Exhibit 10.2
 
 
[ex10_20.jpg]

 
 
 
PRIVATE & CONFIDENTIAL,
 
January 21, 2009
 
Hartmarx Corporation
101 North Wacker Drive, 23rd Floor
Chicago, Illinois 60606
Attn: Mr. Glenn R. Morgan
Michael Buenzow
Senior Managing Director
FTI Consulting, Inc.
333 W. Wacker, Suite 600
Chicago, IL  60606
  (312) 252-9333
 

Re:           Hartmarx Corporation

Dear Mr. Morgan:

1.
Introduction

This letter confirms that we, FTI Consulting, Inc. (“FTI”), have been retained
by you, Hartmarx Corporation (“you”, the “Company”, or “Hartmarx”), to provide
certain financial advisory and consulting services (the “Services”) as set out
below.  This letter of engagement (the “Engagement”) and the related Standard
Terms and Conditions constitute the engagement contract (the “Engagement
Contract”) pursuant to which the Services will be provided.

2.
Scope of Services

The Services that FTI will render to the Company may include, but are not
limited to, the following:
 
Cash Management and Financial Projections
 
·
Evaluate current liquidity position and expected future cash flows;

 
·
Assist management in the updating of weekly cash flow forecasts required
pursuant to the Credit Facility;

 
·
Assist in the management and control all cash disbursements;

 
·
Advise management on cash conservation measures and assist with implementation
of cash forecasting and reporting tools as requested; and

 
·
Assist in the development of financial projections.

Situational Assessment
 
·
Assess current situation and determine solution for highest and best recovery
and recommend appropriate strategic alternatives;

Bankruptcy Advisory Assistance
 
·
Assist management and the Board of Directors in managing the various aspects of
the execution of a Chapter 11 filing;

 
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·
Advise the Company in the process of obtaining and maintaining debtor in
possession (“DIP”) financing and assist the Company in preparing a collateral
package in support of such financing;

 
·
Assist Company personnel with the communications and negotiations, at your
request and under your guidance, with lenders, creditors, and other
parties-in-interest including the preparation of financial information for
distribution to such parties-in-interest;

 
·
Advise and assist the Company in their preparation, analysis and monitoring of
historical, current and projected financial affairs, including without
limitation, if necessary, schedules of assets and liabilities (“SOAL’s”),
statements of financial affairs (“SOFA’s”), periodic operating reports (“MOR’s),
analyses of cash receipts and disbursements, analyses of cash flow forecasts,
analyses of various asset and liability accounts, analyses of any unusual or
significant transactions between themselves and any other entities, and analyses
of proposed restructuring transactions;

 
·
Assist the Company in the valuation of businesses and in the preparation of a
liquidation valuation for a reorganization plan and/or negotiation purposes;

 
·
Assist the Company in managing and executing the claims reconciliation process;
and

 
·
Advise and assist the Company in identifying and/or reviewing preference
payments, fraudulent conveyances and other causes of action.

Interim Management Services
 
·
If the Company decides to file for protection under Chapter 11 of the U.S.
Bankruptcy Code, if required by the Lender Group and authorized by the Board of
Directors, Michael Buenzow will commence serving as the Chief Restructuring
Officer (the “CRO”) of the Company, reporting directly to the Board of
Directors;

 
·
To the extent determined by the Board of Directors from time to time, Michael
Buenzow will be granted the right to attend and participate (but not vote) in
the meetings of the Board of Directors of the Company as an observer (such role
referred to as “Board Observer”);

 
·
Other temporary employees (the “Temporary Employees”) whom you may approve from
time to time to support Michael Buenzow in his role as the CRO;

 
·
Lead management efforts to further identify and implement both short-term and
long-term profit improvement, liquidity generating and debt reduction
initiatives in an effort to improve the ongoing viability of the Company;

 
·
In conjunction with the Company’s retention of Moelis & Company to evaluate
strategic alternatives, the CRO will lead efforts to evaluate all bids or
proposals received for any of the Company’s assets to determine which bid or
bids constitute the highest and best bids;

 
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·
Perform the typical duties of a CRO, work collaboratively with all
parties-in-interest including but not limited to secured creditors, unsecured
creditors, administrative creditors, shareholders, existing management and
employees of the Company; and

 
·
Proactively lead, direct and coordinate the Company’s Chapter 11 restructuring
efforts.

