Board of Directors of the Corporation
shall from time to time determine."
2. This letter may be executed in any number of counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
and the same agreement.
3. This letter shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without regard to principles
of conflicts or choice of law.
<PAGE>
4. Except as modified and amended by this letter, the Existing Employment
Agreement shall remain and continue in full force and effect on and after the
date hereof.
If the foregoing correctly sets forth our understanding and agreement,
kindly countersign this letter in the space provided below.
Very truly yours,
SWANK, INC.
By: /s/ Christopher F. Wolf
------------------------
Name: Christopher F. Wolf
Title: Chief Financial Officer
ACCEPTED AND AGREED:
/s/ James E. Tulin
- ------------------
James E. Tulin
-2-
EXHIBIT 10.04
<PAGE>
SWANK, INC.
AMENDED AND RESTATED 1981 INCENTIVE STOCK OPTION PLAN
1. Purposes of the Plan.
--------------------
This Plan (the "Plan") is designed to provide, in the manner contemplated
by Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
an incentive to key employees, including officers and directors who are
employees, of Swank, Inc. (the "Company") and its present and future
subsidiaries (as defined in paragraph 15 hereof), and to offer additional
inducement in obtaining the services of key personnel. Options granted hereunder
are intended to qualify as "incentive stock options" within the meaning of
Section 422A of the Code.
2. Shares Subject to the Plan.
---------------------------
Options may be granted from time to time hereunder to purchase in the
aggregate not more than 325,000 shares of Common Stock, $1 par value, of the
Company ("Common Stock") which shares may, in the discretion of the Stock Option
Committee, consist either in whole or in part of authorized but unissued shares
of Common Stock or issued shares of Common Stock which are held in the treasury
of the Company. Any shares subject to an option which for any reason expires or
terminates without having been exercised in full (unless the Plan shall have
been terminated) shall again become available for option under the Plan.
3. Administration of the Plan.
---------------------------
The Plan shall be administered by the Board of Directors which, to the
extent it shall determine, may delegate its powers with respect to the
administration of the Plan to a committee of the Board of Directors (the
"Committee") consisting of not less than two directors,
<PAGE>
each of whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3
(or any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended. References in the Plan to determinations or actions by
the Committee shall be deemed to include determinations and actions by the Board
of Directors.
Subject to the express provisions of the Plan, the Committee shall have the
authority in its discretion: to determine the individuals to receive options,
the times when they shall receive them, the number of shares to be subject to
each option, the term of each option, the date each option shall become
exercisable, whether an option granted hereunder shall be exercisable in whole,
in part or in installments, and if in installments, the number of shares to be
subject to each installment, the date each installment shall become exercisable
and the term of each installment; to accelerate the date of exercise of any
installment; to determine whether shares may be issued on exercise of an option
as partly paid and, if so, the dates when future installments of the option
price shall become due and the amounts of such installments; to construe the
respective option agreements and the Plan; and to make all other determinations
necessary or advisable for administering the Plan. The determinations of the
Committee on the matters referred to in this paragraph shall be conclusive.
4. Eligibility.
------------
The Committee may, consistent with the purposes of the Plan, grant options
from time to time, within ten (10) years from the date of adoption of the Plan
by the Board of Directors of the Company, to key employees, including employees
who are officers or directors, of the Company or of its subsidiaries covering
such number of shares of Common Stock as it may determine. No option may be
granted prior to January 1, 1987 under the Plan to any employee if
-2-
<PAGE>
the aggregate fair market value (determined as of the time the option is
granted) of the shares of Common Stock subject to such grant, together with the
aggregate fair market value of the shares of Common Stock subject to prior
grants to the employee under all incentive stock option plans of the Company and
its subsidiaries or of any parent (as defined in paragraph 15 hereof) of the
Company (determined as of the time such prior Option was granted) would in any
calendar year exceed the sum of (a) $100,000, plus (b) one-half of any excess
(the "carryover") in each of the three immediately preceding calendar years
commencing after 1980 of (i) $100,000 over (ii) the aggregate fair market value
(determined as of the time such earlier option was granted) of the shares of
Common Stock for which such employee was granted incentive stock options under
any incentive stock option plan of the Company or any of its subsidiaries or of
its parent in such preceding year to the extent such carryover was not
previously used. Commencing January 1, 1987, the aggregate fair market value
(determined at the time the option is granted) of the shares as to which
incentive stock options may be granted under the terms of the Plan or any other
plan of the Company, its subsidiaries or parent which are exercisable for the
first time by the employee during any calendar year shall not exceed $100,000.
Should it be determined that any option granted under this Plan exceeds such
maximum, the option shall be null and void to the extent, but only to the
extent, of such excess.
5. Option Price.
-------------
The purchase price for each share of Common Stock covered by an option
granted hereunder shall be determined by the Committee, but shall not be less
than the fair market value of the Common Stock at the time of granting of the
option; provided, however, that if, at the time such Option is granted, the
optionee owns (or is deemed to own under applicable provisions of
-3-
<PAGE>
the Code and rules and regulations promulgated thereunder) Common Stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its subsidiaries or of its parent, the option
price shall not be less than 110% of the fair market value of the Common Stock
on the date the option is granted. Unless otherwise required by the Code and the
applicable regulations thereunder, such fair market value shall be taken by the
Committee as the reported closing price of the Common Stock on the New York
Stock Exchange (or, if the Common Stock is not then listed on the New York Stock
Exchange, on such other securities exchange on which the Common Stock may then
be listed), on the date the option is granted, or if there is no sale of the
Common Stock on that date, then on the last previous day on which such sale was
reported. The date on which the Committee approves the granting of an option
shall be considered the date on which such option is granted.
6. Term of Options.
----------------
The term of each option granted hereunder shall be for a period not
exceeding ten (10) years from the date of granting thereof; provided, however,
that if, at the time such option is granted, the optionee owns (or is deemed to
own under applicable provisions of the Code and rules and regulations
promulgated thereunder) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any of its
subsidiaries or of its parent, the term of the option shall be no more than five
(5) years. Options shall be subject to earlier termination as hereinafter
provided.
7. Granting of Options.
--------------------
Each option shall be evidenced by a written Incentive Stock Option Contract
which shall be duly executed by the Company and by the employee and which shall
contain such
-4-
<PAGE>
terms and conditions not inconsistent herewith as may be determined by the
Committee; provided that each such Incentive Stock Option Contract shall contain
a representation by the employee that, in the event he exercises the option, the
shares of Common Stock issuable upon exercise will be acquired by him for
investment and not with a view to the distribution thereof. The Incentive Stock
Option Contract shall further provide that, at such time as the shares of Common
Stock issuable upon exercise of the option have been registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended
("Act"), the foregoing restriction on the distribution of such shares shall be
inoperative. Nothing herein shall be construed as requiring the Company to
register shares subject to an option under the Act.
8. Exercise of Options.
--------------------
Each option shall be exercisable during its term, in whole or in part, as
to such number of shares of Common Stock and at such time or times as the
Committee shall in its discretion determine. Except as provided in paragraphs 9
and 10 hereof, an option may only be exercised if the holder is at the time of
exercise in the employ of the Company or a subsidiary. No option granted
hereunder prior to January 1, 1987 shall be exercisable, in whole or in part,
while there is outstanding (within the meaning of Section 422A(c) (7) of the
Code as in effect immediately before its repeal under the Tax Reform Act of
1986) any "incentive stock option" (within the meaning of the Section 422A(b) of
the Code as in effect immediately before its repeal under the Tax Reform Act of
1986) of the Company, any of its subsidiaries or its parent or any predecessor
corporation of any such corporations, which was granted prior to the grant of
such option. The preceding sentence shall not apply to incentive stock options
granted after December 31, 1986. Options shall be exercised only by the option
holder giving written notice to the
-5-
<PAGE>
Company at its principal office, at present located at 6 Hazel Street,
Attleboro, Massachusetts, specifying the number of shares purchased and
accompanied by payment in full (or in part if so permitted by the Incentive
Stock Option Contract) in cash of the aggregate purchase price therefor (or the
amount due on exercise if the Incentive Stock Option Contract permits
installment payments). Payment of the purchase price shall be made in one or
more of the following manners, as determined by the Committee: (a) in cash or by
certified check, (b) by transferring to the Company previously acquired shares
of Common Stock having an aggregate fair market value on the date an option is
exercised equal to the aggregate option exercise price of all options being
exercised and/or (c) by transferring to the Company previously acquired shares
of Common Stock having an aggregate fair market value on the date an option is
exercised less than the aggregate option exercise price of all options being
exercised and cash or certified check for the balance of the aggregate option
exercise price of all options being exercised. The fair market value of the
shares so transferred to the Company shall be determined in accordance with the
methods described in Article 5 but as of the date the option is exercised.
Certificates representing the shares of Common Stock purchased upon exercise
shall be issued as promptly as practicable thereafter. The Company shall not be
required to deliver certificates for such shares until all payments have been
made. In no event may a fraction of a share be purchased or issued under the
Plan.
9. Termination of Employment.
--------------------------
Any option holder whose employment has terminated for any reason other than
death or disability (within the meaning of Section 22(e)(3) of the Code) may
exercise his option, to the extent exercisable upon the effective date of such
termination, at any time within three (3)
-6-
<PAGE>
months after the date of termination, but in no event after the expiration of
the term of the option; provided that if his employment shall be terminated
either (i) for cause, or (ii) without the consent of the Company, said option
shall (to the extent not previously exercised) terminate immediately. Options
granted under the Plan shall not be affected by any change of employment so long
as the holder continues to be an employee of the Company, a subsidiary or parent
of the Company or of a corporation (or a parent or subsidiary of such
corporation) issuing or assuming the option (within the meaning of Section 425
(a) of the Code) in a transaction to which Section 425(a) of the Code applies.
In the event that the employment of an individual to whom an option has
been granted under this Plan shall be terminated by disability (within the
meaning of Section 22(e)(3) of the Code) such option may be exercised by the
employee, to the extent that the employee was entitled to do so at the
termination of his employment, at any time within twelve (12) months after such
termination but not thereafter, and in no event after the date on which, except
for termination of employment, the option would otherwise expire.
Nothing in this Plan or in any option granted under this Plan shall confer
on any individual any right to continue in the employ of the Company or any
subsidiary or parent of the Company or a corporation (or a parent or subsidiary
of such corporation) issuing or assuming the option or limit or restrict in any
way the right of such employer to terminate the optionee's employment at any
time for any reason whatsoever.
10. Death of Employee.
------------------
If an option holder dies while he is employed by the Company or any of its
subsidiaries or within three (3) months after termination of his employment
(unless such termination was either
-7-
<PAGE>
(i) for cause, or (ii) without the consent of the Company), the option may be
exercised, to the extent exercisable on the date of his death, by his executor,
administrator or other person at the time entitled by law to his rights under
the option, at any time within six (6) months after death, but in no event after
the expiration of the term of the option.
11. Non-Transferability of Options.
-------------------------------
Options shall not be transferable otherwise than by will or the laws of
descent and distribution, and options may be exercised during the lifetime of
the option holder only by him. Except to the extent provided in paragraph 10
hereof, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
12. Adjustments.
------------
Notwithstanding any other provision contained herein, in the event of any
change in the outstanding Common Stock by reason of a stock dividend,
recapitalization, merger, consolidation, split-up, subdivision, combination or
exchange of shares, or the like, the aggregate number and kind of shares
available under the Plan, the number and kind of shares subject to each
outstanding option and the option prices shall be proportionately adjusted by
the Board of Directors, whose determination shall be conclusive.
13. Termination and Amendment of the Plan.
--------------------------------------
Unless sooner terminated, as hereinafter provided, this Plan shall
terminate on September 8, 1991, and no options shall be granted hereunder after
that date. The Board of Directors may, without further approval by the
stockholders, at any time terminate or amend this Plan without notice, or make
such modifications of this Plan as it shall deem advisable; provided
-8-
<PAGE>
that the Board may not, without prior approval by the holders of a majority of
the outstanding shares of Common Stock, (i) increase the maximum number of
shares as to which options may be granted under the Plan (except as contemplated
by paragraph 12 hereof), or (ii) change the eligibility requirements for
individuals entitled to receive options hereunder. The Plan has been adopted
prior to the promulgation of rules and regulations by the Internal Revenue
Service under Section 422A of the Code. Accordingly, as it is intended that
options under the Plan be "incentive stock options" within the meaning of such
section, the Board of Directors may amend the Plan in any respect necessary or
appropriate to bring the Plan and options granted under the Plan into compliance
with such rules and regulations. No termination, amendment or modification of
the Plan may, without the consent of the person to whom any option shall
theretofore have been granted, adversely affect the rights of such person under
such option or any unexercised portion thereof.
14. Substitutions and Assumptions of Options of Certain Constituent
Corporations.
---------------------------------------------------------------------------
Anything in this Plan to the contrary notwithstanding, the Board of
Directors may, without further approval by the stockholders, substitute new
options for prior options of a constituent corporation (as hereinafter defined)
or assume the prior options of such constituent corporation. The term
"constituent corporation" shall mean any corporation which has been merged into
or consolidated with the Company or one or more subsidiaries of the Company, or
whose assets or stock have been purchased or acquired by or liquidated into the
company or by or into one or more subsidiaries of the Company, or any parent or
any subsidiary of any such corporation.
-9-
<PAGE>
15. Definitions.
------------
The term "subsidiary" and "parent" shall mean a subsidiary corporation or a
parent corporation, as the case may be, as defined in Sections 425(e) and 425(f)
of the Code.
16. Stockholders' Approval.
-----------------------
The Plan, as originally adopted, was approved by the stockholders of the
Company at the annual meeting on April 15, 1982. Options granted hereunder prior
to such approval may be exercised only after such approval and the date of grant
of any such options shall be determined as if the Plan had not been subject to
such approval.
-10-
EXHIBIT 10.05
<PAGE>
SWANK, INC.
1987 INCENTIVE STOCK OPTION PLAN
1. Purposes of the Plan.
---------------------
This Plan (the "Plan") is designed to provide, in the manner contemplated
by Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
an incentive to key employees, including officers and directors who are
employees, of Swank, Inc. (the "Company") and its present and future
subsidiaries (as defined in paragraph 15 hereof), and to offer additional
inducement in obtaining the services of key personnel. Options granted hereunder
are intended to qualify as "incentive stock options" within the meaning of
Section 422A of the Code.
2. Shares Subject to the Plan.
---------------------------
Options may be granted from time to time hereunder to purchase in the
aggregate not more than 300,000 shares of Common Stock, $1 par value, of the
Company ("Common Stock") which shares may, in the discretion of the Stock Option
Committee, consist either in whole or in part of authorized but unissued shares
of Common Stock or issued shares of Common Stock which are held in the treasury
of the Company. Any shares subject to an option which for any reason expires or
terminates without having been exercised in full (unless the Plan shall have
been terminated) shall again become available for grant under the Plan.
3. Administration of the Plan.
---------------------------
The Plan shall be administered by the Board of Directors which, to the
extent it shall determine, may delegate its powers with respect to the
administration of the Plan to a
<PAGE>
committee of the Board of Directors (the "Committee") consisting of not less
than two directors, each of whom shall be a "Non-Employee Director" within the
meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under
the Securities Exchange Act of 1934, as amended. References in the Plan to
determinations or actions by the Committee shall be deemed to include
determinations and actions by the Board of Directors.
Subject to the express provisions of the Plan, the Committee shall have the
authority, in its discretion: to determine the individuals to receive options,
the times when they shall receive them, the number of shares to be subject to
each option, the term of each option, the date each option shall become
exercisable, whether an option granted hereunder shall be exercisable in whole,
in part or in installments, and if in installments, the number of shares to be
subject to each installment, the date each installment shall become exercisable
and the term of each installment; to accelerate the date of exercise of any
installment; to determine whether shares may be issued on exercise of an option
as partly paid and, if so, the dates when future installments of the option
price shall become due and the amounts of such installments; to determine the
amount necessary to satisfy the Company's withholding obligations; to construe
the respective option agreements and the Plan; and to make all other
determinations necessary or advisable for administering the Plan. The
determinations of the Committee on the matters referred to in this paragraph
shall be conclusive.
4. Eligibility.
------------
The Committee may, consistent with the purposes of the Plan, grant options
from time to time, within ten (10) years from the date of adoption of the Plan
by the Board of Directors of the Company, to key employees, including employees
who are officers or directors, of the
-2-
<PAGE>
Company or of its subsidiaries covering such number of shares of Common Stock as
it may determine. The aggregate fair market value (determined as of the time the
option is granted) of the shares of Common Stock as to which incentive stock
options may be granted under the Plan or any other plan of the Company, its
parent (as defined in paragraph 15 hereof) or subsidiary which are exercisable
for the first time by such optionee during any calendar year shall not exceed
$100,000. Should it be determined that any option granted under this Plan
exceeds such maximum, the option shall be null and void to the extent, but only
to the extent, of such excess.
5. Option Price.
-------------
The purchase price for each share of Common Stock covered by an option
granted hereunder shall be determined by the Committee, but shall not be less
than the fair market value of the Common Stock at the time of granting of the
option; provided, however, that if, at the time such option is granted, the
optionee owns (or is deemed to own under applicable provisions of the Code and
the regulations promulgated thereunder) Common Stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any of
its subsidiaries or of its parent, the option price shall not be less than 110%
of the fair market value of the Common Stock on the date the option is granted.
Unless otherwise required by the Code or the applicable regulations thereunder,
such fair market value shall be taken by the Committee as the reported closing
price of the Common Stock on the New York Stock Exchange (or, if the Common
Stock is not then listed on the New York Stock Exchange, on such other
securities exchange on which the Common Stock may then be listed), on the date
the option is granted, or if there is no sale of the Common Stock on that date,
then on the last previous day on which such sale was reported. If no quotes are
available, the fair market value of the Common Stock shall be
-3-
<PAGE>
determined by the Committee by any method consistent with the Code and
applicable regulations. The determination of the Committee with respect to fair
market value shall be conclusive. Unless otherwise required by the Code or
applicable regulations thereunder, the date on which the Committee approves the
granting of an option shall be considered the date on which such option is
granted.
6. Term of Options.
----------------
The term of each option granted hereunder shall be for a period not
exceeding ten (10) years from the date of granting thereof; provided, however,
that if, at the time such option is granted, the optionee owns (or is deemed to
own under applicable provisions of the Code and the regulations promulgated
thereunder) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or of any of its subsidiaries or of its
parent, the term of the option shall be no more than five (5) years options
shall be subject to earlier termination as hereinafter provided.
7. Granting of Options.
--------------------
Each option shall be evidenced by a written Incentive Stock Option Contract
which shall be duly executed by the Company and by the employee and which shall
contain such terms and conditions not inconsistent herewith as may be determined
by the Committee; provided that each such Incentive Stock Option Contract shall
contain a representation by the employee that, in the event he exercises the
option, the shares of Common Stock issuable upon exercise will be acquired by
him for investment and not with a view to the distribution thereof. The
Incentive Stock Option Contract shall further provide that, at such time as the
shares of Common Stock issuable upon exercise of the option have been registered
pursuant to an effective registration
-4-
<PAGE>
statement under the Securities Act of 1933, as amended (the "Act"), the
foregoing restriction on the distribution of such shares shall be inoperative.
Nothing herein shall be construed as requiring the Company to register shares
subject to an option under the Act. In addition, the Incentive Stock Option
Contract shall provide that in the event of any disposition of the shares of
Common Stock acquired upon the exercise of an incentive stock option or shares
received in exchange for such shares, within two years from the date of grant of
the option or one year after the date of transfer of such shares to him, the
optionee shall notify the Company thereof in writing within 30 days after such
disposition, provide the Company with such information as the Company may
reasonably require or request to determine its obligation to withhold any income
or other taxes by reason of such disposition and pay the Company on demand in
cash an amount necessary to satisfy such obligation.
