<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION Exhibit Index
Washington, D.C. 20549 is on Page __
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994 OR
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 0-9831
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LIZ CLAIBORNE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-2842791
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1441 Broadway, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-354-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of each exchange on which registered
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Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Based upon the closing sale price on the New York Stock Exchange
composite tape on March 1, 1995, the aggregate market value of the registrant's
Common Stock, par value $1 per share, held by non-affiliates of the registrant
on such date was approximately $1,194,724,797.
Number of shares of the registrant's Common Stock, par value $1 per
share, outstanding as of March 1, 1995: 75,640,645 shares.
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Documents Incorporated by Reference:
Registrant's Proxy Statement relating to its Annual Meeting of
Stockholders to be held on May 11, 1995 - Part III.
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PART I
Item 1. Business.
Overview
Liz Claiborne, Inc. designs, contracts for the manufacture of, and
markets an extensive range of women's and men's apparel and related products,
including accessories, shoes and jewelry. The Company believes that it is the
largest "better" women's sportswear and dress company in the United States.
Generally, the Company's sportswear products are conceived and marketed as
"designer" items, but are priced in the "better" apparel range. Women's
sportswear is offered under the Company's various trademarks, including LIZ
CLAIBORNE, LIZ, COLLECTION, LIZSPORT, LIZWEAR, ELISABETH, LIZ & CO. and its
triangular logo mark. The Company offers a higher priced "bridge" line of
women's sportswear and dresses under the Company's DANA BUCHMAN label,
collections of men's sportswear and furnishings under the CLAIBORNE trademark,
and "moderate" women's apparel under RUSS, THE VILLAGER and CRAZY HORSE
trademarks. The Company offers women's fragrance collections under the LIZ
CLAIBORNE, REALITIES and VIVID trademarks and men's fragrance collections under
the CLAIBORNE FOR MEN trademark. The Company also operates retail stores in a
variety of formats and distributes its products in a number of international
markets.
At March 1, 1995, the Company's order book reflected unfilled
customer orders for approximately $443 million of merchandise, as compared to
approximately $450 million at March 1, 1994. Order book data at any given date
is materially affected by the timing of recording orders and of shipments.
Accordingly, order book data should not be taken as indicative of eventual
actual shipments or net sales, or as providing meaningful period-to-period
comparisons.
As used herein, the term the "Company" refers to Liz Claiborne,
Inc., a Delaware corporation, together with its consolidated subsidiaries, and
its predecessor New York corporation (incorporated in 1976).
Narrative Description of Business
The Company's products are designed by in-house staffs. Apparel
division personnel meet regularly with representatives of the Company's
Accessories, Shoe and Jewelry Divisions and the Company's various licensees to
ensure that Liz Claiborne items are coordinated with one another.
Substantially all items in each sportswear collection are sold as
"separates" rather than as ensembles, such as suits. Each collection is
structured, however, through the use of related styles, color schemes and
fabrics, to enable the consumer to assemble outfits consisting of separate
items which are designed to be worn together. By offering similar or related
styles, color schemes and fabrics over an extended period, the Company intends
to provide the consumer with a wardrobe which can be coordinated with other
Company items from season to season.
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The following is a comparison of net sales by product/division for each of the
five fiscal years ended December 31, 1994.
<TABLE>
<CAPTION>
(Dollars in millions)
---------------------
1994 1993 1992 1991 1990
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<S> <C> <C> <C> <C> <C>
Sportswear-Misses . . . . . . . . . . . . $ 772.5 $ 878.0 $ 947.7 $ 903.7 $ 782.4
Sportswear-Petites . . . . . . . . . . . 227.6 253.5 268.5 250.7 216.6
-------- -------- -------- -------- --------
Total Women's Sportswear. . . . . . 1,000.1 1,131.5 1,216.2 1,154.4 999.0
Accessories . . . . . . . . . . . . . . . 187.3 172.4 144.9 129.9 159.4
Retail Specialty Stores . . . . . . . . . 150.0 114.4 92.9 77.4 58.7
Outlet Stores . . . . . . . . . . . . . . 140.1 122.4 113.9 84.7 62.1
Elisabeth . . . . . . . . . . . . . . . . 137.2 143.5 161.0 130.5 53.4
Dresses and Suits . . . . . . . . . . . . 121.9 130.0 171.3 180.3 164.4
Dana Buchman. . . . . . . . . . . . . . . 112.9 90.2 73.5 28.9 16.8
Moderate Sportswear . . . . . . . . . . . 111.6 78.7 21.2* -- --
Men's Sportswear and Furnishings. . . . . 101.7 80.7 94.0 124.6 122.3
Cosmetics . . . . . . . . . . . . . . . . 84.4 88.4 72.7 75.0 73.6
Liz & Co. . . . . . . . . . . . . . . . . 75.8 91.9 96.4 75.9 58.8
Shoes . . . . . . . . . . . . . . . . . . 62.7 55.5 46.4 39.9 13.2*
Jewelry and Watches. . . . . . . . . 30.7 25.0 18.3 6.2 8.6*
Licensing . . . . . . . . . . . . . 3.0 3.0 2.9 2.4 3.5
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2,319.4 2,327.6 2,325.6 2,110.1 1,793.8
Intercompany Sales Elimination. . . . . . (156.5) (123.3) (131.3) (102.9) (64.9)
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Net Sales . . . . . . . . . . . . . $2,162.9 $2,204.3 $2,194.3 $2,007.2 $1,728.9
======== ======== ======== ======== ========
Net Sales by Geographic Areas
Domestic . . . . . . . . . . . . . . . . $2,039.9 $2,091.0 $2,092.5 $1,923.6 $1,672.5
International . . . . . . . . . . . . . . 123.0 113.3 101.8 83.6 56.4
-------- -------- -------- -------- --------
Net Sales . . . . . . . . . . . . . $2,162.9 $2,204.3 $2,194.3 $2,007.2 $1,728.9
======== ======== ======== ======== ========
</TABLE>
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* Partial Year Sales
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During the fourth quarter of 1994, the Company reconfigured its
Misses and Petite sportswear business (formerly managed as one division, the
Women's Sportswear Group) by creating separate divisions, each under its own
management team, for each of the COLLECTION, LIZSPORT and LIZWEAR labels. This
restructuring aims to align each of these product lines more closely with
changing consumer needs and market conditions and to refine the distinctions
among the three divisions in order to enhance product development, focus
selling efforts and reduce product redundancy. Each of these Divisions offers
its products in both the "misses" and petite ranges.
The COLLECTION Division offers polished and professional career
dressing with desk-to-dinner versatility. The products are designed in groups
of coordinated separates to offer consumers a rich variety of possibilities for
creating personalized pulled-together looks.
The LIZSPORT Division offers all-American sportswear with enduring
style and an eye to detail. The products are designed for less formal work
settings and weekends.
The LIZWEAR Division offers casual fashion, featuring denim styles,
a wide range of fashion tops and soft cotton twills.
The Dress Division offers career, office-to-evening and social
occasion and career dresses, as well as suits, under the LIZ CLAIBORNE
trademark in both the "misses" and petite size ranges. This Division commenced
shipment of its LIZ NIGHT line (special occasions) in July 1994 and its LIZ NOW
line (fashion forward) in January 1995.
The Menswear Division offers collection sportswear and furnishings
(dress shirts and ties) which are modern classics under the CLAIBORNE
trademark.
The DANA BUCHMAN Division offers collections for the women's
"bridge" market, the price range between better sportswear and designer
clothing. The Division offers products with distinctive fabrics and detailing,
sophisticated design and value in the "misses" and petite sizes under the
Company's DANA BUCHMAN trademark. During February 1994, this Division began
shipping its first collection of large sizes.
The ELISABETH Division offers large-sized apparel under the
Company's ELISABETH trademark, including classic career looks, weekend wear and
basics. ELISABETH sportswear and dresses are offered in "misses" and petite
proportions.
The LIZ & CO. Division offers sportswear collections of coordinated
knit separates under the Company's LIZ & CO. trademark. During February 1994,
this Division began shipping its first collection in petite sizes.
During 1994, each of the above Divisions presented four to six
seasonal collections.
As part of its component dressing concept, the Company offers
handbags, small leather goods, hats, scarves, belts, socks, and hair
accessories -- primarily under the LIZ CLAIBORNE trademark - which mirror major
fashion trends and complement the Company's sportswear. The Company also
offers bodywear which features workout gear in high performance fabrics.
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In 1994, the Company consolidated its Cosmetic and Jewelry Divisions
under a single management. The Company's cosmetic offerings include fragrance
and bath and body-care products under the LIZ CLAIBORNE, REALITIES, VIVID and
CLAIBORNE FOR MEN trademarks. The Company's jewelry offerings include
collections of fashion jewelry, such as earrings, necklaces, bracelets and
pins, to complement the Company's women's apparel and accessories lines.
During 1994, this Division introduced a line of fashion quartz watches under
the LIZ CLAIBORNE trademark.
In December 1994, the Company announced that it is phasing out of
its FIRST ISSUE retail business. To date, the Company has converted seven
FIRST ISSUE stores to the ELISABETH format and four to the LIZ CLAIBORNE
format. The Company currently plans to close or convert the remaining 66 FIRST
ISSUE locations to ELISABETH stores or other Company-operated retail formats,
with a majority of these closings or conversions planned for 1995. FIRST ISSUE
stores average approximately 3,300 square feet.
The Shoe Division offers its customers dress and casual shoes which
coordinate with its women's LIZ CLAIBORNE apparel collections and accessories.
This Division's shoe offerings include fashion (career and casual) shoes and
leather and canvas sport shoes.
The Moderate Sportswear Division offers updated career and casual
clothing under the RUSS trademark; traditional mainstream sportswear under THE
VILLAGER trademark; and fashion related separates with a jeanswear attitude
under the CRAZY HORSE trademark. These product lines are sold in department
stores, national chains and specialty stores. These product lines represent
the Company's entry into a new market; such entry is accompanied by the risks
inherent in any new business. The lower-priced apparel business requires
methods of operations and marketing strategies different from those employed in
the Company's other businesses. As this business is generally a lower margin
business, the Company must achieve significant cost efficiencies, in part by
using sources of supply different from the Company's sources for other
products. In addition, the buyers and/or store customers for this Division are
different from the Company's traditional buyers and customers. The Company's
competition in this field includes firms with which the Company has not
historically competed. During the fourth quarter of 1994, the Company
consolidated its moderate business operation under a single management.
Sales and Marketing
The Company's wholesale sales are made primarily to department and
specialty store customers throughout the United States. Retail sales are also
made through the Company's retail stores and through outlet stores, as well as
to international customers, direct-mail catalogue companies, military exchanges
and other outlets. During 1994, the Company's international distribution was
expanded to additional markets; at year end, LIZ CLAIBORNE products were being
sold in over 50 markets outside of the United States. In addition, product
offerings in the United Kingdom, Canada and other countries were further
expanded. The Company expects to continue expansion to additional markets,
primarily in Western Europe, Asia and Latin America.
The Company currently operates a total of 51 prototype and
presentational specialty stores which carry exclusively Company products: 29
LIZ CLAIBORNE stores, 21 ELISABETH large-size apparel stores and one DANA
BUCHMAN store. The specialty stores operated under the LIZ CLAIBORNE name are
of two
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different types: an approximately 8,000 - 12,000 square foot store carrying
the full line of LIZ CLAIBORNE women's apparel and related items, and an
approximately 6,000 square foot store aimed at career dressing, carrying
the Company's LIZ CLAIBORNE COLLECTION and LIZSPORT apparel and related items.
ELISABETH stores are approximately 3,300 square feet and carry exclusively
large-size sportswear and dresses under the ELISABETH label. The DANA BUCHMAN
flagship store located in New York City is approximately 2,900 square feet and
carries regular and petite women's apparel, specifically sportswear and
dresses, as well as accessories, under the DANA BUCHMAN label. These stores
enable the Company to closely track sales and other product data, obtain market
information and experiment with new products, visual presentation and new ideas
for enhancing customer service. This information is used to help the Company's
retail store customers and to more quickly respond to consumer preferences.
In a number of international markets, the Company operates leased or
licensed departments or concessions at leading specialty stores, enabling the
Company to better control its image and obtain direct consumer feedback.
Leased departments have developed into the Company's primary method of doing
business in Western Europe. A number of LIZ CLAIBORNE stores and shops operate
in international markets pursuant to retail licenses granted by the Company.
During 1994, additional LIZ CLAIBORNE stores and shops opened in the Far East
and in the Middle East. During 1995, the Company plans to grant additional
store licenses covering new markets.
Approximately 84% of 1994 sales were made to the Company's 100
largest customers. Except for Dillard's Department Stores, Inc., which
accounted for approximately 11% of 1994 and 1993 sales, no single customer
accounted for more than 5% of 1994 or 1993 sales. However, certain of the
Company's customers are under common ownership; when considered together as a
group under common ownership, sales to the 11 department store customers which
were owned at year-end 1994 by The May Department Stores Company accounted for
approximately 17% of 1994 and 18% of 1993 sales, and sales to the three
department store customers which were owned at year-end 1994 by R. H. Macy &
Co., Inc. accounted for approximately 7% of 1994 sales and 8% of 1993 sales.
Sales to the seven department store customers which were owned at year-end 1994
by Federated Stores, Inc. accounted for approximately 9% of 1994 and 8% of 1993
sales. Subsequent to December 31, 1994, R. H. Macy & Co., Inc. and Federated
Stores, Inc. merged to become a single corporate group which would have
accounted for 16% of 1994 and 1993 sales. See Note 7 of the Notes to
Consolidated Financial Statements. Many major department store groups have
centralized buying decisions; accordingly, any material change in the Company's
relationship with any such group could have a material adverse effect on the
Company's operations. The Company expects that its 100 largest customers will
continue to account for a great majority of its sales.
Sales to the Company's department and specialty store customers are
made primarily through the Company's New York City showrooms.
Orders from the Company's apparel and accessories customers
generally precede the related shipping periods by several months. The Company
has implemented and continues to expand a reorder business in several divisions
to enable customers to reorder certain items for quick delivery. See
"Manufacturing". The Company's largest customers discuss with the Company
retail trends and their plans regarding their anticipated levels of total
purchases of Company products for future seasons. These discussions are
intended to assist the Company in planning the production and timely delivery
of its products. The Company continually monitors retail sales in order to
assess directly consumer response to its products.
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The Company maintains cooperative advertising programs under which
it will generally share the costs of its customers' advertising and promotional
expenditures, up to a stated percentage of a customer's purchases. The Company
incurred costs under these cooperative advertising programs of approximately
$43 million in respect of 1994 sales. In addition to cooperative advertising,
the Company spent approximately $7 million in 1994 on institutional advertising
including the Company's national advertising campaign covering all LIZ
CLAIBORNE products and the Company's advertising campaigns for its various
fragrances.
The Company currently operates 70 outlet stores in "outlet centers"
comprised primarily of manufacturer-operated stores. These stores generally
offer surplus and prior seasons' merchandise; certain stores offer only
irregular merchandise. The Company anticipates opening additional outlet
stores during 1995.
Manufacturing
The Company does not own any product manufacturing facilities; all
of its products are manufactured in accordance with its specifications through
arrangements with independent suppliers.
A very substantial portion of the Company's sales is represented by
products produced abroad, primarily in the Far East. The Company does not
itself own quota and therefore must obtain quota from its suppliers and
vendors. During 1994, the Company's apparel and apparel related products were
manufactured by over 700 suppliers, of which approximately 250 were domestic
suppliers, and the balance of which were located in over 50 different
countries, mainly in China, South Korea, Sri Lanka, Hong Kong and Indonesia.
The Company continually seeks additional suppliers throughout the world for its
sourcing needs. The Company's largest supplier of finished products
manufactured less than 5% of the Company's purchases of finished products
during 1994. Approximately 24% of the Company's 1994 purchases of finished
products were manufactured by its ten largest suppliers, as compared to 22% of
1993 purchases. The Company's purchases from its suppliers are effected
through individual purchase orders specifying the price and quantity of the
items to be produced. Generally, the Company does not have any long-term,
formal arrangements with any of the suppliers which manufacture its products.
The Company believes that it is the largest customer of many of its
manufacturing suppliers and considers its relations with such suppliers to be
satisfactory.
The Company obtains fabrics, trimmings and other materials used in
its apparel and accessories products in bulk from various suppliers. During
1994, the raw materials used in Company products was purchased from
approximately 800 suppliers, approximately 500 of which were located abroad,
primarily in Hong Kong, Italy, South Korea and Japan. Approximately 25% of the
Company's expenditures for raw materials during 1994 were accounted for by its
five largest raw material suppliers, as compared to 29% of 1993 purchases, with
no single raw material supplier accounting for more than 7% of 1994 raw
material expenditures. Generally, the Company does not have any long-term,
formal arrangements with any supplier of raw materials. The Company owns a 50%
interest in a joint venture which supplies certain domestically dyed and
finished fabrics and the Company is currently analyzing its options with
respect to this venture. To date, the Company has experienced little difficulty
in satisfying its raw material requirements and considers its sources of supply
adequate.
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The Company operates under substantial time constraints in producing
each of its collections. See "Sales and Marketing". In order to deliver, in a
timely manner, merchandise which reflects current tastes, the Company attempts
to schedule a substantial portion of its materials and manufacturing
commitments relatively late in the production cycle, thereby favoring suppliers
able to make quick adjustments in response to changing production needs.
However, in order to secure necessary materials and manufacturing facilities,
the Company must make substantial advance commitments, often as much as seven
months prior to the receipt of firm orders from customers for the items to be
produced. Many of these early commitments are made subject to changes in
respect of colors, assortments, sizes and/or delivery dates. The Company has
implemented a number of initiatives designed to reduce the time required to
move a product from design to the sales floor.
The Company is planning forward merchandise commitments on a
conservative basis, particularly for its COLLECTION, LIZSPORT and LIZWEAR
Divisions. If the Company should misjudge its ability to sell its products, it
could be faced with substantial outstanding fabric and/or manufacturing
commitments, resulting in excess merchandise inventories. The Company was left
with significant excess merchandise inventory positions during 1993 and into
the first half of 1994 due to the Company's increased 1993 commitments compared
to 1992 and the decreased demand for certain of the Company's apparel at
retail.
The Company's arrangements with foreign suppliers are subject to the
risks of doing business abroad, including currency fluctuations and
revaluations, restrictions on the transfer of funds and in certain parts of the
world, political instability. The Company's operations have not been
materially affected by any of such factors to date. However, due to the large
portion of the Company's products which are produced abroad, any substantial
disruption of its relationships with its foreign suppliers could adversely
affect the Company's operations.
Import and Import Restrictions
Virtually all of the Company's merchandise imported into the United
States is subject to United States duties. In addition, bilateral agreements
between the major exporting countries and the United States impose quotas that
limit the amount of certain categories of merchandise that may be imported into
the United States. The majority of such agreements contain "consultation"
clauses which allow the United States, under certain circumstances, to impose
unilateral restrictions on the importation of certain categories of merchandise
that are not subject to specified limits under the terms of an agreement.
These bilateral agreements have been negotiated under the framework of the
Multi Fiber Arrangement ("MFA"), which has been in effect since 1974. The
United States has recently concluded international negotiations known as the
"Uruguay Round" in which a variety of trade matters were reviewed and modified.
Legislation to enact and implement the various agreements of the Uruguay Round
was ratified by Congress and became effective January 1, 1995. This includes
the Uruguay Round Agreement on Textiles and Clothing which requires World Trade
Organization Member countries to phase out textile and apparel quotas in three
stages over a ten year period. In addition, it regulates trade in
non-integrated textile and apparel quotas during the ten year transition
period. However, even with respect to integrated textile and apparel quota
categories, the United States remains free to establish numerical restraints in
response to a particular product being imported in such increased quantities as
to cause (or threaten) serious damage to the relevant domestic industry. The
U. S. legislation implementing the
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Uruguay Round also changes the rule of origin for many textiles and apparel
products effective July 1, 1996, with certain minor exceptions. This change
would determine country of origin based on "assembly" for most textile and
apparel products. The Uruguay Round also incorporates modest duty reductions
for textile and apparel products over a ten year staging schedule. This will
likely result in a modification of current patterns of international trade with
respect to apparel and textiles. In addition, there are various United States
initiatives pending concerning the trading status of certain countries, which,
if enacted, would likely increase the cost of doing business in such countries.
(See "Item 7. -- Management's Discussion and Analysis of Financial Condition
and Results of Operations".)
In addition, each of the countries in which the Company's products
are sold have laws and regulations regarding import restrictions and quotas.
Because the United States and other countries in which the Company's products
are manufactured and sold may, from time to time, impose new quotas, duties,
tariffs, surcharges or other import controls or restrictions, or adjust
presently prevailing quota allocations or duty or tariff rates or levels, the
Company maintains a program of intensive monitoring of import and quota-related
developments. The Company seeks continually to minimize its potential exposure
to import and quota-related risks through, among other measures, allocation of
production to merchandise categories that are not subject to quota pressures,
adjustments in product design and fabrication, shifts of production among
countries and manufacturers, and otherwise, as well as through geographical
diversification of its sources of supply.
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 textile agreements, could adversely affect the Company's
operations.
Trademarks
The Company utilizes a variety of trademarks on its products,
including LIZ CLAIBORNE, LIZ, CLAIBORNE, LIZWEAR, LIZSPORT, LIZ LIZ CLAIBORNE,
LIZ LIZWEAR, LIZ LIZSPORT, LIZ CLAIBORNE COLLECTION, LIZ NOW, LIZ NIGHT, its
triangular logomark, DANA BUCHMAN, ELISABETH, LIZ & CO., REALITIES, RUSS, THE
VILLAGER, CRAZY HORSE, VIVID and FIRST ISSUE. The Company has registered or
applied for registration of a multitude of trademarks for use on apparel and
apparel-related products, including accessories, cosmetics, shoes and jewelry
in the United States as well as a great many foreign territories. The Company
also has a number of design patents. The Company regards its trademarks and
other proprietary rights as valuable assets and believes that they have
significant value in the marketing of its products. The Company vigorously
protects its trademarks and other intellectual property rights against
infringement.
Licensing
The Company has five license agreements pursuant to which third
party licensees produce merchandise under the Company's trademarks in
accordance with designs furnished or approved by the Company. The present
terms of these agreements (exclusive of renewal terms) expire at various dates
through 2000. Current licenses cover women's dress hosiery; women's and men's
sunglasses and readers; women's and men's ophthalmic frames for prescription
eyewear; home furnishing products (added in 1994, with the first collections
shipped in the
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first quarter of 1995) and men's tailored clothing (added in 1994, with the
first collections expected to be offered for the fall of 1995). Each of the
licenses provides for the payment to the Company of a percentage of the
licensee's net sales of the licensed products against a guaranteed minimum
royalty which generally increases over the term of the agreement.
Competition
The apparel and related product markets are highly competitive, both
within the United States and abroad.
The Company believes that an ability to effectively anticipate,
gauge and respond to changing consumer demands and tastes relatively far in
advance as well as an ability to operate within substantial production and
delivery constraints (see "Manufacturing") are necessary to compete
successfully in this field. Consumer and customer acceptance and support,
which depend upon styling, quality (both in material and production), pricing
and product identity, are also important aspects of competition. The Company
believes that its continued success will depend upon its ability to remain
competitive in these areas.
The Company believes that, based on sales, it is among the largest
apparel companies operating in the United States. Although the Company is
unaware of any comprehensive trade statistics, it believes, based on its
knowledge of the market and available trade information, that measured by
sales, it is the largest "better" women's sportswear and dress company in the
United States.
Employees
At December 31, 1994, the Company had more than 8,000 full-time
employees, as compared with approximately 7,900 full-time employees at December
25, 1993, representing an increase of approximately 500 employees in the
Company's retail and outlet operations, offset by a decrease in other areas.
As a member of a manufacturers' association, the Company is bound by
collective bargaining agreements with affiliates of the International Ladies'
Garment Workers' Union ("ILGWU") covering, at December 31, 1994, approximately
1,912 of the Company's full-time United States and Canadian apparel, cosmetics
and shoe employees. These collective bargaining agreements expire on various
dates through 1997. The Company is also bound by a collective bargaining
agreement with a unit of the Amalgamated Clothing and Textile Workers of
America ("ACTWA") covering, at December 31, 1994, approximately 162 of the
Company's full-time Accessories Division employees; this agreement expires in
September 1997. The ILGWU and ACTWA have publicly announced that, subject to
ratification by their membership, they will merge into a single union in 1995.
The Company considers its relations with its employees to be
satisfactory and has not experienced any interruption of operations due to
labor disputes.
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Item 2. Properties.