Other
 
·
Assist with such other accounting and financial advisory services as requested
by the Company and/or the Board of Directors consistent with the role of a
financial advisor and not duplicative of services provided by other
professionals.

The Services may be performed by FTI employees or by any employees of
subsidiaries of FTI, as FTI shall determine in consultation with the
Company.  FTI may also provide, with the prior approval of the Company,
non-officer Services through agents or independent contractors.  References
herein to FTI and its employees shall be deemed to apply also, unless the
context shall otherwise indicate, to employees of each such subsidiary and to
any such agents or independent contractors and their employees.    The Services
will be directed and led by Michael Buenzow, a Senior Managing Director who is
expected to devote approximately 10-20 hours per week to this engagement.  Mr.
Buenzow will be assisted by other experienced restructuring personnel familiar
with complex bankruptcy cases.

3.
Confidentiality

We understand that the Company will make available to us information from their
books and records solely for the purpose of this analysis in connection with
your loan evaluation process. Such information will be held in strict confidence
and will not be used for any other purpose except for purposes stated herein.
The information accumulated by us will only be furnished to outside parties if
the Company instructs FTI to do so.
 
4.
Fees and Cash on Account

Hourly Fees

Fees in connection with this Engagement will be based upon the time incurred
providing the Services, multiplied by our standard hourly rates applicable in
the United States.  Effective January 1, 2009 our standard hourly rates are
summarized as follows:

 
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Per Hour
       
Senior Managing Directors
$710 - $825
 
Directors / Managing Directors
$520 - $685
 
Consultants/Senior Consultants
$255 - $480
 
Administrative / Paraprofessionals
$105 - $210

 
Hourly rates are generally revised periodically. To the extent this engagement
requires services of our International divisions or personnel, the time will be
multiplied by our standard hourly rates applicable on International engagements.
Note that we do not provide any assurance regarding the outcome of our work and
our fees will not be contingent on the results of such work.

 
In addition to the fees outlined above, FTI will bill for reasonable allocated
and direct expenses which are likely to be incurred on your behalf during this
Engagement.  Allocated expenses include the cost of items which are not billed
directly to the engagement, including administrative support and other overhead
expenses that are not billed through as direct reimbursable expenses, and are
calculated at 6.0% of FTI’s standard professional rates.

 
Direct expenses include reasonable and customary out-of-pocket expenses which
are billed directly to the engagement such as certain telephone, overnight mail,
messenger, travel, meals, accommodations and other expenses specifically related
to the engagement.  Further, if FTI and/or any of its employees are required to
testify or provide evidence at or in connection with any judicial or
administrative proceeding relating to this matter, FTI will be compensated by
you at its regular hourly rates and reimbursed for reasonable allocated and
direct expenses (including counsel fees) with respect thereto.
      Performance / Completion Fees:   In addition to the monthly fees and
expenses, after conclusion of a Chapter 11 Bankruptcy proceeding, FTI may elect
to seek certain performance fees.  The potential incentive based performance
fees are as follows:

 
 
i.
$900,000 in the event a Plan of Reorganization (“POR”) is confirmed by the
Bankruptcy Court and the Company determines the CRO and FTI were instrumental in
effectuating the development of the Plan.  No fee will be deemed to be earned
and payable unless a Chapter 11 POR is confirmed by the Bankruptcy Court;

 
 
ii.
In the event the Company is not reorganized as a stand alone Company or if
substantially all of the Company’s are not sold to a strategic or financial
buyer, FTI will be entitled to a Completion Fee of $300,000 for coordinating,
negotiating and managing the sale of the Company’s assets to liquidation
buyers.  FTI shall be entitled to this fee if the work is completed as outlined,
required and requested; and

 
 
iii.
All Performance and Completion Fees must be approved by the Board of Directors
and the Bankruptcy Court.