8. Exercise of Options.
--------------------
Each option shall be exercisable during its term, in whole or in part, as
to such number of shares of Common Stock and at such time or times as the
Committee shall in its discretion determine at the granting of such option or
upon the acceleration of the date of exercise of all or any portion of the
option. Except as provided in paragraphs 9 and 10 hereof, an option may only be
exercised if the holder is at the time of exercise in the employ of the Company,
its parent or a subsidiary. Options shall be exercised only by the option holder
giving written notice to the Company at its principal office, at present located
at 6 Hazel Street, Attleboro, Massachusetts, specifying the number of shares
purchased and accompanied by payment in full (or in part if so permitted by the
Incentive Stock Option Contract) in cash of the aggregate purchase price
therefor (or the amount due on exercise if the Incentive Stock Option Contract
permits
-5-
<PAGE>
installment payments). Payment of the purchase price shall be made in one of the
following manners, as determined by the Committee: (a) in cash or by certified
check, (b) by transferring to the Company previously acquired shares of Common
Stock having an aggregate fair market value on the date the option is exercised
equal to the aggregate option exercise price of all options being exercised, or
(c) by any combination thereof. The fair market value of the shares so
transferred to the Company shall be determined in accordance with the methods
described in Article 5 but as of the date the option is exercised. Certificates
representing the shares of Common Stock purchased upon exercise shall be issued
as promptly as practicable thereafter, provided that the Company may postpone
issuing certificates for such shares for such time as the Company, in its sole
discretion, may deem necessary or desirable in order to enable it to comply with
any requirements of the Act, the Securities Exchange Act of 1934, as amended,
any rules or regulations of the Securities Exchange Commission promulgated under
either of the foregoing acts, the listing requirements of any securities
exchange on which the Company's Common Stock may now or hereafter be listed, or
any applicable laws of any jurisdiction relating to the authorization, issuance
or sale of securities. The holder of an option shall not have the rights of a
stockholder with respect to the shares covered by his option until the date of
issuance of a stock certificate to him for such shares; provided, however, that
until such stock certificate is issued, an option holder using previously
acquired shares in payment of an option exercise price shall have the rights of
a stockholder with respect to such previously acquired shares. The Company shall
not be required to deliver certificates for such shares until all payments have
been made. In no event may a fraction of a share be purchased or issued under
the Plan.
-6-
<PAGE>
9. Termination of Employment.
--------------------------
Any option holder whose employment with the Company, its parent and its
subsidiaries has terminated for any reason other than death or disability
(within the meaning of Section 22(e)(3) of the Code) may exercise his option, to
the extent exercisable upon the effective date of such termination, at any time
within three (3) months after the date of termination, but in no event after the
expiration of the term of the option; provided that if his employment shall be
terminated either (i) for cause, or (ii) without the consent of the Company,
said option shall (to the extent not previously exercised) terminate
immediately. Options granted under the Plan shall not be affected by any change
of employment so long as the holder continues to be an employee of the Company,
a subsidiary or parent of the Company or of a corporation (or a parent or
subsidiary of such corporation) issuing or assuming the option (within the
meaning of Section 425(a) of the Code) in a transaction to which Section 425(a)
of the Code applies.
In the event that the employment of an individual to whom an option has
been granted under this Plan shall be terminated by disability (within the
meaning of Section 22(e)(3) of the Code) such option may be exercised by the
employee, to the extent that the employee was entitled to do so at the
termination of his employment, at any time within twelve (12) months after such
termination but not thereafter, and in no event after the date on which, except
for termination of employment, the option would otherwise expire.
Nothing in this Plan or in any option granted under this Plan shall confer
on any individual any right to continue in the employ of the Company or any
subsidiary or parent of the Company or a corporation (or a parent or subsidiary
of such corporation) issuing or assuming the option or limit or restrict in any
way the right of such employer to terminate the optionee's employment at any
time for any reason whatsoever.
-7-
<PAGE>
10. Death of Employee.
------------------
If an option holder dies while he is employed by the Company or any of its
subsidiaries or within three (3) months after termination of his employment
(unless such termination was either (i) for cause, or (ii) without the consent
of the Company), the option may be exercised, to the extent exercisable on the
date of his death, by his executor, administrator or other person at the time
entitled by law to his rights under the option, at any time within six (6)
months after death, but in no event after the expiration of the term of the
option.
11. Non-Transferability of Options.
-------------------------------
Options shall not be transferable otherwise than by will or the laws of
descent and distribution, and options may be exercised during the lifetime of
the option holder only by him. Except to the extent provided in paragraph 10
hereof, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
12. Adjustments.
------------
Notwithstanding any other provision contained herein, in the event of any
change in the outstanding Common Stock by reason of a stock dividend,
recapitalization, merger, consolidation, split-up, subdivision, combination or
exchange of shares, or the like, the aggregate number and kind of shares
available under the Plan, the number and kind of shares subject to each
outstanding option and the option prices shall be proportionately adjusted by
the Board of Directors, whose determination shall be conclusive.
-8-
<PAGE>
13. Termination and Amendment of the Plan.
--------------------------------------
Unless sooner terminated, as hereinafter provided, this Plan shall
terminate on June 23, 1997, and no options shall be granted hereunder after that
date. The Board of Directors may, without further approval by the stockholders,
at any time terminate or amend this Plan without notice, or make such
modifications of this Plan as it shall deem advisable; provided that the Board
may not, without prior approval by the holders of a majority of the outstanding
shares of Common Stock, (i) increase the maximum number of shares as to which
options may be granted under the Plan (except as contemplated by paragraph 12
hereof), (ii) change the eligibility requirements for individuals entitled to
receive options hereunder, or (iii) otherwise materially increase the benefits
to participants under the Plan. The Plan has been adopted prior to the
promulgation of final regulations by the Treasury Department under Section 422A
of the Code. Accordingly, as it is intended that options under the Plan be
"incentive stock options" within the meaning of such section, the Board of
Directors may amend the Plan in any respect necessary or appropriate to bring
the Plan and options granted under the Plan into compliance with such
regulations. No termination, amendment or modification of the Plan may, without
the consent of the person to whom any option shall theretofore have been
granted, adversely affect the rights of such person under such option or any
unexercised portion thereof.
14. Substitutions and Assumptions of Options of Certain Constituent
Corporations.
---------------------------------------------------------------------------
Anything in this Plan to the contrary notwithstanding, the Board of
Directors may, without further approval by the stockholders, substitute new
options for prior options of a constituent corporation (as hereinafter defined)
or assume the prior options of such constituent corporation. The term
"constituent corporation" shall mean any corporation which has been
-9-
<PAGE>
merged into or consolidated with the Company or one or more subsidiaries of the
Company, or whose assets or stock have been purchased or acquired by or
liquidated into the Company or by or into one or more subsidiaries of the
Company, or any parent or any subsidiary of any such corporation.
15. Definitions.
------------
The term "subsidiary" and "parent" shall mean a subsidiary corporation or a
parent corporation, as the case may be, as defined in Sections 425(e) and 425(f)
of the Code.
16. Stockholders' Approval.
-----------------------
The Plan shall be subject to approval by the stockholders of the Company
and any options granted hereunder prior to such approval shall be conditioned
thereon; provided that the date of grant of any options granted under this Plan
shall be determined as if such options had not been subject to such approval.
-10-
EXHIBIT 10.08
<PAGE>
TERMINATION AGREEMENT
---------------------
TERMINATION AGREEMENT effective as of October 1, 1996 between SWANK, INC.,
a Delaware corporation having its principal office at 90 Park Avenue, New York,
New York (the "Company"), and CHRISTOPHER F. WOLF, residing at 116 East Emerson
Road, Lexington, Massachusetts 02173 ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is contemporaneously herewith entering into an Employment
Agreement with the Company pursuant to which, among other things, Employee will
be employed as the Company's Chief Financial Officer; and
WHEREAS, the Company and Employee also desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and Employee hereby agree as follows:
1. Term and Operation of Agreement. This Agreement shall be effective for a
-------------------------------
term (the "Term") commencing as of the date hereof and ending on the earlier of
December 31, 1998 or the termination of Employee's employment prior to a Change
in Control of the Company (as hereafter defined); provided, however, that if
there is a Change in Control subsequent to the date hereof but prior to the
termination of this Agreement in accordance with the foregoing, then the Term
shall be automatically extended for a period ending on the second anniversary of
the date of such Change in Control.
For purposes of this Agreement, Employee's employment by the Company shall
be deemed to be continuing (i) for any period during which, in accordance with
any contract between him and the Company ("Employment Agreement"), provision
shall be made for Employee to perform services as an employee of the Company and
Employee shall be entitled to compensation from the Company for same, or (ii) if
there is no Employment Agreement, for any period during which Employee is in
fact performing services as an employee of the Company and receiving
compensation from the Company for same.
Anything in this Agreement to the contrary notwithstanding, neither this
Agreement nor any provision hereof shall be operative until a Change in Control
has occurred, at which time this Agreement and all of its provisions shall
become operative immediately.
2. Change in Control-Termination of Employment and Compensation in Event of
------------------------------------------------------------------------
Termination.
- ------------
(a) After a Change in Control has occurred, Employee may terminate his
employment within two years after he has obtained actual knowledge of the
occurrence of any of the
<PAGE>
following events:
(i) Failure to elect or appoint, or re-elect or reappoint, Employee
to, or removal of Employee from, his office and/or position with the Company as
constituted immediately prior to the Change in Control, except in connection
with the termination of Employee's employment pursuant to subparagraph 3(a)
hereof.
(ii) A reduction in Employee's overall compensation (including any
reduction in pension or other benefit programs or perquisites) or a significant
change in the nature or scope of the authorities, powers, functions or duties
normally attached to Employee's position with the Company as referred to in
clause (i) of subparagraph 2(a) hereof.
(iii) A determination by Employee made in good faith that, as a result
of a Change in Control, he is unable effectively to carry out the authorities,
powers, functions or duties attached to his position with the Company as
referred to in clause (i) of subparagraph 2 (a) hereof, and the situation is not
remedied within thirty (30) calendar days after receipt by the Company of
written notice from Employee of such determination.
(iv) A breach by the Company of any provision of this Agreement not
covered by clauses (i), (ii) or (iii) of this subparagraph 2(a), which is not
remedied within thirty (30) calendar days after receipt by the Company of
written notice from Employee of such breach.
(v) A change in the location at which substantially all of Employee's
duties with the Company are to be performed to a location which is not within a
20-mile radius of the address of the place where Employee is performing services
immediately prior to the Change in Control.
(vi) A failure by the Company to obtain the assumption of, and the
agreement to perform, this Agreement by any successor (within the meaning of
paragraph 8).
An election by Employee to terminate his employment under the provisions of
this subparagraph 2(a) shall not be deemed a voluntary termination of employment
by Employee for the purpose of interpreting the provisions of any of the
Company's employee benefit plans, programs or policies. Employee's right to
terminate his employment for good reason shall not be affected by his illness or
incapacity, whether physical or mental, unless the Company shall at the time be
entitled to terminate his employment under paragraph 3(a)(ii) of this Agreement.
Employee's continued employment with the Company for any period of time less
than two years after a Change in Control shall not be considered a waiver of any
right he may have to terminate his employment pursuant to this paragraph 2(a).
(b) After a Change in Control has occurred, if Employee terminates his
employment with the Company pursuant to subparagraph 2(a) hereof or if
Employee's employment is terminated by the Company for any reason other than
pursuant to paragraph 3(a) hereof, Employee
2
<PAGE>
(i) shall be entitled to his salary, bonuses, awards, perquisites and benefits,
including, without limitation, benefits and awards under the Company's stock
option plans and the Company's pension and retirement plans and programs,
through the Termination Date (as hereafter defined) and, in addition thereto,
(ii) shall be entitled to be paid in a lump-sum, on the Termination Date, an
amount of cash (to be computed, at the expense of the Company, by the partner of
Coopers & Lybrand, L.L.P., independent certified public accountants to the
Company, or such other independent certified accountants regularly employed by
the Company (the "Accountants") in charge of the Company's account immediately
prior to the Change in Control, whose computation shall be conclusive and
binding upon Employee and the Company) equal to 2.99 times Employee's "base
amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"). Such lump-sum payment is hereinafter referred to as the
"Termination Compensation." Upon payment of the Termination Compensation and all
amounts to which Employee may be entitled under subparagraph 2(b)(i) , any
Employment Agreement between Employee and the Company shall terminate and be of
no further force or effect; provided, however, that (x) if Employee shall, in
terminating his employment with the Company pursuant to paragraph 2(a), include
in his Notice of Termination (as hereafter defined) his election to enforce his
rights under the provisions of his Employment Agreement and not under the
provisions of this Agreement or (y) if Employee shall, within thirty (30)
calendar days after he has obtained actual knowledge of the termination of his
employment by the Company other than pursuant to paragraph 3(a) of this
Agreement, notify the Company that he intends to enforce his rights under the
Employment Agreement, then, in each such case, any Employment Agreement between
Employee and the Company shall remain in full force and effect and the
provisions of this Agreement shall terminate and be of no further force or
effect and Employee shall hold, for the benefit of the Company, any payment on
account of the Termination Compensation theretofore received by him hereunder,
pending the satisfaction of the Company's obligations to Employee under the
provisions of any Employment Agreement between Employee and the company
(whereupon Employee shall return any such Termination Compensation to the
Company).
(c) For purposes hereof, a Change in Control shall be deemed to have
occurred if there has occurred a change in control as the term "control" is
defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 as
in effect on the date hereof (the "Act"); (ii) when any "Person" (as such term
is defined in Sections 3(a)(9) and 13(d)(3) of the Act), except for an employee
stock ownership trust (or any of the trustees thereof) of the Company, becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the Company's then outstanding
securities having the right to vote on the election of directors; (iii) during
any period of not more than two (2) consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clauses (i), (ii), (iv), (v), (vi) or (vii) of
this subparagraph 2(c)) whose election by the Board or nomination for executive
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were either directors at the
beginning of the period or whose election or nomination for election was
previously approved, cease for any reason to constitute at least seventy-five
(75%) percent of the entire Board of Directors; (iv) when a majority of the
directors elected at any annual or special
3
<PAGE>
meeting of stockholders (or by written consent in lieu of a meeting) are not
individuals nominated by the Company's incumbent Board of Directors; (v) if the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the holders of voting securities of the Company outstanding
immediately prior thereto being the holders of at least eighty (80%) percent of
the voting securities of the surviving entity outstanding immediately after such
merger or consolidation; (vi) if the shareholders of the Company approve a plan
of complete liquidation of the Company; or (vii) if the shareholders of the
Company approve an agreement for the sale or disposition of all or substantially
all of the Company's assets. However, the foregoing notwithstanding, no Change
in Control shall be deemed to have occurred as a result of any event specified
in clauses (i)-(.vii) of this paragraph 2(c) if Marshall Tulin or John Tulin
remains the chief executive officer of the Company following such event.
(d) Notwithstanding anything in this Agreement to the contrary, Employee
shall have the right, prior to the receipt by him of any amounts due hereunder
on amounts referred to in subparagraph 2(b)(i) , to waive the receipt thereof
or, subsequent to the receipt by him of any amounts due hereunder, to treat some
or all of such amounts as a loan from the Company which Employee shall repay to
the Company, within ninety (90) days from the date of receipt, with interest at
the rate provided in Section 7872 of the Code. Notice of any such waiver or
treatment of amounts received as a loan shall be given by Employee to the
Company in writing and shall be binding upon the Company.
(e) It is intended that the "present value" of the payments and benefits
to Employee, whether under this Agreement or otherwise, which are includable in
the computation of "parachute payments" shall not, in the aggregate, exceed 2.99
times the "base amount" (the terms "present value", parachute payments" and
"base amount" being determined in accordance with Section 280G of the Code).
Accordingly, if Employee receives payments or benefits from the Company prior to
payment of the Termination Compensation which, when added to the Termination
Compensation and any other payments or benefits which are required to be
included in the computation of parachute payments which have not been waived or
treated as a loan (as contemplated by subparagraph 2 (d)), would, in the opinion
of the Accountants, subject any of the payments or benefits to Employee to the
excise tax imposed by Section 4999 of the Code, the Termination Compensation
shall be reduced by the smallest amount necessary, in the opinion of the
Accountants, to avoid such tax. In addition, the Company shall have no
obligation to make any payment or provide any benefit to Employee subsequent to
payment of the Termination Compensation which, in the opinion of the
Accountants, would subject any of the payments or benefits to Employee to the
excise tax imposed by Section 4999 of the Code. No reduction in Termination
Compensation or release of the Company from any payment or benefit obligation in
reliance upon any aforesaid opinion of the Accountants shall be permitted unless
the Company shall have provided to Employee a copy of any such opinion,
specifically entitling Employee to rely thereon, no later than the date
otherwise required for payment of the Termination Compensation or any such later
payment or benefit.
4
<PAGE>
(f) Promptly after a Change in Control occurs, or before a Change in
Control occurs if there is a high degree of probability that a Change in Control
will occur in the immediate future, as determined by the Chief Executive Officer
of the Company, the Company shall deliver to a bank, or other institution
approved by Employee, as escrow agent, an amount of cash funds or short term
investments necessary to fund the Termination Compensation and instruct such
escrow agent to make the payments of such employee benefits due Employee in the
amounts and at the time provided in paragraph 2(b). The amount to be delivered
to such escrow agent hereunder shall be sufficient to fund such payments from
principal, and all income on the escrowed funds shall be paid to the Company at
the time the principal is paid to the Employee; provided, however, that any
income earned after the Termination Date on principal not paid to Employee at
the time provided in paragraph 2(b) shall be paid to Employee at reasonable
intervals.
3. Termination by the Company.
---------------------------
(a) Except as otherwise provided in any other agreement between Employee
and the Company, Employee's employment may be terminated by the Company without
any further liability under this Agreement if Employee shall (i) die; (ii) be
totally unable to perform the duties and services attached to his position with
the Company for a period of not less than 365 consecutive days due to illness or
incapacity, whether physical or mental; (iii) violate any written contractual
covenant of Employee then in effect in favor of the Company prohibiting Employee
from competing with the Company in any manner materially detrimental to the
Company; or (iv) be convicted of a felony involving an act against the Company
and said conviction shall not have been reversed or be subject to further
appeal, it being expressly understood, however, that conviction for violation of
a criminal statute by reason of actions taken in the course of performance of
Employee's duties as an executive of the Company shall not be deemed to involve
an act against the Company for purposes hereof unless involving a theft,
embezzlement or other fraud against the Company or any of its officers,
directors or employees, or unless involving an act of physical harm to any of
such persons.
(b) After a Change in Control has occurred, if Employee's employment is
terminated by the Company pursuant to subparagraph 3(a) hereof, Employee (or his
widow, or if she shall not survive him, any party designated by Employee by
notice to the Company, or Employee's estate, in the absence of such notice)
shall receive the sums (if any) Employee would otherwise have received if a
Change in Control had not occurred.
4. Notice of Termination and Termination Date.
-------------------------------------------
(a) Any termination of Employee's employment by the Company or by
Employee shall be communicated by a Notice of Termination to the other party
hereto. For purposes hereof, 'a "Notice of Termination" shall mean a notice
which shall state the "Termination Date" (as hereafter defined) and the specific
reasons, and shall set forth in reasonable detail the facts and circumstances,
for such determination and, in the case of Employee' s termination of employment
pursuant to paragraph 2 (a) (iii) hereof, shall state that Employee has made the
good faith determination required by that subparagraph.
5
<PAGE>
(b) "Termination Date" shall mean the date specified in the Notice of
Termination as the last day of Employee's employment by the Company, which date
shall not be sooner than the date on which the Notice of Termination is given.
(c) If within thirty (30) calendar days after any Notice of Termination
is given, or, if later, prior to the Termination Date (as determined without
regard to this paragraph 4(c)), the party hereto receiving such Notice of
Termination notifies the other party hereto that a dispute exists concerning the
termination, the Termination Date shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties hereto, by
a binding arbitration award or by a final judgment, order or decree of a court
of competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party hereto giving
such notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of such dispute, the Company will continue to pay
to Employee his full compensation (including perquisites and other benefits) in
effect when the notice of dispute was given and continue Employee as a
participant in all employee benefit plans and programs in which he was
participating when the notice of dispute was given, until the dispute is finally
resolved as hereinabove provided.
5. Mitigation. Employee shall not be required to use his best efforts to
----------
mitigate the payment of the Termination Compensation by seeking other
employment. To the extent that Employee shall, during or after the Term, receive
compensation from any other employment, the payment of Termination Compensation
shall not be adjusted.