The Company's showrooms, sales, merchandising and design staffs, as
well as its executive offices, are located at 1441 Broadway, New York, New
York, where the Company leases approximately 276,000 square feet under a master
lease which expires at the end of 2001 and contains certain renewal options and
rights of first refusal for additional space. The Company currently leases
office space at two other buildings in New York City covering approximately
92,000 and 24,000 square feet (with terms expiring in 1996 and 2003,
respectively).
The Company owns its approximately 453,000 square foot principal New
Jersey warehouse and distribution facility located at One Claiborne Avenue,
North Bergen, New Jersey. This facility also houses the Company's production
and certain other administrative personnel. The Company also owns an
approximately 300,000 square foot office facility at this location which was
completed in 1994. The Company presently leases approximately 1,210,000 square
feet in 8 other New Jersey warehouse facilities, the current terms of which
expire through 2008. The Company also owns an approximately 313,000 square
foot warehouse and distribution facility located on approximately 80 acres in
Mt. Pocono, Pennsylvania. The Company's approximately 270,000 square foot
facility in Augusta, Georgia (located on a 98-acre site), has been leased to a
joint venture comprised of a wholly-owned subsidiary of the Company and an
unrelated third party. This facility is used as a dyeing and finishing
operation. The Company occupies an approximately 290,000 square foot warehouse
and distribution facility located on a 124 acre site in Montgomery, Alabama.
The Company has options to purchase an additional 80 acres adjacent to the
facility. The Company currently is planning to build additional facilities at
this location. The Company is the lessee of the Georgia and Alabama facilities
pursuant to industrial development financing. The Company also leases
showroom, warehouse and office space in various other domestic and
international locations.
The Company leases space for its 117 retail specialty stores
(aggregating approximately 498,000 square feet in various malls) and for 69 of
its outlet stores (aggregating approximately 643,000 square feet). In October
1994, the Company entered into a fifteen year lease for an approximately 14,000
square foot LIZ CLAIBORNE flagship store to be located at 650 Fifth Avenue, New
York, New York. The Company anticipates that the store will open in August
1995.
The Company believes that its existing facilities are well
maintained, in good operating condition and are adequate for its present
level of operations. See Note 7 of the Notes to Consolidated Financial
Statements.
Item 3. Legal Proceedings.
The Company and certain of its officers and directors are parties to
several pending legal proceedings and claims, including an action styled
Ressler et al. vs. Liz Claiborne, Inc., et al., pending in the United States
District Court for the Eastern District of New York. The plaintiffs seek
compensatory damages on behalf of a class of purchasers of the Company's Common
Stock during the period commencing September 21, 1992 through and including
July 16, 1993, and allege that the defendants violated the federal securities
laws by, among other things, making misrepresentations or omissions of material
facts that artificially inflated the market price of the Common Stock during
the class period. An earlier-filed lawsuit before the same court as Ressler,
styled Fishbaum vs. Chazen, et. al., made allegations similar to the Ressler
complaint and sought damages on behalf of a class of purchasers of the
company's Common Stock for the period commencing March 30, 1993, through and
including July 16,
- 11 -
<PAGE> 12
1993. An amended complaint was filed in the Ressler action in May 1994 to add
Fishbaum as a plaintiff. In June 1994, the court granted the Company's motion
to dismiss the Fishbaum complaint, with leave to amend, on the grounds that the
complaint did not adequately set forth the requisite element of scienter. In
July 1994, the Company moved to dismiss the Ressler complaint.
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 of Delaware against the Company's directors and two
former Vice Chairmen. The complaints contain allegations of breach by the
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 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. In July 1994, the Laz Schneider action was
consolidated into the Goldberg action. In August 1994, the defendants moved to
dismiss the consolidated complaint.
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 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
Executive Officers of the Registrant.
Information as to the executive officers of the Company is set forth below:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Jerome A. Chazen 68 Chairman of the Board
Paul R. Charron 52 Vice Chairman of the Board and Chief Operating Officer
Samuel M. Miller 57 Senior Vice President - Finance, Chief
Financial and Accounting Officer
John R. Thompson 43 Senior Vice President - Service, Systems and
Reengineering and Chief Information Officer
</TABLE>
- 12 -
<PAGE> 13
Executive officers serve at the discretion of the Board of Directors.
Mr. Chazen has served in various senior executive positions and as a
Director of the Company since 1977. In 1985, he was elected Co-Chairman of the
Board of the Company, and became Vice Chairman of the Board in 1987. In 1989,
Mr. Chazen became Chairman of the Board. Mr. Chazen also serves on the board
of directors of Taubman Centers, Inc., an owner and operator of regional
shopping centers.
Mr. Charron joined the Company as Vice Chairman and Chief Operating
Officer, and became a Director, in May 1994. Effective May 1995, he will
become President and Chief Executive Officer. Prior to joining the Company, he
served as Executive Vice President of VF Corporation, an apparel manufacturer,
from 1993, and as a Group Vice President of VF Corporation from 1988 to 1993.
Mr. Miller, a certified public accountant, joined the Company in
1988 as Senior Vice President - Finance (Chief Financial and Accounting
Officer) after more than sixteen years in various senior financial positions
within the apparel industry.
Mr. Thompson joined the Company in February 1995 as Senior Vice
President of Service, Systems and Reengineering and Chief Information Officer.
Prior to joining the Company, Mr. Thompson served as Executive Vice President
for Business Systems/Logistics and Chief Information Officer of Goody's Family
Clothing, Inc., an apparel retailer, from 1993 to 1995. From 1991 to 1993, Mr.
Thompson was Vice President Business Systems and Management Information Systems
for Lee Apparel Company, an apparel manufacturer. Mr. Thompson also served as
Executive Vice President and Chief Information Officer of Quick Response
Services, Inc., an information management services company, from 1987 to 1991.
- 13 -
<PAGE> 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company's Common Stock trades on the New York Stock Exchange
("NYSE") under the symbol LIZ. The table below sets forth the high and low
closing sales prices of the Common Stock (based on the NYSE composite tape) for
the periods indicated.
<TABLE>
<CAPTION>
Calendar Period High Low
--------------- ---- ---
<S> <C> <C>
1994:
1st Quarter 24 1/8 20 1/2
2nd Quarter 26 1/4 19 7/8
3rd Quarter 23 5/8 20 1/4
4th Quarter 24 1/8 15 5/8
1993:
1st Quarter 42 3/8 32 3/4
2nd Quarter 37 1/4 30
3rd Quarter 31 1/2 19 3/4
4th Quarter 24 1/4 18 1/8
</TABLE>
On March 24, 1995, the closing sale price of the Common Stock on the
NYSE was $17 and the approximate number of record holders of Common Stock was
13,980.
The Company has paid regular quarterly cash dividends since May
1984. Quarterly dividends for the last two fiscal years were paid as follows:
<TABLE>
<CAPTION>
Calendar Period Dividends Paid per Common Share
--------------- -------------------------------
<S> <C>
1994:
1st Quarter $.1125
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
1993:
1st Quarter $ .10
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
</TABLE>
The Company plans to continue paying quarterly cash dividends on its
Common Stock. The amount of any such dividend will depend on the Company's
earnings, financial position, capital requirements and other relevant factors.
- 14 -
<PAGE> 15
In December 1989, the Board of Directors first authorized the
repurchase, as market and business conditions warranted, of the Company's
Common Stock for cash in open market purchases and privately negotiated
transactions. From time to time thereafter, the Board has authorized
additional repurchases. As of March 6, 1995, the Company had expended or
committed to expend approximately $429 million of the $450 million authorized
under this stock repurchase program, covering an aggregate of 16,105,000
shares.
Item 6. Selected Financial Data.
The following table sets forth certain information regarding the
Company's operating results and financial position and is qualified in its
entirety by the consolidated financial statements and notes thereto which
appear elsewhere herein:
(All dollar amounts in thousands except per common share data)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ 2,162,901 $ 2,204,297 $ 2,194,330 $ 2,007,177 $ 1,728,868
Gross profit 755,207 750,916 830,116 799,675 698,033
Net income 82,849* 126,924** 218,824 222,748 205,800
Working capital 719,132 750,001 832,789 763,851 608,718
Total assets 1,289,662 1,236,338 1,256,308 1,170,645 984,505
Long-term debt
excluding
current portion 1,227 1,334 1,434 1,615 15,131
Stockholders'
equity 982,984 978,291 997,775 909,599 713,149
Earnings per
common share 1.06* 1.56** 2.61 2.61 2.37
Book value at
year-end 12.77 12.41 12.05 10.67 8.39
Dividends paid
per common share .45 .44 .39 .33 .24
Weighted average
common shares
outstanding 78,526,724 81,509,120 83,965,342 85,457,204 86,783,880
</TABLE>
________________________________________________________________________________
* Includes the after tax effect of a restructuring charge of $18,900 ($30,000
pretax) or $.24 per common share in 1994.
** Includes a credit representing the cumulative effect of a change in the
method of accounting for income taxes of $1,643 or $.02 per common share in
1993.
- 15 -
<PAGE> 16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The following table sets forth items in the Consolidated Statements of Income
as a percent of net sales and the percentage change of those items as compared
to the prior year.
<TABLE>
<CAPTION>
PERCENT OF NET YEAR TO YEAR
SALES PERCENTAGE CHANGE
--------------------------------------------------------------------------------------------------------------------------
1994 VS. 1993 VS.
FISCAL YEARS 1994 1993 1992 1993 1992
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% (1.9)% 0.5%
Cost of goods sold 65.1 65.9 62.2 (3.1) 6.5
----- ----- -----
GROSS PROFIT 34.9 34.1 37.8 0.6 (9.5)
Selling, general and
administrative expenses 27.9 25.8 23.1 6.4 12.0
Restructuring charge 1.4 -- -- -- --
----- ----- -----
OPERATING INCOME 5.6 8.3 14.7 (33.9) (43.4)
Investment and other
income-net .5 .7 .9 (34.0) (16.5)
----- ----- -----
INCOME BEFORE PROVISION
FOR INCOME TAXES AND
CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING
PRINCIPLE 6.1 9.0 15.6 (33.9) (41.9)
Provision for income
taxes 2.3 3.3 5.6 (33.9) (40.3)
----- ----- -----
INCOME BEFORE CUMULATIVE
EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 3.8 5.7 10.0 (33.9) (42.7)
Cumulative effect of a change
in the method of accounting for
income taxes -- 0.1 -- -- --
----- ----- -----
NET INCOME 3.8% 5.8% 10.0% (34.7) (42.0)
===== ===== =====
</TABLE>
- 16 -
<PAGE> 17
RESULTS OF OPERATIONS
continued
The Company's net sales for 1994 (53 weeks) were $2.16 billion,
compared to $2.20 billion in 1993 (52 weeks) and $2.19 billion in 1992 (52
weeks). The 1994 decrease reflected a 12% decline in the net sales of Misses
and Petite COLLECTION, LIZSPORT and LIZWEAR products (collectively,
"Sportswear"), to $1.00 billion, primarily resulting from substantially lower
average unit prices due to weakness in demand for Sportswear, the liquidation
during the first half of significant prior year excess inventory at distressed
prices and changes in product mix. The net sales result also reflected an 18%
decline in LIZ & CO. sales, to $76 million, due primarily to lower unit volume.
These decreases were partially offset by a 42% increase in the sales of the
Moderate Division, to $112 million, a 26% increase in menswear sales, to $102
million, and a 25% increase in DANA BUCHMAN sales, to $113 million. These
increases primarily reflected higher unit volume, although more than half of
the menswear increase was due to higher average unit prices as a result of a
higher proportion of regular price sales. In addition, sales of the Company's
domestic retail stores and international retail operations (collectively, the
"Retail Operations") increased 31%, to $150 million, due to the opening of new
domestic retail stores (113 at 1994 year end compared with 78 at 1993 year end)
as well as the conversion of most of the Company's European business from a
wholesale to a leased department operation. The Company's FIRST ISSUE retail
stores accounted for $64 million of the Retail Operations' 1994 sales, as
compared with $51 million in 1993; the Company has announced that it is phasing
out of the FIRST ISSUE business and currently plans to close or convert these
locations to ELISABETH or other Company- operated retail formats. Sales of the
Company's outlet stores increased 14% to $140 million, due to the opening of
new stores (70 at 1994 year end compared with 61 at 1993 year end). The 1994
and 1993 results also reflected the delay of certain shipments of 1994 Spring
season merchandise into 1994. The 1993 net sales results primarily reflected
the inclusion of full year results of the Moderate Division acquired in May
1992, higher unit volume within the Accessories and DANA BUCHMAN Divisions, as
well as the introduction of the Company's third women's fragrance, VIVID,
offset by decreases across the Company's remaining wholesale apparel
operations. These decreases, primarily in Sportswear, reflected substantially
lower average unit selling prices, as the Company was required to liquidate
significant excess inventory positions and also continued to lower initial
selling prices.
Gross profit expressed as a percentage of net sales was 34.9% in
1994, compared to 34.1% in 1993 and 37.8% in 1992. Gross profit dollars
increased slightly in 1994, reflecting an improvement in the overall gross
profit percentage from last year's depressed level, on a slightly lower sales
base. Margins were negatively impacted throughout the year by the highly
promotional retail environment. While Sportswear gross margins showed some
improvement, notwithstanding the liquidation during the first half of
significant excess prior year inventory, volume declines resulted in lower
gross profit dollars. Margin percentages of the Menswear and Dress Divisions
improved from depressed prior period levels, due to a higher proportion of
regular price sales. Also contributing to the margin improvement were the
higher proportion of the Company's net sales represented by the Retail
Operations and the DANA BUCHMAN and Accessories Divisions (which are all
generally higher margin businesses). These increases were offset by severely
depressed margins within the Moderate Division (which is a lower margin
business) due to a very low proportion of regular price sales, and the higher
proportion of the Company's sales represented by this Division. In addition,
margins declined in the Cosmetics Division, reflecting weak demand and changes
in product mix, and in the ELISABETH Division, reflecting a lower proportion of
regular price sales due primarily to the liquidation of
- 17 -
<PAGE> 18
RESULTS OF OPERATIONS
continued
excess prior year inventory. The 1993 margin decline reflected margin erosion
across substantially all wholesale apparel divisions, principally due to a
lower proportion of regular price sales within Sportswear and the Dress
Division. Also contributing to the margin decreases were higher markdowns
within the outlets and Retail Operations, contributing to operating losses in
these operations, as well as the higher proportion of net sales represented by
the Moderate Division. The decrease in gross margin was partially offset by
the higher proportion of net sales represented by, and higher margins within,
the Accessories and Cosmetics Divisions (which are generally higher margin
businesses).
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 1994 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.
Selling, general and administrative expenses increased by $36
million (6%) in 1994 over 1993 and by $61 million (12%) in 1993 over 1992.
These expenses represented 27.9% of net sales in 1994 as compared to 25.8% in
1993 and 23.1% in 1992. The continued expansion of the Retail Operations
accounted for approximately three-quarters of the 1994 dollar increase. Also
reflected in this dollar increase were the expansion of the Moderate and DANA
BUCHMAN Divisions and outlet operations, partially offset by an overall expense
reduction within the wholesale better-apparel businesses; however, the overall
percentage decrease in the sales of these businesses slightly outpaced their
percentage decrease in expense levels. The 1993 dollar increase in expenses
resulted primarily from the inclusion and expansion of the operations of the
Moderate Division, the continued expansion of the Company's retail and outlet
operations, and increased costs associated with the introduction of the new
VIVID fragrance.
Operating income in 1994 reflected a $30 million charge which was
provided to cover the estimated costs associated with the restructuring of the
Retail Operations and Moderate Division, as well as the Company's strategic
efforts to streamline operating and administrative functions. This charge
included estimated losses on the phase out of the FIRST ISSUE retail business,
the write-off of certain assets, and severance and contract termination costs
(see Note 2 of the Notes to Consolidated Financial Statements). Operating
income was also reduced by continuing losses within the Company's Moderate
Division, Retail Operations and outlets. These losses are expected to continue
into 1995, although at reduced levels.
Investment and other income-net decreased on a year-to-year basis by
$5 million in 1994 and $3 million in 1993. These decreases were due to lower
rates of return realized on the Company's investment portfolio as well as a
decrease in the average portfolio of cash equivalents and marketable securities
reflecting in part the Company's stock repurchase program.
- 18 -
<PAGE> 19
RESULTS OF OPERATIONS
continued
As a result of the factors described above, the Company's income
before provision for income taxes and cumulative effect of a change in
accounting principle expressed as a percentage of net sales was 6.1% in 1994,
compared to 9.0% in 1993 and 15.6% in 1992. The provision for income taxes
expressed as a percentage of net sales was 2.3% in 1994, 3.3% in 1993 and 5.6%
in 1992, reflecting the changes in pre-tax income and the 1993 increase in
federal statutory rates.
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 year 1993. The
cumulative effect on prior years of this accounting change is reflected in the
consolidated statements of income as a one-time increase in 1993 net income of
$1.6 million, or $.02 per common share. The effects of this change are
discussed in the accompanying Notes to Consolidated Financial Statements.
Net income expressed as a percentage of net sales was 3.8% in 1994,
compared with 5.8% in 1993 and 10.0% in 1992. The 1994 and 1993 decreases were
due primarily to lower operating margins and lower investment and other
income-net, offset in part by a lower provision for income taxes. The 1994
decrease also reflected the restructuring charge discussed above, which reduced
after tax net income by $19 million.
The earnings per common share computations reflected a lower number
of outstanding shares on a period-to-period basis as a result of the Company's
stock repurchase program.
The tone of business remains mixed, and the Company is continuing to
plan forward merchandise commitments on a conservative basis, particularly for
Sportswear.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities was $173 million in 1994,
compared to $120 million in 1993 and $132 million in 1992. The 1994 increase
was due primarily to a decrease in inventory levels in 1994 compared to an
increase in 1993 and a larger increase in accrued expenses in 1994 (including
accruals associated with the restructuring charge), offset in part by lower net
income. The 1993 decrease was attributable to lower net income, offset by a
decrease in accounts receivable. Net cash used in investing activities was
$131 million in 1994, compared to net cash provided by investing activities of
$1 million in 1993 and net cash used by investing activities of $55 million in
1992. The fluctuations of net cash used in or provided by investing activities
is related to the increase or decrease in marketable securities and capital
expenditures on a year-to-year basis. Net cash used in financing activities
was $75 million in 1994, compared to $148 million in 1993 and $134 million in
1992. The decrease in 1994 reflected a $77 million reduction in the amount
expended in the Company's stock repurchase program. The increase in 1993
reflected a $9 million reduction in proceeds from the exercise of common stock
options. The decrease in 1994 year end inventory levels over the prior year
end reflected a decrease in excess wholesale apparel inventories, offset in
part by the expansion of an in-stock reorder program in several divisions. The
existence of excess inventory, which takes additional time to liquidate, in the
first half of 1994 had a negative impact on the Company's inventory turnover
rate and gross profit margin during the year.
- 19 -
<PAGE> 20
RESULTS OF OPERATIONS
continued
As of March 6, 1995, the Company had expended or committed to expend
approximately $429 million of the $450 million authorized under its stock
repurchase program, covering an aggregate of 16,105,000 shares.
The Company's anticipated capital expenditures for 1995 currently
approximate $5O million. These expenditures consist primarily of certain
building and equipment expenses, including expansion of the Company's Alabama
distribution facility, leasehold improvements of new stores and leased
departments for the Company's Retail Operations, and the upgrading of data
processing systems. These expenditures will be financed through available
capital and future earnings. Any 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 decreased by the Company from $440
million at December 25, 1993 to $282 million at December 31, 1994 to reduce
excess lines. The Company expects to be able to adjust these lines as
required.
INFLATION
The moderate rate of inflation over the past few years has not had a
significant impact on the Company's sales and profitability.
Item 8. Financial Statements and Supplementary Data.
Information called for by this Item 8 is included following the
"Index to Consolidated Financial Statement Schedules" appearing at the end of
this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
- 20 -
<PAGE> 21
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information with respect to Executive Officers of the Company is set
forth in Part I of this Annual Report on Form 10-K.
Information with respect to Directors of the Company which is called
for by this Item 10 is incorporated by reference to the information set forth
under the heading "Election of Directors" in the Company's Proxy Statement
relating to its 1995 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A (the "Company's 1995 Proxy Statement").
Item 11. Executive Compensation.
Information called for by this Item 11 is incorporated by reference
to the information set forth under the heading "Executive Compensation" in the
Company's 1995 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information called for by this Item 12 is incorporated by reference
to the information set forth under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in the Company's 1995
Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Information called for by this Item 13 is incorporated by reference
to the information set forth under the headings "Election of Directors" and
"Certain Relationships and Related Transactions" in the Company's 1995 Proxy
Statement.
- 21 -
<PAGE> 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
<TABLE>
<CAPTION>
PAGE REFERENCE
--------------
1994 FORM 10-K
--------------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets of December 31, 1994
and December 25, 1993 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 31, 1994 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 31, 1994 F-5
Consolidated Statements of Cash Flows for the
Three Fiscal Years Ended December 31, 1994 F-6
Notes to Consolidated Financial Statements F-7 to F-17
UNAUDITED QUARTERLY RESULTS F-18
</TABLE>
NOTE: Schedules other than those referred to above and parent
company condensed financial statements have been omitted as
inapplicable or not required under the instructions contained
in Regulation S-X or the information is included elsewhere in
the financial statements or the notes thereto.
- 22 -
<PAGE> 23
3. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C> <C>
3(a) - Restated Certificate of Incorporation of Registrant
(incorporated herein by reference from Exhibit 3(a) to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 26, 1993).
3(b) - By-laws of Registrant, as amended (incorporated herein by
reference from Exhibit 3(b) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 26, 1992 [the
"1992 Annual Report"]).
4(a) - Specimen certificate for Registrant's Common Stock, par value
$1.00 per share (incorporated herein by reference from Exhibit
4(a) to the 1992 Annual Report).
4(b) - Rights Agreement, dated December 7, 1988, as amended, between
Registrant and First Chicago Trust Company of New York, as
Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d) to
Registrant's Report on Form 8-A dated January 29, 1991).
4(b)(i) - Amendment to Rights Agreement, dated March 1990, between
Registrant and First Chicago Trust Company of New York, as
Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d)(i) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 30, 1989 [the "1989 Annual Report"]).
4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992,
between Registrant and First Chicago Trust Company of New York,
as Rights Agent (incorporated herein by reference from Exhibit
4(b)(ii) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991 [the "1991 Annual Report"]).
10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder,
which are incorporated herein by this reference.
10(b)+ - Liz Claiborne, Inc. 1981 Stock Option Plan (incorporated herein
by reference from Exhibit 10(p) of Registrant's Registration
Statement on Form S-1, Registration No. 2-71806, in the form
it was declared effective).
10(b)(i)+ - Amendment to the 1981 Stock Option Plan (incorporated herein by
reference from Exhibit 10(b)(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988
[the "1988 Annual Report"]).
</TABLE>
----------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 23 -
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C> <C>
10(c)+ - Amended form of Option Agreement under Liz Claiborne, Inc. 1981
Stock Option Plan (incorporated herein by reference from
Exhibit 10(q) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 26, 1981).
10(d)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated
herein by reference from Exhibit 10(hh) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1983
[the "1983 Annual Report"]).
10(d)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein
by reference from Exhibit 10(d)(i) to the 1988 Annual Report).
10(e)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock
Option Plan (the "1984 Option Plan") (incorporated herein by
reference from Exhibit 10(nn) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 1984).
10(e)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan
(incorporated herein by reference from Exhibit 10(e)(i) to the
1992 Annual Report).
10(f)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended
and restated (incorporated herein by reference from Exhibit
10(f) to the 1989 Annual Report).
10(f)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz
Claiborne, Inc. and IDS Trust Company (incorporated herein by
reference from Exhibit 10(b) to Registrant's Quarterly Report
on Form 10-Q for the period ended July 2, 1994).
10(g)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein
by reference from Exhibit 10(g) to the 1992 Annual Report).
10(g)(i)+ - Amendments Nos. 3 and 4 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 26, 1993
[the "1993 Annual Report"]).
10(g)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended July 2, 1994).
10(h)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement
Plan (the "Profit-Sharing Plan") (incorporated herein by
reference from Exhibit 10(h) to the 1992 Annual Report).
10(i) - Trust Agreement related to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(jj) to the
1983 Annual Report).
</TABLE>
---------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 24 -
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<S> <C> <C>
10(i)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(i)(i) to the 1993 Annual
Report).
10(i)(ii) - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein
by reference from Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for the period ended October 1, 1994).
