SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-5354
SWANK, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-1886990
(State or other jurisdiction of incorporation (IRS employer
or organization identification Number)
6 Hazel Street, Attleboro, Massachusetts 02703
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 508-222-3400
Former name, former address and former fiscal year, if changed
since last report.
Indicate by X 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 __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court:
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date:
Title of Class Shares Outstanding on October 31, 1998
Common stock, $.10 par value 16,554,426
<PAGE>
SWANK, INC.
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements. CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands)
September 30, 1998 December 31, 1997
ASSETS
Current:
Cash and cash equivalents $ 9 $ 1,235
Accounts receivable, less
allowances of $6,245 and $9,706 21,300 12,173
Inventories, at the lower of
cost or market
Raw materials 7,669 4,341
Work in process 8,649 6,758
Finished goods 25,547 41,865 19,868 30,967
Deferred income taxes 2,946 3,242
Prepaid income taxes 791 -
Prepaid and other 767 1,223
Total current assets 67,678 48,840
Property, plant and equipment, at 26,474 25,802
cost
Less accumulated depreciation 20,834 5,640 19,645 6,157
and amortization
Other assets 5,474 4,952
Total assets $78,792 $59,949
LIABILITIES
Current:
Notes payable to banks 24,854 $ 7,517
Current portion of long-term - 1,804
debt
Term loan classified as current - 1,295
Accounts payable 6,682 4,391
Accrued employee compensation 5,116 5,077
Income taxes payable - 253
Other current liabilities 5,240 4,148
Total current liabilities 41,892 24,485
Long-term obligations 8,317 8,603
Total liabilities 50,209 33,088
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00
Authorized 1,000,000 shares -
Common stock, par value $.10
Authorized 43,000,000 shares:
Issued 16,887,945 and 1,689 1,684
16,843,042 shares
Capital in excess of par value 771 570
Retained earnings 26,834 25,623
Deferred employee benefits
0 and 514,437 shares (2) (307)
Treasury stock 333,519 and (709) (709)
333,519 shares
Total stockholders' equity 28,583 26,861
Total liabilities and $ 78,792 $ 59,949
stockholders' equity
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
SWANK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTERS ENDED SEPTEMBER 30, 1998 AND 1997
(Dollars in thousands except per share data)
---------------------------------
1998 1997
Net Sales $ 39,041 $ 36,165
Cost of goods sold 22,852 20,970
Gross profit 16,189 15,195
Selling and administrative expenses 14,181 12,941
Income from operations 2,008 2,254
Interest charges, net 523 438
Income before income taxes 1,485 1,816
Provision for income taxes 579 708
Net income $ 906 $ 1,108
Share and per share information:
Weighted average common shares outstanding 16,550,736 16,296,913
Net income per common share $ .05 $ .07
Weighted average common shares outstanding 16,968,035 16,327,515
assuming dilution
Net income per common share assuming $ .05 $ .07
dilution
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
SWANK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Dollars in thousands)
----------------
1998 1997
Net Sales $104,847 $ 91,311
Cost of goods sold 61,255 51,719
Gross profit 43,592 39,592
Selling and administrative expenses 40,413 37,821
Income from operations 3,179 1,771
Interest charges, net 1,192 1,005
Income before income taxes 1,987 766
Provision for income taxes 775 299
Net income $ 1,212 $ 467
Share and per share information:
Weighted average common shares outstanding 16,529,419 16,358,391
Net income per common share $ .07 $ .03
Weighted average common shares outstanding 16,747,542 16,368,591
assuming dilution
Net income per share assuming dilution $ .07 $ .03
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
SWANK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Dollars in thousands)
--------------
1998 1997
Cash flow from operating activities:
Net income $ 1,212 $ 467
Adjustments to reconcile net income
to net cash used in operations:
Depreciation and amortization 1,668 1,375
Loss on sale of fixed assets (3) -
Decrease in receivable allowances (3,461) (2,471)
Increase in post retirement benefits 225 225
Changes in assets and liabilities
Increase in accounts receivable (5,667) (7,301)
Increase in inventory (10,898) (7,555)
(Increase) Decrease in prepaid and other
current (496) 89
Increase in other assets (522) (293)
Increase in accounts payable, accrued 3,022 147
and other liabilities
Net cash used in operations (14,920) (15,317)
Cash flow from investing activities:
Capital expenditures (698) (807)
Proceeds from sale of property, plant and 6 -
equipment
Net cash used in investing (692) (807)
activities
Cash flow from financing activities:
Borrowing under revolving credit 54,339 35,053
agreements
Payments of revolving credit obligations (37,001) (19,712)
Principal payments on long-term (2,695) (1,105)
obligations
Payments of capital lease obligations (297) (252)
Advance to retirement plan (2) (289)
Proceeds from exercise of employee stock 42 -
options
Net cash provided by 14,386 13,695
financing activities
Net decrease in cash and cash equivalents (1,226) (2,429)
Cash and cash equivalents at beginning of 1,235 2,871
period
Cash and cash equivalents at end of $ 9 $ 442
period
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
SWANK, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(1) The unaudited information furnished herein reflects all
adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary to present
a fair statement of the results for the periods ended
September 30, 1998 and 1997. The financial information
contained herein represents condensed financial data and,
therefore, does not include all footnote disclosures required
to be included in financial statements prepared in conformity
with generally accepted accounting principles. Certain amounts
from previous periods have been reclassified to conform with
the current presentation. Footnote information was included in
financial statements included in the Company's 1997 Annual
Report to Stockholders which was incorporated by reference in
the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1997. The condensed financial data
included herein should be read in conjunction with the
information in the annual report.
(2) During the three month period ended September 30, 1998, the
Company has not incurred any material changes in commitments and
contingencies set forth in Footnote I of the 1997 Annual Report
to Stockholders.