 

 
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Payment of Fees and Expenses

 
Prior to the Chapter 11 filing, the Company will forward to us the amount of
$150,000, which funds will be held as a “Retainer” to be applied against our
final invoice for professional fees, charges and disbursements for the
Engagement (the "Retainer").  To the extent this amount exceeds our fees,
charges and disbursements upon the completion of the Engagement, we will refund
any unused portion.  We will send the Company regular monthly invoices for
services rendered and charges and disbursements incurred on the basis discussed
above, and in certain circumstances, an invoice may be for estimated fees,
charges and disbursements through a date certain.  All post-petition fees,
charges and disbursements will be due and payable immediately upon entry of an
order containing such court approval or at such time thereafter as instructed by
the court.

 
The Company understands that while the arrangement in this paragraph may be
altered in whole or in part by the Bankruptcy Court, the Company shall
nevertheless remain liable for payment of court approved post-petition fees and
expenses.  Such items are afforded administrative priority under 11 U.S.C. §
503(b)(1).  The Bankruptcy Code provides in pertinent part, at 11 U.S.C. §
1129(a)(9)(A), that a plan cannot be confirmed unless these priority claims are
paid in full in cash on the effective date of any plan (unless the holders of
such claims agree to different treatment).

 
Other

 
In a case under the Bankruptcy Code, fees and expenses may not be paid without
the express prior approval of the Bankruptcy Court.  In most cases of this size
and complexity, on request of a party in interest, the Bankruptcy Court permits
the payment of interim fees during the case.  The Company agrees that, if asked
to do so by us, the Company will request the bankruptcy court to establish a
procedure for the payment of interim fees during the case that would permit
payment of interim fees.

 
If the bankruptcy court approves such a procedure, we will submit invoices on
account against our final fee.  These interim invoices will be based on such
percentage as the bankruptcy court allows of our internal time charges and costs
and expenses for the work performed during the relevant period and will
constitute a request for an interim payment against the reasonable fee to be
determined at the conclusion of our representation.

 
Further, if FTI and/or any of its employees are required to testify or provide
evidence at or in connection with any judicial or administrative proceeding
relating to this matter, FTI will be compensated by you at its regular hourly
rates and reimbursed for reasonable allocated and direct expenses with respect
thereto.

 
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Our fees will be based upon actual time incurred, plus out-of-pocket
expenses.  If we do not receive payment of any invoice within 15 days of the due
date, we shall be entitled, without prejudice to any other rights that we may
have, to immediately suspend provision of the Services until all sums due are
paid in full.  It is important that you understand that total fees will depend
upon the condition and accessibility of the books and records, the level of
cooperation provided by management, and the ultimate scope of our work.  All
fees and expenses are payable promptly after approval is received from the
bankruptcy court. Hourly rates are revised from time to time.  We will provide
you with prior written notice of any changes to our rates.  Note that we do not
provide any assurance regarding the outcome of our work and our fees will not be
contingent on the results of such work.
 
Further, if FTI and/or any of its employees are required to testify or provide
evidence at or in connection with any judicial or administrative proceeding
relating to this matter, FTI will be compensated by you at its regular hourly
rates and reimbursed for reasonable allocated and direct expenses (including
counsel fees) with respect thereto.

 
5.
Terms and Conditions

 
The attached Standard Terms and Conditions set forth the duties of each party
with respect to the Services. Further, this letter and the Standard Terms and
Conditions attached comprise the entire Engagement Contract for the provision of
the Services to the exclusion of any other express or implied terms, whether
expressed orally or in writing, including any conditions, warranties and
representations, and shall supersede all previous letters of engagement,
undertakings, agreements, understandings, correspondence and other
communications, whether written or oral, regarding the Services.

