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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED JANUARY 31, 2000,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-22378
MOVADO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW YORK 13-2595932
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
125 CHUBB AVENUE 07071
LYNDHURST, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 460-4800
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT;
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS)
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 on the closing sales price of the Common Stock as of April 4, 2000,
the aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $101,089,751. For purposes of this computation,
each share of Class A Common Stock is assumed to have the same market value as
one share of Common Stock into which it is convertible and only shares of stock
held by directors and executive officers were excluded.
The number of shares outstanding of the registrant's Common Stock and Class
A Common Stock as of April 4, 2000 were 9,505,298 and 3,509,733 respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to Registrant's 2000
annual meeting of shareholders (the "Proxy Statement") are incorporated by
reference in Part III hereof.
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<PAGE> 2
PART I
Item 1. Business
CORPORATE ORGANIZATION
The registrant, Movado Group, Inc. is a designer, manufacturer and distributor
of quality watches with prominent brands sold in almost every price category
comprising the watch industry. The Company was incorporated in New York in 1967
to acquire Piaget Watch Corporation and Corum Watch Corporation, which had been,
respectively, the exclusive importers and distributors of Piaget and Corum
watches in the United States since the 1950's. The registrant and its
subsidiaries are referred to herein as "Movado Group, Inc.," or the "Company"
unless the context otherwise requires.
In 1970, the Company acquired the Swiss manufacturer of Concord watches, which
had been manufacturing Concord watches since 1908, and in 1983, the Company
acquired the U.S. distributor of and substantially all the assets related to the
Movado watch brand from the Swiss manufacturer of Movado watches.
On October 7, 1993, the Company completed a public offering of 2,666,667 shares
of common stock, par value $.01 per share (the "Common Stock"). In connection
with the public offering, each share of the then currently existing Class A
Common Stock was converted into 10.46 shares of new Class A Common Stock, par
value of $.01 per share (the "Class A Common Stock"). Each share of Common Stock
is entitled to one vote per share and each share of Class A Common Stock is
entitled to 10 votes per share on all matters submitted to a vote of the
shareholders. Each holder of shares of Class A Common Stock is entitled to
convert, at anytime, any and all such shares into the same number of shares of
Common Stock. Each share of Class A Common Stock is converted automatically into
Common Stock in the event that the beneficial or record ownership of such shares
of Class A Common Stock is transferred to any person, except to certain family
members or affiliated persons deemed "permitted transferees" pursuant to the
Company's Amended Restated Certificate of Incorporation. The Common Stock is
traded on the NASDAQ National Market under the trading symbol "MOVA".
On October 21, 1997, the Company completed a secondary stock offering in which
1,500,000 shares of Common Stock were issued.
On February 22, 1999, the Company completed the sale of its Piaget business to
VLG North America, Inc. ("VLG"). The Company sold all of its rights, title and
interest in substantially all the assets and properties relating to the business
of selling and distributing Piaget watches and jewelry in the United States,
Canada, Central America and the Caribbean.
On January 14, 2000, the Company completed the sale of its Corum business to
Corum Reis Bannwart & Co. SA ("Corum Switzerland"). The Company sold all of its
rights, title and interest in substantially all the assets and properties
relating to the business of selling and distributing Corum watches in the United
States, Canada and the Caribbean.
With executive offices in Woodcliff Lake and Lyndhurst, New Jersey, the Company
operates wholly owned subsidiaries in Canada, Hong Kong, Japan, Singapore,
Switzerland and the United States.
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INDUSTRY OVERVIEW
The largest markets for watches are North America, Western Europe and the Far
East. While exact worldwide wholesale sales volumes are difficult to quantify,
the Company estimates from data obtained from the Federation of the Swiss Watch
Industry that worldwide wholesale sales of watches are over $13 billion
annually. Watches are produced predominantly in Switzerland, Hong Kong/China and
Japan. According to the Federation of the Swiss Watch Industry, Switzerland,
Hong Kong/China and Japan accounted for approximately 58%, 33% and 2%
respectively, of worldwide watch exports based on units in 1999. Among all the
major watch exporting countries, Swiss watches have the highest average unit
value.
The Company divides the watch market into five principal categories as set forth
in the following table:
<TABLE>
<CAPTION>
PRIMARY CATEGORY OF
SUGGESTED RETAIL MOVADO GROUP, INC.