10(j) - Collective Bargaining Agreement, dated June 1, 1991, between
New York Skirt and Sportswear Association, Inc. (of which
Registrant is a member) and International Ladies' Garment
Workers' Union, Amalgamated Ladies' Garment Cutters' Union,
Local 10, I.L.G.W.U. and Blouse, Skirt and Sportswear Workers'
Union, Local 23-25, I.L.G.W.U (incorporated herein by reference
from Exhibit 10(j) to the 1992 Annual Report).
10(k) - Collective Bargaining Agreement, dated September 1, 1991,
between the Joint Board of Shirt, Leisurewear, Robe, Glove and
Rainwear Workers Union of Amalgamated Clothing Workers of
America and Liz Claiborne Accessories (incorporated herein by
reference from Exhibit 10(k) to the 1991 Annual Report).
10(l)* - Executive Liability and Indemnification Policy No. 81035379F,
with Chubb Group of Insurance Companies.
10(l)(i)* - Description of Excess Coverage Directors and Officers
Liability Insurance Policy No. ZKA9400406, with Lloyds of
London.
10(m)+* - Description of 1994 Salaried Employee Incentive Bonus Plan.
10(n) - Lease, dated as of January 1, 1990 for premises located at 1441
Broadway, New York, New York between Liz Claiborne, Inc. and
Lechar Realty Corp. (incorporated herein by reference from
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 1990).
10(o)+ - Liz Claiborne, Inc. Outside Directors' 1991 Stock Ownership
Plan (the "Directors Plan") (incorporated herein by reference
from Exhibit 10(o) to the 1991 Annual Report).
10(o)(i)+ - Amendment No. 1 to the Directors Plan (incorporated herein by
reference from Exhibit 10(o)(i) to the 1993 Annual Report).
10(p)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan")
(incorporated herein by reference from Exhibit 10(p) to the
1991 Annual Report).
</TABLE>
---------------------------------------------------------------------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 25 -
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<S> <C> <C>
10(p)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by
reference from Exhibit 10(p)(i) to the 1993 Annual Report).
10(q)+ - Form of Option Agreement under the 1992 Plan for premium-priced
options (incorporated herein by reference from Exhibit 10(q)
to the 1992 Annual Report).
10(r)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(s)+ - Description of unfunded deferred compensation arrangement for
Jerome A. Chazen (incorporated herein by reference from
Exhibit 10(s) to the 1992 Annual Report).
10(t)+* - Description of Supplemental Life Insurance Plans (incorporated
herein by reference from Exhibit 10(t) to the 1993 Annual
Report).
10(u)+ - Description of unfunded death/disability benefits for certain
executives (incorporated herein by reference from Exhibit 10(u)
to the 1992 Annual Report).
10(v)+* - Form of the Liz Claiborne Section 162(m) Cash Bonus Plan.
10(w)+* - Liz Claiborne Supplemental Executive Retirement Plan.
10(x)+ - Employment Agreement dated as of May 9, 1994, between Liz
Claiborne, Inc. and Paul R. Charron (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended April 2, 1994).
10(y)+* - Agreement dated as of January 2, 1995, between Liz Claiborne,
Inc. and Harvey Falk
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
28* - Undertakings.
</TABLE>
(b) Reports on Form 8-K.
Not applicable.
---------------------------------------------------------------------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 26 -
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
on March 30, 1995.
LIZ CLAIBORNE, INC.
By /s/Samuel M. Miller
---------------------------------
Samuel M. Miller,
Senior Vice President-Finance/
Principal Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant and in the capacities indicated, on March 30, 1995.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/Jerome A. Chazen Chairman of the Board, Principal Executive
------------------- Officer and Director
Jerome A. Chazen
/s/Paul R. Charron Vice Chairman of the Board, Chief Operating
------------------ Officer and Director
Paul R. Charron
/s/Lee Abraham
--------------
Lee Abraham Director
/s/Leonard Boxer
----------------
Leonard Boxer Director
/s/Ann M. Fudge
---------------
Ann M. Fudge Director
/s/J. James Gordon
------------------
J. James Gordon Director
/s/Sherwin Kamin
----------------
Sherwin Kamin Director
/s/Kay Koplovitz
----------------
Kay Koplovitz Director
/s/Louis Lowenstein
-------------------
Louis Lowenstein Director
</TABLE>
- 27 -
<PAGE> 28
INDEX
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
December 31, 1994 and December 25, 1993 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 31, 1994 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 31, 1994 F-5
Consolidated Statements of Cash Flows
for the Three Fiscal Years Ended December 31, 1994 F-6
Notes to Consolidated Financial Statements F-7 to F-17
UNAUDITED QUARTERLY RESULTS F-18
</TABLE>
NOTE: Schedules other than those referred to above and parent
company condensed financial statements have been omitted as
inapplicable or not required under the instructions contained
in Regulation S-X or the information is included elsewhere in
the financial statements or the notes thereto.
F-1
<PAGE> 29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Liz Claiborne, Inc.:
We have audited the accompanying consolidated balance sheets of Liz Claiborne,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994 and
December 25, 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 31, 1994. These financial statements referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Liz Claiborne, Inc. and
subsidiaries as of December 31, 1994 and December 25, 1993, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
As explained in Note 1 to the consolidated financial statements, effective
December 27, 1992, the Company changed its method of accounting for income
taxes.
New York, New York
February 20, 1995
F-2
<PAGE> 30
CONSOLIDATED BALANCE SHEETS
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
ALL AMOUNTS IN THOUSANDS EXCEPT SHARE DATA DECEMBER 31, 1994 DECEMBER 25, 1993
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 71,419 $ 104,720
Marketable securities 258,932 204,571
Accounts receivable - trade 159,766 174,435
Inventories 423,003 436,593
Deferred income tax benefits 32,547 15,065
Other current assets 76,864 69,055
---------- ----------
Total current assets 1,022,531 1,004,439
---------- ----------
PROPERTY AND EQUIPMENT - NET 236,560 202,068
OTHER ASSETS 30,571 29,831
---------- ----------
$1,289,662 $1,236,338
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 138,581 $ 141,126
Accrued expenses 156,924 97,765
Income taxes payable 7,894 15,547
---------- ----------
Total current liabilities 303,399 254,438
---------- ----------
LONG-TERM DEBT 1,227 1,334
DEFERRED INCOME TAXES 2,052 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 56,714 56,699
Retained earnings 1,164,850 1,123,413
Cumulative translation adjustment (1,637) (1,279)
---------- ----------
1,308,146 1,267,052
Common stock in treasury, at cost - 11,214,688 shares
in 1994 and 9,371,217 shares in 1993 (325,162) (288,761)
---------- ----------
Total stockholders' equity 982,984 978,291
---------- ----------
$1,289,662 $1,236,338
========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 31
CONSOLIDATED STATEMENTS OF INCOME
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER COMMON SHARE DATA DECEMBER 31, DECEMBER 25, DECEMBER 26,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $2,162,901 $2,204,297 $2,194,330
Cost of goods sold 1,407,694 1,453,381 1,364,214
---------- ---------- ----------
GROSS PROFIT 755,207 750,916 830,116
Selling, general and administrative expenses 604,421 568,286 507,541
Restructuring charge 30,000 -- --
---------- ---------- ----------
OPERATING INCOME 120,786 182,630 322,575
Investment and other income - net 10,663 16,151 19,349
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 131,449 198,781 341,924
Provision for income taxes 48,600 73,500 123,100
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 82,849 125,281 218,824
Cumulative effect of a change in the method
of accounting for income taxes -- 1,643 --
---------- ---------- ----------
NET INCOME $ 82,849 $ 126,924 $ 218,824
========== ========== ==========
EARNINGS PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE $ 1.06 $ 1.54 $ 2.61
Cumulative effect of a change in the method
of accounting for income taxes -- .02 --
---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 1.06 $ 1.56 $ 2.61
========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ .45 $ .44 $ .39
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 32
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Common Stock
----------------------- Capital in Cumulative
Number of Excess of Retained Translation
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment
--------- ------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1991 88,218,617 $88,219 $50,493 $ 854,003 $ --
Net income -- -- -- 218,824 --
Exercise of stock options and
related tax benefits -- -- 5,035 (6,033) --
Cash dividends paid -- -- -- (32,514) --
Translation adjustment -- -- -- -- (1,410)
Purchase of 3,133,837 shares
of common stock -- -- -- -- --
---------- ------- ------- ---------- -------
BALANCE, DECEMBER 26, 1992 88,218,617 88,219 55,528 1,034,280 (1,410)
Net income -- -- -- 126,924 --
Exercise of stock options and
related tax benefits -- -- 1,171 (2,134) --
Cash dividends paid -- -- -- (35,657) --
Translation adjustment -- -- -- -- 131
Purchase of 4,179,800 shares
of common stock -- -- -- -- --
---------- ------- ------- ---------- -------
BALANCE, DECEMBER 25, 1993 88,218,617 88,219 56,699 1,123,413 (1,279)
Net income -- -- -- 82,849 --
Exercise of stock options and
related tax benefits -- -- 15 (134) --
Cash dividends paid -- -- -- (35,304) --
Effect of a change in accounting
for available-for-sale securities,
net of tax -- -- -- 2,848 --
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (6,787) --
Translation adjustment -- -- -- -- (358)
Purchase of 1,960,300 shares of
common stock -- -- -- -- --
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- (2,035) --
---------- ------- ------- ---------- -------
BALANCE, DECEMBER 31, 1994 88,218,617 $88,219 $56,714 $1,164,850 $(1,637)
========== ======= ======= ========== =======
<CAPTION>
Common
Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Treasury Total
-------- -----
<S> <C> <C>
BALANCE, DECEMBER 28, 1991 $ (83,116) $ 909,599
Net income -- 218,824
Exercise of stock options and
related tax benefits 19,312 18,314
Cash dividends paid -- (32,514)
Translation adjustment -- (1,410)
Purchase of 3,133,837 shares
of common stock (115,038) (115,038)
--------- ---------
BALANCE, DECEMBER 26, 1992 (178,842) 997,775
Net income -- 126,924
Exercise of stock options and
related tax benefits 6,687 5,724
Cash dividends paid -- (35,657)
Translation adjustment -- 131
Purchase of 4,179,800 shares
of common stock (116,606) (116,606)
--------- ---------
BALANCE, DECEMBER 25, 1993 (288,761) 978,291
Net income -- 82,849
Exercise of stock options and
related tax benefits 431 312
Cash dividends paid -- (35,304)
Effect of a change in accounting
for available-for-sale securities,
net of tax -- 2,848
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- (6,787)
Translation adjustment -- (358)
Purchase of 1,960,300 shares of
common stock (39,591) (39,591)
Issuance of common stock under
restricted stock and employment
agreements, net 2,759 724
--------- ---------
BALANCE, DECEMBER 31, 1994 $(325,162) $ 982,984
========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 33
CONSOLIDATED STATEMENTS OF CASH FLOWS
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
DECEMBER 31, DECEMBER 25, DECEMBER 26,
ALL DOLLAR AMOUNTS IN THOUSANDS 1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 82,849 $ 126,924 $ 218,824
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 35,039 32,278 28,500
Other-net 513 (5,231) 1,685
Change in current assets and liabilities:
Decrease (increase) in accounts receivable - trade 14,669 25,748 (54,273)
Decrease (increase) in inventories 13,590 (50,714) (63,887)
(Increase) in deferred income tax benefits (15,169) (1,403) (3,592)
(Increase) decrease in other current assets (7,809) (13,671) 2,391
(Decrease) increase in accounts payable (2,545) 2,388 (1,413)
Increase in accrued expenses 59,159 10,435 5,519
(Decrease) in income taxes payable (7,653) (6,562) (1,459)
--------- --------- ---------
Net cash provided by operating activities 172,643 120,192 132,295
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (181,739) (375,748) (468,569)
Disposals of investment instruments 121,713 466,069 456,012
Purchases of property and equipment (70,594) (91,407) (34,749)
Purchase of trademarks (3,193) (1,817) (7,588)
Other - net 2,935 4,336 (138)
--------- --------- ---------
Net cash (used in)/provided by investing activities (130,878) 1,433 (55,032)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (107) (100) (181)
Proceeds from exercise of common stock options 297 4,553 13,509
Dividends paid (35,304) (35,657) (32,514)
Purchase of common stock (39,591) (116,606) (115,038)
--------- --------- ---------
Net cash used in financing activities (74,705) (147,810) (134,224)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (361) 184 (1,513)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (33,301) (26,001) (58,474)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 104,720 130,721 189,195
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 71,419 $ 104,720 $ 130,721
========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Liz Claiborne,
Inc. and its wholly-owned subsidiaries (the "Company"). All intercompany
balances and transactions have been eliminated in consolidation. The Company
is primarily engaged in the design and marketing of a broad range of apparel,
accessories, shoes and fragrances.
CASH EQUIVALENTS
All highly liquid investments with a remaining maturity of three months or less
at the date of acquisition are classified as cash equivalents.
MARKETABLE SECURITIES
At December 31, 1994, investments are stated at market in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" which was adopted by the
Company at the beginning of the 1994 fiscal year. Prior year's financial
statements have not been restated to reflect the change in accounting method.
At December 25, 1993, investments are stated at cost, which approximates market
value. Gains and losses on investment transactions are recognized when
realized based on settlement dates. Unrealized gains and losses are included
in retained earnings until realized. Dividends on equity securities are
recorded in income based on payment dates. Interest is recognized when earned.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out for wholesale
operations and retail method for retail and outlet operations) or market.
PROPERTY AND EQUIPMENT - NET
Property and equipment is stated at cost less accumulated depreciation and
amortization. Buildings and building improvements are depreciated using the
straight-line method over their estimated useful lives of 20 to 39 1/2 years.
Machinery and equipment and furniture and fixtures are depreciated using the
straight-line method over their estimated useful lives of five to seven years.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful lives of the assets.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of non-U.S. subsidiaries have been translated at
year-end exchange rates. Revenues and expenses have been translated at average
rates of exchange in effect during the year. Resulting translation adjustments
have been recorded as a separate component of stockholders' equity. Gains and
losses on translation of intercompany investments in foreign subsidiaries of a
long-term nature are also included in this component of stockholders' equity.
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts to hedge transactions
denominated in foreign currencies for periods up to 18 months 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.
Transaction gains and losses included in income were not significant in fiscal
1994, 1993 and 1992. As of December 31, 1994, the Company had contracts
maturing through May 1996 to purchase at contracted forward rates 1,977,485,000
Spanish pesetas and to sell 27,500,000 Canadian dollars and 9,700,000 British
sterling. The aggregate U.S. dollar value of all foreign exchange contracts is
approximately $50,000,000 at year end 1994, as compared with approximately
$42,000,000 at year end 1993. Unrealized gains and losses for outstanding
foreign exchange contracts were not material at December 31, 1994 and December
25, 1993.
REVENUE RECOGNITION
Revenue within wholesale operations is recognized at the time merchandise is
shipped from the Company's distribution centers. Retail and outlet store
revenues are recognized at the time of sale.
CHANGE IN ACCOUNTING PRINCIPLES - INCOME TAXES
The Company adopted the provisions of SFAS No. 109 "Accounting for Income
Taxes" as of the beginning of fiscal 1993. The effect of this accounting
change in fiscal 1993 was an increase in net income of $1,643,000, or $.02 per
common share.
EARNINGS PER COMMON SHARE
Earnings per common share have been computed using the weighted average number
of shares outstanding during each period. The inclusion of shares subject to
unexercised stock options would not have a material dilutive effect.
FISCAL YEAR
In 1994, the Company changed its fiscal year to the Saturday closest to
December 31 from the last Saturday in December. This change had no effect on
the 1994 year end date. The 1994 fiscal year reflects a 53-week period, while
the 1993 and 1992 fiscal years each reflect a 52-week period.
PRIOR YEARS' RECLASSIFICATION
Certain items previously reported in specific captions in the accompanying
financial statements have been reclassified to conform with the current year's
classifications.
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 2
RESTRUCTURING CHARGE
In December 1994, the Company recorded a $30.0 million restructuring charge.
The amount includes $16.8 million related to the phase out of its First Issue
business, $10.2 million for the streamlining of operating and administrative
functions and $3.0 million for the restructuring of its Moderate Division.
Principal items included in the charge are estimated contract termination
costs, severance and related benefits for staff reductions, losses on contracts
and the write-off of certain assets. This charge reduced net income by $18.9
million, or $.24 per common share. The remaining balance of the restructuring
liability as of December 31, 1994 was $28,163,000. The majority of these
liabilities should be paid or settled during the 1995 fiscal year.
NOTE 3
MARKETABLE SECURITIES
The Company adopted the provisions of SFAS No. 115 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 gains on
securities classified as available-for-sale which were previously carried at
amortized cost. This increase in stockholders' equity was included in retained
earnings.
The following are summaries of available-for-sale marketable securities and
maturities:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------------------------------------
Gross Unrealized
--------------------- Estimated DECEMBER 25, 1993
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value Cost
---- ----- ------ ---------- ----
<S> <C> <C> <C> <C> <C>
Tax exempt notes and bonds................ $309,126 $83 $(3,060) $306,149 $278,033
U.S. & foreign government securities...... 11,323 -- (905) 10,418 10,619
Collateralized mortgage obligations....... 8,569 3 (1,785) 6,787 8,201
-------- --- ------- -------- --------
329,018 86 (5,750) 323,354 296,853
Equity securities......................... 2,528 -- (588) 1,940 5,000
-------- --- ------- -------- --------
$331,546 $86 $(6,338) $325,294 $301,853
======== === ======= ======== ========
<CAPTION>
DECEMBER 31, 1994
----------------------------
Estimated
(DOLLARS IN THOUSANDS) Cost Fair Value
---------------------- ---- ----------
<S> <C> <C>
Due in one year or less................... $126,411 $124,898
Due after one year through three years.... 191,197 188,896
Due after three years..................... 11,410 9,560
-------- --------
329,018 323,354
Equity securities ........................ 2,528 1,940
-------- --------
$331,546 $325,294
======== ========
</TABLE>
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
At December 31, 1994 the above investments include $64,422,000 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. At December 25, 1993 the above investments include $92,282,000
of tax exempt notes and bonds which are classified as cash and cash
equivalents.
For the year ended December 31, 1994, gross realized gains and (losses) on
sales of available-for-sale securities totaled $674,000 and ($412,000),
respectively. The net of tax adjustment to unrealized gains and losses on
available-for-sale securities for the 1994 year was a charge of $6,787,000 (net
of $3,986,000 in deferred income taxes) which was included in retained
earnings. As of December 31, 1994, the fair value adjustment for
available-for-sale securities was a charge of $3,939,000 (net of $2,313,000 in
deferred income taxes) which reflects the net unrealized loss included in
retained earnings.
NOTE 4
INVENTORIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 25,
Inventories are summarized as follows: 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,724 $ 56,560
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,527 24,006
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,752 356,027
-------- --------
$423,003 $436,593
======== ========
</TABLE>
NOTE 5
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 25,
Property and equipment consists of the following: 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $123,746 $ 67,049
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,686 99,644
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,518 39,489
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,104 99,802
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 38,491
-------- --------
409,054 344,475
Less-accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 172,494 142,407
-------- --------
$236,560 $202,068
======== ========
</TABLE>
The Company's land and building located in Mount Pocono, Pennsylvania is
pledged as collateral against long-term debt of $1,227,000.
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 6
INCOME TAXES
<TABLE>
<CAPTION>
The provisions for income taxes are as follows:
FISCAL YEARS ENDED
(DOLLARS IN THOUSANDS)
-----------------------------------------------------
(53 weeks) (52 weeks) (52 weeks)
December 31, December 25, December 26,
1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,117 $ 63,273 $105,485
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,962 4,139 4,527
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,950 12,250 19,800
-------- -------- --------
59,029 79,662 129,812
Deferred - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,429) (6,162) (6,712)
-------- -------- --------
$ 48,600 $ 73,500 $123,100
======== ======== ========
</TABLE>
Liz Claiborne, Inc. and its U.S. subsidiaries file a consolidated federal
income tax return. Deferred income tax benefits and deferred income taxes
represent the tax effects of revenues and expenses which are recognized for tax
purposes in different periods from those used for financial statement purposes.
The net deferred tax benefit primarily reflects the capitalization of certain
overhead expenses in inventory for income tax purposes, taxes provided on
unremitted earnings of foreign subsidiaries, the effects of different
depreciation rates used for financial statement and tax purposes and, for the
year ended December 31, 1994, a restructuring charge. The current income tax
provisions have not been reduced by $15,000 in 1994, $1,171,000 in 1993 and
$4,805,000 in 1992, of tax benefits arising from the exercise of nonqualified
stock options. These amounts have been credited to capital in excess of par
value.
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
The effective income tax rate differs from the statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
DECEMBER 31, DECEMBER 25, DECEMBER 26,
1994 1993 1992
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax provision at statutory rate . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 34.0%
State and local income taxes, net of federal benefit . . . . . . . . . . . . . . . 4.4 4.0 3.8
Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.3) (1.5) (1.3)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) (0.5) (0.5)
---- ---- ----
37.0% 37.0% 36.0%
==== ==== ====
</TABLE>
The components of net deferred taxes arising from temporary differences as of
December 31, 1994 and December 25, 1993 were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
DECEMBER 31, 1994 DECEMBER 25, 1993
------------------------------------------------------------------------------------------------------------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY
<S> <C> <C> <C> <C>
Inventory valuation. . . . . . . . . . . . . . . . . . . . . . . . $ 14,515 $ -- $ 13,140 $ --
Unremitted earnings from foreign subsidiaries . . . . . . . . . . . -- 12,906 -- 12,617
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . 9,857 -- -- --
Unrealized investment losses . . . . . . . . . . . . . . . . . . . 2,313 -- -- --
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (6,749) -- (5,701)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,862 (4,105) 1,925 (4,641)
-------- -------- -------- --------
$ 32,547 $ 2,052 $ 15,065 $ 2,275
======== ======== ======== ========
</TABLE>
Management believes that the deferred tax benefits will be fully realized
through future taxable income and reversals of deferred tax liabilities.
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 7
COMMITMENTS, CONTINGENCIES
AND OTHER MATTERS
The Company leases office, showroom, warehouse/distribution and retail space,
transportation equipment, computers and other equipment under various
noncancellable operating lease agreements which expire through January 2009.
Rental expense for 1994, 1993 and 1992 was approximately $67,208,000,
$56,664,000 and $46,591,000, respectively.
At December 31, 1994, the minimum aggregate rental commitments were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
FISCAL YEAR OPERATING LEASES FISCAL YEAR OPERATING LEASES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,689 1998. . . . . . . . . . . . . . . . . . . . . $ 40,365
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,167 1999. . . . . . . . . . . . . . . . . . . . . 39,325
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,461 Thereafter. . . . . . . . . . . . . . . . . . 137,550
</TABLE>
Certain rental commitments have renewal options extending through the year
2027. Some of these renewals are subject to adjustments in future periods.
Many of the leases call for additional charges, some of which are based upon
various escalations and, in the case of outlet and retail leases, the gross
sales of the individual stores above base levels.
At December 31, 1994, the Company had entered into commitments for the purchase
of raw materials and for the production of finished goods totaling
approximately $587,328,000.
In the normal course of business, the Company extends credit, on open account,
to its retail store customers, after a credit analysis based on a number of
financial and other criteria. In recent years, a number of corporate groups
which include certain of the Company's largest department store customers have
been involved in highly leveraged financial transactions and certain of these
customers have filed for protection under Chapter 11 of the Federal Bankruptcy
Code. In 1994, two corporate groups of department store customers accounted
for 17% and 11%, respectively, of net sales. In 1993, two corporate groups of
department store customers accounted for 18% and 11%, respectively, of net
sales. In 1992, three corporate groups of department store customers accounted
for 18%, 11% and 10%, respectively, of net sales. Subsequent to December 31,
1994, two corporate groups of department store customers merged to become a
single corporate group which would have accounted for 16% of net sales in 1994.
The Company does not believe that this concentration of sales and credit risks
represents a material risk of loss with respect to its financial position as of
December 31, 1994.
The Company is a party to several pending legal proceedings and claims.
Although the outcome of such actions cannot be determined with certainty,
management is of the opinion that the final outcome should not have a material
adverse effect on the Company's results of operations or financial position.
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 8
LINES OF CREDIT
As of December 31, 1994, the Company had bank lines of credit aggregating
$282,000,000 which were available to cover letters of credit issued by the
banks and direct borrowings. The Company has not used these facilities for
direct borrowings.
At December 31, 1994 and December 25, 1993, the Company had outstanding letters
of credit of $204,113,000 and $184,294,000, respectively.
