<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
Commission File Number 0-9831
LIZ CLAIBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2842791
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1441 Broadway, New York, New York 10018
(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
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 ___
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. [ ]
Based upon the closing sale price on the New York Stock Exchange composite
tape on March 4, 1997, 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 $2,885,159,802.
Number of shares of the registrant's Common Stock, par value $1 per share,
outstanding as of March 4, 1997: 70,785,884 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 15, 1997 - Part III.
<PAGE> 2
PART I
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Item 1. Business.
Overview
Liz Claiborne, Inc. designs and markets an extensive range of fashion
apparel and accessories, with versatile collections appropriate to wearing
occasions ranging from casual to dressy. The Company's portfolio includes DANA
BUCHMAN, dana b. & karen, LIZ CLAIBORNE, ELISABETH, EMMA JAMES, VILLAGER, FIRST
ISSUE and RUSS brands for women and the CLAIBORNE brand for men.
A portfolio of products licensed to carry the Company's brands includes
women's shoes, home furnishings, optics, sunglasses, watches and men's tailored
clothing. Products are manufactured to the Company's specifications in the
United States and abroad and are marketed through leading department and
specialty stores and other channels in the United States, Canada, Europe, Asia,
and Central and South America. Although they offer a wide array of styles, all
of Liz Claiborne's lines share the common characteristics of innovative fashion
and exceptionally high quality and value. 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.
At February 28, 1997, the Company's order book reflected unfilled customer
orders for approximately $690 million of merchandise, as compared to
approximately $536 million at March 1, 1996. Order book data at any given date
is materially affected by the timing of recording orders and of shipments;
furthermore, customer orders are currently reflected in the Company's order
books on a more timely basis than in prior years, due to certain modifications
and enhancements to the Company's order entry processes. 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
In order to reach a broad spectrum of consumers, the Company offers an
array of products under its portfolio of brands through a variety of
distribution channels at a broad range of price points. The Company seeks in its
product offerings to provide versatility to its consumers, in terms of
individual items, price points and overall collections of items.
In the first quarter of 1996, the Company realigned its "better" women's
sportswear product lines into the Casual Unit (consisting of misses LIZSPORT,
LIZWEAR and LIZ & CO. product); the COLLECTION Division (consisting of misses
COLLECTION and STUDIO (casual careerwear) product); and the Special Sizes Unit
(consisting of ELISABETH sportswear (including ELISABETH-LIZ & CO.) and dresses,
and petite LIZSPORT, COLLECTION, LIZWEAR, LIZ & CO. and STUDIO product). In
addition, during 1996 the Company established its new Special Markets Unit,
which includes the operations of its former Moderate Division, with
responsibility for sales of women's sportswear products under the repositioned
RUSS, VILLAGER and FIRST ISSUE brands, as well as under the new "upper moderate"
EMMA JAMES brand.
Substantially all products in each sportswear collection are sold as
separate items. Collections are 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 28, 1996.
<TABLE>
<CAPTION>
(Dollars in millions)
---------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Casual ................................................. $ 607.6 $ 555.9 $ 610.2 $ 695.6 $ 759.3
Special Sizes .......................................... 410.3 344.7 364.8 397.0 429.5
Collection and Studio .................................. 209.7 207.1 238.1 274.3 284.8
---------- ---------- ---------- ---------- ----------
Total Better Women's Sportswear ............... 1,227.6 1,107.7 1,213.1 1,366.9 1,473.6
Accessories and Other Non-Apparel ...................... 297.5 330.4 368.1 344.3 285.2
Retail Specialty Stores ................................ 199.7 195.0 150.0 114.4 92.9
Outlet Stores .......................................... 193.8 155.0 140.1 122.4 113.9
Dana Buchman ........................................... 188.7 136.2 112.9 90.2 73.5
Men's Sportswear and Furnishings ....................... 121.6 113.1 101.7 80.7 94.0
Dresses and Suits ...................................... 105.3 123.0 121.9 130.0 171.3
Special Markets/Moderate ............................... 77.3 81.3 111.6 78.7 21.2*
---------- ---------- ---------- ---------- ----------
2,411.5 2,241.7 2,319.4 2,327.6 2,325.6
Intercompany Sales Elimination ......................... (194.0) (160.1) (156.5) (123.3) (131.3)
---------- ---------- ---------- ---------- ----------
Net Sales ..................................... $ 2,217.5 $ 2,081.6 $ 2,162.9 $ 2,204.3 $ 2,194.3
========== ========== ========== ========== ==========
Net Sales by Geographic Areas
Domestic ............................................... $ 2,092.3 $ 1,943.4 $ 2,039.9 $ 2,091.0 $ 2,092.5
International .......................................... 125.2 138.2 123.0 113.3 101.8
---------- ---------- ---------- ---------- ----------
Net Sales ..................................... $ 2,217.5 $ 2,081.6 $ 2,162.9 $ 2,204.3 $ 2,194.3
========== ========== ========== ========== ==========
</TABLE>
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* Partial Year Sales
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The Casual Unit offers "misses" casual sportswear under three of the
Company's trademarks. The LIZSPORT Division offers all-American sportswear for
less formal work settings and casual occasions. The LIZWEAR Division offers
denim and denim-related sportswear, including twills and fashion coordinates.
The LIZ & CO. Division offers versatile career and casual knitwear.
The COLLECTION Division offers "misses" professional careerwear with
desk-to-dinner versatility under the LIZ CLAIBORNE trademark and casual
careerwear under the STUDIO trademark. During 1996, the STUDIO line's offerings
were expanded.
The above collections are offered in petite sizes through the Special Sizes
Unit.
The DANA BUCHMAN Division offers collections for the women's "bridge"
market, the price range between "better" sportswear and designer clothing, under
the Company's DANA BUCHMAN trademark. The Division offers products with elegant
styling in distinctive fabrics, in "misses", large and petite sizes. In February
1996, the Division commenced shipment of a new line of sophisticated casual wear
under the Company's dana b. and karen trademark.
The ELISABETH Division of the Special Sizes Unit offers large-sized classic
careerwear, dresses, weekend casual, and wardrobe basics in both "plus" sizes
and petite proportions under the Company's ELISABETH trademark. In 1996, the
Division commenced offering ELISABETH-LIZ & CO. products.
The Division offers dresses and suits providing day-into-evening
versatility Dresses under the Company's LIZ CLAIBORNE trademark in both the
"misses" and petite size ranges, as well as special occasion dresses under the
LIZ NIGHT trademark.
The Menswear Division offers men's business-casual wear, sportswear and
furnishings (dress shirts and ties) under the CLAIBORNE trademark. The Company
introduced a line of men's accessories in January 1997, with shipping to
commence in the third quarter of 1997.
Each of the above Divisions presented four seasonal collections during
1996, except that the DANA BUCHMAN Division presented three, and the Dresses
Division presented five, seasonal collections.
The Accessories Group offers a wide variety of products through its
Handbag, Fashion Accessories and Jewelry Divisions, primarily under the LIZ
CLAIBORNE trademark. These offerings mirror major fashion trends and complement
many of the Company's other product lines.
The Company's Cosmetics Division offers fragrance and bath and body-care
products under the LIZ CLAIBORNE, REALITIES, VIVID, CLAIBORNE FOR MEN and,
commencing in the third quarter of 1996, CURVE, trademarks. The Company
introduced its LIZSPORT and CLAIBORNE SPORT fragrances in March 1997, with
shipping to commence in the third quarter of 1997.
In late 1994, the Company announced plans to phase out the First Issue
retail store business and to close or convert its 77 First Issue locations to
other Company-operated retail formats. As of March 1, 1996, the Company
completed the phase out. See Note 2 of Notes to Consolidated Financial
Statements.
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The Special Markets Unit offers updated career and casual clothing under
four Company trademarks: EMMA JAMES ("upper-moderate" priced related separates
for the casual workplace, sold in department stores nationally), VILLAGER
("popular" priced relaxed separates for soft career and weekend dressing, sold
in regional department stores), FIRST ISSUE ("value" priced relaxed career and
everyday wear, sold exclusively in Sears department stores), and RUSS ("budget"
priced casual separates, sold in Wal-Mart stores and other mass merchandisers).
The EMMA JAMES line first shipped in January 1997. The newly repositioned FIRST
ISSUE line first shipped to Sears in November 1996. In 1996, the Company
suspended product offerings under its CRAZY HORSE trademark, with the last
regular season shipment under this label in December 1996. The RUSS line first
shipped to Wal-Mart in January 1997. See "Competition; Certain Risks."
Sales and Marketing
The Company's wholesale sales are made primarily to department and
specialty and chain store customers throughout the United States. Retail sales
are also made through the Company's own retail stores and outlet stores, as well
as to international customers, direct-mail catalog companies, military exchanges
and other outlets. The Company continues to evaluate its methods of doing
business internationally. At 1996 year end, LIZ CLAIBORNE products were being
sold in over 60 markets outside the United States. The Company expects to
continue expansion within these markets and to expand to additional markets.
The Company currently operates a total of 112 prototype and presentational
specialty retail stores located throughout the United States which carry solely
Company products: 49 LIZ CLAIBORNE stores, 56 ELISABETH large-size apparel
stores, 6 CLAIBORNE mens' stores and one DANA BUCHMAN store. These stores
typically range in size from 2,000 square feet to 12,000 square feet. The LIZ
CLAIBORNE flagship store, an approximately 17,000 square foot store is located
on Fifth Avenue in New York City. The Company's retail stores enable it to more
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 wholesale
customers respond more quickly to consumer preferences.
In Canada, the Company operates a wholesale business which sells primarily
to department store chains. During 1996, the Company continued its LIZ CLAIBORNE
and DANA BUCHMAN product distribution in Canada while expanding its reach into
the moderate market and into new channels with its moderate brands. During 1996,
the Company continued to operate in Western Europe, principally through leased
departments, or concessions, primarily in the United Kingdom, commencing
wholesale distribution in Germany, Spain and the Benelux countries; the Company
plans to further expand wholesale distribution throughout international markets.
In other international markets, the Company has continued to add retail licenses
with third parties, totaling 61 stores in 19 countries by year-end 1996.
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Approximately 84% of 1996 sales were made to the Company's 100 largest
customers. Except for Dillard's Department Stores, Inc., which accounted for
approximately 11% of 1996 and 1995 sales, no single customer accounted for more
than 6% of 1996 or 1995 sales. However, certain of the Company's customers are
under common ownership; when considered together as a group under common
ownership, sales to the eight department store customers which were owned at
year-end 1996 by The May Department Stores Company accounted for approximately
18% of 1996 and 1995 sales and sales to the seven department store customers
which were owned at year-end 1996 by Federated Department Stores, Inc. accounted
for approximately 17% of 1996 and 1995 sales. See Note 8 of Notes to
Consolidated Financial Statements. Many major department store groups make
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 largest customers will
continue to account for a significant percentage 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 customers generally precede the related shipping
periods by several months. 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.
The Company has implemented and continues to expand in-stock reorder
programs in several divisions to enable customers to reorder certain items for
quick delivery. See "Manufacturing." During 1996, the Company expanded LIZRIM,
an inventory replenishment system installed at a number of its retail customers,
which was first implemented in 1995.
Effective January 1, 1996, the Company lowered the trade discount offered
by its LIZSPORT, LIZWEAR, LIZ & CO., ELISABETH, COLLECTION and Dresses Divisions
from the previous 10% level to 8% (the prevailing standard in the industry). The
Company is redeploying the additional funds received as a result of this change
towards a national advertising campaign, an expanded in-store presentation
program and similar brand-enhancing activities, in an effort to stimulate full
price sales at retail. See "Item 7. -- Management's Discussion and Analysis of
Financial Condition and Results of Operations."
In January 1996, the Company introduced LIZEDGE, an in-store servicing and
maintenance program designed to enhance the way the Company's products appear on
the selling floor and to encourage multiple item, regular price sales. In 1997,
the Company expects to expand the LIZEDGE program to include accessories and
jewelry and to integrate the Company's LIZ & LEARN program, a training and
motivational program for customer sales associates.
In March 1996, the Company introduced LIZVIEW, a program designed to
enhance the presentation of the Company's product on retail selling floors
generally through the use of proprietary fixturing and layouts. By year-end
1996, 176 LIZVIEW shops were installed in 97 stores, amounting to over 200,000
square feet of upgraded selling space. The Company has requests for in excess of
500 additional LIZVIEW installations and anticipates that approximately 400 will
be installed during 1997.
The Company spent approximately $23 million on national advertising for its
various brands in 1996 and currently plans to spend approximately $31 million in
1997. The Company maintains cooperative advertising programs under which it
generally shares the costs of each customer's advertising and promotional
expenditures, up to a stated percentage of the customer's purchases. The Company
incurred costs under the cooperative advertising programs of approximately $50
million in respect of 1996 sales.
The Company currently operates 83 outlet stores, virtually all of which are
located in "outlet centers" comprised primarily of manufacturer-operated stores.
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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, mainly in the Far East, the Caribbean and Central
America. The Company also sources in the United States and other regions. The
Company does not itself own quota and therefore must obtain quota from its
suppliers and vendors. During 1996, the Company's products were manufactured by
several hundred suppliers. The Company's products are currently manufactured in
approximately 30 different countries, including China, the Dominican Republic,
South Korea, the United States, Sri Lanka and Hong Kong. The Company continually
seeks additional suppliers throughout the world for its sourcing needs. The
Company's largest supplier of finished products manufactured less than 6% of the
Company's purchases of finished products during 1996. Approximately 28% of the
Company's 1996 and 1995 purchases of finished products were manufactured by its
ten largest suppliers, as compared to 24% of 1994 purchases. The Company expects
that the percentage of production represented by its largest suppliers will
continue to increase in light of the Company's ongoing worldwide factory
certification initiative, under which the Company is planning to allocate even
larger portions of its production requirements to suppliers which appear to have
superior capacity, quality (of product and operations) and financial resources.
The Company's purchases from its suppliers are affected 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.
During 1996, most of the Company's fabrics, trimmings and other materials
were obtained in bulk from various foreign and domestic suppliers. Where the
Company purchases completed product "packages" from its contractors, the
contractor is itself responsible to purchase all necessary raw materials and
other product components. Inasmuch as the Company intends to continue to move
towards purchasing an increasing portion of its products as "packages," the
Company is developing a group of "approved suppliers" to supply such raw
materials and other product components directly to its contractors; the Company
anticipates purchasing a substantial portion of its products as "packages" in
1997. During 1996, the raw materials used in Company products were purchased
from several hundred suppliers, located in the United States, South Korea,
Taiwan, Hong Kong, Japan and Italy. Approximately 28% of the Company's
expenditures for raw materials during 1996 and 25% during 1995 were accounted
for by its five largest raw material suppliers, with no single raw material
supplier accounting for more than 6% of 1996 raw material expenditures.
Generally, the Company does not have any long-term, formal arrangements with any
supplier of raw materials. The Company, through a wholly-owned subsidiary, owns
a 50% interest in a joint venture which supplies certain types of domestically
dyed and finished fabrics for use in certain Company products; the Company
continues to analyze 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.
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. The Company
has and continues to implement a number of initiatives designed to reduce the
time required to move a product from design to the customer.
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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. See "Competition; Certain Risks".
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 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 MultiFiber
Arrangement ("MFA"), which has been in effect since 1974. The United States, a
participant in international negotiations known as the "Uruguay Round", ratified
legislation enacting and implementing the various agreements of the Uruguay
Round, effective January 1, 1995, including 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. United States legislation implementing the
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".
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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 CLAIBORNE COLLECTION, LIZ
NIGHT, LIZ CLAIBORNE STUDIO, its LC logomark, its triangular logomark, DANA
BUCHMAN, dana b. and karen, ELISABETH, LIZ & CO., LEATHER CO., EMMA JAMES, FIRST
ISSUE, RUSS, VILLAGER, REALITIES, VIVID, CURVE and CLAIBORNE SPORT. The Company
has registered or applied for registration of a multitude of trademarks for use
on apparel and apparel-related products, including accessories, cosmetics and
jewelry in the United States as well as numerous foreign territories. In
February 1997, the Company acquired several trademarks from JH Collectibles,
Inc., including JH COLLECTIBLES, JH and JUNIOR HOUSE. 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 six 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 (not including renewal terms) expire at various dates through 2010.
Current licenses cover women's and men's sunglasses and readers; women's and
men's ophthalmic frames for prescription eyewear; home furnishing products;
men's tailored clothing; women's watches; and women's career, career-casual,
casual and sport shoes. Each of the licenses provides for the payment to the
Company of a percentage of the licensee's sales of the licensed products against
a guaranteed minimum royalty which generally increases over the term of the
agreement. The Company is currently negotiating a license agreement pursuant to
which a third party licensee will produce swimwear merchandise.
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Competition; Certain Risks
The apparel and related product markets are highly competitive, both within
the United States and abroad.
The Company's ability to effectively compete depends on a number of
factors, including the Company's ability to effectively anticipate, gauge and
respond to changing consumer demands and tastes, to effectively translate these
market trends into appropriate, saleable product offerings relatively far in
advance, and to operate within substantial production and delivery constraints.
In addition, consumer and customer acceptance and support (especially by the
Company's largest customers), depend upon, among other things, product, value
and services.
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.
Commencing in 1996, a number of apparel companies began distribution of new
collections of women's "better" sportswear through the department store channel
of distribution.
In addition to the competitive factors described above, the Company's
business, including its revenues and profitability, is influenced by and subject
to a number of factors which are inherently uncertain and therefore difficult to
predict, including the general retail environment and general economic
conditions; the Company's relationships with its customers, especially its major
department store customers; the Company's ability to correctly judge the level
of its fabric and/or merchandise commitments; the Company's ability to
effectively distribute its products within its targeted markets (including
distribution through wholesale accounts and Company operated retail stores and
concession locations); and the chance of substantial disruption of the Company's
relationships with its suppliers, manufacturers and employees. See "Sales and
Marketing", "Manufacturing" and "Employees."
The Company from time to time reviews its possible entry into new markets.
The entry into new markets (including the development and launch of new product
categories), such as the Company's entry into the moderate market, is
accompanied by risks inherent in any new business and may require methods of
operations and marketing strategies different from those employed in the
Company's other businesses. Certain new businesses may be lower margin
businesses and may require the Company to achieve significant cost efficiencies.
In addition, new markets may involve buyers, store customers and/or competitors
different from the Company's historical buyers, customers and competitors.
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Employees
At December 28, 1996, the Company had approximately 7,100 full-time
employees, as compared with approximately 7,400 full-time employees at December
30, 1995. The Company considers its relations with its employees to be
satisfactory and to date has not experienced any interruption of operations due
to labor disputes.
Between May 31, 1997 and August 31, 1997, five separate collective
bargaining agreements between the Company and various locals of the Union of
Needletrades, Industrial and Textiles Employees (UNITE) will expire. These
agreements cover approximately 1,700 of the Company's full-time employees. Most
of the union-represented employees are employed in the seven warehouse
facilities the Company maintains in New Jersey, Pennsylvania and Alabama. While
relations between the Company and the union have historically been amicable, the
Company believes it prudent to prepare for the possibility of a labor dispute at
one or more of its facilities. While the Company does not foresee the likelihood
of a prolonged labor dispute, any substantial labor disruption could adversely
affect the Company's operations.
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
one other building in New York City covering approximately 29,000 square feet,
with a term expiring in 2003.
The Company owns its approximately 450,000 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. The Company presently
leases approximately 969,000 square feet in six 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 leased facility in Augusta, Georgia (located
on a 98-acre site), has been subleased 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 leases an
approximately 290,000 square foot warehouse and distribution facility located on
an approximately 124 acre site in Montgomery, Alabama; the Company's options to
purchase 80 acres adjacent to this facility expired unexercised on November 30,
1996. 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 112 retail specialty stores (aggregating
approximately 500,000 square feet in various malls) and for its 83 outlet stores
(aggregating approximately 818,000 square feet).
The Company believes that its existing facilities are well maintained, in
good operating condition and, upon occupancy of additional space, will be
adequate for its present level of operations. See Note 8 of Notes to
Consolidated Financial Statements.
- 11 -
<PAGE> 12
Item 3. Legal Proceedings.
Various legal actions are pending against the Company including the
following:
The Company and certain of its present and former officers and directors
are defendants in 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, 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 August 1995, the Court granted that motion,
again with leave to amend, on the grounds that the Ressler complaint failed to
comply with pleading requirements of the Federal Rules of Civil Procedure.
However, the Court rejected the contention that scienter had not been adequately
pled. In response to the Company's motion for reconsideration of that latter
point, the Court indicated that the Company could present the scienter issue
again in moving to dismiss a new amended complaint. In October 1995, a second
amended complaint was filed. In December 1995, the Company moved to dismiss that
complaint. The motion was argued in May 1996 and has not yet been decided.
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 certain of the Company's former and
present directors and two of its former Vice Chairmen. The complaints contain
allegations that the individual defendants breached their fiduciary obligations
to the Company and its shareholders, committed corporate mismanagement and
wasted corporate assets in connection with the Company's stock repurchase
program and the defense of pending legal proceedings, and were unjustly enriched
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 with the
Goldberg action. In August 1994, the defendants moved to dismiss the
consolidated complaint. The motion is pending.
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.
- 12 -
<PAGE> 13
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>
Paul R. Charron 54 Chairman of the Board and Chief Executive
Officer
Denise V. Seegal 43 President
Jorge L. Figueredo 36 Senior Vice President - Human Resources
Samuel M. Miller 59 Senior Vice President - Finance, Chief
Financial Officer
John R. Thompson 45 Senior Vice President - Service, Systems and
Reengineering, Chief Information Officer
Robert J. Zane 57 Senior Vice President - Manufacturing and
Sourcing
</TABLE>
- 13 -
<PAGE> 14
Executive officers serve at the discretion of the Board of Directors.
Mr. Charron joined the Company as Vice Chairman and Chief Operating
Officer, and became a Director, in May 1994. In 1995, Mr. Charron became
President, a position he held until October 1996, and Chief Executive Officer.
In May 1996, Mr. Charron became Chairman of the Board of the Company. Prior to
joining the Company, Mr. Charron served as Executive Vice President of VF
Corporation, an apparel manufacturer, from 1993 to 1994, and as a Group Vice
President of VF Corporation from 1988 to 1993.
Ms. Seegal joined the Company in October 1996 as President. Prior to
joining the Company, Ms. Seegal served as President of the CK Men's and Women's
divisions of Calvin Klein, Inc. from 1994 to 1996 and as President of the DKNY
divisions of the Donna Karan Company from 1989 to 1994.
Mr. Figueredo joined the Company in 1984 as Administrator, Warehouse
Employee Relations and served in various management positions thereafter. In
1992, Mr. Figueredo was promoted to Vice President, Human Resources Operations.
In 1994, Mr. Figueredo was promoted to Senior Vice President - Human Resources.
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, 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
Vice President of Marketing and Sales of Quick Response Services, Inc., an
information management services company, from 1987 to 1991.
Mr. Zane joined the Company in September 1995 as Senior Vice President -
Manufacturing and Sourcing. Prior to joining the Company, Mr. Zane owned and
operated Medallion Tekstil, a private label manufacturing company he founded in
1989. Prior to that, Mr. Zane was Vice President, Sourcing at Bernard Chaus,
Inc. and Executive Vice President at Murjani International, Inc.
- 14 -
<PAGE> 15
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 sale
prices of the Common Stock (based on the NYSE composite tape) for the periods
indicated.