MARKET CATEGORY PRICE RANGE BRANDS
- --------------- ----------- ------
<S> <C> <C>
Exclusive $10,000 and over Concord
Luxury $1,000 to $9,999 Concord
Premium $500 to $999 Movado and Coach
Moderate $100 to $499 ESQ and Coach
Mass Market Less than $100 -
</TABLE>
The Company's Concord watches compete primarily in the Luxury category of the
market, although certain Concord watches compete in the Exclusive and Premium
categories. The Company's Movado watches compete primarily in the Premium
category of the market, although certain Movado watches compete in the
Exclusive, Luxury and Moderate categories. The Company's Coach brand competes in
both the Premium and Moderate categories. The ESQ line competes in the Moderate
category of the market. The Company does not currently sell watches in the Mass
Market category, but plans to enter this category in Spring 2001 with a line of
watches to be marketed under a license agreement with Tommy Hilfiger Licensing,
Inc., which was executed in June 1999.
Exclusive Watches
Exclusive watches are usually made of precious metals, including 18 karat gold
or platinum, and may be set with precious gems, including diamonds, emeralds,
rubies and sapphires. These watches are primarily mechanical or quartz-analog
watches. Mechanical watches keep time with intricate mechanical movements
consisting of an arrangement of wheels, jewels and winding and regulating
mechanisms. Quartz-analog watches have quartz movements in which time is
precisely calibrated to the regular frequency of the vibration of quartz
crystal. Exclusive watches are manufactured almost entirely in Switzerland. In
addition to the Company's Concord and Movado watches, well-known brand names of
Exclusive watches include Audemars Piguet, Patek Philippe, Piaget and Vacheron
Constantin.
Luxury Watches
Luxury watches are either quartz-analog watches or mechanical watches. These
watches typically are made with either 14 or 18 karat gold, stainless steel or a
combination of gold and stainless steel, and are occasionally set with precious
gems. Luxury watches are primarily manufactured in Switzerland. In addition to a
majority
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of the Company's Concord and certain Movado watches, well-known brand names of
Luxury watches include Baume & Mercier, Breitling, Cartier, Ebel, Omega, Rolex
and TAG Heuer.
Premium Watches
The majority of Premium watches are quartz-analog watches. These watches
typically are made with gold finish, stainless steel or a combination of gold
finish and stainless steel. Premium watches are manufactured primarily in
Switzerland, although some are manufactured in the Far East. In addition to a
majority of the Company's Movado, Coach and certain Concord watches, well-known
brand names of Premium watches include Gucci, Rado and Raymond Weil.
Moderate Watches
Most Moderate watches are quartz-analog watches. Moderate watches are
manufactured primarily in the Far East and Switzerland. These watches typically
are made with gold finish, stainless steel, brass or a combination of gold
finish and stainless steel. In addition to the Company's ESQ and Coach brands,
well-known brand names of watches in the Moderate category include Anne Klein,
Bulova, Gucci, Guess, Seiko, Citizen and Wittnauer.
Mass Market Watches
Mass Market watches typically consist of digital and quartz-analog watches that
are made with stainless steel, brass or plastic. Digital watches, unlike
quartz-analog watches, have no moving parts. Instead, time is kept by electronic
microchips and is displayed as discrete Arabic digits illuminated on the watch
face by light emitting diodes (LED's) or liquid crystal displays (LCD's). Mass
Market watches are manufactured primarily in the Far East. Movado Group, Inc.
does not currently manufacture or distribute Mass-Market watches. Well-known
brands of Mass Market watches include Casio, Citizen, Fossil, Pulsar, Seiko,
Swatch and Timex. The Company plans to enter this category in Spring 2001 with
the launch of a line of watches to be produced and sold under license from Tommy
Hilfiger Licensing, Inc.
PRODUCTS
The Company currently markets four distinctive brands of watches: Movado,
Concord, ESQ and Coach, which compete in the Exclusive, Luxury, Premium and
Moderate categories. The Company designs and manufactures Movado and Concord
watches primarily in Switzerland, as well as in the United States, for sale
throughout the world. ESQ watches are manufactured to the Company's
specifications by independent contractors located in the Far East and are
presently sold primarily in the United States, Canada and the Caribbean. Coach
watches are assembled in Switzerland by independent suppliers. Until the end of
fiscal 1999, the Company distributed Piaget watches. On February 22, 1999, the
Company sold its Piaget business to VLG. Until the end of fiscal 2000, the
Company distributed Corum watches. On January 14, 2000, the Company sold its
Corum business to Corum Switzerland.