NOTE 9
STOCK PLANS
In April 1981, February 1984 and March 1992, the Company adopted plans under
which nonqualified options to acquire shares of common stock may be granted to
officers, other key employees and directors selected by the plans'
administrative committee. Payment by option holders upon exercise of an option
may be made in cash or, with the consent of the committee, by delivering
previously acquired shares of Company common stock. Stock appreciation rights
may be granted in connection with all or any part of any option granted under
the plans, and may also be granted without a grant of a stock option. The
grantee of a stock appreciation right has the right, with the consent of the
committee, to receive either in cash or in shares of common stock, an amount
equal to the appreciation in the fair market value of the covered shares from
the date of grant to the date of exercise. Options and rights are exercisable
over a period of time designated by the committee (but not prior to one year
from the date of grant) and are subject to such other terms and conditions as
the committee determines. Vesting schedules will be accelerated upon merger of
the Company or the happening of certain other events. Options and rights may
not be transferred during the lifetime of a holder.
Awards under the 1992 plan may also be made in the form of incentive stock
options, dividend equivalent rights, restricted stock, unrestricted stock and
performance shares. To date, no stock appreciation rights, incentive stock
options, dividend equivalent rights, unrestricted stock or performance shares
have been granted under the plans. Exercise prices for awards under the plans
are determined by the committee; to date, all stock options have been granted
at an exercise price not less than the fair market value of the underlying
shares on the date of grant.
The 1992 plan provides initially for the issuance of up to 2,500,000 shares of
common stock with respect to options, stock appreciation rights and other
awards granted under the plan, and provides that the Board of Directors may
increase such number by an amount equal to 1% of the common stock outstanding
as of January 1, 1994 and each January 1st thereafter. At December 31, 1994,
there were available for future grant 1,955,609 shares under the 1992 plan.
The 1992 plan expires in 2002. The 1984 and 1981 plans have expired. All
awards made under the 1984 and 1981 plan prior to their respective termination
dates remain in effect in accordance with the terms of their plans.
Since January 1990, the Company has delivered treasury shares upon the exercise
of stock options. The difference between the cost of the treasury shares, on a
first-in, first-out basis, and the exercise price of the options has been
reflected in retained earnings.
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
Changes in common shares under option for the three fiscal years in the period
ended December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------- --------------------------- --------------------------
PRICE RANGE PRICE RANGE PRICE RANGE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year....... 3,728,249 $19.00-$58.50 3,698,417 $15.13-$58.50 2,470,469 $15.00-$49.50
Granted................. 123,000 15.75- 25.63 1,125,575 19.00- 42.38 2,088,425 33.88- 58.50
Exercised............... (13,496) 21.00- 22.00 (244,196) 15.13- 40.00 (682,530) 15.00- 40.00
Cancelled............... (1,387,332) 20.13- 58.50 (851,547) 15.50- 58.50 (177,947) 15.50- 49.00
---------- ------------- --------- ------------- --------- -------------
End of year............. 2,450,421 $15.75-$58.50 3,728,249 $19.00-$58.50 3,698,417 $15.13-$58.50
========== ============= ========= ============= ========= =============
Exercisable at
end of year........... 1,019,674 $19.00-$49.50 892,529 $22.00-$49.50 679,152 $15.13-$49.50
========== ============= ========= ============= ========= =============
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On January 3, 1995, 1,025,975 nonqualified options to acquire shares of common
stock were granted to officers and other key employees with an exercise price
of $17.13.
In May 1994, the Compensation Committee of the Board of Directors granted
85,000 shares of common stock in connection with the hiring of a key executive.
These shares are subject to restrictions on transfer and subject to risk of
forfeiture until earned by continued employment. The restrictions expire on
the last day of each of the Company's fiscal years, 1994 through 2001, at the
rate of 10,000 shares of common stock per year through the year 2000 and 15,000
shares of common stock in the year 2001. The expiration of the restrictions
may be accelerated if the market value of the common stock attains certain
predetermined levels.
In 1992, options were granted to certain of the Company's senior officers at a
price of $58.50 per share, representing 150% of the market price at the date of
grant. At December 31, 1994, 100,000 of these options were outstanding; they
will become exercisable on October 21, 1998 and expire on October 21, 2000,
subject to certain exceptions.
In November 1991, the Company adopted an outside directors' stock ownership
plan under which non-employee directors automatically receive, as part of their
annual retainer, shares of common stock with a value of $10,000 on each January
1. The shares so issued are nontransferable for a period of three years
following the grant date, subject to certain exceptions. In 1994, 3,087 shares
of common stock were issued under this plan. Not more than one twentieth of
one percent (0.05%) of the shares of common stock outstanding from time to time
may be issued under the plan, which will expire in 2002.
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 10
PROFIT-SHARING RETIREMENT,
SAVINGS AND DEFERRED COMPENSATION PLANS
The Company adopted a noncontributory, defined contribution profit-sharing
retirement plan in January 1983. The plan covers all eligible U.S. employees
who are 21 years of age with one or more years of service and who are not
covered by collective bargaining agreements. The plan pays benefits based on
an employee's vested account balance in accordance with qualification rules set
out in the plan. Vesting begins at 20% after two years of service, and from
the 3rd through 6th years, vesting increases by 20% each year until full
vesting occurs. Each year, profit-sharing contributions, if any, are
determined by the Board of Directors. The Company's 1994, 1993 and 1992 plan
contribution expenses, which are included in selling, general and
administrative expenses, were $6,166,000, $5,646,000 and $5,431,000,
respectively.
The Company adopted a 401(k) savings plan effective January 1985. The plan
covers all eligible U.S. employees who are 21 years of age with one or more
years of service and who are not covered by collective bargaining agreements.
The plan pays benefits based on an employee's vested account balance.
Participants may contribute from 1% to 15% of their salary on a before - tax
basis. Such contributions are fully and immediately vested. Vesting of the
Company's matching contribution is on the same basis as the profit sharing
retirement plan. The Company's 1994, 1993 and 1992 plan contribution expenses,
which are included in selling, general and administrative expenses, were
$2,658,000, $2,352,000 and $1,944,000, respectively.
The Company has established an unfunded deferred compensation arrangement for a
senior executive which will accrue for up to four years at the rate of $375,000
per year commencing on January 1, 1993. The accrued amount, plus interest,
will be payable upon retirement.
The Company has adopted a supplemental retirement plan for executives whose
benefits under the profit-sharing retirement plan and the savings plan are
constrained by the operation of certain Internal Revenue Code limitations. The
supplemental plan provides a benefit equal to the difference between the
contribution that would be made for an executive under the two tax-qualified
plans absent such limitations and the actual contribution under those plans.
Supplemental benefits accrued vest on the same schedule applicable under the
tax-qualified plans. The supplemental plan is not funded. Eligible executives
employed on August 5, 1993 were credited with a retroactive supplemental plan
benefit for the prior years in which the legal limitations had affected their
tax-qualified plan benefits. The Company's plan expense, which are included
in selling, general and administrative expenses, were $362,000 and $773,000 in
1994 and 1993, respectively.
NOTE 11
STOCKHOLDER RIGHTS PLAN
The Company has adopted a Stockholder Rights Plan under which one preferred
stock purchase right is attached to each share of common stock outstanding.
Pursuant to the Rights Agreement covering the Stockholder Rights Plan, the
rights become exercisable ten days, subject to extension, after a party or
group acquires or makes a tender offer for 20% or more of the Company's common
stock. Each right entitles its holder, under certain circumstances, to buy
1/100 share of a newly created Series A Junior Participating Preferred Stock
for $85. If 20% of the Company's common stock is acquired by a party or group,
each right not owned by a 20%-or-more stockholder will entitle the holder to
purchase Company common stock having a market value of twice the exercise price
of the right. In addition, if the Company is involved in a merger or certain
other business combinations in which it is not the surviving corporation, each
right not owned by a 20%-or-more stockholder will entitle the holder to
purchase common stock of the surviving corporation having a market value of
twice the exercise price of the right. The rights, which expire on December
21, 1998 and do not have voting rights, may be redeemed by the Company at $.01
per right prior to their becoming exercisable.
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 12
CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
During fiscal 1994, 1993 and 1992, the Company made income tax payments of
$72,415,000, $84,689,000 and $127,230,000, respectively. Non-cash investing
and financing activities which are not included in the cash flow statements for
1994 and 1993 include a direct financing lease receivable with a disposition of
property and equipment of $1,177,000 and $4,348,000, respectively.
NOTE 13
ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and December 25, 1993 consisted of the
following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
December 31, December 25,
1994 1993
------------ ------------
<S> <C> <C>
Payroll and bonuses......................................... $ 27,103 $20,588
Taxes, other than taxes on income........................... 8,190 6,080
Employee benefits........................................... 17,232 17,990
Advertising ................................................ 15,807 15,442
Restructuring liability..................................... 28,163 --
Treasury stock purchased.................................... 11,083 --
Other....................................................... 49,346 37,665
-------- -------
$156,924 $97,765
======== =======
</TABLE>
<PAGE> 45
UNAUDITED QUARTERLY RESULTS
Unaudited quarterly financial information for 1994 and 1993 is set forth in the
table below:
<TABLE>
<CAPTION>
March June September December
------------------ ----------------- ----------------- -------------------
All dollar amounts in thousands
except per common share data 1994 1993 1994 1993 1994 1993 1994 1993
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $541,368 $531,347 $490,043 $506,915 $616,788 $621,894 $514,702 $544,141
Gross profit 187,620 191,781 168,910 180,131 226,408 209,281 172,269 169,723
Net income (loss) 27,437 42,681** 15,895 31,094 42,887 38,258 (3,370)* 14,891
Earnings (loss) per common share $ .35 $ .52** $ .20 $ .38 $ .55 $ .47 $ (.04)* $ .19
Dividends paid per common share $ .11 $ .10 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes the after tax effect of a restructuring charge of $18,900 ($30,000
pretax) or $.24 per common share in 1994.
** Includes a credit representing the cumulative effect of a change in the
method of accounting for income taxes of $1,643 or $.02 per common share in
1993.
<PAGE> 46
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
No. Description Page
-------- ----------- ----
<S> <C> <C>
3(a) - Restated Certificate of Incorporation of Registrant (incorporated herein by reference
from Exhibit 3(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 26, 1993).
3(b) - By-laws of Registrant, as amended (incorporated herein by reference from Exhibit 3(b)
to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26,
1992 [the "1992 Annual Report"]).
4(a) - Specimen certificate for Registrant's Common Stock, par value $1.00 per share
(incorporated herein by reference from Exhibit 4(a) to the 1992 Annual Report).
4(b) - Rights Agreement, dated December 7, 1988, as amended, between Registrant and First
Chicago Trust Company of New York, as Rights Agent (successor to The Chase Manhattan
Bank, N.A.) (incorporated herein by reference from Exhibit 4(d) to Registrant's Report
on Form 8-A dated January 29, 1991).
4(b)(i) - Amendment to Rights Agreement, dated March 1990, between Registrant and First Chicago
Trust Company of New York, as Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d)(i) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 30, 1989 [the "1989 Annual Report"]).
4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992, between Registrant and
First Chicago Trust Company of New York, as Rights Agent (incorporated herein by
reference from Exhibit 4(b)(ii) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991 [the "1991 Annual Report"]).
10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder, which are incorporated
herein by this reference.
10(b)+ - Liz Claiborne, Inc. 1981 Stock Option Plan (incorporated herein by reference from
Exhibit 10(p) of Registrant's Registration Statement on Form S-1, Registration
No. 2-71806, in the form it was declared effective).
10(b)(i)+ - Amendment to the 1981 Stock Option Plan (incorporated herein by reference from
Exhibit 10(b)(i) to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988 [the "1988 Annual Report"]).
</TABLE>
______________________________________________________________________
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 46 -
<PAGE> 47
<TABLE>
<CAPTION>
Exhibit
No. Description Page
-------- ----------- ----
<S> <C> <C>
10(c)+ - Amended form of Option Agreement under Liz Claiborne, Inc. 1981 Stock
Option Plan (incorporated herein by reference from Exhibit 10(q) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 26, 1981).
10(d)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(hh) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1983 [the "1983 Annual
Report"]).
10(d)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(d)(i) to the 1988 Annual Report).
10(e)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock Option
Plan (the "1984 Option Plan") (incorporated herein by reference from
Exhibit 10(nn) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1984).
10(e)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan (incorporated
herein by reference from Exhibit 10(e)(i) to the 1992 Annual Report).
10(f)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended and
restated (incorporated herein by reference from Exhibit 10(f) to the
1989 Annual Report).
10(f)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz Claiborne, Inc.
and IDS Trust Company (incorporated herein by reference from Exhibit
10(b) to Registrant's Quarterly Report on Form 10-Q for the period
ended July 2, 1994).
10(g)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to the 1992 Annual Report).
10(g)(i)+ - Amendments Nos. 3 and 4 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 26, 1993 [the "1993 Annual Report"]).
10(g)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by reference
from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for
the period ended July 2, 1994).
</TABLE>
_____________________________________________________________________
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 47 -
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit
No. Description Page
-------- ----------- ----
<S> <C> <C>
10(h)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement Plan
(the "Profit-Sharing Plan") (incorporated herein by reference from
Exhibit 10(h) to the 1992 Annual Report).
10(i) - Trust Agreement related to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(jj) to the 1983 Annual Report).
10(i)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(i)(i) to the 1993 Annual Report).
10(i)(ii) - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report on Form
10-Q for the period ended October 1, 1994).
10(j) - Collective Bargaining Agreement, dated June 1, 1991, between New York
Skirt and Sportswear Association, Inc. (of which Registrant is a
member) and International Ladies' Garment Workers' Union, Amalgamated
Ladies' Garment Cutters' Union, Local 10, I.L.G.W.U. and Blouse, Skirt
and Sportswear Workers' Union, Local 23-25, I.L.G.W.U (incorporated
herein by reference from Exhibit 10(j) to the 1992 Annual Report).
10(k) - Collective Bargaining Agreement, dated September 1, 1991, between the
Joint Board of Shirt, Leisurewear, Robe, Glove and Rainwear Workers
Union of Amalgamated Clothing Workers of America and Liz Claiborne
Accessories (incorporated herein by reference from Exhibit 10(k) to
the 1991 Annual Report).
10(l)* - Executive Liability and Indemnification Policy No. 81035379F, with
Chubb Group of Insurance Companies.
10(l)(i)* - Description of Excess Coverage Directors and Officers Liability Insurance
Policy No. ZKA9400406, with Lloyds of London.
10(m)+* - Description of 1994 Salaried Employee Incentive Bonus Plan.
10(n) - Lease, dated as of January 1, 1990 for premises located at 1441
Broadway, New York, New York between Liz Claiborne, Inc. and Lechar
Realty Corp. (incorporated herein by reference from Exhibit 10(n)
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990).
</TABLE>
_____________________________________________________________________
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 48 -
<PAGE> 49
<TABLE>
<CAPTION>
Exhibit
No. Description Page
-------- ----------- ----
<S> <C> <C>
10(o)+ - Liz Claiborne, Inc. Outside Directors' 1991 Stock Ownership Plan
(the "Directors Plan") (incorporated herein by reference from
Exhibit 10(o) to the 1991 Annual Report).
10(o)(i)+ - Amendment No. 1 to the Directors Plan (incorporated herein by
reference from Exhibit 10(o)(i) to the 1993 Annual Report).
10(p)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan")
(incorporated herein by reference from Exhibit 10(p) to the 1991
Annual Report).
10(p)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by reference
from Exhibit 10(p)(i) to the 1993 Annual Report).
10(q)+ - Form of Option Agreement under the 1992 Plan for premium-priced
options (incorporated herein by reference from Exhibit 10(q) to
the 1992 Annual Report).
10(r)+ - Form of Option Agreement under the 1992 Plan (incorporated herein
by reference from Exhibit 10(r) to the 1992 Annual Report).
10(s)+ - Description of unfunded deferred compensation arrangement for Jerome
A. Chazen (incorporated herein by reference from Exhibit 10(s) to
the 1992 Annual Report).
10(t)+* - Description of Supplemental Life Insurance Plans (incorporated
herein by reference from Exhibit 10(t) to the 1993 Annual Report).
10(u)+ - Description of unfunded death/disability benefits for certain
executives (incorporated herein by reference from Exhibit 10(u) to
the 1992 Annual Report).
10(v)+* - Form of the Liz Claiborne Section 162(m) Cash Bonus Plan.
10(w)+* - Liz Claiborne Supplemental Executive Retirement Plan.
10(x)+ - Employment Agreement dated as of May 9, 1994, between Liz Claiborne,
Inc. and Paul R. Charron (incorporated herein by reference from
Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for
the period ended April 2, 1994).
</TABLE>
_____________________________________________________________________
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 49 -
<PAGE> 50
<TABLE>
<CAPTION>
Exhibit
No. Description Page
-------- ----------- ----
<S> <C> <C>
10(y)+* - Agreement dated as of January 2, 1995, between Liz Claiborne,
Inc. and Harvey Falk
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
28* - Undertakings.
</TABLE>
(b) Reports on Form 8-K.
Not applicable.
_____________________________________________________________________
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 50 -
<PAGE> 1
EXHIBIT 10(L)
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
EXECUTIVE PROTECTION POLICY FOR:
LIZ CLAIBORNE, INC.
FORM 14-02-0941 (Ed. 1-92) Page 1 of 5
<PAGE> 2
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
DECLARATIONS
EXECUTIVE PROTECTION POLICY
Policy Number 8103-53-79-F
Federal Insurance Company, a stock
insurance company, incorporated under
the laws of Indiana, herein called the
Company.
Item 1. Parent Organization:
LIZ CLAIBORNE, INC.
1 CLAIBORNE AVENUE
NORTH BERGEN, NEW JERSEY
07047
Item 2. POLICY PERIOD: From 12:01 A.M. on AUGUST 11, 1994
To 12:01 A.M. AUGUST 11, 1995
Local time at the address shown in Item 1.
Item 3. Coverage Summary
Description
GENERAL TERMS AND CONDITIONS
EXECUTIVE LIABILITY AND INDEMNIFICATION
CRIME INSURANCE
OUTSIDE DIRECTORSHIP LIABILITY
Item 4. Termination of
Prior Policies: 81035379-E
THE EXECUTIVE LIABILITY AND INDEMNIFICATION, FIDUCIARY LIABILITY, OUTSIDE
DIRECTORSHIP LIABILITY AND EMPLOYMENT PRACTICES LIABILITY COVERAGE SECTIONS
(WHICHEVER ARE APPLICABLE) ARE ALL WRITTEN ON A CLAIMS MADE BASIS. EXCEPT AS
OTHERWISE PROVIDED, THESE COVERAGE SECTIONS COVER ONLY CLAIMS FIRST MADE
AGAINST THE INSURED DURING THE POLICY PERIOD. PLEASE READ CAREFULLY.
In witness whereof, the Company issuing this policy has caused this policy to
be signed by its authorized officers, but it shall not be valid unless also
signed by a duly authorized representative of the Company.
FEDERAL INSURANCE COMPANY
-------------------------- ---------------------------
Secretary President
/s/ John S. Bain
September 7, 1994 ----------------------------
Date Authorized Representative
Form 14-02-0941 (Ed. 1-92) Page 2 OF 5
<PAGE> 3
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
GENERAL TERMS
AND CONDITIONS
<TABLE>
<S> <C> <C>
Territory 1 Coverage shall extend anywhere in the world.
Terms and Conditions 2. Except for the General Terms and Conditions or unless stated to the contrary
in any coverage section, the terms and conditions of each coverage section of
this policy apply only to that section and shall not be construed to apply to any
other coverage section of this policy.
Limits of Liability and 3. Unless stated to the contrary in any coverage section, the limits of liability and
Deductible Amounts deductible amounts shown for each coverage section of this policy are separate
limits of liability and separate deductible amounts pertaining to the coverage
section for which they are shown; the application of a deductible amount to a
loss under one coverage section of this policy shall not reduce the deductible
amount under any other coverage section of this policy.
Notice 4. Notice to the Company under this policy shall be given in writing addressed to:
Notice of Claim:
National Claims Department
Chubb Group of Insurance Companies
15 Mountain View Road
Warren, New Jersey 07059
All Other Notices:
Executive Protection Department
Chubb Group of Insurance Companies
15 Mountain View Road
Warren, New Jersey 07059
Such notice shall be effective on the date of receipt by the Company at such
address.
Investigation 5. The Company may make any investigation it deems necessary and may, with
and Settlement the written consent of the Insured, make any settlement of a claim it deems
expedient. If the Insured withholds consent to such settlement, the Company's
liability for all loss on account of such claim shall not exceed the amount for
which the Company could have settled such claim plus costs, charges and
expenses accrued as of the date such settlement was proposed in writing by the
Company to the Insured.
</TABLE>
Form 14-02-0941 (Ed. 1-92) Page 3 of 5
<PAGE> 4
GENERAL TERMS
AND CONDITIONS
<TABLE>
<S> <C> <C>
Valuation and 6. All premiums, limits, retentions, loss and other amounts under this policy are
Foreign Currency expressed and payable in the currency of the United States of America. Except
as otherwise provided in any coverage section, if judgment is rendered,
settlement is denominated or another element of loss under this policy is stated
in a currency other than United States of America dollars, payment under this
policy shall be made in United States dollars at the rate of exchange published
in the Wall Street Journal on the date the final judgment is reached, the amount
of the settlement is agreed upon or the other element of loss is due,
respectively.
Subrogation 7. In the event of any payment under this policy, the Company shall be subrogated
to the extent of such payment to all the Insured's rights of recovery, and the
Insured shall execute all papers required and shall do everything necessary to
secure and preserve such rights, including the execution of such documents
necessary to enable the Company effectively to bring suit in the name of the
Insured.
Action Against 8. No action shall lie against the Company unless, as a condition precedent thereto,
the Company there shall have been full compliance with all the terms of this policy. No person
or organization shall have any right under this policy to join the Company as a
party to any action against the Insured to determine the Insured's liability nor
shall the Company be impleaded by the Insured or his legal representatives.
Bankruptcy or insolvency of an Insured or of the estate of an Insured shall not
relieve the Company of its obligations nor deprive the Company of its rights
under this policy.
Authorization Clause 9. By acceptance of this policy, the PARENT ORGANIZATION agrees to act on behalf
of all Insureds with respect to the giving and receiving of notice of claim or
termination, the payment of premiums and the receiving of any return premiums
that may become due under this policy, the negotiation, agreement to and
acceptance of endorsements, and the giving or receiving of any notice provided
for in this policy (except the giving of notice to apply for the Extended Reporting
Period), and the Insureds agree that the PARENT ORGANIZATION shall act on their
behalf.
Alteration 10. No change in, modification of, or assignment of interest under this policy shall
and Assignment be effective except when made by a written endorsement to this policy which is
signed by an authorized employee of Chubb & Son Inc.
Termination of 11. This policy or any coverage section shall terminate at the earliest of the following
Policy or times:
Coverage Section
(A) sixty days after the receipt by the PARENT ORGANIZATION of a written notice
of termination from the Company,
(B) upon the receipt by the Company of written notice of termination from the
PARENT ORGANIZATION,
</TABLE>
FORM 14-02-0941 (Ed. 1-92) Page 4 of 5
<PAGE> 5
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
GENERAL TERMS
AND CONDITIONS
<TABLE>
<S> <C> <C>
Termination of (C) upon expiration of the POLICY PERIOD as set forth in Item 2 of the
Policy or Declarations of this policy, or
Coverage Section
(continued) (D) at such other time as may be agreed upon by the Company and the PARENT
ORGANIZATION.
The Company shall refund the unearned premium computed at customary short rates if the policy
or any coverage section is terminated by the PARENT ORGANIZATION. Under any other
circumstances the refund shall be computed pro rata.
Termination of 12. Any bonds or policies issued by the Company or its affiliates and specified in
Prior Bonds Item 4 of the Declarations of this policy shall terminate, if not already terminated,
or Policies as of the inception date of this policy. Such prior bonds or policies shall not
cover any loss under the Crime or Kidnap/Ransom & Extortion coverage sections
not discovered and notified to the Company prior to the inception date of this
policy.
Definitions 13. When used in this policy:
PARENT ORGANIZATION means the organization designated in Item 1 of the
Declarations of this policy.
POLICY PERIOD means the period of time specified in Item 2 of the Declarations
of this policy, subject to prior termination in accordance with Subsection 11
above. If this period is less than or greater than one year, then the Limits of
Liability specified in the Declarations for each coverage section shall be the
Company's maximum limit of liability under such coverage section for the entire
period.
</TABLE>
Form 14-02-0941 (Ed. 1-92) Page 5 of 5
<PAGE> 6
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
Effective date of
this endorsement: AUGUST 11, 1994
To be attached to and form part of Company: FEDERAL INSURANCE COMPANY
Policy No. 8103-53-79-F
Issued to: LIZ CLAIBORNE, INC.