<TABLE>
<CAPTION>
Calendar Period High Low
--------------- ---- ---
<S> <C> <C>
1996:
1st Quarter 35 5/8 26 3/8
2nd Quarter 37 3/4 33 1/4
3rd Quarter 37 5/8 28 1/8
4th Quarter 45 36 1/4
1995:
1st Quarter 18 14 1/2
2nd Quarter 21 1/4 17 3/4
3rd Quarter 25 3/4 21 1/8
4th Quarter 30 23 3/4
</TABLE>
On March 4 1997, the closing sale price of the Common Stock on the NYSE was
$41 3/4. As of March 4, 1997, the approximate number of record holders of Common
Stock was 10,115.
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>
1996:
1st Quarter $.1125
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
1995:
1st Quarter $.1125
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.
- 15 -
<PAGE> 16
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
4, 1997, the Company had expended or had commitments to expend, through the sale
of put warrants (see Note 8 of Notes to Consolidated Financial Statements),
approximately $624 million of the $675 million authorized under its stock
repurchase program, covering an aggregate of 22.2 million 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:
<TABLE>
<CAPTION>
(All dollar amounts in thousands except per common share data)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 2,217,518 $ 2,081,630 $ 2,162,901 $ 2,204,297 $ 2,194,330
Gross profit 876,435 790,701 755,207 750,916 830,116
Net income 155,665 126,914 82,849* 126,924** 218,824
Working capital 816,425 758,314 719,132 750,001 832,789
Total assets 1,382,750 1,329,243 1,289,662 1,236,338 1,256,308
Stockholders'
equity 1,020,492 988,226 982,984 978,291 997,775
Earnings per
common share 2.15 1.69 1.06* 1.56** 2.61
Book value at
year-end 14.37 13.41 12.77 12.41 12.05
Dividends paid
per common share .45 .45 .45 .44 .39
Weighted average
common shares
outstanding 72,396,130 75,002,861 78,526,724 81,509,120 83,965,342
</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.
- 16 -
<PAGE> 17
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
- ------------------------------------------------------------------------------------------------------------------------------------
FISCAL YEARS 1996 1995 1994 1996 VS. 1995 VS.
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% 6.5% (3.8)%
Cost of goods sold 60.5 62.0 65.1 3.9 (8.3)
----- ----- -----
GROSS PROFIT 39.5 38.0 34.9 10.8 4.7
Selling, general and
administrative expenses 28.9 28.8 27.9 6.9 (.7)
Restructuring charge -- -- 1.4 -- --
----- ----- -----
OPERATING INCOME 10.6 9.2 5.6 23.4 57.5
Investment and other
income-net .6 .6 .5 11.4 20.8
----- ----- -----
INCOME BEFORE PROVISION
FOR INCOME TAXES 11.2 9.8 6.1 22.6 54.5
Provision for income
taxes 4.2 3.7 2.3 22.6 56.8
----- ----- -----
NET INCOME 7.0% 6.1% 3.8% 22.7% 53.2%
===== ===== =====
</TABLE>
- 17 -
<PAGE> 18
RESULTS OF OPERATIONS
CONTINUED
The Company's net sales for 1996 (52 weeks) were $2.22 billion, compared to
$2.08 billion in 1995 (52 weeks) and $2.16 billion in 1994 (53 weeks). The 1996
results reflected increased net sales of better women's sportswear and DANA
BUCHMAN product, as well as increased net sales of the outlet operations,
partially offset by lower net sales of dresses. New apparel product lines
introduced during 1996 (LIZ & CO. petites; ELISABETH-LIZ & CO.; and dana b. &
karen, the casual career offering of the DANA BUCHMAN Division) accounted for
$48 million of net sales. The Cosmetics Division's 1996 net sales increased $13
million, reflecting $40 million of sales of the new CURVE for Women and CURVE
for Men fragrances, initially shipped in July 1996, partially offset by a
decline in net sales of the Company's other fragrance products. The Liz
Claiborne shoe business was licensed to a third party as of June 1995; this
business accounted for $39 million of 1995 net sales prior to the license. The
Company's watch business was licensed to a third party as of June 1996; this
business accounted for $1 million of 1996 net sales prior to the license,
compared to $8 million in 1995 (see Note 3 of Notes to Consolidated Financial
Statements). Approximately 18% of the 1996 net sales increase was attributable
to the change in trade terms (from 10% to 8%, the prevailing standard in the
industry), effective as of January 1, 1996. As a result of this change, the net
sales of the Company's misses and petite sportswear (including LIZ & CO.),
Dress, and ELISABETH Divisions increased by approximately 2% over the results
they would have reported without the change, with corresponding dollar increases
in gross margin and selling, general and administrative ("SG&A") expenses.
The Company has realigned its better women's sportswear product lines into
the Casual Unit (consisting of misses LIZSPORT, LIZWEAR and LIZ & CO. product);
the COLLECTION Division (consisting of misses COLLECTION and STUDIO (casual
careerwear) product); and the Special Sizes Unit (consisting of ELISABETH
sportswear (including ELISABETH-LIZ & CO.) and dresses, and petite LIZSPORT,
COLLECTION, LIZWEAR, LIZ & CO. and STUDIO product). The Company's new Special
Markets Unit includes the operations of its former Moderate Division, with
responsibility for sales of women's sportswear products under the repositioned
RUSS, VILLAGER and FIRST ISSUE brands, as well as under the new "upper-moderate"
EMMA JAMES brand.
The 1996 net sales result reflected an 11% increase in the sales of the
Company's better women's sportswear lines, comprised of: a 9% increase in the
sales of the Casual Unit, to $608 million, due in equal parts to higher unit
volume and higher average unit selling prices; a 19% increase in the sales of
the Special Sizes Unit, to $410 million, due to a significant increase in unit
volume, with 31% of the increase due to the new LIZ & CO. petite line and, to a
lesser extent, the additional product required by the Company's new ELISABETH
stores (61 at 1996 year end as compared with 51 at 1995 year end),
notwithstanding lower net sales of petite COLLECTION product; and a 1% increase
in the net sales of the COLLECTION Division, to $210 million, reflecting the
inclusion of the expanded STUDIO line, offset by a 12% decrease in the sales of
misses COLLECTION product due to weakness in demand. Sales of DANA BUCHMAN
product increased 39%, to $189 million, due to higher unit volume, with
approximately 45% of the increase relating to the introduction of the dana b. &
karen line. Net sales of the outlet operations increased 25%, to $194 million,
reflecting improved store productivity and new store openings (82 at 1996 year
end as compared with 76 at 1995 year end). Net sales of menswear increased 8%,
to $122 million, due to higher unit volume. The 1996 net sales increase was
moderated by a 14% decrease in dress sales, to $105 million, due in equal parts
to lower unit volume and lower average unit selling prices, reflecting weakness
in demand. In late 1994, the Company announced plans to phase out the First
Issue retail store business and to close or convert its 77 First Issue locations
to other Company-operated retail formats. As of March 1, 1996, the Company
completed the phase out; the First Issue stores accounted for $3 million of 1996
net sales (two months), compared to $53 million in 1995 (twelve months) (see
Note 2 of Notes to Consolidated Financial Statements).
The 1995 net sales result reflected a 9% decline in the sales of the
Company's better women's sportswear lines, comprised of: a 13% decrease in the
net sales of the COLLECTION Division, to $207 million; a 9% decrease in the net
- 18 -
<PAGE> 19
RESULTS OF OPERATIONS
CONTINUED
sales of the Casual Unit, to $556 million; and a 6% decrease in the net sales of
the Special Sizes Unit, to $345 million. These decreases reflected planned unit
volume declines and slightly lower average unit selling prices due to product
mix, offset by higher unit volume of LIZ & CO. product. The decline in the net
sales of the Special Sizes Unit reflected a 4% decrease in sales of ELISABETH
product, to $131 million, due to lower off-price sales volume, offset by
increased sales to the Company's new ELISABETH stores. Net sales of the Special
Markets Unit declined 27%, to $81 million, reflecting a planned unit volume
decrease. Also contributing to the net sales result was a 6% decrease in the net
sales of accessories, to $175 million, due primarily to lower average unit
selling prices, reflecting lower initial selling prices and changes in product
mix. The Shoe Division accounted for $39 million of 1995 net sales (six months),
compared to $63 million in 1994 (twelve months). These declines were offset in
part by a 30% sales increase within the Company's LIZ CLAIBORNE, ELISABETH, DANA
BUCHMAN, CLAIBORNE, FIRST ISSUE and international retail stores and leased
departments (collectively, the "Retail Operations"), to $195 million, reflecting
higher average numbers of domestic retail stores and European retail leased
departments. Net sales gains were also posted by DANA BUCHMAN (21%, to $136
million), primarily reflecting higher unit volume as well as slightly higher
average unit selling prices, and menswear (11%, to $113 million), due to higher
unit volume. Net sales of the outlet operations increased 11%, to $155 million,
principally reflecting the opening of new stores (76 at 1995 year end compared
with 70 at 1994 year end). The First Issue retail stores accounted for $53
million of 1995 net sales, compared to $64 million in 1994.
Gross profit margins were 39.5% in 1996, compared to 38.0% in 1995 and
34.9% in 1994. Gross profit dollars increased $86 million, or 10.8%, in 1996 and
$35 million, or 4.7%, in 1995. Approximately one-half of the 1996 improvement in
gross margin percentage was due to the change in trade terms referred to above.
The 1996 gross profit results also reflected higher initial gross margins due in
part to an improved air/vessel ratio. Overall margins were favorably impacted by
significant margin improvements in the outlet operations, as well as higher
margins within, and a higher proportion of net sales represented by, the DANA
BUCHMAN Division and the Cosmetics Division (both of which are higher margin
businesses). The improvements in gross margin percentage were moderated by lower
margins realized on dress sales, lower margins within the Special Markets Unit
(principally reflecting the repositioning of the brands), and lower margins
within the Company's domestic retail store operations due to higher store
markdowns.
The margin improvement in 1995 generally reflected lower markdowns
resulting from lower excess inventory positions, an increase in average unit
selling prices realized on close-out merchandise, and slightly lower average
unit costs across substantially all of the wholesale apparel divisions.
Significant margin gains were realized by the ELISABETH and LIZ & CO. Divisions,
as well as the outlet operations. Although women's sportswear margins improved,
gross profit dollars declined somewhat, reflecting the lower sales base. Special
Markets' margins remained at depressed levels notwithstanding significant
improvement over 1994. Overall margins were favorably impacted by the larger
percentage of sales represented by the Retail Operations and the DANA BUCHMAN
Division (which are higher margin businesses) and the lower percentage of sales
represented by the Special Markets Unit (which is a lower margin business).
Margins within the Retail Operations declined slightly from 1994 levels, and
DANA BUCHMAN margins improved. Margin improvements were partially offset by
margin declines within the menswear and jewelry businesses due to a lower
proportion of regular price sales, reflecting weakness in demand.
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
- 19 -
<PAGE> 20
RESULTS OF OPERATIONS
CONTINUED
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") and/or retaliatory duties,
quotas or other trade sanctions, which, if enacted, would increase the cost of
products purchased from suppliers in such countries. The PRC's MFN treatment was
renewed in July 1996 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.
SG&A expenses increased $41 million, or 6.9%, in 1996 over 1995, compared
with a decrease of $4 million, or 0.7%, in 1995 over 1994. These expenses
represented 28.9% of net sales in 1996, compared to 28.8% in 1995 and 27.9% in
1994. The 1996 dollar increase principally reflected the continued expansion of
the Company's brand enhancing activities (including a national advertising
campaign and in-store service and presentation program), the costs of which are
being funded through the redeployment of funds generated as a result of the
change in trade terms, and the introduction of the new CURVE fragrances.
Additional expenses associated with the expansion of the Company's DANA BUCHMAN
Division and the Company's domestic retail stores and outlet operations, as well
as incremental expenses related to the higher sales volume in certain divisions,
contributed to the SG&A increase. This increase was partially offset by lower
expense levels as expense reduction initiatives continued during 1996. The
Company's former shoe and watch businesses together accounted for approximately
$1 million and $10 million of 1996 and 1995 direct expenses, respectively, prior
to the license of such businesses to third parties.
The 1995 SG&A results reflected lower expense levels due to expense
reduction initiatives; however, the percentage decrease in the sales of certain
divisions slightly outpaced their percentage decreases in expense levels. The
1995 results also reflected increases resulting from the continued expansion of
the Company's outlets and Retail Operations, as well as expansion of the DANA
BUCHMAN Division and the expansion of in-store retail shop programs at a number
of divisions. These results reflected $6 million of direct expenses related to
the shoe business in 1995 (six months), compared with $12 million in 1994
(twelve months).
Investment and other income-net increased on a year-to-year basis by $1.5
million in 1996 and $2.2 million in 1995, reflecting in each case an increase in
the Company's investment portfolio of cash equivalents and marketable
securities, notwithstanding the Company's ongoing stock repurchase program. The
1996 increase was moderated by various other income and expense items, and the
1995 increase also reflected slightly higher rates of return.
As a result of the factors described above, the Company's income before
provision for income taxes increased on a year-to-year basis 23% in 1996,
compared with 55% in 1995. These results included continuing operating losses
within the Special Markets Unit and (viewed on a stand alone basis) the
Company's Retail Operations. The 1995 improvement reflected the absence of a $30
million charge provided against the 1994 results to cover estimated costs
associated with the restructuring of the Retail Operations and the Special
Markets Unit, as well as the Company's efforts to streamline operating and
administrative functions (see Note 2 of Notes to Consolidated Financial
Statements). The provisions for income taxes reflected the changes in pre-tax
income and an increase in the effective tax rate in 1995.
The earnings per common share computations reflected a lower number of
average outstanding shares on a period-to-period basis as a result of the
Company's ongoing stock repurchase program.
- 20 -
<PAGE> 21
RESULTS OF OPERATIONS
CONTINUED
Net income expressed as a percentage of net sales was 7.0% in 1996,
compared with 6.1% in 1995 and 3.8% in 1994. The 1996 increase was principally
due to higher operating margins, offset in part by a higher provision for income
taxes as a percentage of sales. The 1994 results reflected the restructuring
charge discussed above, which reduced 1994 after-tax net income by $19 million.
The retail environment remains intensely competitive and highly
promotional, and the tone of business continues to be challenging. The Company
is continuing the process of implementing a comprehensive business
transformation effort which includes process reengineering and profit
improvement programs, and is progressing towards a number of previously
announced three-year goals for this initiative. Over the past few years, the
Company has licensed a number of product categories to third parties; management
is exploring entry into a licensing arrangement covering its cosmetics business.
Management believes that ongoing product improvements as well as the Company's
stepped up marketing activities will continue to enhance customer and consumer
response to its product offerings, resulting in continued growth in sales and
earnings in 1997, although any such improvement will be moderated by continuing
losses within certain divisions.
Financial Position, Capital Resources and Liquidity
Net cash provided by operating activities was $238 million in 1996,
compared to $222 million in 1995 and $173 million in 1994. The year-to-year
increase in 1996 primarily reflects a larger decrease in inventories ($44
million in 1996 compared to $12 million in 1995), higher net income and a larger
increase in accounts payable ($25 million in 1996 compared to $0.2 million in
1995), offset by an increase in accounts receivable of $32 million in 1996
compared to a decrease of $34 million in 1995.
The 1995 increase primarily reflected higher net income, a larger decrease
in accounts receivable ($34 million in 1995 compared to $15 million in 1994), a
smaller increase in deferred income tax benefits ($0.4 million in 1995 compared
to $15 million in 1994) and a $5 million increase in income taxes payable
compared to an $8 million decrease in 1994, offset by a decrease in accrued
expenses of $1 million compared to an increase in 1994 (including accruals
associated with the restructuring charge) of $59 million.
Net cash provided by investing activities was $156 million in 1996,
compared to net cash used in investing activities of $134 million in 1995 and
$131 million in 1994. The fluctuations in net cash provided by and used in
investing activities are related to the net disposals of investments of $176
million in 1996, compared to net purchases of $118 million in 1995 and $60
million in 1994, and the lower level of capital expenditures on a year-to-year
basis in both 1996 and 1995. The 1996 to 1995 comparisons were also affected by
the cash proceeds from the sale of certain assets from the Company's former shoe
business in 1995.
Net cash used in financing activities was $123 million in 1996, compared to
$104 million in 1995 and $75 million in 1994. The changes in net cash used in
financing activities principally reflects the amount expended in the Company's
stock repurchase program, partially offset in 1996 by the proceeds from exercise
of stock options. As of March 4, 1997, the Company had expended or committed to
expend, through the sale of put warrants (see Note 8 of Notes to Consolidated
Financial Statements), approximately $624 million of the $675 million authorized
under its stock repurchase program, covering an aggregate of 22.2 million
shares.
- 21 -
<PAGE> 22
RESULTS OF OPERATIONS
CONTINUED
The decrease in 1996 year end inventory levels over the prior year end
reflected later receipt of spring merchandise across substantially all of the
Company's wholesale apparel divisions and a reduction of ongoing inventory
levels within the outlet operations. Lower average inventory levels had a
positive impact on the Company's 1996 inventory turnover rate.
The Company's anticipated capital expenditures for 1997 currently
approximate $70 million. These expenditures consist primarily of the expansion
of the Company's distribution facilities, including certain building and
equipment expenses and renovation of New York showrooms and offices. The Company
has recently completed the planning stages of a significant information systems
upgrade project, which will involve substantial changes to the Company's present
hardware and software systems which the Company expects to provide certain
competitive benefits and allow the information systems to be "Year 2000"
compliant. Management currently expects that full implementation of this project
will involve a commitment of approximately $45-$60 million over the next three
years; approximately $17 million of such amount is included in the Company's $70
million anticipated capital expenditures for 1997 referred to above. Capital
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, were $270 million at
year end 1996 and 1995. The Company expects to be able to adjust these lines as
required.
Statements contained herein that relate to the Company's future
performance, including, without limitation, statements with respect to the
Company's anticipated results for any portion of fiscal 1997, shall be deemed
forward-looking statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, as a number of factors affecting the
Company's business and operations could cause actual results to differ
materially from those contemplated by the forward-looking statements. Those
factors include the overall level of consumer spending and the performance of
the Company's products within the prevailing retail environment, as well as such
other factors as are set forth in the Company's 1996 Annual Report on Form 10-K,
including, without limitation, those set forth under the heading "Business -
Competition; Certain Risks". The Company has introduced a new upper-moderate
label and has repositioned its moderate brands under its recently designated
Special Markets Unit. This business is accompanied by certain risks, including
risks associated with generating acceptance by new customers (including mass
merchants) of new product lines and the general risks inherent with any such
expansion. The Company's efforts to date within the moderate market (which is
generally a lower margin business) have not been profitable.
Inflation
The 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.
- 22-
<PAGE> 23
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
1997 Annual Meeting of Stockholders to be filed pursuant to Regulation aG (the
"Company's 1997 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 1997 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 1997
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 "Executive
Compensation-Employment Arrangements" in the Company's 1997 Proxy Statement.
- 23 -
<PAGE> 24
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
<TABLE>
<CAPTION>
PAGE REFERENCE
1996 FORM 10-K
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets of December 28, 1996
and December 30, 1995 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 28, 1996 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 28, 1996 F-5 to F-6
Consolidated Statements of Cash Flows for the
Three Fiscal Years Ended December 28, 1996 F-7
Notes to Consolidated Financial Statements F-8 to F-19
UNAUDITED QUARTERLY RESULTS F-20
</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.
- 24 -
<PAGE> 25
3. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <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. 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(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(d)(i) to the 1988 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>
10(c)+ - 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(c)(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(d)+ - 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(d)(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(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to the 1992 Annual Report).
10(e)(i)+ - Amendment 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(e)(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(e)(iii)+* - Amendment No. 6 to the Savings Plan.
10(e)(iv)+* - Amendment No. 7 to the Savings Plan.
10(f)+ - 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(g) - Trust Agreement related to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(jj) to the 1983 Annual Report).
10(g)(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(g)(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(g)(iii)+ - Amendment No. 4 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 July 1, 1995).
10(g)(iv)+* - Amendment No. 5 to the Profit-Sharing Plan.
</TABLE>
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 26 -
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10(h) - Collective Bargaining Agreement, dated June 1, 1994, between New
York Skirt and Sportswear Association, Inc. (of which Registrant is
a member) and Amalgamated Ladies' Garment Cutters' Union, Local 10,
I.L.G.W.U. and Blouse, Skirt, Sportswear, Children's Wear & Allied
Workers' Union, Local 23-25, I.L.G.W.U. (incorporated herein by
reference from Exhibit 10(h) to Registrant's Annual Report on Form
10-K for Fiscal Year ended December 28, 1995 (the "1995 Annual
Report").
10(i)+ - Executive Liability and Indemnification Policy No. 81035379F, with
Chubb Group of Insurance Companies (the "Insurance Policy")
(incorporated herein by reference from Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for Fiscal Year ended December 31, 1994
(the "1994 Annual Report").
10(i)(i)+* - Summary of Extension of the Insurance Policy.
10(j)* - Excess Coverage Directors and Officers Liability Insurance Policy
No. 483-73-56, with National Union Fire Insurance Company of
Pittsburgh, PA.
10(k)+* - Description of 1996 Salaried Employee Incentive Bonus Plan.
10(l) - Lease, dated as of January 1, 1990 for premises located at 1441
Broadway, New York, New York between Registrant 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(m)+ - Liz Claiborne, Inc. Amended and Restated Outside Directors' 1991
Stock Ownership Plan (the "Outside Directors' 1991 Plan")
(incorporated herein by reference from Exhibit 10(m) to the 1995
Annual Report).
10(m)(i)+* - Form of Option Agreement under the Outside Directors' 1991 Plan.
10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan")
(incorporated herein by reference from Exhibit 10(p) to the 1991
Annual Report).
10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by reference
from Exhibit 10(p)(i) to the 1993 Annual Report).
10(o)+ - 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(p)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(q)+* - Form of Option Grant Certificate under the 1992 Plan.
10(r)+ - Form of Restricted Career Share Agreement under the 1992 Plan
(incorporated herein by reference from Exhibit 10(a) to Registrant's
Quarterly Report of Form 10-Q for the period ended September 30,
1995).
</TABLE>
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 27 -
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
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.
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 ss.162(m) Cash Bonus Plan
(incorporated herein by reference from Exhibit 10(v) to the
1994 Annual Report).
10(w)+* - Liz Claiborne, Inc. Supplemental Executive Retirement Plan (As amended and
restated effective as of January 1, 1997).
10(x)+* - The Liz Claiborne, Inc. Bonus Deferral Plan.
10(y)+ - Employment Agreement dated as of May 9, 1994, between Registrant and
Paul R. Charron (the "Employment Agreement") (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)(i)+ - Amendment to the Employment Agreement, dated as of November 20,
1995, between Registrant and Paul R. Charron (incorporated herein by
reference from Exhibit 10(x)(i) to the 1995 Annual Report).
10(y)(ii)+* - Amendment to the Employment Agreement, dated as of September 19,
1996, between Registrant and Paul R. Charron (including the Liz
Claiborne Retirement Income Accumulation Plan for the benefit of
Mr. Charron).
10(z)+* - Employment Agreement dated as of September 26, 1996 between
Registrant and Denise V. Seegal.
10(aa)* - Agreements dated as of May 15, 1996 and May 17, 1996, between
Registrant and Jerome A. Chazen.
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
99* - Undertakings.
(b) Reports on Form 8-K.
Not applicable.
</TABLE>
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 28 -
<PAGE> 29
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 27, 1997.