Movado
Founded in 1881 in La Chaux-de-Fonds, Switzerland, the Movado brand today
includes a line of watches based on the design of the world famous Movado Museum
watch and a number of other watch collections with more traditional dial
designs. The design for the Movado Museum watch was the first watch design
chosen by the Museum of Modern Art for its permanent collection. It has since
been honored by 10 other museums throughout
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the world. All Movado watches have Swiss movements, and are made with 14 or 18
karat gold, 18 karat gold finish, stainless steel or a combination of 18 karat
gold finish and stainless steel. The majority of Movado watches have suggested
retail prices between approximately $195 and $4,000.
Concord
Concord was founded in 1908 in Bienne, Switzerland. All Concord watches have
Swiss movements, either quartz or mechanical. Concord watches are made with 18
karat gold, stainless steel or a combination of 18 karat gold and stainless
steel, except for Concord Royal Gold watches, most of which are made with 14
karat gold. The majority of Concord watches have suggested retail prices between
approximately $1,000 and $15,000.
Coach
During fiscal 1999, the Company introduced Coach watches under an exclusive
license with Coach, a division of Sara Lee Corporation. All Coach watches
contain Swiss movements and are made with stainless steel, gold finish or a
combination of stainless steel and gold finish with leather straps, stainless
steel bracelets or gold finish bracelets. The suggested retail prices range from
$195 to $795.
ESQ
ESQ was launched in the second half of fiscal 1993. All ESQ watches contain
Swiss movements and are made with stainless steel, gold finish or a combination
of stainless steel and gold finish, with leather straps, stainless steel
bracelets or gold finish bracelets. The ESQ brand consists of sport and fashion
watches with suggested retail prices ranging from $125 to $495, with features
and styles comparable to more expensive watches.
Other Revenue
During fiscal 2000, sales of other products and services totaled approximately
$39.1 million, or approximately 13% of consolidated net sales. Approximately $33
million of this other revenue is derived from the Company's retail operations
which consist of 22 outlet stores and 5 Movado Boutiques. The outlet stores sell
discontinued models and factory seconds of all of the Company's watch brands.
The Movado Boutiques sell selected models of Movado watches as well as
proprietary jewelry, home and personal accessory lines which were launched in
1998. The jewelry, home and personal accessory lines are sold exclusively in the
Movado Boutiques. Other revenue also includes the Company's after sales service
and watch repair operations.
WARRANTY AND REPAIR
The Company has service facilities around the world including 8 Company-owned
service facilities and approximately 120 authorized independent service centers.
The Company conducts training sessions for and distributes technical information
and updates to repair personnel in order to maintain consistency and quality at
its service facilities and authorized independent service centers. The Company's
products are covered by limited warranties against defects in materials and
workmanship for periods ranging from one to three years from the date of
purchase for movements and up to five years for Movado watch casings and
bracelets. Products that are returned under warranty to the Company are
generally serviced by the Company's employees at its service facilities.
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Historically, the Company has retained significant inventories of component
parts to facilitate after sales service of its watches for an extended period of
time after the discontinuance of such watches from its core range line. The
Company decided that it would no longer retain this level of non-core component
inventories and took steps to begin assembling some of these components into
finished watches for resale through liquidation channels and its outlet stores.
In connection with this assembly process, the Company determined that assembly
of a certain portion of the non-core components would require significant
additional investment in logistics, material and labor to produce watches and
that the return on this investment would not be adequate to warrant the effort.
Accordingly, the Company recorded a fourth quarter charge to reduce this portion
of its non-core components to estimated net realizable value and will pursue
sale or disposal of these components.
ADVERTISING
Advertising is important to the successful marketing of the Company's watches.
Hence, the Company devotes significant resources to advertising. Since 1972 and
until fiscal year 2000, the Company maintained its own in-house advertising
department. In fiscal 2000, the Company restructured its advertising department
to focus primarily on the implementation and management of global marketing and
advertising programs and shifted the creative development of advertising
campaigns to an outside agency with no increase in cost. Advertising
expenditures totaled approximately 21.0%, 19.4% and 20.9% of net sales in fiscal
2000, 1999 and 1998, respectively. Advertising is developed individually for
each of the Company's watch brands and is directed primarily to the ultimate
consumer rather than to trade customers and is developed by targeting consumers
with particular demographic characteristics appropriate to the image and price
range of the brand. Advertisements are placed predominately in magazines and
other print media, but are also created for television campaigns, catalogues and
promotional materials.