The following is a schedule of endorsements issued with the policy at
inception:
GENERAL TERMS AND CONDITIONS
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-1323
CRIME INSURANCE
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0975
2 14-02-0976
3 14-02-0998
OUTSIDE DIRECTORSHIP LIABILITY
ENDORSEMENT NUMBER FORM NUMBER
1 14-02-0961
2 14-02-0961
Page 1 Last page
Form 14-02-1252 (Ed. 12/92)
<PAGE> 7
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
ENDORSEMENT
Coverage Section: GENERAL TERMS Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 1
this endorsement: AUGUST 11, 1994
To be attached to and form part of
Policy No. 8103-53-79-F
Issued to: LIZ CLAIBORNE, INC.
NEW JERSEY AMENDATORY ENDORSEMENT
It is agreed that the following shall be added to Subsection 11 of the General
Terms and Conditions:
Pursuant to New Jersey law, this policy cannot be terminated or nonrenewed for
any underwriting reason or guideline(s) which is arbitrary, capricious or
unfairly discriminatory or without adequate prior notice to the PARENT
ORGANIZATION. The underwriting reasons or guidelines that the Company can use
to terminate or nonrenew this policy are maintained by the Company and/or the
PARENT ORGANIZATION'S lawful representative upon written request.
This provision shall not apply to any policy which has been in effect for less
than 60 days of the time notice of cancellation is mailed or delivered, unless
the policy is a renewal policy.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
/s/ JOHN S. BAIN
-------------------------
Authorized Representative
September 7, 1994
-------------------------
Date
Form 14-02-1323 (Ed. 3/93)
<PAGE> 8
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
DECLARATIONS
EXECUTIVE LIABILITY AND
INDEMNIFICATION COVERAGE SECTION
<TABLE>
<S> <C>
Item 1. PARENT ORGANIZATION:
LIZ CLAIBORNE, INC.
Item 2. Limits of Liability:
(A) Each LOSS $ 15,000,000.
(B) Each POLICY PERIOD $ 15,000,000.
Note that the limits of liability and any deductible or
retention are reduced or exhausted by DEFENSE COSTS.
Item 3. Coinsurance Percent: NONE
Item 4. Deductible Amount:
Insuring Clause 2 $ 500,000.
Item 5. INSURED ORGANIZATION:
LIZ CLAIBORNE,INC. AND ITS SUBSIDIARIES.
Item 6. INSURED PERSONS:
Any person who has been, now is, or shall become a duly
elected director or a duly elected or appointed
officer of the Insured Organization.
Item 7. Extended Reporting Period:
(A) Additional Premium: $210,000.
(B) Additional Period: ONE YEAR
Item 8. Pending or Prior Date: JUNE 8, 1981
Item 9. Continuity Date: JUNE 8, 1981
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 1 of 10
<PAGE> 9
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
<TABLE>
<S> <C>
EXECUTIVE LIABILITY In consideration of payment of the premium and subject to the Declarations, General
AND INDEMNIFICATION Terms and Conditions, and the limitations, conditions, provisions and other terms of
COVERAGE SECTION this coverage section, the Company agrees as follows:
INSURING CLAUSES
Executive 1. The Company shall pay on behalf of each of the INSURED PERSONS all LOSS for
Liability Coverage which the INSURED PERSON is not indemnified by the INSURED ORGANIZATION and
Insuring Clause 1 which the INSURED PERSON becomes legally obligated to pay on account of any
CLAIM first made against him, individually or otherwise, during the POLICY PERIOD
or, if exercised, during the Extended Reporting Period, for a WRONGFUL ACT
committed, attempted, or allegedly committed or attempted by such INSURED
PERSON before or during the POLICY PERIOD.
Executive 2. The Company shall pay on behalf of the INSURED ORGANIZATION all LOSS for
Indemnification which the INSURED ORGANIZATION grants indemnification to each INSURED
Coverage PERSON, as permitted or required by law, which the INSURED PERSON has
Insuring Clause 2 become legally obligated to pay on account of any CLAIM first made against him,
individually or otherwise, during the POLICY PERIOD or, if exercised, during the
Extended Reporting Period, for a WRONGFUL ACT committed, attempted, or
allegedly committed or attempted by such INSURED PERSON before or during THE
POLICY PERIOD.
ESTATES AND LEGAL 3. Subject otherwise to the General Terms and Conditions and the limitations,
REPRESENTATIVES conditions, provisions and other terms of this coverage section, coverage shall
extend to CLAIMS for the WRONGFUL ACTS of INSURED PERSONS made against the
estates, heirs, legal representatives or assigns of INSURED PERSONS who are
deceased or against the legal representatives or assigns of INSURED PERSONS
who are incompetent, insolvent or bankrupt.
EXTENDED 4. If the Company terminates or refuses to renew this coverage section other than
REPORTING PERIOD for nonpayment of premium, the PARENT ORGANIZATION and the INSURED
PERSONS shall have the right, upon payment of the additional premium set forth
in Item 7(A) of the Declarations for this coverage section, to an extension of the
coverage granted by this coverage section for the period set forth in Item 7(B)
of the Declarations for this coverage section (Extended Reporting Period)
following the effective date of termination or nonrenewal, but only for any
WRONGFUL ACT committed, attempted, or allegedly committed or attempted, prior
to the effective date of termination or nonrenewal. This right of extension shall
lapse unless written notice of such election, together with payment of the
additional premium due, is received by the Company within 30 days following the
effective date of termination or nonrenewal. Any CLAIM made during the
Extended Reporting Period shall be deemed to have been made during the
immediately preceding POLICY PERIOD.
If the PARENT ORGANIZATION terminates or declines to accept renewal, the
Company may, if requested, at its sole option, grant an Extended Reporting
Period. The offer of renewal terms and conditions or premiums different from
those in effect prior to renewal shall not constitute refusal to renew.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 2 of 10
<PAGE> 10
<TABLE>
<S> <C> <C>
EXCLUSIONS
Exclusions Applicable 5. The Company shall not be liable for LOSS on account of any CLAIM made against
to Insuring any INSURED PERSON:
Clauses 1 and 2
(a) based upon, arising from, or in consequence of any circumstance if written
notice of such circumstance has been given under any policy or coverage
section of which this coverage section is a renewal or replacement and if
such prior policy or coverage section affords coverage (or would afford
such coverage except for the exhaustion of its limits of liability) for such
LOSS, in whole or in part, as a result of such notice;
(b) based upon, arising from, or in consequence of any demand, suit or other proceeding
pending, or order, decree or judgement entered against any INSURED on or prior to the
Pending or Prior Date set forth in Item 8 of the Declarations for this coverage section,
or the same or any substantially similar fact, circumstance or situation underlying or
alleged therein;
(c) brought or maintained by or on behalf of any INSURED except:
(i) a CLAIM that is a derivative action brought or maintained on behalf of an INSURED
ORGANIZATION by one or more persons who are not INSURED PERSONS and who bring and
maintain the CLAIM without the solicitation, assistance or participation of any
INSURED,
(ii) a CLAIM brought or maintained by an INSURED PERSON for the actual or alleged
wrongful termination of the INSURED PERSON, or
(iii) a CLAIM brought or maintained by an INSURED PERSON for contribution or indemnity,
if the CLAIM directly results from another CLAIM covered under this coverage
section;
(d) for an actual or alleged violation of the responsibilities, obligations or duties imposed
by the Employee Retirement Income Security Act of 1974 and amendments thereto or similar
provisions of any federal, state or local statutory law or common law upon fiduciaries of
any pension, profit sharing, health and welfare or other employee benefit plan or trust
established or maintained for the purpose of providing benefits to employees of an
INSURED ORGANIZATION;
(e) for bodily injury, mental or emotional distress, sickness, disease or death of any person
or damage to or destruction of any tangible property including loss of use thereof; or
(f) based upon, arising from, or in consequence of (i) the actual, alleged or threatened
discharge, release, escape or disposal of POLLUTANTS into or on real or personal
property, water or the atmosphere; or (ii) any direction or request that the INSURED
test for, monitor, clean up, remove, contain, treat, detoxify or neutralize POLLUTANTS,
or any voluntary decision to do so; including but not limited to any CLAIM for
financial loss to the INSURED ORGANIZATION, its security holders or its creditors
based upon, arising from, or in consequence of the matters described in (i) or (ii)
of this exclusion.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 3 of 10
<PAGE> 11
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
EXCLUSIONS
(continued)
<TABLE>
<S> <C> <C>
Exclusions Applicable 6. The Company shall not be liable under Insuring Clause 1 for LOSS on account
to Insuring of any CLAIM made against any INSURED PERSON:
Clause 1 Only
(a) for an accounting of profits made from the purchase or sale by such INSURED PERSON of
securities of the INSURED ORGANIZATION within the meaning of Section 16 (b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law or common law;
(b) based upon, arising from, or in consequence of any deliberately fraudulent act or
omission or any willful violation of any statute or regulation by such INSURED PERSON,
if a judgement or other final adjudication adverse to the INSURED PERSON establishes
such a deliberately fraudulent act or omission or willful violation; or
(c) based upon, arising from, or in consequence of such INSURED PERSON having gained in fact
any personal profit, remuneration or advantage to which such INSURED PERSON was not
legally entitled.
Severability 7. With respect to the Exclusions in Subsections 5 and 6 of this coverage section,
of Exclusions no fact pertaining to or knowledge possessed by any INSURED PERSON shall be
imputed to any other INSURED PERSON to determine if coverage is available.
LIMIT OF LIABILITY, 8. For the purposes of this coverage section, all LOSS arising out of the same
DEDUCTIBLE AND WRONGFUL ACT and all INTERRELATED WRONGFUL ACTS of any INSURED PERSON shall
COINSURANCE be deemed one LOSS, and such LOSS shall be deemed to have originated in the
earliest POLICY PERIOD in which a CLAIM is first made against any INSURED
PERSON alleging any such WRONGFUL ACT or INTERRELATED WRONGFUL ACTS.
The Company's maximum liability for each LOSS, whether covered under
Insuring Clause 1 or Insuring Clause 2 or both, shall be the Limit of Liability for
each LOSS set forth in Item 2(A) of the Declarations for this coverage section.
The Company's maximum aggregate liability for all LOSS on account of all
CLAIMS first made during the same POLICY PERIOD, whether covered under
Insuring Clause 1 or Insuring Clause 2 or both, shall be the Limit of Liability for
each POLICY PERIOD set forth in Item 2(B) of the Declarations for this coverage
section.
The Company's liability under Insuring Clause 2 shall apply only to that part of
each LOSS which is excess of the Deductible Amount set forth in Item 4 of the
Declarations for this coverage section and such Deductible Amount shall be
borne by the INSUREDS uninsured and at their own risk.
If a single LOSS is covered in part under Insuring Clause 1 and in part under
Insuring Clause 2, the Deductible Amount applicable to the LOSS shall be the
Insuring Clause 2 deductible set forth in Item 4 of the Declarations for this
coverage section.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 4 of 10
<PAGE> 12
<TABLE>
<S> <C> <C>
LIMIT OF LIABILITY, With respect to all LOSS (excess of the applicable Deductible Amount) originating
DEDUCTIBLE AND in any one POLICY PERIOD, the INSUREDS shall bear uninsured and at their own
COINSURANCE risk that percent of all such LOSS specified as the Coinsurance Percent in Item
(continued) 3 of the Declarations for this coverage section, and the Company's liability hereunder shall
apply only to the remaining percent of all such LOSS.
Any LOSS covered in whole or in part by this coverage section and the Employment Practices
Liability coverage section of this policy (if purchased) shall be subject to the limits of
liability, deductible and coinsurance percent applicable to such other coverage section;
provided, however, if any limit of liability applicable to such other coverage section is
exhausted with respect to such LOSS, any remaining portion of such LOSS otherwise covered by
this coverage section shall be subject to the Limits of Liability and Coinsurance Percent
applicable to this coverage section, as reduced by the amount of such LOSS otherwise covered by
this coverage section which is paid by the Company pursuant to such other coverage section.
For purposes of this Subsection 8 only, the Extended Reporting Period, if exercised, shall be
part of and not in addition to the immediately preceding POLICY PERIOD.
PRESUMPTIVE 9. If the INSURED ORGANIZATION:
INDEMNIFICATION
(a) fails or refuses, other than for reason of FINANCIAL IMPAIRMENT, to indemnify the INSURED
PERSON for LOSS; and
(b) is permitted or required to indemnify the INSURED PERSON for such LOSS pursuant to:
(i) the by-laws or certificate of incorporation of the INSURED ORGANIZATION in effect at
the inception of this coverage section, or
(ii) any subsequently amended or superseding by-laws or certificate of incorporation of
the INSURED ORGANIZATION provided, however, that such amended or superseding by-laws
or certificate of incorporation expand or broaden, and do not restrict or in any way
limit, the INSURED ORGANIZATION'S ability to indemnify the INSURED PERSON;
then, notwithstanding any other conditions, provisions or terms of this coverage section to the
contrary, any payment by the Company of such LOSS shall be subject to (i) the Insuring Clause 2
Deductible Amount set forth in Item 4 of the Declarations for this coverage section, and
(ii) all of the Exclusions set forth in Subsections 5 and 6 of this coverage section.
For purposes of this Subsection 9, the shareholder and board of director resolutions of the
INSURED ORGANIZATION shall be deemed to provide indemnification for such LOSS to the fullest
extent permitted by such by-laws or certificate of incorporation.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 5 of 10
<PAGE> 13
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
<TABLE>
<S> <C> <C>
REPORTING 10. The INSUREDS shall, as a condition precedent to exercising their rights under this
AND NOTICE coverage section, give to the Company written notice as soon as practicable of any
CLAIM made against any of them for a WRONGFUL ACT.
If during the POLICY PERIOD or Extended Reporting Period (if exercised) an
INSURED becomes aware of circumstances which could give rise to a CLAIM and
gives written notice of such circumstance(s) to the Company, then any CLAIMS
subsequently arising from such circumstances shall be considered to have been
made during the POLICY PERIOD or the Extended Reporting Period in which the
circumstances were first reported to the Company.
The INSUREDS shall, as a condition precedent to exercising their rights under this
coverage section, give to the Company such information and cooperation as it
may reasonably require, including but not limited to a description of the CLAIM
or circumstances, the nature of the alleged WRONGFUL ACT, the nature of the
alleged or potential damage, the names of actual or potential claimants, and the
manner in which the INSURED first became aware of the CLAIM or circumstances.
DEFENSE AND 11. Subject to this Subsection, it shall be the duty of the INSURED PERSONS and not
SETTLEMENT the duty of the Company to defend CLAIMS made against the INSURED PERSONS.
The INSUREDS agree not to settle any CLAIM, incur any DEFENSE COSTS or
otherwise assume any contractual obligation or admit any liability with respect
to any CLAIM without the Company's written consent, which shall not be
unreasonably withheld. The Company shall not be liable for any settlement,
DEFENSE COSTS, assumed obligation or admission to which it has not consented.
The Company shall have the right and shall be given the opportunity to
effectively associate with the INSUREDS in the investigation, defense and
settlement, including but not limited to the negotiation of a settlement, of any
CLAIM that appears reasonably likely to be covered in whole or in part by this
coverage section.
The INSUREDS agree to provide the Company with all information, assistance and
cooperation which the Company reasonably requests and agree that in the event
of a CLAIM the INSUREDS will do nothing that may prejudice the Company's
position or its potential or actual rights of recovery.
DEFENSE COSTS are part of and not in addition to the Limits of Liability set forth
in Item 2 of the Declarations for this coverage section, and the payment by the
Company of DEFENSE COSTS reduces such Limits of Liability.
ALLOCATION 12. If both LOSS covered by this coverage section and loss not covered by this
coverage section are incurred, either because a CLAIM against the INSURED
PERSONS includes both covered and uncovered matters or because a CLAIM is
made against both an INSURED PERSON and others, including the INSURED
ORGANIZATION, the INSUREDS and the Company shall use their best efforts to
agree upon a fair and proper allocation of such amount between covered LOSS
and uncovered loss.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 6 of 10
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ALLOCATION If the INSUREDS and the Company agree on an allocation of DEFENSE COSTS, the
(continued) Company shall advance on a current basis DEFENSE COSTS allocated to the covered LOSS. If the
INSUREDS and the Company cannot agree on an allocation:
(a) no presumption as to allocation shall exist in any arbitration, suit or other proceeding;
(b) the Company shall advance on a current basis DEFENSE COSTS which the Company believes to be
covered under this coverage section until a different allocation is negotiated, arbitrated or
judicially determined; and
(c) the Company, if requested by the INSUREDS, shall submit the dispute to binding arbitration. The
rules of the American Arbitration Association shall apply except with respect to the
selection of the arbitration panel, which shall consist of one arbitrator selected by the
INSUREDS, one arbitrator selected by the Company, and a third independent arbitrator
selected by the first two arbitrators.
Any negotiated, arbitrated or judicially determined allocation of DEFENSE COSTS on account of a
CLAIM shall be applied retroactively to all DEFENSE COSTS on account of such CLAIM, notwithstanding
any prior advancement to the contrary. Any allocation or advancement of DEFENSE COSTS on account of
a CLAIM shall not apply to or create any presumption with respect to the allocation of other LOSS on
account of such CLAIM.
OTHER 13. If any LOSS arising from any CLAIM made against any INSURED PERSONS is
INSURANCE insured under any other valid policy(ies), prior or current, then this coverage
section shall cover such LOSS, subject to its limitations, conditions, provisions
and other terms, only to the extent that the amount of such LOSS is in excess
of the amount of payment from such other insurance whether such other
insurance is stated to be primary, contributory, excess, contingent or otherwise,
unless such other insurance is written only as specific excess insurance over the
Limits of Liability provided in this coverage section.
CHANGES IN
EXPOSURE
Acquisition or 14. If the INSURED ORGANIZATION (i) acquires securities or voting rights in another
Creation of organization or creates another organization, which as a result of such
Another Organization acquisition or creation becomes a SUBSIDIARY, or (ii) acquires any organization
by merger into or consolidation with an INSURED ORGANIZATION, such
organization and its INSURED PERSONS shall be INSUREDS under this coverage
section but only with respect to WRONGFUL ACTS committed, attempted, or
allegedly committed or attempted, after such acquisition or creation unless the
Company agrees, after presentation of a complete application and all appropriate
information, to provide coverage by endorsement for WRONGFUL ACTS committed,
attempted, or allegedly committed or attempted, by such INSURED PERSONS prior
to such acquisition or creation.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 7 of 10
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CHANGES IN
EXPOSURE
Acquisition or If the fair value of all cash, securities, assumed indebtedness and other
Creation of consideration paid by the INSURED ORGANIZATION for any such acquisition or
Another Organization creation exceeds 10% of the total assets of the PARENT ORGANIZATION as
(continued) reflected in the PARENT ORGANIZATION'S most recent audited consolidated
financial statements, the PARENT ORGANIZATION shall give written notice of such
acquisition or creation to the Company as soon as practicable together with such
information as the Company may require and shall pay any reasonable additional
premium required by the Company.
Acquisition of Parent 15. If (i) the PARENT ORGANIZATION merges into or consolidates with another
Organization by organization, or (ii) another organization or person or group of organizations
Another Organization and/or persons acting in concert acquires securities or voting rights which result
in ownership or voting control by the other organization(s) or person(s) of more
than 50% of the outstanding securities representing the present right to vote for
the election of directors of the PARENT ORGANIZATION, coverage under this
coverage section shall continue until termination of this coverage section, but
only with respect to CLAIMS for WRONGFUL ACTS committed, attempted, or
allegedly committed or attempted, by INSURED PERSONS prior to such merger,
consolidation or acquisition. The PARENT ORGANIZATION shall give written notice
of such merger, consolidation or acquisition to the Company as soon as
practicable together with such information as the Company may require.
Cessation of 16. In the event an organization ceases to be a SUBSIDIARY before or after the
Subsidiaries Inception Date of this coverage section, coverage with respect to such
SUBSIDIARY and its INSURED PERSONS shall continue until termination of this
coverage section but only with respect to CLAIMS for WRONGFUL ACTS committed,
attempted or allegedly committed or attempted prior to the date such
organization ceased to be a SUBSIDIARY.
REPRESENTATIONS 17. In granting coverage to any one of the INSUREDS, the Company has relief upon
AND SEVERABILITY the declarations and statements in the written application for this coverage
section and upon any declarations and statements in the original written
application submitted to another insurer in respect of the prior coverage
incepting as of the Continuity Date set forth in Item 9 of the Declarations for this
coverage section. All such declarations and statements are the basis of such
coverage and shall be considered as incorporated in and constituting part of this
coverage section.
Such written application(s) for coverage shall be construed as a separate
application for coverage by each of the INSURED PERSONS. With respect to the
declarations and statements contained in such written application(s) for
coverage, no statement in the application or knowledge possessed by any
INSURED PERSON shall be imputed to any other INSURED PERSON for the purpose
of determining if coverage is available.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 8 of 10
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DEFINITIONS 18. When used in this coverage section:
CLAIM means:
(i) a written demand for monetary damages,
(ii) a civil proceeding commenced by the service of a complaint or similar pleading,
(iii) a criminal proceeding commenced by a return of an indictment, or
(iv) a formal administrative or regulatory proceeding commenced by the filing of a notice of
charges, formal investigative order or similar document,
against any INSURED PERSON for a WRONGFUL ACT, including any appeal therefrom.
DEFENSE COSTS means that part of LOSS consisting of reasonable costs, charges, fees (including
but not limited to attorneys' fees and experts' fees) and expenses (other than regular or
overtime wages, salaries or fees of the directors. officers or employees of the INSURED
ORGANIZATION) incurred in defending or investigating CLAIMS and the premium for appeal,
attachment or similar bonds.
FINANCIAL IMPAIRMENT means the status of the INSURED ORGANIZATION resulting from (i) the
appointment by any state or federal official, agency or court of any receiver, conservator,
liquidator, trustee, rehabilitator or similar official to take control of, supervise, manage or
liquidate the INSURED ORGANIZATION, or (ii) THE INSURED ORGANIZATION becoming a debtor in
possession.
INSURED, either in the singular or plural, means the INSURED ORGANIZATION and any INSURED
PERSON.
INSURED CAPACITY means the position or capacity designated in Item 6 of the Declarations for
this coverage section hold by any INSURED PERSON but shall not include any position or
capacity in any organization other than the INSURED ORGANIZATION, even if the INSURED
ORGANIZATION directed or requested THE INSURED PERSON to serve in such other position or
capacity.
INSURED ORGANIZATION means, collectively, those organizations designated in Item 5 of the
Declarations for this coverage section.
INSURED PERSON, either in the singular or plural, means any one or more of those persons
designated in Item 6 of the Declarations for this coverage section.
INTERRELATED WRONGFUL ACTS means all causally connected WRONGFUL ACTS.
LOSS means the total amount which any INSURED PERSON becomes legally obligated to pay on account
of each CLAIM and for all CLAIMS in each POLICY PERIOD and the Extended Reporting Period, if
exercised, made against them for WRONGFUL ACTS for which coverage applies, including, but not
limited to, damages, judgements, settlements, costs and DEFENSE COSTS. LOSS does not include
(i) any amount not indemnified by the INSURED ORGANIZATION for which the INSURED PERSON is
absolved from payment by reason of any covenant, agreement or court order, (ii) any amount
incurred by the INSURED ORGANIZATION (including its board of directors or any committee of
the board of directors) in connection with the investigation or evaluation of any CLAIM or
potential CLAIM by or on behalf of the INSURED ORGANIZATION, (iii) fines or penalties imposed
by law or the multiple portion of any multiplied damage award, or (iv) matters uninsurable
under the law pursuant to which this coverage section is construed.
</TABLE>
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DEFINITIONS POLLUTANTS means any substance located anywhere in the world exhibiting any hazardous
characteristics as defined by, or identified on a list of hazardous substances issued by,
the United States Environmental Protection Agency or a state, county, municipality or locality
counterpart thereof. Such substances shall include, without limitation, solids, liquids, gaseous or
thermal irritants, contaminants or smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste
materials. POLLUTANTS shall also mean any other air emission, odor, waste water, oil or oil
products, infectious or medical waste, asbestos or asbestos products and any noise.
SUBSIDIARY, either in the singular or plural, means any organization in which more than 50% of the
outstanding securities or voting rights representing the present right to vote for election of
directors is owned or controlled, directly or indirectly, in any combination, by one or more INSURED
ORGANIZATIONS.
WRONGFUL ACT means any error, misstatement, misleading statement, act, omission, neglect, or breach
of duty committed, attempted, or allegedly committed or attempted, by an INSURED PERSON, individually
or otherwise, in his INSURED CAPACITY, or any matter claimed against him solely by reason of his
serving in such INSURED CAPACITY.