LIZ CLAIBORNE, INC.
By /s/ Samuel M. Miller
-------------------------------------------
Samuel M. Miller,
Senior Vice President-Finance,
Chief Financial Officer/
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 27, 1997.
Signature Title
--------- -----
/s/Paul R. Charron Chairman of the Board, Chief Executive Officer
- ---------------------------- and Director/Principal Executive Officer
Paul R. Charron
/s/Denise V. Seegal
- ----------------------------
Denise V. Seegal President
/s/Lee Abraham
- ----------------------------
Lee Abraham Director
/s/Eileen H. Bedell
- ----------------------------
Eileen H. Bedell Director
/s/Jerome A. Chazen
- ----------------------------
Jerome A. Chazen Director
/s/Ann M. Fudge
- ----------------------------
Ann M. Fudge Director
/s/J. James Gordon
- ----------------------------
J. James Gordon Director
/s/Kenneth P. Kopelman
- ----------------------------
Kenneth P. Kopelman Director
/s/Kay Koplovitz
- ----------------------------
Kay Koplovitz Director
/S/Paul E. Tierney, Jr.
- ----------------------------
Paul E. Tierney, Jr. Director
- 29 -
<PAGE> 30
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 28, 1996 and December 30, 1995 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 28, 1996 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 28, 1996 F-5 to F-6
Consolidated Statements of Cash Flows
for the Three Fiscal Years Ended December 28, 1996 F-7
Notes to Consolidated Financial Statements F-8 to F-19
UNAUDITED QUARTERLY RESULTS F-20
</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> 31
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 28, 1996 and
December 30, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Liz Claiborne, Inc. and
subsidiaries as of December 28, 1996 and December 30, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 28, 1996 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
New York, New York
February 14, 1997
F-2
<PAGE> 32
CONSOLIDATED BALANCE SHEETS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
ALL AMOUNTS IN THOUSANDS EXCEPT SHARE DATA DECEMBER 28, 1996 DECEMBER 30, 1995
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 322,881 $ 54,722
Marketable securities 205,855 383,128
Accounts receivable - trade 158,168 126,053
Inventories 349,427 393,363
Deferred income tax benefits 31,555 30,235
Other current assets 74,212 77,710
----------- -----------
Total current assets 1,142,098 1,065,211
----------- -----------
PROPERTY AND EQUIPMENT - NET 223,284 239,467
OTHER ASSETS 17,368 24,565
----------- -----------
$ 1,382,750 $ 1,329,243
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 163,666 $ 138,800
Accrued expenses 151,245 155,449
Income taxes payable 10,762 12,648
----------- -----------
Total current liabilities 325,673 306,897
----------- -----------
LONG-TERM DEBT 996 1,115
DEFERRED INCOME TAXES 8,253 7,722
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 27,336 25,283
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 38,577 35,075
Retained earnings 1,382,247 1,255,325
Cumulative translation adjustment (4,311) (1,256)
----------- -----------
1,504,732 1,377,363
Common stock in treasury, at cost - 17,212,585
shares in 1996 and 14,526,922 shares in 1995 (484,240) (389,137)
----------- -----------
Total stockholders' equity 1,020,492 988,226
----------- -----------
$ 1,382,750 $ 1,329,243
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 33
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
LIZ CLAIBORNE, INC. AND SUBSIDIARIES FISCAL YEARS ENDED
------------------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER COMMON SHARE DATA DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $2,217,518 $2,081,630 $2,162,901
Cost of goods sold 1,341,083 1,290,929 1,407,694
---------- ---------- ----------
GROSS PROFIT 876,435 790,701 755,207
Selling, general and administrative expenses 641,720 600,471 604,421
Restructuring charge -- -- 30,000
---------- ---------- ----------
OPERATING INCOME 234,715 190,230 120,786
Investment and other income - net 14,350 12,884 10,663
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 249,065 203,114 131,449
Provision for income taxes 93,400 76,200 48,600
---------- ---------- ----------
NET INCOME $ 155,665 $ 126,914 $ 82,849
========== ========== ==========
NET INCOME PER COMMON SHARE $ 2.15 $ 1.69 $ 1.06
========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ .45 $ .45 $ .45
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 34
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock
--------------------- Capital in Cumulative Common
Number of Excess of Retained Translation Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total
---------- ------- ---------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 25, 1993 88,218,617 $88,219 $56,699 $1,123,413 $(1,279) $(288,761) $978,291
Effect of a change in accounting
for available-for-sale securities,
net of tax -- -- -- 2,848 -- -- 2,848
Net income -- -- -- 82,849 -- -- 82,849
Exercise of stock options and
related tax benefits -- -- 15 (134) -- 431 312
Cash dividends paid -- -- -- (35,304) -- -- (35,304)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (6,787) -- -- (6,787)
Translation adjustment -- -- -- -- (358) -- (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 -- -- -- (2,035) -- 2,759 724
----------- ------- ------- ----------- ------- --------- ---------
BALANCE, DECEMBER 31, 1994 88,218,617 88,219 56,714 1,164,850 (1,637) (325,162) 982,984
Net income -- -- -- 126,914 -- -- 126,914
Exercise of stock options and
related tax benefits -- -- 27 (132) -- 659 554
Cash dividends paid -- -- -- (33,627) -- -- (33,627)
Proceeds from sale of put warrants -- -- 3,617 -- -- -- 3,617
Reclassification of put warrant
obligations -- -- (25,283) -- -- -- (25,283)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- 4,549 -- -- 4,549
Translation adjustment -- -- -- -- 381 -- 381
Purchase of 3,749,900 shares of
common stock -- -- -- -- -- (74,800) (74,800)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- (7,229) -- 10,166 2,937
----------- ------- ------- ----------- ------- --------- ---------
BALANCE, DECEMBER 30, 1995 88,218,617 88,219 35,075 1,255,325 (1,256) (389,137) 988,226
</TABLE>
<PAGE> 35
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock
--------------------- Capital in Cumulative Common
Number of Excess of Retained Translation Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total
---------- ------- ---------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 30, 1995 88,218,617 $88,219 $35,075 $1,255,325 $(1,256) $(389,137) $988,226
Net income -- -- -- 155,665 -- -- 155,665
Exercise of stock options and
related tax benefits -- -- 1,719 1,778 -- 11,070 14,567
Cash dividends paid -- -- -- (32,318) -- -- (32,318)
Proceeds from sale of put warrants -- -- 3,836 -- -- -- 3,836
Reclassification of put warrant
obligations, net -- -- (2,053) -- -- -- (2,053)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (991) -- -- (991)
Translation adjustment -- -- -- -- (3,055) -- (3,055)
Purchase of 3,211,462 shares of
common stock -- -- -- -- -- (107,617) (107,617)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- 2,788 -- 1,444 4,232
----------- ------- ------- ----------- ------- --------- ---------
BALANCE, DECEMBER 28, 1996 88,218,617 $88,219 $38,577 $1,382,247 $(4,311) $(484,240) $1,020,492
=========== ======= ======= =========== ======= ========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 36
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED
LIZ CLAIBORNE, INC. AND SUBSIDIARIES -------------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
DECEMBER 28, DECEMBER 30, DECEMBER 31,
ALL DOLLAR AMOUNTS IN THOUSANDS 1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 155,665 $ 126,914 $ 82,849
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 42,850 39,043 35,039
Other-net 6,452 7,524 513
Change in current assets and liabilities:
(Increase) decrease in accounts receivable - trade (32,115) 33,713 14,669
Decrease in inventories 43,936 12,362 13,590
(Increase) in deferred income tax benefits (676) (416) (15,169)
Decrease (increase) in other current assets 3,498 (846) (7,809)
Increase (decrease) in accounts payable 24,866 219 (2,545)
(Decrease) increase in accrued expenses (4,204) (1,475) 59,159
(Decrease) increase in income taxes payable (1,886) 4,754 (7,653)
--------- --------- ---------
Net cash provided by operating activities 238,386 221,792 172,643
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (348,646) (344,626) (181,739)
Disposals of investment instruments 524,323 227,119 121,713
Purchases of property and equipment (23,337) (34,357) (70,594)
Purchase of trademarks -- (2,595) (3,193)
Proceeds from sale of certain shoe division assets -- 17,872 --
Other-net 3,828 2,102 2,935
--------- --------- ---------
Net cash provided by (used in) investing activities 156,168 (134,485) (130,878)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (119) (112) (107)
Proceeds from exercise of common stock options 12,878 537 297
Dividends paid (32,318) (33,627) (35,304)
Purchase of common stock, net of put warrant premiums (103,781) (71,183) (39,591)
--------- --------- ---------
Net cash used in financing activities (123,340) (104,385) (74,705)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,055) 381 (361)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 268,159 (16,697) (33,301)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 54,722 71,419 104,720
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 322,881 $ 54,722 $ 71,419
========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Liz Claiborne, Inc. is primarily engaged in the design and marketing of a broad
range of apparel, accessories and fragrances. The Company's products are sold
principally in the United States. 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 consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts in the financial
statements and related notes. Actual results could differ from those estimates.
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
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. Gains and losses on investment transactions are recognized
in income 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 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 loans with foreign subsidiaries of a long-term
investment nature are also included in this component of stockholders' equity.
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
FOREIGN EXCHANGE FORWARD AND OPTION CONTRACTS
The Company enters into foreign exchange forward and option contracts to hedge
transactions denominated in foreign currencies for periods of less than one year
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 and are accounted for as part of the underlying
transaction. Transaction gains and losses included in income were not
significant in fiscal 1996, 1995 and 1994. As of December 28, 1996, the Company
had forward contracts maturing through May 1997 to sell 6,000,000 Canadian
dollars and option contracts to sell 5,000,000 Canadian dollars and 1,000,000
British pounds sterling. The aggregate U.S. dollar value of the foreign exchange
contracts is approximately $9,800,000 at year-end 1996, as compared with
approximately $35,000,000 at year-end 1995. Unrealized gains and losses for
outstanding foreign exchange forward and option contracts were not material at
December 28, 1996 and December 30, 1995.
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.
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,
1995 or 1996 year end date. The 1996 and 1995 fiscal years each reflect a
52-week period, while the 1994 fiscal year reflects a 53-week period.
NOTE 2
RESTRUCTURING CHARGE
In December 1994, the Company recorded a $30.0 million restructuring charge. The
amount included $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 were estimated contract termination
costs, severance and related benefits for staff reductions, losses on contracts
and write-off of certain assets. This charge reduced net income by $18.9
million, or $.24 per common share, in the fourth quarter of 1994. Expenditures
charged to the reserve consisted of $12.3 million related to severance costs,
$11.0 million to losses on contracts and write-off of certain assets and $6.7
million to other miscellaneous costs. The process of streamlining operating and
administrative functions is continuing and the costs are currently being charged
through operations. First Issue accounted for $3.2 million of 1996 net sales, as
compared with $53.3 million in 1995 and $63.9 million in 1994, and incurred
operating losses of $.7 million in 1996, $8.9 million in 1995 and $17.3 million
in 1994. The conversion of the Company's First Issue retail stores to other
Company-operated formats was completed during the first quarter of 1996.
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 3
LICENSE AGREEMENT
Effective June 30, 1995, the Company entered into an agreement with a third
party to operate under license the shoe business formerly operated by the
Company's Shoe Division. As part of the transaction, the Company received $18.0
million in cash, plus other consideration valued at $4.9 million, in exchange
for inventory and other assets. In 1996, the Company also licensed its watch
business. The Shoe and Watch Divisions had combined net sales of $47.1 million
in 1995 and $62.7 million in 1994. The operating results of the shoe and watch
businesses for each period were not material to the Company's overall operating
results.
NOTE 4
MARKETABLE SECURITIES
The following are summaries of available-for-sale marketable securities and
maturities:
<TABLE>
<CAPTION>
DECEMBER 28, 1996
--------------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value
- ---------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Tax exempt notes and bonds ........................... $ 354,392 $ 357 $ (288) $ 354,461
Commercial paper ..................................... 148,651 -- -- 148,651
U.S. & foreign government securities ................. 12,877 74 (272) 12,679
Collateralized mortgage obligations .................. 7,112 -- (442) 6,670
--------- --------- --------- ---------
523,032 431 (1,002) 522,461
Equity securities .................................... 236 -- (39) 197
--------- --------- --------- ---------
$ 523,268 $ 431 $ (1,041) $ 522,658
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 30, 1995
--------------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value
- ---------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Tax exempt notes and bonds ........................... $ 409,763 $ 1,285 $ (86) $ 410,962
U.S. & foreign government securities ................. 12,124 187 (129) 12,182
Collateralized mortgage obligations .................. 7,118 -- (231) 6,887
--------- --------- --------- ---------
429,005 1,472 (446) 430,031
Equity securities .................................... 1,721 -- -- 1,721
--------- --------- --------- ---------
$ 430,726 $ 1,472 $ (446) $ 431,752
========= ========= ========= =========
</TABLE>
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 28, 1996
--------------------
Estimated
(DOLLARS IN THOUSANDS) Cost Fair Value
- ---------------------- ---- ----------
<S> <C> <C>
Due in one year or less ................................ $365,376 $364,931
Due after one year through three years ................. 152,308 152,486
Due after three years .................................. 5,348 5,044
-------- --------
523,032 522,461
Equity securities ...................................... 236 197
-------- --------
$523,268 $522,658
======== ========
</TABLE>
These investments include $316,606,000 in 1996 of tax exempt notes and bonds
and commercial paper and $46,903,000 in 1995 of tax exempt notes and bonds which
are classified as cash and cash equivalents and equity securities which are
included in other long-term assets in the consolidated balance sheets.
For the fiscal years 1996, 1995 and 1994, gross realized gains on
available-for-sale securities totaled $1,881,000, $956,000 and $674,000,
respectively, and gross realized losses totaled $491,000, $1,167,000 and
$412,000, respectively. The adjustment to unrealized gains and losses on
available-for-sale securities which was included in retained earnings was a
charge of $991,000 (net of $645,000 in deferred income taxes) and a credit of
$4,549,000 (net of $2,729,000 in deferred income taxes) in fiscal 1996 and 1995,
respectively.
NOTE 5
INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials .......................... $ 28,198 $ 41,972
Work in process ........................ 17,209 17,018
Finished goods ......................... 304,020 334,373
-------- --------
$349,427 $393,363
======== ========
</TABLE>
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 6
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings ................................... $124,125 $124,195
Machinery and equipment .............................. 138,620 137,847
Furniture and fixtures ............................... 55,022 52,848
Leasehold improvements ............................... 126,956 127,422
-------- --------
444,723 442,312
Less-accumulated depreciation and amortization ....... 221,439 202,845
-------- --------
$223,284 $239,467
======== ========
</TABLE>
The Company's land and building located in Mount Pocono, Pennsylvania is pledged
as collateral against long-term debt of $996,000.
NOTE 7
INCOME TAXES
The provisions for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
DECEMBER 28, DECEMBER 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ----------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ..................... $ 76,898 $ 57,617 $ 48,117
Foreign ..................... 2,055 3,003 1,962
State and local ............. 14,300 9,300 8,950
-------- -------- --------
93,253 69,920 59,029
Deferred - net ................... 147 6,280 (10,429)
-------- -------- --------
$ 93,400 $ 76,200 $ 48,600
======== ======== ========
</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, costs and expenses which are recognized for tax
purposes in different periods from those used for financial statement purposes.
The current income tax provisions exclude $1,719,000 in 1996, $27,000 in 1995
and $15,000 in 1994, arising from the exercise of nonqualified stock options.
These amounts have been credited to capital in excess of par value.
<PAGE> 42
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
-----------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax provision at statutory rate ...................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit ......................... 3.7 3.0 4.4
Tax-exempt interest income ................................................... (2.7) (3.2) (2.3)
Other-net .................................................................... 1.5 2.7 (0.1)
---- ---- ----
37.5% 37.5% 37.0%
==== ==== ====
</TABLE>
The components of net deferred taxes arising from temporary differences as of
December 28, 1996 and December 30, 1995 are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 28, 1996 DECEMBER 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY
<S> <C> <C> <C> <C>
Inventory valuation ......................................... $ 13,301 $ -- $ 14,235 $ --
Unremitted earnings from foreign subsidiaries ............... -- 14,342 -- 13,481
Restructuring liability ..................................... -- -- 4,988 --
Accounts receivable valuation ............................... 5,805 -- 5,486 --
Unrealized investment losses/(gains) ........................ 229 -- (384) --
Depreciation ................................................ -- (5,933) -- (7,430)
Other-net ................................................... 12,220 (156) 5,910 1,671
-------- -------- -------- --------
$ 31,555 $ 8,253 $ 30,235 $ 7,722
======== ======== ======== ========
</TABLE>
Management believes that the deferred tax benefits will be fully realized
through future taxable income and reversals of deferred tax liabilities.
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 8
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
The Company leases office, showroom, warehouse/distribution and retail space,
computers and other equipment under various noncancellable operating lease
agreements which expire through December 2013. Rental expense for 1996, 1995 and
1994 was approximately $74,685,000, $74,902,000 and $67,208,000, respectively.
At December 28, 1996, the minimum aggregate rental commitments are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
FISCAL YEAR OPERATING LEASES FISCAL YEAR OPERATING LEASES
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
1997..................................................... $52,365 2000.............................................. $ 43,884
1998..................................................... 49,303 2001 ............................................. 43,200
1999..................................................... 45,967 Thereafter........................................ 107,646
</TABLE>
Certain rental commitments have renewal options extending through the year 2029.
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 28, 1996, the Company had entered into commitments for the purchase
of raw materials and for the production of finished goods totaling approximately
$625,727,000.
In 1996, in connection with its stock repurchase program, the Company sold put
warrants on 1.25 million shares of common stock in privately negotiated
transactions based on the then-current market price of the common stock. The
warrants give the holders the right at maturity to require the Company to
repurchase shares of its common stock at specified prices. In 1996, warrants on
1.5 million shares of common stock expired unexercised or were terminated.
Warrants on an additional 750,000 shares remained outstanding at December 28,
1996; if exercised, these warrants will require the Company to purchase up to
750,000 shares of its common stock at various dates in 1997. In 1995, the
Company sold put warrants on 2.0 million shares of common stock. As of December
30, 1995, warrants on 1.0 million shares of common stock had expired unexercised
and warrants on an additional 1.0 million shares remained outstanding, and
expired at various dates in 1996. The proceeds from the sale of put warrants of
$3.8 million in 1996 and $3.6 million in 1995 have been recorded in capital in
excess of par value. The Company's potential obligations of $27.3 million in
1996 and $25.3 million in 1995 to buy back 750,000 and 1.0 million shares,
respectively, of common stock have been charged to capital in excess of par
value and reflected as put warrants on the consolidated balance sheets.
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 the past, 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. Subsequently, certain customers have emerged from protection under Chapter
11. In 1996 and 1995, three corporate groups of department store customers
accounted for 18%, 17% and 11%, respectively, of net sales. In 1994, two
corporate groups of department store customers accounted for 17% and 11%,
respectively, of net sales. The Company does not believe that this concentration
of sales and credit risk represents a material risk of loss with respect to its
financial position as of December 28, 1996.
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> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 9
LINES OF CREDIT
As of December 28, 1996, the Company had bank lines of credit aggregating
$270,000,000 which were available to cover letters of credit issued by the
banks.
At December 28, 1996 and December 30, 1995, the Company had outstanding letters
of credit of $195,567,000 and $210,145,000, respectively.
NOTE 10
STOCK PLANS
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations in accounting for its stock-based
compensation plans, which are described below. Accordingly, no compensation cost
has been recognized for its fixed stock option grants. Had compensation costs
for the Company's stock option grants been determined based on the fair value at
the grant dates for awards under these plans in accordance with SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would have been reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>
(Dollars in thousands except per common share data) DECEMBER 28, DECEMBER 30,
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income:
As reported ...................................................... $ 155,665 $ 126,914
Pro forma ........................................................ $ 153,918 $ 125,960
Earnings per share:
As reported ...................................................... $ 2.15 $ 1.69
Pro forma ........................................................ $ 2.13 $ 1.68
</TABLE>
For this purpose, the fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in 1996 and 1995, respectively:
dividend yield of 1% for both years, expected volatility of 34% and 35%, risk
free interest rates of 5.4% and 7.8% and expected lives of four years.
In 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 ("the 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.
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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 or performance shares have been granted
under the plan. Exercise prices for awards under the plan are determined by the
committee; to date, all stock options have been granted at an exercise price not
less than the quoted 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 28, 1996, there
were available for future grant 1,968,666 shares under the 1992 plan. The 1992
plan expires in 2002. The 1984 plan has expired; awards made thereunder prior to
its termination remain in effect in accordance with their terms.
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.
Changes in common shares under option for the three fiscal years in the period
ended December 28, 1996 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ----------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year......... 2,581,870 $26.82 2,450,421 $32.06 3,728,249 $36.06
Granted................... 726,900 27.73 1,085,875 17.32 123,000 22.39
Exercised................. (486,484) 26.74 (30,502) 25.48 (13,496) 22.00
Cancelled................. (646,363) 29.56 (923,924) 29.57 (1,387,332) 42.07
--------- ------ --------- ------ ---------- ------
End of year............... 2,175,923 $26.34 2,581,870 $26.83 2,450,421 $32.06
========= ====== ========= ====== ========== ======
Exercisable at
end of year............. 493,098 $30.87 829,253 $35.19 1,019,674 $33.90
========= ====== ========= ====== ========== ======
Weighed average fair
value of options granted
during the year........... $8.93 $6.43 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The following table summarizes information about options outstanding at December
28, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------------- ----------------------------------------
Weighted Average
Range of Outstanding Remaining Weighted Average Exercisable at Weighted Average
Exercise Prices at Dec. 28, 1996 Contractual Life Exercise Price Dec. 28, 1996 Exercise Price
- --------------- ---------------- ---------------- ------------------ -------------- ------------------
<C> <C> <C> <C> <C> <C>
$15.00 - $25.00 1,108,479 5.6 years $19.08 239,536 $20.06
25.01 - 35.00 635,749 8.8 years 27.23 12,624 30.31
35.01 - 60.00 431,695 3.4 years 43.68 240,938 41.64
- ------------------------------------------------------------------------------------------------------------------------------------
$15.00 - $60.00 2,175,923 6.1 years $26.34 493,098 $30.87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On January 9, 1997, nonqualified options to acquire 752,235 shares of common
stock were granted to officers and other key employees with an exercise price of
$38.75.
In January 1996 and June 1995, the committee granted 43,500 and 416,000 shares,
respectively, of common stock to a group of key executives. As of December 28,
1996, 415,500 of these shares remained outstanding. These shares are subject to
restrictions on transfer and subject to risk of forfeiture until earned by
continued employment. The restrictions expire on December 20, 2004. The
expiration of the restrictions may be accelerated if the total return of the
common stock exceeds that of a predetermined group of competitors or upon the
happening of certain other events. The unearned compensation is being amortized
over a period of three years in anticipation of the accelerated expiration of
the restrictions.
In May 1994, the committee 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. The expiration of the restrictions may be accelerated if the
market value of the common stock attains certain predetermined levels or upon
the happening of certain other events. In 1996, one-third of the then 65,000
unvested restricted shares (or 21,665 shares) vested in accordance with the
accelerated vesting provisions of the employment agreement. The remaining shares
vest at the rate of 6,667 shares of common stock per year through the year 2000
and 10,000 shares in the year 2001. The unearned compensation related to all
restricted stock grants as of December 28, 1996 and December 30, 1995 was
$4,622,000 and $6,933,000, respectively, and is included in retained earnings on
the consolidated balance sheets.