SALES AND DISTRIBUTION
Overview
The Company divides its business into two major geographic segments: "Domestic"
which includes the results of the Company's United States and Canadian
operations and "International" which includes the results of all other Company
operations. The Company's international operations are principally conducted in
Europe and the Far East.
Domestic Wholesale
The Company sells all of its brands in the domestic market primarily through
department stores, such as Macy's, Neiman-Marcus and Saks Fifth Avenue; jewelry
store chains, such as Zales, Helzberg and Sterling; and independent jewelers.
Sales to trade customers in the United States and Canada are made directly by
the Company's sales force of approximately 100 employees who typically
specialize in a particular brand. A majority of the sales force is compensated
solely on the basis of commissions, which are determined as a percentage of
sales. One trade customer accounted for 13%, 10% and 12% of the Company's net
sales for fiscal 2000, 1999 and 1998, respectively. At January 31, 2000 and
1999, the same trade customer accounted for 18% and 15% of consolidated trade
receivables, respectively.
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International Wholesale
The Company sells Movado, Concord and Coach watches internationally through its
own sales force of approximately 20 employees operating from the Company's sales
and distribution offices in Hong Kong, Singapore, and Switzerland, and also
through a network of approximately 45 independent distributors operating in
numerous countries around the world. A majority of the Company's arrangements
with its international distributors are long-term, generally require certain
minimum purchases and restrict the distributor from selling competitive
products.
Retail
In addition to its sales to trade customers and independent distributors, the
Company sells Movado watches as well as Movado jewelry, table top accessories
and other product line extensions in 5 company-operated Movado Boutiques. The
Company also operates 22 outlet stores which sell discontinued and sample
merchandise and factory seconds, providing the Company with an organized and
efficient method of reducing inventory without competing directly with trade
customers.
BACKLOG
At March 31, 2000, the Company had unfilled customer orders of approximately
$49.8 million, compared to approximately $28.7 million at March 31, 1999 (based
on currency exchange rates in effect on March 31, 2000). The Company believes
the backlog is affected by a variety of factors, including seasonality and the
scheduling of the manufacture and shipment of products. The March 31, 2000
backlog includes orders resulting from the Basel Trade Fair, which were not
included in the March 31, 1999 backlog, due to the timing of the date of the
fair. Excluding orders resulting from the Basel Trade Fair, the backlog at March
31, 2000 was $35.4 million, as compared to $28.7 million at March 31, 1999.
Accordingly, a period-to-period comparison of backlog is not necessarily
meaningful and may not be indicative of eventual shipments.
SOURCES AND AVAILABILITY OF SUPPLIES
Concord watches are generally assembled at the Company's manufacturing facility
in Bienne, Switzerland with some off-site assembly performed principally by
independent Swiss watchmakers. Movado watches are assembled primarily in
Switzerland by independent third party subcontract assemblers. Certain lower
price point Movado models are assembled by sub-contractors in the Far East.
Movado and Concord watches are assembled using Swiss movements and other
components obtained from third-party suppliers. Coach watches are assembled in
Switzerland by independent assemblers using Swiss movements and other components
obtained from third-party suppliers in Switzerland and elsewhere. ESQ watches
are assembled by independent contractors in the Far East using Swiss movements
and other components purchased from third-party suppliers principally located in
the Far East.
A majority of the watch movements used in the manufacture of Movado, Concord and
ESQ watches are purchased from two suppliers. The Company obtains other watch
components for all of its manufactured brands, including movements, cases,
crystals, dials, bracelets and straps, from a number of other suppliers.
Precious stones used in the Company's watches are purchased from various
suppliers and are set in the United States and Switzerland. The Company does not
have long-term supply contracts with any of its component parts suppliers.
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COMPETITION
The markets for each of the Company's watch brands are highly competitive. With
the exception of the Swatch Group, Inc. (formerly known as SMH), a large
Swiss-based competitor, no single company competes with the Company across all
of its brands. Certain companies, however, compete with Movado Group, Inc. with
respect to one or more of its watch brands. Certain of these companies have, and
other companies that may enter the Company's markets in the future may have,
substantially greater financial, distribution, marketing and advertising
resources than the Company. The Company's future success will depend, to a
significant degree, upon its ability to compete effectively with regard to,
among other things, the style, quality, price, advertising, marketing and
distribution of its watch brands.