</TABLE>
Form 14-02-0943 (Ed. 1/92) Page 10 of 10
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DECLARATIONS
OUTSIDE DIRECTORSHIP LIABILITY
COVERAGE SECTION
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Item 1. PARENT ORGANIZATION:
LIZ CLAIBORNE, INC.
Item 2. Limits of Liability:
(A) Each LOSS $ 15,000,000.
(B) Each POLICY PERIOD $ 15,000,000.
Note that the limits of liability and any deductible or retention are reduced or exhausted by
DEFENSE COSTS.
Item 3. Coinsurance Percent: NONE
Item 4. Deductible Amount:
Insuring Clause 2 $ 500,000.
Item 5. INSURED ORGANIZATION:
LIZ CLAIBORNE, INC. AND ITS SUBSIDIARIES.
Item 6. INSURED PERSONS:
With regard to A Non-Profit Outside Entity, any person who has been, now is or shall become a duly elected
director, a duly elected or appointed officer, or an employee of the Insured Organization. With regard to any
Scheduled Outside Entity, any individual listed on a Scheduled Outside Entity Endorsement.
Item 7. Extended Reporting Period:
(A) Additional Premium: $8,750.
(B) Additional Period: ONE YEAR
Item 8. Pending or Prior Date: JUNE 8, 1981
Item 9. Continuity Date: JUNE 8, 1981
</TABLE>
Form 14-02-0951 (ED. 1-92) Page 1 of 10
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OUTSIDE DIRECTORSHIP In consideration of payment of the premium and subject to the Declarations, General
LIABILITY COVERAGE Terms and Conditions, and the limitations, conditions, provisions and other terms of
SECTION this coverage section, the Company agrees as follows:
INSURING CLAUSES
Outside Directorship 1. The Company shall pay on behalf of each of the INSURED PERSONS who serve
Liability Coverage in an OUTSIDE DIRECTORSHIP all LOSS for which the INSURED PERSON is not
Insuring Clause 1 indemnified by the INSURED ORGANIZATION or the OUTSIDE ENTITY and which the
INSURED PERSON becomes legally obligated to pay on account of any CLAIM first
made against him, individually or otherwise, during the POLICY PERIOD or, if
exercised, during the Extended Reporting Period, for a WRONGFUL ACT committed,
attempted, or allegedly committed or attempted by such INSURED PERSON before
or during the POLICY PERIOD.
Outside Directorship 2. The Company shall pay on behalf of the INSURED ORGANIZATION all LOSS (i) for
Indemnification Coverage which the INSURED ORGANIZATION grants indemnification, as permitted or
Insuring Clause 2 required by law, to each INSURED PERSON who serves in an OUTSIDE
DIRECTORSHIP, (ii) for which the INSURED PERSON is not indemnified by the
OUTSIDE ENTITY, and (iii) which the INSURED PERSON has become legally
obligated to pay on account of any CLAIM first made against him, individually or
otherwise, during the POLICY PERIOD or, if exercised, during the Extended
Reporting Period for a WRONGFUL ACT committed, attempted, or allegedly
committed or attempted by such INSURED PERSON before or during the POLICY
PERIOD.
ESTATES AND LEGAL 3. Subject otherwise to the General Terms and Conditions and the limitations,
REPRESENTATIVES conditions, provisions and other terms of this coverage section, coverage shall
extend to CLAIMS for the WRONGFUL ACTS of INSURED PERSONS made against the
estates, heirs, legal representatives or assigns of INSURED PERSONS who are
deceased or against the legal representatives or assigns of INSURED PERSONS
who are incompetent, insolvent or bankrupt.
EXTENDED 4. If the Company terminates or refuses to renew this coverage section other than
REPORTING PERIOD for nonpayment of premium, the PARENT ORGANIZATION and the INSURED
PERSONS shall have the right, upon payment of the additional premium set forth
in Item 7(A) of the Declarations for this coverage section, to an extension of the
coverage granted by this coverage section for the period set forth in Item 7(B)
of the Declarations for this coverage section (Extended Reporting Period)
following the effective date of termination or nonrenewal, but only for any
WRONGFUL ACT committed, attempted, or allegedly committed or attempted, prior
to the effective date of termination or nonrenewal. This right of extension shall
lapse unless written notice of such election, together with payment of the
additional premium due, is received by the Company within 30 days following the
effective date of termination or nonrenewal. Any CLAIM made during the
Extended Reporting Period shall be deemed to have been made during the
immediately preceding POLICY PERIOD.
If the PARENT ORGANIZATION terminates or declines to accept renewal, the
Company may, if requested, at its sole option, grant an Extended Reporting
Period. The offer of renewal terms and conditions or premiums different from
those in effect prior to renewal shall not constitute refusal to renew.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 2 of 10
<PAGE> 20
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EXCLUSIONS
Exclusions 5. The Company shall not be liable for LOSS on account of any CLAIM made against
Applicable to any INSURED PERSON:
Insuring Clauses 1 and 2
(a) based upon, arising from, or in consequence of any circumstance if written
notice of such circumstance has been given under any policy or coverage
section of which this coverage section is a renewal or replacement and if
such prior policy or coverage section affords coverage (or would afford
such coverage except for the exhaustion of its limits of liability) for such
LOSS, in whole or in part, as a result of such notice.
(b) based upon, arising from, or in consequence of any demand, suit or other proceeding
pending, or order, decree or judgment entered against any INSURED PERSON on or prior to:
(i) the Pending or Prior Date set forth in Item 8 of the Declarations for this
coverage section with respect to OUTSIDE DIRECTORSHIPS in a NON-PROFIT OUTSIDE
ENTITY;
(ii) the Pending or Prior Date set forth in the Scheduled Outside Entity Endorsement
hereto with respect to OUTSIDE DIRECTORSHIPS in a SCHEDULED OUTSIDE ENTITY,
or the same or any substantially similar fact, circumstance or situation
underlying or alleged therein;
(c) brought or maintained by or on behalf of any INSURED, the OUTSIDE ENTITY, or one or
more of the OUTSIDE ENTITY'S directors, officers, trustees, governors or equivalent
executives, except:
(i) a CLAIM that is a derivative action brought and maintained on behalf of an INSURED
ORGANIZATION by one or more persons who are not INSURED PERSONS and who bring
and maintain the CLAIM without the solicitation, assistance or participation
of any INSURED; or
(ii) a CLAIM that is a derivative action brought and maintained on behalf of the
OUTSIDE ENTITY by one or more persons who are not directors, officers,
trustees, governors or equivalent executives of the OUTSIDE ENTITY and who
bring and maintain the CLAIM without the solicitation, assistance or
participation of the OUTSIDE ENTITY or any director, officer, trustee, governor
or equivalent executive thereof;
(d) for an actual or alleged violation of the responsibilities, obligations or duties
imposed by the Employee Retirement Income Security Act of 1974 and amendments thereto
or similar provisions of any federal, state or local statutory law or common law upon
fiduciaries of any pension, profit sharing, health and welfare or other employee
benefit plan or trust established or maintained for the purpose of providing benefits
to employees of any OUTSIDE ENTITY;
(e) for bodily injury, mental or emotional distress, sickness, disease or death of any
person or damage to or destruction of any tangible property including loss of use
thereof;
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 3 of 10
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EXCLUSIONS
Exclusions (f) based upon, arising from, or in consequence of (i) the actual, alleged or
Applicable to threatened discharge, release, escape or disposal of POLLUTANTS into or on
Insuring Clauses 1 and 2 real or personal property, water or the atmosphere; or (ii) any direction or
(continued) request that the INSURED or OUTSIDE ENTITY test for, monitor, clean up,
remove, contain, treat, detoxify or neutralize POLLUTANTS, or any voluntary
decision to do so; including but not limited to any CLAIM for financial loss
to the INSURED ORGANIZATION, the OUTSIDE ENTITY, or any security holders
or creditors thereof based upon, arising from, or in consequence of the
matters described in (i) or (ii) of this Exclusion; or
(g) for WRONGFUL ACTS committed, attempted or allegedly committed or attempted after
the date such INSURED PERSON ceases to serve in the OUTSIDE DIRECTORSHIP.
Exclusions 6. The Company shall not be liable under Insuring Clause 1 for LOSS on account
Applicable to of any CLAIM made against any INSURED PERSON:
Insuring Clause 1 Only
(a) for an accounting of profits made from the purchase or sale by such
INSURED PERSON of securities of the INSURED ORGANIZATION or the OUTSIDE
ENTITY within the meaning of Section 16(b) of the Securities Exchange Act
of 1934 and amendments thereto or similar provisions of any federal, state
or local statutory law or common law;
(b) based upon, arising from, or in consequence of any deliberately fraudulent act or
omission or any willful violation of any statute or regulation by such INSURED PERSON,
if a judgment or other final adjudication adverse to the INSURED PERSON establishes
such a deliberately fraudulent act or omission or willful violation; or
(c) based upon, arising from, or in consequence of such INSURED PERSON having gained in
fact any personal profit, remuneration or advantage to which such INSURED PERSON was not
legally entitled.
Severability 7. With respect to the Exclusions in Subsections 5 and 6 of this coverage section,
of Exclusions no fact pertaining to or knowledge possessed by any INSURED PERSON shall be
imputed to any other INSURED PERSON to determine if coverage is available.
LIMIT OF LIABILITY, 8. For the purposes of this coverage section, all LOSS arising out of the same
DEDUCTIBLE and WRONGFUL ACT and all INTERRELATED WRONGFUL ACTS of any INSURED PERSON shall
COINSURANCE be deemed one LOSS, and such LOSS shall be deemed to have originated in the
earliest POLICY PERIOD in which a CLAIM is first made against any INSURED
PERSON alleging any such WRONGFUL ACTS or INTERRELATED WRONGFUL ACTS.
The Company's maximum liability for each LOSS, whether covered under
Insuring Clause 1 or Insuring Clause 2 or both, shall be the Limit of Liability for
Each Loss set forth in Item 2(A) of the Declarations for this coverage section.
The Company's maximum aggregate liability for all LOSS on account of all
CLAIMS first made during the same POLICY PERIOD, whether covered under
Insuring Clause 1 or Insuring Clause 2 or both, shall be the Limit of Liability for
each POLICY PERIOD set forth in Item 2(B) of the Declarations for this coverage
section.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 4 of 10
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LIMIT OF LIABILITY, The Company's liability under Insuring Clause 2 shall apply only to that part of
DEDUCTIBLE AND each LOSS which is excess of the Deductible Amount set forth in Item 4 of the
COINSURANCE Declarations for this coverage section and such Deductible Amount shall be
(continued) borne by the INSUREDS uninsured and at their own risk.
If a single LOSS is covered in part under Insuring Clause 1 and in part under Insuring Clause
2, the Deductible Amount applicable to such LOSS shall be the Insuring Clause 2 deductible set
forth in Item 4 of the Declarations for this coverage section.
With respect to all LOSS (excess of the applicable Deductible Amount) originating in any one
POLICY PERIOD, the INSUREDS shall bear uninsured and at their own risk that percent of all such
LOSS specified as the Coinsurance Percent in Item 3 of the Declarations for this coverage
section and the Company's liability hereunder shall apply only to the remaining percent of all
such LOSS.
For purposes of this Subsection 8 only, the Extended Reporting Period, if exercised, shall be
part of and not in addition to the immediately preceding POLICY PERIOD.
If the Company or any of its subsidiaries or affiliated companies makes payment under another
policy or another coverage section of this policy on account of any CLAIM also covered under
this coverage section, the Limit of Liability for this coverage section with respect to such
CLAIM shall be reduced by the amount of such payment.
PRESUMPTIVE 9. If the INSURED ORGANIZATION:
INDEMNIFICATION
(a) fails or refuses, other than for reason of FINANCIAL IMPAIRMENT, to
indemnify the INSURED PERSON for LOSS; and
(b) is permitted or required to indemnify the INSURED PERSON for such LOSS to the fullest
extent permitted or required by law,
then, notwithstanding any other conditions, provisions or terms of this coverage section to the
contrary, any payment by the Company of such LOSS shall be subject to (i) the Insuring Clause 2
Deductible Amount set forth in item 4 of the Declarations for this coverage section and (ii) all
of the Exclusions set forth in Subsections 5 and 6 of this coverage section.
For purposes of this Subsection 9, the shareholder and board of director resolutions of the
INSURED ORGANIZATION shall be deemed to provide indemnification for such LOSS to the fullest
extent permitted or required by law.
REPORTING 10. The INSUREDS shall, as a condition precedent to exercising their rights under this
AND NOTICE coverage section, give to the Company written notice as soon as practicable of
any CLAIM made against any of them for a WRONGFUL ACT.
If during the POLICY PERIOD or Extended Reporting Period (if exercised) an
INSURED becomes aware of circumstances which could give rise to a CLAIM and
gives written notice of such circumstance(s) to the Company, then any CLAIMS
subsequently arising from such circumstances shall be considered to have been
reported during the POLICY PERIOD or the Extended Reporting Period in which
the circumstances were first reported to the Company.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 5 of 10
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REPORTING The INSUREDS shall, as a condition precedent to exercising their rights under this
AND NOTICE coverage section, give to the Company such information and cooperation as it
(continued) may reasonably require, including but not limited to a description of the CLAIM or
circumstances, the nature of the alleged potential damage, the names of actual or
potential claimants, and the manner in which the INSURED first became aware of the
CLAIMS or circumstances.
DEFENSE AND 11. Subject to this Subsection, it shall be the duty of the INSURED PERSONS and not
SETTLEMENT the duty of the Company to defend CLAIMS made against the INSURED
PERSONS.
The INSUREDS agree not to settle any CLAIM, incur any DEFENSE COSTS or
otherwise assume any contractual obligation or admit any liability with respect
to any CLAIM without the Company's consent, which shall not be unreasonably
withhold. The Company shall not be liable for any settlement, DEFENSE COSTS,
assumed obligation or admission to which it has not consented.
The Company shall have the right and shall be given the opportunity to
effectively associate with the INSUREDS in the investigation, defense and
settlement, including but not limited to the negotiation of a settlement, of any
CLAIM that appears reasonably likely to be covered in whole or in part by this
coverage section.
The INSUREDS agree to provide the Company with all information, assistance and
cooperation which the Company reasonably requests and agree that in the event
of a CLAIM the INSUREDS will do nothing that may prejudice the Company's
position or its potential or actual rights of recovery.
DEFENSE COSTS shall be part of and not in addition to the Limits of Liability set
forth in Item 2 of the Declarations for this coverage section, and the payment
by the Company of DEFENSE COSTS reduces such Limits of Liability.
ALLOCATION 12. If both LOSS covered by this coverage section and loss not covered by this coverage section are
incurred, either because a CLAIM against the INSURED PERSONS includes both covered and uncovered
matters or because a claim is made against both an INSURED PERSON and others, including the
INSURED ORGANIZATION, and/or the OUTSIDE ENTITY, the INSUREDS and the Company shall use their
best efforts to agree upon a fair and proper allocation of such amount between covered LOSS and
uncovered loss.
IF the INSUREDS and the Company agree on an allocation of DEFENSE COSTS, the Company shall
advance on a current basis DEFENSE COSTS allocated to covered LOSS. If the INSUREDS and the
Company cannot agree on an allocation:
(a) no presumption as to allocation shall exist in any arbitration, suit or other proceeding;
(b) the Company shall advance on a current basis DEFENSE COSTS which the Company believes to
be covered under this coverage section until a different allocation is negotiated,
arbitrated or judicially determined; and
(c) the Company, if requested by the INSUREDS, shall submit the dispute to binding
arbitration. The rules of the American Arbitration Association shall apply except with
respect to the selection of the arbitration panel, which shall consist of one arbitrator
selected by the INSUREDS, one arbitrator selected by the Company, and a third independent
arbitrator selected by the first two arbitrators.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 6 of 10
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ALLOCATION Any negotiated, arbitrated or judicially determined allocation of DEFENSE COSTS
(continued) on account of a CLAIM shall be applied retroactively to all DEFENSE COSTS on account of such
CLAIM, notwithstanding any prior advancement to the contrary. Any allocation or
advancement of DEFENSE COSTS on account of a CLAIM shall not apply to or create any
presumption with respect to the allocation of other LOSS on account of such CLAIM.
OTHER INSURANCE 13. If the OUTSIDE ENTITY maintains one or more insurance policies during the period
AND INDEMNITY a CLAIM otherwise covered by this coverage section is first made against an
INSURED PERSON, then with respect to such CLAIM this coverage section shall
be specifically excess of the amount of payment from such other insurance.
If any LOSS arising from any CLAIM made against any INSURED PERSONS is
insured under any other valid policy(ies), prior or current, or is indemnified by the
OUTSIDE ENTITY or any other organization other than the INSURED
ORGANIZATION, then this coverage section shall cover such LOSS, subject to its
limitations, conditions, provisions and other terms, only to the extent that the
amount of such LOSS is in excess of the amount of payment from such
indemnity or other insurance whether such other insurance is stated to be
primary, contributory, excess, contingent or otherwise, unless such other
insurance is written only as specific excess insurance over the limits provided
in this coverage section.
The INSUREDS agree that they will use their best efforts to promptly enforce any
rights of the INSURED PERSONS to indemnification by the OUTSIDE ENTITY or any
other organization.
CHANGES IN
EXPOSURE
Acquisition or 14. If the INSURED ORGANIZATION (i) acquires securities or voting rights in another
Creation of organization or creates another organization, which as a result of such
Another Organization acquisition or creation becomes a SUBSIDIARY, or (ii) acquires any organization
by merger into or consolidation with an INSURED ORGANIZATION, such
organization and its INSURED PERSONS shall be INSUREDS under this coverage
section but only with respect to WRONGFUL ACTS committed, attempted, or
allegedly committed or attempted, after such acquisition or creation unless the
Company agrees, after presentation of a complete application and all appropriate
information, to provide coverage by endorsement for WRONGFUL ACTS committed
or attempted, or allegedly committed or attempted, by such INSURED PERSONS
prior to such acquisition or creation.
If the fair value of all cash, securities, assumed indebtedness and other
consideration paid by the INSURED ORGANIZATION for any such acquisition or
creation exceeds 10% of the total assets of the PARENT ORGANIZATION as
reflected in the PARENT ORGANIZATION'S most recent audited consolidated
financial statements, the PARENT ORGANIZATION shall give written notice of such
acquisition to the Company as soon as practicable together with such
information as the Company may require and shall pay any reasonable additional
premium required by the Company.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 7 of 10
<PAGE> 25
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
CHANGES IN
EXPOSURE
(continued)
<TABLE>
<S> <C> <C>
Acquisition of 15. If (i) the PARENT ORGANIZATION merges into or consolidates with another
Parent Organization organization, or (ii) another organization or person or group of organizations
by Another and/or persons acting in concert acquires securities or voting rights which result
Organization in ownership or voting control by the other organization(s) or person(s) of more
than 50% of the outstanding securities representing the present right to vote for
election of directors of the PARENT ORGANIZATION, coverage under this coverage
section shall continue until termination of this coverage section, but only with
respect to CLAIMS for WRONGFUL ACTS committed, attempted, or allegedly
committed or attempted by INSURED PERSONS prior to such merger, consolidation
or acquisition. The PARENT ORGANIZATION shall give written notice of such
merger, consolidation or acquisition as soon as practicable, together with such information as
the Company may require.
Cessation of 16. In the event an organization ceases to be a SUBSIDIARY before or after the
Subsidiaries Inception Date of this coverage section, coverage with respect to such
SUBSIDIARY and its INSURED PERSONS shall continue until termination of this
coverage section, but only with respect to CLAIMS for WRONGFUL ACTS
committed, attempted or allegedly committed or attempted prior to the date such
organization ceased to be a SUBSIDIARY.
SCOPE OF 17. The coverage under this coverage section shall not be construed under any
COVERAGE circumstance to extend to any OUTSIDE ENTITY or to any director, officer, trustee,
governor or other executive or employee of any OUTSIDE ENTITY, other than the
INSURED PERSON in his OUTSIDE DIRECTORSHIP.
REPRESENTATIONS 18. In granting coverage to any one of the INSUREDS, the Company has relied upon
AND SEVERABILITY the declarations and statements in the written application for this coverage
section and upon any declarations and statements in the original written
application submitted to another insurer in respect of the prior coverage
incepting as of the Continuity Date set forth in Item 9 of the Declarations for this
coverage section. All such declarations and statements are the basis of such
coverage and shall be considered as incorporated in and constituting part of this
coverage section.
Such written application(s) for coverage shall be construed as a separate
application for coverage by each of the INSURED PERSONS. With respect to the
declarations and statements contained in such written application(s) for
coverage, no statement in the application or knowledge possessed by any
INSURED PERSON shall be imputed to any other INSURED PERSON for the purpose
of determining if coverage is available.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 8 of 10
<PAGE> 26
<TABLE>
<S> <C> <C>
DEFINITIONS 19. When used in this coverage section:
CLAIM means:
(i) a written demand for monetary damages,
(ii) a civil proceeding commenced by the service of a complaint or similar pleading,
(iii) a criminal proceeding commenced by a return of an indictment, or
(iv) a formal administrative or regulatory proceeding commenced by the filing of a notice of
charges, formal investigative order or similar document,
against any INSURED PERSON for a WRONGFUL ACT, including any appeal therefrom.
DEFENSE COSTS means that part of LOSS consisting of reasonable costs, charges, fees (including
but not limited to attorneys' fees and experts' fees) and expenses (other than regular or
overtime wages, salaries or fees of the directors, officers or employees of the INSURED
ORGANIZATION) incurred in defending or investigating CLAIMS, and the premium for appeal,
attachment or similar bonds.
FINANCIAL IMPAIRMENT means the status of the INSURED ORGANIZATION resulting from (i) the
appointment by any state or federal official, agency or court of any receiver, conservator,
liquidator, trustee, rehabilitator or similar official to take control of, supervise, manage or
liquidate the INSURED ORGANIZATION, or (ii) the INSURED ORGANIZATION becoming a debtor in
possession.
INSUREDS, either in the singular or plural, means the INSURED ORGANIZATION and any INSURED
PERSONS.
INSURED ORGANIZATION means, collectively, those organizations designated in Item 5 of the
Declarations for this coverage section.
INSURED PERSONS, either in the singular or plural, means any one or more of those persons
designated in Item 6 of the Declarations for this coverage section.
INTERRELATED WRONGFUL ACTS means all causally connected WRONGFUL ACTS.
LOSS means the total amount which any INSURED PERSON becomes legally obligated to pay on account
of each CLAIM and for all CLAIMS in each POLICY PERIOD and the Extended Reporting Period, if
exercised, made against them for WRONGFUL ACTS for which coverage applies, including, but not
limited to, damages, judgments, settlements, costs and DEFENSE COSTS.
LOSS does not include (i) any amount not indemnified by the INSURED ORGANIZATION for which the
INSURED PERSON is absolved from payment by reason of any covenant, agreement or court order,
(ii) fines or penalties imposed by law or the multiple portion of any multiplied damage
award, or (iii) matters uninsurable under the law pursuant to which this coverage section
is construed.
NON-PROFIT OUTSIDE ENTITY means any non-profit corporation, community chest, fund or foundation
that is not included in the definition of INSURED ORGANIZATION and that is exempt from federal
income tax as an organization described in Section 501 (c) (3) of the Internal Revenue Code of
1986, as amended.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 9 of 10
<PAGE> 27
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
<TABLE>
<S> <C>
DEFINITIONS OUTSIDE DIRECTORSHIP means the position of director, officer, trustee, governor
(continued) or equivalent executive position held by any INSURED PERSON in an OUTSIDE ENTITY if service in such
position was with the knowledge and consent or at the request of the INSURED ORGANIZATION.
OUTSIDE ENTITY means a NON-PROFIT OUTSIDE ENTITY or a SCHEDULED OUTSIDE ENTITY.
POLLUTANTS means any substance located anywhere in the world exhibiting any hazardous characteristics
as defined by, or identified on a list of hazardous substances issued by, the United States
Environmental Protection Agency or a state, county, municipality or locality counterpart thereof.
Such substances shall include, without limitation, solids, liquids, gaseous or thermal irritants,
contaminants or smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste materials. POLLUTANTS
shall also mean any other air emission, odor, waste water, oil or oil products, infectious or medical
waste, asbestos or asbestos products and any noise.
SCHEDULED OUTSIDE ENTITY means any organization listed in a Scheduled Outside Entity Endorsement to
this policy.
SUBSIDIARY, either in the singular or plural, means any organization in which more than 50% of the
outstanding securities or voting rights representing the present right to vote for election of
directors is owned or controlled, directly or indirectly, in any combination, by one or more INSURED
ORGANIZATIONS.