6. Arbitration. In the event any dispute arises between the parties hereto,
-----------
Employee and the Company shall each have the right to seek arbitration in New
York, New York under the rules of the American Arbitration Association by giving
written notice of intention to arbitrate to the other party. Any award rendered
in any such arbitration proceeding shall be non-appealable and final and binding
upon the parties hereto, and judgment thereon may be entered in any court of
competent jurisdiction. If Employee prevails in any litigation or arbitration
proceeding brought in accordance herewith, or if any such litigation or
arbitration proceeding is settled, Employee shall be entitled, to the extent not
prohibited by applicable law, to reimbursement from the Company for his
reasonable attorneys' fees and expenses incurred in connection with such
litigation or arbitration proceeding.
7. Indemnification.
----------------
(a) The Company agrees that all rights to indemnification existing
immediately prior to a Change in Control and all rights to indemnification
existing immediately prior to the Termination Date in favor of Employee as
provided in the respective corporate charters and by-laws of the Company and its
subsidiaries shall survive the Termination Date and shall continue in full force
and effect for a period of not less than ten (10) years after the Termination
Date. Until the expiration of such period, the Company shall also indemnify
Employee to the fullest extent permitted by the
6
<PAGE>
Delaware General Corporation Law; provided, that in the event that any claim
shall be asserted or made within such ten-year period, all rights to
indemnification in respect of any such claim shall continue until disposition of
such claim. Without limiting the foregoing, in the event that Employee becomes
involved in any capacity in any action, proceeding or investigation in
connection with any activities involving the Company occurring on or prior to
the Termination Date, the Company will, subject to paragraph 7(b), advance to
Employee his reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith.
(b) Employee shall give prompt written notice to the Company of any
claim and the commencement of any action, suit or proceeding for which
indemnification may be sought under this paragraph 7, and the Company, through
counsel reasonably satisfactory to Employee, may assume the defense thereof;
provided, however, that Employee shall be entitled to participate in any such
action, suit or proceeding with counsel of his own choice but at his own
expense; and provided, further, the Employee shall be entitled to participate in
any such action, suit or proceeding with counsel of his own choice at the
expense of the Company if, in the good faith judgment of Employee's counsel,
representation by the Company's counsel may present a conflict of interest or
there may be defenses available to Employee which are different from or in
addition to those available to the Company. In any event, if the Company fails
to assume the defense within a reasonable time, Employee may assume such defense
and the reasonable fees and expenses of his attorneys shall be borne by the
Company. No action, suit or proceeding for which indemnification may be sought
shall be compromised or settled in any manner which might adversely affect the
interest of the Company without the prior written consent of the Company.
Notwithstanding anything in this Agreement to the contrary, the Company shall
not, without the written consent of Employee, (i) settle or compromise any
action, suit or proceeding or consent to the entry of any judgment which does
not include as an unconditional term thereof the delivery by the claimant or
plaintiff to Employee of a written release from all liability in respect of such
action, suit or proceeding or (ii) settle or compromise any action, suit or
proceeding in any manner that may materially and adversely affect Employee other
than as a result of money damages or other money payments for which the Company
fully pays.
(c) The Company shall cause to be maintained in effect, for not less
than two (2) years after the Termination Date, the then current policies of the
directors' and officers' liability insurance maintained by the Company and the
Company's subsidiaries provided that the Company may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous so long as no lapse in coverage occurs as a result of such
substitution, and shall use its best efforts to provide such insurance for an
additional three (3) years after the expiration of such two-year period, subject
to the availability of such insurance at commercially reasonable rates (or, if
not available at reasonable rates, then the Company shall purchase similar
insurance but with such lower limits of liability, without change in retention
amounts, as may be available for a premium comparable to that paid by the
Company for the last year of such two-year period), with respect to all matters
occurring prior to and including the Termination Date; provided, that in the
event that any claim shall be asserted or made within such period during which
insurance has been or is to be provided, such insurance shall be continued in
respect of any such claim until final disposition of any
7
<PAGE>
and all such claims. The Company shall pay all expenses, including reasonable
attorneys' fees, that may be incurred by Employee in enforcing the indemnity and
other obligations provided for in this paragraph 7. The covenant in this
paragraph 7 shall survive the Termination Date and shall continue without time
limit (except as expressly provided in this paragraph 7).
8. Assignability. This Agreement may not be assigned by Employee and all of
-------------
its terms and conditions shall be binding upon and enure to the benefit of
Employee and his heirs, legatees and legal representatives and the Company and
its successors and assignees. Successors of the Company shall include, without
limitation, any corporation or corporations acquiring directly or indirectly all
or substantially all of the assets of the Company, whether by merger,
consolidation, purchase or otherwise, and such successor shall thereafter be
deemed the "Company" for purposes hereof.
9. Notices. All notices, requests, demands and other communications
-------
provided for hereby shall be in writing and shall be deemed to have been duly
given when delivered personally when received, or sent by registered or
certified mail, return receipt requested, or by Federal Express or other
equivalent overnight courier, in each case with the cost of delivery prepaid, to
the party entitled thereto at the address first above written (in the case of
the Company) or to such address as contained in the Company's records (in the
case of Employee) or to such other address as may be designated by notice
pursuant to this paragraph.
10. Modification. This Agreement may be modified or amended only by an
------------
instrument in writing signed by Employee and the Company and any provision
hereof may be waived only by an instrument in writing signed by the party hereto
against whom any such waiver is sought to be enforced.
11. Severability. The invalidity or unenforceability of any provision
------------
hereof shall in no way affect the validity or enforceability of any other
provision contained herein.
12. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
13. Captions. The captioned headings herein are for convenience of
--------
reference only and are not intended and shall not be construed to have any
substantive effect.
[PAGE END HERE]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SWANK, INC.
By: /s/ John A. Tulin
----------------------------
John A. Tulin, President
/s/ Christopher F. Wolf
--------------------------------
Christopher F. Wolf
9
EXHIBIT 10.14.1
<PAGE>
FIRST AMENDMENT TO THE SWANK, INC. KEY EMPLOYEE
DEFFERRED COMPENSATION PLAN
The Swank, Inc. Key Employee Deferred Compensation Plan (the "Plan") is
hereby amended as follows:
1. Section 6.6 of the Plan is hereby amended and restated in its entirety,
effective January 1, 1997, to read and provide as follows:
"6.6 Early Payment of Deferrals. A Participant's Account
--------------------------
Balance shall be paid in accordance with the provisions of this
Article VI; provided, that a Participant may irrevocably elect in the
Deferral Agreement in effect for a Plan Year that any Deferrals
(determined without regard to earnings) made during such Plan Year
shall be paid to the Participant on or about (but in no event later
than thirty (30) days after) the earlier of (i) a specified
anniversary of the first day of such Plan Year (but no earlier than
the third anniversary of such date), or (ii) the date on which such
Deferrals would otherwise be payable in accordance with the
provisions of this Article VI."
SWANK, INC.
By: /s/ John Tulin
-------------------------
John Tulin, President
<PAGE>
MEMORANDUM TO ALL PARTICIPANTS IN THE
SWANK, INC. KEY EMPLOYEE
DEFERRED COMPENSATION PLAN (THE "PLAN")
---------------------------------------
As you know, you have been requested to complete a Deferred Compensation
Election form each year, irrevocably electing to defer a portion of your
compensation for services to be performed in the following year. The Plan gives
you the option of deferring your compensation until your termination of
employment (for any reason) or for a fixed term of three (3) years from January
1 of the year in which the services are to be provided (in both cases, subject
to certain discretion on the part of Swank, Inc. (the "Company") to pay your
compensation to you at a different time). For example, in late 1993, you could
have elected to have your deferrals paid to you at your termination of
employment or on January 1, 1997. It has come to the Company's attention that
many of you believed you were deferring your compensation for a fixed term of
three (3) years, but actually signed a document which provides for a later
payout.
Because of this confusion, the Plan Committee is asking each Participant in
the Plan to clarify his elections as to his deferrals for compensation earned in
1994, 1995 and 1996. Please check the appropriate lines below. If you did not
defer any portion of your compensation for a particular year, please leave both
lines for that year blank.
If you have any questions, please contact ___________________.
1994 Compensation:
- ------------------
_____ I intended to defer my compensation to January 1, 1997.
_____ I intended to defer my compensation until my actual termination of
employment.
1995 Compensation:
- ------------------
_____ I intended to defer my compensation to January 1, 1998.
_____ I intended to defer my compensation until my actual termination of
employment.
1996 Compensation:
- ------------------
_____ I intended to defer my compensation to January 1, 1999.
_____ I intended to defer my compensation until my actual termination of
employment.
<PAGE>
THE SWANK, INC. KEY EMPLOYEE
DEFFERRED COMPENSATION PLAN
DEFERRAL AGREEMENT
ALL ELECTIONS HEREUNDER ARE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE
SWANK, INC. KEY EMPLOYEE DEFERRED COMPANSATION PLAN (THE "PLAN").
1. I hereby irrevocably elect to defer $_______________ (not less than $5,000)
of my compensation for services to be performed from January 1 through December
31, 1997, and $____________ or _____% of any bonus compensation or commissions
above my draw to be received in 1997.
2. I hereby irrevocably elect that the amounts deferred in accordance with
Paragraph 1, together with any net earnings with respect to such amounts to
which I am entitled under the terms of the Plan (my "account balance") shall be
paid to me at the following time:
a. ______ On the earlier of the date my employment ceases for any reason,
or January 1, 20___ (the date selected may not be earlier
than January 1, 2000).
b. ______ On the date my employment ceases for any reason.
I understand that Swank, Inc. has 30 days after my employment ceases to make the
distribution to me, unless I have made a different election under Paragraph 3.
3. I understand that if I am dismissed by Swank, Inc., or in the event of my
death or disability, my account balance will be distributed to me or to my
Beneficiary in a lump sum no later than 30 days following my dismissal, death or
disability, as the case may be. If my employment with Swank, Inc. ceases for any
other reason, I elect to receive my benefits as follows:
a._______ In a lump sum, not later than 30 days following the date my
employment ceases; or
b._______ In annual installments over a period of _____ years (not more
than 10), with the first installment to be paid not later
than 30 days after the date my employment ceases. Each
succeeding installment will be paid on each succeeding
January 2nd, under my entire account balance has been
distributed to me.
<PAGE>
4. I elect to have the following measuring fund(s) (no more than 3) be used in
determining the net earnings (or losses, if any) by which my account balance
will be increased or reduced. Investment elections may be made only in multiples
of 10%. I understand that I may change my investment election only on the last
business day of a calendar quarter. I further understand that neither Swank,
Inc. nor the Committee administering the Plan shall be responsible or held
liable for the investment performance of any fund made available hereunder.
Fund Manager Fund Percentage
------------ ---- ----------
Bankers Trust Equity Index ______%
Blairlogie Capital Management Emerging Markets ______%
Capital Guardian Growth ______%
Columbus Circle Investors Aggressive Equity ______%
Janus Growth LT ______%
J.P. Morgan Investment Equity Income ______%
Multi-Strategy ______%
Templeton International ______%
PIMCO Managed Bond ______%
Government Securities ______%
Pacific Mutual Money Market ______%
High-Yield Bond ______%
M Financial Advisors Edinburgh Overseas Equity ______%
Edinburgh Fund Managers
MFI-Turner Investment Partners Turner Core Growth ______%
MFI-Frontier Capital Management Frontier Capital Appreciation ______%
MFI-Franklin Portfolio Associates Enhanced U.S. Equity Fund ______%
Dated: ________________ _______________________________
Signature
_______________________________
Print name
EXHIBIT 10.15.5
<PAGE>
SWANK, INC.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 31st day of
July 1996, between Swank, Inc., a Delaware corporation (the "Company"), and Mark
Abramowitz (the "Optionee").
W I T N E S S E T H
-------------------
1. The Company, in accordance with the terms and conditions of the 1994
Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants as
of July 31, 1996 to the Optionee an option to purchase an aggregate of 5,000
shares of the Common Stock, $.10 par value per share, of the Company ("Common
Stock"), at $ .875 per share, being 100% of the fair market value of such shares
of Common Stock on such date.
2. The term of this option shall be 5 years from July 31, 1996, subject to
earlier termination as provided in this Contract and in the Plan. This option
shall be immediately exercisable as to 100% of the number of shares of Common
Stock subject hereto.
3. This option shall be exercised by giving written notice to the Company
at its principal office, presently 6 Hazel Street, Attleboro, Massachusetts
02703-0962, Attention: Treasurer, stating that the Optionee is exercising this
stock option, specifying the number of shares being purchased and accompanied by
payment in full of the aggregate purchase price thereof in cash or by check. In
no event may a fraction of a share of Common Stock be purchased under this
option.
4. Notwithstanding the foregoing, and without limiting the provisions of
paragraph 11 of the Plan, this option shall not be exercisable by the Optionee
unless (a) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Common stock to be received
upon the exercise of the option shall be effective and current at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of the shares of Common Stock upon exercise. At the request of
the Board of Directors, the Optionee shall execute and deliver to the Company
his representation and warranty, in form and substance satisfactory to the Board
of Directors, that the shares of Common Stock to be issued upon the exercise of
the option are being acquired by the Optionee for his own account, for
investment only and not with a view to the resale or distribution thereof
without the meaning of the Securities Act. Nothing herein shall be construed so
as to obligate the Company to register the shares subject to the option under
the Securities Act.
-1-
<PAGE>
5. Notwithstanding anything herein to the contrary, if at any time the
Board of Directors shall determine, in its discretion, that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of an option, or the issue of shares of
Common Stock thereunder, this option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors, in
its discretion.
6. Nothing in the Plan or herein shall confer upon the Optionee any right
to continue as a director of the Company.
7. The Company may endorse or affix appropriate legends upon the
certificates for shares of Common Stock issued upon exercise of this option and
may issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirement of the Securities Act, or (b) implement the provisions of the Plan
or any agreement between the Company and the Optionee with respect to such
shares of Common Stock.
8. The Company and the Optionee agree that they will both be subject to and
bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made part hereof. In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
9. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and the grant and exercise of the option
and the disposition of the shares of Common Stock acquired upon exercise of the
option, including without limitation, federal state securities and "blue sky"
laws.
10. This option is not transferrable otherwise than by will or the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by him or his legal representatives.
11. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
-2-
<PAGE>
12. This Contract shall be governed by and construed in accordance with the
laws of the State of Delaware.
13. The invalidity or illegality of any provision herein shall not affect
the validity of any other provision.
14. The Optionee agrees that the Company may amend the Plan and the options
granted to the Optionee under the Plan, subject to the limitations contained in
the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this contract as of
the day and year first above written.
SWANK, INC.
By: /s/ John Tulin
--------------------------
Its: President
--------------------------
/s/ Mark Abramowitz
------------------------------
Optionee
Parker Chapin Flattau & Klimpl
------------------------------
1211 Avenue of the Americas
------------------------------
Address
New York, NY 10036
------------------------------
-3-
<PAGE>
SWANK, INC.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 31st day of
July 1996, between Swank, Inc., a Delaware corporation (the "Company"), and
Raymond Vise (the "Optionee").
W I T N E S S E T H
-------------------
1. The Company, in accordance with the terms and conditions of the 1994
Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants as
of July 31, 1996 to the Optionee an option to purchase an aggregate of 5,000
shares of the Common Stock, $.10 par value per share, of the Company ("Common
Stock"), at $ .875 per share, being 100% of the fair market value of such shares
of Common Stock on such date.
2. The term of this option shall be 5 years from July 31, 1996, subject to
earlier termination as provided in this Contract and in the Plan. This option
shall be immediately exercisable as to 100% of the number of shares of Common
Stock subject hereto.
3. This option shall be exercised by giving written notice to the Company
at its principal office, presently 6 Hazel Street, Attleboro, Massachusetts
02703-0962, Attention: Treasurer, stating that the Optionee is exercising this
stock option, specifying the number of shares being purchased and accompanied by
payment in full of the aggregate purchase price thereof in cash or by check. In
no event may a fraction of a share of Common Stock be purchased under this
option.
4. Notwithstanding the foregoing, and without limiting the provisions of
paragraph 11 of the Plan, this option shall not be exercisable by the Optionee
unless (a) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Common stock to be received
upon the exercise of the option shall be effective and current at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of the shares of Common Stock upon exercise. At the request of
the Board of Directors, the Optionee shall execute and deliver to the Company
his representation and warranty, in form and substance satisfactory to the Board
of Directors, that the shares of Common Stock to be issued upon the exercise of
the option are being acquired by the Optionee for his own account, for
investment only and not with a view to the resale or distribution thereof
without the meaning of the Securities Act. Nothing herein shall be construed so
as to obligate the Company to register the shares subject to the option under
the Securities Act.
-1-
<PAGE>
5. Notwithstanding anything herein to the contrary, if at any time the
Board of Directors shall determine, in its discretion, that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of an option, or the issue of shares of
Common Stock thereunder, this option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors, in
its discretion.
6. Nothing in the Plan or herein shall confer upon the Optionee any right
to continue as a director of the Company.
7. The Company may endorse or affix appropriate legends upon the
certificates for shares of Common Stock issued upon exercise of this option and
may issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirement of the Securities Act, or (b) implement the provisions of the Plan
or any agreement between the Company and the Optionee with respect to such
shares of Common Stock.
8. The Company and the Optionee agree that they will both be subject to and
bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made part hereof. In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
9. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and the grant and exercise of the option
and the disposition of the shares of Common Stock acquired upon exercise of the
option, including without limitation, federal state securities and "blue sky"
laws.
10. This option is not transferrable otherwise than by will or the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by him or his legal representatives.
11. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
-2-
<PAGE>
12. This Contract shall be governed by and construed in accordance with the
laws of the State of Delaware.
13. The invalidity or illegality of any provision herein shall not affect
the validity of any other provision.
14. The Optionee agrees that the Company may amend the Plan and the options
granted to the Optionee under the Plan, subject to the limitations contained in
the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this contract as of
the day and year first above written.
SWANK, INC.
By: /s/ John Tulin
-------------------------
Its: President
-------------------------
/s/ Raymond Vise
----------------------------
Optionee
8 El Paseo
----------------------------
Address
Irvine, CA 92612-2907
----------------------------
-3-
<PAGE>
SWANK, INC.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 31st day of
July 1996, between Swank, Inc., a Delaware corporation (the "Company"), and John
J. Macht (the "Optionee").
W I T N E S S E T H
-------------------
1. The Company, in accordance with the terms and conditions of the 1994
Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants as
of July 31, 1996 to the Optionee an option to purchase an aggregate of 5,000
shares of the Common Stock, $.10 par value per share, of the Company ("Common
Stock"), at $ .875 per share, being 100% of the fair market value of such shares
of Common Stock on such date.
2. The term of this option shall be 5 years from July 31, 1996, subject to
earlier termination as provided in this Contract and in the Plan. This option
shall be immediately exercisable as to 100% of the number of shares of Common
Stock subject hereto.
3. This option shall be exercised by giving written notice to the Company
at its principal office, presently 6 Hazel Street, Attleboro, Massachusetts
02703-0962, Attention: Treasurer, stating that the Optionee is exercising this
stock option, specifying the number of shares being purchased and accompanied by
payment in full of the aggregate purchase price thereof in cash or by check. In
no event may a fraction of a share of Common Stock be purchased under this
option.
4. Notwithstanding the foregoing, and without limiting the provisions of
paragraph 11 of the Plan, this option shall not be exercisable by the Optionee
unless (a) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Common stock to be received
upon the exercise of the option shall be effective and current at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of the shares of Common Stock upon exercise. At the request of
the Board of Directors, the Optionee shall execute and deliver to the Company
his representation and warranty, in form and substance satisfactory to the Board
of Directors, that the shares of Common Stock to be issued upon the exercise of
the option are being acquired by the Optionee for his own account, for
investment only and not with a view to the resale or distribution thereof
without the meaning of the Securities Act. Nothing herein shall be construed so
as to obligate the Company to register the shares subject to the option under
the Securities Act.
-1-
<PAGE>
5. Notwithstanding anything herein to the contrary, if at any time the
Board of Directors shall determine, in its discretion, that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of an option, or the issue of shares of
Common Stock thereunder, this option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors, in
its discretion.