(3) The following table sets forth the computation of net income
per share for the quarters and nine month periods ending
September 30, 1998 and September 30, 1997 (in thousands, except
for share and per share data):
<TABLE>
Quarter Nine months
Ended September 30, Ended September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Numerator:
Net income $ 906 $ 1,108 $ 1,212 $ 467
Denominators:
Weighted average common shares outstanding 16,550,736 16,509,523 16,529,419 16,509,523
Effect of excluding unallocated shares held in ESOP 0 212,610 0 151,132
Shares used in computing net income per common share 16,550,736 16,296,913 16,529,419 16,358,391
Effect of dilutive options 417,299 30,602 218,123 10,200
Shares used in computing net income per common share 16,968,035 16,327,515 16,747,542 16,368,591
assuming dilution
Net income per common share $ .05 $ .07 $ .07 $ .03
Net income per common share assuming dilution $ .05 $ .07 $ .07 $ .03
</TABLE>
(4) During the quarter ended March 31, 1998, the Company
fulfilled its previously recorded commitment to allocate 514,437
shares to the individual accounts of participants in the stock
ownership component of the Company's retirement plan. As a result
of the allocation, deferred employee benefits was reduced by
$307,000, accrued employee compensation was reduced by $470,000
and capital in excess of par value was increased by $163,000.
(5) In April 1998, the Company prepaid, in full, the remaining
principal balance outstanding on its Term Loan and applicable
fees utilizing borrowings under the Company's existing revolving
credit facility.
<PAGE>
SWANK, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
(6) In July 1998, the Company signed a new five year $30
million revolving credit agreement (the "1998 Revolving Credit
Agreement") with PNC Bank, National Association (the "Bank"). The
new financing replaced the Company's prior $25 million credit
facility and is collateralized by substantially all of the
Company's domestic accounts receivable, inventory and machinery
and equipment. The terms of the 1998 Revolving Credit Agreement
permit the Company to borrow against a percentage of eligible
accounts receivable and eligible inventory at an interest rate
equal to the Bank's prime rate or at a Eurodollar lending rate
plus 1.75%. The 1998 Revolving Credit Agreement requires a
facility fee of 3/8% per annum on the unused portion of the
revolving credit facility. Under the 1998 Revolving Credit
Agreement, the Company must maintain a certain fixed charge
coverage ratio and payment of dividends is prohibited. In
addition, the 1998 Revolving Credit Agreement imposes limits on
capital expenditures and additional indebtedness for borrowed
money.
(7) Change in Accounting Principle. Effective January 1, 1998,
the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income." This Statement
requires that all items recognized under accounting standards as
components of comprehensive income be reported in an annual
financial statement that is displayed with the same prominence as
the other annual financial statements. This statement also
requires that an entity classify items of other comprehensive
income by their nature in an annual financial statement. Annual
financial statements for prior periods will be reclassified, as
required. The Company's total comprehensive income consisting of
unrealized gains and losses on marketable securities, net of
income tax, was:
Quarter Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
(In thousands) (In thousands)
Net Income $906 $1,108 $1,212 $467
Other comprehensive income (loss) (50) 16 (20) 17
Total comprehensive income $ 856 $1,124 $1,192 $ 484
(8) The Company will adopt the provisions of Statement of
Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ( the "SOP") in the first
quarter of 1999. The SOP establishes criteria for capitalizing
internal and external costs associated with software and any new
accounting treatment will be applied prospectively. Based on
presently planned software projects, management anticipates that
adoption of the SOP will not have a material impact on the
Company's financial statements.
<PAGE>
SWANK, INC
Notes to Condensed Consolidated Financial Statements (Unaudited)
(continued)
(9) Subsequent event. In April 1998, the Company's
stockholders approved the Swank, Inc. 1998 Equity Incentive
Compensation Plan (the "Plan") which replaced the Company's prior
incentive stock plans, all of which had expired by their terms.
The Plan permits the Company's Board to grant a maximum of
3,000,000 shares to key employees through stock options, stock
appreciation rights, restricted stock units, performance awards
and other stock-based awards. Long-term performance awards were
granted under the Plan in October 1998 to certain key employees.
Awards are based upon a formula which incorporates a minimum and
maximum range of cumulative earnings, determined before incentive
compensation pursuant to the awards and before income taxes, for
the three year period ending December 31, 2000. If earned, the
awards will be payable partially in cash and partially in
restricted shares of the Company's common stock. Each award is
entirely denominated in dollars. The number of restricted shares
to be issued to participants will be the aggregate dollar amount
of the equity portion of the awards divided by the fair value of
the Company's shares at the date of distribution. Based on a
market value of $1.08625 per share for the Company's common stock
when the awards were granted, a maximum of approximately
1,383,100 shares have been awarded. Restrictions on any shares
actually issued will lapse over a three year period from the date
of issuance.
<PAGE>
Item 2. Management's Discussion and Analysis of the Financial
Condition and Results of Operations
Results of Operations
As is customary in the fashion accessories industry, the
Company makes modifications to its lines coinciding with the
Spring and Fall seasons. The Company believes that results of
operations are more meaningful on a seasonal basis than on a
quarterly basis as the timing of sales and related income between
quarters can be affected by the availability of materials, retail
sales and fashion trends. These factors may affect the shift of
volume between quarters within a season differently in one year
than another. Due to seasonality and other factors, the results
of the quarter are not necessarily indicative of the results to
be expected for the full year.
Net Sales
Net sales for the quarter and nine months ended September 30,
1998 were $39,041,000 and $104,847,000 respectively, an increase
of $2,876,000 (8.0%) and $13,536,000 (14.8%) over the quarter and
nine months ended September 30, 1997, respectively.