TRADEMARKS, PATENTS AND LICENSING AGREEMENTS
Movado Group, Inc. owns the trademarks MOVADO(R), CONCORD(R), VIZIO(R), as well
as trademarks for the Movado Museum dial design, and related trademarks for
watches in the United States and in numerous other countries. The Company
licenses ESQUIRE(R), ESQ(R) and related trademarks on an exclusive basis for use
in connection with the manufacture, distribution, advertising and sale of
watches pursuant to an agreement with the Hearst Corporation ("Hearst License
Agreement"). The current term of the Hearst License Agreement expires December
31, 2003 but contains options for renewal at the Company's discretion through
December 31, 2018. The Company licenses the trademark COACH(R) and related
trademarks on an exclusive basis for use in connection with the manufacture,
distribution, advertising and sale of watches pursuant to an agreement with
Coach, a division of Sara Lee Corporation ("Coach License Agreement"). Subject
to meeting certain performance goals, the Coach License Agreement expires in
March, 2008.
The Company has also entered into a license agreement with Tommy Hilfiger
Licensing, Inc. ("THLI"), the initial term of which expires December 31, 2005
but which can be extended at the request of the Company through December 31,
2010 if it is in compliance with all material terms of the agreement. Under the
agreement with THLI, the Company has been granted the exclusive license to use
the trademark TOMMY HILFIGER(R) and related trademarks in connection with the
manufacture of watches worldwide and in connection with the marketing,
advertising, sale and distribution of watches at wholesale (and at retail
through its outlet stores) in the United States, Canada, the Caribbean, and in
duty free and U.S. military shops worldwide.
In connection with the sale of the Piaget business to VLG, and the Corum
business to Corum Switzerland, the Company assigned the trademark PIAGET(R) for
watches and jewelry and certain related trademarks in the United States to VLG
and assigned the trademark CORUM(R) and certain related trademarks in the United
States to Corum Switzerland.
The Company also owns and has pending applications for a number of design
patents in the United States and internationally for various watch designs, as
well as designs of watch cases and bracelets.
The Company actively seeks to protect and enforce its intellectual property
rights by working with industry associations, anti-counterfeiting organizations,
private investigators and law enforcement authorities, including the United
States Customs Service and, when necessary, suing infringers of its trademarks
and patents. Consequently, the Company is involved from time to time in
litigation or other proceedings to determine the enforceability, scope and
validity of these rights. With respect to the trademarks MOVADO(R) and
CONCORD(R) and certain other related trademarks, the Company has received
exclusion orders that prohibit the importation of counterfeit goods or goods
bearing confusingly similar trademarks into the United States. In accordance
with Customs regulations, these exclusion orders, however, cannot cover the
importation of gray-
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market Movado or Concord watches because the Company is the manufacturer of such
watches. All of the Company's exclusion orders are renewable.
EMPLOYEES
As of January 31, 2000, the Company has approximately 930 full-time employees in
its domestic and international operations. No employee of the Company is
represented by a labor union or is subject to a collective bargaining agreement.
The Company has never experienced a work stoppage due to labor difficulties and
believes that its employee relations are good.
FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS, SEASONALITY, FOREIGN AND
DOMESTIC OPERATIONS
The Company divides its business into two major geographic segments: "Domestic",
which includes the results of the Company's United States and Canadian
operations, and "International", which includes the results of all other Company
operations. The Company's international operations are principally conducted in
Europe and the Far East and its international assets are substantially located
in Europe. Other international operations constituted less than 10% of
consolidated total assets for all periods presented.
The Company's domestic sales are traditionally greater during the Christmas and
holiday season and are significantly more seasonal than its international sales.
Consequentially, the Company's net sales historically have been higher during
the second half of its fiscal year. The second half of each year accounted for
approximately 60.3%, 60.2% and 61.2% of the Company's net sales for the fiscal
years ended January 31, 2000, 1999 and 1998, respectively. The amount of net
sales and operating income generated during the second half of each fiscal year
depends upon the general level of retail sales during the Christmas and holiday
season, as well as economic conditions and other factors beyond the Company's
control. The Company does not expect any significant change in the seasonality
of its domestic business in the foreseeable future. International sales tend to
be less seasonal, particularly those derived from the Middle and Far Eastern
markets.
The Company conducts its business primarily in two operating segments:
"Wholesale" and "Other". The Company's wholesale segment includes the design,
manufacture and distribution of quality watches. The Company's other segment
includes the Company's retail and service center operations. See Note 11 to the
Consolidated Financial Statements for financial information regarding segment
data.
