[TEXT]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 April 2, 1994
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............... to .................
Commission file number: 0-9831
LIZ CLAIBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2842791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1441 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
(212) 354-4900
(Registrant's telephone number, including area code)
Indicate by check 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 .
The number of shares of Registrant's Common Stock, par value
$1.00 per share, outstanding at 5/12/94 was 78,778,502.
(2)
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of April 2, 1994
and December 25, 1993 ............................. 3
Consolidated Statements of Income for the Three
Month Periods Ended April 2, 1994 and
March 27, 1993..................................... 4
Consolidated Statements of Cash Flows
for the Three Month Periods
Ended April 2, 1994 and March 27, 1993............. 5
Notes to Consolidated Financial Statements .......... 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .... 10-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................... 12
Item 6. Exhibits and Reports on Form 8-K ................... 13
SIGNATURE .................................................... 14
<PAGE>
<TABLE> (3)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands except share data)
<CAPTION>
(Unaudited)
April 2, December 25,
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 58,621 $ 104,720
Marketable securities 180,350 204,571
Accounts receivable - trade 255,526 174,435
Inventories 374,272 436,593
Deferred income tax benefits 16,695 15,065
Other current assets 70,545 69,055
Total current assets 956,009 1,004,439
PROPERTY AND EQUIPMENT - NET 210,209 202,068
OTHER ASSETS 32,002 29,831
$1,198,220 $1,236,338
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 88,621 $ 141,126
Accrued expenses 84,417 97,765
Income taxes payable 27,126 15,547
Total current liabilities 200,164 254,438
LONG-TERM DEBT 1,308 1,334
DEFERRED INCOME TAXES 1,627 2,275
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized shares - 50,000,000,
issued shares - none -- --
Common stock, $1 par value,
authorized shares - 250,000,000,
issued shares - 88,218,617 88,219 88,219
Capital in excess of par value 56,699 56,699
Retained earnings 1,139,968 1,123,413
Cumulative translation adjustment (1,109) (1,279)
1,283,777 1,267,052
Common stock in treasury, at cost
9,367,210 shares in 1994 and
9,371,217 shares in 1993 (288,656) (288,761)
Total stockholders' equity 995,121 978,291
$1,198,220 $1,236,338
The accompanying notes to consolidated financial statements are an integral
part of these statements.
/TABLE
<PAGE>
<TABLE> (4)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(All dollar amounts in thousands, except common share data)
<CAPTION>
(Unaudited)
Three Months Ended
(14 weeks) (13 weeks)
April 2, March 27,
1994 1993
<S> <C> <C>
NET SALES $541,368 $531,347
Cost of goods sold 353,748 339,566
GROSS PROFIT 187,620 191,781
Selling, general & administrative expenses 146,943 132,452
OPERATING INCOME 40,677 59,329
Investment and other income-net 2,860 4,709
INCOME BEFORE PROVISION FOR INCOME TAXES
AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 43,537 64,038
Provision for income taxes 16,100 23,000
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 27,437 41,038
Cumulative effect of a change in the
method of accounting for income taxes -- 1,643
NET INCOME $ 27,437 $ 42,681
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 78,850,388 82,671,613
EARNINGS PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE $0.35 $0.50
Cumulative effect of a change in the
method of accounting for income taxes -- 0.02
NET INCOME $0.35 $0.52
DIVIDENDS PAID PER COMMON SHARE $0.11 $0.10
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<TABLE> (5)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
<CAPTION> (Unaudited)
Three Months Ended
(14 weeks) (13 weeks)
April 2, March 27,
<S> 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net income $ 27,437 $ 42,681
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 8,359 7,745
Non-current deferred income taxes (648) 188
Cumulative effect of a change in
accounting for income taxes -- (1,643)
Tax benefit on exercise of stock options 1 833
Change in current assets and liabilities:
(Increase) in accounts receivable (81,091) (78,282)
Decrease in inventories 62,321 34,831
(Increase) in deferred
income tax benefits (505) (1,248)
(Increase) in other current assets (1,490) (18,443)
(Decrease) in accounts payable (52,505) (59,255)
(Decrease) increase in accrued expenses (13,348) 6,825
Increase in income taxes payable 11,579 8,133
Net cash used in operating
activities (39,890) (57,635)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (39,735) (93,777)
Sales of investment instruments 60,562 153,452
Purchases of property and equipment (15,955) (14,527)
Purchase of trademarks (757) (303)
Other-net (1,566) 527
Net cash provided by
investing activities 2,549 45,372
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (26) (25)
Proceeds from exercise of common stock options 21 2,497
Dividends paid (8,871) (8,270)
Repurchase of common stock -- (25,716)
Net cash used in
financing activities (8,876) (31,514)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 118 245
NET CHANGE IN CASH AND CASH EQUIVALENTS (46,099) (43,532)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 104,720 130,721
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58,621 $ 87,189
The accompanying notes to consolidated financial statements are an integral
part of these statements.
/TABLE
<PAGE>
(6)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted from this report,
as is permitted by such rules and regulations; however, the
Company believes that the disclosures are adequate to make
the information presented not misleading. It is suggested
that these condensed financial statements be read in
conjunction with the financial statements and the notes
thereto included in the Company's latest annual report.
2. In the opinion of management, the information furnished
reflects all adjustments, all of which are of a normal
recurring nature, necessary for a fair presentation of the
results for the reported interim periods. Certain items
previously reported in specific captions in the accompanying
financial statements have been reclassified to conform with
the current year's classifications. Results of operations
for interim periods are not necessarily indicative of results
for the full year.
3. The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" as of the
beginning of fiscal 1994. In accordance with SFAS No.115,
prior period financial statements have not been restated to
reflect the change in accounting principle. The effect as of
December 26, 1993 of adopting SFAS No.115 was an increase in
the opening balance of stockholders' equity of $2,848,000
(net of $1,673,000 in deferred income taxes) to reflect the
net unrealized holding gains on securities classified as
available-for-sale previously carried at amortized cost.
This increase in stockholders' equity was included in
retained earnings.
<PAGE>
<TABLE> (7)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a summary of available-for-sale marketable
securities:
<CAPTION>
(Dollars in thousands) Dec. 25,
1993
April 2, 1994
Gross Estimated
Unrealized Fair
<S> Cost Gains Losses Value Cost
Tax exempt notes <C> <C> <C> <C> <C>
and bonds $213,517 $ 11 $(1,521) $212,007 $278,033
U.S. & foreign
government securities 10,708 -- (659) 10,049 10,619
Collateralized mortgage
obligations 7,601 -- (1,225) 6,376 8,201
Total debt securities 231,826 11 (3,405) 228,432 296,853
Equity securities 2,527 353 -- 2,880 5,000
$234,353 $364 $(3,405) $231,312 $301,853
(Dollars in thousands)
April 2, 1994
Estimated
Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 77,016 $ 76,144
Due after one year thru three
years 109,396 108,620
Due after three years 45,414 43,668
231,826 228,432
Equity securities 2,527 2,880
$234,353 $231,312
</TABLE>
At April 2, 1994, the above investments include $48,082,000 of tax
exempt notes and bonds which are classified as cash and cash
equivalents and equity securities which are included in other long-
term assets in the consolidated balance sheets.
For the period ended April 2, 1994 gross realized gains and
(losses) on sales of available-for-sale securities totaled $686,000
and ($9,000), respectively. The net adjustment to unrealized
holding gains and losses on available-for-sale securities for the
period was a charge of $4,764,000 which was included in retained
earnings.