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 28, 1996, 50,000 of these options remained outstanding; they
will become exercisable on October 21, 1998 and expire on October 21, 2000,
subject to certain exceptions.
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The Company's outside directors' stock ownership plan provides non-employee
directors, as part of their annual retainer, shares of common stock with a value
of $15,000 on the first business day of each fiscal year. The shares so issued
are nontransferable for a period of three years following the grant date,
subject to certain exceptions. In 1996, 2,872 shares of common stock were issued
under this plan. This plan also provides each non-employee director a grant of
options to purchase 1,000 shares of common stock on the first business day of
each fiscal year. Not more than one half of one percent (0.50%) of the shares of
common stock outstanding from time to time may be issued under the plan, which
will expire in 2006.
NOTE 11
PROFIT-SHARING RETIREMENT,
SAVINGS AND DEFERRED COMPENSATION PLANS
The Company's noncontributory, defined contribution profit-sharing retirement
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, except that for employees
commencing employment after December 31, 1996, vesting will be on a "cliff"
(100%) basis after a period of five years of service. Each year, profit-sharing
contributions, if any, are determined by the Board of Directors. The Company's
1996, 1995 and 1994 plan contribution expense, which is included in selling,
general and administrative expenses, was $5,590,000, $5,572,000 and $6,166,000,
respectively.
The Company's 401(k) savings 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. Subject to Internal Revenue Code limitations,
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 (equal to 50% of the first 5% contributed by the
participant) 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. The
Company's 1996, 1995 and 1994 plan contribution expense, which is included in
selling, general and administrative expenses, was $2,016,000, $2,044,000 and
$2,082,000, respectively.
The Company has a supplemental retirement plan for executives whose benefits
under the profit-sharing retirement plan and the savings plan are expected to be
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. The
plan also allows participants to defer up to 15% of their salary. Supplemental
benefits attributable to participant deferals are fully vested at all times and
the balance of a participant's benefits vests on the same basis as the matching
contribution under the Company's 401(k) plan. Under a separate bonus deferral
plan participants may defer up to 100% of their annual bonus. These supplemental
plans are not funded. The Company's expenses related to these plans, which are
included in selling, general and administrative expenses, were $889,000,
$405,000 and $362,000 in 1996, 1995 and 1994, respectively.
In 1996, the Company established an unfunded deferred compensation arrangement
for a senior executive which accrues over a six year period as of the first day
of each fiscal year beginning in 1996, based on an amount equal to 15% of the
sum of the senior executive's base salary and bonus. The accrued amount plus
earnings will become fully vested on December 28, 2002, provided the senior
executive is the Chairman of the Board and Chief Executive Officer of the
Company on such date. This arrangement also provides for the deferral of an
amount equal to the portion of the executive's base salary that exceeds $1
million. The deferred amount plus earnings will be fully vested at all times.
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 12
STOCKHOLDER RIGHTS PLAN
The Company has 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 10 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.
NOTE 13
CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
During fiscal 1996, 1995 and 1994, the Company made income tax payments of
$94,632,000, $65,590,000, and $72,415,000, respectively. Non-cash investing
activities which are not included in the consolidated statements of cash flows
for 1995 and 1994 include a direct financing lease receivable with a disposition
of property and equipment of $1,120,000 and $1,177,000, respectively, and in
1995 a reversal of the remaining direct financing lease receivable and
acquisition of property and equipment of $9,738,000.
NOTE 14
ACCRUED EXPENSES
Accrued expenses at December 28, 1996 and December 30, 1995 consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll and bonuses ..................................................... $ 42,065 $ 40,070
Taxes, other than taxes on income ....................................... 9,432 8,072
Employee benefits ....................................................... 16,784 19,153
Advertising ............................................................. 17,042 15,461
Restructuring reserve ................................................... -- 13,316
Common stock in transit ................................................. 2,420 --
Other ................................................................... 63,502 59,377
-------- --------
$151,245 $155,449
======== ========
</TABLE>
<PAGE> 49
UNAUDITED QUARTERLY RESULTS
Unaudited quarterly financial information for 1996 and 1995 is set forth in the
table below:
<TABLE>
<CAPTION>
March June September December
------------------- ------------------- ------------------- -------------------
All dollar amounts in thousands
except per common share data 1996 1995 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $556,558 $527,076 $500,595 $474,849 $622,102 582,572 $538,263 $497,133
Gross profit 211,242 192,067 192,604 176,698 254,120 228,315 218,469 193,621
Net income 35,886 28,085 22,670 17,022 56,223 48,165 40,886 33,642
Earnings per common share $.49 $.37 $.31 $.23 $.78 $.64 $.57 $.45
Dividends paid per common share $.11 $.11 $.11 $.11 $.11 $.11 $.11 $.11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 50
]
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <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. 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(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein
by reference from Exhibit 10(d)(i) to the 1988 Annual Report).
</TABLE>
- ----------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
<PAGE> 51
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10(c)+ - 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(c)(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(d)+ - 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(d)(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(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to the 1992 Annual
Report).
10(e)(i)+ - Amendment 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(e)(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(e)(iii)+* - Amendment No. 6 to the Savings Plan.
10(e)(iv)+* - Amendment No. 7 to the Savings Plan.
10(f)+ - 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(g) - Trust Agreement related to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(jj) to the
1983 Annual Report).
10(g)(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(g)(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(g)(iii)+ - Amendment No. 4 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 July 1,
1995).
10(g)(iv)+* - Amendment No. 5 to the Profit-Sharing Plan.
</TABLE>
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
<PAGE> 52
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10(h) - Collective Bargaining Agreement, dated June 1, 1994, between
New York Skirt and Sportswear Association, Inc. (of which
Registrant is a member) and Amalgamated Ladies' Garment
Cutters' Union, Local 10, I.L.G.W.U. and Blouse, Skirt,
Sportswear, Children's Wear & Allied Workers' Union, Local
23-25, I.L.G.W.U. (incorporated herein by reference from
Exhibit 10(h) to Registrant's Annual Report on Form 10-K for
Fiscal Year ended December 28, 1995 (the "1995 Annual
Report").
10(i)+ - Executive Liability and Indemnification Policy No. 81035379F,
with Chubb Group of Insurance Companies (the "Insurance
Policy") (incorporated herein by reference from Exhibit 10(l)
to Registrant's Annual Report on Form 10-K for Fiscal Year
ended December 31, 1994 (the "1994 Annual Report").
10(i)(i)+* - Summary of Extension of the Insurance Policy.
10(j)* - Excess Coverage Directors and Officers Liability Insurance
Policy No. 483-73-56, with National Union Fire Insurance
Company of Pittsburgh, PA.
10(k)+* - Description of 1996 Salaried Employee Incentive Bonus Plan.
10(l) - Lease, dated as of January 1, 1990 for premises located at
1441 Broadway, New York, New York between Registrant 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(m)+ - Liz Claiborne, Inc. Amended and Restated Outside Directors'
1991 Stock Ownership Plan (the "Outside Directors' 1991 Plan")
(incorporated herein by reference from Exhibit 10(m) to the
1995 Annual Report).
10(m)(i)+* - Form of Option Agreement under the Outside Directors' 1991
Plan.
10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992
Plan") (incorporated herein by reference from Exhibit 10(p) to
the 1991 Annual Report).
10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by
reference from Exhibit 10(p)(i) to the 1993 Annual Report).
10(o)+ - 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(p)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(q)+* - Form of Option Grant Certificate under the 1992 Plan.
10(r)+ - Form of Restricted Career Share Agreement under the 1992 Plan
(incorporated herein by reference from Exhibit 10(a) to
Registrant's Quarterly Report of Form 10-Q for the period
ended September 30, 1995).
</TABLE>
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
<PAGE> 53
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
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.
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 162(m) Cash Bonus Plan
(incorporated herein by reference from Exhibit 10(v) to the
1994 Annual Report).
10(w)+* - Liz Claiborne Supplemental Executive Retirement Plan (As amended
and restated effective as of January 1, 1997).
10(x)+* - The Liz Claiborne, Inc. Bonus Deferral Plan.
10(y)+ - Employment Agreement dated as of May 9, 1994, between
Registrant and Paul R. Charron (the "Employment Agreement")
(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)(i)+ - Amendment to the Employment Agreement, dated as of November
20, 1995, between Registrant and Paul R. Charron (incorporated
herein by reference from Exhibit 10(x)(i) to the 1995 Annual
Report).
10(y)(ii)+* - Amendment to the Employment Agreement, dated as of September
19, 1996 between Registrant and Paul R. Charron (including the
Liz Claiborne Retirement Income Accumulation Plan for the
benefit of Mr. Charron).
10(z)+* - Employment Agreement dated as of September 26, 1996, between
Registrant and Denise V. Seegal.
10(aa)* - Agreements dated as of May 15, 1996 and May 17, 1996, between
Registrant and Jerome A. Chazen.
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
99* - Undertakings.
(b) Reports on Form 8-K.
Not applicable.
</TABLE>
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
<PAGE> 1
EXHIBIT 10(e)(iii)
AMENDMENT NO. 6
TO THE
LIZ CLAIBORNE SAVINGS PLAN
(As Amended and Restated Effective January 1, 1987)
The Liz Claiborne Savings Plan as amended and restated effective
January 1, 1987 (the "Plan") is hereby further amended in the following
respects:
(1) The first sentence of Section 1.36 is restated to read as
follows:
"Total compensation as that term is defined in Treasury Regulation section
1.415-2(d)(11)(i), paid by an Employer or Affiliate to an individual, but
determined before giving effect to any Participation Agreement under this Plan
(or any other cash or deferred arrangement described in section 401(k) of the
Code) or to any similar reduction agreement pursuant to any cafeteria plan
(within the meaning of section 125 of the Code)."
(2) The second sentence of Section 5.1.2 is deleted and replaced
with the following:
"Notwithstanding the foregoing, such a Member who has completed at least 3 years
of Service prior to the expiration of the applicable election period may elect
to have the vested percentage of his Matching Contributions Account computed
under the Plan provisions in effect on December 31, 1988. For purposes of the
preceding sentence, the election period shall begin on December 31, 1988 and end
on the later of March 1, 1989 or the date that is 60 days after the Member is
issued a notice of the change in the vesting schedule effective January 1,
1989."
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer the 1st day of May, 1996.
LIZ CLAIBORNE, INC.
By: /s/ Jerome A. Chazen
-----------------------------
ATTEST:
/s/ Mona Mayer
- ---------------
<PAGE> 1
Exhibit 10(e)(iv)
AMENDMENT NO. 7
TO THE
LIZ CLAIBORNE SAVINGS PLAN
(As Amended and Restated Effective as of January 1, 1987)
The Liz Claiborne Savings Plan as amended (the "Plan") is hereby further
amended in the following respects, pursuant to the provisions of Section 13.2 of
the Plan, effective as of January 1, 1997.
I. Section 4.4 is amended by replacing the parenthetical "(in 10%
increments on or after July 1, 1994)" with the parenthetical "(in 10% increments
on or after July 1, 1994 and, beginning January 1, 1997, in such other
increments as the Plan Administrator may from time to time permit)".
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer the 27th day of March, 1997.
LIZ CLAIBORNE, INC.
By:/s/ Samuel M. Miller
------------------------------------
Title: Senior Vice President-
Finance and Chief Financial
Officer
Attest:
/s/ Roberta S. Karp
- ----------------------
<PAGE> 1
Exhibit 10(g)(iv)
AMENDMENT NO. 5
TO THE
LIZ CLAIBORNE PROFIT-SHARING RETIREMENT PLAN
(As Amended and Restated Effective as of January 1, 1987)
The Liz Claiborne Profit-Sharing Retirement Plan as amended (the "Plan") is
hereby further amended in the following respects, pursuant to the provisions of
Section 12.1 of the Plan, effective as of January 1, 1997:
1. Section 6.2.2 of Article VI of the Plan is restated in its entirety as
follows:
6.2.2 Vesting After December 31, 1988 for Participants Hired Before
January 1, 1997.
Except as provided in Section 6.2.3, a Member who is credited with an Hour
of Service (as defined in Section 14.1.3) after December 31, 1988, and
whose Date of Hire (as defined in Section 14.1.2) is before January 1,
1997, has a vested and non-forfeitable right to a percentage of his account
determined under the following schedule:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 2 0 percent
2 20 percent
3 40 percent
4 60 percent
5 80 percent
6 100 percent
</TABLE>
<PAGE> 2
2. Article VI of the Plan is amended by adding a new Subsection 6.2.3 to
provide as follows:
6.2.3 Vesting after December 31, 1996.
A Member whose Date of Hire (as defined in Section 14.1.2) is after
December 31, 1996, and a Member who (a) has a Severance Period that
commenced prior to January 1, 1997 and (b) had accumulated less than two
(2) years of Vesting Service as of his Severance Date (for purposes of this
Section 6.2.3 a Member's Vesting Service shall be determined without regard
to Section 14.3) has a vested and non-forfeitable right to a percentage of
his Account determined under the following schedule:
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 5 0 percent
5 100 percent
</TABLE>
IN WITNESS WHEREOF, and as evidenced as the adoption of this Amendment No.
5 to the Plan, Liz Claiborne, Inc. has caused this instrument to be executed by
its duly authorized officer and its corporate seal to be hereunto affixed, the
27th day of March, 1997.
LIZ CLAIBORNE, INC.
By:/s/ Samuel M. Miller
--------------------------------
Title: Senior Vice President -
Finance and Chief Financial
Officer
ATTEST:
/s/ Roberta S. Karp
- ---------------------------
- 2 -
<PAGE> 1
EXHIBIT 10(I)(I)
SUMMARY OF EXTENSION OF THE EXECUTIVE LIABILITY AND
INDEMNIFICATION POLICY NO. 8103-53-79G (THE "POLICY")
The Policy has been extended to August 11, 1998. The annual premium for the
period August 11, 1996 to August 11, 1997 is $273,000.
<PAGE> 1
Exhibit 10(j)
NATIONAL UNION
FIRE INSURANCE COMPANY
[LOGO] OF PITTSBURGH, PA.
POLICY NUMBER:
A CAPITAL STOCK COMPANY 483 77 56
ADMINISTRATIVE OFFICE:
70 PINE STREET, NEW YORK, N.Y. 10270
The Company agrees with the insured named below, in consideration of the
premium paid and subject to all terms and conditions set forth below that the
insurance afforded by this policy shall follow all the terms and conditions of
Policy Number 8103-53-79G issued by Federal Insurance Company (but not
including any renewal or rewrite thereof unless otherwise specifically agreed
in writing by the Company), except for any endorsements attached hereto.
NAMED INSURED: CLAIBORNE, LIZ INC
ADDRESS: 1441 BROADWAY
NEW YORK, NY 10018-2002
POLICY PERIOD: August 11, 1996 to August 11, 1997
COVERAGE: EXCESS DIRECTORS AND OFFICERS LIABILITY AND CORPORATE REIMBURSEMENT
LIMIT OF LIABILITY: $10,000,000 EXCESS OF $15,000,000
PREMIUM: $90,000
RATE: FLAT
IN WITNESS WHEREOF, the Company has caused this policy to be signed by its
President and Secretary at New York, New York and countersigned by a duly
authorized representative of the Company.
/s/ Elizabeth M. Tuck
- ---------------------------------
SECRETARY
FRANK CRYSTAL & CO., INC. /s/ ILLEGIBLE
40 BROAD STREET ------------------------
NEW YORK, NY 10004 PRESIDENT
258924
/s/ ILLEGIBLE SEP 20 96
-------------------------
AUTHORIZED REPRESENTATIVE
Vice President - National Union
8136
NOTICE; THESE POLICY FORMS AND THE APPLICABLE RATES ARE EXEMPT FROM THE FILING
REQUIREMENTS OF THE NEW YORK STATE INSURANCE DEPARTMENT. HOWEVER, SUCH FORMS
AND RATES MUST MEET THE MINIMUM STANDARDS OF THE NEW YORK INSURANCE LAW AND
REGULATIONS.
<PAGE> 1
EXHIBIT 10(K)
DESCRIPTION OF LIZ CLAIBORNE, INC. 1996 SALARIED
EMPLOYEE INCENTIVE BONUS PLAN
For the 1996 fiscal year, Liz Claiborne, Inc. maintained a bonus plan for full
time salaried employees under which bonuses were earned based upon a combination
of growth in earnings per share and return on invested capital, as measured
against pre-established targets, and, as applicable, achievement of targeted
levels of divisional direct operating profit and/or departmental performance
considerations, subject to certain terms and conditions. A similar bonus plan is
anticipated for 1997.
<PAGE> 1
EXHIBIT 10(m) (i)
LIZ CLAIBORNE, INC.
OUTSIDE DIRECTORS' 1991 STOCK OWNERSHIP PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement"), dated as of
May 16, 1996, between LIZ CLAIBORNE, INC., a Delaware corporation (the
"Company"), and _______________, a non-employee director of the Company (the
"Optionee").
The Company's Outside Directors' 1991 Stock Ownership Plan, as
amended and restated (the "Plan"), provides for the grant, as of the date on
which the Company's stockholders approved the amended and restated Plan, of an
option to purchase 1,000 shares of the Company's Common Stock to each of the
Company's non-employee directors.
The amended and restated Plan was approved by the Company's
stockholders on May 16, 1996.
In consideration of the foregoing and of the mutual undertakings set
forth in this Agreement, the Company and the Optionee hereby agree as follows:
SECTION 1. Grant of Option.
The Company hereby grants to the Optionee a nonqualified stock
option (the "Option") to purchase 1,000 shares of common stock of the Company
("Common Stock") at a purchase price of $36.75 per share, equal to the Fair
Market Value thereof (as defined under the Plan) on the date hereof.
<PAGE> 2
SECTION 2. Exercisability.
Subject to the further terms of this Agreement, the Option shall
become exercisable with respect to 25% of the shares of Common Stock initially
subject thereto on the first anniversary of the date of this Agreement and with
respect to an additional 25% and 50% of such shares on the second and third
anniversaries, respectively, of the date of this Agreement, provided that the
Optionee is then a director of the Company. Unless earlier terminated pursuant
to the provisions of the Plan, the unexercised portion of the Option shall
expire and cease to be exercisable at 12:01 a.m. on the tenth anniversary of the
date of this Agreement. The Option may be partially exercised from time to time
up to the amount of shares exercisable at such time as set forth above.
SECTION 3. Method of Exercise.
The Option or any part thereof may be exercised only by the giving
of written notice to the Company on such form and in such manner as the Company
shall prescribe. Such written notice must be accompanied by payment of the full
purchase price for the number of shares with respect to which the Option is
being exercised. Such payment may be made by one or a combination of the
following methods: (a) in cash; (b) by a certified or official bank check (or
the equivalent thereof acceptable to the Company); or (c) by delivery of shares
of Common Stock acquired at least six months prior to the option exercise date
and having a Fair Market Value as of the exercise date equal to all or part of
the option exercise price. The date of exercise of the Option shall be the date
on
2
<PAGE> 3
which written notice of exercise is hand delivered to the Company, during normal
business hours, at its address as provided in Section 6 of this Agreement, or,
if mailed, the date on which it is postmarked, provided such notice is actually
received. Promptly after receiving payment of the full option exercise price,
the Company shall deliver to the Optionee a certificate representing the shares
of Common Stock for which the Option has been exercised.
SECTION 4. Termination of Employment; Death.
4.1 Upon termination of the Optionee's membership on the Company's
Board of Directors for any reason, the Option shall terminate and expire except
as provided in Section 4.2 of this Agreement.
4.2 If the Optionee's membership on the Board terminates for any
reason other than removal for cause, the Option shall be exercisable, but only
to the extent it was exercisable on the date of such termination; provided that
such exercise must occur by the first anniversary of termination on the account
of death, by the third anniversary of termination on account of retirement with
at least five years of Board membership or otherwise within ninety (90) days
following the date of such termination. Exercise following the Optionee's death
shall be made only by the Optionee's executor or administrator, unless the
Optionee's will specifically disposes of the Option, in which case exercise
shall be made only by the recipient of such specific disposition.
3
<PAGE> 4
SECTION 5. Plan Provisions to Prevail.
This Agreement is subject to all of the terms and provisions of the
Plan. Without limiting the generality of the foregoing, by entering into this
Agreement, the Optionee agrees that neither any employee of the Company nor any
member of the Company's Board of Directors or the Committee (as defined in the
Plan) shall be liable for any action or determination made in good faith with
respect to the Plan or any award thereunder or this Agreement. In the event that
there is any inconsistency between the provisions of this Agreement and of the
Plan, the provisions of the Plan shall govern.
SECTION 6. Notices.
Any notice to be given to the Company hereunder shall be in writing
and shall be addressed to the Senior Vice President, Finance, of the Company at
Liz Claiborne, Inc., One Claiborne Avenue, North Bergen, NJ 07047, or at such
other address as the Company may hereafter designate to the Optionee by notice
as provided in this Section 6. Any notice to be given to the Optionee hereunder
shall be addressed to the Optionee at the address set forth beneath his or her
signature hereto, or at such other address as the Optionee may hereafter
designate to the Company by notice as provided herein. A notice shall be deemed
to have been duly given when personally delivered or mailed by registered or
certified mail to the party entitled to receive it.
4
<PAGE> 5
SECTION 7. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the extent
consistent with Section 4 of this Agreement and with the Plan, the heirs and
personal representatives of the Optionee.
SECTION 8. Governing Law.
This Agreement shall be interpreted, construed and administered in
accordance with the laws of the State of Delaware as they apply to contracts
made, delivered and to be wholly performed in the State of Delaware.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first written above.
LIZ CLAIBORNE, INC.
ATTEST:_______________________ By:___________________________
Name: Samuel M. Miller
Title: Senior Vice President-
Finance and Chief Financial
Officer
_______________, Optionee
Name:
Address:_______________________
6
<PAGE> 1
EXHIBIT 10(q)
[LOGO]
LIZ CLAIBORNE, INC. 1992 STOCK INCENTIVE PLAN
STOCK OPTION
GRANT DATE: GRANT PRICE: GOOD UNTIL:
Social Security Number: This Certifies That: Certificate Number:
Has an Option to Purchase Shares
of Common Stock, $1.00 par value, of Liz Claiborne, Inc., a Delaware
corporation, at $ per share subject to the terms and conditions set forth
on the reverse side hereof and as set forth in the Liz Claiborne, Inc. 1992
Stock Incentive Plan.
IN WITNESS WHEREOF, Liz Claiborne, Inc. has caused this certificate to be duly
executed in its name by signature of its proper officers.
LIZ CLAIBORNE, INC.
- ------------------------------------ -----------------------------------
Paul R. Charron Samuel Miller
Chairman and Chief Executive Officer Senior Vice President - Finance and
Chief Financial Officer
<PAGE> 2
STOCK OPTION GRANT CERTIFICATE - ADDITIONAL TERMS
1. GRANT OF OPTION - Liz Claiborne, Inc. (the "Company") hereby grants to
the person named on the face of this Certificate (the "Optionee") a
nonqualified stock option (the "Option") to purchase the number of
shares of common stock of the Company at a purchase price as specified
on the face hereof. It is intended that the Option shall not qualify as
an "incentive stock option" as defined in section 422 of the Internal
Revenue Code of 1986, as amended.