6. Nothing in the Plan or herein shall confer upon the Optionee any right
to continue as a director of the Company.
7. The Company may endorse or affix appropriate legends upon the
certificates for shares of Common Stock issued upon exercise of this option and
may issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirement of the Securities Act, or (b) implement the provisions of the Plan
or any agreement between the Company and the Optionee with respect to such
shares of Common Stock.
8. The Company and the Optionee agree that they will both be subject to and
bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made part hereof. In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
9. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and the grant and exercise of the option
and the disposition of the shares of Common Stock acquired upon exercise of the
option, including without limitation, federal state securities and "blue sky"
laws.
10. This option is not transferrable otherwise than by will or the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by him or his legal representatives.
11. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
-2-
<PAGE>
12. This Contract shall be governed by and construed in accordance with the
laws of the State of Delaware.
13. The invalidity or illegality of any provision herein shall not affect
the validity of any other provision.
14. The Optionee agrees that the Company may amend the Plan and the options
granted to the Optionee under the Plan, subject to the limitations contained in
the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this contract as of
the day and year first above written.
SWANK, INC.
By: /s/ John Tulin
-----------------------------
Its: President
-----------------------------
/s/ John Macht
--------------------------------
Optionee
The Macht Group
--------------------------------
176 Federal St. 5th Floor
--------------------------------
Address
Boston, MA 02110
--------------------------------
-3-
EXHIBIT 10.16
<PAGE>
SWANK, INC.
1987 INCENTIVE STOCK OPTION PLAN
INCENTIVE STOCK OPTION CONTRACT
-------------------------------
THIS INCENTIVE STOCK OPTION CONTRACT entered into as of October 1, 1996
between SWANK, INC., a Delaware corporation (the "Company"), and CHRISTOPHER F.
WOLF (the "Optionee").
W I T N E S S E T H:
--------------------
1. The Company, in accordance with the allotment made by the Stock Option
Committee of the Company's Board of Directors (the "Committee") and subject to
the terms and conditions of the 1987 Incentive Stock Option Plan of the Company
(the "Plan"), grants to the Optionee an option to purchase an aggregate of
185,000 shares of the Common Stock, $.10 par value per share, of the Company
("Common Stock") at an exercise price of $.6875 per share, being at least equal
to the fair market value of such shares of Common Stock on the date hereof. This
option is intended to constitute an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
although the Company makes no representation or warranty as to such
qualification.
2. The term of this option shall be 10 years from the date hereof, subject
to earlier termination as provided in the Plan. This option may be exercised
commencing on October 1, 1997 as to 61,666 shares of Common Stock subject
hereto, as to an additional 61,666 shares of Common Stock on October 1, 1998 and
as to the remaining 61,667 shares of Common Stock on October 1, 1999. The right
to purchase shares of Common Stock subject hereto shall be cumulative, so that
if the full number of shares purchasable in a period shall not be purchased, the
balance may be purchased any time and from time to time thereafter, but not
after the termination hereof. This option may be exercised in whole or in part
and from time to time commencing on the date hereof, but prior to the end of the
term of the option, by giving written notice to the Company at its principal
financial office, presently 6 Hazel Street, Attleboro, Massachusetts 02703,
Attention: Secretary, stating that the Optionee is exercising his incentive
stock option, specifying the number of shares purchased (provided that not less
than one hundred (100) shares may be purchased unless the number purchased is
the total number of shares purchasable hereunder) and accompanied by payment of
the aggregate purchase price therefor in accordance with Section 3 below.
Notwithstanding any of the foregoing, in no event may a fraction of a share of
Common Stock be purchased under this option.
3. The purchase price of shares purchased hereunder may be paid (a) in cash
or by certified check, (b) by transferring to the Company previously acquired
shares of Common Stock having an aggregate fair market value on the date this
option is exercised equal to the aggregate option purchase price of all options
being exercised, or (c) by any combination of (a) and (b).
<PAGE>
4. The Company may withhold cash and/or shares of Common Stock to be issued
to the Optionee in the amount which the Company determines is necessary to
satisfy its obligation to withhold taxes or other amounts incurred by reason of
the grant or exercise of this option or the disposition of the underlying shares
of Common Stock. Alternatively, the Company may require the Optionee to pay the
Company such amount in cash promptly upon demand.
5. In the event of any disposition of the shares of Common Stock acquired
pursuant to the exercise of this option within two years from the date hereof or
one year from the date of transfer of such shares to him, the Optionee shall
notify the Company thereof in writing within 30 days after such disposition. In
addition, the Optionee shall provide the Company on demand with such information
as the Company shall reasonably request in connection with determining the
amount and character of the Optionee's income, the Company's deduction and its
obligation to withhold taxes or other amounts incurred by reason of such
disqualifying disposition, including the amount thereof. The Optionee shall pay
the Company in cash on demand the amount, if any, which the Company determines
is necessary to satisfy such withholding obligation.
6. Notwithstanding the foregoing, this option shall not be exercisable by
the Optionee unless (a) a Registration Statement under the Securities Act of
1933, as amended (the "Securities Act") with respect to the shares of Common
Stock to be received upon the exercise of this option shall be effective and
current at the time of exercise or (b) there is an exemption from registration
under the Securities Act for the issuance of the shares of Common Stock upon
such exercise. The Optionee hereby represents and warrants to the Company that,
unless such a Registration Statement is effective and current at the time of
exercise of this option, the shares of Common Stock to be issued upon the
exercise of this option will be acquired by the Optionee for his own account,
for investment only and not with a view to the resale or distribution thereof.
In any event, the Optionee shall notify the Company of any proposed resale of
the shares of Common Stock issued to him upon exercise of this option. Any
subsequent resale or distribution of shares of Common Stock by the Optionee
shall be made only pursuant to (x) a Registration Statement under the Securities
Act which is effective and current with respect to the sale of shares of Common
Stock being sold, or (y) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption, the Optionee shall, prior
to any offer of sale or sale of such shares of Common Stock, provide the Company
(unless waived by the Company) with a favorable written opinion of counsel, in
form and substance satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution. Such representations and
warranties shall also be deemed to be made by the Optionee upon each exercise of
this option. Nothing herein shall be construed as requiring the Company to
register the shares subject to this option under the Securities Act.
7. Notwithstanding anything herein to the contrary, if at any time the
Committee shall determine, in its discretion, that the listing or qualification
of the shares of Common Stock subject to this option on any securities exchange
or under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issuance of shares of Common Stock
hereunder, this
-2-
<PAGE>
option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
8. The Company may affix appropriate legends upon the certificates for
shares of Common Stock issued upon exercise of this option and may issue such
"stop transfer" instructions to its transfer agent in respect of such shares as
it determines, in its discretion, to be necessary or appropriate (a) (i) to
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, (ii) to implement the provisions of the Plan
or this Contract or any other agreement between the Company and the Optionee
with respect to such shares of Common Stock, or (iii) to permit the Company to
determine the occurrence of a "disqualifying disposition," as described in
Section 421(b) of the Code, of the shares of Common Stock transferred upon the
exercise of this option or (b) if applicable, with regard to any other
restriction, including, without limitation, on the assignment, pledge,
hypothecation or transfer of shares acquired upon the exercise of this option.
9. Nothing in the Plan or herein shall confer upon the Optionee any right
to continue in the employ of the Company, any parent or any of its subsidiaries,
or interfere in any way with any right of the Company, any parent or its
subsidiaries to terminate such employment at any time for any reason whatsoever
without liability to the Company, any parent or any of its subsidiaries.
10. The Company and the Optionee agree that they will both be subject to
and bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made a part hereof. In the event (a) the employment of the
Optionee terminates, (b) of the disability of the Optionee, or (c) of the death
of the Optionee, his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
11. The Optionee shall have no rights as a stockholder with respect to any
shares issuable or transferable upon exercise of this option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued.
12. This option is not transferable by the Optionee otherwise than by will
or the laws of descent and distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee or the Optionee's legal
representatives.
13. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled to the Optionee's rights
hereunder.
14. This Contract shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to the
conflicts of law rules thereof.
-3-
<PAGE>
15. The invalidity, illegality or unenforceability of any provision herein
shall not affect the validity, legality or enforceability of any other
provision.
16. The Optionee agrees that the Company may amend the Plan and the options
granted to the Optionee under the Plan, subject to the limitations contained in
the Plan. Without limiting the foregoing, the Committee, in its sole discretion,
may at any time make or provide for such adjustments to the Plan, to the number
and class of shares available thereunder and to this option as it shall deem
appropriate, all in accordance with the provisions of the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Contract as of
the day and year first above written.
SWANK, INC.
By: /s/ John A. Tulin
---------------------------------
Title: John A. Tulin, President
/s/ Christopher F. Wolf
---------------------------------
Christopher F. Wolf, Optionee
116 East Emerson Road
---------------------------------
Address
Lexington, Massachusetts 02173
---------------------------------
---------------------------------
Tax Identification No.
-4-
EXHIBIT 10.17
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of October 1, 1996 between SWANK, INC., a Delaware
corporation with an address at 90 Park Avenue, New York, New York 10016 (the
"Corporation"), and CHRISTOPHER F. WOLF, residing at 116 East Emerson Road,
Lexington, Massachusetts 02173 ("Employee").
W I T N E S S E T H :
---------------------
WHEREAS, the Corporation wishes to obtain the services of Employee as the
Corporation's Chief Financial Officer upon the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, Employee is willing to serve as the Corporation's Chief Financial
Officer upon such terms and subject to such conditions.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Corporation and Employee hereby agree as
follows:
1. Employment and Term.
--------------------
The Corporation hereby employs Employee, and Employee hereby accepts
employment by the Corporation, on the terms and conditions herein contained, to
perform the duties described in paragraph 2 for a term (the "Employment Term")
commencing on October 1, 1996 (the "Commencement Date") and, subject to the
remaining provisions of this Agreement, ending on September 30, 1998.
2. Duties.
-------
(a) During the Employment Term, Employee shall serve as the Corporation's
Chief Financial Officer, with the corporate titles of Senior Vice President and
Treasurer. Employee will perform such duties and responsibilities as from time
to time shall be designated by the Corporation's President and/or its Board of
Directors. Employee shall serve the Corporation faithfully and to the best of
his ability and will devote his full business time and attention to the business
and affairs of the Corporation and its subsidiaries except during vacation
periods and periods of illness or incapacity. Notwithstanding the immediately
preceding sentence, during the period from and after the Commencement Date to
and including the earlier of (i) September 30 , 1997 and (ii) the sale of the
Nursing Home (as hereinafter defined), whether such sale takes the form of a
sale of (1) all or substantially all of its assets, (2) stock or other evidences
of ownership, or (3) otherwise, Employee may
<PAGE>
continue to serve as a trustee, and to spend not more than one morning per month
during normal business hours to attend meetings of the board of trustees, of
Maristhill Nursing Home, a non-profit organization (the "Nursing Home").
(b) The Corporation and Employee acknowledge and agree that, while the
duties of Employee under this paragraph 2 are presently intended primarily to be
performed at the Corporation's offices located at 6 Hazel Street, Attleboro,
Massachusetts 02703, Employee shall spend such time at the Corporation's other
offices, including those offices located in New York City, and otherwise travel
in furtherance of the business of the Corporation or the performance of
Employees duties and responsibilities hereunder, as the Board of Directors or
the Corporation's President shall deem necessary.
3. Compensation and Benefits.
--------------------------
(a) During the Employment Term, the Corporation agrees to pay Employee a
salary ("Base Salary") at the rate of $200,000 per year, payable in accordance
with the Corporation's regular pay intervals for its executive officers or in
such other manner as shall be mutually agreeable to Employee and the
Corporation. The Corporation's Board of Directors may, in its discretion, at any
time and from time to time, increase the Base Salary for Employee and grant
Employee other compensation in addition to that provided for hereby.
(b) During the Employment Term, Employee shall be entitled to participate
in any stock option, retirement, medical payment, disability, health or life
insurance and other similar benefit plans and arrangements which may be or
become available to executive officers of the Corporation in general; provided,
that Employee shall be required to comply with the conditions attendant to
coverage by such plans and arrangements and shall comply with, and be entitled
to benefits only in accordance with, the terms and conditions of such plans and
arrangements.
(c) Employee shall be entitled to reimbursement for expenses reasonably
incurred by him in furtherance of the business of the Corporation and in the
performance of his duties hereunder, on an accountable basis with such
substantiation as the Corporation may at the time require from its executive
officers. In addition, during the Employment Term, Employee shall be provided by
the Corporation with a cellular phone and a laptop computer (the cost and
specifications of which laptop computer shall be mutually agreed to by the
Corporation and Employee prior to its purchase), in each case for use in
furtherance of the business of the Corporation. Employee shall be responsible
and shall reimburse the Corporation for cellular phone charges incurred by him
that are not related to the business of the Corporation. Such cellular phone and
laptop computer shall be the property of the Corporation.
-2-
<PAGE>
(d) Employee shall be entitled to three weeks vacation in each year during
the Employment Term. Such vacation shall be taken at such time or times as may
be mutually agreed upon by the Corporation and Employee.
(e) The Corporation shall pay Employee' membership dues (i) for the
American Institute of Certified Public Accountants and the Massachusetts Society
of Certified Public Accountants and (ii) for other professional societies upon
which the Corporation and Employee shall mutually agree.
4. Termination upon Death; Death Benefit. The Employment Term shall
-----------------------------------------
terminate on the date of Employee's death, except that Employee's Base Salary
shall be paid to his estate through the end of the month in which his death
occurs.
5. Termination for Disability. If, during the Employment Term, in the
----------------------------
judgment of the Corporation's Board of Directors, Employee shall, because of
physical or mental illness or incapacity, become unable adequately to perform
the duties and services required of him pursuant to this Agreement for a period
of 90 consecutive days or for a period of 120 days in any 365-day period, the
Corporation may, upon prior written notice given at any time after the
expiration of such 90-day period or 120-day period, as the case may be, to
Employee of its intention to do so, terminate the Employment Term to such date
as may be set forth in such notice. In case of such termination, Employee shall
be entitled to receive his Base Salary through the end of the month in which the
Employment Term shall be terminated. The payment of Base Salary provided for in
this paragraph 5 shall be in addition to amounts, if any, that shall be payable
to Employee upon his illness or incapacity under any disability insurance policy
or other disability plan of the Company.
6. Termination by Corporation; Expiration of the Employment Term.
--------------------------------------------------------------
(a) The Corporation may terminate this Agreement, without liability other
than for payment of accrued but unpaid compensation through the date the
Employment Term ends, "for cause." The term "for cause" shall mean (i) a breach
by Employee of this Agreement which is not cured within 14 days after notice of
such breach shall have been given to Employee by the Corporation, (ii) the
commission by Employee of an act involving moral turpitude, dishonesty, theft or
unethical business conduct, (iii) any other conduct of Employee which
significantly impairs or harms the reputation, or is otherwise to the
significant detriment, of the Corporation, or any of its subsidiaries or
affiliates, (iv) the possession or use of illegal drugs or prohibited
substances, (v) excessive drinking which, in the good faith determination of the
Corporation's Board of Directors, significantly impairs Employee's ability to
perform his duties and responsibilities hereunder, (vi) the conviction of
Employee of a felony or (vii) the breach by Employee of a fiduciary duty or
obligation to the Corporation or any of its subsidiaries or affiliates.
-3-
<PAGE>
(b) The Corporation may also terminate this Agreement at any time without
cause. In such event, provided Employee shall not at any time be in violation of
paragraph 7 hereof, the Corporation shall pay to Employee (i) if termination
shall occur on or prior to April 1, 1998, his Base Salary (at the annual rate in
effect on the date of termination) from the date of termination of the
Employment Term through and including September 30, 1998, or (ii) if termination
shall occur after April 1, 1998, his Base Salary (at the annual rate in effect
on the date of termination) from the date of termination through and including
the day immediately preceding the six month anniversary of the date of
termination, in each case, which Base Salary shall be payable in installments in
accordance with the Corporation's regular pay intervals for its executive
officers or in such other manner as shall be mutually agreeable to Employee and
the Corporation.
(c) Notwithstanding anything contained in this Agreement to the contrary,
in the event that Employee's employment with the Corporation and/or its
subsidiaries and affiliates shall terminate and he shall be entitled to receive
amounts under that certain Termination Agreement dated the date hereof between
the Corporation and Employee (the "Termination Agreement"), Employee shall not
be entitled to receive, and the Corporation shall not be required to pay, any
amounts to which he may otherwise be entitled under this Agreement, including,
without limitation, under paragraphs 6(b) and (d) hereof.
(d) In the event that (i) the Employment Term shall expire by its terms on
September 30, 1998 and (ii) the employment of Employee shall terminate on such
date, then, provided Employee shall not at any time be in violation of paragraph
7 hereof, the Corporation shall pay to Employee his Base Salary (at the annual
rate in effect on September 30, 1998) from October 1, 1998 through and including
March 31, 1999, with such Base Salary payable in installments in accordance with
the Corporation's regular pay intervals for its executive officers or in such
other manner as shall be mutually agreeable to Employee and the Corporation. In
the event that after the Employment Term (iii) Employee shall continue to be
employed by the Corporation and (iv) he shall terminate his employment with the
Corporation or the Corporation shall terminate the employment of Employee for
any reason other than for cause, then, provided Employee shall not at any time
be in violation of paragraph 7 hereof, the Corporation shall pay to Employee his
Base Salary (at the annual rate in effect on the date of termination) from the
date of termination through and including the day immediately preceding the six
month anniversary of the date of termination, with such Base Salary payable in
installments in accordance with the Corporation's regular pay intervals for its
executive officers or in such other manner as shall be mutually agreeable to
Employee and the Corporation. Nothing herein shall be deemed to require the
Corporation to employ Employee after the expiration or termination of the
Employment Term or to require the Employee to agree to be so employed.
-4-
<PAGE>
(e) Employee shall be required to mitigate the amount of the payments to
which he is entitled under paragraphs 6(b) and (d). Without limiting the
generality of the foregoing, in the event Employee secures employment of any
kind and receives compensation in respect thereof, any payments to which he
might otherwise be entitled under paragraph 6(b) or (d) shall be reduced by the
amount of such compensation actually received by him.
7. Certain Covenants and Agreements.
---------------------------------
(a) In consideration of Employee's employment hereunder, Employee agrees
that during the Employment Term and for a period of one year thereafter (and for
such additional period, if any, during which Employee shall be receiving amounts
from the Corporation pursuant to paragraphs 6(b) or (d) hereof), Employee will
not directly or indirectly (i) solicit, induce or entice for employment,
retention or affiliation, or recommend to any corporation, entity or other
person the solicitation, inducement or enticement for employment, retention or
affiliation of, any employee, consultant, independent contractor or other person
employed or retained by, or affiliated with, the Corporation, or any of its
subsidiaries or affiliates, (ii) engage in any activity intended to terminate,
disrupt or interfere with the Corporation's or any of its subsidiary's or
affiliate's relationship with a customer, supplier, lessor or other person, or
(iii) engage or participate in, or have any interest in any corporation, entity
or other person that engages or participates in any business or activity engaged
or participated in by the Corporation on date of termination of the Employment
Term. For purposes of this paragraph 7(a), Employee will be deemed directly or
indirectly to be engaged or participating in the operation of such a business or
activity, or to have an interest in a corporation, entity or other person, if he
is a proprietor, partner, joint venturer, shareholder, director, officer,
lender, manager, employee, consultant, advisor or agent or if he, directly or
indirectly (including as a member of a group), controls all or any part thereof;
provided, that nothing in this paragraph 7(a) shall prohibit Employee from
holding less than two percent (2%) of a class of a corporation's outstanding
securities that are listed on a national securities exchange or traded in the
over-the-counter market.