6.
Conflicts of Interest

 
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Based on the list of interested parties (the “Potentially Interested Parties”),
provided by you, we have undertaken a limited review of our records to determine
FTI's professional relationships with the Company.  As you may be aware, FTI is
regularly retained by the administrative agent and/or other members of your
lending group (or law firms retained by the administrative agent or lending
group members).  However, such representations are in matters unrelated to this
engagement.

From the results of such review, we were not made aware of any conflicts of
interest or additional relationships that we believe would preclude us from
performing the Services.  However, as you know, we are a large consulting firm
with numerous offices throughout the United States.  We are regularly engaged by
new clients, which may include one or more of the Potentially Interested
Parties.  We will not knowingly accept an engagement that directly conflicts
with this Engagement without your prior written consent.

7.
Limitation of Liability

FTI personnel serving as employees of the Company will be entitled to the
benefit of the most favorable indemnities provided by the Company to its
officers and directors, whether under the Company’s by-laws, certificate of
incorporation, by contract or otherwise.

The Company agrees that it will specifically include and cover Michael Buenzow
(and any other employee of FTI who, at the request of the Board of Directors of
the Company, FTI agrees will serve as an employee or officer of the Company)
under the Company’s policies for directors’ and officers’ insurance.  The
Company agrees to also maintain insurance coverage for Michael Buenzow for a
period of not less than two (2) years following the date of termination of such
employee's services hereunder. In the event that the Company is unable to
include FTI employees serving as employees or officers of the Company under the
Company’s policies, it is agreed that FTI will attempt to purchase a separate
directors’ and officers’ policy providing coverage similar to the coverage
provided to the Company’s other directors and officers that will cover FTI’s
employees serving as employees or officers of the Company only and that the cost
of the same shall be invoiced to the Company as an out-of-pocket expense.

If FTI is unable to purchase such coverage, then it shall have the right to
terminate this letter agreement upon notice to the Company.  The provisions of
this section 7 are in the nature of contractual obligations and no change in
applicable law or the Company's charter, bylaws or other organizational
documents or policies shall affect any of Michael Buenzow’s rights hereunder.
The obligations of the parties as reflected herein shall survive the termination
of the Engagement.

The parties intend that an independent contractor relationship will be created
by this letter agreement.  As an independent contractor, FTI will have complete
and

 
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exclusive charge of the management and operation of its business, including
hiring and paying the wages and other compensation of all its employees and
agents, and paying all bills, expenses and other charges incurred or payable
with respect to the operation of its business.

None of FTI’s employees serving as a Temporary Employee, including Michael
Buenzow in his capacity as CRO of the Company, will be entitled to receive from
the Company any salary, bonus, compensation, vacation pay, sick leave,
retirement, pension or social security benefits, workers compensation,
disability, unemployment insurance benefits or any other Company employee
benefits.  FTI will be responsible for all employment, withholding, income and
other taxes incurred in connection with the operation and conduct of its
business (including those related to Michael Buenzow, and the Temporary
Employees).

8.
Acknowledgement and Acceptance

Please acknowledge your acceptance of the terms of this Engagement Contract by
signing both the confirmation below and the attached Standard Terms and
Conditions and returning a copy of each to us at the above address.

Thank you very much for allowing us to assist you in this matter.  If you have
any questions regarding this letter or the attached Standard Terms and
Conditions, please do not hesitate to contact Michael Buenzow at (312) 252-9333.

 
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Very truly yours,

FTI Consulting, Inc.
 
 
By:
/s/ Michael Buenzow
   
Michael Buenzow
 
Senior Managing Director

Date:
1/23/09
 

Agreed by:
 Hartmarx Corporation, Inc.

By:
/s/ Glenn R. Morgan
 

Name:
Glenn R. Morgan
     
Title:
/s/ EVP, Chief Financial Officer
     
Date:
1/23/09
 

 

 
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FTI CONSULTING, INC.