<PAGE>
(8)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Inventories are stated primarily at the lower of cost (first-
in, first-out) or market and consist of the following:
<TABLE>
<CAPTION> (Dollars in thousands)
April 2, December 25,
1994 1993
<C> <C>
Raw materials $ 48,251 $ 56,560
Work-in-process 19,819 24,006
Finished goods 306,202 356,027
$374,272 $436,593
</TABLE>
5. Property and equipment - net
<TABLE>
<CAPTION> (Dollars in thousands)
April 2, December 25,
1994 1993
<S> <C> <C>
Land and buildings $ 67,392 $ 67,049
Machinery and equipment 104,831 99,644
Furniture and fixtures 40,896 39,489
Leasehold improvements 102,486 99,802
Construction in progress 44,813 38,491
360,418 344,475
Less: Accumulated depreciation
and amortization 150,209 142,407
$210,209 $202,068
</TABLE>
6. On April 21, 1994, the Company's Board of Directors declared
a quarterly cash dividend on the Company's Common Stock at the
rate of $0.1125 per share, to be paid on June 3, 1994, to
stockholders of record at the close of business on May 9,
1994.
7. For the quarters ended April 2, 1994 and March 27, 1993, the
Company made income tax payments of $6,061,000 and
$14,329,000, respectively. For the quarters ended April 2,
1994 and March 27, 1993, the Company made interest payments of
$68,000 and $24,000, respectively. As of April 2, 1994, the
fair value adjustment for available-for-sale securities was a
charge of $1,916,000 (which reflects an unrealized loss net of
$1,125,000 in deferred income taxes) included in retained
earnings.
<PAGE>
(9)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. The Company adopted the provisions of SFAS No. 109 "Accounting
for Income Taxes" as of the beginning of fiscal 1993. SFAS
No. 109 requires a change from the deferred method to the
asset and liability method of accounting for income taxes.
The cumulative effect on prior years of this accounting change
is reflected in the consolidated statement of income for the
three months ended March 27, 1993 as a one-time increase in
net income of $1,643,000, or $.02 per share.
9. The Company enters into foreign exchange contracts to hedge
transactions denominated in foreign currencies and to hedge
expected payment of intercompany transactions with its non-
U.S. subsidiaries. Gains and losses on contracts which hedge
specific foreign currency denominated commitments are
recognized in the period in which the transaction is
completed. As of April 2, 1994, the Company had contracts
maturing in 1994 to purchase at contracted forward rates
789,684,000 Spanish pesetas and 4,077,000 Dutch guilders and
to sell 12,000,000 Canadian dollars and 7,300,000 British
sterling. The aggregate U.S. dollar value of all foreign
exchange contracts is approximately $27,000,000.
<PAGE>
(10)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The quarter-to-quarter increase in net sales of 1.9% was due to an
additional week in the 1994 period (14 weeks) compared to 1993 (13
weeks) and the shipment in the 1994 first quarter of certain Spring
season merchandise delayed from fiscal 1993. The results for the
1994 quarter also reflected higher unit volume within the RUSS, THE
VILLAGER and CRAZY HORSE Divisions (collectively, the "Russ
Divisions"), continued expansion of the Company's retail and outlet
operations, as well as gains in the DANA BUCHMAN and Shoe
Divisions. The increase was offset by substantially lower average
unit selling prices in the Company's Misses and Petite sportswear
group and lower unit volume within the Dress, LIZ & CO. and
Cosmetics Divisions. The lower average unit selling prices within
the Misses and Petite sportswear group were required to liquidate
excess prior season inventory.
Gross profit expressed as a percentage of net sales decreased to
34.7% for the first quarter of 1994 from 36.1% for the 1993 first
quarter. This decrease reflected margin erosion in several of the
wholesale apparel divisions, primarily the Misses and Petite
sportswear group, LIZ & CO. and ELISABETH Divisions, principally
due to a lower proportion of regular price sales, as well as lower
margins within the Cosmetics Division due to product mix. Also
contributing to the margin decrease was the higher proportion of
net sales represented by, and lower margins within, the Russ
Divisions (which are lower margin businesses) and higher markdowns
within the outlet operations, contributing to an operating loss in
those opertions. The decrease in the gross profit percentage was
partially offset by improved margins of the Retail, International,
Menswear and Shoe Divisions.
Legislation which would further restrict the importation and/or
increase the cost of textiles and apparel produced abroad has
periodically been introduced in Congress. Although it is unclear
whether any new legislation will be enacted into law, it appears
likely that various new legislative or executive initiatives will
be proposed. These initiatives may include a reevaluation of the
trading status of certain countries, including Most Favored Nation
("MFN") treatment for the People's Republic of China ("PRC"),
which, if enacted, would increase the cost of products purchased
from suppliers in such countries. The PRC's MFN treatment was
renewed in July 1993 for an additional year. In light of the very
substantial portion of the Company's products which are
manufactured by foreign suppliers, the enactment of new legislation
or the administration of current international trade regulations,
or executive action affecting international textile agreements,
could adversely affect the Company's operations.
The period-to-period dollar increase in selling, general and
administrative expenses was 10.9%. These expenses represented
27.1% of 1994 first quarter net sales, up from 24.9% of 1993 first
(11)
RESULTS OF OPERATIONS (continued)
quarter net sales. The dollar increase in expenses resulted
primarily from the extra week in the quarter, the continued
expansion of the Company's Retail, Russ and DANA BUCHMAN Divisions
and increased costs associated with the VIVID fragrance (introduced
in July 1993).
The decrease in investment and other income-net on a period-to-
period basis was due to a decrease in the Company's portfolio of
cash equivalents and marketable securities reflecting in part the
Company's stock repurchase program as well as a slightly lower rate
of return realized on the Company's portfolio.
As a result of the factors described above, on a period-to-period
basis, the Company's income before provision for income taxes and
cumulative effect of a change in accounting principle declined
32.0%, resulting in a decrease in net income of 35.7%, as the
provision for income taxes declined to reflect the profit decrease.
The results for the first quarter also reflected the continuing
investment in the Russ and Retail Divisions.
The Company adopted the Financial Accounting Standards Board
Statement No. 109 "Accounting for Income Taxes" and changed its
method of accounting for income taxes as of the beginning of fiscal
1993. The cumulative effect on prior years of this accounting
change is reflected in the consolidated statement of income for the
three months ended March 27, 1993 as a one-time increase in net
income of $1.6 million or $0.02 per share. Management believes
that the $16.7 million deferred tax benefit will be fully realized
through reversals of existing deferred tax liabilities of $1.6
million and future taxable income.
The earnings per common share computation reflected a lower number
of outstanding shares on a period-to-period basis, as a result of
the Company's stock repurchase program.
As previously announced, the continued liquidation at distressed
prices of excess prior season inventory, is expected to continue to
negatively impact gross margins in the second quarter. The Company
continues to view 1994 as a year in which it has begun a far-
reaching process of rebuilding and restructuring.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital increased $5.8 million during the
1994 first quarter, primarily as a result of the excess of
internally generated profits over dividends paid. Inventories at
April 2, 1994 were $374.3 million, down from $436.6 million at year
end 1993, and 6.6% higher than the $351.0 million at 1993 first
quarter end. The increase in inventory levels on a period-to-
period basis reflected incremental inventories resulting from the
expansion of the Russ Divisions, the Company's new women's
<PAGE>
(12)
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY (continued)
fragrance, VIVID, as well as the balance of the excess prior season
inventory. On April 21, 1994, the Company's Board of Directors
authorized an additional $50 million under the previously announced
stock repurchase program. As of May 12, 1994, the Company had
expended or committed to expend approximately $359 million of the
$400 million authorized under the program, covering an aggregate of
12,114,000 shares.
The Company's anticipated capital expenditures for 1994 currently
approximate $90 million. These expenditures consist primarily of
certain building and equipment expenditures, including expansions
of and improvements to the Company's North Bergen, New Jersey
office facility, as well as distribution facilities in Pennsylvania
and Alabama, leasehold improvements of new stores for the Company's
Retail Division, and the upgrading of data processing systems.