Included in net sales for the nine month periods ending
September 30 are annual second quarter adjustments to record the
variance between customer returns of prior year shipments
actually received in the current year and the estimate used to
establish the allowance for customer returns at the end of the
preceding fiscal year. At December 31, 1997, the allowance for
returns was established in consideration of new product lines
for which initial shipments were made during 1997 and for which
the Company had no direct prior experience. These adjustments
increased net sales in both 1998 and 1997, as set forth in the
following table:
Increase (Decrease) in Net Sales
1998 1997 Change
Men's and Women's Jewelry $1,014,000 $292,000 $722,000
Men's Leather Accessories 1,527,000 752,000 775,000
Other products 0 (3,000) 3,000
Total $2,541,000 $1,041,000 $1,500,000
Net sales of Men's and Women's Jewelry increased by $1,294,000
(8.4%) and $4,825,000 (12.1%) compared to the quarter and nine
months ended September 30, 1997. The increase in Jewelry net
sales for both the quarter the nine months is primarily due to
increased domestic shipments of the Company's women's Guess?
jewelry line and higher sales of women's jewelry to certain new
and existing mass merchandise customers. The sales increase for
the nine month period also includes the returns adjustment
recorded in the second quarter described in the preceding
paragraph. Shipments of out of line goods decreased during both
the quarter and nine month period relative to the prior year and
export sales declined due to weaker demand from Asian customers.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Net Sales , (continued)
Men's leather accessories net sales increased by $1,544,000
(7.7%) and $8,655,000 (17.5%), respectively compared to the
quarter and nine months ended September 30, 1997. The
improvement for both the quarter and nine months primarily
reflects increased shipments of men's belts licensed under
certain new men's designer labels first introduced in 1997. The
sales increase for the nine months ended September 30, 1998 also
includes the second quarter returns adjustment described above.
In addition, sales of Men's leather accessories during the first
half of 1997 may have been adversely affected by a reduction in
orders for established products by certain retailers pending the
availability of new Men's designer lines later in that year.
Sales through the Company's factory outlet stores constituted
less than 5% of net sales for the nine month periods ended
September 30, 1998 and 1997 . Management believes that the
Company's factory outlets remain a useful distribution channel
for the disposition of excess inventory and/or discontinued
inventory.
Gross Profit
Gross profit for the quarter and nine months ended September
30, 1998 increased $994,000 (6.5%) and $4,000,000 (10.1%),
respectively compared to 1997. Men's and Women's Jewelry gross
profit increased $938,000 (13.6%) for the quarter and $2,257,000
(12.0%) for the nine month period, as compared to the equivalent
periods in 1997. Men's Leather Accessories gross profit
increased $35,000 (less than 1%) and $1,668,000 (8.4%),
respectively, for the quarter and for the nine months ended
September 30, 1998.
Included in gross profit for the nine months ending September
30 are annual second quarter adjustments to record the variance
between customer returns of prior year shipments actually
received in the current year and the allowance for customer
returns which was established at the end of the preceding fiscal
year. At December 31, 1997, the allowance for returns was
established in consideration of new product lines for which
initial shipments were made during 1997 and for which the Company
had no direct prior experience. These adjustments increased gross
profit in both 1998 and 1997, as set forth in the following
table:
Increase (Decrease) in Gross Profit
1998 1997 Change
Men's and Women's Jewelry $752,000 $210,000 $ 542,000
Men's Leather Accessories 1,036,000 476,000 560,000
Other product lines 0 (2,000) 2,000
Total $1,788,000 $684,000 $1,104,000
Gross profit expressed as a percentage of net sales decreased
to 41.5% from 42.0% for the quarter and decreased to 41.6% from
43.4% for the nine months ended September 30, 1998, as compared
to the equivalent periods in 1997. Gross profit percentage
decreased .5% during the quarter compared to 1997 mostly from a
reduction in favorable manufacturing overhead variances and
higher royalty costs. The reduction of 1.8% in gross profit as a
percent of sales for the nine month period occurred primarily in
the first quarter and is principally attributable to higher
product costs resulting from a less favorable product mix,
including the disposition of excess and out of line merchandise,
increased royalty expenses, certain non-recurring costs and a
reduction in favorable overhead variances incurred in connection
with jewelry and belt manufacturing all as compared to the first
quarter of 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Men's and Women's Jewelry gross profit as a percent of net
sales increased to 47.0% from 44.7% for the quarter and was
unchanged at 47.1% for the nine months ended September 30,
1998, both as compared to the equivalent periods in 1997. The
increase in gross profit percentage for Men's and Women's Jewelry
during the quarter was primarily due to a more favorable product
mix and lower inventory control expenses, partially offset by
unfavorable manufacturing overhead variances.
Gross profit as a percent of net sales for Men's Leather
accessories decreased to 36.9% from 39.3% for the quarter and
declined to 37.1% from 40.1% for the nine months ended September
30, 1998, compared to the same periods in 1997. Gross profit as a
percentage of net sales decreased 2.4% for the quarter and 3.0%
for the nine months primarily due to a less favorable sales mix.
Gross profit was also affected during both the quarter and nine
month period by higher royalty expenses and a reduction in
favorable production variances in connection with belt
manufacturing as compared to the equivalent periods in 1997.
Selling and Administrative Expenses
Selling and administrative expenses were $14,181,000 and
$40,413,000 for the quarter and nine months ended September 30,
1998, respectively, an increase of $1,240,000 (9.6%) and
$2,592,000 (6.9%) compared to the quarter and nine month 1997
periods, respectively. The increase in selling expenses for both
the quarter and nine month period is principally due to increased
sales commissions and other variable costs associated with higher
sales volume. Selling expenses were also impacted during the
quarter by planned increases in promotional costs incurred in
connection with positioning certain products in certain markets.
Administrative expenses for the nine months ended September 30,
1998 were higher than in 1997 partly as a result of accruals of
incentive compensation in 1998 and partly from a reduction in
the provision for bad debts recorded in the second quarter of
1997. Total advertising and promotional expenditures totaled
6.8% and 6.0% of net sales for the quarters ending September 30,
1998 and September 30, 1997, respectively, reflecting the
increased promotional activity in 1998, and 6.8 % and 7.3% of
net sales for the nine months ending September 30, 1998 and
September 30, 1997, respectively. Selling and administrative
expenses as a percentage of net sales increased to 36.3% in 1998
from 35.8% for the quarter reflecting increased promotional
expenditures and decreased as a percentage of net sales to 38.5%
in 1998 from 41.4% for the nine month period n 1997 primarily due
to the increase in net sales.