STANDARD TERMS AND CONDITIONS

The following are the Standard Terms and Conditions on which we will provide the
Services to you set forth within the attached letter of engagement with Hartmarx
Corporation, dated January 21, 2009.  The Engagement letter and the Standard
Terms and Conditions  (collectively the “Engagement Contract”) form the entire
agreement between us relating to the Services and replace and supersede any
previous proposals, letters of engagement, undertakings, agreements,
understandings, correspondence and other communications, whether written or
oral, regarding the Services.  The headings and titles in the Engagement
Contract are included to make it easier to read but do not form part of the
Engagement Contract.

1.
Reports and Advice
   
1.1
Use and purpose of advice and reports – Any advice given or report issued by us
is provided solely for your use and benefit and only in connection with the
purpose in respect of which the Services are provided. Unless required by law,
you shall not provide any advice given or report issued by us to any third
party, or refer to us or the Services, without our prior written consent. In no
event, regardless of whether consent has been provided, shall we assume any
responsibility to any third party to which any advice or report is disclosed or
otherwise made available.
   
2.
Information and Assistance
   
2.1
Provision of information and assistance – Our performance of the Services is
dependent upon your providing us with such information and assistance as we may
reasonably require from time to time.
   
2.2
Punctual and accurate information – You shall use reasonable skill, care and
attention to ensure that all information we may reasonably require is provided
on a timely basis and is accurate and complete and relevant for the purpose for
which it is required.  You shall also notify us if you subsequently learn that
the information provided is incorrect or inaccurate or otherwise should not be
relied upon.
   
2.3
No assurance on financial data – While our work may include an analysis of
financial and accounting data, the Services will not include an audit,
compilation or review of any kind of any financial statements or components
thereof.  Company management will be responsible for any and all financial
information they provide to us during the course of this Engagement, and we will
not examine or compile or verify any such financial information.  Moreover, the
circumstances of the Engagement may cause our advice to be limited in certain
respects based

 
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upon, among other matters, the extent of sufficient and available data and the
opportunity for supporting investigations in the time period.  Accordingly, as
part of this Engagement, we will not express any opinion or other form of
assurance on financial statements of the Company.
   
2.4
Prospective financial information - In the event the Services involve
prospective financial information, our work will not constitute an examination
or compilation, or apply agreed-upon procedures, in accordance with standards
established by the American Institute of Certified Public Accountants or
otherwise, and we will express no assurance of any kind on such
information.  There will usually be differences between estimated and actual
results, because events and circumstances frequently do not occur as expected,
and those differences may be material.  We will take no responsibility for the
achievability of results or events projected or anticipated by the management of
the Company.
       
3.
Additional Services
   
3.1
Responsibility for other parties – You shall be solely responsible for the work
and fees of any other party engaged by you to provide services in connection
with the Engagement regardless of whether such party was introduced to you by
us.  Except as provided in this Engagement Contract, we shall not be responsible
for providing or reviewing the advice or services of any such third party,
including advice as to legal, regulatory, accounting or taxation
matters.  Further, we acknowledge that we are not authorized under our
Engagement Contract to engage any third party to provide services or advice to
you, other than our agents or independent contractors engaged to provide
Services, without your written authorization.
   
4.
Confidentiality
   
4.1
Restrictions on confidential information – Both parties agree that any
confidential information received from the other party shall only be used for
the purposes of providing or receiving Services under this or any other contract
between us. Except as provided below, neither party will disclose the other
party’s confidential information to any third party without the other party’s
consent. Confidential information shall not include information that:
     
4.1.1
is or becomes generally available to the public other than as a result of a
breach of an obligation under this Clause 4.1;
       
4.1.2
is acquired from a third party who, to the recipient party’s knowledge, owes no
obligation of confidence in respect of the information; or
       
4.1.3
is or has been independently developed by the recipient.

 
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4.2
Disclosing confidential information – Notwithstanding Clause 1.1 or 4.1 above,
either party will be entitled to disclose confidential information of the other
to a third party to the extent that this is required by valid legal process,
provided that (and without breaching any legal or regulatory requirement) where
reasonably practicable not less than 2 business days’ notice in writing is first
given to the other party.
   