2. EXERCISABILITY - Subject to the further terms included herein, the
Option shall become exercisable with respect to 25% of the shares of
Common Stock initially subject thereto on the first anniversary of the
date of grant and with respect to an additional 25% and 50% of such
shares on the second and third anniversaries of the grant date. Unless
earlier terminated pursuant to the provisions of the 1992 Stock
Incentive Plan (the "Plan), the unexercised portion of the Option shall
expire and cease to be exercisable at midnight on the tenth anniversary
of the grant date of the option. The Option may be partially exercised
from time to time up to the amount of shares exercisable at such time
as set forth above.
3. EXERCISING OPTIONS - Subject to the terms and conditions of the Plan,
the Optionee may exercise Options by giving notice of exercise to the
Company or its designee accompanied by payment of the aggregate Option
exercise price for the shares being purchased together with any amount
which the Company or its subsidiaries may be required to withhold upon
such exercise in respect of applicable foreign, federal (including
FICA), state and local taxes, all in such manner as specified from time
to time by the Company. Each such exercise notice shall specify the
number of shares of Company common stock to be purchased, the Option
exercise price, the grant date, and such other matters as may be
required by the the Company or the Company's Stock Option Committee.
4. TERMINATION OF EMPLOYMENT
4.1 Upon termination of the Optionee's employment for any reason,
the Option shall terminate and expire, except as provided in
Section 4.2 or 4.3 below.
4.2 If the Optionee's employment terminates for any reason other
than death, dismissal for cause or resignation without the
Company's prior consent, the Option shall be exercisable but
only to the extent is was exercisable at the time of such
termination and only until the earlier of the expiration date
of the Option, determined pursuant to Section 2 above, or the
expiration of either (a) three months following employment
termination or (b) in the case of Retirement (as defined),
three years following the date of Retirement. "Retirement"
shall mean Optionee's 65th birthday, on or after the date on
which Optionee has attained age 60 and completed at least six
years of Vesting Service (as defined in and determined under
the Liz Claiborne Profit Sharing Plan, as the same has been
and may from time to time be amended) or, if approved by the
committee, on or after the date Optionee has completed at
least 20 years of Vesting Service.
4.3 If the Optionee dies while employed by the Company or after
employment terminates but during a period in which the option
is exercisable pursuant to Section 4.2 above, the Option shall
be exercisable but only to the extent it was exercisable at
the time of death and only until the earlier of the expiration
date of the Option, determined pursuant to Section 2 above, or
the first anniversary of the date of the Optionee's death.
5. PLAN PROVISIONS TO PREVAIL - The Option is subject to all of the terms
and provisions of the Plan. Without limiting the generality of the
foregoing, by accepting the grant of the Option the Optionee agrees
that no member of the Company's Stock Option Committee shall be liable
for any action or determination made in good faith with respect to the
Plan or any award thereunder or this Certificate In the event that
there is any inconsistency between the provisions of this Certificate
and of the Plan, the provisions of the Plan shall govern.
6. NOTICES - Any notice to be given to the Company hereunder shall be in
writing and shall be addressed to the Senior Vice President, Finance,
Liz Claiborne, Inc. One Claiborne Avenue, North Bergen, NJ 07047, or at
such other address as the Company may hereafter designate to the
Optionee by notice as provided in this Section 6. Any notice to be
given to the Optionee hereunder shall be addressed to the Optionee at
the address set forth on the front of this Certificate, or at such
other address as the Optionee may hereafter designate to the Company by
notice as provided herein. A notice shall be deemed to have been duly
given when personally delivered or mailed by registered or certified
mail to the party entitled to receive it.
7. SUCCESSORS AND ASSIGNS - The terms of this Certificate shall be binding
upon and inure to the benefit of the parties hereto and the successors
and assigns of the Company and, to the extent consistent with Section
4.1 above and with the Plan, the heirs and personal representatives of
the Optionee.
8. GOVERNING LAW - The Option and this Certificate shall be interpreted,
construed and administered in accordance with the laws of the State of
New York.
9. RECEIPT OF PROSPECTUS - By accepting delivery of this Certificate, the
Optionee acknowledges that he or she has received a copy of the
Prospectus relating to the Options and the shares of Company common
stock covered thereby under the Plan.
<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 portable life insurance policy with a
minimal cash surrender value.
<PAGE> 1
EXHIBIT 10(W)
LIZ CLAIBORNE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As amended and restated effective as of January 1, 1997)
<PAGE> 2
INDEX TO ARTICLES
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
Preamble .................................................................. 1
1. Definitions ............................................................ 1
2. Eligibility ............................................................ 2
3. Contributions and Deferrals ............................................ 2
4. Accounts ............................................................... 5
5. Benefits ............................................................... 7
6. Beneficiaries .......................................................... 8
7. Administration ......................................................... 9
8. Amendment and Termination .............................................. 10
9. Miscellaneous .......................................................... 11
</TABLE>
<PAGE> 3
PREAMBLE
--------
Effective August 5, 1993, Liz Claiborne, Inc. (the "Company") adopted this
Liz Claiborne, Inc. 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
and that is, for purposes of the State Taxation of Pension Income Act of 1995
(the "Source Tax Act"), to the maximum extent considered a plan as described in
section 2(b)(1)(I)(ii) of the Source Tax Act. 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, effective for years beginning on and
after January 1, 1997:
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, Matching Contributions, 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).
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 Deferral Limit means, with respect to any calendar year, the limit on
elective deferrals for such year established pursuant to section 402(g) of the
Code.
1.6 Earnings Percentage means, with respect to any Plan Year, the annual
rate of earnings on assets of the Profit-Sharing Plan.
1
<PAGE> 4
1.7 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.
1.8 Phantom Share means a bookkeeping entry made to a SERP Account pursuant
to Section 3.2 or 3.4.
1.9 Plan means this Liz Claiborne Supplemental Executive Retirement Plan as
in effect from time to time.
1.10 Plan Administrator means the individual serving pursuant to Section
7.1.
1.11 Profit-Sharing Plan means the Liz Claiborne Profit-Sharing Retirement
Plan.
1.12 Savings Plan means the Liz Claiborne Savings Plan.
1.13 Section 415 Limit means, with respect to any limitation year within
the meaning of Treas. Reg. e 1.415-2(b), the limit established for such year
pursuant to section 415(c)(1)(A) of the Code.
1.14 SERP Account means an account established by the Company pursuant to
Section 4.1.
1.15 SERP Compensation means Compensation without regard to the
Compensation Limit (and without regard to any deferral elections made pursuant
to this Plan).
1.16 SERP Matching Accrual means an amount credited to a SERP Member's SERP
Account pursuant to Section 3.3.
1.17 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).
2
<PAGE> 5
1.18 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 could reasonably be expected to be limited in any Plan
Year by the operation of the Compensation Limit, the Section 415 Limit or the
Deferral Limit, or whose Compensation at least equals $100,000, 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.
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;
3
<PAGE> 6
(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 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.
4
<PAGE> 7
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, 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 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.
(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.
5
<PAGE> 8
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.
(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
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 his SERP Account attributable to
SERP Matching Accruals shall be determined on the same basis as his vested
percentage in his Matching Contributions under the
6
<PAGE> 9
Savings Plan and his vested and nonforfeitable interest in the remaining portion
of his SERP Account shall be determined on the same basis as his vested
percentage under 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.
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 and Method 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 unless he has elected otherwise in accordance with Section
5.2(b). 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) Subject to the further provisions of this paragraph (b), the Plan
Administrator may permit SERP Members, under uniformly applicable procedures, to
designate the form of payment of their SERP Benefits. Pursuant to such
procedures, a SERP Member may elect to receive his SERP Benefit in substantially
equal installments paid at such intervals as the Plan Administrator shall
determine over a period certain not to exceed the lesser of 15 years or his life
expectancy determined at the time payments are to commence. Such election shall
apply to the SERP Member's entire SERP Benefit. Each Eligible Employee who is or
becomes a SERP Member on January 1, 1997 shall file such election with the Plan
Administrator prior to December 31, 1996. Each Eligible Employee who becomes a
SERP Member thereafter shall file such election with the Plan Administrator upon
becoming a SERP Member. A SERP Member's election shall remain in effect until
such time as a new election shall be made; provided, however, that no new
7
<PAGE> 10
election shall become effective unless it has been in effect for at least one
year prior to the SERP Member's Termination of Employment (but the one year
requirement shall not apply if Termination was due to accidental death). If a
SERP Member who has elected to receive or is receiving payment in installments
dies before his entire SERP Benefit has been paid, his Beneficiary shall receive
the undistributed SERP Benefit in a single distribution, which shall be made as
soon as practicable following the date of death, unless the SERP Member had
specifically elected that payments continue to be made to the Beneficiary in
installments.
(c) 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 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 deferrals and 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 as a condition of deferral and payment that the Eligible Employee or
other recipient remit to such Employer 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 pursuant to procedures
established by the Plan Administrator. 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
8
<PAGE> 11
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.
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.
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.
9
<PAGE> 12
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
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
10
<PAGE> 13
amendment or termination of the Plan by the Company shall be binding upon
each other Employer.
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, 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. If any benefit or portion of any benefit payable
hereunder is determined not to be paid pursuant to an arrangement described in
section 2(b)(1)(I)(ii) of the Source Tax Act or pursuant to a plan that is
unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of ERISA, such benefit or portion thereof shall be deemed
paid under a separate plan or arrangement for purposes of the Source Tax Act or
ERISA, as the case may be, under provisions identical to this Plan. Without
limiting the application of the preceding sentences, a provision
11
<PAGE> 14
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. Further, if
any provision of this Plan shall hereafter be held to be invalid, unenforceable
or illegal in whole or in part, in any jurisdiction under any circumstances for
any reason, (i) such provision shall be reformed to the minimum extent necessary
to cause such provision to be valid, enforceable and legal while preserving the
intent of the Plan as expressed herein or (ii) if such provision cannot be so
reformed, such provision shall be severed from the Plan and an equitable
adjustment shall be made to the Plan (including, without limitation, addition of
necessary further provisions to the Plan) so as to give effect to the intent as
so expressed. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of any other
provision of the Plan.
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.
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 is intended to constitute (a) in part an
arrangement that is an unfunded "excess benefit plan" and in part an arrangement
that is unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
all within the meaning of the Employee Retirement Income Security Act of 1974,
as amended, and (b) an arrangement that is described in section 2(b)(1)(I)(ii)
of the Source Tax Act. All rights under this Plan shall be governed by and
construed in accordance with rules of Federal law applicable to such plans. No
action (whether at law, in equity or otherwise) shall be brought by or on behalf
of any Participant or Beneficiary for or with respect to benefits due under this
Plan unless the person bringing such action has timely exhausted the Plan's
claim review procedure. Any action (whether at law, in equity or otherwise) must
be commenced within three years. This three year period shall be
12
<PAGE> 15
computed from the earlier of (a) the date a final determination denying such
benefit, in whole or in part, is issued under the Plan's claim review procedure
and (b) the date such individual's cause of action first accrued (as determined
under the laws of the State of New York without regard to principles of choice
of laws).
IN WITNESS WHEREOF, LIZ CLAIBORNE, INC. has caused this instrument to be
executed by its duly authorized officers, and its corporate seal to be hereunto
affixed, as of this 1st day of January, 1997.
LIZ CLAIBORNE, INC.
By: /s/ Samuel M. Miller
-------------------------------------
Title: Senior Vice President-Finance and
Chief Financial Officer
13
<PAGE> 1
EXHIBIT 10(X)
LIZ CLAIBORNE, INC.
BONUS DEFERRAL PLAN
<PAGE> 2
INDEX TO ARTICLES
-----------------
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
Preamble .................................................................. 1
1. Definitions ............................................................ 1
2. Bonus Deferrals......................................................... 2
3. Benefits ............................................................... 3
4. Beneficiaries; Administration .......................................... 4
</TABLE>
<PAGE> 3
PREAMBLE
--------
Effective as of December 8, 1995, Liz Claiborne, Inc. (the "Company")
adopted this Liz Claiborne, Inc. Bonus Deferral Plan (the "Plan") to enable
certain employees of the Company and its subsidiaries to make elective deferrals
of annual bonuses. The Plan is intended to constitute an arrangement that is,
for purposes of the Employee Retirement Income Security Act of 1974 ("ERISA"),
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 Account means the record maintained on the books of an Employer to
reflect Bonus deferrals by a Participant pursuant to Section 2.2.
1.2 Beneficiary means the person or persons designated pursuant to Article
4 to receive a benefit in the event of a Participant's death before his benefit
under this Plan has been paid in full.
1.3 Bonus means a bonus paid by an Employer, in respect of the Fiscal Year
ending December 8, 1995 or any subsequent Fiscal Year, under its compensation
program.
1.4 Committee has the meaning given that term in Section 1.1 of the SERP.
1.5 Company means Liz Claiborne, Inc., a Delaware corporation.
1.6 Eligible Employee means an individual who meets the requirements to be
a SERP Member as set forth in Section 2.1 of the SERP.
1
<PAGE> 4
1.7 Employer means the Company and any subsidiary of the Company that
participates in this Plan.
1.8 Fiscal Year means the Company's fiscal year.
1.9 Participant means an individual who has an Account to which amounts
stand credited.
1.10 Plan means this Liz Claiborne Bonus Deferral Plan as in effect from
time to time.
1.11 Plan Administrator means the individual appointed from time to time by
the Company to administer the Plan.
1.12 Profit-Sharing Plan means the Liz Claiborne Profit-Sharing Retirement
Plan.
1.13 SERP means the Liz Claiborne Supplemental Executive Retirement Plan.
1.14 Termination of Employment means cessation for any reason of a
Participant's employment by the Company and all of its subsidiaries.
ARTICLE 2
BONUS DEFERRALS
---------------
2.1 Accounts. Each Employer shall establish an Account for each Eligible
Employee employed by it who elects to defer a Bonus pursuant to Section 2.2.
Amounts deferred pursuant to Section 2.2, and income thereon determined pursuant
to Section 2.4, shall be credited to such Account.
2.2 Deferral of Bonus. An Eligible Employee may direct his Employer to
reduce a Bonus otherwise payable to him and to pay the amount of such reduction
to him in the future as deferred compensation. The maximum amount eligible to be
deferred shall be determined from time to time by the Plan Administrator, who
may provide different limits for different Eligible Employees or categories of
Eligible Employees. A deferral direction pursuant to this Section 2.2
2
<PAGE> 5
shall be made in writing before the last day of the Fiscal Year for which such
Bonus is paid, in such manner as the Plan Administrator shall prescribe, and
shall be irrevocable.
2.3 Installment Payments. An Eligible Employee may irrevocably elect, at
the time of a Bonus deferral, to receive the amount which will become payable as
a result of such deferral in no more than ten annual installments. Except as may
be elected pursuant to this Section 2.3, all amounts becoming payable under this
Plan shall be paid in a single sum.
2.4 Income. The Committee shall from time to time designate the investment
vehicle or vehicles in which Accounts shall be deemed invested. If more than one
such vehicle is designated, the Plan Administrator shall determine the manner in
which, and frequency with which, Participants may elect how their Accounts shall
be deemed invested. As of the end of each Fiscal Year, each Employer shall
credit each Account maintained by it with income for the Fiscal Year then
ending. Such income shall be determined on the basis of the total return of the
investment vehicle(s) in which such Account is deemed invested during such
Fiscal Year.
2.5 Accounts Confer No Interest in Assets. The crediting of amounts to the
Account of a Participant is merely a bookkeeping record and shall not confer on
such Participant any right, title or interest in or to any specific assets of
any Employer.
2.6 Account Statements. The Plan Administrator shall furnish written
statements to each Participant setting forth, at least as of the end of each
Fiscal Year, the amount standing credited to his Account.
ARTICLE 3
BENEFITS
--------
3.1 Benefit. A Participant's benefit under this Plan shall be a sum equal
to the dollar value of his Account at the time of payment pursuant to Section
3.2.
3.2 Time of Payment. (a) A Participant's benefit shall be paid to him, or
to his Beneficiary in the event of his death, in cash. Payment shall be in a
single sum except to the extent that installments have been elected pursuant to
Section 2.3, and shall be made (or begin) as soon as practicable 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.
3
<PAGE> 6
(b) In the event that a Participant shall die following Termination of
Employment but before his benefit is fully paid, such benefit shall be paid to
the Participant's Beneficiary as soon as practicable.
(c) When all benefit payments provided for under this Section 3.2 have been
made in full, a Participant's Account shall be closed.
3.3 Source of Payment. Each deferred Bonus and income thereon shall be the
obligation of the Employer by whom the Participant is employed at the time of
Bonus deferral, and shall be a general liability of such Employer. The claim of
a Participant or Beneficiary to a benefit shall at all times be merely the claim
of an unsecured creditor of the applicable Employer(s). No trust, security,
escrow, or similar account need be established for the purpose of paying
benefits hereunder. However, the Company may in its discretion establish a
custodial account or "rabbi trust" (or other arrangement having equivalent
taxation characteristics under the Internal Revenue Code) to hold assets of the
Company and other Employers, subject to the claims of creditors in the event of
insolvency, for the purpose of paying benefits hereunder. 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.
3.4 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 benefit hereunder 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.
3.5 Right of Offset. Any amount payable pursuant to this Plan shall be
reduced at the discretion of the Plan Administrator to take account of any
amount due, and not paid, by the Participant to the Employer at the time payment
is to be made hereunder.
ARTICLE 4
BENEFICIARIES; ADMINISTRATION
-----------------------------
4.1 Incorporation by Reference. Articles 6, 7, 8 and 9 of the SERP --
entitled, respectively, Beneficiaries, Administration, Amendment and
Termination, and Miscellaneous -- are incorporated into this Plan and made a
part hereof, with the following provisions:
(a) references in the SERP to a "SERP benefit" shall be read as
references to a benefit hereunder;
(b) the term Participant is substituted for the term SERP Member
wherever the latter appears in the SERP; and
4
<PAGE> 7
(c) all other capitalized terms appearing in the SERP shall have the
meanings ascribed to them in Article 1 of this Plan.
IN WITNESS WHEREOF, LIZ CLAIBORNE, INC. has caused this instrument to be
executed by its duly authorized officer, and its corporate seal to be hereunto
affixed, as of this 1st day of January, 1997.
LIZ CLAIBORNE, INC.
By: /s/ Samuel M. Miller
----------------------------------------------
Title: Senior Vice President-Finance and Chief
Financial Officer
<PAGE> 1
EXHIBIT 10(y) (ii)
Liz Claiborne, Inc.
1441 Broadway
New York, NY 10018
September 19, 1996
Mr. Paul R. Charron
70 Oxridge Lane
Darien, Connecticut 06820
Dear Paul:
In light of your promotion to the position of Chairman of the Board
of Liz Claiborne, Inc. ("Company"), which position you hold in addition to your
positions of Chief Executive Officer and President of the Company, you and the
Company desire to amend certain aspects of your employment and compensation
arrangements, including certain of those contained in your employment agreement
with the Company dated May 9, 1994, as amended by a letter agreement between us
dated November 20, 1995 (such original employment agreement, as so amended, your
"Employment Agreement"). Unless otherwise noted, capitalized terms used but not
defined in this letter shall have the meanings given such terms in the
Employment Agreement. We hereby agree as follows:
1. Section 2(a) of the Employment Agreement is hereby amended and
restated to read in its entirety as follows:
"During your term of employment, you will hold the titles and
offices of, and serve in the positions of, Chairman and Chief
Executive Officer of the Company, together with other title(s) and
office(s) as you and the Board of Directors of the Company (the
"Board of Directors") shall from time to time agree. You shall
report to the Board of Directors and shall perform such specific
duties and services as Chairman and Chief Executive Officer
(including service as an officer, director or equivalent position of
any subsidiary, affiliated company or venture of the Claiborne
Group, without additional compensation) as the Board of Directors
shall reasonably request consistent with your position. Your
performance
<PAGE> 2
September 19, 1996
Page 2
shall be reviewed periodically by the Board of Directors."
2. Section 4(a) of the Employment Agreement is hereby amended and
restated to read in its entirety as follows:
"Effective as of May 16, 1996, the Company will pay you a base
salary (your "Annual Base Salary") at an annual rate of not less
than One Million Dollars ($1,000,000), subject to annual review by
the Compensation Committee of the Board of Directors (the
"Compensation Committee") and, in the discretion of such Committee,
increase from time to time; provided that your Annual Base Salary
shall be increased on each of the first through fourth anniversaries
of May 16, 1996, inclusive, during the term hereof (each, an
"Increase Date") by an amount equal to the applicable Increase Rate
times your Annual Base Salary in effect immediately prior to such
increase; provided further, that your Annual Base Salary that is in
excess of One Million Dollars ($1,000,000) in any fiscal year of the
Company shall be automatically deferred and credited to your
Deferred Salary Account pursuant to the Liz Claiborne Retirement
Income Accumulation Plan. As used herein, the term "Increase Rate"
shall mean (x) the percentage increase in the Consumer Price Index
during the twelve-month period immediately preceding the Increase
Date, but not to exceed (y) the annual salary increase guideline
approved by the Compensation Committee (typically in March) and
generally applicable to all executive officers of the Company. As
used herein, the term "Consumer Price Index" means the Consumer
Price Index for All Urban Consumers - New York, prepared by the
Bureau of Labor Statistics of the United States Department of Labor,
or if that Consumer Price Index is not then being published, the
most nearly comparable successor index which you and the Company may
agree upon or, if we fail to agree, an index to be designated by the
Company's independent certified public accountants, with such
adjustments necessary to permit us to carry out the provisions of
this paragraph, and the determination of such accountants shall be
final and binding for purposes hereof."
<PAGE> 3
September 19, 1996
Page 3
3. The following sentence is hereby added as the last sentence of
Section 4(b) of the Employment Agreement:
"Your target bonus under such Section 162(m) Plan for (i) the 1996
fiscal year shall be as previously established by the Compensation
Committee, and (ii) for each subsequent fiscal year of the Company
through the 2000 fiscal year shall be set at a level equal to 75% of
your Annual Base Salary at the rate in effect on the first day of
such fiscal year."
4. The following sentence is hereby added as the last sentence of
Section 4(d) of the Employment Agreement:
"You shall be granted in respect of the 1996 fiscal year, and in
respect of each fiscal year of the Company through the 2000 fiscal
year, stock options covering 50,000 shares of Common Stock, under
and in accordance with the terms and conditions of, the Company's
1992 Stock Incentive Plan (each, an "Annual Option Grant"). All such
options shall have an exercise price equal to the fair market value
of the underlying Common Stock on the date of grant; such options
shall be granted on such date during the year (typically in
December) on which the Compensation Committee of the Board makes its
general annual granting of options to the senior executives of the
Company, and shall be subject to such vesting schedule and other
terms as are applicable to options generally granted to such other
senior executives; provided that options covering 10,000 shares of
Common Stock within each Annual Option Grant ("Career Options")
shall have a vesting schedule providing that no such Career Options
shall vest unless you are employed full-time by the Company as
Chairman and Chief Executive Officer under this Employment Agreement
on December 28, 2002, except that such special Career Option vesting
restriction shall be deemed to have been satisfied upon your earlier
Termination of Employment by reason of death or Disability or upon a
Change of Control Termination (such capitalized terms having the
meanings
<PAGE> 4
September 19, 1996
Page 4
ascribed to them under the Retirement Income Accumulation Plan).
5. The Company has adopted as of the date hereof for your benefit
the Liz Claiborne, Inc. Retirement Income Accumulation Plan, a copy of which has
been provided to you.
6. Except to the extent specifically amended hereby, the provisions
of the Employment Agreement shall remain unmodified, and as amended herein the
Employment Agreement remains in full force and effect.