WRONGFUL ACT means any error, misstatement, misleading statement, act, omission, neglect, or breach
of duty committed, attempted, or allegedly committed or attempted, by an INSURED PERSON, individually
or otherwise, in an OUTSIDE DIRECTORSHIP, or any matter claimed against him solely by reason of his
serving in an OUTSIDE DIRECTORSHIP.
</TABLE>
Form 14-02-0951 (Ed. 1-92) Page 10 OF 10
<PAGE> 28
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
ENDORSEMENT
Coverage Section: OUTSIDE DIRECTORSHIP Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 1
this endorsement: AUGUST 11, 1994
To be attached to and form part of
Policy No. 8103-53-79-F
Issued to: LIZ CLAIBORNE, INC.
With respect to the following INSURED PERSONS serving in an
OUTSIDE DIRECTORSHIP in the following respective
OUTSIDE ENTITIES:
<TABLE>
<CAPTION>
Insured Person Outside Entity
-------------- --------------
<S> <C>
Harvey Falk Amity Dyeing & Finishing Partnership
Samuel M. Miller Amity Dyeing & Finishing Partnership
Jack Listanowski Amity Dyeing & Finishing Partnership
</TABLE>
It is agreed:
1. Insuring Clause 2 of this coverage section is deleted in its entirety.
2. The Company shall not be liable for LOSS:
(a) which is indemnified by the INSURED ORGANIZATION,
or
(b) which but for this endorsement would be subject to the Insuring
Clause 2 deductible pursuant to subsection 9 of this coverage
section.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
/s/ JOHN S. BAIN
-------------------------
Authorized Representative
September 7, 1994
-------------------------
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE> 29
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
ENDORSEMENT
Coverage Section: OUTSIDE DIRECTORSHIP Company: FEDERAL INSURANCE COMPANY
Effective date of Endorsement No: 2
this endorsement: AUGUST 11, 1994
To be attached to and form part of
Policy No. 8103-53-79-F
Issued to: LIZ CLAIBORNE, INC.
With respect to the following INSURED PERSONS serving in an
OUTSIDE DIRECTORSHIP in the following respective
OUTSIDE ENTITIES:
<TABLE>
<CAPTION>
Insured Person Outside Entity Prior Acts Date
-------------- -------------- ---------------
<S> <C> <C>
Harvey Falk Amity Dyeing & Finishing September 26, 1991
Partnership
Samuel M. Miller Amity Dyeing & Finishing September 26, 1991
Partnership
Jack Listanowski Amity Dyeing & Finishing September 26, 1991
Partnership
</TABLE>
it is agreed the Company shall not be liable for LOSS on account of any CLAIM
made against any such INSURED PERSON based upon, arising from, or in
consequence of any WRONGFUL ACT, including INTERRELATED WRONGFUL ACTS,
committed, attempted or allegedly committed or attempted in whole or in part
before the respective Prior Acts Date set forth above.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
/s/ JOHN S. BAIN
-------------------------
Authorized Representative
September 7, 1994
-------------------------
Date
Page 1 Last page
Form 14-02-0961 (Rev. 1-92)
<PAGE> 30
[CHUBB LOGO] EXECUTIVE PROTECTION POLICY
ENDORSEMENT
Coverage Section: General Terms Company: Federal Insurance Company
Effective Date of Endorsement No.: 2
this endorsement: June 11, 1994
To be attached to and form part of
Policy No.: 8103-53-79-E
Issued to: Liz Claiborne, Inc.
It is agreed that coverage is continued under this policy and that Item 2 of
the Declarations is amended to in its entirety read as follows:
POLICY PERIOD: From 12:01 A.M. on June 11, 1993 To 12:01 A.M. August 11,
1994 Local time at the address shown in Item 1.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
By:
-----------------------
Authorized Employee
Date: September 12, 1994
-----------------------
kf-0912.13
<PAGE> 1
EXHIBIT 10(l)(i)
SUMMARY OF EXCESS COVERAGE DIRECTORS AND OFFICERS
LIABILITY INSURANCE POLICY NO. ZKA9400406 ENTERED INTO BY
AND BETWEEN LIZ CLAIBORNE, INC. (THE "COMPANY")
AND LLOYDS OF LONDON
For the period August 11, 1994 to August 11, 1995, the Company
maintains a $10,000,000.00 directors and officers liability policy with Lloyds
of London, for liability claims in excess of the policy limits of policy number
81035379F, which policy has a term of August 11, 1994 to August 11, 1995, and
is subject to a retention of $500,000 for each claim under the Company
reimbursement section and contains certain exclusions from coverage. The
premium for the excess policy is $95,000.
<PAGE> 1
EXHIBIT 10(m)
DESCRIPTION OF SALARIED
EMPLOYEE INCENTIVE BONUS PLAN
For the 1994 fiscal year, Liz Claiborne, Inc. (the "Company") maintained a
bonus plan for full time salaried employees under which bonuses were earned
based on achievement of certain performance criteria, subject to certain terms
and conditions. Under the bonus plan, the potential maximum bonus an employee
could earn was established as a percentage of the employee's base salary
ranging from 20% to 100%. Bonuses for the year were determined by reference to
a combination of pre-established corporate, divisional (if applicable) and
individual performance criteria. The corporate portion of the bonus was
determined by reference to levels of corporate operating income and return on
capital compared to specified targets. The corporate performance goals set for
fiscal 1994 were not met, and, as a result, no bonus awards were earned under
the corporate component of the bonus program. For the 1995 fiscal year, a bonus
plan which will place increased emphasis on the achievement of specified target
levels of objective divisional and departmental goals, as contrasted with
corporate and/or subjective individual performance is anticipated.
<PAGE> 1
EXHIBIT 10(t)
DESCRIPTION OF SUPPLEMENTAL LIFE INSURANCE PLANS
Vice Presidents of the Liz Claiborne, Inc. (the "Company") receive universal
life insurance policies which provide coverage equal to two times annual base
salary. The Company pays the premiums on each policy during the employment
period, enabling the employee to have a paid-up life insurance policy at
retirement with a cash surrender value. Additionally, during 1994 the Chairman
of the Board and former Vice Chairman of the Board and President were each
covered under a $1 million term life insurance policy for which the Company
paid the premium on the policies. Both of these policies terminated effective
as of March 15, 1995.
<PAGE> 1
Exhibit 10(v)
19200/0022
LIZ CLAIBORNE Section 162(m) CASH BONUS PLAN
I. Definitions.
The following terms have the meanings indicated unless a different
meaning is clearly required by the context.
1.1 "Board of Directors" means the board of directors of the
Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Committee" means the Compensation Committee of the Board of
Directors or a subcommittee thereof.
1.4 "Company" means Liz Claiborne, Inc.
1.5 "Executive Officer" has the meaning set forth in Rule 3b-7
promulgated under the Securities Exchange Act of 1934, as amended.
1.6 "Participant" means an individual who participates in the Plan
pursuant to Section 3.1.
II. Purpose.
The purpose of the Plan is to provide performance incentives to certain
executives who are "covered employees" within the
<PAGE> 2
meaning of Section 162(m) of the Code while securing, to the extent
practicable, a tax deduction by the Company for payments of incentive
compensation to such executives.
III. Participation.
3.1 An individual shall be a Participant in the Plan for a fiscal
year of the Company if he or she (a) is an Executive Officer of the Company on
the first day of such year or becomes an Executive Officer during such year by
virtue of being hired or promoted and (b) has a base salary in excess of
$500,000 per year or is reasonably expected by the Committee to have
compensation for such year in excess of $1 million; provided, however, that if
the Committee determines, in its discretion, prior to the ninety first day
(91st) day of such fiscal year, that it would be in the best interests of the
Company and its shareholders for one or more otherwise eligible Executive
Officers not to be a Participant for such year, such person shall not be a
Participant for such year and the Committee may establish alternative incentive
compensation arrangements for such person.
3.2 An individual who is a Participant in the Plan for a fiscal
year shall not participate for such year in the Company's regular annual bonus
program.
- 2 -
<PAGE> 3
IV. Performance Goals.
4.1 Prior to the ninety first (91st) day of each fiscal year of the
Company, the Committee shall set one or more objective performance goals for
each Participant for such year. Such goals shall be expressed in terms of (a)
one or more corporate or divisional earnings-based measures (which may be based
on net income, operating income, cash flows, or any combination thereof) and/or
(b) one or more corporate or divisional sales-based measures. Each such goal
may be expresed on an absolute and/or relative basis, may employ comparisons
with past performance of the Company (including one or more divisions) and/or
the current or past performance of other companies, and in the case of
earnings-based measures, may employ comparisons to capital, shareholders'
equity and shares outstanding.
4.2 The measures used in performance goals set under the Plan shall
be determined in accordance with generally accepted account principles ("GAAP")
and in a manner consistent with the methods used in the Company's regular
reports on Forms 10-K and 10-Q, without regard to changes in accounting
principles or to extraordinary items as determined by the Company's independent
public accountants in accordance with GAAP.
V. Bonus Awards
5.1 At the time that annual performance goals are set for
Participants, the Committee shall establish a bonus opportunity
- 3 -
<PAGE> 4
for each Participant for the year that is related to the Participant's base
salary at the start of the year by a formula that takes account of the degree
of achievement of the goals set for the Participant; provided, however, that
the Committee shall have absolute discretion to reduce the actual bonus payment
that would otherwise be payable to any Participant on the basis of achievement
of performance goals.
5.2 The annual bonus opportunity for a Participant shall in no
event exceed $1.5 million.
5.3 Bonuses determined under the Plan shall be paid to Participants
in cash at such time as bonuses are generally paid to other Executive Officers;
provided, however, that no such payment shall be made until the Committee has
certified (in the manner prescribed under applicable regulations) that the
performance goals and any other material terms related to the award were in
fact satisfied.
5.4 In the event of the death, disability, or retirement of a
Participant during a fiscal year, the Committee shall, in its discretion, have
the power to award to such Participant an equitably prorated portion of the
bonus which otherwise would have been earned by such Participant.
- 4 -
<PAGE> 5
VI. Administrative Provisions.
6.1 The Plan shall be administered by the Committee, which shall be
comprised solely of two or more members of the Board of Directors who satisfy
the requirements set forth in applicable regulations under Section 162(m) of
the Code.
6.2 The Plan was adopted by the Board of Directors on March 9,
1994, subject to shareholder approval, and shall take effect beginning with the
fiscal year of the Company that starts January 1, 1995. No payments shall be
made under the Plan prior to the time such approval is obtained in accordance
with applicable law. The Board of Directors may at any time amend the Plan in
any fashion or terminate the Plan.
6.3 The Plan shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of choice of
laws.
- 5 -
<PAGE> 1
EXHIBIT 10(w)
LIZ CLAIBORNE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(EFFECTIVE AUGUST 5, 1993)
<PAGE> 2
<TABLE>
<CAPTION>
INDEX TO ARTICLES
-----------------
ARTICLE Page
------- ----
<S> <C> <C>
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3 Contributions and Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . 4
4 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 3
PREAMBLE
Effective August 5, 1993, Liz Claiborne, Inc. (the "Company")
adopted this Liz Claiborne Supplemental Executive Retirement Plan (the "Plan").
The Plan provides benefits to certain employees of the Company and its
subsidiaries for whom contributions under the Liz Claiborne Profit-Sharing
Retirement Plan and the Liz Claiborne Savings Plan are limited by certain
provisions of law. It is intended that benefits paid under the Plan shall be
paid under an arrangement that is, for purposes of the Employee Retirement
Income Security Act of 1974, unfunded and maintained primarily for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees. This document describes the benefits provided under the
Plan and is intended to represent a binding obligation of Liz Claiborne, Inc.
and participating subsidiaries to provide those benefits, subject to the terms
and conditions of the Plan as from time to time in effect. The Plan reads as
follows:
ARTICLE 1
DEFINITIONS
The following terms when used in this Plan have the designated
meanings unless a different meaning is clearly required by the context.
1.1 Code, Committee, Company, Compensation, Disability, Eligible
Employee, Employer, ERISA, Plan Year, Termination of Employment and Valuation
Date have the meanings given them in the Profit-Sharing Plan.
1.2 Beneficiary means the person or persons designated pursuant to
Article 6 to receive a benefit in the event of a SERP Member's death before his
SERP Account has been closed pursuant to Section 5.2(c) or 8.1(c).
<PAGE> 4
1.3 Company Stock means the common stock of the Company.
1.4 Compensation Limit means, with respect to any Plan Year, the
limit established for such Year pursuant to section 401(a)(17) of the Code.
1.5 Earnings Percentage means, with respect to any Plan Year, the
annual rate of earnings on assets of the Profit-Sharing Plan.
1.6 Fair Market Value of a share of Company Stock on any date
means the closing price per share reported on the New York Stock Exchange for
such date or, if no trading occurs on such date, for the last preceding day on
which trading occurred.
1.7 Phantom Share means a bookkeeping entry made to a SERP Account
pursuant to Section 3.2 or 3.4.
1.8 Plan means this Liz Claiborne Supplemental Executive
Retirement Plan as in effect from time to time.
1.9 Plan Administrator means the individual serving pursuant to
Section 7.1.
1.10 Profit-Sharing Plan means the Liz Claiborne Profit-Sharing
Retirement Plan.
1.11 Savings Plan means the Liz Claiborne Savings Plan.
1.12 SERP Account means an account established by the Company
pursuant to Section 4.1.
1.13 SERP Compensation means Compensation without regard to the
Compensation Limit.
<PAGE> 5
1.14 SERP Matching Accrual means an amount credited to a SERP
Member's SERP Account pursuant to Section 3.3.
1.15 SERP Member means an individual who has a SERP Account that
has not been terminated pursuant to Section 5.2(c) or 8.1(c).
1.16 SERP Profit-Sharing Accrual means an amount credited to a SERP
Member's SERP Account pursuant to Section 3.1.
ARTICLE 2
ELIGIBILITY
2.1 Eligibility. An Eligible Employee who is a Member of the
Profit-Sharing Plan or the Savings Plan, and whose opportunity to share in
contributions under one or both such Plans is limited in any Plan Year by the
operation of the Compensation Limit, shall become a SERP Member; provided,
however, that no person shall become a SERP Member if he is not in a select
group of management or highly compensated employees within the meaning of
Section 201(2) of ERISA. In the case of an Eligible Employee whose SERP
Compensation is at a rate in excess of $250,000 per year, the Committee in its
discretion may waive the requirement that such Eligible Employee must be a
Member of the Profit-Sharing Plan or the Savings Plan in order to be a SERP
Member. A SERP Member shall be eligible to be credited with a SERP
Profit-Sharing Accrual and with a SERP Matching Accrual, pursuant to the
provisions of Sections 3.1 and 3.3, and shall be eligible to direct his
Employer to defer part of his SERP Compensation pursuant to the provisions of
Section 3.5. An individual shall continue to be a SERP Member until his SERP
Account is closed pursuant to Section 5.2(c) or 8.1(c). The Committee in its
sole discretion may establish specific terms and conditions for the
participation of any Eligible Employee.
<PAGE> 6
ARTICLE 3
CONTRIBUTIONS AND DEFERRALS
3.1 SERP Profit-Sharing Accruals. As soon as practicable after
the close of each Plan Year that begins on or after January 1, 1993, each
Employer that makes a Profit-Sharing Contribution for such Plan Year determined
pursuant to Section 3.1 of the Profit-Sharing Plan shall determine a SERP
Profit-Sharing Accrual for such Plan Year for each SERP Member who is entitled
to share in the allocation of such Profit-Sharing Contribution pursuant to
Section 4.2 of the Profit-Sharing Plan. The SERP Profit-Sharing Accrual for
each such SERP Member shall be equal to the product of (a) multiplied by (b),
reduced by (c), where:
(a) is the ratio of (i) such Profit-Sharing Contribution to
(ii) the total Compensation, during the Plan Year for which such
Profit-Sharing Contribution is made, of all Profit-Sharing Plan
Members entitled to share in the allocation of such Profit-Sharing
Contribution;
(b) is the SERP Member's SERP Compensation during such Plan
Year; provided, that if such SERP Compensation does not exceed the
applicable Compensation Limit, the SERP Member shall be deemed to have
no SERP Compensation for such Plan Year; and
(c) is the amount allocated for such Plan Year to the SERP
Member's Profit-Sharing Plan Account.
Each SERP Member's SERP Profit-Sharing Accrual shall be credited to his SERP
Account as of the last day of the Plan Year to which it relates.
3.2 Retroactive SERP Profit-Sharing Accruals. Each individual who
on August 5, 1993 was both an Eligible Employee and a Member of the
Profit-Sharing Plan, and whose SERP Compensation for the Plan Year 1992
exceeded the Compensation Limit, shall be credited with a retroactive SERP
Profit-Sharing
<PAGE> 7
Accrual for each of the Plan Years 1985 through 1992 for which he was allocated
a share of the Profit-Sharing Contribution pursuant to Section 4.2 of the
Profit-Sharing Plan. The retroactive accrual for an individual for each such
Year shall first be determined by the formula set forth in Section 3.1, and
then increased by cumulative application of the Earnings Percentage for each
subsequent Plan Year through 1992. The amount of each such retroactive accrual
shall be converted to Phantom Shares using a price of $23.125 per Phantom
Share, which is the Fair Market Value of a share of Company Stock on August 5,
1993. Such Phantom Shares shall be credited to the individual's SERP Account
as of August 5, 1993.
3.3 SERP Matching Accruals. Each SERP Member who has in effect a
Participation Agreement pursuant to Section 3.1 of the Savings Plan during any
Plan Year beginning on or after January 1, 1993, and who is eligible to share
in the allocation of the Profit-Sharing Contribution for such Year pursuant to
Section 4.2 of the Profit-Sharing Plan, or any other Eligible Employee who may
become a SERP Member pursuant to Section 2.1, shall be entitled to a SERP
Matching Accrual for such Plan Year equal to (a) minus (b), where:
(a) is 2.5 percent (0.025) of the SERP Member's SERP
Compensation during such Plan Year; provided, that if such SERP
Compensation does not exceed the applicable Compensation Limit, the
SERP Member shall be deemed to have no SERP Compensation for such Plan
Year; and
(b) is the amount of Matching Contributions made under the
Savings Plan for the SERP Member for such Plan Year.
A SERP Member's SERP Matching Accrual shall be credited to his SERP Account as
of the last day of the Plan Year to which it relates.
3.4 Retroactive SERP Matching Accruals. Each individual who on
August 5, 1993 was both an Eligible Employee and a Member of the Savings Plan,
<PAGE> 8
and whose SERP Compensation for the Plan Year 1992 exceeded the Compensation
Limit, shall be credited with a retroactive SERP Matching Accrual for each of
the Plan Years 1985 through 1992 during which he had a Participation Agreement
in effect under the Savings Plan. The retroactive accrual for an individual
for each such Plan Year shall first be determined by the formula set forth in
Section 3.3, and then increased by the cumulative application of the Earnings
Percentage for each subsequent Plan Year through 1992. The amount of each such
retroactive accrual shall be converted to Phantom Shares using a price of
$23.125 per Phantom Share, which is the Fair Market Value of a share of Company
Stock on August 5, 1993. Such Phantom Shares shall be credited to the
individual's SERP Account as of August 5, 1993.
3.5 Deferral Election. (a) Effective January 1, 1995, or as soon
as practicable thereafter, each SERP Member who is an Eligible Employee may
direct the Employer that employs him to reduce his SERP Compensation for a Plan
Year by an amount equal to any whole percentage thereof, provided that such
percentage shall be not less than one percent (1%) and not more than fifteen
percent (15%), and to pay such amount to such SERP Member in the future as
deferred compensation. Any direction pursuant to this Section 3.5 shall be
given in writing, at such time and in such manner as the Committee shall
prescribe, and shall apply only to SERP Compensation that is remuneration for
services rendered after the date such direction is given. No direction given
pursuant to this Section 3.5 shall be changed with retroactive effect.
(b) A reduction of SERP Compensation elected pursuant to this
Section 3.5 shall be effected by regular payroll deductions subsequent to the
date the SERP Member directs an Employer to make such reduction. Each such
<PAGE> 9
payroll deduction shall be equal to the amount determined for the applicable
pay period in accordance with the SERP Member's direction given pursuant to
paragraph (a) of this Section 3.5, reduced by the amount of any Tax-Saver
Contribution made for such SERP Member for such pay period pursuant to Section
3.1 of the Savings Plan. The sum for any Plan Year of a SERP Member's SERP
Compensation reduction pursuant to this Section 3.5 and Tax-Saver Contributions
made for such SERP Member pursuant to Section 3.1 of the Savings Plan shall not
exceed an amount equal to fifteen percent (15%) of the SERP Compensation paid
to such SERP Member during such Plan Year. The reduction of SERP Compensation
pursuant to this Section 3.5 shall be adjusted to the extent necessary to
comply with the limitation set forth in the preceding sentence.
(c) Each payroll deduction described in paragraph (b) of this
Section 3.5 shall be credited to the SERP Member's SERP Account as of the day
on which such amount would otherwise have been paid to the SERP Member.
ARTICLE 4
ACCOUNTS
4.1 SERP Accounts. The Company shall establish a SERP Account for
each SERP Member which shall be credited with the amounts determined pursuant
to Sections 3.1, 3.3 and 3.5 and the number of Phantom Shares determined
pursuant to Sections 3.2 and 3.4, and with earnings determined pursuant to
Sections 4.2, and 4.3.
4.2 Imputed Earnings. (a) The balance standing credited to each
SERP Account other than the portion expressed in Phantom Shares shall be
credited with earnings as of the last day of each Plan Year as provided for in
this Section 4.2.
<PAGE> 10
(b) The amount of earnings for any Plan Year with respect to the
balance of the SERP Account represented by the SERP Member's SERP Profit
Sharing Accruals, SERP Matching Accruals and related earnings shall be equal to
such balance as of the first day of such Plan Year multiplied by the Earnings
Percentage for such Plan Year unless such Earnings Percentage is negative.
(c) The Committee may, in its discretion, permit SERP Members to
elect the rate(s) of earnings applicable to the balance of the SERP Account
represented by payroll deduction amounts credited to such SERP Account pursuant
to Section 3.5 and related earnings. The Committee may also determine the
number of times in each Plan Year a SERP Member may change any such election.
The amount of earnings for any Plan Year with respect to the balance of the
SERP Account representing payroll deduction amounts credit to such SERP Account
pursuant to Section 3.5 and related earnings shall be the amount of such
balance (including payroll deduction amounts for such Plan Year) multiplied by
the applicable rate(s) of earnings elected by the SERP Member (or, in the
absence of any such election, the Earnings Percentage for such Plan Year),
prorated to reflect the portion of the Plan Year during which each payroll
deduction amount for such Plan Year stood credited to such SERP Account.
4.3 Credits for Dividend Reinvestment. Whenever a cash dividend
is paid on Company Stock, the portion of each SERP Account expressed in Phantom
Shares shall be credited as of the payment date with a number of Phantom Shares
(including any fractional share) equal to the quotient of (a) an amount equal
to the cash dividend payable on a number of shares of Company Stock equal to
the number of Phantom Shares (excluding any fractional share) standing credited
to such SERP Account at the record date divided by (b) the Fair Market Value of
a
<PAGE> 11
share of Company Stock on such payment date. In the event of a stock dividend
or distribution, stock split, recapitalization or the like, each SERP Account
shall be credited as of the payment date with a number of Phantom Shares
(including any fractional share) equal to the number of shares (including any
fractional share) of Company Stock payable in respect of shares of Company
Stock equal in number to the number of Phantom Shares (excluding any fractional
share) standing credited to such SERP Account at the record date.
4.4 Vesting of SERP Accounts. A SERP Member's interest in that
portion of his SERP Account attributable to compensation deferrals elected
pursuant to Section 3.5, and earnings credited thereon pursuant to Section 4.2,
shall be fully vested and nonforfeitable at all times. A SERP Member's vested
and nonforfeitable interest in the remaining portion of his SERP Account shall
be fully vested and nonforfeitable upon the happening of any of the events set
forth in Section 5.3 of the Savings Plan; in any other circumstances, a SERP
Member's vested and nonforfeitable interest in such remaining portion shall be
determined on the basis of the vested percentage provisions of Section 6.2 of
the Profit-Sharing Plan.
4.5 Accounts Confer No Interest in Assets. The crediting of
amounts and of shares of Phantom Stock to the SERP Account of a SERP Member is
merely a bookkeeping record and shall not confer on such SERP Member any right,
title or interest in or to any specific assets of any Employer.
4.6 Account Statements. The Plan Administrator shall furnish
written statements to each SERP Member setting forth, at least as of the end of
each calendar year, the amounts and the number of shares of Phantom Stock
(including any fractional share) standing credited to his SERP Account.