4.3
Citation of engagement – Without prejudice to Clause 4.1 and Clause 4.2 above,
to the extent our engagement is or becomes known to the public, we may cite the
performance of the Services to our clients and prospective clients as an
indication of our experience, unless we and you specifically agree otherwise in
writing.
   
4.4
Internal quality reviews – Notwithstanding the above, we may disclose any
information referred to in this Clause 4 to any other FTI entity or use it for
internal quality reviews.
   
4.5
Maintenance of workpapers – Notwithstanding the above, we may keep one archival
set of our working papers from the Engagement, including working papers
containing or reflecting confidential information, in accordance with our
internal policies.
   
5.
Termination
   
5.1
Termination of Engagement with notice – Either party may terminate the
Engagement Contract for whatever reason upon written notice to the other party.
Upon receipt of such notice, we will stop all work immediately. You will be
responsible for all fees and expenses incurred by us through the date
termination notice is received.
   
5.2
Continuation of terms – The terms of the Engagement that by their context are
intended to be performed after termination or expiration of this Engagement
Contract, including but not limited to, Clauses 3 and 4 of the Engagement
letter, and Clauses 1.1, 4, 6 and 7 of the Standard Terms and Conditions, are
intended to survive such termination or expiration and shall continue to bind
all parties.
   
6.
Indemnification and Liability Limitation; Waiver of Jury Trial
   
6.1
Indemnification - You agree to indemnify and hold harmless FTI and any of its
subsidiaries and affiliates, officers, directors, principals, shareholders,
agents, independent contactors and employees (collectively “Indemnified
Persons”) from and against any and all claims, liabilities, damages,
obligations, costs and expenses (including reasonable attorneys’ fees and
expenses and costs of investigation) arising out of or relating to your
retention of FTI, the execution and delivery of this Engagement Contract, the
provision of Services or other matters relating to or arising from this
Engagement Contract, except to the extent that any such claim, liability,
obligation, damage, cost or expense shall have been.

 
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determined by final non-appealable order of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of the Indemnified
Person or Persons in respect of whom such liability is asserted
   
6.2
Limitation of liability - You agree that no Indemnified Person shall have any
liability as a result of your retention of FTI, the execution and delivery of
this Engagement Contract, the provision of Services or other matters relating to
or arising from this Engagement Contract, other than liabilities that shall have
been determined by final non-appealable order of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Indemnified Person or Persons in respect of whom such liability is
asserted.  Without limiting the generality of the foregoing, in no event shall
any Indemnified Person be liable for consequential, indirect or punitive
damages, damages for lost profits or opportunities or other like damages or
claims of any kind.
   
6.3
WAIVER OF JURY TRIAL –TO FACILITATE JUDICIAL RESOLUTION AND SAVE TIME AND
EXPENSE, YOU AND FTI IRREVOCABLY AND UNCONDITIONALLY AGREE NOT TO DEMAND A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THE SERVICES OR ANY SUCH OTHER MATTER. .
   
7.
Governing Law and Jurisdiction-The Engagement Contract shall be governed by and
interpreted in accordance with the laws of the State of New York, without giving
effect to the choice of law provisions thereof.  The United States District
Court for the Southern District of New York and the appropriate Courts of the
State of New York sitting in the Borough of Manhattan, City of New York shall
have exclusive jurisdiction in relation to any claim, dispute or difference
concerning the Engagement Contract and any matter arising from it. The parties
submit to the jurisdiction of such Courts and irrevocably waive any right they
may have to object to any action being brought in these Courts, to claim that
the action has been brought in an inconvenient forum or to claim that those
Courts do not have jurisdiction.

Confirmation of Standard Terms and Conditions

We agree to engage FTI Consulting, Inc. upon the terms set forth in these
Standard Terms and Conditions as outlined above.

Hartmarx Corporation.

By:
/s/ Glenn R. Morgan
         
Date:
1/23/09
 

 

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