If the foregoing correctly sets forth your understanding, please
indicate your acceptance by executing the enclosed copy of this letter in the
space provided below, following which this letter will constitute a legally
binding amendment to the Employment Agreement as of the date first written
above.
Very truly yours,
LIZ CLAIBORNE, INC.
By: /s/ Samuel Miller
------------------
Authorized Signature
ACCEPTED AND AGREED:
/s/ Paul R. Charron
- -------------------
Paul R. Charron
<PAGE> 5
LIZ CLAIBORNE
RETIREMENT INCOME ACCUMULATION PLAN
<PAGE> 6
September 19, 1996
Page i
<TABLE>
<CAPTION>
ARTICLE Page
- ------- ----
<S> <C>
Preamble.......................................................... 1
1 Definitions....................................................... 1
2 Credits to Accounts............................................... 4
3 Benefits.......................................................... 6
4 Beneficiaries..................................................... 8
5 Administration.................................................... 9
</TABLE>
- i -
<PAGE> 7
September 19, 1996
Page 1
PREAMBLE
Liz Claiborne, Inc. (the "Company") hereby adopts this Liz Claiborne
Retirement Income Accumulation Plan (the "Plan") for the benefit of Paul R.
Charron, who currently holds the position of Chairman, Chief Executive Officer
and President of the Company (the "Participant"). The Plan is intended to
constitute 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 member of management. 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 Base Salary means, for any calendar year, the base salary
payable to the Participant for such year pursuant to the terms of the Employment
Agreement.
1.2 Beneficiary means the person or persons designated pursuant to
Article 4 to receive a benefit in the event of the Participant's death before
his benefit under this Plan has been paid in full.
<PAGE> 8
September 19, 1996
Page 2
1.3 Cash Bonus means the amount payable to the Participant (without
regard to any bonus deferral elected by the Participant) in respect of a
specified Fiscal Year pursuant to the Company's Section 162(m) Cash Bonus Plan
or any other bonus arrangement in which the Participant participates. Unless the
Committee expressly determines otherwise, Cash Bonus shall not include any
amounts related to the grant, vesting or exercise of stock options, restricted
shares, or other equity-based awards.
1.4 Change of Control Termination means Termination of Employment
(a) by the Company other than for "Cause" as defined in Section 6 of the
Employment Agreement, or (b) by the Participant for "Good Reason" as defined in
Section 7 of the Employment Agreement, in either case only on or after the
occurrence of a "Change of Control" as defined in Section 7 of the Employment
Agreement.
1.5 Committee means the Compensation Committee of the Company's
Board of Directors as constituted from time to time.
1.6 Deferred Salary Account means the record maintained on the books
of the Company to reflect deferred amounts of salary credited pursuant to
Section 2.2 and earnings thereon.
1.7 Disability means a condition that qualifies the Participant for
benefits under the long-term disability insurance program generally applicable
to the Company's employees.
-2-
<PAGE> 9
September 19, 1996
Page 3
1.8 Employment Agreement means the employment agreement between the
Participant and the Company dated as of May 9, 1994, as amended and in effect
from time to time.
1.9 Fiscal Year means the Company's fiscal year.
1.10 Imputed Earnings Rate means, (a) for any Fiscal Year beginning
on or before the first to occur of (x) December 30, 2001 and (y) the
Participant's Termination of Employment, the greater of (i) the Rate of Return
for such Fiscal Year or (ii) the appropriate Federal mid-term rate compounded
annually (as defined and published pursuant to Section 1274(d) of the Internal
Revenue Code of 1986, as amended) for the first business day of such Fiscal Year
for which such rate is determined and (b) for any Fiscal Year beginning
thereafter the rate specified in (ii).
1.11 Rate of Return for any Fiscal Year means the Company's
after-tax rate of return on average capital (excluding cash) for such Fiscal
Year, determined by dividing (a) the product obtained by multiplying (i) the
Company's operating income for such Fiscal Year by (ii) the reciprocal of the
Company's effective tax rate for such Fiscal Year, by (b) the amount determined
by subtracting (i) the 52 week average of the Company's portfolio of cash
equivalents and marketable securities for such Fiscal Year, from (ii) the sum of
(A) the average of the Company's beginning and ending shareholders' equity for
such Fiscal Year plus (B) the average long-term debt of the Company outstanding
during such Fiscal Year, all as illustrated in the computations set forth in
Exhibit A. The Rate of Return shall be determined in accordance
-3-
<PAGE> 10
September 19, 1996
Page 4
with generally accepted accounting principles ("GAAP") and in a manner
consistent with the methods used in the Company's 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.
1.12 Retirement Income Account means the record maintained on the
books of the Company to reflect amounts credited pursuant to Section 2.1 and
earnings thereon.
1.13 Termination of Employment means cessation for any reason of the
Participant's full-time employment by the Company as Chairman and Chief
Executive Officer under the Employment Agreement.
ARTICLE 2
CREDITS TO ACCOUNTS
2.1 Retirement Income Account . As of January 1, 1996, and on the
first day of each Fiscal Year thereafter through the 2001 Fiscal Year, the
Retirement Income Account shall be credited with an amount equal to fifteen
percent of the sum of (a) the Participant's Base Salary for the Fiscal Year then
beginning plus (b) the Cash Bonus (if any) payable to the Participant in respect
of the Fiscal Year then ending. For purposes of this Section 2.1, the
Participant's Base Salary for 1996 shall be deemed to be one million dollars.
2.2 Deferred Salary Account. As of December 29, 1996 and the
first day of each Fiscal Year thereafter, the Deferred Salary Account shall be
credited with the amount of
-4-
<PAGE> 11
September 19, 1996
Page 5
the Participant's Base Salary for the Fiscal Year then beginning that is in
excess of one million dollars and therefore deferred pursuant to the Employment
Agreement.
2.3 Imputed Earnings. As of the last day of each Fiscal Year, the
Retirement Income Account and the Deferred Salary Account shall each be credited
with an amount equal to the product of (a) the balance standing credited to such
account as of the first day of such Fiscal Year, multiplied by (b) the Imputed
Earnings Rate for such Fiscal Year until all payments have been made pursuant to
Section 3.3.
2.4 Accounts Confer No Interest in Assets. The crediting of amounts
to the Accounts is merely a bookkeeping record and shall not confer on the
Participant any right, title or interest in or to any specific assets of the
Company.
2.5 Account Statements. The Company shall furnish a written
statement to the Participant setting forth the amount standing credited to the
Accounts as of the end of each Fiscal Year.
ARTICLE 3
BENEFITS
3.1 Vesting
3.1.1 Retirement Income Account. The Participant's right to
be paid, pursuant to the terms of the Plan, the amount standing credited to the
Retirement Income
-5-
<PAGE> 12
September 19, 1996
Page 6
Account shall become fully vested and nonforfeitable on the earliest of (a)
December 28, 2002, provided that on such date the Participant is employed
full-time by the Company as Chairman and Chief Executive Officer pursuant to the
Employment Agreement, or (b) the Participant's Termination of Employment by
reason of death or Disability, or (c) a Change of Control Termination. Without
limiting any other provision of the Plan, upon the Participant's Termination of
Employment prior to December 28, 2002 for any reason other than death or
Disability or in a Change of Control Termination, his rights to payment from the
Retirement Income Account shall be forfeited in their entirety.
3.1.2 Deferred Salary Account. The Participant's right to be
paid, pursuant to the terms of the Plan, the amount standing credited to the
Deferred Salary Account shall be at all times fully vested and nonforfeitable.
3.2 Benefit. Upon the Participant's Termination of Employment, he
(or his Beneficiary in the event of his death) shall be entitled to receive the
sum of the amounts standing credited on the date of Termination of Employment to
(a) the Deferred Salary Account and (b) the Retirement Income Account, but only
to the extent that his right to such amount has become vested and nonforfeitable
pursuant to Section 3.1.1. If the Participant's Termination of Employment is on
account of Disability or death prior to December 28, 2002, he or his Beneficiary
shall be entitled to receive in addition an amount equal to fifteen percent of
the Cash Bonus (if any) payable to the Participant in respect of the Fiscal Year
in which his death or Disability occurred. Payment shall be made in accordance
with Section 3.3.
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<PAGE> 13
September 19, 1996
Page 7
3.3 Payment
3.3.1 Method of Payment. The amount described in Section 3.2
shall be paid in one lump sum cash payment made as soon as practicable following
the first day of the Fiscal Year following the Participant's Termination of
Employment unless at least two years prior to such Termination of Employment
(but in any event no later than December 31, 2000) the Participant shall have
irrevocably elected in writing to receive payment in annual installments over a
period not to exceed fifteen years. Each annual installment shall be determined
by dividing (a) the total balance standing credited to the two Accounts as of
the first day of each Fiscal Year in the payment period, by (b) the number of
payments still to be made.
3.3.2 Death. In the event that the Participant shall die
following Termination of Employment but before his benefit is fully paid, the
remaining installments shall be paid to his Beneficiary provided, however, that
the Company in its discretion may determine at any time to pay the benefit in a
smaller number of installments or in a lump sum.
3.4 Source of Payment. The benefit payable hereunder shall be a
general liability of the Company. The claim of the Participant or his
Beneficiary to such benefit shall at all times be merely the claim of an
unsecured creditor of the Company. No trust, security, escrow, or similar
account need be established for the purpose of paying the benefit hereunder, but
the Company may in its discretion establish a custodial account or "rabbi trust"
(or other arrangement having equivalent taxation characteristics under the
Internal Revenue Code) to hold assets of the Company, subject to the claims of
the Company's creditors in the event of its
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<PAGE> 14
September 19, 1996
Page 8
insolvency, for the purpose of paying such benefit. 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.
3.5 Withholding. All amounts credited to the Accounts pursuant to
the Plan and all payments under the Plan shall be subject to any applicable
withholding requirements imposed by any tax (including, without limitation,
FICA) or other law. The Company shall have the right to require as a condition
of any crediting to an Account or of any payment hereunder that the Participant
remit to the Company an amount sufficient in its opinion to satisfy all
applicable withholding requirements.
ARTICLE 4
BENEFICIARIES
4.1 Beneficiary Designation.
4.1.1 Designation. The Participant may from time to time
designate a Beneficiary to receive payment pursuant to Article 3 in the event of
his death.
4.1.2 Absence of Beneficiary. In the event that there is no
properly designated Beneficiary living at the time of the Participant's death,
his benefit hereunder shall be paid to his estate.
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<PAGE> 15
September 19, 1996
Page 9
4.2 Payment to Incompetent. If any person entitled to benefits under
this Plan shall be a minor or shall be physically or mentally incompetent in the
judgment of the Company, such benefits may be paid in any one or more of the
following ways, as the Company in its discretion shall determine:
4.2.1 to the legal representatives of such minor or
incompetent person;
4.2.2 directly to such minor or incompetent person; or
4.2.3 to a parent or guardian of such minor or incompetent
person, to the person with whom such minor or incompetent person resides, or to
a custodian for such minor under the Uniform Gifts to Minors Act (or similar
statute) of any jurisdiction.
Payment to any person in accordance with the foregoing provisions of
this Section 4.2 shall to that extent discharge the Company, which shall not be
required to see to the proper application of any such payment.
ARTICLE 5
ADMINISTRATION
5.1 Administration. Authority to administer the Plan shall be vested
in the Committee, which shall have the power and discretion to make and enforce
rules and regulations for the administration of the Plan, construe all terms,
provisions, conditions and limitations of the Plan and resolve ambiguities,
inconsistencies and omissions, and determine all
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<PAGE> 16
September 19, 1996
Page 10
questions arising out of or in connection with the provisions of the Plan or its
administration. The Committee may delegate authority to agents and other persons
to act on its 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. The Committee's determinations under the Plan shall
be conclusive and binding on all persons, subject to the right of appeal set
forth in Section 5.2.
5.2 Claims Procedure. If the Committee denies any claim for benefits
under the Plan it shall notify the Participant (or Beneficiary) of such denial
by written notice which shall set forth the specific reasons for such denial,
and the Participant (or Beneficiary) shall be afforded a reasonable opportunity
for a full and fair review by the Committee of the decision to deny the claim.
5.3 Indemnity. The Company shall indemnify and hold each employee,
officer and director of the Company 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 law, except when the same is
judicially determined to be due to the gross negligence or willful misconduct of
such employee, officer or director.
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<PAGE> 17
September 19, 1996
Page 11
5.4 Payment of Expenses. All expenses of Plan administration
shall be paid by the Company.
5.5 Right to Amend or Terminate. The Company may not amend the
Plan in any respect without the consent of the Participant.
5.6 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 Internal Revenue Code or otherwise.
5.7 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.
5.8 Captions. The captions in this document and in the table of
contents 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 provision thereof.
5.9 Employment. The establishment of the Plan shall not be construed
to confer upon the Participant any legal right to be retained in the employ of
the Company, or affect any right which the Company may have to terminate such
employment, or give the
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<PAGE> 18
September 19, 1996
Page 12
Participant or any other person any right to benefits except to the extent
expressly provided for hereunder.
5.10 Governing Law and Construction. The Plan is intended to
constitute an unfunded, nonqualified deferred compensation arrangement. Except
to the extent preempted by Federal law, all rights under the Plan shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be wholly performed within such state and
without regard to principles of conflict of laws. No action shall be brought by
or with respect to benefits due under this Plan unless the person bringing such
action has timely exhausted the Plan's claim review procedure. Any such action
must be commenced within three years from the earlier of (a) the date a final
determination denying such benefit, in whole or in part, is issued under the
Plan's claim review procedure or (b) the date such individual's cause of action
first accrued. Any dispute, controversy or claim arising out of or in connection
with this Plan (including the applicability of this arbitration provision) and
not resolved pursuant to the Plan's claim review procedure shall be determined
and settled by arbitration conducted by the American Arbitration Association
("AAA") in the County and State of the Company's principal place of business and
in accordance with the then existing rules, regulations, practices and
procedures of the AAA. Any award in such arbitration shall be final, conclusive
and binding upon the parties to the arbitration and may be enforced by either
party in any court of competent jurisdiction. Each party to the arbitration will
bear its own costs and fees (including attorney's fees).
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<PAGE> 19
September 19, 1996
Page 13
IN WITNESS WHEREOF, LIZ CLAIBORNE, INC. has caused this instrument
to be executed by its duly authorized officer this 19th day of September, 1996.
LIZ CLAIBORNE, INC.
By: /s/ Samuel Miller
-------------------
Authorized Signature
ATTEST:
/s/ ILLEGIBLE
- -------------
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<PAGE> 1
EXHIBIT 10(z)
Liz Claiborne, Inc.
1441 Broadway
New York, NY 10018
September 26, 1996
Ms. Denise Seegal
36 Pheasant Lane
Greenwich, Connecticut 06830
Dear Denise:
The undersigned Liz Claiborne, Inc. ("the Company") desires to
employ you in the capacity of President of the Company, and you desire to be so
employed, all subject to the terms and conditions set forth in this letter
agreement ("Agreement"). As used in this Agreement, the term the "Claiborne
Group" means and includes the Company and each of its subsidiaries and
affiliated companies and ventures from time to time.
Accordingly, in consideration of the mutual covenants hereinafter
set forth and intending to be legally bound, the Company and you hereby agree as
follows:
1. Employment; Term. The Company hereby employs you, and you hereby
accept such employment and agree to serve the Claiborne Group, upon the terms
and conditions hereinafter set forth, for a term commencing on your first day of
full time employment with the Company under this Agreement, which shall be as
soon as is practicable, but in any event within thirty days from the date first
written above ("your First Day"), and, unless sooner terminated as hereinafter
provided, expiring on September 30, 1999 (such term of employment being
hereinafter referred to as "your term of employment"). In the event that, at
March 31, 1999, you and the Company shall mutually expect and intend that your
employment with the Company will be extended beyond September 30, 1999, then you
and the Company shall thereupon enter into good faith negotiations with the aim
of extending your term of employment under this Agreement.
2. Position; Conduct.
(a) During your term of employment, you will hold the title
and office of, and serve in the position of, President of the Company, or such
equivalent or more senior title(s) and office(s) as the Board of Directors of
the Company (the "Board of
<PAGE> 2
Directors") may assign to you. In such capacities, the parties mutually intend
that you shall have overall particular responsibility for the operations
(including product development, sales and marketing management) of all of the
better women's apparel divisions of the Claiborne Group (specifically, Liz
Claiborne Casual, including LizSport, LizGolf, Lizwear and Liz & Co.; Liz
Claiborne Collection, including Liz Studio; Special Sizes, including Elisabeth
and Petites; Liz Claiborne Dresses, including Liz Claiborne Suits; and Liz
Claiborne Retail, including the operations of the Elisabeth, Liz Claiborne and
Claiborne (men's) stores) and the corporate merchandising function, and that the
executives in charge of such divisions and function shall report directly to
you. We further mutually intend that you will, over time, be assigned particular
responsibility for other Claiborne Group operating units as the Chief Executive
Officer of the Company (the "CEO") deems appropriate, with the ultimate goal of
your having general management (including P&L) responsibility for all of the
Company's operating divisions, including responsibility for product development,
sales and marketing. It is expected that additional operating unit assignments
will be made within approximately six months from your First Day, and that a
full transition of all general management responsibilities as described above
would be completed within two years from your First Day (although the parties
have mutually expressed the hope of accelerating this timeline). In addition,
you shall be a member of the senior-most management policy-making group of the
Company as constituted from time to time. You shall report to the CEO and shall
perform such specific duties and services of a senior executive nature
(including service as an officer, director or equivalent position of any
subsidiary, affiliated company or venture of the Claiborne Group, without
additional compensation) as shall be reasonably requested consistent with your
position. Your performance shall be reviewed periodically, but no less
frequently than annually, in accordance with the Company's policies applicable
to its senior most executives.
(b) During your term of employment, you shall (i) devote your
full business time and attention and best efforts to the business and affairs of
the Claiborne Group and shall faithfully and diligently perform, to the best of
your ability, all of your duties and responsibilities; (ii) abide by all
applicable policies of the Company from time to time in effect; and (iii)
conduct yourself in such manner as will tend to preserve and enhance the
reputation and goodwill of the Claiborne Group. Nothing in this paragraph shall
preclude you from devoting reasonable time and attention to (A) serving, with
the prior approval of the CEO (which shall not be unreasonably withheld), as
director, trustee or member of a committee of any organization involving no
conflict of interest with the interests of the Claiborne Group, (B) engaging in
charitable and community activities, and (C) managing your personal investments
and affairs; provided that such activities do not, individually or
2
<PAGE> 3
collectively, interfere with the performance of your duties and responsibilities
as contemplated under this Agreement.
3. Salary; Bonus; Equity Participation; Additional Compensation;
Perquisites and Benefits.
(a) During your term of employment, the Company will pay you a
base salary at an annual rate of not less than Six Hundred Eighty Thousand
Dollars ($680,000), subject to annual review by the CEO and the Compensation
Committee of the Company's Board of Directors (the "Compensation Committee")
and, in the discretion of such Committee, increase (but not decrease) from time
to time. Such salary shall be paid in installments in accordance with the
Company's standard practice, which is currently bi-weekly.
(b) (i) You will be eligible to earn an annual bonus each
year, commencing with the Company's 1997 fiscal year, as a participant in
accordance with and subject to the terms and conditions of, the Company's
Section 162(m) Cash Bonus Plan (the "Section 162(m) Plan"), a copy of which Plan
has been provided to you. Pursuant to the Section 162(m) Plan, you will be
eligible to earn an annual bonus each year (with your target bonus expected to
be in the range of 65-75% of your salary in effect on the first day of each
fiscal year, and which, where particularly distinguished results are generated,
could range upwards of 150% of such salary), it being expressly understood that
the actual target level set each year shall be at the discretion of the
Compensation Committee and the amount of any bonus payable shall be determined
by the Compensation Committee based upon actual performance as measured against
goals set annually by such Committee.
(ii) In lieu of the foregoing, for the Company's 1996
fiscal year, you shall be entitled to a bonus of not less than Six Hundred
Eighty Thousand Dollars ($680,000); such 1996 bonus shall be paid to you on such
date in 1997 (typically, in March) on which the Company makes its bonus payments
to the other senior executives of the Company, provided, that on your First Day,
or as soon as is practicable thereafter but in any event within two weeks of
your First Day, the Company will pay to you Three Hundred Fifty Thousand Dollars
($350,000) as an advance to be credited against the amount of such 1996 bonus.
(c) During your term of employment, you will participate, on
the same basis as the other most highly compensated senior executives of the
Company, in accordance with and subject to the respective terms and conditions
thereof as to eligibility and otherwise, in (i) the Company's existing Profit-
Sharing Retirement Plan, 401(k) Savings Plan and Supplemental Executive
Retirement Plan relating to the Profit-Sharing and Savings Plans, as well as the
Company's medical, dental, long-
3
<PAGE> 4
term disability and life insurance programs (subject to insurability at standard
rates) and (ii) such other Company benefit programs as are from time to time
made generally available to the other most highly compensated senior executives
of the Company. You understand that you will become eligible to participate in
certain of the Company's plans and programs only after the expiration of certain
periods following your commencement of employment; for example, participation in
the Company's Profit Sharing Retirement Plan and 401(k) Savings Plan require
completion of one year's service.
(d) You shall be eligible for stock option grants from time to
time pursuant to the Company's 1992 Stock Incentive Plan (the "Company Stock
Plan") in accordance with the terms and conditions thereof. Pursuant to such
Plan, the Compensation Committee has granted to you, effective upon your First
Day, options covering 20,000 shares of Company common stock ("Common Stock"), as
set forth in the Option Agreement between the Company and you attached as Annex
A, subject to the terms and conditions set forth therein. The CEO shall
recommend to the Compensation Committee that you be granted additional options
covering 12,000 shares of Common Stock, on such date during late 1996 or early
1997 on which the Compensation Committee makes its general annual granting of
options to the senior executives of the Company. The CEO shall also recommend to
the Compensation Committee that you be granted, in respect of each subsequent
year of your term of employment (commencing with the granting made to senior
Company executives around the close of the Company's 1997 fiscal year),
additional options in an amount commensurate with your position and achievements
and in line with the grants made to the other senior-most executives of the
Company. Although the present expectation is that such recommendation with
respect to future option grants will cover between 15,000 and 20,000 shares of
Common Stock annually, you understand and agree that the Compensation
Committee's award of options each year is made in its discretion and that no
assurances can be given in regard to the level of any future option grant. All
such options shall be subject to such vesting schedule and other terms as are
applicable to options generally granted to other senior Company executives.
(e) The Compensation Committee has granted to you under the
Company Stock Plan, in consideration of your entry into this Agreement and
effective as of your First Day, (i) 5,000 issued and outstanding shares of
Common Stock held in the Company's treasury, and (ii) 10,000 shares of
restricted stock as set forth in the Restricted Stock Agreement between the
Company and you attached as Annex B, subject to the terms and conditions set
forth therein. The Company and you acknowledge as a common goal that you will,
over time, accumulate a personal holding of unrestricted, unencumbered shares of
Common Stock having a market value of at least $1 million, it being understood
and agreed that such goal is a long-term goal and need not be met during your
initial term of employment hereunder and that your failure to
4
<PAGE> 5
meet such goal shall not give rise to any right of the Company to terminate you
for Cause (as defined below) hereunder. You agree that in working toward such
goal, you will not (except for the withholding of shares to pay taxes in
accordance with the Restricted Stock Agreement) sell, transfer, give, pledge,
deposit, alienate, or otherwise encumber or dispose of (as used in this
paragraph, collectively, "transfer") any shares of Common Stock (or any
securities issued as a dividend or distribution on such shares, or in respect of
such shares in connection with a recombination or recapitalization of the Common
Stock) issued to you pursuant to the Restricted Stock Agreement if, following
such transfer, you would not be the sole beneficial owner of at least $1 million
worth of Common Stock as aforesaid.