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Item 2. Properties
The Company leases various facilities in the United States, Canada, Switzerland,
and the Far East for its corporate, manufacturing, distribution and sales
operations. The Company's leased facilities are as follows:
<TABLE>
<CAPTION>
SQUARE LEASE
LOCATION FUNCTION FOOTAGE EXPIRATION
- -------- -------- ------- ----------
<S> <C> <C> <C>
Lyndhurst, New Jersey Watch assembly and distribution 57,000 May 2002
Bienne, Switzerland Corporate functions, watch sales, 52,000 January 2007
distribution, assembly and repair
Lyndhurst, New Jersey Executive offices 28,000 December 2001
Woodcliff Lake, New Jersey Executive offices 19,400 March 2001
Markham, Canada Office and distribution 11,200 June 2007
Hackensack, New Jersey Warehouse 6,600 July 2004
New York, New York Watch repair and Public Relations 4,900 April 2008
Office
Hong Kong Watch sales, distribution and repair 5,800 June 2001
Los Angles, California Watch repair 3,000 December 2002
Miami, Florida Watch repair 2,600 October 2001
Grenchen, Switzerland Watch sales 2,600 March 2005
Toronto, Canada Office 1,600 June 2000
Japan Watch sales 1,500 Month to Month
Singapore Watch sales, distribution and repair 1,100 August 2001
</TABLE>
The Company leases retail space averaging 1,300 square feet per store with
leases expiring from November 2000 to October 2006 for the operation of the
Company's 22 outlet stores. The Company also leases retail space for the
operation of each of its five Movado Boutiques averaging 1,800 square feet per
store with leases expiring from January 2005 to August 2008.
The Company also owns approximately 2,400 square feet of office space in Hanau,
Germany, which it previously used for sales, distribution and watch repair
functions. The Company is currently subletting this facility.
The Company is currently exploring available alternatives in connection with the
presently scheduled expiration in March 2001 of its Woodcliff Lake, New Jersey
lease and the December 2001 and May 2002 scheduled expiration of its facilities
in Lyndhurst, New Jersey. The Company is currently exploring available
alternatives for relocation of its U.S. distribution operations currently
conducted in Lyndhurst, New Jersey.
The Company believes that its existing facilities are adequate for its current
operations but that it will require some expanded distribution and warehouse
space in order to handle reasonably foreseeable sales growth.
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Item 3. Legal Proceedings
The Company is involved in certain legal proceedings arising in the normal
course of its business. The Company believes that none of these proceedings,
either individually or in the aggregate, will have a material adverse effect on
the Company's operating results, liquidity or its financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders of the Company during the
fourth quarter of fiscal 2000.
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PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
As of March 24, 2000, there were 47 holders of record of the Class A Common
Stock and, the Company estimates, approximately 2,100 beneficial owners of the
Common Stock represented by 403 holders of record. The Common Stock is traded on
the NASDAQ National Market under the symbol "MOVA" and on March 24, 2000, the
closing price of the Common Stock was $ 10.00. The quarterly high and low
closing prices for the fiscal years ended January 31, 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
----------- -----------
QUARTER ENDED LOW HIGH LOW HIGH
- ------------- --- ---- --- ----
<S> <C> <C> <C> <C>
April 30 $20.75 $25.75 $21.00 $30.44
July 31 $22.88 $27.75 $24.00 $30.25
October 31 $21.63 $27.13 $15.13 $24.75
January 31 $18.63 $25.38 $17.63 $26.63
</TABLE>
The Class A Common Stock is not publicly traded and is subject to certain
restrictions on transfer as provided under the Company's Amended Restated
Certificate of Incorporation and, consequently, there is currently no
established public trading market for these shares.
During the fiscal year ended January 31, 2000, the Board of Directors approved
four $0.025 per share quarterly cash dividends to shareholders of record of the
Common Stock and Class A Common Stock. During the fiscal year ended January 31,
1999, the Board of Directors approved four $0.02 per share quarterly cash
dividends to shareholders of record of the Common Stock and Class A Common
Stock. The declaration and payment of future dividends, if any, will be at the
sole discretion of the Board of Directors and will depend upon the Company's
profitability, financial condition, capital and surplus requirements, future
prospects, terms of indebtedness and other factors deemed relevant by the Board
of Directors. See Note 4 to the Consolidated Financial Statements regarding
contractual restrictions on the Company's ability to pay dividends.