These expenditures will be financed through available capital and
future earnings. Increased working capital needs will be met by
current funds. Bank lines of credit, which are available to
finance import transactions and direct borrowings, were $295
million at April 2, 1994. The Company expects to be able to adjust
these lines as required.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its officers and directors are parties
to several pending legal proceedings and claims, including actions
styled Fishbaum v. Chazen et al., and Ressler et al. vs. Liz
Claiborne, Inc. et al. both pending in the United States District
Court for the Eastern District of New York. Plaintiff in the
Fishbaum case seeks compensatory damages on behalf of a class of
purchasers of the Company's Common Stock during the period
commencing March 30, 1993 through and including July 16, 1993 and
alleges that the defendants violated the federal securities laws
by, among other things, making misrepresentations or omission of
material facts which artificially inflated the market price of the
Common Stock during the class period. In October 1993, the Company
moved to dismiss the Fishbaum complaint. Arguments on the motion
were presented in March 1994. The Ressler complaint makes
allegations similar to the Fishbaum complaint, but seeks damages on
behalf of a class of purchasers of the Company's Common Stock for
the period commencing September 21, 1992 through and including July
16, 1993. An amended complaint was filed in the Ressler action in
May 1994 to add Fishbaum as a plaintiff.
In April 1994, two stockholder derivative actions, which contain
substantially similar allegations, styled Goldberg Family Trust vs.
Chazen, et al. and Liz Claiborne, Inc., nominal defendant and Laz
Schneider vs. Chazen, et al. and Liz Claiborne, Inc., nominal
defendant, were brought in the court of Chancery of the State Court
of Delaware against the Company's directors and its former Vice
Chairman. The complaints contain allegations of breach by the
<PAGE>
(13)
directors of their fiduciary obligations to the Company and its
shareholders and corporate mismanagement, waste of corporate assets
in connection with the Company's stock repurchase program and the
defense of pending legal proceedings, and unjust enrichment in
connection with the sale of shares of the Company's Common Stock
between September 1992 and July 1993 by certain of its present and
former officers and directors.
The Company believes that the litigations described in this
Item are without merit and intends to vigorously defend these
actions. Although the outcome of any such litigation or claim
cannot be determined with certainty, management is of the opinion
that the final outcome of these litigations should not have a
material adverse effect on the Company's results of operations or
financial position.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) Employment Agreement, dated as of May 9, 1994, between
Liz Claiborne, Inc. and Paul R. Charron.
(b) The Company filed a report on Form 8-K dated March 9, 1994, to
report the change of the Company's fiscal year end from the last
Saturday in December to the Saturday closest to December 31,
commencing with the 1994 fiscal year.<PAGE>
<PAGE>
(14)
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
LIZ CLAIBORNE, INC.
DATE: May 16, 1994 BY /s/Samuel M. Miller
SAMUEL M. MILLER
Senior Vice President - Finance
Chief Financial and Accounting
Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page Number
Employment Agreement, dated as of
May 9, 1994, between Liz Claiborne,
Inc. and Paul R. Charron
KPK:50594 Exhibit 10(a)
19200/0001
Liz Claiborne, Inc.
1441 Broadway
New York, NY 10018
May 9, 1994
Paul R. Charron
403 Wyomissing Boulevard
Wyomissing, PA
Dear Paul:
The undersigned Liz Claiborne, Inc. ("the Company") desires to
employ you in the capacities of Vice Chairman and Chief Operating
Officer, and you desire to be so employed by the Company, in each
case subject to the terms and conditions set forth in this letter
agreement ("Agreement"). As used in this Agreement, the term the
"Claiborne Group" means and includes the Company and each of its
subsidiaries and affiliated companies and ventures from time to
time.
Accordingly, in consideration of the mutual covenants hereinafter
set forth and intending to be legally bound, the Company and you
hereby agree as follows:
1.Employment; Term. The Company hereby employs you, and you
hereby accept such employment and agree to serve the Claiborne
Group, upon the terms and conditions hereinafter set forth, for a
term commencing on your first day of full time employment with the
Company under this Agreement (May 9, 1994) ("your First Day") and
(unless sooner terminated as hereinafter provided) expiring on
April 30, 1997, provided that, if you are promoted to the position
of Vice Chairman and Chief Executive Officer of the Company on or
prior to the date of the Company's 1996 annual meeting of stock-
holders, such term shall automatically be extended for an addition-
al year, so as to expire on April 30, 1998 (such term of employment
being hereinafter referred to as "your term of employment").
2. Position; Conduct.
(a) During your term of employment, you will hold
the titles and offices of, and serve in the positions of, Vice
Chairman and Chief Operating Officer of the Company, or such more
senior title(s) and office(s) as the Board of Directors of the
Company (the "Board of Directors") may assign to you. In such
capacities, following your initial orientation period and no later
than July 1, 1994, the parties mutually intend that you shall have
particular responsibility for the operations of all of the better
women's wholesale apparel divisions of the Claiborne Group and that
the executives in charge of such divisions shall report directly to
you. In addition, you shall be a member of the senior-most
management policy-making group of the Company as constituted from
time to time. You shall report to the Chief Executive Officer and
the Board of Directors and shall perform such specific duties and
services of a senior executive nature (including service as an
officer, director or equivalent position of any subsidiary,
affiliated company or venture of the Claiborne Group, without
additional compensation) as they shall reasonably request consis-
tent with your position. Your performance shall be reviewed
periodically by the Board of Directors.
(b) During your term of employment, you agree to
(i) devote your full time and attention and best efforts to the
business and affairs of the Claiborne Group and to faithfully and
diligently perform, to the best of your ability, all of your duties
and responsibilities; (ii) abide by all applicable policies of the
Claiborne Group from time to time in effect; and (iii) not take any
action or conduct yourself in any manner which would tend to harm
the reputation or goodwill of the Claiborne Group. Nothing in this
paragraph shall preclude you from devoting reasonable time and
attention to (A) serving, with the prior approval of the Board of
Directors (which shall not be unreasonably withheld), as director,
trustee or member of a committee of any organization involving no
conflict of interest with the interests of the Claiborne Group; (B)
engaging in charitable and community activities; and (C) managing
your personal investments and affairs; provided that such activi-
ties do not, individually or collectively, interfere with the
performance of your duties and responsibilities as contemplated
under this Agreement.
3. Board of Directors. While it is understood that the
right to elect directors of the Company is by law vested in its
stockholders and directors, it is nevertheless mutually contemplat-
ed that, subject to such rights, you will be elected to serve as a
member of the Board of Directors promptly following your First Day
for a term extending through the date of the Company's 1996 annual
meeting of stockholders. You agree to serve on the Board of
Directors at the request of the Company without additional
compensation. By your signature below, you agree that any
termination of your employment with the Company shall also
constitute your resignation as a director of the Company.
4. Salary; Additional Compensation; Perquisites and
Benefits.
(a) During your term of employment, the Company
will pay you a base salary at an annual rate of not less than Six
Hundred Thousand Dollars ($600,000), subject to annual review by
the Compensation Committee of the Board of Directors (the "Com-
pensation Committee") and, in the discretion of such Committee,
increase from time to time. Such salary shall be paid in in-
stallments in accordance with the Company's standard practice, but
not less frequently than monthly.
(b) For fiscal year 1994, you will be eligible to
earn a bonus of up to 100% of the base salary paid to you during
such year, the actual amount of such bonus to be determined by the
Compensation Committee based upon actual performance as measured
against goals set by such Committee. On your First Day, or as soon
as is practicable thereafter, the Company will pay to you Two
Hundred Thousand Dollars ($200,000) as a non-refundable advance to
be credited against the amount of such bonus. For fiscal year 1995
and thereafter during your term of employment, you will partici-
pate, in accordance with and subject to the terms and conditions
thereof, in the Company's 162(m) Cash Bonus Plan, provided the
same is approved by the Company's stockholders at their upcoming
annual meeting. If such approval is not obtained, you will
participate in fiscal year 1995 and thereafter during your term of
employment, in accordance with the terms and conditions thereof, in
whatever annual cash bonus plan or arrangement in which the
Chairman and President of the Company participate.