(b) Employee acknowledges that by his employment he will be in a
confidential relationship with the Corporation and will have access to
confidential information and trade secrets of the Corporation, its subsidiaries
and affiliates (collectively, the "Confidential Information"). Confidential
Information includes, but is not limited to, customer and client lists,
financial information, price lists, marketing and sales strategies and
procedures, computer programs, databases and software, supplier, vendor and
service information, personnel information, operating procedures and techniques,
business plans and systems, and all other records, files, and information in
respect of the Corporation. During the Employment Term and thereafter, Employee
shall maintain the strictest confidentiality of all Confidential Information and
shall not use or permit the use of, or disclose, discuss,
-5-
<PAGE>
communicate or transmit or permit the disclosure, discussion, communication or
transmission of, any Confidential Information. This paragraph 7(b) shall not
apply to (i) information that, by means other than Employee's deliberate or
inadvertent disclosure, becomes generally known to the public or (ii)
information the disclosure of which is compelled by law (including judicial or
administrative proceedings and legal process). In that connection, in the event
that Employee is requested or required (by oral question, interrogatories,
requests for information or documents, subpoenas, civil investigative demand or
other legal process) to disclose any Confidential Information, Employee agrees
to provide the Corporation with prompt written notice of such request or
requirement so that the Corporation may seek an appropriate protective order or
relief therefrom or may waive the requirements or this paragraph 7(b). If,
failing the entry of a protective order or the receipt of a waiver hereunder,
Employee is, in the opinion of counsel, compelled to disclose Confidential
Information under pain of liability for contempt or other censure or penalty,
Employee may disclose such Confidential Information to the extent so required.
(c) In the event of a breach or threatened breach by Employee of any of the
provisions of this paragraph 7, the Corporation shall be entitled to an
injunction to be issued by any court or tribunal of competent jurisdiction to
restrain Employee from committing or continuing any such violation. In any
proceeding for an injunction, Employee agrees that his ability to answer in
damages shall not be a bar or be interposed as a defense to the granting of a
temporary or permanent injunction against him. Employee acknowledges that the
Corporation will not have an adequate remedy at law in the event of any breach
by him as aforesaid and that the Corporation may suffer irreparable damage and
injury in the event of such a breach by him. Nothing contained herein shall be
construed as prohibiting the Corporation from pursuing any other remedy or
remedies available to the Corporation in respect of such breach or threatened
breach.
(d) If any term or provision of this paragraph 7 shall be held invalid or
unenforceable because of its duration, geographic scope, or for any other
reason, the Corporation and Employee agree that the court making such
determination shall have the power to modify such provision, whether by limiting
the geographic scope, reducing the duration, or otherwise, to the minimum extent
necessary to make such term or provision valid and enforceable, and such term or
provision shall be enforceable in such modified form.
(e) The provisions of this paragraph 7 shall survive the termination of the
Employment Term.
8. Assignability. This Agreement may not be assigned by Employee and all of
-------------
its terms and conditions shall be binding upon and inure to the benefit of
Employee and his heirs, executors, administrators, legal representatives and
assigns and the Corporation and its successors and assigns. Successors of the
Corporation shall include, without
-6-
<PAGE>
limitation, any corporation or other entity acquiring directly or indirectly all
or a substantial part of the assets of the Corporation whether by merger,
consolidation, purchase, lease or otherwise, and such successor shall thereafter
be deemed the "Corporation" for purposes hereof.
9. Notices. All notices, requests, demands and other communications
-------
provided for hereby shall be in writing and shall be deemed to have been duly
given when delivered personally or two days after sent by registered or
certified mail, return receipt requested, to the party entitled thereto at the
address first above written or to such changed address as the addressee may have
given by a similar notice, with a copy, in each case, to William D. Freedman,
Esq., Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New
York, NY 10036.
10. Modification. This Agreement may be modified or amended only by an
------------
instrument in writing signed by Employee and the Corporation and any provision
hereof may be waived only by an instrument in writing signed by the party hereto
against whom any such waiver is sought to be enforced.
11. Termination Agreement. The Corporation represents and warrants to
----------------------
Employee that the provisions of the Termination Agreement are substantially the
same as the provisions of the form of termination agreement executed and
delivered by the Corporation and the immediately preceding chief financial
officer of the Corporation.
12. Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect, impair or invalidate any other provision of
this Agreement.
13. Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of New York, without regard
to principles of conflicts of law (or any other law that would make the laws of
any jurisdiction other than the State of New York applicable to this Agreement).
[PAGE ENDS HERE]
-7-
<PAGE>
14. Captions. The captioned headings contained herein are for convenience
--------
of reference only and are not intended, nor shall they be construed, to have any
substantive effect.
IN WITNESS WHEREOF, the Corporation and Employee have signed this Agreement
on the date set forth on the first page of this Agreement.
SWANK, INC.
By: /s/ John A. Tulin
-------------------------------
John A. Tulin, President
/s/ Christopher F. Wolf
-------------------------------
Christopher F. Wolf
-8-
EXHIBIT 10.18
<PAGE>
SWANK, INC.
90 PARK AVENUE
NEW YORK, NEW YORK 10016
Effective August 1, 1996
The Macht Group
176 Federal Street
Boston, Massachusetts 02110
Attention: John J. Macht, President
Dear John:
This will confirm the understanding between The Macht Group ("Macht") and
Swank, Inc. ("Swank") as follows:
Macht may from time to time bring to Swank's attention certain potential
license arrangements pursuant to which Swank shall be the exclusive licensee for
the manufacture, promotion, distribution and sale of products under the
trademark or trade name owned by the licensor in such arrangement (each, a
"License"). Macht and Swank hereby agree that if, during the period from and
after August 1, 1996 to and including July 31, 1998, Swank shall enter into any
License with a licensor to whom Swank has not previously been introduced or with
whom Swank has not had previous discussions or business arrangements, Macht will
be entitled to receive an amount equal to (i) three (3%) percent of Swank's Net
Sales (as defined below) under and during the term, including all renewals of
the term (the "Term"), of such License up to, but not exceeding, $2,000,000 of
Net Sales, (ii) two (2%) percent of such Net Sales under and during the Term of
such License above $2,000,000 up to, but not exceeding, $5,000,000 of Net Sales,
and (iii) one (1%) percent of such Net Sales under and during the Term of such
License above $5,000,000. For purposes of this letter agreement, the term "Net
Sales" shall have the same meaning as set forth in the License executed by
Swank; provided, that if such term is not so defined, the term "Net Sales" shall
mean the gross sales price of goods sold pursuant to such License less all
manufacturing, sales, luxury, purchase and other taxes of any kind or nature and
less trade discounts, returns, credits and allowances. Amounts payable to Macht
by Swank will be paid contemporaneously with the payment of royalties by Swank
to the licensor under such License. Discounts, returns, credits and/or
allowances not deducted by Swank in determining amounts payable or paid to Macht
at any time and from time to time under this letter agreement may be deducted
from amounts payable thereafter to Macht. Any amounts not so deducted by Swank
shall be repaid to Swank by Macht promptly upon request by Swank. In the event
of a termination of any License, Swank's obligation to pay amounts to Macht in
respect of such License shall terminate contemporaneously therewith. Nothing
herein shall require Swank to amend, modify or renew any such License or to keep
any such License in effect.
<PAGE>
This will also confirm our understanding that in the event that the license
agreement dated September 20, 1994 between Swank and Christie Brinkley, Inc. (as
amended to date, the "Brinkley License") shall be amended so that Swank shall
have the exclusive license for the manufacture, promotion, distribution and sale
of products covered by the Brinkley License in Japan, Macht shall be entitled to
receive an amount equal to the amounts set forth in clauses (i), (ii) and (iii),
as applicable, of the immediately preceding paragraph solely in respect of
Swank's Net Sales under and during the term, including all renewals of the term,
of the amendment to the Brinkley License to persons located in Japan. Amounts
shall be payable at the times and otherwise in accordance with the terms of this
letter agreement.
Nothing in this letter agreement shall require Swank to agree to or to
enter into any License or to any amendment to the Brinkley License. The decision
to agree to any License and/or amendment to the Brinkley License shall be made,
in each and every case, by Swank in its sole and absolute discretion. In
addition, nothing in this letter agreement shall be deemed or construed to
confer upon Macht or any other party any rights or interests, including that of
a third-party beneficiary, in any License, the Brinkley License or any amendment
thereof.
This letter agreement constitutes the entire agreement between Swank and
Macht with respect to the subject matter hereof, supersedes all other agreements
and understandings between Swank and Macht and may not be amended or modified
except by a written instrument signed by both Swank and Macht. Macht may not,
voluntarily or involuntarily, by operation of law or otherwise, assign, convey,
or in any other manner transfer or encumber, any or all of its rights or
delegate any or all of its duties hereunder without the prior written consent of
Swank. Subject to the foregoing, this letter agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. This letter agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without regard to
principles of conflicts or choice of law.
If the foregoing correctly reflects our understanding, please sign this
letter agreement where indicated below and return it to Swank. The enclosed copy
if for your records.
Very truly yours,
SWANK, INC.
By: /s/ John A. Tulin
-------------------------------
John A. Tulin, President
AGREED:
THE MACHT GROUP
By: /s/ John J. Macht
-------------------------------
John J. Macht, President
-2-
EXHIBIT 11.01
<PAGE>
EXHIBIT 11.01
-------------
SWANK, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) $ 1,299 $ (8,944) $ 5,572
============ ============ ============
Primary
- -------
Weighted average common shares 16,509,523 16,509,523 16,470,636
outstanding
Effect of excluding unallocated shares held (688,189) (364,440) (538,127)
in ESOP
Common shares issuable in respect to 0 (9,715) 274,174
common equivalents with a dilutive effect ------------ ------------ ------------
Total common and common 15,821,334 16,135,368 16,206,683
equivalent shares ============ ============ ============
Primary net income (loss) per share (1) $ .08 $ (.55) $ .34
============ ============ ============
Fully Diluted
- -------------
Weighted average common shares 16,509,523 16,509,523 16,470,636
outstanding
Effect of excluding unallocated shares held (688,189) (364,440) (538,127)
in ESOP
Common shares issuable in respect to 0 (9,715) 274,174
common stock equivalents with a dilutive ------------ ------------ ------------
effect
Total common and common 15,821,334 16,135,368 16,206,683
equivalent shares ============ ============ ============
Fully diluted net income (loss) per share (1) $ .08 $ (.55) $ .34
============ ============ ============
</TABLE>
(1) Net income (loss) per common share is computed by dividing net income
(loss) by total common and common equivalent shares for primary and fully
diluted, respectively.
EXHIBIT 13
<PAGE>
================================================================================
SWANK (LOGO)
ANNUAL REPORT
1996
================================================================================
<PAGE>
TO OUR SHAREHOLDERS AND FRIENDS
CHAIRMAN'S MESSAGE
I am quite proud to share with you the accomplishments of Swank's
management and employees during 1996. As we closed out a very difficult year in
1995, we set some aggressive goals in order to restore the Company to
profitability. These goals were the basis of Company-wide programs to reduce
costs, become more efficient and improve gross profit margins. Our efforts
produced a dramatic effect on the bottom line.
The forces of change, including consolidation and market saturation, which
affect our retail customer base continue to affect Swank. Consumer interest in
fashion jewelry has yet to regain its former strength. These factors contributed
to the decline in net sales the Company experienced in 1996. They also dictate
that we institutionalize and aggressively pursue our improvement programs and we
are doing so.
We have also sharpened our focus on maintaining and enhancing market share.
In 1996, we signed several important new licenses for our men's products. These
additions, plus some repositioning of our "Pierre Cardin" line, will broaden
our product offerings for 1997. The results of our initiatives with mass
merchandisers have been encouraging and we will focus on expanding this segment
of our business. Exports represent another area which we have nurtured in recent
years. We feel strongly that this presents growth potential, and we are
attempting to develop meaningful opportunities offshore.
I congratulate your Company's management team and employees on their
efforts in 1996. I thank all of you stockholders who supported us through a most
challenging year. There is no shortage of challenges ahead in 1997. However, I
am confident that the Company has turned the corner and look ahead with
optimism.
Sincerely yours,
/s/ MARSHALL TULIN
-------------------------------------
Marshall Tulin, Chairman
February 18, 1997
----------
PRESIDENT'S LETTER
I am most pleased to report that not only has the Company successfully
returned to profitability, but has also taken those steps which we believe
necessary to provide a firm foundation for the future. The Company reported net
income of 1.3 million dollars for 1996, an improvement of over $10,000,000
compared to the loss reported in 1995.
We set several ambitious goals for the Company for 1996. The first, of
course, was a return to profitability and that goal was accomplished through a
combination of reduced spending and increased margins. We have reduced our
overhead and increased the productivity of all of our operations. Our second
goal was to dramatically improve our asset management. We have significantly
reduced our inventory, increased our cash flow and reduced our short term
borrowings, all of which helped to generate increased profits for the Company.
In addition, we sought to improve the Company's competitive position in the
marketplace. To that end, we are proud to announce the following new licenses
which have been acquired by the Company in 1996:
Yves Saint Laurent -- Men's jewelry, belts and
small leather goods
Geoffrey Beene -- Men's jewelry, belts and
small leather goods
Kenneth Cole -- Men's jewelry
We believe that these new licenses will help strengthen our share of the
Men's Accessories Market. We will continue to pursue new licenses and new
markets in our effort to secure an ever increasing share of the Men's Accessory
and Women's Jewelry Markets, both domestically and internationally.
With the success of 1996 behind us, we have taken an even more aggressive
approach to 1997 and the future. We are fully aware that our rebuilding program
has just begun and that there is a great deal more work to be done. We will
expend every effort to make 1997 another step towards achieving our long term
goal of continued growth in sales and profits.
I would like to thank our Chairman, Board of Directors, and our valuable
employees for their help and sacrifices. I would also like to thank our
suppliers and customers for their loyal support throughout the year.
Sincerely yours,
/s/ JOHN TULIN
-------------------------------------
John Tulin,
President and Chief Executive Officer
February 18, 1997
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For each of the Five Years Ended
December 31
(In thousands, except share data) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING DATA:
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ............................................. $132,642 $140,102 $143,496 $126,770 $127,062
Cost of goods sold .................................... 74,396 85,774 79,122 69,002 68,469
- -----------------------------------------------------------------------------------------------------------------------------------
Gross profit .......................................... 58,246 54,328 64,374 57,768 58,593
Selling and administrative expenses ................... 54,232 60,193 58,212 53,273 52,270
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations ......................... 4,014 (5,865) 6,162 4,495 6,323
- -----------------------------------------------------------------------------------------------------------------------------------
Gain on sale of product line .......................... 1,775
Interest charges, net ................................. 1,855 2,085 1,632 1,446 2,132
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and cumulative
effect of a change in accounting for income taxes ... 2,159 (7,950) 4,530 3,049 5,966
Provision (benefit) for income taxes .................. 860 994 (1,042) 256 1,840
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change
in accounting for income taxes ...................... 1,299 (8,944) 5,572 2,793 4,126
Cumulative effect of a change in accounting
for income taxes .................................... 477
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ..................................... $ 1,299 $ (8,944) $ 5,572 $ 3,270 $ 4,126
- -----------------------------------------------------------------------------------------------------------------------------------
Share and per share information:
Weighted average common shares and
common share equivalents outstanding .............. 15,821,334 16,135,368 16,206,683 17,258,928 16,874,482
Income (loss) before cumulative effect of a
change in accounting for income taxes ............. $ .08 $ (.55) $ .34 $ .16 $ .24
Cumulative effect of a change in accounting
for income taxes .................................. .03
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share ........................... $ .08 $ (.55) $ .34 $ .19 $ .24
- -----------------------------------------------------------------------------------------------------------------------------------
Additions to property, plant and
equipment, net ...................................... $ 1,132 $ 2,006 $ 1,000 $ 1,439 $ 669
Depreciation and amortization ......................... $ 2,027 $ 1,523 $ 1,108 $ 955 $ 876
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION (In thousands, except share data)
- -----------------------------------------------------------------------------------------------------------------------------------
Current assets ........................................ $ 37,905 $ 45,768 $ 47,258 $ 43,273 $ 36,464
Current liabilities ................................... 18,865 29,218 21,877 19,987 14,255
Net working capital ................................... 19,040 16,550 25,381 23,286 22,209
Property, plant and equipment, net .................... 6,760 7,457 6,587 6,695 6,211
Total assets .......................................... 48,787 57,324 57,458 52,123 45,010
Long-term obligations ................................. 8,591 7,573 5,364 7,524 9,469
Stockholders' equity .................................. 21,331 20,533 30,217 24,612 21,286
Stockholder's equity per weighted average share ....... $ 1.35 $ 1.27 $ 1.86 $ 1.43 $ 1.26
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<CAPTION>
Percentage Changes
- -------------------------------------------------------------------------------------------
1996 1995 1994 1996-95 1995-94
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTRIBUTION TO NET SALES
$ 55,988 $ 59,271 $ 63,084 Men's and Women's Jewelry (6%) (6%)
72,967 74,786 68,764 Men's Leather Accessories (2%) 9%
3,687 6,045 11,648 Other* (39%) (48%)
- -------------------------------------------------------------------------------------------
$132,642 $140,102 $143,496 Total Net Sales (5%) (2%)
- -------------------------------------------------------------------------------------------
CONTRIBUTION TO GROSS PROFIT
$ 26,054 $ 25,323 $ 31,678 Men's and Women's Jewelry 3% (20%)
30,325 27,335 28,162 Men's Leather Accessories 11% (3%)
1,867 1,670 4,534 Other* 12% (63%)
- -------------------------------------------------------------------------------------------
$ 58,246 $ 54,328 $ 64,374 Total Gross Profit 7% (16%)
- -------------------------------------------------------------------------------------------
* Includes the men's accessories (gifts) line which was discontinued during the fourth
quarter of fiscal 1995 and certain merchandise sold through factory outlets. The table
indicates the relative contribution to net sales and gross profit by principal product
categories for each of the three years ended December 31. The components of net sales
are gross sales less cash discounts and customer returns.
</TABLE>
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes, thereto.
1996 vs. 1995
NET SALES
- ---------
Net sales for the year ended December 31,1996, decreased by $7,460,000 from
1995. Men's and Women's Jewelry net sales decreased $3,283,000. Men's Leather
Accessories' net sales decreased $1,819,000 and Other net sales decreased
$2,358,000 for the year. Gross shipments declined from the prior year's level in
each line, including the effect of lower volume at the Company's factory outlets
as further discussed below. The market for Women's Jewelry continues to be
difficult due to a lackluster retail environment for fashion accessories and
emphasis on competitively priced, career oriented products. In addition, all
product lines have been affected by the continuing consolidation among major
retailers. A change in distribution channels announced by one of the Company's
principal licensors of men's products has prompted the Company to introduce,
commencing in 1997, new men's designer lines. Although management anticipates
that the Company will be strengthened by the addition of these new lines,
unfavorable consumer acceptance of the new lines could adversely affect future
operating results. Net sales of Men's Leather Accessories in 1996 have been
reduced by anticipated additional returns in connection with the pending product
transition.
Net sales at the Company's factory outlets declined 27% for the year ended
December 31, 1996 and constituted approximately 6% of net sales for the year.
Same store sales declined approximately 4% and sales decreased approximately 23%
as a result of the closure of fifteen unprofitable stores in 1996. An additional
3 stores were closed in January 1997. The Company believes that factory outlets
are still a valuable distribution channel for the disposition of excess and/or
discontinued inventory and continues to assess the performance of each store.