(f) As you are aware, the Compensation Committee has
instituted a so-called "Career Share" program for selected senior executives
under the Company Stock Plan. Although you will not be a participant in the
current program, should a similar program be instituted in the future, you shall
be entitled to participate therein on a basis competitive with similarly
situated senior executives of the Company.
(g) The Company will reimburse you, in accordance with its
standard policies from time to time in effect, for such reasonable and necessary
receipted out-of-pocket business expenses as may be incurred by you during your
term of employment in the performance of your duties and responsibilities under
this Agreement. You shall be entitled to a monthly car allowance of $850.
(h) You shall be entitled to a vacation period to be credited
and taken in accordance with Claiborne Group policy from time to time in effect
for similarly situated senior executives, which in any event shall not be less
than a total of four weeks per annum.
(i) You shall be entitled to an annual clothing allowance of
$4,000, which shall be applied by you to the purchase of Company products at
discounted prices in accordance with the Company's standard policies with
respect thereto from time to time in effect.
(j) You shall be entitled, if you so desire, to receive
financial counseling services provided by a third-party group which has been
retained by the Company, on such terms as are made available to certain other
senior Company executives similarly situated.
(k) Your rights under this Agreement with respect to the
Company's Section 162(m) Cash Bonus Plan, Profit-Sharing Retirement Plan, 401(k)
Savings Plan, Supplemental Executive Retirement Plan, 1992 Stock Incentive Plan,
medical, dental, long-term disability and life insurance programs and other
programs, perquisites and policies shall not preclude the Claiborne Group
5
<PAGE> 6
from modifying or terminating any such program, perquisite or policy, subject to
your right, in accordance with the terms of this Agreement, to participate in or
be eligible for such program, perquisite or policy as so modified or any
replacement thereof.
4. Termination.
(a) Your term of employment under this Agreement will
terminate at the election of the Company for Cause immediately upon notice of
termination, after expiration of any applicable cure period provided for in
subparagraphs (i) through (v) below, 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 covered by this
Agreement, if such breach is not cured, if curable,
within 30 days after notice thereof to you by the
Company;
(ii) Any willful or intentional act or failure to act
involving fraud, theft, embezzlement, dishonesty, moral
turpitude, or material misrepresentation (collectively,
"Fraud") affecting the Claiborne Group or any customer,
supplier or employee of the Claiborne Group, if such
breach is not cured, if curable, within five days after
notice thereof to you by the Company;
(iii) Conviction of (or a plea of nolo contendere to) an
offense which is a felony in the jurisdiction involved;
(iv) Any willful or intentional act which would reasonably be
expected to materially injure the reputation, business
or business relationships of the Claiborne Group, or
your business reputation or 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 CEO 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.
6
<PAGE> 7
(b) For purposes of this Section 4, no act, or failure to act,
on your part shall be deemed "willful" or "intentional" if reasonable under the
circumstances and done, or omitted to be done, by you with reasonable belief
that your action or omission was in the best interests of the Claiborne Group.
(c) In the event that the events or circumstances underlying
the Company's right to terminate your employment for Cause hereunder are based
on an allegation of willfull or intentional misconduct, or in the event the
Company determines it necessary or appropriate under the circumstances, the
Company shall provide you with a prompt hearing before the Board of Directors or
a duly constituted committee thereof (at which you may be accompanied by
counsel) prior to any termination for Cause hereunder, it being understood and
agreed that notice to you of any such hearing shall be sufficient if it provides
you with at least 48 hours' prior notice of such hearing time and place, and
that your failure to appear at such hearing at the appointed time and place
(except upon a clear showing medical or similar good cause) shall constitute a
waiver of your right to any such hearing.
(d) Your term of employment will terminate forthwith upon your
death or, at the Claiborne Group's option, upon your Disability. As used herein
the term "Disability" means your inability to perform your duties and
responsibilities as contemplated under this Agreement for a period of more than
180 consecutive days, or for a period aggregating more than 240 days, whether or
not continuous, during any 360-day period, due to physical or mental incapacity
or impairment. A determination of Disability will be made by a physician
satisfactory to both you and the Company; provided that if you and the Company
cannot agree as to a physician, then each will select a physician and these two
together will select a third physician, whose determination as to Disability
will be binding on you and the Company. You, your legal representative or any
adult member of your immediate family shall have the right to present to the
Company and such physician such information and arguments on your behalf as you
or they deem appropriate, including the opinion of your personal physician.
Should you become incapacitated, your employment shall continue and all base
salary and other compensation otherwise due to you hereunder shall be continued
through the date on which your employment is terminated for Disability.
(e) Your term of employment will terminate if you resign
without Good Reason (as hereinafter defined), provided that you shall in all
events give the Company not less than sixty (60) days' prior written notice
thereof. You understand and agree that once you give the Company notice of your
intention to so terminate your employment hereunder, then notwithstanding any
provision to the contrary in this Agreement, the Company may (i) terminate this
Agreement at any time prior to the expiration of
7
<PAGE> 8
such notice period, and upon such termination the Company will pay to you the
amount provided in paragraph 5(a) below (with the effect provided in paragraph
5(e) below), and (ii) at any time prior to such termination, reassign any or all
of your title(s), duties and/or responsibilities hereunder to such other
person(s) as it may in its discretion determine, and you shall no longer have
any right to terminate your employment hereunder for Good Reason.
5. Severance.
(a) In the event that your term of employment is terminated
for Cause, or if you resign without Good Reason, the Company will pay to you an
amount equal to your accrued but unpaid base salary through the date of such
termination and, if such termination occurs on or prior to December 31, 1997,
you shall repay to the Company one half of any amount received by you pursuant
to Section 3(b)(ii).
(b) In the event that your term of employment is terminated
(other than upon your death or Disability) during your term of employment (i) by
the Company other than for Cause or (ii) by you for Good Reason, then the
Company shall pay to you an amount equal to your accrued but unpaid base salary
through the date of such termination and, if such termination occurs on or prior
to December 31, 1997, you shall repay to the Company one half of any amount
received by you pursuant to Section 3(b)(ii). In addition, so long as you shall
not have breached your obligations to the Claiborne Group under Sections 6 and 7
hereof, or your representation under Section 11 hereof (without limitation to
any other remedy available to the Company), the Company shall pay to you, as and
for a severance payment, (1) upon receipt from you of your duly executed and
delivered general release of the Company and the other entities then comprising
the Claiborne Group, and their respective officers, directors, agents and
representatives, in form and substance reasonably satisfactory to the Company,
within 20 days after being provided with a form thereof ("your General
Release"),(A) in substantially equal monthly installments over the period from
the date of such termination until August 30, 1999, an aggregate amount equal to
the greater of (i) what your base salary would have been for said period (using
for such purpose the base salary rate in effect on the date of termination) or
(ii) $1 million and (B) the amount of your out-of-pocket costs for your cost of
continued medical coverage through August 30, 1999 pursuant to Section 4980B of
the Internal Revenue Code of 1986, as amended; or (2) in the event that you do
not deliver your General Release as aforesaid, a lump sum payment of $170,000.
For the purpose of this Agreement, termination of employment hereunder by you
for "Good Reason" shall mean your termination of your employment upon notice to
the Company following assignment to you of duties inconsistent with your
position as described in Section 2(a) or your being removed from such position,
in either case without your consent, which termination shall be effective 30
days after prompt notice of
8
<PAGE> 9
such circumstances by you to the Company, if such circumstances have not been
cured prior to such date.
(c) In the event that your term of employment is terminated
(i) on account of your death or Disability, or (ii) upon the expiration of this
Agreement on September 30, 1999 in accordance with its terms without renewal,
and you then immediately leave the employ of the Company, the Company will pay
to you (or if such termination is on account of Death, your estate) an amount
equal to your accrued but unpaid base salary through the date of such
termination, plus a portion of the annual bonus which you would have earned
under the provisions of paragraph 3(b) hereof, prorated through the date of such
termination.
(d) In the event that your term of employment is terminated
for any reason, the Company's payment of salary as provided in the previous
paragraphs of this Section 5 (together with reimbursement of your reasonable and
necessary out-of-pocket business expenses incurred through such date in
accordance with the Company's standard policy in effect at such time) shall
constitute complete satisfaction of all obligations of the Company to you
pursuant to the express terms of this Agreement. Upon any such termination, you
shall cease to be an employee of the Company for all purposes and (except as
otherwise expressly set forth in paragraph 5(b)), the Company shall have no
obligation to provide you with any employee benefits or perquisites hereunder.
(e) Your rights set out in this Section 5 shall constitute
your sole and exclusive rights and remedies as a result of your actual or
constructive termination of employment without Cause, and you hereby waive any
such other claims against the Claiborne Group, its officers, directors, agents
and representatives, in such event; it being agreed that the foregoing
provisions of this paragraph 5(e) shall not apply in the case of a for Cause
termination of your employment hereunder.
6. Confidential Information.
(a) The Claiborne Group owns and has developed and compiled,
and will own, develop and compile, certain proprietary techniques and
confidential information which have great value to its business (referred to in
this Agreement, collectively, as "Confidential Information"). Confidential
Information includes not only information disclosed by the Claiborne Group to
you, but also information developed or learned by you during the course or as a
result of employment hereunder, which information you acknowledge is and shall
be the sole and exclusive property of the Claiborne Group. Confidential
Information includes all proprietary 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
9
<PAGE> 10
interests of the Claiborne Group, whether or not such information is
specifically labelled as Confidential Information by the Claiborne Group. By way
of example and without limitation, Confidential Information includes any and all
information developed, obtained or owned by the Claiborne Group concerning trade
secrets, techniques, know-how (including designs, plans, procedures, processes
and research records), software, computer programs, innovations, discoveries,
improvements, research, development, test results, reports, specifications,
data, formats, marketing data and plans, business plans, strategies, forecasts,
unpublished financial information, orders, agreements and other forms of
documents, price and cost information, merchandising opportunities, expansion
plans, designs, store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and salary, staffing
and employment information. Notwithstanding the foregoing, Confidential
Information shall not in any event include (A) your personal knowledge and
know-how relating to merchandising and business techniques which you have
developed over your career in the apparel business and of which you were aware
on your First Day, or (B) 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 will from time to time disclose to you and
entrust you with Confidential Information. You also acknowledge and agree that
the unauthorized disclosure of Confidential Information, among other things, may
be prejudicial to the Claiborne Group's interests, an invasion of privacy and an
improper disclosure of trade secrets. You agree that you shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any
corporation, partnership, individual or other third party, other than in the
course of your assigned duties and for the benefit of the Claiborne Group, any
Confidential Information, either during your term of employment or thereafter.
The Company acknowledges that your spouse is a senior apparel executive whose
current affiliation is with a business that competes with certain of the
Company's businesses.
(c) In the event your employment with the Company ceases for
any reason, you will not remove from the Claiborne Group's premises without its
prior written consent any records, files, drawings, documents, equipment,
materials or writings received from, created for or belonging to the Claiborne
Group, including those which relate to or contain Confidential Informa-
10
<PAGE> 11
tion, or any copies thereof. Upon request or when your employment with the
Company terminates, you will immediately deliver the same to the Company.
(d) During your term of employment, you will disclose to the
Company all designs, inventions and business strategies or plans developed by
you during such period which relate directly or indirectly to the business of
the Claiborne Group, including without limitation any process, operation,
product or improvement. You agree that all of the foregoing are and will be the
sole and exclusive property of the Claiborne Group and that you will at the
Company's request and cost do whatever is necessary to secure the rights
thereto, by patent, copyright or otherwise, to the Claiborne Group.
(e) You and the Company agree that you shall not disclose to
the Claiborne Group or use for the Claiborne Group's benefit, any information
which may constitute trade secrets or confidential information of third parties,
to the extent you have any such secrets or information.
(f) The provisions of this Section 6 shall survive the
termination of this Agreement and your term of employment.
7. Restrictive Covenants.
(a) You acknowledge and agree (i) that the services to be
rendered by you for the Claiborne Group are of a special, unique, extraordinary
and personal character, (ii) that you have and will continue to develop a
personal acquaintance and relationship with one or more of the Claiborne Group's
customers, employees, suppliers and independent contractors, which may
constitute the Claiborne Group's primary or only contact with such customers,
employees, suppliers and independent contractors, and (iii) that you will be
uniquely identified by customers, employees, suppliers, independent contractors
and retail consumers with the Claiborne Group's products. Consequently, you
agree that it is fair, reasonable and necessary for the protection of the
business, operations, assets and reputation of the Claiborne Group that you make
the covenants contained in this Section 7.
(b) You agree that, during your term of employment and for a
period of 3 months thereafter, you shall not, directly or indirectly, own,
manage, operate, join, control, participate in, invest in or otherwise be
connected or associated with, in any manner, including as an officer, director,
employee, partner, consultant, advisor, proprietor, trustee or investor, any
Competing Business in the United States; provided however that nothing contained
in this Section 7(b) shall prevent you from owning less than 2% of the voting
stock of a publicly held corporation for investment purposes; and provided
further that the foregoing 3-month non-compete covenant shall not apply in the
case where you leave the employ of the Company immediately upon
11
<PAGE> 12
the expiration of this Agreement on September 30, 1999 in accordance with its
terms without renewal. For purposes of this Section 9(b), the term "Competing
Business" shall mean those businesses engaged in the design, manufacture,
distribution or marketing of apparel or related products bearing one or more of
the competitive trademarks/brands listed on Schedule A hereto.
(c) You agree that, during your term of employment and for a
period of 12 months thereafter, you shall not, directly or indirectly,
(i) seek to employ or engage, or assist anyone else to seek to
employ or engage, any individual who at any time during the year
preceding the termination of your employment hereunder (A) was in
the employ of the Claiborne Group or (B) was engaged or utilized as
an independent contractor providing material manufacturing,
marketing, sales, financial or management consulting services in
connection with the business of the Claiborne Group and with whom
you had regular contact, provided that the restriction set out in
clause (B) shall not apply to any individual who was at any time
during the two-year period immediately preceding the date of
termination of employment, or is on such date of termination,
engaged by or utilized by your new employer without prior
recommendation by you; or
(ii) interfere in the relationship of the Claiborne Group with
any of its suppliers or independent contractors, whether or not the
relationship between the Claiborne Group and such supplier or
independent contractor was originally established in whole or in
part by your efforts; provided that you shall not be deemed to have
breached the restrictions set out in this subparagraph 7(c)(ii) by
virtue of the fact that you are employed during such 12 month period
by a competitor of the Company and in the discharge of your duties
for such new employer you engage in the normal and regular types of
activities which by their nature involve competing with companies,
including the Company, within the apparel and related products
marketplace.
As used in this Section 7, the terms "customer" and "supplier" shall mean and
include any individual, proprietorship, partnership, corporation, joint venture,
trust or any other form of business entity which is then a customer or supplier,
as the case may be, of the Claiborne Group or which was such a customer or
supplier at any time during the one-year period immediately preceding the date
of termination of employment.
(d) You agree that, during your term of employment and for a
period of 18 months thereafter, you will take no
12
<PAGE> 13
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 7 shall survive the
termination of this Agreement and your term of employment.
8. 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 6 or 7 hereof, and by reason thereof you consent and
agree that if you violate any of the provisions of said Sections 6 or 7, 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.
9. Life Insurance. You agree that the Claiborne Group will have the
right to obtain and maintain life insurance on your life, at its expense, and
for its benefit; provided that the Company shall not obtain any such life
insurance if you are advised by insurance professionals of national repute that,
in their opinion, in doing so, the Company would unreasonably restrict the
amount of life insurance which you or your family beneficiaries could personally
maintain on your life. Subject to the foregoing, you agree to cooperate fully
with the Claiborne Group in obtaining such life insurance, to sign any necessary
consents, applications and other related forms or documents and to take any
required medical examinations.
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 represent and warrant that you are not party to
or subject to any agreement, contract, understanding, covenant, judgment or
decree or under any obligation, contractual or otherwise, in any way restricting
or adversely affecting your ability to enter into this Agreement, perform your
obligations under this Agreement, or otherwise act for the Claiborne Group in
all of the respects contemplated hereby. Based upon the foregoing, the Company
agrees to reimburse you for your reasonable legal fees and expenses incurred
during your term of employment in defending any litigation which may be brought
by your former employer alleging that your employment by the Company constitutes
a breach of your employment agreement with such former employer (your "Prior
Agreement"). Contingent upon the
13
<PAGE> 14
truth and accuracy of the foregoing representation and warranty and upon your
compliance with your covenant set forth in Section 6(e) hereof, the Company
agrees to hold you harmless against damages required to be paid by you by reason
of a finding that your employment by the Company constitutes a breach of your
Prior Agreement.
12. 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 delivered personally or by courier
as aforesaid, will be deemed effectively given on the date of delivery. Notices
delivered by confirmed facsimile transmission will be deemed effectively given
one day after the date of delivery. Notices delivered by mail will be deemed
effectively given upon the fifth calendar day subsequent to the postmark date
thereof.
13. Miscellaneous.
(a) The failure of either party at any time to require
performance by the other party of any provision hereunder will in no way affect
the right of that party thereafter to enforce the same, nor will it affect any
other party's right to enforce the same, or to enforce any of the other
provisions in this Agreement; nor will the waiver by either party of the breach
of any provision hereof be taken or held to be a waiver of any prior or
subsequent breach of such provision or as a waiver of the provision itself.
(b) This Agreement is a personal contract calling for the
provision of unique services by you, and your rights and obligations hereunder
may not be sold, transferred, assigned, pledged or hypothecated by you. In the
event of any attempted assignment or transfer of rights hereunder by you
contrary to the provisions hereof (other than as may be required by law), the
Company will have no further liability for payments hereunder. The rights and
obligations of the Company hereunder will be binding upon and run in favor of
the successors and assigns of the Company.
(c) Each of the covenants and agreements set forth in this
Agreement are separate and independent covenants, each of which has been
separately bargained for and the parties hereto intend that the provisions of
each such covenant shall be enforced to the fullest extent permissible. Should
the whole or any part or provision of any such separate covenant be held or
declared invalid, such invalidity shall not in any way affect the validity of
any other such covenant or of any part or provision of the same covenant not
also held or declared invalid. If any
14
<PAGE> 15
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) 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 legal fees and expenses incurred by you in pursuing such
disputed claim.
(f) This Agreement (which includes the Exhibits and Annexes
hereto) sets forth the entire understanding between the parties as to the
subject matter of this Agreement and merges and supersedes all prior agreements,
commitments, representations, writings and discussions between the parties with
respect to that subject matter. This Agreement may be terminated, altered,
modified or changed only by a written instrument signed by both parties hereto.
(g) The Section headings contained herein are for purposes of
convenience only and are not intended to define or list the contents of the
Sections .
(h) The provisions of this Agreement which by their terms call
for performance subsequent to termination of your term of employment hereunder,
or of this Agreement, shall so survive such termination.
Please confirm your agreement with the foregoing by signing and
returning the enclosed copy of this letter, following
15
<PAGE> 16
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/Paul R. Charron
---------------------------------------
Name: Paul R. Charron
Title: Chairman of the Board/President/
Chief Executive Officer
Accepted and Agreed:
/s/ Denise V. Seegal
- ---------------------
Ms. Denise Seegal
16
<PAGE> 17
EXHIBIT A
to Employment Agreement,
dated as of September , 1996
between
Liz Claiborne, Inc.
and
Ms. Denise Seegal
Addresses for Notice
If to Liz Claiborne, Inc.:
Liz Claiborne, Inc.
1441 Broadway
New York, NY 10018
Attention: Chairman
Facsimile: (212) 626-1803
Confirm: (212) 626-3500
- and -
Liz Claiborne, Inc.
One Claiborne Avenue
North Bergen, NJ 07047
Attention: General Counsel
Facsimile: (201) 295-7803
Confirm: (201) 295-7830
If to You:
To your address set forth on the first page of this Agreement
Facsimile:
Confirm:
17
<PAGE> 18
SCHEDULE A
to Employment Agreement,
dated as of September , 1996
between
Liz Claiborne, Inc.
and
Ms. Denise Seegal
The competitive trademarks/brands referred to in the definition of
the term "Competing Business" in Section 7(b) shall be the following:
Ellen Tracy
Emanuel
Jones New York
Ralph Lauren
Tommy Hilfiger
18
<PAGE> 19
Annex A: Stock Option Agreement
Annex B: Restricted Stock Agreement
19
<PAGE> 20
9496
19200/0001 ANNEX A
LIZ CLAIBORNE, INC.
1992 STOCK INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement"), dated as of
September , 1996, between LIZ CLAIBORNE, INC., a Delaware corporation (the
"Company"), and Denise Seegal, an employee of the Company (the "Optionee").
The Compensation Committee of the Board of Directors of the Company has
determined that the objectives of the Company's 1992 Stock Incentive Plan (the
"Plan") will be furthered by granting to the Optionee a nonqualified stock
option pursuant to the Plan.
Notwithstanding any provision hereof, this Agreement shall become effective
only as, when and if the Grantee shall have executed and delivered to the
Company both (i) this Agreement, and (ii) the Employment Agreement dated as of
the date hereof between the Company and the Optionee.
In consideration of the foregoing and of the mutual undertakings set forth
in this Agreement, the Company and the Optionee agree as follows:
<PAGE> 21
SECTION 1. Grant of Option.
The Company hereby grants to the Optionee a nonqualified stock option (the
"Option") to purchase 20,000 shares of common stock of the Company ("Common
Stock") at a purchase price of $XX.YY per share, equal to the Fair Market Value
thereof (as defined under the Plan) on the date hereof. It is intended that the
Option shall not qualify as an "incentive stock option" as defined in section
422 of the Internal Revenue Code of 1986, as amended to date.
SECTION 2. Exercisability.
Subject to the further terms of this Agreement, the Option shall become
exercisable with respect to twenty five percent (25%) of the shares of Common
Stock initially subject thereto on the first anniversary of the date of this
Agreement and with respect to an additional twenty five percent (25%) and fifty
percent (50%) of such shares on the second and third anniversaries,
respectively, of the date of this Agreement, provided that the Optionee is then
an employee of the Company. Unless earlier terminated pursuant to the provisions
of the Plan, the unexercised portion of the Option shall expire and cease to be
exercisable at 12:01 am on the tenth anniversary of the date of this Agreement.
-2-
<PAGE> 22
SECTION 3. Method of Exercise.
The Option or any part thereof may be exercised only by the giving of
written notice to the Company on such form and in such manner as the Committee
shall prescribe. Such written notice must be accompanied by payment of the full
purchase price for the number of shares with respect to which the Option is
being exercised. Such payment may be made by one or a combination of the
following methods: (a) by a check acceptable to the Company; (b) with the
consent of the Committee, by delivery of unrestricted shares of Common Stock
having a Fair Market Value on the exercise date equal to part or all of the
purchase price; or (c) by such other method as the Committee may authorize. The
date of exercise of the Option shall be the date on which written notice of
exercise is hand delivered to the Company, during normal business hours, at its
address as provided in Section 6 of this Agreement, or, if mailed, the date on
which it is postmarked, provided such notice is actually received.
SECTION 4. Termination of Employment; Death.