(c) During your term of employment, you will
participate, on the same basis as other similarly situated senior
executives of the Claiborne Group, in accordance with and subject
to the respective terms and conditions thereof as to eligibility
and otherwise, in (i) the Company's existing Profit-Sharing
Retirement Plan, 401(k) Savings Plan and Supplemental Executive
Retirement Plan relating to the Profit-Sharing and Savings Plans,
as well as the Company's medical, dental, long-term disability and
life insurance programs (subject to insurability at standard rates)
and (ii) such other Company benefit programs as are from time to
time made generally available to other similarly situated senior
executives of the Claiborne Group.
(d) You shall be eligible for stock option grants
from time to time pursuant to the Company's 1992 Stock Incentive
Plan in accordance with the terms and conditions thereof. Pursuant
to such Plan, the Compensation Committee has granted to you,
effective upon your First Day, the options set forth in the Option
Agreement between the Company and you attached as Annex A, subject
to the terms and conditions set forth therein.
(e) The Compensation Committee has granted to you,
in consideration of your entry into this Agreement and effective as
of your First Day, 10,000 issued and outstanding shares of Company
common stock ("Common Stock") held in the Company's treasury, and
has approved the grant to you, on the last day of the Company's
current fiscal year, subject to your remaining an employee of the
Company on such date, of an additional issued and outstanding
10,000 shares of Common Stock held in the Company's treasury. In
this connection, you shall also receive the sum of $125,000,
payable contemporaneously with the delivery of the initial 10,000
shares.
(f) The Compensation Committee has granted to you,
effective as of your First Day, the restricted stock set forth in
the Restricted Stock Agreement between the Company and you attached
as Annex B, subject to the terms and conditions set forth therein.
The Company and you acknowledge as a common goal that you will
accumulate a personal holding of unrestricted, unencumbered shares
of Common Stock having a market value of at least $1.2 million.
You agree that in working toward such goal, you will not (except
for the withholding of shares to pay taxes in accordance with the
Restricted Stock Agreement) sell, transfer, give, pledge, deposit,
alienate, or otherwise encumber or dispose of (as used in this
paragraph, collectively, "transfer") any shares of Common Stock (or
any securities issued as a dividend or distribution on such shares,
or in respect of such shares in connection with a recombination or
recapitalization of the Common Stock) issued to you pursuant to the
Restricted Stock Agreement if, following such transfer, you would
not be the sole beneficial owner of at least $1.2 million worth of
Common Stock as aforesaid.
(g) The Company will reimburse you, in accordance
with its standard policies from time to time in effect, for such
reasonable and necessary vouchered out-of-pocket business expenses
as may be incurred by you during your term of employment in the
performance of your duties and responsibilities under this
Agreement.
(h) You shall be entitled to a vacation period to
be credited and taken in accordance with Claiborne Group policy
from time to time in effect for similarly situated senior execu-
tives, which in any event shall not be less than a total of four
weeks per annum.
(i) Your rights under this Agreement with respect
to the Company's 162(m) Cash Bonus Plan, Profit-Sharing Retirement
Plan, 401(k) Savings Plan, Supplemental Executive Retirement Plan,
1992 Stock Incentive Plan, medical, dental, long-term disability
and life insurance programs and other programs, perquisites and
policies shall not preclude the Claiborne Group from modifying or
terminating any such program, perquisite or policy, subject to your
right, in accordance with the terms of this Agreement, to partici-
pate in or be eligible for such program, perquisite or policy as so
modified or any replacement thereof.
5. Relocation.
(a) The Company agrees to purchase from you your
current residence at 403 Wyomissing Boulevard within 60 days of
your written request delivered to the Company no later than October
31, 1994. Such request shall be accompanied by three appraisals of
the value of such residence as of the date of the closing of title
thereon by independent real estate appraisers to be agreed upon
between you and the Company (such appraisals to be at the Company's
cost and expense). The purchase price to be paid by the Company
upon the closing of title for such residence shall be the average
of such appraised values. Such purchase shall be effectuated
pursuant to customary documentation (including but not limited to
a purchase contract and title insurance) prepared by the Company
and reasonably satisfactory to you, and you shall provide the
Company with any documents or materials reasonably requested by it
and otherwise comply with any reasonable request of the Company in
connection with the sale of such residence by the Company. If the
Company so desires, it may assign its obligations under this
paragraph to purchase your residence to a third party purchaser,
provided that the Company shall remain primarily responsible for
its obligations set forth in this paragraph.
(b) The Company shall reimburse you for your
reasonable expenses incurred to move your family and your family's
personal property from your current residence to a new residence to
be purchased by you in the New York City metropolitan area.
(c) Until the earlier of (i) the time the you
establish a new residence in the New York City metropolitan area or
(ii) October 31, 1994, the Company shall provide you with an
appropriate furnished apartment/hotel accommodation in the New York
City metropolitan area reasonably acceptable to you.
(d) In connection with your purchase of a new
residence in the New York City metropolitan area, the Company will,
within 14 days of your written request, advance to you on or about
the date on which title of such new residence is expected to close,
a loan of up to Two Hundred Fifty Thousand Dollars ($250,000),
which loan shall bear interest at the rate of 5% per annum, payable
quarterly. The principal amount of such loan shall be repaid in a
balloon payment at the earlier of two years after the date of such
advance and 10 days after the date of termination of your employ-
ment by the Company for Cause (as hereinafter defined). You shall
execute a promissory note evidencing such loan prepared by the
Company and reasonably satisfactory to you.
6. Termination.
(a) Your term of employment under this Agreement
will terminate at the election of the Company for Cause immediately
upon notice from the Company to you. As used herein, the term
"Cause" means:
(i) Your willful or intentional failure or refusal
to perform or observe any of your material
duties, responsibilities or obligations set
forth in, or as contemplated under, this
Agreement, if such breach is not cured, if
curable, within 30 days after notice thereof
to you by the Company;
(ii) Any willful or intentional act or failure
to act involving fraud, misrepresenta-
tion, theft, embezzlement, dishonesty or
moral turpitude (collectively, "Fraud")
affecting the Claiborne Group or any
customer, supplier or employee of the
Claiborne Group;
(iii) Conviction of (or a plea of nolo contendere
to) an offense which is a felony in the ju-
risdiction involved or which is a misdemeanor
in the jurisdiction involved but which in-
volves Fraud;
(iv) Any willful or intentional act which could
reasonably be expected to materially injure
the reputation, business or business relation-
ships of the Claiborne Group, or your reputa-
tion or business relationships, if such breach
is not cured, if curable, within 30 days after
notice thereof to you by the Company; or
(v) Your willful or intentional failure to comply
with any reasonable request or direction of
the Board of Directors or the Chief Executive
Officer of the Company not contrary to the
provisions of this Agreement, if such breach
is not cured, if curable, within 30 days after
notice thereof to you by the Company.
(b) For purposes of this Section 6, no act, or
failure to act, on your part shall be deemed "willful" or "inten-
tional" unless done, or omitted to be done, by you without
reasonable belief that your action or omission was in the best
interests of the Claiborne Group.
(c) The Company will endeavor in good faith to
provide you with a prompt hearing before the Board of Directors (at
which you may be accompanied by counsel) prior to any termination
for Cause hereunder.
(d) Your term of employment will terminate
forthwith upon your death or, at the Claiborne Group's option, upon
your Disability. As used herein the term "Disability" means your
inability to perform your duties and responsibilities as contem-
plated under this Agreement for a period of more than 180 consecu-
tive days, or for a period aggregating more than 240 days, whether
or not continuous, during any 360-day period, due to physical or
mental incapacity or impairment. A determination of Disability
will be made by a physician satisfactory to both you and the
Company; provided that if you and the Company cannot agree as to a
physician, then each will select a physician and these two together
will select a third physician, whose determination as to Disability
will be binding on you and the Company. You, your legal represen-
tative or any adult member of your immediate family shall have the
right to present to the Company and such physician such information
and arguments on your behalf as you or they deem appropriate,
including the opinion of your personal physician. Should you
become incapacitated, your employment shall continue and all base
salary and other compensation otherwise due to you hereunder shall
be continued through the date on which your employment is terminat-
ed for
Disability.