As described in Note B to the financial statements, the Company reduces
sales and cost of sales by the estimated effect of future returns of current
period shipments. Overall returns experience in 1996 was generally more
favorable than last year. In 1995, the Company shifted emphasis on women's
jewelry from higher margin fashion products to more competitively priced career
oriented products. This action produced heavier returns due to the necessity of
changing the merchandise presentation at the store level. Each Spring, upon
completion of processing returns from the preceding Fall season, the Company
records adjustments to net sales to reflect the difference in actual sales
returns versus the estimates accrued at the end of the preceding year. These
adjustments were as follows:
- --------------------------------------------------------------------------------
Increase (decrease) in net sales -
(in thousands) 1996 1995 Change
------ ------ ------
Men's & Women's Jewelry .................... $1,059 ($1,642) $2,701
Men's Leather Accessories .................. 188 (37) 225
Other ...................................... 138 (312) 450
------ ------ ------
Increase (decrease)in Net Sales ............ $1,385 ($1,991) $3,376
====== ====== ======
- --------------------------------------------------------------------------------
GROSS PROFIT
- ------------
Gross profit for the year ended December 31, 1996 increased $3,918,000, or
7.2%. Gross profit expressed as a percentage of net sales increased to 43.9%
from 38.8%. Increased margins in 1996 are attributable to reductions in product
costs and lower costs associated with the reduced level of customer returns. As
part of an effort to enhance margins and respond to the competitive price
pressures in the fashion goods industry, the Company increased its utilization
of off-shore and domestic manufacturing suppliers for sourcing certain of its
products. In addition, the Company initiated continuing programs to make its
factories more competitive through reductions in overhead and through
improvements in various processes. The Company's asset management program
enabled it to maintain lower inventory levels throughout 1996 which resulted in
significantly reduced costs associated with inventory shortages, obsolescence
and markdowns compared to 1995. More favorable returns experience also
contributed to a reduction in inventory handling costs. Royalties to licensors
of the Company's designer names are included in cost of sales. During 1996, the
Company entered into extensions and/or modifications of its principal existing
licenses and executed agreements for important new ones. The Company is likely
to incur increases in future royalty expense as a result of these agreements.
However, management believes that the benefits to be derived from these licenses
will offset the incremental costs. The Company's gross profit in 1995 was
depressed by increased markdowns needed to dispose of excess inventory, higher
production costs and an unfavorable product mix.
Men's and Women's Jewelry gross profit increased
2
<PAGE>
$731,000 for the year ended December 31, 1996, in spite of decreased net sales,
and Men's Leather Accessories gross profit increased $2,990,000, also on reduced
net sales. Both increases were primarily attributable to the reductions in
product costs discussed in the preceding paragraph as well as favorable returns
experience. Gross profit for Other lines, which include certain merchandise sold
through the Company's factory outlets and, in 1995, included residual sales of
items in the Company's discontinued men's accessories (gift) lines increased
$197,000.
Gross profit includes adjustments relating to customer returns that reflect
the differences between amounts estimated at the end of the preceding year and
actual retums as follows. The incremental 1996 year end provision for returns
associated with the transition in Men's designer lines substantially offset the
aggregate benefit realized earlier in the year.
- --------------------------------------------------------------------------------
Increase (decrease) in gross profit --
(in thousands) 1996 1995 Change
------ ------ ------
Men's & Women's Jewelry .................... $ 674 ($ 990) $1,664
Men's Leather Accessories .................. 72 2 70
Other ...................................... 310 (172) 482
------ ------ ------
Increase (decrease) in Gross Profit ........ $1,056 ($1,160) $2,216
====== ======= ======
- --------------------------------------------------------------------------------
SELLING AND ADMINISTRATIVE EXPENSES
- -----------------------------------
Selling and administrative expenses decreased $5,961,000, or 9.9% for the
year and, expressed as a percentage of sales, decreased from 43.0% to 40.9%.
Compensation and related fringe benefits decreased by approximately $2,999,000,
net of an increase in the contribution to the Company's retirement plan of
approximately $990,000. Personnel reductions and lower commission rates were
initiated late in 1995 as part of the Company's cost reduction program.
Advertising and promotion expenses (see table under "Promotional Expenses"
below) decreased by $1,472,000 in 1996, primarily due to reduced expenditures on
displays, fixtures, and national advertising. In-store markdowns in 1996 include
a provision of approximately $1,000,000 to be utilized during the first half of
1997 to minimize customer returns in connection with the transition in Men's
designer lines. In 1995, advertising and promotion included display and
refixturing costs associated with the change in Women's Jewelry from fashion to
competitively priced products at the store level, costs of the Company's efforts
to penetrate new markets and expand market share, and in-store markdowns given
to retailers demanding more promotional activity in a sluggish retail
environment. The provision for bad debts decreased by $174,000. Additional
expense was recognized in 1995 after one of the Company's customers filed
reorganization proceedings in January 1996.
INTEREST EXPENSE
- ----------------
Interest expense decreased $230,000, or 11%, for the year even though the
weighted average interest rate was slightly higher than the prior year.
Borrowing levels in the last half of 1996 were lower because of increased focus
on asset management, particularly inventories, and reduced requirements to
finance accounts receivable in a period of lower net sales.
PROVISION FOR INCOME TAXES
- --------------------------
In 1996, the Company recorded an income tax provision at a combined federal
and state effective tax rate of 39.8%, which approximates the combined statutory
rate. The Health Insurance and Accountability Act of 1966 eliminates the
deduction of interest on policy loans on a significant portion of the Company's
corporate owned life insurance (See Note F to the financial statements) by 1999
and, therefore, substantially increases the after tax cost of maintaining these
policies. The Company is not committed to maintaining the affected policies and,
unless a better strategy emerges, is likely to surrender these policies in 1998.
A deferred tax liability was established in 1996 for the income taxes which will
become due over a four year period in the event that the policies are
surrendered. The current year increase in policy values was treated as a
temporary difference. Deferred income taxes were recorded in 1996 for the
aggregate of prior years' increases in policy values. The Company had
established a valuation allowance in the fourth quarter of 1995 to reduce
deferred tax assets to a level management believes more likely than not will be
realized. The expectation in 1996 of additional future taxable income from the
surrender of the insurance policies reduced the requirement for a valuation
allowance by an equivalent amount and the incremental deferred taxes recorded in
1996 did not alter the current years effective rate.
EARNING (LOSS) PER SHARE
- ------------------------
Weighted average shares outstanding used to compute earnings (loss) per
share are adjusted to include shares held by the Company's employee stock
ownership plan and deemed to be allocated to participants.
1995 vs. 1994
The Company's net sales decreased $3,394,000 in 1995 compared to the prior
year. Net sales decreased in Men's and Women's Jewelry by $3,813,000 and in the
Other lines by $5,603,000. The decreased net sales in Men's and Women's Jewelry
were primarily attributable to a lackluster retail environment combined with a
change in the sales mix. The change in sales mix was caused by a shift in
emphasis on women's jewelry from higher margin fashion products to more
competitively priced career oriented products. This resulted in heavier than
anticipated returns due to the necessity of changing the merchandise
presentation at the store level. The higher than anticipated returns in 1995
compared to lower than anticipated returns in 1994 combined for a decrease in
net sales of $4,263,000. The Men's and Women's Jewelry decrease accounted for
$3,477,000 of the total with the balance being comprised of Men's Leather
Accessories, $370,000, and Other lines, $416,000. The decreased net sales in the
Other lines resulted from the Company's decision to discontinue the sale and
distribution of its Gift lines at the end of 1995. The Company noted that the
Gift lines, while providing incremental revenues, involved the maintenance of
significant inventory levels that, in a volatile and competitive retail
environment with quickly shifting consumer preferences, would not be the best
use of the Company's resources. These decreases were offset, in part, by
increased net sales from Men's Leather Accessories of $6,022,000 or 9%. The
increased net sales in Men's Leather Accessories were attributable to an
expanded customer base for the Company's special market lines and private label
belt programs along with the continued success of Guess? Leather Accessories.
Included in the net sales figures noted above were sales from the Company's
factory outlets, which declined 20% from 1994. Sales declines of 12% and 9% were
experienced in same store sales and closed store sales, respectively, offset in
part by a 1% increase in new store sales.
Gross profit decreased $10,046,000 compared to the prior year. Gross profit
expressed as a percentage of net sales declined 6.1 percentage points from 44.9%
to 38.8%. The
3
<PAGE>
erosion of the Company's margins was caused principally by higher inventory
markdowns needed to dispose of excess inventory, higher production costs and an
unfavorable product mix.
The decreased gross profit was attributable to Men's and Women's Jewelry,
$6,355,000, Men's Leather Accessories, $827,000 and Other, $2,864,000. The
decreased gross profit in Men's and Women's Jewelry was attributable to lower
sales volume, higher production costs and the shift in emphasis on women's
jewelry from higher margin fashion products to more competitively priced career
oriented products. As discussed above, this change caused heavier than
anticipated returns due to the necessity of changing merchandise at the store
level. The higher than anticipated returns in 1995 compared to lower than
anticipated returns in 1994 combined for a decrease in total gross profit of
$2,553,000. The Men's and Women's Jewelry decrease accounted for $2,126,000 of
the total with the balance being comprised of Men's Leather Accessories,
$231,000 and Other, $196,000. The higher returns of women's jewelry also
contributed to excess inventory balances which resulted in higher markdown
expense. The decreased gross profit in Men's Leather Accessories was primarily
the result of higher production costs and lower margins on current line items
offset in part by increased volume. The decreased gross profit in the Other
lines resulted principally from the Company's decision to discontinue the sale
and distribution of gifts.
Inventory levels increased $3,021,000 or 12% primarily as a result of
holiday sales being less than expected. The increased inventory levels,
corresponding carrying costs and loss from operations strained the Company's
working capital. In order to fund projected working capital requirements in July
1995 the Company amended its revolving credit facility from $21 million to $32
million. The lower holiday sales also contributed to the Company's inability to
reduce its revolving credit facility to the required levels stated in the
agreement.
Selling and administrative expenses increased $1,981,000 or 3%. When
expressed as a percentage of net sales the rate increased from 40.6% in 1994 to
43.0% in 1995.
The increased selling and administrative expenses were attributable
principally to increased costs for advertising, promotion and sample lines and
provision for bad debts. These costs were offset in part by decreased
compensation and related fringe benefits. Advertising and promotion increased
$695,000 primarily from display and refixturing costs needed to adjust to the
change of merchandise from fashion to competitively priced products at the store
level as well as the Company's efforts to penetrate new markets and expand
market share. Also contributing were increased in-store markdowns given to
retailers demanding more promotional activity in the sluggish retail environment
in the apparel and accessories sector. The provision for bad debts increased
$592,000 primarily from recognizing the exposure that arose from one of the
Company's customers filing reorganization proceedings in January 1996.
Expenditures relating to sample charges increased $309,000 in order to change
the style of merchandise from fashion to career oriented, as mentioned
previously. Compensation and related fringe benefits decreased $1,424,000 as a
result of staff reductions, the elimination of estimated bonuses and the
reduction of the contribution to the Company's retirement plan during fiscal
1995, offset by increased expenses associated with workman's compensation,
group insurance and severance benefits.
Interest charges increased $ 453,000 or 28% primarily from increased short
term borrowing combined with a higher monthly average interest rate, offset in
part by reduced long term bank debt.
The Company recognized a provision of $994,000 for income taxes,
principally as a result of reestablishing a valuation allowance eliminated in
1994. A valuation allowance is provided to reduce the deferred tax assets to a
level which management believes more likely than not will be realized. The net
effect of establishing this valuation allowance was to decrease net income
approximately $4,764,000 in the fourth quarter.
PROMOTIONAL EXPENSES
Substantial expenditures for advertising and promotion are necessary to
enhance the Company's business and minimum expenditures are increasingly
required by the Company's licensors. Advertising and promotion expenses
decreased by $1,472,000 in 1996 primarily due to reduced expenditures on
displays, fixtures, and national advertising. This decrease is net of a
provision of approximately $1,000,000 recorded in 1996 for additional in-store
markdowns expected during the first half of 1997 to minimize customer returns in
connection with the transition in Men's designer lines. In 1995, the Company
adjusted its women's jewelry inventory presentation at the retail level to put
more emphasis on competitively priced career-oriented merchandise. This change,
combined with the Company's efforts to penetrate new distribution channels and
increase market share in a sluggish retail environment required substantially
more promotional activity compared to the prior year. The table below indicates
the principal promotional expenses incurred by the Company.
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
In-store markdowns ......................... $6,120 $ 6,121 $ 5,741
Co-op advertising .......................... 1,095 1,227 1,314
Displays ................................... 932 1,620 1,124
National advertising & other ............... 1,104 1,755 1,849
------ ------- -------
Total .................................... $9,251 $l0,723 $l0,028
====== ======= =======
Percentage of net sales .................... 7.0% 7.7% 7.0%
- --------------------------------------------------------------------------------
INTEREST CHARGES
The average monthly amount of short-term borrowings and related weighted
average interest rates were $13,218,000 and 10.44% in 1996, $18,266,000 and
10.32% in 1995 and $12,971,000 and 9.43% in 1994.
LIQUIDITY AND CAPITAL RESOURCES
As is customary in the fashion accessories industry, substantial
percentages of the Company's sales and earnings occur in the months of
September, October and November, during which the Company makes significant
shipments of its products to retailers for sale during the holiday season. As a
result, receivables increase during the year and peak in the fourth quarter. The
Company generally builds its inventory during the first three quarters of the
year to meet the demand for the holiday season. The required cash is provided by
a revolving credit facility.
The Company has implemented a plan designed to enhance its overall
competitiveness, productivity and efficiency through reductions in overhead
costs and better inventory management. Inventory levels decreased $6,800,000, or
23%, from December 31, 1995, primarily as a result of improved management to
align inventories more closely with sales, increased sales of excess inventory,
discontinuing the sale and distribution of the men's accessories (gifts) product
line in 1995, and a reduction in the number of retail outlets.
Cash Flows. Cash provided by operations in 1996 totaled $15,386,000 of
which 44% is attributable to decreased inventory.
4
<PAGE>
The remainder consists primarily of net income, depreciation and
amortization and reduction in accounts receivable. This compares to $6,051,000
cash used by operations in 1995, primarily as a result of the net loss in that
year. Working capital increased by approximately $2,500,000 in 1996. Cash used
in investing activities for capital expenditures was $1,070,000 in 1996 and
$663,000 in 1995. Cash used in financing activities totaled $12,566,000 in 1996,
consisting primarily of repayments of borrowings under revolving credit
agreements and debt issuance costs, while financing activities provided
$5,682,000 cash in 1995 due to an increase in short term borrowings.
Financing Arrangements. On July 20, 1995, the Company modified and extended
its revolving Credit Agreement (the "1995 Agreement") with The Chase Manhattan
Bank, N.A. and Fleet National Bank (the "Banks"). The 1995 Agreement provided
for loans and letters of credit in an amount up to $32,000,000, with a sublimit
of $7,000,000 for letters of credit, available through June 30, 1998. The 1995
Agreement required the Company to meet certain financial tests, including
ratios, and certain other covenants. As of December 31, 1995, the Company was
not in compliance with various financial covenants under the 1995 Agreement and,
subsequently, the Company was unable to reduce the outstanding balance as
required under the 1995 Agreement to $2 million for a 30 day period within the
first six months of 1996. Due primarily to the Company's net loss in fiscal 1995
and the resulting failure of the Company to meet various financial covenants
required by the 1995 Agreement, the Banks requested that the Company investigate
alternative sources of working capital.
The Company obtained revolving credit financing on May 24, 1996 from IBJ
Schroder Bank & Trust Company, as agent (the "New Lenders") for up to
$25,000,000 with a sublimit of $3,000,000 in letters of credit (the "Revolving
Credit Agreement"). The proceeds of the Revolving Credit Agreement were used, in
part, to repay all but $4 million of the outstanding balance under the 1995
Agreement.
The Revolving Credit Agreement is available through April 1999 and is
collateralized by all of the Company's assets. The New Lenders have a senior
lien position on all assets other than real property, improvements and certain
fixtures, in which the Banks maintain a senior position to collateralize a
$4,000,000 term loan, as described below, and in which the New Lenders have a
subordinate lien. The Revolving Credit Agreement permits the Company to borrow
against a percentage of eligible accounts receivable and inventory and its loans
bear an interest rate of 1.5% over the New Lenders' prime lending rate. The
Revolving Credit Agreement also contains a facility fee of 1/2% per annum on the
unused portion of the revolving credit facility and a closing fee of $500,000
was paid at the closing date.
The terms of the Revolving Credit Agreement include covenants requiring the
Company to maintain certain financial ratios including interest coverage,
leverage and quarterly inventory turnover. The Revolving Credit Agreement also
includes covenants pertaining to profitability and limits capital expenditures
and additional indebtedness. The Company believes the inventory turnover
covenant to be the most restrictive, requiring minimum inventory turnover, as
defined, up to 2.25 times annually. The Revolving Credit Agreement also
prohibits the payment of dividends. Management believes this credit facility
will meet the Company's working capital needs until May 1999.
In connection with the refinancing, the Banks amended and restated the 1995
Agreement to provide the Company with a $4,000,000 term loan (the "Term Loan")
in lieu of a like amount of revolving credit debt. The Term Loan is payable in
$200,000 quarterly increments starting in June 1997 with a final payment of
$2,600,000 due May 1999, if not prepaid earlier pursuant to annual prepayments
based on excess cash flow, as defined. The Company is required to prepay
approximately $ 700,000 by March 31,1997. The Term Loan bears interest at 2.5%
over the Banks' prime lending rate and is collateralized by a senior lien on
real property and certain improvements and a subordinate lien on all other
assets. The Term Loan also contains an annual facility fee of 2% of the Term
Loan and a maximum success fee of $450,000 payable as follows; $225,000 upon
final maturity with the balance payable subsequently in six equal monthly
installments. The Term Loan covenants are the same as those in the Revolving
Credit Agreement.
The financing agreements include provisions specifying that a material
adverse effect, as determined by the lenders, in the financial position or
results of operations of the Company is an event of default. As such, the Term
Loan, which would otherwise be classified as long-term, has been classified as
current in the balance sheet at December 31,1996 and 1995.
ENVIRONMENTAL MATTERS
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with the
completion of a feasibility study or the Company's commitment to a formal plan
of action.
In January 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation
Liabilities", which is effective for fiscal year 1997. SOP 96-1 provides
guidance on the recognition of expenses related to environmental remediation
activities and the related financial statement disclosures. Management believes
that implementation of SOP 96-1 will not have a material effect on the Company's
financial statements.
CAPITAL EXPENDITURES
The Company is continuing the policy of replacing aging machinery and
equipment to maintain operating efficiencies. Internally generated working
capital is anticipated to provide the funding required. The Company also expects
to continue to make enhancements and upgrades to its information and
communication systems capabilities. At the end of 1995, the Company entered into
a capital lease for computer hardware and software to increase its systems
capabilities and, in turn, enhance the information available to management.
"FORWARD LOOKING STATEMENTS"
Certain of the preceding paragraphs contain "forward looking statements"
under the securities laws of the United States. Actual results may vary from
anticipated results as a result of various risks and uncertainties, including
sales patterns, overall economic conditions, competition, pricing, consumer
buying trends and other factors.
5
<PAGE>
SWANK, INC.