Interest Expense
Net interest expense increased $84,000 (19.2%) for the quarter
and $187,000 (18.6%) for the nine months ended September 30, 1998
reflecting increased borrowing levels during these periods. In
1997, the Company did not commence substantial borrowings under
its revolving credit agreement until late February. Net interest
expense for the nine months ended September 30, 1998 includes
approximately $78,000 in non-recurring interest income which was
recorded in the first quarter.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Provision for Income Taxes
The Company recorded a provision for income taxes for both
the quarter nine month periods ending September 30, 1998 at an
estimated effective full-year rate of 39.0%. The Company recorded
a tax provision during the comparable periods of 1997 at the same
rate.
Liquidity and Capital Resources
The Company's working capital increased by $1,431,000 during
the nine months ended September 30, 1998 as compared to an
increase of $450,000 for the comparable 1997 period.
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 peak in the fourth quarter. The Company's inventories
traditionally are at a seasonal low point at year-end. Then 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.
Cash used in operations for the nine month period totaled
$14,902,000, consisting primarily of inventory increases of
$10,898,000 during the period (compared to an increase of
$7,555,000 in 1997) reflecting seasonal growth, including
planned earlier procurement in 1998 designed to improve customer
delivery performance for the fall season. The broadening of the
Company's product offerings through licensed Men's designer lines
introduced in 1997 has added upward pressure on the Company's
investment in inventory. The Company continues to focus on asset
management as part of its overall program to enhance its
competitiveness, productivity and efficiency. Accounts
receivable increased by $5,667,000 in 1998 and by $7,301,000 in
1997 as compared to the preceding year end reflecting the
seasonal increase in net sales during the respective nine month
periods. Accounts receivable allowances decreased by
$3,461,000 in 1998 and by $2,471,000 in 1997 as compared to the
preceding year end due to actual current year charges processed
for cash discounts, doubtful accounts, in-store markdowns,
cooperative advertising and customer returns. These reductions
are partially offset by increases resulting from accruals
associated with current period activity.
Cash used in investing activities was $692,000, principally
for equipment. Cash provided by financing activities totaled
$14,368,000 consisting primarily of net borrowings under the
Company's revolving credit agreements and prepayment, in full,
of bank term borrowings during the second quarter totaling
$2,695,000.
In July 1998, the Company signed a new five year $30 million
revolving credit agreement (the "1998 Revolving Credit
Agreement") with PNC Bank, National Association (the "Bank"). The
new financing replaced the Company's prior $25 million credit
facility and is collateralized by substantially all of the
Company's domestic accounts receivable, inventory and machinery
and equipment. The terms of the 1998 Revolving Credit Agreement
permit the Company to borrow against a percentage of eligible
accounts receivable and eligible inventory at an interest rate
equal to the Bank's prime rate or at a Eurodollar lending rate
plus 1.75%. The 1998 Revolving Credit Agreement requires a
facility fee of 3/8% per annum on the unused portion of the
revolving credit facility. Under the 1998 Revolving Credit
Agreement, the Company must maintain a certain fixed charge
coverage ratio and payment of dividends is prohibited. In
addition, the 1998 Revolving Credit Agreement imposes limits on
capital expenditures and additional indebtedness for borrowed
money. Management believes that this credit facility is adequate
to meet the Company's working capital needs over the foreseeable
future.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Year 2000
Management's present assessment is that the Company will be
able to modify its significant software systems on a timely
basis to make them Year 2000 compliant without material effects
on the Company's business or results of operations. This
assessment is unchanged from that previously reported.
Management has completed the identification of date issues
associated with key applications software and the necessary
modifications are, for the most part, complete. Most of the
Company's applications software was internally developed and the
necessary modifications have been and are being made utilizing
internal resources.
User testing of the modified software is in various stages of
completion and is presently anticipated to be substantially
complete prior to March 31, 1999. Operating systems for key
hardware components are either Year 2000 compliant or will be
upgraded prior to December 31, 1998. Formal Year 2000 assessment
of the Company's network is expected to be completed by March 31,
1999.
The process of identifying potential issues associated with
embedded technology or so called non-IT systems has not been
formally initiated. Management has considered the Company's
manufacturing processes, the age of its facilities and the
associated building systems in determining that non-IT systems
represent relatively low risk and has deferred action until
conclusion of work on key applications software.
The Company's principal retail customers have been extending the
scope of their electronic interfaces with the Company and
management believes that this is likely to continue. To date,
these interfaces have consisted principally of sales order entry
transactions through Electronic Data Interchange ("EDI"). The
Company has been able to respond to its customers' Year 2000
requirements without material effects on the Company's business
or results of operations and management presently has no reason
to believe that the Company will not be able to continue to do
so.
In September 1998, the Company implemented a program to contact
third parties with whom it has material business relationships to
obtain information and representations with respect to the
respective readiness of each for Year 2000. Third parties
contacted include major customers, determined regardless of
whether there is an existing EDI relationship, major vendors and
suppliers of key services such as utilities, telecommunications
and banking. The Company is still receiving the responses to its
inquiries and is in the process of evaluating the responses.
Various third parties with whom the Company has material
business relationships have represented that they have programs
in place to attain Year 2000 compliance but with a completion
date in 1999. Management has determined that for the time being
it is in the best interest of the Company to periodically monitor
the progress of key vendors and suppliers by obtaining updated
representations and/or by review of their public disclosures,
where available, rather than disrupt mutually beneficial
relationships and attempt to identify alternative sources solely
on the basis of represented Year 2000 compliance. This position
will be reassessed in each individual case in the third quarter
of 1999 in light of the information then available.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Year 2000, (continued)
With respect to material customers, management is relatively
less concerned about EDI transactions per se because of their
defined protocols, the utilization of generally available third
party translators and the ability to conduct mutual testing.