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Item 6. Selected Financial Data
The selected financial data presented below has been derived from the
Consolidated Financial Statements. This information should be read in
conjunction with, and is qualified in its entirety by, the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of this report. Amounts
are in thousands except per share amounts.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales $295,067 $277,836 $237,005 $215,107 $185,867
-------- -------- -------- -------- --------
Cost of sales 126,667 111,766 97,456 95,031 83,502
Selling, general and administrative 152,631 133,395 113,593 99,657 84,315
-------- -------- -------- -------- --------
Total expenses 279,298 245,161 211,049 194,688 167,817
-------- -------- -------- -------- --------
Operating income 15,769 32,675 25,956 20,419 18,050
Gain on disposition of business 4,752
Net interest expense 5,372 5,437 5,383 4,874 4,450
-------- -------- -------- -------- --------
Income before income taxes 15,149 27,238 20,573 15,545 13,600
Provision for income taxes 1,428 6,265 4,731 3,853 3,876
-------- -------- -------- -------- --------
Net income (1) $ 13,721 $ 20,973 $ 15,842 $ 11,692 $ 9,724
======== ======== ======== ======== ========
Net income per share-Basic $ 1.10 $ 1.63 $ 1.35 $ 1.04 $ 0.86
Net income per share-Diluted (1) $ 1.06 $ 1.58 $ 1.29 $ 1.02 $ 0.86
Basic shares outstanding 12,527 12,842 11,736 11,273 11,263
Diluted shares outstanding 12,890 13,256 12,236 11,489 11,327
Cash dividends declared per share $ 0.100 $ 0.080 $ 0.080 $ 0.064 $ 0.053
BALANCE SHEET DATA (END OF PERIOD):
Working capital $158,730 $191,033 $157,103 $126,690 $132,679
Total assets 267,186 296,375 249,069 208,443 200,380
Long-term debt 45,000 55,000 35,000 40,000 40,000
Shareholders' equity 147,815 162,608 145,533 103,870 104,841
</TABLE>
(1) Includes $8.3 million pretax or $0.46 per share after tax one-time charge
and $4.8 million pretax or $0.28 per share after tax gain from the sale of the
Company's Piaget business. Excluding these items, net income was $15.9 million
or $1.24 per share on a diluted basis.
12
<PAGE> 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD LOOKING STATEMENTS
Statements included under Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, in this annual report on Form
10-K, as well as statements in future filings by the Company with the Securities
and Exchange Commission ("SEC"), in the Company's press releases and oral
statements made by or with the approval of an authorized executive officer of
the Company, which are not historical in nature, are intended to be, and are
hereby identified as, "FORWARD LOOKING STATEMENTS" for purposes of the safe
harbor provided by Section 21E of the Securities Exchange Act of 1934. The
Company cautions readers that FORWARD LOOKING STATEMENTS, include without
limitation, those relating to the Company's future business prospects, revenues,
working capital, liquidity, capital needs, plans for future operations,
effective tax rates, margins, interest costs, and income as well as assumptions
relating to the foregoing. FORWARD LOOKING STATEMENTS are subject to certain
risks and uncertainties, some of which cannot be predicted or quantified. Actual
results and future events could differ materially from those indicated in the
FORWARD LOOKING STATEMENTS, due to several important factors herein identified,
among others, and other risks and factors identified from time to time in the
Company's reports filed with the SEC including, without limitation, the
following: general economic and business conditions which may impact disposable
income of consumers, competitive products and pricing, seasonality, availability
of alternative sources of supply in the case of loss of any significant
supplier, the Company's dependence on key officers, ability to enforce
intellectual property rights, continued availability to the Company of financing
and credit on favorable terms, and success of hedging strategies with respect to
currency exchange rate fluctuations.
GENERAL
Wholesale Sales. Among the more significant factors that influence annual sales
are general economic conditions in the Company's domestic and international
markets, new product introductions, the level and effectiveness of advertising
and marketing expenditures, and product pricing decisions. Fiscal 2000 sales
were also impacted by the sale of the Piaget and Corum businesses.
Approximately 20% of the Company's total sales are from international markets
and therefore reported sales are affected by foreign exchange rates. Significant
portions of the Company's international sales are billed in Swiss francs and
translated to U.S. dollars at average exchange rates for financial reporting
purposes.
The Company's business is very seasonal. There are two major selling seasons in
the Company's domestic markets: the Spring season, which includes school
graduations and several holidays, and, most importantly, the Christmas and
holiday season. Major selling seasons in certain international markets center
around significant local holidays that occur in late Winter or early Spring.