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31
(Dollars in thousands)
ASSETS 1996 1995
- --------------------------------------------------------------------------------
Current:
Cash and cash equivalents .............................. $ 2,871 $ 1,121
Accounts receivable, less allowances of $10,463
and $9,097 ........................................... 7,977 10,704
Inventories:
Raw materials ........................................ 3,930 5,092
Work in process ...................................... 5,122 6,476
Finished goods ....................................... 13,318 17,602
- --------------------------------------------------------------------------------
22,370 29,170
Deferred income taxes .................................. 2,921 1,890
Recoverable income taxes ............................... 0 1,665
Prepaid and other ...................................... 1,766 1,218
- --------------------------------------------------------------------------------
Total current assets ................................. 37,905 45,768
- --------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land and buildings ..................................... 7,452 7,302
Machinery and equipment ................................ 14,966 14,328
Improvements to leased premises ........................ 842 842
Capital leases ......................................... 1,404 1,466
- --------------------------------------------------------------------------------
24,664 23,938
Less accumulated depreciation and amortization ......... 17,904 16,481
- --------------------------------------------------------------------------------
Net property, plant and equipment .................... 6,760 7,457
- --------------------------------------------------------------------------------
Deferred income taxes .................................... 0 399
Other assets ............................................. 4,122 3,700
- --------------------------------------------------------------------------------
TOTAL ASSETS ............................................. $48,787 $57,324
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Current:
Notes payable to banks ................................. $ 0 $14,800
Current portion of long-term debt ...................... 1,637 235
Term loan classified as current ........................ 2,700 0
Accounts payable ....................................... 3,331 5,870
Accrued employee compensation .......................... 4,776 2,879
Accrued royalties payable .............................. 1,318 1,278
Income taxes payable ................................... 1,483 0
Other liabilities ...................................... 3,620 4,156
- --------------------------------------------------------------------------------
Total current liabilities ........................... 18,865 29,218
- --------------------------------------------------------------------------------
Long-term obligations .................................... 8,591 7,573
- --------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................ $27,456 $36,791
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note I)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Preferred stock, par value $1.00:
Authorized 1,000,000 shares
Common stock, par value $.10:
Authorized 43,000,000 shares:
issued 16,843,042 and 16,843,042 shares .............. 1,684 1,684
Capital in excess of par value ........................... 852 852
Retained earnings ........................................ 20,776 19,477
- --------------------------------------------------------------------------------
23,312 22,013
Deferred employee benefits ............................. (1,272) (771)
Treasury stock at cost, 333,519 and 333,519 shares ..... (709) (709)
- --------------------------------------------------------------------------------
Total stockholders' equity ........................... 21,331 20,533
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $48,787 $57,324
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
<TABLE>
SWANK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For Each of the Three Years Ended
December 31
(In thousands, except share data)
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ............................................. $132,642 $140,102 $143,496
Cost of goods sold .................................... 74,396 85,774 79,122
- ----------------------------------------------------------------------------------------------------
Gross profit .......................................... 58,246 54,328 64,374
Selling and administrative expenses ................... 54,232 60,193 58,212
- ----------------------------------------------------------------------------------------------------
Income (loss) from operations ......................... 4,014 (5,865) 6,162
- ----------------------------------------------------------------------------------------------------
Interest charges, net ................................. 1,855 2,085 1,632
- ----------------------------------------------------------------------------------------------------
Income (loss) before income taxes ..................... 2,159 (7,950) 4,530
Provision (benefit) for income taxes .................. 860 994 (1,042)
- ----------------------------------------------------------------------------------------------------
Net income (loss) ..................................... $ 1,299 $ (8,944) $ 5,572
- ----------------------------------------------------------------------------------------------------
Net income (loss) per share ........................... $ .08 $ (.55) $ .34
- ----------------------------------------------------------------------------------------------------
Weighted average common shares and common share
equivalents outstanding ............................. 15,821,334 16,135,368 16,206,683
- ----------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For Each of the Three Years
Ended December 31,
1996, 1995 and 1994
(Dollars in thousands)
DEFERRED EMPLOYEE
BENEFITS TREASURY STOCK
COMMON CAPITAL IN --------------------- --------------------
STOCK, PAR EXCESS OF RETAINED NUMBER NUMBER
VALUE $.10 PAR VALUE EARNINGS OF SHARES AMOUNT OF SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $1,677 $795 $22,849 333,519 $(709)
Exercise of employees' stock options 3 30
Net income 5,572
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,680 825 28,421 333,519 (709)
Exercise of employees' stock options 4 27
Advance to retirement plan 664,461 $ (771)
Net loss (8,944)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,684 852 19,477 664,461 (771) 333,519 (709)
Advance to retirement plan 610,327 (501)
Net income 1,299
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $1,684 $852 $20,776 1,274,788 $(1,272) 333,519 $(709)
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
7
<PAGE>
<TABLE>
SWANK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For Each of the Three Years Ended December 31
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ..................................................... $ 1,299 $ (8,944) $ 5,572
Adjustments to reconcile net income to net cash provided by
(used in) operations:
Increase (decrease) in accounts receivable allowances ............ 1,366 (387) 865
Depreciation and amortization .................................... 2,027 1,523 1,108
Loss on sale of fixed assets ..................................... 55
Loan forgiveness in lieu of contribution to employees'
stock ownership trust .......................................... 519
Decrease (increase) in deferred taxes ............................ (632) 2,649 (2,891)
Decrease (increase) in recoverable income taxes .................. 1,665 (1,665)
Increase in postretirement benefits .............................. 279 331 260
Change in assets and liabilities:
Decrease (increase) in accounts receivable ....................... 1,361 3,557 (2,808)
Decrease (increase) in inventories ............................... 6,800 (3,021) (1,132)
(Increase) decrease in prepaid and other ......................... (568) (1,090) (778)
Increase (decrease) in income taxes payable ...................... 1,483 (1,826) 1,247
Increase (decrease) in accounts payable, accrued
and other liabilities .......................................... (875) 548 1,840
Increase (decrease) in long term obligations ..................... 1,126 2,274 (2,160)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations .................... 15,386 (6,051) 1,642
- ---------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Net capital expenditures ............................................ (1,070) (663) (877)
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ........................ (1,070) (663) (877)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements ........................ 84,615 37,550 34,850
Payments of revolving credit agreements ............................. (95,415) (27,750) (33,350)
Debt issuance costs ................................................. (1,001) (458)
Principal payments on long-term obligations ......................... (264) (2,920) (3,080)
Advance to retirement plan .......................................... (501) (771)
Proceeds from exercise of employees' stock options .................. 31 33
- ---------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities .......... (12,566) 5,682 (1,547)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents ....................... 1,750 (1,032) (782)
Cash and cash equivalents at beginning of year ........................ 1,121 2,153 2,935
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year .............................. $ 2,871 $ 1,121 $ 2,153
- ---------------------------------------------------------------------------------------------------------------
Cash paid during the year for:
Interest .......................................................... $ 1,779 $ 2,102 $ 1,714
Income taxes ...................................................... $ 1,794 $ 765
Noncash transactions:
Capital lease obligation incurred ................................. $ 62 $ 1,343 $ 123
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. THE COMPANY
The Company is engaged in the manufacture, sale and distribution of men's
jewelry, belts, leather accessories and suspenders and women's jewelry. Its
products are sold both domestically and internationally, principally through
department stores and also through specialty stores and mass merchandisers. The
Company operates a number of factory outlet stores primarily to distribute
excess and out of line merchandise.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of Swank and a
wholly owned foreign sales corporation. All significant intercompany amounts
have been eliminated. Certain prior year amounts have been reclassified to
conform to the current year's presentation. Dollar amounts are in thousands
except for per share data.
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 amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
REVENUE RECOGNITION
Net sales are comprised of gross sales and royalty income less cash
discounts and customer returns. Sales are recorded upon shipment.
ALLOWANCES FOR ACCOUNTS RECEIVABLE
The Company's allowances for receivables are comprised of cash discounts,
doubtful accounts, in-store markdowns, cooperative advertising and customer
returns. Provisions for doubtful accounts, in-store markdowns and cooperative
advertising are reflected in selling and administrative expenses. The allowance
for customer returns results from the reversal of sales for estimated returns
and associated costs. These allowances are generally at their seasonal highs on
December 31. Reductions of these allowances occurs principally in the first and
second quarters when the balances are adjusted to reflect actual charges as
processed. These allowances are estimates made by management based on historical
experience, adjusted for current conditions, and may differ from actual results.
The provision for bad debts for 1996, 1995 and 1994 was $631, $805 and $213,
respectively.
CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid instruments purchased with original maturities of
three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (principally average cost which
approximates FIFO) or market. The Company's inventory is considered fashion
oriented and, as a result, is subject to risk of rapid obsolescence. Management
believes that inventory has been adequately marked down, where appropriate, and
that the Company has adequate channels to dispose of excess and obsolete
inventory.
In connection with the purchase of gold for manufacturing requirements, the
Company may enter into commodity forward contracts to reduce the risk of future
price fluctuations. These contracts are accounted for as hedges and,
accordingly, gains and losses are deferred and recognized in cost of sales as
part of the product cost. At December 31, 1996 and 1995, the Company had no
outstanding gold contracts.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company provides for
depreciation of plant and equipment by charges against income which are
sufficient to write off the cost of the assets on a straight-line or double
declining-balance basis over estimated useful lives of 10-45 years for building
and improvements and 3-12 years for machinery and equipment. Improvements to
leased premises are amortized on a straight-line basis over the shorter of the
useful life of the improvement or the term of the lease.
The Company has capitalized lease obligations for computer hardware and
software held under capital leases equal to the lesser of the present value of
the minimum lease payments or the fair market value of the leased property at
the inception of the lease. The cost of the leased assets is amortized on a
straight line basis over the lesser of the term of the lease obligation or the
life of the asset, generally 3 to 5 years
Expenditures for maintenance and repairs and minor renewals are charged to
expense; betterments and major renewals are capitalized. Upon disposition, cost
and related accumulated depreciation are removed from the accounts with any
related gain or loss reflected in results of operations.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Net deferred tax assets are recorded when
it is more likely than not that such tax benefits will be realized.
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed
or capitalized, as appropriate. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable and the costs can
be reasonably estimated. Generally, the timing of these accruals coincides with
the completion of a feasibility study or the
9
<PAGE>
Company's commitment to a formal plan of action.
STOCK-BASED COMPENSATION
The Company measures the cost of stock-based compensation associated with
the stock option plans described in Note G using the "intrinsic value" method.
Under this method, the increment of fair value, if any, at the date of grant
over the exercise price is charged to expense over the period that the employee
provides the associated services. In 1996, the Company adopted the disclosure
provisions of Statement of Financial Accounting Standards No. 123 which include
information with respect to stock-based compensation determined under the "fair
value" method. The Company uses the Black-Scholes formula to determine the fair
value of options on the grant date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of notes payable to banks approximates fair value because
these financial instruments have variable interest rates.
CONCENTRATIONS OF CREDIT RISK
The Company sells products primarily to major retailers within the United
States. The Company performs ongoing credit evaluations of its customers and
maintains reserves for potential credit losses.
Sales to the Company's two largest customers accounted for 17% and 13% of
consolidated net sales in 1996 and 19% and 12% in 1995, respectively. These
customers represent 16% and 18% of consolidated trade receivables (gross of
allowances) in 1996 and 22% and 15% in 1995. Sales to one customer amounted to
11% of consolidated net sales during 1994.
C. SHORT-TERM BORROWINGS
- ------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
At December 31:
Total lines ............................. $25,000 $32,000 $21,000
Weighted average interest rate .......... 9.75% 11.00% 10.50%
For the year:
Monthly average borrowing
outstanding ........................... $13,218 $18,266 $12,971
Maximum borrowing outstanding
at any month end ...................... $17,800 $28,800 $22,250
Monthly interest rate
(weighted average) .................... 10.44% 10.32% 9.43%
Balance at December 31 .................... $0 $10,800 $5,000
- ------------------------------------------------------------------------------
The average amounts outstanding and weighted average interest rates during
each year are based on average monthly balances outstanding under the Company's
revolving credit facility for seasonal working capital needs.
On July 20, 1995 the Company modified and extended its revolving Credit
Agreement (the "1995 Agreement") with The Chase Manhattan Bank, N.A. and Fleet
National Bank (the "Banks"). The 1995 Agreement provided for loans and letters
of credit in an amount up to $32,000, with a sublimit of $7,000 for letters of
credit. Loans under the 1995 Agreement bore interest at the Banks' prime rate
plus 2.5%. Borrowings under the 1995 Agreement were collateralized by all of the
Company's assets. The 1995 Agreement required the Company to meet certain
financial tests, including ratios, and certain other covenants. As of December
31, 1995, the Company was not in compliance with various financial covenants
under the 1995 Agreement and, subsequently, the Company was unable to reduce the
outstanding balance as required under the 1995 Agreement to $2 million for a 30
day period within the first six months of 1996. Due primarily to the Company's
net loss in fiscal 1995 and the resulting failure of the Company to meet various
financial covenants required by the 1995 Agreement, the Banks requested that the
Company investigate alternative sources of working capital.
The Company obtained revolving credit financing on May 24, 1996 from IBJ
Schroder Bank & Trust Company, as agent (the "New Lenders") for up to $25,000
with a sublimit of $3,000 in letters of credit (the "Revolving Credit
Agreement"). The proceeds of the Revolving Credit Agreement were used, in part,
to repay all but $4 million of the outstanding balance under the 1995 Agreement.
The Revolving Credit Agreement is available through April 1999 and is
collateralized by all of the Company's assets. The New Lenders have senior lien
position on all assets other than real property, improvements and certain
fixtures, in which the Banks maintain a senior position to collateralize a
$4,000 term loan, as described below, and in which the New Lenders have a
subordinate lien. The Revolving Credit Agreement permits the Company to borrow
against a percentage of eligible accounts receivable and eligible inventory at
an interest rate of 1.5% over the Lenders' prime lending rate. The Revolving
Credit Agreement also contains a facility fee of 1/2%, per annum, on the unused
portion of the revolving credit facility. A closing fee of $500 was paid on the
closing date
The terms of the Revolving Credit Agreement include covenants requiring the
Company to maintain certain financial ratios including interest coverage,
leverage and quarterly inventory turnover. The Revolving Credit Agreement also
includes covenants limiting capital expenditures and additional indebtedness and
defining minimum profitability. The Company believes the inventory turnover
covenant to be the most restrictive, requiring minimum inventory turnover, as
defined, up to 2.25 times annually. The Revolving Credit Agreement also
prohibits the payment of dividends. Management believes this credit facility
will meet the Company's working capital needs until May 1999.
In connection with the refinancing, the Banks amended and restated the 1995
Agreement to provide the Company with a $4,000 term loan (the "Term Loan") in
lieu of a like amount of revolving credit debt then outstanding under the 1995
Agreement. The Term Loan is payable in $200 quarterly increments starting in
June 1997 with a final payment of $2,600 due May 1999, if not prepaid earlier
pursuant to annual prepayments based on excess cash flow, as defined. The
Company is required to prepay approximately $700 by March 31, 1997. The Term
Loan bears interest at 2.5% over the Banks' prime lending rate, a total of
10.75% at December 31, 1996, and is collateralized by a senior lien on real
property and certain improvements and a subordinate lien on all other assets.
The Term Loan also requires an annual facility fee of 2% of the term loan and a
maximum success fee of $450, of which $225 is payable at maturity and the
balance is payable in six equal monthly installments thereafter. The Term Loan
covenants are the same as those in the Revolving Credit Agreement.
10
<PAGE>
The financing agreements include provisions specifying that a material
adverse effect, as determined by the lenders, in the financial position or
results of operations of the Company is an event of default. As such, the Term
Loan, which would otherwise be classified as long-term, has been classified as
current in the accompanying balance sheets at December 31, 1996 and 1995. Based
upon present information and the Company's operating plans for fiscal 1997, the
Company expects that it will continue to meet the financial covenants contained
in the Revolving Credit and Term Loan Agreements and that eligible assets will
provide a sufficient borrowing base to meet the Company's seasonal working
capital needs.
D. INCOME TAXES
PROVISION (BENEFIT) FOR INCOME TAXES:
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Currently payable (benefit):
Federal ..................................... $1,422 ($1,630) $ 1,494
State ....................................... 37 (35) 329
Foreign sales corporation ................... 33 9 26
------ ------ -------
1,492 (1,656) 1,849
Deferred:
Federal ..................................... (493) 2,037 (2,252)
State ....................................... (139) 613 (639)
------ ------ -------
(632) 2,650 (2,891)
------ ------ -------
Total provision (benefit) ..................... $ 860 $ 994 $(1,042)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEFERRED TAX PROVISION (BENEFIT) 1996 1995 1994
- --------------------------------------------------------------------------------
Accounts receivable reserves .................. $ (697) $ 225 $ 147
Deferred compensation ......................... (122) (98) 63
Inventory capitalization ...................... 94 (136) (11)
Environmental costs ........................... (161) (116) (37)
Borrowing costs ............................... (178) 70 96
Postretirement benefits ....................... (112) (130) (14)
Inventory reserves ............................ (212) (21)
Workman's compensation ........................ (230) (201) (157)
Termination costs ............................. (68) (166) (14)
Capital leases ................................ (253)
Corporate owned life insurance ................ 3,044
AMT credit carryforwards ...................... 345 (1,010)
State NOL carryforwards ....................... 315 (365)
Capital loss .................................. 606
Other items ................................... (22) (166) (32)
Valuation allowance ........................... (2,375) 4,764 (3,538)
- --------------------------------------------------------------------------------
$ (632) $2,650 $(2,891)
- --------------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATE:
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Statutory federal income tax rate ............. 34.0% (34.0%) 34.0%
State income taxes, net of federal tax benefit. 3.3 (3.6) 4.8
Life insurance ................................ 111.5 (5.5) (6.8)
Valuation allowance ........................... (111.5) 60.1 (54.2)
Other items, net .............................. 2.5 (4.5) (.8)
- --------------------------------------------------------------------------------
39.8% 12.5% (23.0%)
- --------------------------------------------------------------------------------
COMPONENTS OF THE NET DEFERRED TAX ASSET
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Deferred tax assets
Accounts receivable reserves ................ $2,956 $2,259 $2,484
Deferred compensation ....................... 1,829 1,707 1,380
Inventory capitalization .................... 474 568 481
Environmental costs ......................... 667 506 390
Borrowing costs ............................. 178 70
Postretirement benefits ..................... 516 404 274
Inventory reserves .......................... 233 21
Workman's compensation ...................... 588 358 157
Termination costs ........................... 248 180 14
Capital leases .............................. 253
AMT credit carryforward ..................... 665 1,010
State NOL carryforwards ..................... 50 365
Other ....................................... 397 345 366
------ ------ ------
Gross deferred asset ........................ 9,054 7,723 5,616
Less valuation allowance .................. (2,389) (4,764) 0
------ ------ ------
6,665 2,959 5,616
Deferred tax liabilities
Depreciation ................................ (700) (670) (677)
Corporate owned life insurance .............. (3,044) 0 0
------ ------ ------
Net deferred tax asset ...................... $2,921 $2,289 $4,939
- --------------------------------------------------------------------------------
The Health Insurance and Accountability Act of 1996 (the "Act") eliminates
the deduction of interest on policy loans on a significant portion of the
Company's corporate owned life insurance (See Note F) by 1999 and, therefore,
substantially increases the after tax cost of maintaining these policies. The
Company is not committed to maintaining the affected policies and, unless a
better strategy emerges, is likely to surrender these policies in 1998.
Accordingly, a deferred tax liability was established in 1996 for the income
taxes which will become due over a four year period in the event that the
policies are surrendered.
A valuation allowance is provided to reduce the deferred tax assets to a
level which management believes, more likely than not to be realized.
Alternative minimum tax credit carryforwards are available to reduce future
regular federal income taxes over an indefinite period.
E. LONG-TERM OBLIGATIONS
- --------------------------------------------------------------------------------
Long-term obligations, excluding the current portion, at December 31, were
as follows:
1996 1995
- --------------------------------------------------------------------------------
1987 deferred compensation plan (1) ........................ $2,323 $2,669
1993 deferred compensation plan (1) ........................ 1,467 1,109
Postretirement benefits other than pensions (1) ............ 549 555
Supplemental death benefits .............................. 201 235
Environmental liabilities ................................ 1,588 1,186
Other ...................................................... 1,615 605
Long-term portion of capital lease (2) ..................... 848 1,214
- --------------------------------------------------------------------------------
$8,591 $7,573
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See footnote F.
(2) The Company's lease agreements for certain computer hardware and software
and have been classified as capital leases for financial reporting
purposes. Accumulated amortization of assets under capital leases was $570
and $20 as of December 31,1996 and 1995, respectively. Computer hardware
with fair value of approximately $62 was added to capitalized leases in
1996.
11
<PAGE>
Future minimum lease payments and the present value of the minimum lease
payments as of December 31, 1996 were:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1997 ................................................. $ 489
1998 ................................................. 484
1999 ................................................. 265
2000 ................................................. 193
2001 ................................................. 48
- --------------------------------------------------------------------------------
Subtotal ............................................. 1,479
Imputed interest at 11% .............................. (294)
- --------------------------------------------------------------------------------
Present value of minimum lease payments .............. $1,185
- --------------------------------------------------------------------------------
F. EMPLOYEE BENEFITS
Effective January 1, 1994, the Company amended and restated the Swank, Inc.
Employees' Stock Ownership Plan in a merger with the Swank, Inc. Employees'
Stock Ownership Plan No. 2 and the Swank, Inc. Savings Plan. The combined plans
became The New Swank, Inc. Retirement Plan (the "Plan"). The Plan incorporates
the characteristics of the three predecessor plans, covers substantially all
full time employees and reflects the Company's continued desire to provide added
incentives and to enable employees to acquire shares of the Company's Common
Stock. The cost of the Plan has been borne by the Company. Shares of Common
Stock acquired by the Plan are allocated to participating employees to the
extent of contributions to the Plan, as determined annually at the discretion of
the Board of Directors, and are vested on a prescribed schedule.