4.1 Upon termination of the Optionee's employment for any reason, the
Option shall terminate and expire except as provided in Section 4.2 or 4.3 of
this Agreement.
4.2 If the Optionee's employment terminates for any reason other than
death, dismissal for "cause" as defined in the Optionee's employment agreement
with the Company or resignation
-3-
<PAGE> 23
without the Company's prior consent, the Option shall be exercisable but only to
the extent it was exercisable at the time of such termination and only until the
earlier of the expiration date of the Option, determined pursuant to Section 2
of this Agreement, or the expiration of either (a) three months following
employment termination or, (b) in the case of Retirement (as defined) there
years following the date of Retirement. "Retirement" shall mean the Optionee
ceasing to be employed by the Company and any of its affiliates on or after (a)
Optionee's 65th birthday, (b) the date on which the Optionee has attained age 60
and completed at least six years of Vesting Services (as defined in and
determined under the Liz Claiborne Profit Sharing Plan, as the same has been and
may from time to time be amended), or, (c) if approved by the Committee, the
date the Optionee has completed at least 20 years of Vesting Service.
4.3 If the Optionee dies while employed by the Company or after employment
terminates but during a period in which the Option is exercisable pursuant to
Section 4.2 of this Agreement, the Option shall be exercisable but only to the
extent it was exercisable at the time of death and only until the earlier of the
expiration date of the Option, determined pursuant to Section 2 of this
Agreement, or the first anniversary of the date of the Optionee's death.
-4-
<PAGE> 24
SECTION 5. Plan Provisions to Prevail.
This Agreement is subject to all of the terms and provisions of the Plan.
Without limiting the generality of the foregoing, by entering into this
Agreement the Optionee agrees that no member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any award thereunder or this Agreement. In the event that there is any
inconsistency between the provisions of this Agreement and of the Plan, the
provisions of the Plan shall govern.
SECTION 6. Notices.
Any notice to be given to the Company hereunder shall be in writing and
shall be addressed to the Senior Vice President-Finance or Vice
President-Financial Operations of the Company at Liz Claiborne, Inc., One
Claiborne Avenue, North Bergen, N.J. 07047, or at such other address as the
Company may hereafter designate to the Optionee by notice as provided in this
Section 6. Any notice to be given to the Optionee hereunder shall be addressed
to the Optionee at the address set forth beneath his or her signature hereto, or
at such other address as the Optionee may hereafter designate to the Company by
notice as provided herein. A notice shall be deemed to have been duly given when
personally delivered or mailed by registered or certified mail to the party
entitled to receive it.
-5-
<PAGE> 25
SECTION 7. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the extent
consistent with Section 4.1 of this Agreement and with the Plan, the heirs and
personal representatives of the Optionee.
SECTION 8. Governing Law.
This Agreement shall be interpreted, construed and administered in
accordance with the laws of the State of Delaware as they apply to contracts
made, delivered and to be wholly performed in the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
LIZ CLAIBORNE, INC.
ATTEST: By:
---------------------------- ------------------------------------
Title:
Denise Seegal, Optionee
---------------------------------------
Address:
-------------------------------
---------------------------------------
---------------------------------------
Social Security Number
-6-
<PAGE> 26
9496
19200/0001 ANNEX B
LIZ CLAIBORNE, INC.
1992 STOCK INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT (the "Agreement"), dated as of September ,
1996, between LIZ CLAIBORNE, INC., a Delaware corporation (the "Company"), and
Denise Seegal, an employee of the Company (the "Grantee").
The Compensation Committee of the Board of Directors of the Company (the
"Committee") has determined that the objectives of the Company's 1992 Stock
Incentive Plan (the "Plan") will be furthered by the grant to the Grantee of
10,000 issued and outstanding shares of Common Stock of the Company currently
held by the Company, subject to the restrictions set out in this Agreement (the
"Restricted Shares").
Notwithstanding any provision hereof, this Agreement shall become effective
only as, when and if the Grantee shall have executed and delivered to the
Company (i) this Agreement, (ii) the stock powers referenced below, and (iii)
the Employment Agreement dated the date hereof between the Company and the
Grantee.
In connection with the grant of the Restricted Shares, the Grantee has
delivered to the Company herewith stock powers duly endorsed in blank, each of
which will be returned to the
<PAGE> 27
Grantee when all restrictions on the Restricted Shares covered thereby have
expired as provided in Section 2.
In consideration of the foregoing and of the mutual undertakings set forth
in this Agreement, the Company and the Grantee agree as follows:
SECTION 1. Issuance of Restricted Shares. As soon as practicable after
receipt from the Grantee of this executed Agreement, the Company shall cause to
be issued under the Plan in the name of the Grantee two Restricted Share stock
certificates, each representing 5,000 shares of Common Stock. Each such
certificate shall remain in the possession of the Company until the Restricted
Shares represented thereby are free of the restrictions set forth in Section 2.
Upon the issuance of such certificates, the Grantee shall have the rights of a
stockholder with respect to the Restricted Shares, subject to the restrictions
set forth in this Agreement and the Plan.
SECTION 2. Restrictions.
2.1 Restricted Shares may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of prior to the date provided for in Section
2.2 or 2.3. These restrictions shall apply as well to any shares of Common Stock
or other securities of the Company which may be acquired by the Grantee in
respect of the Restricted Shares as a result of any stock split,
-2-
<PAGE> 28
stock dividend, combination of shares or other change, or any exchange,
reclassification or conversion of securities.
2.2 Unless sooner terminated pursuant to the terms hereof, the restrictions
set forth in Section 2.1 shall, provided that the Grantee is then an employee of
the Company, expire on the last day of each of the Company's fiscal years 1997
and 1998 (the "Vesting Dates") with respect to the number of Restricted Shares
listed below next to each Vesting Date:
<TABLE>
<CAPTION>
Vesting Date: Number of
Last business day Restricted Shares
of fiscal year as to Which Restrictions Expire
-------------- -------------------------------
<S> <C>
1997 5,000
1998 5,000
</TABLE>
As soon as practicable after each Vesting Date, the Company shall deliver to the
Grantee, subject to the provisions of Section 4, a stock certificate
representing the Restricted Shares which became free of restrictions on such
Vesting Date.
2.3 Dividends that become payable on Restricted Shares shall be held by the
Company in escrow in accordance with the provisions of this Agreement. In this
connection, on each Common Stock dividend payment date while any Restricted
Shares remain outstanding and restricted hereunder (each, a "RS Dividend Date"),
the Company shall be deemed to have reinvested any cash dividend otherwise then
payable on the Restricted Shares in a number of phantom shares of Common Stock
(including any fractional share) equal to the quotient of such dividend divided
by the
-3-
<PAGE> 29
Fair Market Value of a share of Common Stock on such RS Dividend Date and to
have credited such shares to an unfunded book account in the Grantee's name (the
"Dividend Escrow Account"). As of each subsequent RS Dividend Date, the phantom
shares then credited to the Dividend Escrow Account shall be deemed to receive a
dividend at the then applicable dividend rate, which shall be reinvested in the
same manner in such Account in the form of additional phantom shares. If any
dividend payable on any RS Dividend Date is paid in the form of Common Stock,
then any such stock dividend shall be treated as additional Restricted Shares
under this Agreement, pursuant to Section 2.1 above, with such additional
Restricted Shares being subject to the same vesting and other restrictions as
the Restricted Shares with respect to which such dividends became payable, and
with any fractional share being treated as a cash dividend that is subject to
the escrow and reinvestment procedures in this Section 2.3. Any other non-cash
dividends credited with respect to Restricted Stock shall be subject to the
escrow and reinvestment procedures in this Section 2.3, and shall be valued for
purposes of this Section 2.3 at the fair market value thereof as of the relevant
RS Dividend Date, as determined by the Committee in its sole discretion. At each
Vesting Date, the Company shall deliver out of escrow to the Grantee that number
of shares of Common Stock equal to the number of phantom shares then credited to
the Dividend Escrow Account as the result of the deemed investment and
reinvestment in phantom shares of the dividends attributable
-4-
<PAGE> 30
to the Restricted Shares on which restrictions lapse at such Vesting Date.
SECTION 3. Forfeiture. Effective upon termination of the Grantee's
employment with the Company for any reason, the Company shall cancel the stock
certificate(s) representing any Restricted Shares on which the restrictions have
not expired, and the Dividend Escrow Account shall thereupon be terminated, it
being understood and agreed that Grantee shall not be entitled to any payment
whatsoever under this Agreement or provisions of the Plan relating to this
Agreement (including without limitation Section 2.6(e) thereof) in connection
with such cancellation and termination.
SECTION 4. Withholding Taxes.
4.1 Whenever a stock certificate representing Restricted Shares that have
vested in accordance with the terms hereof is to be delivered to the Grantee
pursuant to Section 2.2, the Company shall be entitled to require as a condition
of such delivery that the Grantee remit to the Company an amount sufficient in
the opinion of the Company to satisfy all federal, state and other governmental
tax withholding requirements related to the expiration of restrictions on the
shares represented by such certificate. The Company shall, upon the request of
the Grantee, withhold from delivery shares having a Fair Market Value on the
Vesting Date equal to the amount of tax to be withheld. Fractional share amounts
shall be settled in cash.
-5-
<PAGE> 31
4.2 If the Grantee makes the election permitted under section 83(b) of the
Internal Revenue Code (that is, an election to include in gross income in the
year of transfer the amounts specified in section 83(b)), she shall notify the
Company of such election within 10 days of filing notice of the election with
the Internal Revenue Service and shall within the same 10-day period remit to
the Company an amount sufficient in the opinion of the Company to satisfy all
federal, state and other governmental tax withholding requirements related to
such inclusion in Grantee's income.
SECTION 5. Nature of Payments. The grant of the Restricted Shares hereunder
is in consideration of services to be performed by the Grantee for the Company
and constitutes a special incentive payment and the parties agree that it is not
to be taken into account in computing the amount of salary or compensation of
the Grantee for the purposes of determining (i) any pension, retirement,
profit-sharing, bonus, life insurance or other benefits under any pension,
retirement, profit-sharing, bonus, life insurance or other benefit plan of the
Company, or (ii) any severance or other amounts payable under any other
agreement between the Company and the Grantee.
SECTION 6. Plan Provisions to Prevail. This Agreement is subject to all of
the terms and provisions of the Plan. Without limiting the generality of the
foregoing, by entering into this Agreement the Grantee agrees that no member of
the
-6-
<PAGE> 32
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any award thereunder or this Agreement. In the event
that there is any inconsistency between the provisions of this Agreement and of
the Plan, the provisions of the Plan shall govern.
SECTION 7. Miscellaneous.
7.1 Section Headings. The Section headings contained herein are for
purposes of convenience only and are not intended to define or limit the
contents of the Sections.
7.2 Notices. Any notice to be given to the Company hereunder shall be in
writing and shall be addressed to the Company's Senior Vice President, Finance,
or Vice President of Financial Operations, at One Claiborne Avenue, North
Bergen, NJ 07047, or at such other address as the Company may hereafter
designate to the Grantee by notice as provided in this Section 7.2. Any notice
to be given to the Grantee hereunder shall be addressed to the Grantee at the
address set forth beneath his signature hereto, or at such other address as he
may hereafter designate to the Company by notice as provided herein. A notice
hereunder shall be deemed to have been duly given when personally delivered or
mailed by registered or certified mail to the party entitled to receive it.
7.3 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and
-7-
<PAGE> 33
the successors and assigns of the Company and, to the extent consistent with
Sections 2 and 3 of this Agreement, the heirs and personal representatives of
the Grantee.
7.4 Governing Law. This Agreement shall be interpreted, construed and
administered in accordance with the laws of the State of Delaware as they apply
to contracts made, delivered and to be wholly performed in the State of
Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
LIZ CLAIBORNE, INC.
ATTEST: By:
---------------------------- ------------------------------------
Title:
Denise Seegal, Grantee
---------------------------------------
Address:
-------------------------------
---------------------------------------
---------------------------------------
Social Security Number
-8-
<PAGE> 1
15 May 96 9:54am EXHIBIT 10(aa)
Liz Claiborne, Inc.
1441 Broadway
New York City
May 15, 1996
Mr. Jerome A. Chazen
543 North Broadway
Upper Nyack, NY 10960
Dear Jerry:
This letter sets forth our mutual agreements relative to your retirement
from Liz Claiborne, Inc. (the "Company"), which shall be effective as of the
close of the Company's upcoming Annual Meeting (the "Effective Date"), as
follows:
1. Positions. Assuming your reelection by the Company's Shareholders at
the Annual Meeting, you shall serve as a Director of the Company through the
1997 Annual Meeting, during which term you shall have the title "Chairman
Emeritus" and be entitled to such compensation as is generally provided to the
Company's other non-management Directors. By your execution and delivery hereof,
you shall be deemed to have retired from the Company and resigned, effective as
of the Effective Date, from all of your other positions with the Company and all
other entities within the Claiborne Group (as such term is defined and used in
the Consulting Agreement between you and the Company referenced below (the
"Consulting Agreement")), as well as any position held by you at the request of
the Company or any entity within the Claiborne Group, including without
limitation as (i) Chairman of the Board of the Company, (ii) a member of any
Company committees (including without limitation any committee under any Company
Retirement Plan (as such term is hereinafter defined)), and (iii) an employee,
officer, director (except as aforesaid) or board or committee member of any
entity within the Claiborne Group; provided that you shall continue to serve as
a member of the Board of the Liz Claiborne Foundation during the Term of the
Consulting Agreement, and thereafter for such additional period as you and the
Company shall agree.
2. General Release. Contemporaneously with our mutual execution and
delivery of the Consulting Agreement, you shall deliver a general release in
favor of the Company and the Claiborne Group in the form annexed hereto as
Exhibit A. You hereby confirm (i) that your decision to retire was entirely
voluntary and effected solely at your request, (ii) that you accept the
arrangements contemplated by the Consulting Agreement
1
<PAGE> 2
referenced below in full and complete satisfaction of any severance obligations
the Company may have to you, and (iii) that you were represented by counsel of
your own choosing in connection with this letter agreement and the transactions
contemplated hereby.
3. Retirement Plans.
(a) You understand that, effective upon the Effective Date, you
shall no longer participate in the Company's profit sharing or savings plans, or
the related SERP (collectively, the "Company Retirement Plans"); you shall be
entitled to receive credit to your respective accounts under such Plans in
accordance with the terms thereof applicable to employees retiring with the
consent of the Company, through the Effective Date.
(b) With respect to your payout options under the Company Retirement
Plans, you shall in accordance with the applicable provisions of such Plans
deliver to the Company your directions as to your payout elections thereunder,
on such forms as the Company shall provide to you for such purpose.
(c) In full satisfaction of the Company's obligations to you under
that certain unfunded deferred compensation arrangement established in 1992, the
Company shall pay to you, and you shall accept, the sum of $1,692,541, which
shall be paid to you, net of any applicable withholding, in a lump sum as soon
as is practicable after the Effective Date.
4. Life Insurance Policy. You may, at your option, take over ownership of
the "portable" life insurance policy held by the Company on your life, in
accordance with standard Company and insurer procedures with respect thereto.
5. Consulting Agreement. Concurrently herewith, we have executed and
delivered the Consulting Agreement, in the form previously agreed.
6. Company Property. You shall, as soon as is practicable after the
Effective Date, return to the Company or as it may direct, any Company property
in your possession or under your control; provided that you may move the
furniture currently used for your office to your new off site offices. You may,
at your option, take over the Company's lease of the automobile presently
supplied by the Company for your use, such to be at your own cost and expense.
7. Further Assurances. Each of us shall provide, upon the request of the
other, any documents (signed, if so requested) reasonably deemed necessary or
appropriate by the other to confirm or evidence any of the foregoing matters.
8. Miscellaneous. This letter agreement may be amended only in a writing
executed by both parties. It shall be governed by the laws of the State of New
York applicable to contracts made
2
<PAGE> 3
and to be wholly performed within such State, without reference to principles of
conflicts of laws.
If the foregoing letter correctly sets out our agreement and
understanding, please return an executed copy to us, whereupon it shall
constitute our legally binding agreement.
Very truly yours,
Liz Claiborne, Inc.
/s/ Paul R. Charron
By:________________________
Authorized Signature
Agreed and accepted:
/s/ Jerome A Chazen
- --------------------------
Jerome A. Chazen
3
<PAGE> 4
Liz Claiborne, Inc.
1441 Broadway
New York City
as of May 17, 1996
Jerome A. Chazen
543 North Broadway
Upper Nyack, New York 10960
Dear Jerry:
The undersigned Liz Claiborne, Inc. (the "Company") desires to
engage you as a consultant, and you desire to be so engaged by the Company, all
subject to the terms and conditions set forth in this letter agreement ("this
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 May 18, 1996 and (unless sooner terminated as hereinafter
provided) expiring on May 17, 1998 (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 and shall be reasonably acceptable to you.
(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
<PAGE> 5
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 15 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.
(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 reasonably be expected 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 will accept
consulting fees at an annual rate of Four Hundred Thousand Dollars ($400,000).
Such consulting fees will 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 standard 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). In addition, 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. Such expenses shall include an office allowance of up to $25,000
per year of the Term. With respect to any projects requiring that you travel 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 (subject, with respect to subparagraph (i) below, to the cure
period
5
<PAGE> 6
provided therein) upon notice from the Company to you. As used herein, the term
"Cause" means:
(i) Your willful or intentional failure or refusal to
perform or observe any of your material duties,
responsibilities or obligations set forth in, or as
contemplated under, this Agreement, if such breach is
not cured, if curable, within 30 days after notice
thereof to you by the Company;
(ii) Any willful or intentional act or failure to act
involving fraud, misrepresentation, theft, embezzlement,
dishonesty or moral turpitude (collectively, "Fraud")
affecting the Claiborne Group or any customer, supplier
or employee of the Claiborne Group; or
(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.
(b) For purposes of this Section 4, no act, or failure to act,
on your part shall be deemed "willful" or "intentional" if done, or omitted to
be done, by you with 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 resignation,
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 May 17, 1998 your consulting fee provided in
paragraph 3(a) to your estate or personal representative; provided further that
in the event of death, upon request of your estate, all remaining payments shall
be paid to your estate in a lump sum, discounted at 8%, as promptly as
reasonably practicable.
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
6
<PAGE> 7
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 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
7
<PAGE> 8
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 later of (i) the first
anniversary of the Effective Date, and (ii) thirty days after the end of the
Term hereof, you shall not, directly or indirectly, without the express prior
written consent of the Board of Directors,
(i) be or become employed or engaged as an employee of or
consultant to, or exercise control over, any business
which directly competes with any business presently
operated by the Company or any member of the Claiborne
Group; provided that the written consent of the Board of
Directors permitting your activities under this clause
(i) shall not be unreasonably withheld or delayed;
(ii) 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;
(iii) seek to employ or engage, or assist anyone else to seek
to employ or engage, any Protected Person or Entity; or
(iv) knowingly interfere in any manner in the relationship of
the Claiborne Group with any of its 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, 1995 through the end of the Term hereof
an employee of any entity within the Claiborne Group, other than your personal
assistant, (B) any person or entity who or which, at any time during the period
January 1, 1995 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.
8
<PAGE> 9
(c) You agree that, during the Term, and for a period of 90
days thereafter, you will not willfully or intentionally (such phrase to have
the meaning ascribed to it in Section 4(b) above) take any action which is
intended, or would reasonably be expected, to materially injure the reputation,
business or business relationships of the Claiborne Group or which is intended,
or would reasonably be expected, to lead to unfavorable publicity to the
Claiborne Group.
(d) The provisions of this Section 6 shall survive the
termination or expiration of this Agreement and the Term to the extent herein
provided.
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, 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. No Conflict. You covenant that you shall not become party to or
subject to any agreement, contract, understanding or covenant, 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.
9. 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) You 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 your assistance may be requested
by the Company. Such cooperation shall include, among other things, making
documents in your custody or control available to the Company or its counsel,
making yourself available for interviews by the Company or its counsel, and
making yourself available to appear as a witness, at deposition, trial or
9
<PAGE> 10
otherwise. Any reasonable and necessary vouchered out-of-pocket expenses
incurred by you in fulfilling your obligations under this paragraph 9(b) shall
be reimbursed by the Company.
(c) The provisions of this Section 9 shall survive the
termination or expiration of this Agreement and the Term.
10. Notices. All notices required or permitted hereunder will be
given in writing by personal delivery; by confirmed facsimile transmission; by
express delivery via 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.
11. 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. 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.
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<PAGE> 11
(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 in good faith
against the Company under this Agreement, or the Company makes a claim against
you under this Agreement, (ii) the party charged disputes such claim, and (iii)
you prevail in whole or in part 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 or defending such
disputed claim.
(f) This Agreement, together with the letter agreement between
us dated May 15, 1996 (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.
11
<PAGE> 12
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/ Paul R. Charron
-------------------------------------
Name:
Title:
Accepted and Agreed:
/s/ Jerome A. Chazen
- ---------------------------
Jerome A. Chazen
12
<PAGE> 13
EXHIBIT A
Addresses for Notice
If to Liz Claiborne, Inc.:
Liz Claiborne, Inc.
1441 Broadway
New York, NY 10018
Attention: CEO
Facsimile: (212) 626-1803
Confirm: (212) 626-3500
- and -
Liz Claiborne, Inc.
One Claiborne Avenue
North Bergen, NJ 07094
Attention: General Counsel
Facsimile: (201) 295-7851
Confirm: (201) 295-7830
If to You:
To your address set forth on the first page of this Agreement
Facsimile: (914)
Confirm: (914) 353-3596
With a copy to:
Henry P. Baer, Esq.
Skadden Arps
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-3743
Confirm: (212) 735-2910
- and-
Sherwin Kamin, Esq.
Kramer Levin
919 Third Avenue
New York, New York 10022
Fascimile: (212) 715-8000
13
<PAGE> 14
Confirm: (212) 715-9314
14
<PAGE> 1
EXHIBIT 21
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.
<TABLE>
<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 Europe 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
L.C. Special Markets, Inc. Delaware
Liz Claiborne Foreign Sales Corporation US Virgin Islands
Liz Claiborne Operations (Israel) 1993 Limited Israel
Liz Claiborne Colombia Limitada Colombia
Liz Claiborne GmbH Germany
Liz Claiborne De El Salvador, S.A., de C. V. El Salvador
L.C.I. Fragrances, Inc. Delaware
DB Newco, 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, 33-51257, 033-63859
and 333-09851.
/s/ Arthur Andersen LLP
New York, New York
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 322,881
<SECURITIES> 205,855
<RECEIVABLES> 158,168
<ALLOWANCES> 0
<INVENTORY> 349,427
<CURRENT-ASSETS> 1,142,098
<PP&E> 444,723
<DEPRECIATION> 221,439
<TOTAL-ASSETS> 1,382,750
<CURRENT-LIABILITIES> 325,673
<BONDS> 0
0
0
<COMMON> 88,219
<OTHER-SE> 932,273
<TOTAL-LIABILITY-AND-EQUITY> 1,382,750
<SALES> 2,217,518
<TOTAL-REVENUES> 2,217,518
<CGS> 1,341,083
<TOTAL-COSTS> 1,341,083
<OTHER-EXPENSES> 641,720
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> 249,065
<INCOME-TAX> 93,400
<INCOME-CONTINUING> 155,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,665
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.15
</TABLE>
<PAGE> 1
EXHIBIT 99
To Be Incorporated By Reference Into
Registration Statements on Forms S-8
(File Nos. 2-77590, 2-95258, 2-33661,33-51257
033-63859 and 333-09851)
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.