However, there remains the risk that EDI customers' may
experience other systems issues internal to them which disrupt
the functionality of otherwise Year 2000 compliant EDI systems.
A significant disruption in EDI processing could materially
impair the Company's shipments. Management has determined that,
for the time being, it is in the best interest of the Company to
periodically monitor the progress of key customers by obtaining
updated representations and/or by review of their public
disclosures, where available. Major customers' progress will be
reassessed in the third and fourth quarters of 1999 and, if
issues remain, management anticipates the ability to ameliorate
the problem, at least temporarily, through development of
mutually agreed strategies which might include some acceleration
of order placement during 1999. January and February are
typically important cash flow months as the Company's retail
customers remit payments for their seasonally high pre-holiday
purchases. Irrespective of EDI, it is possible that the ability
of one or more material customers to process payments may be
impaired. Management believes that the existing revolving line
of credit will be adequate for a number of months in the event of
unanticipated delays in customer remittances.
Presently, it is management's view that service providers
represent the greatest conceptual risk to material disruption in
the Company's operations. The Company is dependent upon utilities
and telecommunications entities for day-to-day operations as well
as upon the ability of its banks to provide cash receipts and
disbursements services as well as working capital. To the extent
that any of these entities are significantly impaired for more
than a relatively short period the corresponding impact on the
Company is likely to be material.
The Company has not yet developed a contingency plan and has no
definitive plans in this regard other than to quarterly reassess
the need to develop a formal plan during 1999. This assessment
will be based for the most part on the results of the periodic
monitoring of material third parties as described above.
Management notes that relatively modest actions may be sufficient
to significantly reduce certain risks to the Company. For
example, if it appears warranted, management has the ability
prior to year end to accelerate procurement of inventories which
would otherwise take place in the first quarter. In addition,
management believes that alternative sources of supply are
readily available for most of its purchased materials and
finished products and that relationships with such sources could
be developed within a few months. Management believes that the
Company's seasonality with reduced activity in the first quarter
provides something of a buffer against the worst case customer
and service provider scenarios. The Company's exposure to lost
revenue and the risk of reduction in its other activities will be
significantly less in the first quarter of 2000 than in the last
quarter of 1999. January will be the first month in a Year 2000
operating environment and January is historically a relatively
low volume month for the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Year 2000, (continued)
As described above, most of the Company's applications software
was internally developed and the necessary modifications have
been and are being made utilizing existing internal personnel
resources. These resources are included in the Company's
recurring IT budget. Management does not believe that use of
existing resources for Year 2000 remediation has been materially
detrimental to the completion of other significant IT projects.
The Company has had to purchase specific Year 2000 upgrades with
respect to certain third party software applications. The
aggregate cost of these upgrades through September 30, 1998 is
approximately $70,000 and no significant additional specific Year
2000 expenditures are presently anticipated for third party
software. The Company has been working toward standard minimum
personal computer (PC) specifications and common PC operating
systems. Acceleration of this program, if any, required by Year
2000 considerations is not expected to be significant.
"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.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
10.0 Swank, Inc. 1998 Equity Incentive Compensation Plan.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K - none
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWANK, INC.
Registrant
\S\ Christopher F. Wolf
Christopher F. Wolf
Senior Vice President, Treasurer
and Chief Financial Officer
Date: November 12, 1998
EXHIBIT 10.0
SWANK, INC.
1998 EQUITY INCENTIVE COMPENSATION PLAN
SECTION 1. Purpose. The purposes of this Swank, Inc.
1998 Equity Incentive Compensation Plan (the "Plan") are to promote
the interests of Swank, Inc.(the "Company") and its stockholders
by (i) attracting and retaining officers and other key employees of
the Company and its Subsidiaries (as defined below); (ii)
motivating such individuals by means of performance-related
incentives to achieve longer-range performance goals; and (iii)
enabling such individuals to participate in the long-term growth
and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the
following terms shall have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or
indirectly, is controlled by, or controls, or is under common
control with, the Company and (ii) any entity in which the Company
has a significant equity interest, in either case as determined by
the Committee.
"Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock Award, Restricted Stock Unit Award, Performance
Award or Other Stock-Based Award.
"Award Agreement" shall mean any written agreement,
contract, or other instrument or document evidencing any Award,
which may, but need not, be executed or acknowledged by a
Participant.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall mean the occurrence of any of
the following: (i) a change in control as the term "control" is
defined in Rule 12b-2 promulgated under the Exchange Act; (ii) when
any "Person" (as such term is defined in Sections 3(a)(9) and
13(d)(3) of the Exchange Act), except for an employee stock
ownership trust or other employee plan of the Company or any
Affiliate, 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 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 paragraph)
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; (iv) when a majority of the directors elected at any
annual or special meeting of stockholders (or by written consent in
lieu of a meeting) are not individuals nominated by the Company's
incumbent Board; (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
stockholders of the Company approve a plan of complete liquidation
of the Company; or (vii) if the stockholders of the Company approve
an agreement for the sale or disposition of all or substantially
all of the Company's assets. Notwithstanding the foregoing, no
Change in Control shall be deemed to have occurred as a result of
any event specified in clauses (i)-(vii) of this paragraph if
Marshall Tulin or John Tulin remains the Chief Executive Officer of
the Company following such event.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" shall mean (i) a committee of the Board
designated by the Board to administer the Plan or (ii) if at any
time such a committee has not been so designated by the Board, the
Board or any authorized committee thereof.