The savings (401(k)) component of the Plan provides employees' an election
to reduce taxable compensation through contributions to the Plan. Matching cash
contributions from the Company are determined annually at the Board's
discretion. The Company has made contributions to the Plan of $1,238, $300 and
$1,463 in 1996, 1995 and 1994, respectively. The 1996 contribution includes
$990, determined at average fair value, upon the commitment to allocate
1,274,788 shares to participants in the stock ownership component of the Plan.
The allocations to individual employees' accounts were made in February, 1997.
At December 31, 1996, the Plan held a total of 10,204,456 shares of the
Company's outstanding stock. The Company makes loans at 8% per annum to the Plan
to provide the Plan with liquidity to meet the statutory obligation to purchase
shares tendered by former employees. Outstanding balances were $1,272, and $771
in 1996, and 1995, respectively, which are classified in the balance sheet as
deferred employee benefits, a reduction in stockholders' equity.
The Company provides postretirement life insurance, supplemental pension
and medical benefits for certain groups of active and retired employees. The
postretirement medical plan is contributory, with contributions adjusted
annually; the death benefit is noncontributory. Effective in 1993, the Company
began to recognize the cost of postretirement benefits over the period in which
they are earned and elected to amortize the transition obligation for all plan
participants on a straight-line basis over a 20 year period.
The following table sets forth the plans' funded status reconciled to the
amount shown in the Company's statement of financial position at December 31:
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees ............................................. $(2,882) $(2,683)
Fully eligible plan participants ..................... (1,437) (1,034)
Other plan actives ................................... (937) (1,674)
------- -------
$(5,256) $(5,391)
Plan assets at fair value .............................. 0 0
------- -------
Accumulated postretirement benefit
obligation in excess of plan assets .................. $(5,256) $(5,391)
Unrecognized net loss from past
experience different from that assumed
and from changes in assumptions ...................... 1,397 1,651
Prior service cost not yet recognized
in net periodic postretirement
benefit cost ......................................... 0 0
Unrecognized transition obligation ..................... 2,553 2,713
------- -------
Accrued postretirement benefit cost (1) ................ $(1,306) $(1,027)
- --------------------------------------------------------------------------------
(1) Amounts totaling $757 and $472 have been included in accrued employee
compensation as of December 31, 1996 and 1995, respectively. The remaining
balance has been included in long-term obligations as set forth in Note E.
Net periodic postretirement benefit cost for 1996 and 1995 included the
following components:
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Service cost-benefits attributed to
service during the period .................................. $ 42 $ 75
Interest cost on accumulated post-
retirement benefit obligation .............................. 369 365
Amortization of transition obligation ........................ 160 160
Amortization of actuarial loss ............................... 96 77
---- ----
Net periodic postretirement benefit cost
included in selling and administrative ..................... $667 $677
- --------------------------------------------------------------------------------
For measurement purposes, an 8% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1996; the rate was assumed
to decrease gradually to 5.5% for 1999 and to remain at that level thereafter.
The effect of increasing the assumed health care cost trend rate by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1996 by $57 and the effect on the service
and interest cost components of net periodic postretirement benefit cost for
the year then ended would be insignificant.
Life insurance contracts have been purchased on the lives of certain
employees in order to fund the postretirement death benefits. The net cost
included in selling and administrative expenses was $123, $97 and $103 in
1996, 1995 and 1994, respectively. The weighted-average discount rate used in
determining the accumulated postretirement obligation was 7.5% and 7.0% on
December 31, 1996 and 1995, respectively.
In 1987 the Company adopted a deferred compensation plan for certain key
executives that provides for payments upon retirement, death or other
termination of employment. Amounts payable to participants of this plan
aggregated $3,067, and $3,176 at December 31, 1996 and 1995, respectively, of
which $744 and $507, have been classified
12
<PAGE>
in accrued employee compensation in 1996 and 1995, respectively. The balance of
the liability has been included in long-term obligations (See Note E). Life
insurance contracts have been purchased on the lives of the plan participants
and certain other employees in order to fund the benefits. The net proceeds from
death benefits are expected to provide the necessary funding for future payments
to participants of the 1987 deferred compensation plan, unless the policies are
surrendered (See Note D), although there are likely to be differences in the
timing of cash flows.
In 1993, the Company established an additional deferred compensation plan
for certain key executives that provides for payments upon retirement, death or
other termination of employment. Amounts payable to participants of this plan
aggregated $1,563 and $1,300 at December 31, 1996 and 1995, respectively, of
which $96 and $191, respectively, have been classified in accrued employee
compensation. The balance of the liability has been included in long term
obligations (See Note E). Variable life insurance contracts have been purchased
on the lives of the plan participants and certain other employees in order to
fund the benefit obligations.
The net charges related to these deferred compensation plans are included
in selling and administrative expense and aggregated $856, $1,153 and $1,278,
in 1996, 1995 and 1994, respectively. The benefits under each plan are paid
directly by the Company and are indirectly funded by corporate owned life
insurance. The net proceeds from the policies are expected to provide the
necessary funding for future payments to participants in the 1993 deferred
compensation plan and postretirement death benefits to beneficiaries of salaried
employees who reach age sixty with ten years of service, although there are
likely to be differences in the timing of cash flows over the life of the
programs.
The Company uses loans against the policy cash values to pay part or all of
the annual life insurance premiums, except for variable life policies. The
aggregate gross cash surrender value of all policies was approximately $30,339
and $29,981, at December 31,1996 and 1995, which is included in other assets net
of policy loans aggregating approximately $26,401 and $25,920, respectively. The
Company has no intention of repaying these loans and expects that they will be
liquidated from future death benefits or by surrender of the policies. Interest
on policy loans amounted to approximately $2,207, $2,128, and $1,621, in
1996, 1995 and 1994, respectively, and is included in the net costs of each plan
described above. The weighted average interest rate on policy loans was 8.6%,
8.7% and 9.4% at December 31, 1996, 1995 and 1994, respectively.
G. STOCK OPTIONS
Under the Company's stock option plans, options may be granted to key
employees to purchase shares of Common Stock at the market value on the date of
grant. Options to purchase shares of Common Stock were granted under these plans
and are generally exercisable beginning one year after the date of grant and
continuing for an additional nine years.
During 1994 the Company established a directors' stock option plan pursuant to
which options may be granted to non-employee directors to purchase 150,000
shares of Common Stock at market value on the date of grant. Options under this
plan are for five years and are immediately exercisable. Options to purchase
15,000, 20,000 and 15,000 shares of Common Stock were granted under this plan in
1996, 1995 and 1994, respectively. At December 31, 1996, a total of 1,818,873
shares of Common Stock were reserved for future grants under these plans.
The following table summarizes stock option activity for the years 1994
through 1996:
- --------------------------------------------------------------------------------
Weighted
Average
Option Exercise Exercise
Shares Price Price
- --------------------------------------------------------------------------------
Outstanding at December 31, 1993 ....... 2,336,054 $ .94 to $1.17
Exercised ............................ (35,000) .94
Expired .............................. (26,447) .94 to 1.16
Granted .............................. 15,000 1.16
---------
Outstanding at December 31, 1994 ....... 2,289,607 $ 94 to $1.17
Exercised ............................ (51,000) .94 to 1.16
Expired .............................. (55,447) .94 to 1.16
Granted .............................. 20,000 $1.16
---------
OUTSTANDING AT DECEMBER 31, 1995 ....... 2,203,160 $ .94 TO $1.17 $1.07
EXERCISED ............................ 0
FORFEITED ............................ (291,772) 1.06
EXPIRED .............................. 0
GRANTED .............................. 200,000 .70
---------
OUTSTANDING AT DECEMBER 31, 1996 ....... 2,111,388 $1.03
- --------------------------------------------------------------------------------
The estimated weighted average fair value of options granted in 1996 was
approximately $.63 per share on the grant dates determined using a 6.5% interest
rate, an expected life of 10 years, expected volatility of .99 and assuming no
dividends. The pro forma effect of accounting for options granted in 1996 using
the fair value method on 1996 net income and net income per share was
insignificant.
Options outstanding as of December 31,1996 were as follows:
- --------------------------------------------------------------------------------
Weighted Weighted Weighted
Exercise Shares Average Average Number Average
Price Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------------
$1.16 ............ 1,094,941 .5 years $1.16 1,094,941 $1.16
$0.80-$1.28 ...... 50,000 4.25 1.07 50,000 1.07
$0.94 ............ 781,447 5.75 .94 781,447 .94
$ .069 ........... 185,000 9.75 .69 0 .69
--------- ---- ----- --------- -----
Total .......... 2,111,388 3.34 $1.03 1,926,388 $1.07
- --------------------------------------------------------------------------------
H. EARNINGS (LOSS) PER SHARE
The difference between shares for primary and fully diluted earnings per
share was not significant in any year. Unallocated shares maintained in the
Company's Employee Stock Ownership Plans ("ESOP") (described in Note F) are
reflected as a reduction of outstanding shares for earnings per share purposes
until such shares are committed to be allocated. At December 31, 1996, 1995 and
1994 the Company had 0, 664,461 and 0 shares,
13
<PAGE>
respectively, remaining in its ESOP which were not committed to be allocated.
The following table reconciles the total outstanding common shares with
total weighted average common shares and common share equivalents used in
computing primary earnings (loss) per share:
- --------------------------------------------------------------------------------
Year Ended December 31,
1996 1995 1994
- --------------------------------------------------------------------------------
Common shares outstanding ............ 16,509,523 16,509,523 16,470,636
Effect of using weighted average
common and common equivalent
shares outstanding ................. 0 (9,715) 274,174
Effect of excluding unallocated
shares held in ESOP ................ (688,189) (364,440) (538,127)
---------- ---------- ----------
Shares used in computing primary
earnings per share ................. 15,821,334 16,135,368 16,206,683
- --------------------------------------------------------------------------------
I. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its warehousing, sales and office facilities,
automobiles and equipment under noncancelable long-term operating leases.
Certain of the leases provide renewal options ranging from one to ten years and
escalation clauses covering increases in various costs. The Company is also
contingently liable for premises leased by an unrelated third party. This
contingency totals $225 per year until March 31, 1998. Total rental expenses
amounted to $3,811, $4,109 and $3,979, in 1996, 1995 and 1994, respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1996 are as follows:
- --------------------------------------------------------------------------------
1997 ............................................ $2,427
1998 ............................................ 2,130
1999 ............................................ 1,926
2000 ............................................ 1,230
2001 ............................................ 171
- --------------------------------------------------------------------------------
Total minimum payments .......................... $7,884
- --------------------------------------------------------------------------------
On June 7, 1990 the Company received notice from the United States
Environmental Protection Agency ("EPA") that it, along with fifteen others, had
been identified as a Potentially Responsible Party ("PRP") in connection with
the release of hazardous substances at a Superfund Site located in
Massachusetts. This notice does not constitute the commencement of a proceeding
against the Company or necessarily indicate that a proceeding against the
Company is contemplated. The Company, along with six other PRP's, has
voluntarily entered into an Administrative Order pursuant to which, inter alia,
they have undertaken to conduct a remedial investigation/feasibility study
("RI/FS") with respect to the alleged contamination at the site. It is the
position of the PRP's that the remedial investigation has been completed. The
scope of work is within the discretion of the EPA. AccordingIy, it is reasonably
possible that the Company's potential obligation may change in the near term.
The Company's share of costs for the RI/FS is being allocated on an interim
basis at approximately 12.5%. This Superfund site is adjacent to a municipal
landfill that is in the process of being closed under Massachusetts law. Due to
the proximity of the site to the landfill and the composition of waste at the
site, the issues are under discussion regarding the site among state and
federal agencies and the United States Department of Energy.
In September, 1991. the Company signed a judicial consent decree relating
to the Western Sand and Gravel site located in Burrillville and North
Smithfield, Rhode Island. The consent decree was entered on August 28, 1992 by
the U.S. District Court for the District of Rhode Island. The most likely
scenario cost estimates for remediation of the ground water at the site range
from approximately $2.8 million to approximately $7.8 million. Based on current
participation, the Company's share is approximately 8% of approximately 75% of
the costs. The Company and certain other participants have commenced litigation
against non-settling potentially responsible parties to seek to obtain
reimbursement for their share of the remediation costs. In 1988, the Company
received notice that it had been identified as a PRP, together with numerous
other companies, in connection with an unrelated site in another state. The
Company has appropriately responded but has received no further communications
on this matter.
The estimated liability for costs associated with environmental sites is
included in Long-term obligations in the accompanying balance sheets, exclusive
of an additional amount of approximately $100 included in Other liabilities in
each year. Management believes it has provided adequately for the above
environmental exposures.
In January 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1 ("SOP 96-1"), "Environmental Remediation
Liabilities", which is effective for fiscal year 1997. SOP 96-1 provides
guidance on the recognition of expenses related to environmental remediation
activities and the related financial statement disclosures. Management believes
that implementation of SOP 96-1 will not have a material effect on the Company's
financial statements.
J. PROMOTIONAL EXPENSES
Substantial expenditures for advertising and promotion are considered
necessary to maintain and enhance the Company's business. These expenditures are
included in Selling and Administrative expenses in the year incurred. The
following table summarizes the various promotional expenses incurred by the
Company.
- --------------------------------------------------------------------------------
(in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
In-store markdowns ........................... $6,120 $ 6,121 $ 5,741
Co-op advertising ............................ 1,095 1,227 1,314
Displays ..................................... 932 1,620 1,124
National advertising & other ................. 1,104 1,755 1,849
------ ------- -------
Total ................................... $9,251 $10,723 $10,028
Percentage of net sales ...................... 7.0% 7.7% 7.0%
- --------------------------------------------------------------------------------
K. PATENTS, TRADEMARKS AND LICENSES
The Company owns the rights to various patents, trademarks, trade names and
copyrights and has exclusive licenses to market certain products in the United
States. The Company's "Pierre Cardin" and "Yves Saint Laurent" (men's), "Anne
Klein", "Anne Klein II", and "Guess?" (women's) licenses may be considered
material to the Company's business. A change in distribution channels announced
by one of the Company's principal Iicensors of men's products has prompted the
Company to introduce, commencing in 1997, new men's designer lines. Although
management anticipates that the Company will be strengthened by the addition of
these new lines, unfavorable consumer acceptance of the new lines could
adversely affect future operating results.
14
<PAGE>
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Swank, Inc.
Attleboro, Massachusetts:
We have audited the accompanying consolidated balance sheets of
Swank, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Swank,
Inc. as of December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
February 18, 1997 -------------------------------
Coopers & Lybrand L.L.P.
================================================================================
ABOUT THE COMPANY
Swank, Inc. is a leading U.S. manufacturer and distributor of men's
jewelry, belts, leather accessories and suspenders and women's jewelry. The
Company is dedicated to maintaining style and quality leadership in the broad
diversity of products it markets.
The Company's customers are primarily major retailers within the
United States. Sales have become more concentrated as a result of consolidations
within the retail industry. The Company's ten largest customers represented
approximately 63% of consolidated net sales in 1996 compared to 62% in 1995.
In order to appeal to a large economic cross-section of the buying
public, most of Swank's collections are offered in a wide variety of styles and
price ranges.
The Company takes great pride in the strength of its consumer
franchise and the brand name recognition of its products such as "Yves Saint
Laurent", "Pierre Cardin", "Kenneth Cole", "Geoffrey Beene", "Colours by
Alexander Julian", "Anne Klein", "Anne Klein II", "Guess?" and "Swank".
Approximately 96 sales people and regional managers are engaged in
the sale of Company products, working out of offices located in 5 major cities
throughout the United States. The Company employs approximately 1,200 people.
Swank operates three production and distribution facilities, two in
Massachusetts and one in Connecticut, and 19 factory outlet stores in 13 states.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Small Cap Market
tier of The Nasdaq Stock Market under the symbol SNKI. The following table sets
forth in 1996 and 1995 the range of high and low sales prices of the Company's
Common Stock, as reported by The Nasdaq Stock Market for the calendar quarters
indicated.
1996 1995
- ---------------------------------------------------------------------
Quarter.................. HIGH LOW HIGH LOW
- ---------------------------------------------------------------------
First.................... $ .94 $ .63 $2.06 $1.06
Second................... 1.22 .63 1.63 1.06
Third.................... 1.06 .75 1.56 1.00
Fourth................... .88 .56 1.25 .75
For the Year............. $1.22 $ .56 $2.06 $ .75
- ---------------------------------------------------------------------
Number of Record Holders at February 27, 1997 - 1,793
Estimated number of stockholders - 3,797
FORM 10-K
The Company's Annual Report on Form 10-K will be furnished without
charge to stockholders. Written requests for the report should be forwarded to
Mr. Christopher F. Wolf, Corporate Secretary, Swank, Inc., P.O. Box 2962,
Attleboro, Massachusetts 02703-0962.
15
<PAGE>
CORPORATE INFORMATION
================================================================================
BOARD OF DIRECTORS
MARK ABRAMOWITZ
Parker Chapin Flattau & Klimpl, LLP
JOHN J. MACHT
The Macht Group, Retail and
Marketing Consultants
JAMES E. TULIN
Senior Vice President-Merchandising
JOHN TULIN
President and Chief Executive Officer
MARSHALL TULIN
Chairman of the Board
RAYMOND H. VISE
Retired Senior Vice President
- --------------------------------------------------------------------------------
CORPORATE DATA
EXECUTIVE AND ADMINISTRATIVE OFFICE PRODUCTION AND
6 Hazel Street DISTRIBUTION FACILITIES
Attleboro, Massachusetts Attleboro, Massachusetts
02703 South Norwalk, Connecticut
Taunton, Massachusetts
EXECUTIVE AND
NATIONAL SALES OFFICES GENERAL COUNSEL
90 Park Avenue Parker Chapin Flattau &
New York, New York Klimpl, LLP
10016 1211 Avenue of the Americas
New York, New York 10036
INTERNATIONAL DIVISION
SALES OFFICE INDEPENDENT ACCOUNTANTS
90 Park Avenue Coopers & Lybrand L.L.P.
New York, New York One Post Office Square
10016 Boston, Massachusetts 02109
REGIONAL SALES OFFICES TRANSFER AGENT AND REGISTRAR
Atlanta, Chicago, Dallas American Stock Transfer &
Beverly Hills, New York Trust Company
40 Wall Street
New York, New York 10005
- --------------------------------------------------------------------------------
CORPORATE OFFICERS
MARSHALL TULIN WILLIAM F. RUBIN
Chairman of the Board Senior Vice President -
Regional Sales
JOHN TULIN
President and Chief Executive Officer BRUCE SHOPOFF
Senior Vice President -
RICHARD S. BLUM Regional Sales
Senior Vice President - International
JAMES E. TULIN
RICHARD V. BYRNES, JR. Senior Vice President -
Senior Vice President - Operations Merchandising
CHRISTOPHER F. WOLF LEWIS VALENTI
Senior Vice President - Senior Vice President -
Chief Financial Officer, Women's Division
Secretary and Treasurer
BARRY HEUSER
PAUL DUCKETT Vice President - Merchandising
Senior Vice President - Belt Division
Distribution and
Retail Store Operations FREDERICK M. MOEHLE
Vice President -
ARTHUR T. GATELY, JR. Merchandising
Senior Vice President - Women's Division
Administration
KIMBERLY RENK
MELVIN GOLDFEDER Vice President - Merchandising
Senior Vice President - Women's Division
Special Markets
ERIC P. LUFT
Senior Vice President
Men's Division
================================================================================
EXHIBIT 23.01
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Swank, Inc.
Attleboro, Massachusetts:
We consent to the incorporation by reference in the Registration Statements
relating to the Swank, Inc. 1981 Incentive Stock Option Plan (File No. 2-83629)
and the 1987 Incentive Stock Option Plan (File No. 33-23913) on Form S-8, of our
reports dated February 18, 1997, on our audits of the consolidated financial
statements and financial statement schedule of Swank, Inc. as of December 31,
1996 and 1995 and for the years ended December 31, 1996, 1995 and 1994, which
reports are included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 27, 1997
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<SECURITIES> 0
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<COMMON> 1,684
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