<PAGE> 12
ARTICLE 5
BENEFITS
5.1 SERP Benefit. A SERP Member's SERP benefit shall be a sum
equal to the dollar value of his SERP Account at the time of payment pursuant
to Section 5.2. Phantom Shares standing credited to a SERP Account shall be
converted to a dollar value using the Fair Market Value of a share of Company
Stock on the day in which the SERP Member's Termination of Employment occurs.
5.2 Time of Payment. (a) A SERP Member's vested SERP benefit
shall be paid to him, or to his Beneficiary in the event of his death, as a
single sum in cash. Payment shall be made as soon as practicable after the end
of the year following Termination of Employment. The Plan Administrator may
delay any payment, in whole or in part, if in his judgment such a delay is
necessary in order to preserve tax deductibility of the amount paid.
(b) When all benefit payments provided for under Section 5.2
have been made in full, a SERP Member's SERP Account shall be closed.
5.3 Source of Payment. The SERP benefit of each SERP Member shall
be the obligation of the Employer(s) by which such SERP Member was employed at
the time SERP Accruals and SERP Compensation reductions in respect of him were
made pursuant to Sections 3.1 through 3.5, and shall be the general liability
of such Employer(s). The claim of a SERP Member or Beneficiary to a SERP
benefit shall at all times be merely the claim of an unsecured creditor of the
Employer(s) responsible therefor. No trust, security, escrow, or similar
account need be established for the purpose of paying SERP benefits. However,
the Company may in its discretion establish a custodial
<PAGE> 13
account or "rabbi trust" (or other arrangement having equivalent taxation
characteristics under the Code and applicable regulations or rulings) to hold
assets of the Employers, subject to the claims of such Employers' creditors in
the event of insolvency, for the purpose of paying SERP benefits. If the
Company establishes such an account or trust, amounts paid therefrom shall
discharge the obligations hereunder to the extent of the payments so made.
5.4 Withholding. All payments under the Plan shall be subject to
any applicable withholding requirements imposed by any tax or other law. The
Employer(s) responsible for payment of a SERP benefit shall have the right to
require withholding from any payment in an amount sufficient in its or their
opinion to satisfy all applicable withholding requirements.
ARTICLE 6
BENEFICIARIES
6.1 Beneficiary Designation. A SERP Member shall be deemed to
have designated the same Beneficiary or Beneficiaries for his SERP benefit as
those he has at the time of reference properly designated pursuant to Section
8.6 of the Profit-Sharing Plan unless he/she indicates otherwise. Any proper
change in designation under the Profit-Sharing Plan shall be deemed a like
change under this Plan. In the event that there is no properly designated
Beneficiary or contingent Beneficiary living at the time of a SERP Member's
death, any unpaid amount of his SERP benefit shall be paid in accordance with
Section 8.6.4 of the Profit-Sharing Plan.
6.2 Payment to Incompetent. If any person entitled to benefits
under this Plan shall be a minor or physically or mentally incompetent in the
judgment of the Committee, such benefits may be paid to the person to whom
benefits under the Profit-Sharing Plan are paid pursuant to Section 15.6
thereof.
<PAGE> 14
ARTICLE 7
ADMINISTRATION
7.1 Appointment of Plan Administrator. Except to the extent
reserved to the Committee pursuant to a provision of the Plan, authority to
administer the Plan shall be vested in the Plan Administrator, who shall be
appointed by and serve at the pleasure of the Committee and shall have the
power and discretion to:
(a) make and enforce rules and regulations and
prescribe the use of forms he deems appropriate
for the administration of the Plan;
(b) construe all terms, provisions, conditions and
limitations of the Plan and resolve ambiguities,
inconsistencies and omissions;
(c) determine all questions arising out of or in
connection with the provisions of the Plan or its
administration in any and all cases in which he
deems such a determination advisable, such
determinations to be final and conclusive on all
persons;
(d) delegate authority to agents and other persons to
act on his behalf in carrying out the provisions
and administration of the Plan, and to take or
direct any action required or advisable with
respect to the administration of the Plan.
<PAGE> 15
7.2 Claims Procedure. The claims procedure in the event that the
Plan Administrator denies any SERP Member's or Beneficiary's claim for benefits
shall be that established pursuant to Section 15.1 of the Profit-Sharing Plan.
7.3 Service of Process. The Company or such other person as may
from time to time be designated by the Company shall be the agent for service
of process under the Plan.
7.4 No Bond Required. No bond or other security shall be required
of the Plan Administrator or any member of the Committee or any person to whom
the Plan Administrator or the Committee delegates authority except as may be
required by law.
7.5 Limitation of Liability; Indemnity. Except to the extent
otherwise provided by law, if any duty or responsibility of the Plan
Administrator or the Committee has been allocated or delegated to any other
person in accordance with any provision of this Plan, then the Plan
Administrator or the Committee (as the case may be) shall not be liable for any
act or omission of such person in carrying out such duty or responsibility.
The Company shall indemnify and save the Plan Administrator and each person who
is a member of the Committee, and each employee or director of an Employer who
may be deemed a "fiduciary" under the Plan, harmless against any and all loss,
liability, claim, damage, cost and expense which may arise by reason of, or be
based upon, any matter connected with or related to the Plan or the
administration of the Plan (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or in settlement of any such claim) to the
fullest extent permitted under applicable
<PAGE> 16
law, except when the same is judicially determined to be due to the gross
negligence or willful misconduct of the Plan Administrator or such Committee
member, employee or director.
7.6 Payment of Expenses. The Plan Administrator and members of
the Committee shall serve without special compensation. These expenses, and
all other expenses of Plan administration, shall be paid by the Company.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 Right Reserved. (a) Subject to Section 8.2, the Committee may
at any time amend the Plan, retroactively or otherwise, any respect or
terminate the Plan. However, no such amendment or termination shall reduce any
SERP Member's SERP benefit determined as though the date of such amendment or
termination were the date of his Termination of Employment. No amendment shall
increase Plan benefits, or broaden Plan eligibility, without action by the
Board of Directors of the Company.
(b) Notwithstanding a termination of the Plan, earnings shall
continue to be credited to each SERP Account pursuant to Sections 4.2 and 4.3
until such time as such Account is terminated pursuant to Section 5.2(c) or
8.1(c).
(c) In its discretion, the Company may upon Plan termination
or at any time thereafter pay to every SERP Member (or Beneficiary) in a single
distribution a sum determined pursuant to Section 5.1, whereupon all SERP
Accounts shall be terminated.
8.2 Action to Bind Company. Upon the execution of the Plan by the
Company, each other Employer designates the Company as its agent to administer
the Plan. Any amendment or termination of the Plan by the Company shall be
binding upon each other Employer.
<PAGE> 17
ARTICLE 9
MISCELLANEOUS
9.1 Doubt as to Right to Payment. If any doubt exists as to the
right of any person to any benefits under this Plan or the amount or time of
payment of such benefits (including, without limitation, any case of doubt as
to identity, or any case in which any notice has been received from any other
person claiming any interest in amounts payable hereunder, or any case in which
a claim from other persons may exist by reason of community property or similar
laws), the Plan Administrator may, in his discretion, direct that payment of
such benefits be deferred until such right or amount or time is determined, or
until a court of competent jurisdiction orders that such benefits by paid into
court in accordance with appropriate rules of law, or the Plan Administrator
may direct that payment be made only upon receipt of a bond or similar
indemnification (in such amount and in such form as is satisfactory to him).
9.2 Spendthrift Clause. No benefit, distribution or payment under
the Plan may be anticipated, assigned (either at law or in equity), alienated
or subject to attachment, garnishment, levy, execution or other legal or
equitable process whether pursuant to a "qualified domestic relations order" as
defined in section 414(p) of the Code or otherwise.
9.3 Usage. Whenever applicable, the masculine gender, when used
in the Plan, includes the feminine gender, and the singular includes the
plural.
9.4 Data. Any SERP Member or Beneficiary claiming a SERP benefit
under the Plan shall furnish to the Plan Administrator such documents,
<PAGE> 18
evidence or information as the Plan Administrator shall consider necessary or
desirable for the purpose of administering the Plan, or to protect the Plan
Administrator. It is a condition of the Plan that each such SERP Member or
Beneficiary shall furnish promptly true and complete data, evidence or
information and sign such documents as the Plan Administrator may require
before any benefits become payable under the Plan.
9.5 Separability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included therein. Without limiting the application of
the preceding sentence, a provision shall be considered invalid if its
operation would cause the Profit-Sharing Plan or Savings Plan to fail to
qualify under section 401 of the Code.
9.6 Captions. The captions in this document and in the table of
contents prefixed hereto are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or intent
of the Plan and shall in no way affect the Plan or the construction of any
provisions thereof.
9.7 Right of Discharge Reserved. The establishment of the Plan
shall not be construed to confer upon any employee any legal right to be
retained in the employ of an Employer or give any employee or any other person
any right to benefits, except to the extent expressly provided for hereunder.
All employees shall remain subject to discharge to the same extent as if the
Plan had never been adopted, and may be treated without regard to the effect
such treatment may have upon them under the Plan.
<PAGE> 19
9.8 Limitations on Liability. Notwithstanding any other provision
of the Plan, no Employer nor any employee or agent of an Employer shall be
liable to any SERP Member, Beneficiary or other person for any claim, loss,
liability or expense incurred in connection with the Plan.
9.9 Governing Law. The Plan in intended to constitute an
unfunded, nonqualified deferred compensation arrangement. All rights under the
Plan shall be governed by and construed in accordance with the laws of the
State of New York (except to the extent that ERISA is determined to apply)
without regard to principles of choice of laws.
<PAGE> 1
EXHIBIT 10(y)
Liz Claiborne, Inc.
1441 Broadway
New York City
as of January 2, 1995
Harvey L. Falk
Buckingham Towers
800 Palisades Avenue
Fort Lee, New Jersey 07024
Dear Harvey:
The undersigned Liz Claiborne, Inc. (the "Company") desires to engage
you as a consultant, and you desire to be so engaged 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. Engagement; Term. The Company hereby engages you, and you
hereby accept such engagement and agree to serve as a consultant to the
Claiborne Group, upon the terms and conditions hereinafter set forth, for a
term commencing on January 2, 1995 and (unless sooner terminated as hereinafter
provided) expiring on December 31, 1996 (such term being hereinafter referred
to as the "Term").
2. Duties; Conduct.
(a) During the Term, you shall serve in the capacity of a
Senior Advisor to the Company; as such, you shall render consulting services
from time to time as hereinafter provided on such project or projects relating
to the business, affairs and management of the Claiborne Group as may be
reasonably selected and/or delegated to you by the Board of Directors of the
Company ("Board of Directors") and/or the Company's Chief Executive Officer.
The specific consulting services requested of you shall be limited to those of
a senior executive nature.
(b) To the extent practicable, the services to be
provided by you shall be performed at such times as are reasonably convenient
to you. The Company acknowledges that you may have other activities,
obligations and engagements which may command your time and attention and the
Company will exercise its best efforts, in calling upon your services
hereunder, to respect such other commitments. Your services may require
travel; domestic travel shall be as reasonably required and foreign travel
shall be as we shall mutually agree. Your services (including travel time)
shall not require more than 20 days per fiscal quarter of the Company without
your consent, although you shall not be entitled to any greater or lesser
compensation for rendering services for a greater or lesser period of time.
<PAGE> 2
(c) During the Term, you agree to make yourself available
to perform the consulting services referred above in accordance with the
provisions hereof, and to apply your best efforts to perform such services
faithfully and diligently, and to the best of your ability; and not take any
action or conduct yourself in any manner which would tend to harm the
reputation or goodwill of the Claiborne Group.
3. Compensation, Benefits and Expenses.
(a) As full compensation for all services to be provided
by you hereunder during the Term, the Company will pay you and you shall accept
the following: (i) Three Hundred Thousand Dollars ($300,000) on January 2,
1995; and (ii) additional consulting fees, at an annual rate of (A) Three
Hundred Thousand Dollars ($300,000) during the first year of the Term; and (B)
Two Hundred Ninety Thousand Dollars ($290,000) during the second year of the
Term. Such consulting fees shall be paid in installments in accordance with
the Company's standard practice regarding salary payments to its senior-most
executives from time to time in effect.
(b) During the Term, you will continue to participate, on
the same basis as heretofore, in accordance with and subject to the respective
terms and conditions thereof as to eligibility and otherwise, in the Company's
medical, dental, long-term disability and life insurance programs (subject to
insurability at standard rates, it being understood and agreed that if
insurance becomes unavailable at standard rates, the Company shall maintain the
insurance provided that the difference in premiums between standard and actual
rate is paid by you), provided that, (i) during the Term, the Company shall
provide you with supplemental life insurance as heretofore in effect in the
face amount of $1.2 million; and (ii) for a period of eighteen months
subsequent to the expiration of the Term, the Company shall provide you with
coverages substantially identical to those provided to its senior-most
executives under its medical and dental insurance programs, such that your
"COBRA" rights, under which you may continue your existing medical coverages
for an additional 18 months at your own expense, shall be deemed to commence
after the expiration of such initial eighteen month period.
(c) 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 the Term in the performance of the duties and responsibilities assigned
to you under this Agreement. The Company understands that you will be a
Florida resident during the Term and that with respect to any projects
requiring that you travel (to New York City or otherwise) in accordance with
the terms hereof, you shall be entitled to reimbursement of business class
airfare and first class hotel accommodations.
4. Termination.
(a) The Term 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;
<PAGE> 3
(ii) Any willful or intentional act or failure to act
involving fraud, misrepresentation, 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 jurisdiction
involved or which is a misdemeanor in the
jurisdiction involved but which involves Fraud, after
exhaustion of all appeals taken therefrom;
(iv) Any willful or intentional act which could reasonably
be expected to materially injure the reputation,
business or business relationships of the Claiborne
Group, or your reputation 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 "intentional" unless done, or
omitted to be done, by you without reasonable belief on your part that your
action or omission was in the best interests of the Claiborne Group.
(c) The Company shall 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) The Term will terminate forthwith upon your death or,
at the Claiborne Group's option, upon your disability; provided that in the
event that you shall die or become disabled during the Term, the Company shall
continue to pay through the end of the Term your consulting fee provided in
paragraph 3(a) to your estate or personal representative.
5. 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 "Proprietary Information"). Proprietary
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 your prior employment or your engagement hereunder, which information
you acknowledge is and shall be the sole and exclusive property of the
Claiborne Group. Proprietary Information includes all proprietary information
that has or could have commercial value or other utility in the business in
which the Claiborne Group is engaged or contemplates 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 specifically labelled as Proprietary
<PAGE> 4
Information by the Claiborne Group. By way of example and without limitation,
Proprietary 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, Proprietary
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 appropriate protection of such information).
(b) You acknowledge and agree that in the performance of
your duties hereunder the Claiborne Group may from time to time disclose to you
and entrust you with Proprietary Information. You also acknowledge and agree
that the unauthorized disclosure of Proprietary 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 Proprietary Information, either during your term of
engagement or thereafter.
(c) 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.
(d) The provisions of this Section 5 shall survive the
termination or expiration of this Agreement and the Term.
6. Restrictive Covenants.
(a) You acknowledge and agree that you have and will
continue to develop a personal acquaintance and relationship with one or more
of the Claiborne Group's customers, employees, suppliers and independent
contractors, and 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 6.
(b) You agree that, until the first anniversary of the
Effective Date, without the prior express written consent of the Board of
Directors, 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
(as hereinafter defined); provided however that nothing contained in this
Section 6(b) shall prevent you from owning less than 2% of the voting stock of
<PAGE> 5
a publicly held corporation for investment purposes. For purposes of this
Section 6(b), the term "Competing Business" shall mean a business engaged in
the design, manufacture, distribution or marketing of better apparel or related
products which competes with any business or line of business representing more
than $75 million in sales of the Company and then being operated by the
Company.
(c) You agree that, until the third anniversary of the
Effective Date, 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 Protected Person or
Entity; or
(iii) knowingly interfere in any manner in the
relationship of the Claiborne Group with any of its customers,
suppliers or independent contractors, whether or not the
relationship between the Claiborne Group and such customer,
supplier or independent contractor was originally established
in whole or in part by your efforts.
As used in this Section 6, (i) 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 your engagement hereunder; and (ii) the
term "Protected Person or Entity" shall mean and include (A) any person who was
at any time during the period January 1, 1994 through the end of the Term
hereof an employee of any entity within the Claiborne Group, (B) any person or
entity who or which, at any time during the period January 1, 1994 through the
date hereof was a contractor or supplier to the Company (1) who or which (x)
provided material manufacturing marketing, sales, financial or management
consulting services to any entity within the Claiborne Group, or (y) was a
supplier of apparel or related goods or components thereof to the Claiborne
Group, and (2) with whom you had regular or significant contact as an employee
of the Company, and (C) any person or entity with whom you had substantive
meetings or discussions at the direction of the Company hereunder during the
Term hereof.
(d) You agree that, during the Term, and for a period of
12 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 6 shall survive the
termination or expiration of this Agreement and the Term.
7. 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 5 or 6 hereof, and by reason thereof you consent and
agree that if you violate any of the provisions of said Sections 5 or 6,
<PAGE> 6
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. The provisions of this Section 7 shall survive the
termination or expiration of this Agreement and the Term.
8. Stock Options.
By all necessary corporate action, which the Company
represents has been taken, your existing option agreements dated December 13,
1993; December 14, 1992; December 17, 1991; and December 14, 1990
(collectively, the "Option Agreements") are hereby amended, with effect as of
the day following the Effective Date, to provide as follows:
(a) that your "termination of employment" for all purposes
under such Option Agreements shall be deemed to be the last day of your
engagement as a consultant pursuant to this Agreement;
(b) Provided that you shall not have materially breached
any provision of this Agreement entitling the Company to terminate the same in
accordance with its terms, all options granted pursuant to the Option
Agreements that shall not have theretofore vested in accordance with the terms
of such Option Agreements shall vest in full on the date immediately preceding
the last day of the Term; and
(c) Your use of so-called "cashless exercise" procedures
permitted within the terms of the stock option plan of the Company under which
your Option Agreements were issued, including your being deemed to tender "in
the money" options as payment for your exercise price and/or tax withholding
obligations in connection with your option exercises, are hereby approved with
respect to any future exercises of your options granted under the Option
Agreements.
(d) In the event that the Company shall amend the
relevant option plan, or adopt any policy thereunder, to generally provide,
with effect prior to the end of the Term, that Company stock options issued
prior to the date hereof to senior executive officers and vested prior to
termination of employment may be exercised by the holder thereof during a
period longer than three months after termination of employment, or to
otherwise unconditionally provide an acceleration or other benefit under the
Terms of such options to the holder thereof, then such amendment or policy
shall apply to your options covered by the Option Agreements with equal force
and effect.
9. Life Insurance.
(a) 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
<PAGE> 7
obtaining such life insurance, to sign any necessary consents, applications and
other related forms or documents and to take any required medical examinations.
(b) At the conclusion of the Term, you shall be entitled
to take over ownership of any "portable" life insurance policies held by
Company on your life, in accordance with the standard Company procedures with
respect thereto.
10. 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.
11. No Conflict. You covenant that you shall not become 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.
12. Indemnification; Cooperation. (a) The Company hereby
confirms to and agrees with you with respect to any and all matters arising out
of or in connection with your prior employment by the Company or your
engagement as a consultant hereunder, that you shall continue to be entitled to
receive the benefits of all indemnification provisions contained in the
Certificate of Incorporation and By-Laws of the Company, as in effect on the
date hereof, notwithstanding any changes therein made after the date hereof, to
the fullest extent permitted by applicable law at the time of the assertion of
any liability against you. Without limiting the generality of the foregoing,
the Company hereby covenants and agrees that you shall be entitled to receive
any and all indemnification to which you would have been entitled had you
remained an officer or director of the Company after the date hereof,
including, without limitation, such indemnification benefits as may hereafter
be extended or otherwise made available by the Company to its senior executive
officers.
(b) Consultant shall cooperate fully with the Company in
the prosecution or defense, as the case may be, of any and all actions,
governmental inquiries or other legal proceedings in which his assistance may
be requested by the Company. Such cooperation shall include, among other
things, making documents in his custody or control available to the Company or
its counsel, making himself available for interviews by the Company or its
counsel, and making himself available to appear as a witness, at deposition,
trial or otherwise. Any reasonable and necessary vouchered out-of-pocket
expenses incurred by Consultant in fulfilling his obligations under this
paragraph 12(b) shall be the sole responsibility of the Company.
(c) The provisions of this Section 12 shall survive the
termination or expiration of this Agreement and the Term.
13. 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.
<PAGE> 8
14. 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, but no assignment by the Company
shall release the Company from its obligations hereunder, and the Company shall
not assign this Agreement to any entity outside of the Claiborne Group except
in connection with a sale of all or substantially all of the assets 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 jurisdiction 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 5 or 6 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.
<PAGE> 9
(f) This Agreement, together with the letter agreement
between us dated December 8, 1994 (which include any Exhibits and Annexes
hereto or thereto), 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 the Term, or of this
Agreement, shall so survive such termination.
(i) In rendering the services to be rendered by you
hereunder, you shall be an independent contractor, and you shall not, without
the prior express direction of the Company, be authorized to bind the Company
in any manner whatsoever.
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
-----------------------------
Name: Jerome A. Chazen
Title: Chairman
Accepted and Agreed:
/s/ Harvey L. Falk
------------------
Harvey L. Falk
<PAGE> 10
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:
With a copy to:
Donald D. Shack, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York
Facsimile: (212) 730-1964
Confirm: (212) 782-0700
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
S U B S I D I A R I E S O F
L I Z C L A I B O R N E, I N C.
<S> <C>
Claiborne Limited Hong Kong
Liz Claiborne Cosmetics, Inc. Delaware
Liz Claiborne Accessories, Inc. Delaware
Liz Claiborne Accessories-Sales, Inc. Delaware
Liz Claiborne Export, Inc. Delaware
Liz Claiborne Foreign Holdings, Inc. Delaware
Liz Claiborne International Limited Hong Kong
Liz Claiborne (Israel) Ltd. Israel
Liz Claiborne (Italy) Ltd. Delaware
L. C. Licensing, Inc. Delaware
Liz Claiborne Sales, Inc. Delaware
Liz Claiborne-Texas, Inc. Delaware
LCI Investments, Inc. Delaware
LCI Holdings, Inc. Delaware
Liz Claiborne (Canada) Limited Canada
Liz Claiborne, S.A. Costa Rica
L.C. Caribbean Holdings, Inc. Delaware
Liz Claiborne Shoes, Inc. Delaware
L. C. Service Company, Inc. Delaware
Liz Claiborne (U.K.) Limited U.K.
LCI - Claiborne Limited Partnership New Jersey
Liz Claiborne do Brasil Ltda. Brazil
LC/QL Investments, Inc. Delaware
L.C. Dyeing, Inc. Delaware
L.C. Augusta, Inc. Delaware
Textiles Liz Claiborne Guatemala, S.A. Guatemala
Liz Claiborne (Malaysia) SDN.BHD Malaysia
Liz Claiborne B.V. Netherlands
RTVCH Holdings, Inc. Delaware
Liz Claiborne Foreign Sales Corporation US Virgin Islands
Liz Claiborne Operations (Israel) 1993 Limited Israel
Liz Claiborne Apparel (Shanghai), Co. Ltd. China
Liz Claiborne Colombia Limitada Colombia
Liz Claiborne De El Salvador, S.A., de C. V. El Salvador
L. C. I. K. F. T. Hungary
LCI Fragrances, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Registration Statements File Nos. 2-77590, 2-95258, 2-33661 and 33-51257.
New York, New York
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LIZ CLAIBORNE, INC. FOR THE YEAR ENDED DECEMBER 31,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 71,419
<SECURITIES> 258,932
<RECEIVABLES> 159,766
<ALLOWANCES> 0
<INVENTORY> 423,003
<CURRENT-ASSETS> 1,022,531
<PP&E> 409,054
<DEPRECIATION> 172,494
<TOTAL-ASSETS> 1,289,662
<CURRENT-LIABILITIES> 303,399
<BONDS> 0
<COMMON> 88,219
0
0
<OTHER-SE> 894,765
<TOTAL-LIABILITY-AND-EQUITY> 1,289,662
<SALES> 2,162,901
<TOTAL-REVENUES> 2,162,901
<CGS> 1,407,694
<TOTAL-COSTS> 1,407,694
<OTHER-EXPENSES> 634,421
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 329
<INCOME-PRETAX> 131,449
<INCOME-TAX> 48,600
<INCOME-CONTINUING> 82,849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,849
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
<PAGE> 1
EXHIBIT 28
To Be Incorporated By Reference Into
Registration Statements on Forms S-8
(File Nos. 2-77590, 2-95258, 2-33661 and 33-51257)
UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the 1934 Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