7. Severance.
(a) In the event that your term of employment is
terminated for Cause, or if you resign without Good Reason (as
hereinafter defined), the Company will pay to you an amount equal
to your accrued but unpaid base salary through the date of such
termination.
(b) In the event that your term of employment is
terminated (other than upon your death or Disability) during your
term of employment (i) by the Company other than for Cause or (ii)
by you for Good Reason, then the Company shall pay to you an amount
equal to your accrued but unpaid base salary through the date of
such termination and, so long as you shall not have breached your
obligations to the Claiborne Group under Sections 8 and 9 hereof
(without limitation to any other remedy available to the Company),
the Company shall (A) provide you with coverages substantially
identical to those provided to other similarly situated senior
executives of the Claiborne Group in its medical, dental, long term
disability and life insurance programs (subject to insurability at
standard rates) for 12 months following the date of such termina-
tion, and (B) pay to you, in substantially equal monthly install-
ments over the period from the date of such termination until April
30, 1997 or, if prior to such termination this Agreement had been
automatically extended pursuant to Section 1 hereof, April 30,
1998, an aggregate amount equal to the greater of (1) what your
base salary would have been for said period (using for such purpose
the base salary rate in effect on the date of termination) and (2)
$1 million. In such event, the Company agrees that your rights to
continued medical coverage pursuant to Section 4980B of the
Internal Revenue Code of 1986, as amended (your "COBRA" rights)
shall be deemed to commence after the expiration of the 12-month
period described in clause (A) above. For the purpose of this
Agreement, termination of employment hereunder by you for "Good
Reason" shall mean your termination of your employment upon notice
to the Company following (x) assignment to you of duties inconsis-
tent with your position as described in Section 2(a) or your being
removed from such position, in either case without your consent,
which termination shall be effective 30 days after prompt notice of
such circumstances by you to the Company, if such circumstances
have not been cured prior to such date; or (y) failure of the
Company to have promoted you to the position of Vice Chairman and
Chief Executive Officer on or prior to the date of the Company's
1996 annual meeting of stockholders; provided that your right to
terminate your employment for Good Reason pursuant to this clause
(y) may only be exercised by notice from you to the Company given
not later than 90 days after the date you receive notice that you
will not be so promoted, or, if no such notice is given, 90 days
after the date of the Company's 1996 annual meeting of stockhold-
ers.
(c) In the event that your term of employment is
terminated on account of your death or Disability, the Company will
pay to you or your estate an amount equal to your accrued but
unpaid base salary through the date of such termination.
(d) In the event that your term of employment is
terminated for any reason, the Company's payment of salary as
provided in the previous paragraphs of this Section 7 (together
with reimbursement of your reasonable and necessary out-of-pocket
business expenses incurred through such date in accordance with the
Company's standard policy in effect at such time) shall constitute
complete satisfaction of all obligations of the Company to you
pursuant to this Agreement. Upon any such termination, you shall
cease to be an employee of the Company for all purposes and (except
as otherwise expressly set forth in paragraph 7(b)), the Company
shall have no obligation to provide you with any employee benefits
or perquisites hereunder.
(e) Your rights set out in this Section 7 shall
constitute your sole and exclusive rights and remedies as a result
of your actual or constructive termination of employment without
Cause or the failure of the Company to elect you to the position of
Chief Executive Officer, and you hereby waive any such other claims
against the Claiborne Group in such event.
8. Confidential Information.
(a) The Claiborne Group owns and has developed and
compiled, and will own, develop and compile, certain proprietary
techniques and confidential information which have great value to
its business (referred to in this Agreement, collectively, as
"Confidential Information"). Confidential Information includes not
only information disclosed by the Claiborne Group to you, but also
information developed or learned by you during the course or as a
result of employment hereunder, which information you acknowledge
is and shall be the sole and exclusive property of the Claiborne
Group. Confidential Information includes all proprietary informa-
tion that has or could have commercial value or other utility in
the business in which the Claiborne Group is engaged or contem-
plates engaging, and all proprietary information of which the
unauthorized disclosure could be detrimental to the interests of
the Claiborne Group, whether or not such information is specifical-
ly labelled as Confidential Information by the Claiborne Group. By
way of example and without limitation, Confidential Information
includes any and all information developed, obtained or owned by
the Claiborne Group concerning trade secrets, techniques, know-how
(including designs, plans, procedures, merchandising know-how,
processes and research records), software, computer programs,
innovations, discoveries, improvements, research, development, test
results, reports, specifications, data, formats, marketing data and
plans, business plans, strategies, forecasts, unpublished financial
information, orders, agreements and other forms of documents, price
and cost information, merchandising opportunities, expansion plans,
designs, store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and
salary, staffing and employment information. Notwithstanding the
foregoing, Confidential Information shall not in any event include
information which (i) was generally known or generally available to
the public prior to its disclosure to you; (ii) becomes generally
known or generally available to the public subsequent to disclosure
to you through no wrongful act of any person or (iii) which you are
required to disclose by applicable law or regulation (provided that
you provide the Company with prior notice of the contemplated
disclosure and reasonably cooperate with the Company at the
Company's expense in seeking a protective order or other appropri-
ate protection of such information).
(b) You acknowledge and agree that in the perfor-
mance of your duties hereunder the Claiborne Group will from time
to time disclose to you and entrust you with Confidential Infor-
mation. You also acknowledge and agree that the unauthorized
disclosure of Confidential Information, among other things, may be
prejudicial to the Claiborne Group's interests, an invasion of
privacy and an improper disclosure of trade secrets. You agree
that you shall not, directly or indirectly, use, make available,
sell, disclose or otherwise communicate to any corporation,
partnership, individual or other third party, other than in the
course of your assigned duties and for the benefit of the Claiborne
Group, any Confidential Information, either during your term of
employment or thereafter.
(c) In the event your employment with the Company
ceases for any reason, you will not remove from the Claiborne
Group's premises without its prior written consent any records,
files, drawings, documents, equipment, materials or writings
received from, created for or belonging to the Claiborne Group,
including those which relate to or contain Confidential Informa-
tion, or any copies thereof. Upon request or when your employment
with the Company terminates, you will immediately deliver the same
to the Company.
(d) During your term of employment, you will
disclose to the Company all designs, inventions and business
strategies or plans developed by you during such period which
relate directly or indirectly to the business of the Claiborne
Group, including without limitation any process, operation, product
or improvement. You agree that all of the foregoing are and will
be the sole and exclusive property of the Claiborne Group and that
you will at the Company's request and cost do whatever is necessary
to secure the rights thereto, by patent, copyright or otherwise, to
the Claiborne Group.
(e) You and the Company agree that you shall not
disclose to the Claiborne Group or use for the Claiborne Group's
benefit, any information which may constitute trade secrets or
confidential information of third parties, to the extent you have
any such secrets or information.
(f) The provisions of this Section 8 shall survive
the termination of this Agreement and your term of employment.
9. Restrictive Covenants.
(a) You acknowledge and agree (i) that the services
to be rendered by you for the Claiborne Group are of a special,
unique, extraordinary and personal character, (ii) that you have
and will continue to develop a personal acquaintance and relation-
ship with one or more of the Claiborne Group's customers, employ-
ees, suppliers and independent contractors, which may constitute
the Claiborne Group's primary or only contact with such customers,
employees, suppliers and independent contractors, and (iii) that
you will be uniquely identified by customers, employees, suppliers,
independent contractors and retail consumers with the Claiborne
Group's products. Consequently, you agree that it is fair,
reasonable and necessary for the protection of the business,
operations, assets and reputation of the Claiborne Group that you
make the covenants contained in this Section 9.