"Company" shall mean Swank, Inc., a Delaware corporation,
and any successor thereto.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
"Fair Market Value" shall mean: (i) with respect to any
property other than Shares, the fair market value of such property
determined by such methods or procedures as shall be established
from time to time by the Committee and (ii) with respect to a
Share, as of any date, shall mean (A) if the principal market for
the Shares is a national securities exchange, the closing sales
price per Share on such day as reported by such exchange or on a
composite tape reflecting transactions on such exchange, (B) if the
principal market for the Shares is not a national securities
exchange and the Shares are quoted on The Nasdaq Stock Market
("Nasdaq"), and (I) if actual sales price information is available
with respect to the Shares, the closing sales price per Share on
such day on Nasdaq, or (II) if such information is not available,
the average of the highest bid and lowest asked prices per Share on
such day on Nasdaq, or (C) if the principal market for the Shares
is not a national securities exchange and the Shares are not quoted
on Nasdaq, the average of the highest bid and lowest asked prices
per Share on such day as reported on the OTC Bulletin Board Service
or by National Quotation Bureau, Incorporated or a comparable
service; provided, however, that if clauses (A), (B) and (C) of
this paragraph are all inapplicable, or if no trades have been made
or no quotes are available for such day, the fair market value of
a Share shall be determined by the Board by any method consistent
with applicable regulations adopted by the Treasury Department
relating to stock options.
"Incentive Stock Option" shall mean a right to purchase
Shares from the Company that is granted under Section 6 of the Plan
and that is intended to meet the requirements of section 422 of the
Code.
"Non-Qualified Stock Option" shall mean a right to
purchase Shares from the Company that is granted under Section 6 of
the Plan and that is not intended to be an Incentive Stock Option,
or is intended to be an Incentive Stock Option and under Section 6
of the Plan is to be regarded as a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
"Other Stock-Based Award" shall mean any right granted by
the Committee under Section 10 of the Plan.
"Participant" shall mean any officer or other key
employee of the Company or its Subsidiaries eligible for an Award
under Section 5 of the Plan and selected by the Committee to
receive an Award under the Plan.
"Performance Award" shall mean any right granted by the
Committee under Section 9 of the Plan.
"Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, government or political subdivision
thereof or other entity.
"Plan" shall mean this Swank, Inc.1998 Equity Incentive
Compensation Plan, as amended from time to time.
"Restricted Stock" shall mean any Share granted by the
Committee under Section 8 of the Plan.
"Restricted Stock Unit" shall mean any unit with a value
equal to the Fair Market Value of a Share granted under Section 8
of the Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated under
the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission
or any successor thereto and shall include the Staff thereof.
"Shares" shall mean the common shares of the Company,
$.10 par value per share, or such other securities of the Company
(i) into which such common shares shall be changed by
reason of a recapitalization, merger, consolidation, split-up,
combination, exchange of shares or other similar transaction or
(ii) as may be determined by the Committee pursuant to Section
4(b).
"Stock Appreciation Right" shall mean any right granted
by the Committee under Section 7 of the Plan.
"Subsidiary" shall mean (i) any entity that, directly or
indirectly, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, in either case
as determined by the Committee.
"Substitute Awards" shall have the meaning specified in
Section 4(c) of the Plan.
SECTION 3. Administration.
(a) The Plan shall be administered by the Committee.
Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on
the Committee by the Plan, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to a Participant; (iii) determine
the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of
any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares,
other securities, other Awards or other property, or canceled,
forfeited, or suspended and the method or methods by which Awards
may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances
cash, Shares, other securities, other Awards, other property, and
other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of
the Committee; (vii) interpret, administer, reconcile any
inconsistency, correct any default, or supply any omission in the
Plan and any instrument or agreement relating to an Award made
under the Plan; (viii) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem
appropriate for the administration of the Plan; and (ix) make any
other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions
under or with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall
be final, conclusive and binding upon all Persons, including the
Company, any Affiliate, any Participant, any holder or beneficiary
of any Award.
(c) No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan
or any Award hereunder.
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided
in Section 4(b), the aggregate number of Shares with
respect to which Awards may be granted under the Plan shall be
Three Million (3,000,000). If, after the effective date of the
Plan, any Share covered by an Award granted under the Plan, or to
which such an Award relates, is forfeited, or if an Award has
expired, terminated or been canceled for any reason whatsoever
(other than by reason of exercise or vesting), then the Shares
covered by such Award shall again be, or shall become, Shares
with respect to which Awards may be granted hereunder.
(b) Adjustments. In the event that the Committee
determines that any dividend or other distribution (whether in the
form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase,
or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities
of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the
Committee in its discretion to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee
may, in such manner as it may deem equitable, adjust any or all of
(i) the number of Shares or other securities of the Company (or the
number and kind of other securities or property) with respect to
which Awards may be granted, (ii) the number of Shares or other
securities of the Company (or the number and kind of other
securities or property) subject to outstanding Awards, and (iii)
the grant or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder of an
outstanding Award in consideration for the cancellation of such
Award.
(c) Substitute Awards. Awards may, in the discretion
of the Committee, be made under the Plan in substitution for
outstanding awards previously granted by the Company or its
Affiliates or by a company acquired by the Company or with which
the Company combines ("Substitute Awards"). The number of Shares
underlying any Substitute Award shall be counted against the
aggregate number of Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any
Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any officer or other key
employee of the Company or any of its Subsidiaries (including any
prospective officer or key employee) shall be eligible to be
designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan,
the Committee shall have sole and complete authority to determine
the Participants to whom Options shall be granted, the number of
Shares to be covered by each Option, the exercise price therefor
and the conditions and limitations applicable to the exercise of
the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options,
or to grant both types of Options. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject
to and comply with such rules as may be prescribed by section 422
of the Code. All Options when granted under the Plan are intended
to be Non-Qualified Stock Options, unless the applicable Award
Agreement expressly states that the Option is intended to be an
Incentive Stock Option. If an Option is intended to be an
Incentive Stock Option, and if for any reason such Option (or any
portion thereof) shall not qualify as an Incentive Stock Option,
then, to the extent of such nonqualification, such Option (or
portion thereof) shall be regarded as a Non-Qualified Stock Option
appropriately granted under the Plan; provided, however, that such
Option (or portion thereof) otherwise complies with the Plan's
requirements relating to Non-Qualified Stock Options.