(b) You agree that, during your term of employment
and for a period of 18 months thereafter, you shall not, directly
or indirectly, own, manage, operate, join, control, participate in,
invest in or otherwise be connected or associated with, in any
manner, including as an officer, director, employee, partner,
consultant, advisor, proprietor, trustee or investor, any Competing
Business in the United States; provided however that nothing
contained in this Section 9(b) shall prevent you from owning less
than 2% of the voting stock of a publicly held corporation for
investment purposes. For purposes of this Section 9(b), the term
"Competing Business" shall mean a business engaged in the design,
manufacture, distribution or marketing of better apparel and
related products which competes with any business then being
operated by the Company (except where such competition is de
minimus).
(c) You agree that, during your term of employment
and for a period of 18 months thereafter, you shall not, directly
or indirectly,
(i) persuade or seek to persuade any customer of
the Claiborne Group to cease to do business or to reduce
the amount of business which any customer has customarily
done or contemplates doing with the Claiborne Group,
whether or not the relationship between the Claiborne
Group and such customer was originally established in
whole or in part through your efforts;
(ii) seek to employ or engage, or assist anyone else
to seek to employ or engage, any person who at any time
during the year preceding the termination of your
employment hereunder was in the employ of the Claiborne
Group or was an independent contractor providing material
manufacturing, marketing, sales, financial or management
consulting services in connection with the business of
the Claiborne Group and with whom you had regular
contact; or
(iii) interfere in any manner in the relationship of
the Claiborne Group with any of its suppliers or indepen-
dent contractors, whether or not the relationship between
the Claiborne Group and such supplier or independent
contractor was originally established in whole or in part
by your efforts.
As used in this Section 9, the terms "customer" and "supplier"
shall mean and include any individual, proprietorship, partnership,
corporation, joint venture, trust or any other form of business
entity which is then a customer or supplier, as the case may be, of
the Claiborne Group or which was such a customer or supplier at any
time during the one-year period immediately preceding the date of
termination of employment.
(d) You agree that, during your term of employment
and for a period of 18 months thereafter, you will take no action
which is intended, or would reasonably be expected, to harm the
Claiborne Group or its reputation or which would reasonably be
expected to lead to unwanted or unfavorable publicity to the
Claiborne Group.
(e) The provisions of this Section 9 shall survive
the termination of this Agreement and your term of employment.
10. Specific Performance. You acknowledge that the
Company would sustain irreparable injury in the event of a
violation by you of any of the provisions of Sections 8 or 9
hereof, and by reason thereof you consent and agree that if you
violate any of the provisions of said Sections 8 or 9, in addition
to any other remedies available, the Company shall be entitled to
a decree specifically enforcing such provisions, and shall be
entitled to a temporary and permanent injunction restraining you
from committing or continuing any such violation, from any
arbitrator duly appointed in accordance with the terms of this
Agreement or any court of competent jurisdiction, without the
necessity of proving actual damages, posting any bond, or seeking
arbitration in any forum.
11. Life Insurance. You agree that the Claiborne Group
will have the right to obtain and maintain life insurance on your
life, at its expense, and for its benefit. You agree to cooperate
fully with the Claiborne Group in obtaining such life insurance, to
sign any necessary consents, applications and other related forms
or documents and to take any required medical examinations.
12. Withholding. The parties understand and agree that
all payments to be made by the Company pursuant to this Agreement
shall be subject to all applicable tax withholding obligations of
the Company.
13. No Conflict. You represent and warrant that you are
not party to or subject to any agreement, contract, understanding,
covenant, judgment or decree or under any obligation, contractual
or otherwise, in any way restricting or adversely affecting your
ability to act for the Claiborne Group in all of the respects
contemplated hereby.
14. Notices. All notices required or permitted
hereunder will be given in writing by personal delivery; by
confirmed facsimile transmission; by express delivery via any
reputable express courier service; or by registered or certified
mail, return receipt requested, postage prepaid, in each case
addressed to the parties at the respective addresses set forth in
Exhibit A or at such other address as may be designated in writing
by either party to the other in the manner set forth herein.
Notices which are delivered personally, by confirmed facsimile
transmission, or by courier as aforesaid, will be effective on the
date of delivery. Notices delivered by mail will be deemed
effectively given upon the fifth calendar day subsequent to the
postmark date thereof.
15. Miscellaneous.
(a) The failure of either party at any time to
require performance by the other party of any provision hereunder
will in no way affect the right of that party thereafter to enforce
the same, nor will it affect any other party's right to enforce the
same, or to enforce any of the other provisions in this Agreement;
nor will the waiver by either party of the breach of any provision
hereof be taken or held to be a waiver of any prior or subsequent
breach of such provision or as a waiver of the provision itself.
(b) This Agreement is a personal contract calling
for the provision of unique services by you, and your rights and
obligations hereunder may not be sold, transferred, assigned,
pledged or hypothecated by you. In the event of any attempted
assignment or transfer of rights hereunder by you contrary to the
provisions hereof (other than as may be required by law), the
Company will have no further liability for payments hereunder. The
rights and obligations of the Company hereunder will be binding
upon and run in favor of the successors and assigns of the Company.
(c) Each of the covenants and agreements set forth
in this Agreement are separate and independent covenants, each of
which has been separately bargained for and the parties hereto
intend that the provisions of each such covenant shall be enforced
to the fullest extent permissible. Should the whole or any part or
provision of any such separate covenant be held or declared
invalid, such invalidity shall not in any way affect the validity
of any other such covenant or of any part or provision of the same
covenant not also held or declared invalid. If any covenant shall
be found to be invalid but would be valid if some part thereof were
deleted or the period or area of application reduced, then such
covenant shall apply with such minimum modification as may be
necessary to make it valid and effective.
(d) This Agreement has been made and will be
governed in all respects by the laws of the State of New York
applicable to contracts made and to be wholly performed within such
state and the parties hereby irrevocably consent to the jurisdic-
tion of the courts of the State of New York and federal courts
located therein for the purpose of enforcing this Agreement.
(e) Any controversy arising out of or relating to
this Agreement or the breach hereof shall be settled by arbitration
in the City of New York in accordance with the rules then obtaining
of the American Arbitration Association and judgment upon the award
rendered may be entered in any court having jurisdiction thereof,
except that in the event of any controversy relating to any
violation or alleged violation of any provision of Section 8 or 9
hereof, the Company in its sole discretion shall be entitled to
seek injunctive relief from a court of competent jurisdiction
without any requirement to seek arbitration. The parties hereto
agree that any arbitral award may be enforced against the parties
to an arbitration proceeding or their assets wherever they may be
found. In the event that (i) you make a claim against the Company
under this Agreement, (ii) the Company disputes such claim, and
(iii) you prevail with respect to such disputed claim, then the
Company shall reimburse you for your reasonable costs and expenses
(including reasonable attorney's fees) incurred by you in pursuing
such disputed claim.
(f) This Agreement (which includes the Exhibits and
Annexes hereto) sets forth the entire understanding between the
parties as to the subject matter of this Agreement and merges and
supersedes all prior agreements, commitments, representations,
writings and discussions between the parties with respect to that
subject matter. This Agreement may be terminated, altered,
modified or changed only by a written instrument signed by both
parties hereto.
(g) The Section headings contained herein are for
purposes of convenience only and are not intended to define or list
the contents of the Sections.
(h) The provisions of this Agreement which by their
terms call for performance subsequent to termination of your term
of employment hereunder, or of this Agreement, shall so survive
such termination.
Please confirm your agreement with the foregoing by
signing and returning the enclosed copy of this letter, following
which this will be a legally binding agreement between us as of the
date first written above.
Very truly yours,
Liz Claiborne, Inc.
By:/s/Jerome A. Chazen
Jerome A. Chazen
Chairman of the Board
Accepted and Agreed:
/s/Paul R. Charron
Paul R. Charron
<PAGE>
EXHIBIT A
Addresses for Notice
If to Liz Claiborne, Inc.:
Liz Claiborne, Inc.
1441 Broadway
New York, NY 10018
Attention: Chairman
Facsimile: (212) 626-1888
Confirm: (212) 626-3300
- and -
Liz Claiborne, Inc.
300 Lighting Way
Secaucus, NJ 07094
Attention: General Counsel
Facsimile: (201) 601-8650
Confirm: (201) 601-8501
If to You:
To your address set forth on the first page of this
Agreement
Facsimile:
Confirm:
<PAGE>
Annex A: Stock Option Agreement
Annex B: Restricted Stock Agreement<PAGE>
KPK:50594 Annex A
19200/0001
LIZ CLAIBORNE, INC.
1992 STOCK INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement"),
dated as of May 9, 1994, between LIZ CLAIBORNE, INC., a Delaware
corporation (the "Company"), and Paul R. Charron, an employee of
the Company (the "Optionee").
The Compensation Committee of the Board of Directors of
the Company has determined that the objectives of the Company's
1992 Stock Incentive Plan (the "Plan") will be furthered by
granting to the Optionee a nonqualified stock option pursuant to
the Plan.
Notwithstanding any provision hereof, this Agreement
shall become effective only as, when and if the Grantee shall have
executed and delivered to the Company both (i) this Agreement, and
(ii) the Employment Agreement dated the date hereof between the
Company and the Grantee.
In consideration of the foregoing and of the mutual
undertakings set forth in this Agreement, the Company and the
Optionee agree as follows:
SECTION 1. Grant of Option.
The Company hereby grants to the Optionee a nonqualified
stock option (the "Option") to purchase 25,000 shares of common
stock of the Company ("Common Stock") at a purchase price of $24.00
per share, equal to the Fair Market Value thereof (as defined under
the Plan) on the date hereof. It is intended that the Option shall
not qualify as an "incentive stock option" as defined in section
422 of the Internal Revenue Code of 1986, as amended to date.
SECTION 2. Exercisability.
Subject to the further terms of this Agreement, the
Option shall become exercisable in six substantially equal install-
ments, one on each of the first, second, third, fourth, fifth and
sixth anniversaries of the date of this Agreement, provided that
the Optionee is then an employee of the Company. Unless earlier
terminated pursuant to the provisions of the Plan, the unexercised
portion of the Option shall expire and cease to be exercisable at
12:01 am on the seventh anniversary of the date of this Agreement.
SECTION 3. Method of Exercise.
The Option or any part thereof may be exercised only by
the giving of written notice to the Company on such form and in
such manner as the Committee shall prescribe. Such written notice
must be accompanied by payment of the full purchase price for the
number of shares with respect to which the Option is being
exercised. Such payment may be made by one or a combination of the
following methods: (a) by a check acceptable to the Company; (b)
with the consent of the Committee, by delivery of unrestricted
shares of Common Stock having a Fair Market Value on the exercise
date equal to part or all of the purchase price; or (c) by such
other method as the Committee may authorize. The date of exercise
of the Option shall be the date on which written notice of exercise
is hand delivered to the Company, during normal business hours, at
its address as provided in Section 6 of this Agreement, or, if
mailed, the date on which it is postmarked, provided such notice is
actually received.
SECTION 4. Termination of Employment; Death.
4.1 Upon termination of the Optionee's employment for
any reason, the Option shall terminate and expire except as
provided in Section 4.2 or 4.3 of this Agreement.
4.2 If the Optionee's employment terminates for any
reason other than death, dismissal for "cause" as defined in the
Optionee's employment agreement with the Company or resignation
without the Company's prior consent for purposes of this Agreement,
the Option shall be exercisable but only to the extent it was
exercisable at the time of such termination and only until the
earlier of the expiration date of the Option, determined pursuant
to Section 2 of this Agreement, or the expiration of three months
following termination.
4.3 If the Optionee dies while employed by the Company
or after employment terminates but during a period in which the
Option is exercisable pursuant to Section 4.2 of this Agreement,
the Option shall be exercisable but only to the extent it was
exercisable at the time of death and only until the earlier of the
expiration date of the Option, determined pursuant to Section 2 of
this Agreement, or the first anniversary of the date of the
Optionee's death.
SECTION 5. Plan Provisions to Prevail.
This Agreement is subject to all of the terms and pro-
visions of the Plan. Without limiting the generality of the
foregoing, by entering into this Agreement the Optionee agrees that
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 thereunder or this Agreement. In the event that there is any
inconsistency between the provisions of this Agreement and of the
Plan, the provisions of the Plan shall govern.
SECTION 6. Notices.
Any notice to be given to the Company hereunder shall be
in writing and shall be addressed to the Senior Vice President,
Finance, or Vice President Financial Operations, of the Company at
Liz Claiborne, Inc., One Claiborne Avenue, North Bergen, N.J.
07047, or at such other address as the Company may hereafter
designate to the Optionee by notice as provided in this Section 6.
Any notice to be given to the Optionee hereunder shall be addressed
to the Optionee at the address set forth beneath his signature
hereto, or at such other address as the Optionee may hereafter
designate to the Company by notice as provided herein. A notice
shall be deemed to have been duly given when personally delivered
or mailed by registered or certified mail to the party entitled to
receive it.
SECTION 7. Successors and Assigns.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors and assigns of the
Company and, to the extent consistent with Section 4.1 of this
Agreement and with the Plan, the heirs and personal representatives
of the Optionee.
SECTION 8. Governing Law.
This Agreement shall be interpreted, construed and
administered in accordance with the laws of the State of Delaware
as they apply to contracts made, delivered and to be wholly
performed in the State of Delaware. <PAGE>
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date and year first written above.
LIZ CLAIBORNE, INC.
ATTEST: By
Title:
PAUL R. CHARRON, Optionee
Address:
Social Security Number
<PAGE>
KPK:50594 Annex B
19200/0001
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT (the "Agreement"), dated as of May 9,
1994, between LIZ CLAIBORNE, INC., a Delaware corporation (the
"Company"), and Paul R. Charron (the "Grantee").
The Compensation Committee of the Board of Directors of the Company
(the "Committee") has determined that the objectives of the
Company's 1992 Stock Incentive Plan (the "Plan") will be furthered
by the grant to the Grantee of 85,000 issued and outstanding shares
of Common Stock of the Company currently held by the Company,
subject to the restrictions set out in this Agreement (the
"Restricted Shares").
Notwithstanding any provision hereof, this Agreement shall become
effective only as, when and if the Grantee shall have executed and
delivered to the Company (i) this Agreement, (ii) the stock powers
referenced below, and (iii) the Employment Agreement dated the date
hereof between the Company and the Grantee.
In connection with the grant of the Restricted Shares, the Grantee
has delivered to the Company herewith stock powers duly endorsed in
blank, each of which will be returned to the Grantee when all
restrictions on the Restricted Shares covered thereby have expired
as provided in Section 2.
In consideration of the foregoing and of the mutual undertakings
set forth in this Agreement, the Company and the Grantee agree as
follows:
SECTION 1. Issuance of Restricted Shares. As soon as practicable
after receipt from the Grantee of this executed Agreement, the
Company shall cause to be issued under the Plan in the name of the
Grantee eight Restricted Share stock certificates, as follows:
seven representing 10,000 shares of Common Stock each, and one
representing 15,000 shares of Common Stock. Each certificate shall
remain in the possession of the Company until the Restricted Shares
represented thereby are free of the restrictions set forth in
Section 2. Upon the issuance of such certificates, the Grantee
shall have the rights of a stockholder with respect to the
Restricted Shares, subject to the restrictions set forth in this
Agreement and the Plan.
SECTION 2. Restrictions.
2.1 Restricted Shares may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of prior to the date
provided for in Section 2.2, 2.3 or 2.4. These restrictions shall
apply as well to any shares of Common Stock or other securities of
the Company which may be acquired by the Grantee in respect of the
Restricted Shares as a result of any stock split, stock dividend,
combination of shares or other change, or any exchange, reclassifi-
cation or conversion of securities.