(b) Exercise Price. The Committee shall establish
the exercise price at the time each Option is granted, which
exercise price shall be set forth in the applicable Award
Agreement. In the sole discretion of the Committee, Options may be
granted with an exercise price that is less than the Fair Market
Value per Share
(c) Exercise. Each Option shall be exercisable at
such times and subject to such terms and conditions as the
Committee may, in its sole discretion, specify in the applicable
Award Agreement or thereafter. The Committee may impose such
conditions with respect to the exercise of Options, including,
without limitation, any condition relating to the application of
federal or state securities laws, as it may deem necessary or
advisable.
(d) Payment. No Shares shall be delivered pursuant to
any exercise of an Option until payment in full of the aggregate
exercise price therefor is received by the Company. Such payment
may be made in cash, certified check, by exchanging Shares owned by
the Participant (which are not the subject of any pledge or other
security interest and which have been owned by such Participant for
at least six months), or by any combination of the foregoing.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan,
the Committee shall have sole and complete authority to determine
the Participants to whom Stock Appreciation Rights shall be
granted, the number of Shares to be covered by each Stock
Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof. In
the sole discretion of the Committee, Stock Appreciation Rights may
be granted with an exercise price that is less than the Fair Market
Value per Share. Stock Appreciation Rights may be granted in
tandem with another Award, in addition to another Award, or
freestanding and unrelated to another Award.Stock Appreciation
Rights granted in tandem with or in addition to an Award
may be granted either at the same time as the Award or at
a later time.
(b) Exercise and Payment. A Stock Appreciation Right
shall entitle the Participant to receive an amount equal to the
excess of the Fair Market Value of a Share on the date of exercise
of the Stock Appreciation Right over the grant price thereof. The
Committee shall determine whether a Stock Appreciation Right shall
be settled in cash, Shares or a combination of cash and Shares.
(c) Other Terms and Conditions. Subject to the terms
of the Plan and any applicable Award Agreement, the Committee may
change the terms and conditions of any Stock Appreciation Right
from time to time. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it
shall deem appropriate.
SECTION 8. Restricted Stock and Restricted Stock Units.
(a) Grant. Subject to the provisions of the Plan,
the Committee shall have sole and complete authority to determine
the Participants to whom Shares of Restricted Stock and Restricted
Stock Units shall be granted, the number of Shares of Restricted
Stock or the number of Restricted Stock Units to be granted to each
Participant, the duration of the period during which, and the
conditions, if any, under which, the Restricted Stock and
Restricted Stock Units may be forfeited to the Company and the
other terms and conditions of such Awards.
(b) Transfer Restrictions. Shares of Restricted
Stock and Restricted Stock Units may not be sold, assigned,
transferred, pledged or otherwise encumbered, except, in the case
of Restricted Stock, as provided in the Plan or the applicable
Award Agreements. Certificates issued in respect of Shares of
Restricted Stock shall be registered in the name of the Participant
and deposited by such Participant, together with a stock power
endorsed in blank, with the Company. Upon the lapse of the
restrictions applicable to such Shares of Restricted Stock, the
Company shall deliver a certificate in respect of the applicable
number of shares to the Participant or the Participant's legal
representative.
(c) Payment. Each Restricted Stock Unit shall have
a value equal to the Fair Market Value of a Share. Restricted
Stock Units shall be paid in cash, Shares, other securities or
other property, as determined in the sole discretion of the
Committee, upon the lapse of the restrictions applicable thereto,
or otherwise in accordance with the applicable Award Agreement.
SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete
authority to determine the Participants who shall receive
a "Performance Award", which shall consist of a right which is (i)
denominated in cash or Shares, (ii) valued, as determined by the
Committee, in accordance with the achievement of such
performance goals during such performance periods as
the Committee shall establish, and (iii) payable at such
time and in such form as the Committee shall determine.
(b) Terms and Conditions. Subject to the terms of
the Plan and any applicable Award Agreement, the Committee shall
determine the performance goals to be achieved during any
performance period, the length of any performance period, the
amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
(c) Payment of Performance Awards. Performance
Awards may be paid in a lump sum or in installments following the
close of the performance period or, in accordance with procedures
established by the Committee, on a deferred basis.
SECTION 10. Other Stock-Based Awards.
(a) General. The Committee shall have authority to
grant to Participants an "Other Stock-Based Award", which shall
consist of any right which is (i) not an Award described in
Sections 6 through 9 above and (ii) an Award of Shares or an Award
denominated or payable in, valued in whole or in part by reference
to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as deemed by the
Committee to be consistent with the purposes of the Plan. Subject
to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of any such
Other Stock-Based Award, including the price, if any, at which
securities may be purchased pursuant to any Other Stock-Based Award
granted under this Plan.
(b) Dividends or Dividend Equivalents. In the sole
and complete discretion of the Committee, an Award, whether made as
an Other Stock-Based Award under this Section 10 or as an Award
granted pursuant to Sections 6 through 9 hereof, may provide the
Participant with dividends or dividend equivalents, payable in
cash, Shares, other securities or other property on a current or
deferred basis.
SECTION 11. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend,
alter, suspend, discontinue, or terminate the Plan or any portion
thereof at any time; provided, however, that any such amendment,
alteration, suspension, discontinuance or termination that would
impair the rights of any Participant or any holder or beneficiary
of any Award theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder
or beneficiary.
(b) Amendments to Awards. The Committee may waive
any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, any Award theretofore
granted, prospectively or retroactively; provided, however, that
any such waiver, amendment, alteration, suspension, discontinuance,
cancellation or termination that would impair the rights of any
Participant or any holder or beneficiary of any Award theretofore
granted shall not to that extent be effective without the consent
of the affected Participant, holder or beneficiary.
(c) Adjustment of Awards Upon the Occurrence of
Certain Unusual or Nonrecurring Events. The Committee is hereby
authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards in recognition of (i) unusual or
nonrecurring events (including, without limitation, the events
described in Section 4(b) of the Plan) affecting the Company, any
Affiliate, or the financial statements of the Company or any
Affiliate, or (ii) changes in applicable laws, regulations, or
accounting principles, whenever, in any such case, the Committee
determines such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits that
are intended to be made available under the Plan, or otherwise.