2.2 unless sooner terminated pursuant to the terms hereof, and
subject to accelerated termination pursuant to Section 2.3, the
restrictions set forth in Section 2.1 shall, provided that the
Grantee is then an employee of the Company, expire on the last day
of each of the Company's fiscal years 1994 through 2001 (the "Vest-
ing Dates") with respect to the number of Restricted Shares listed
below next to each Vesting Date:
Vesting Date: Number of
Last business day Restricted Shares
of fiscal year as to Which Restrictions Expire
1994 10,000
1995 10,000
1996 10,000
1997 10,000
1998 10,000
1999 10,000
2000 10,000
2001 15,000
As soon as practicable after each Vesting Date, the Company shall
deliver to the Grantee, subject to the provisions of Section 4, a
stock certificate representing the Restricted Shares which became
free of restrictions on such Vesting Date.
2.3 For purposes of this Section 2.3, a Partial
Acceleration Date is any day at least four months after the date of
this Agreement on which the Fair Market Value of a share of Common
Stock (determined for all purposes of this Agreement pursuant to
Section 1.6(a) of the Plan) is at least $36, provided that the
average Fair Market Value of a share of Common Stock averaged for
such day and the preceding 74 consecutive days on which the Common
Stock was traded on the principal stock exchange on which such
stock is listed, is also at least $36. A Full Acceleration Date is
defined in the same manner as a Partial Acceleration Date except
that $48 is substituted for $36 in both places where $36 appears in
the preceding sentence. The prices of $36 and $48 set forth in
this Section 2.3 shall be subject to equitable adjustment by the
Committee in its sole discretion pursuant to Section 1.5(b) of the
Plan. Upon the happening of a Partial Acceleration Date, restric-
tions shall thereupon lapse as to one-third of the Restricted
Shares (rounded to the nearest whole number) scheduled to become
unrestricted on each Vesting Date subsequent thereto and the
Partial Acceleration Date shall be deemed the Vesting Date for such
newly vested shares for purposes of this Agreement. Upon the
happening of a Full Acceleration Date, provided that the Grantee is
an employee of the Company on such Date, restrictions shall lapse
as to all Restricted Shares as of the later of such Full Acceler-
ation Date or the last day of the Company's 1998 fiscal year, and
such lapse date shall be deemed the Vesting Date of such shares for
purposes of this Agreement, provided that the Grantee is an
employee of the Company on such lapse date.
2.4 dividends that become payable on Restricted Shares shall be
held by the Company in escrow in accordance with the provisions of
this Agreement. In this connection, on each Common Stock dividend
payment date while any Restricted Shares remain outstanding and
restricted hereunder (each, a "RS Dividend Date"), the Company
shall be deemed to have reinvested any cash dividend otherwise then
payable on the Restricted Shares in a number of phantom shares of
Common Stock (including any fractional share) equal to the quotient
of such dividend divided by the Fair Market Value of a share of
Common Stock on such RS Dividend Date and to have credited such
shares to an unfunded book account in the Grantee's name (the
"Dividend Escrow Account"). As of each subsequent RS Dividend
Date, the phantom shares then credited to the Dividend Escrow
Account shall be deemed to receive a dividend at the then appli-
cable dividend rate, which shall be reinvested in the same manner
in such Account in the form of additional phantom shares. If any
dividend payable on any RS Dividend Date is paid in the form of
Common Stock, then any such stock dividend shall be treated as
additional Restricted Shares under this Agreement, pursuant to
Section 2.1 above, with such additional Restricted Shares being
subject to the same vesting and other restrictions as the Restrict-
ed Shares with respect to which such dividends became payable, and
with any fractional share being treated as a cash dividend that is
subject to the escrow and reinvestment procedures in this Section
2.4. Any other non-cash dividends credited with respect to Re-
stricted Stock shall be subject to the escrow and reinvestment
procedures in this Section 2.4, and shall be valued for purposes of
this Section 2.4 at the fair market value thereof as of the rele-
vant RS Dividend Date, as determined by the Committee in its sole
discretion. At each Vesting Date, the Company shall deliver out of
escrow to the Grantee that number of shares of Common Stock equal
to the number of phantom shares then credited to the Dividend
Escrow Account as the result of the deemed investment and rein-
vestment in phantom shares of the dividends attributable to the
Restricted Shares on which restrictions lapse at such Vesting Date.
SECTION 3. Forfeiture. Effective upon termination of the
Grantee's employment with the Company for any reason, the Company
shall cancel the stock certificate(s) representing any Restricted
Shares on which the restrictions have not expired, and the Dividend
Escrow Account shall thereupon be terminated, it being understood
and agreed that Grantee shall not be entitled to any payment
whatsoever under this Agreement or provisions of the Plan relating
to this Agreement (including without limitation Section 2.6(e)
thereof) in connection with such cancellation and termination.
SECTION 4. Withholding Taxes. Whenever a stock certificate
representing Restricted Shares that have vested in accordance with
the terms hereof is to be delivered to the Grantee pursuant to
Section 2.2, the Company shall be entitled to require as a
condition of such delivery that the Grantee remit to the Company an
amount sufficient in the opinion of the Company to satisfy all
federal, state and other governmental tax withholding requirements
related to the expiration of restrictions on the shares represented
by such certificate. Until an election by Grantee under the
provisions currently set forth in Rule 16b-3(d)(1)(i) as adopted
February 21, 1991 under the Securities Exchange Act of 1934 (the
"New Rule") shall have become effective in accordance with the
terms of the New Rule, the Company shall automatically withhold
from delivery shares having a Fair Market Value on the Vesting Date
equal to the amount of tax to be withheld. Fractional share
amounts shall be settled in cash. Any such election by Grantee
under the New Rule shall take effect six months after it is made
and shall remain in effect until revoked by an election made at
least six months in advance of the revocation date.
SECTION 5. Nature of Payments. The grant of the Restricted Shares
hereunder is in consideration of services to be performed by the
Grantee for the Company and constitutes a special incentive payment
and the parties agree that it is not to be taken into account in
computing the amount of salary or compensation of the Grantee for
the purposes of determining (i) any pension, retirement, profit-
sharing, bonus, life insurance or other benefits under any pension,
retirement, profit-sharing, bonus, life insurance or other benefit
plan of the Company, or (ii) any severance or other amounts payable
under any other agreement between the Company and the Grantee.
SECTION 6. Plan Provisions to Prevail. This Agreement is subject
to all of the terms and provisions of the Plan. Without limiting
the generality of the foregoing, by entering into this Agreement
the Grantee agrees that 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 thereunder or this Agreement. In the event
that there is any inconsistency between the provisions of this
Agreement and of the Plan, the provisions of the Plan shall govern.
SECTION 7. Miscellaneous.
7.1 Section Headings. The Section headings contained herein are
for purposes of convenience only and are not intended to define or
limit the contents of the Sections.
7.2 Notices. Any notice to be given to the Company hereunder
shall be in writing and shall be addressed to the Company's Senior
Vice President, Finance, or Vice President of Financial Operations,
at One Claiborne Avenue, North Bergen, NJ 07047, or at such other
address as the Company may hereafter designate to the Grantee by
notice as provided in this Section 7.2. Any notice to be given to
the Grantee hereunder shall be addressed to the Grantee at the
address set forth beneath his signature hereto, or at such other
address as he may hereafter designate to the Company by notice as
provided herein. A notice hereunder shall be deemed to have been
duly given when personally delivered or mailed by registered or
certified mail to the party entitled to receive it.
7.3 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and the successors
and assigns of the Company and, to the extent consistent with
Sections 2 and 3 of this Agreement, the heirs and personal repre-
sentatives of the Grantee.
7.4 Governing Law. This Agreement shall be interpreted, construed
and administered in accordance with the laws of the State of
Delaware as they apply to contracts made, delivered and to be
wholly performed in the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
LIZ CLAIBORNE, INC.
ATTEST: By
Title:
PAUL R. CHARRON, Grantee
Address