SECTION 12. Change of Control. In the event of a Change
of Control after the date of the adoption of this Plan, any
outstanding Award then held by a Participant which is exercisable
or otherwise unvested shall automatically be deemed exercisable or
otherwise vested, as the case may be, as of immediately prior to
such Change of Control.
SECTION 13. General Provisions.
(a) Nontransferability.
(i) Each Award, and each right under any Award,
shall be exercisable only by the Participant during the
Participant's lifetime, or, if permissible under applicable law, by
the Participant's legal guardian or representative.
(ii) No Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a
Participant otherwise than by will or by the laws of descent and
distribution, and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate; provided,
however, that the designation of a beneficiary shall not constitute
an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(b) No Rights to Awards. No Participant or other
Person shall have any claim to be granted any Award,
and there is no obligation for uniformity of treatment
of Participants, or holders or beneficiaries of Awards.
The terms and conditions of Awards and the Committee's
determinations and interpretations with respect
thereto need not be the same with respect to each Participant
(whether or not such Participants are similarly situated).
(c) Share Certificates. All certificates for Shares
or other securities of the Company or any Affiliate delivered under
the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations,
and other requirements of the Securities and Exchange Commission,
any stock exchange upon which such Shares or other securities
are then listed, and any applicable Federal or state laws,
and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to
such restrictions.
(d) Withholding. A Participant may be required to
pay to the Company or any Affiliates, and the Company or
any Affiliate shall have the right and is hereby authorized
to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any
compensation or other amount owing to a Participant, the
amount (in cash, Shares, other securities, other Awards or other
property as determined by the Committee in its sole discretion) of
any applicable withholding taxes or other amounts in respect of an
Award, its exercise, or any payment or transfer under an Award or
under the Plan and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the
payment of such taxes and amounts. The Committee may provide for
additional cash payments to holders of Awards to defray or offset
any tax arising from the grant, vesting, exercise or payments of
any Award.
(e) Award Agreements. Each Award hereunder shall be
evidenced by an Award Agreement which shall be delivered to the
Participant and shall specify the terms and conditions of the Award
and any rules applicable thereto, including, but not limited to,
the effect on such Award of the death, disability or termination of
employment or service of a Participant and the effect, if any, of
such other events as may be determined by the Committee.
(f) No Limit on Other Compensation Arrangements.
Nothing contained in the Plan shall prevent the Company or any
Affiliate from adopting or continuing in effect other compensation
arrangements, which may, but need not, provide for the grant of
options, restricted stock, Shares and other types of awards
provided for hereunder and such arrangements may be either
generally applicable or applicable only in specific cases.
(g) No Right to Employment. The grant of an Award
shall not be construed as giving a Participant the right to be
retained in the employ of, or in any consulting relationship with,
the Company or any Affiliate.
(h) No Rights as Stockholder. Subject to the
provisions of the applicable Award, no Participant or holder or
beneficiary of any Award shall have any rights as a stockholder
with respect to any Shares to be distributed under the Plan until
a certificate or certificates representing such Shares shall be
delivered to such Participant, holder or beneficiary, as the case
may be. Notwithstanding the foregoing, in connection with each
grant of Restricted Stock hereunder, the applicable Award shall
specify if and to what extent the Participant shall be entitled to
the rights of a stockholder in respect of such Restricted Stock.
(i) Governing Law. The validity, construction, and
effect of the Plan and any rules and regulations relating to the
Plan and any Award Agreement shall be determined in accordance with
the laws of the State of Delaware.
(j) Severability. If any provision of the Plan or
any Award is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any Person or Award, or
would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or
deemed amended to conform the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction, Person or
Award and the remainder of the Plan and any such Award shall remain
in full force and effect.
(k) Other Laws. The Committee may refuse to issue or
transfer any Shares or other consideration under an Award if,
acting in its sole discretion, it determines that the issuance or
transfer of such Shares or such other consideration might violate
any applicable law or regulation or entitle the Company to recover
the same under Section 16(b) of the Exchange Act, and any payment
tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be
promptly refunded to the relevant Participant, holder or
beneficiary. Without limiting the generality of the foregoing, no
Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding,
unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance
with all applicable requirements of the U.S. federal securities
laws.
(l) No Trust or Fund Created. Neither the Plan nor
any Award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate and a Participant or any other Person. To
the extent that any Person acquires a right to receive payments
from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general
creditor of the Company or any Affiliate.
(m) No Fractional Shares. No fractional Shares shall
be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities, or other
property shall be paid or transferred in lieu of any fractional
Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
(n) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material
or relevant to the construction or interpretation of the Plan or
any provision thereof.
SECTION 14. Term of the Plan.
(a) Effective Date. The Plan shall become effective
as of the date of its approval by the Board; provided, however,
that no Award shall be exercisable unless the Plan is approved by
the stockholders of the Company.
(c) Expiration. The Plan shall terminate 10 years
after the earlier of the date on which it becomes effective and the
date it is approved by the stockholders of the Company.
Notwithstanding the foregoing, all Awards made under the Plan prior
to such termination date shall remain in effect until such Awards
have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Award Agreement.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095779
<NAME> SWANK, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 27,545
<ALLOWANCES> 6,245
<INVENTORY> 41,865
<CURRENT-ASSETS> 67,678
<PP&E> 26,474
<DEPRECIATION> 20,834
<TOTAL-ASSETS> 78,792
<CURRENT-LIABILITIES> 41,892
<BONDS> 0
0
0
<COMMON> 1,689
<OTHER-SE> 26,894
<TOTAL-LIABILITY-AND-EQUITY> 78,792
<SALES> 104,847
<TOTAL-REVENUES> 104,847
<CGS> 61,255
<TOTAL-COSTS> 61,255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (294)
<INTEREST-EXPENSE> 1,192
<INCOME-PRETAX> 1,987
<INCOME-TAX> 775
<INCOME-CONTINUING> 1,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,212
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