These markets are a less significant portion of the Company's business and
therefore, their impact is far less than that of the selling seasons in North
America.
During fiscal 2000, the Company completed the sale of both the Piaget and Corum
distribution businesses and substantially all the assets associated with these
businesses. Prior to the sale, the Company had been the exclusive distributor of
these brands in North America.The Company completed the sale of its Piaget
business to VLG in February 1999 and sold its Corum business to Corum
Switzerland in January 2000. The disposition of these brands negatively impacted
sales in fiscal 2000.
Retail Sales. The Company's retail operations consist of 22 outlet stores
located throughout the U.S. and five full-priced Movado Boutiques. The Company
does not have any overseas retail operations.
13
<PAGE> 15
The significant factors that influence annual sales volumes in the Company's
retail operations are similar to those that influence domestic wholesale
operations. In addition, many of the Company's outlet stores are located near
vacation destinations, and therefore, the seasonality of these stores is driven
by the peak tourist season associated with these locations.
Gross Margins. The Company's overall gross margins are primarily affected by
four major factors: sales mix, product pricing strategy, manufacturing costs and
the U.S. dollar/Swiss franc exchange rate.
Gross margins vary among the brands included in the Company's portfolio and also
among watch models within each brand. Luxury and premium retail price point
models generally earn lower gross margins than more popular moderate price
models. Gross margins in the Company's outlet business are lower than those of
the wholesale business since the outlets primarily sell seconds and discontinued
models that generally command lower retail prices. Gross margins in the full
priced Movado Boutiques exceed those of the wholesale business since the Company
earns full channel margins from manufacture to point of sale in this business.
All of the Company's brands compete with a number of other brands on the basis
of not only styling but also wholesale and retail price. The Company's ability
to improve margins through price increases is, therefore, to some extent,
constrained by competitors' actions. In addition, the Company's wholesale
operation periodically engages in liquidation sales of discontinued models at
reduced prices. The level of these sales in a particular period can also have a
significant impact on the Company's gross margins.
Manufacturing costs of the Company's brands consist primarily of component
costs, internal and subcontractor assembly costs and unit overhead costs
associated with the Company's supply chain operations in the U.S., Switzerland
and the Far East. The Company seeks to control and reduce component and
subcontractor labor costs through a combination of negotiations with existing
suppliers and alternative sourcing. The Company's supply chain operations
consist of logistics and minor assembly in the U.S. and Switzerland and a
product sourcing operation in the Far East. The Company has historically
controlled the level of overhead costs and maintained flexibility in its cost
structure by outsourcing a significant portion of its component and assembly
requirements and expects to extend this strategy over the near term.
Since a substantial amount of the Company's product costs are incurred in Swiss
francs, fluctuations in the U.S. dollar/Swiss franc exchange rate can impact the
Company's production costs and, therefore, its gross margins. The Company,
therefore, hedges its Swiss franc purchases using a combination of forward
contracts, purchased currency options and spot purchases. The Company's hedging
program has, in the recent past, been reasonably successful in stabilizing
product costs and therefore gross margins despite exchange rate fluctuations.
Operating Expenses. The Company's operating expenses consist primarily of
advertising, selling, distribution and general and administrative expenses.
Annual advertising expenditures are based principally on overall strategic
considerations relative to maintaining or increasing market share in markets
that management considers to be crucial to the Company's continued success as
well as on general economic conditions in the various markets around the world
in which the Company sells its products.
Selling expenses consist primarily of sales commissions, sales force costs and
operating costs incurred in connection with the Company's retail business. Sales
commissions vary proportionally with overall sales levels. Retail operating
expenses consist primarily of salaries and store rents.
14
<PAGE> 16
Distribution expenses consist primarily of salaries of distribution staff, the
cost of part-time help to meet seasonal needs, and shipping costs and supplies.
General and administrative expenses consist primarily of salaries, employee
benefit plan costs, office rent, management information systems costs and
various other general corporate expenses.
Operating expenses over the last three fiscal years reflect the effect of the
implementation of the Company's growth strategy. The more significant expenses
associated with this strategy included: advertising and marketing expenses
designed to increase market share for all of the Company's watch brands, both
domestically and internationally; additions to the Company's sales force;
salaries and rents associated with additional outlet stores and the Movado
Boutiques; the addition of staff to support distribution, inventory management
and customer service requirements coincident with growth of the Company's
business; and general and administrative expenses, such as employee benefits and
the development of the Company's information systems infrastructure.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
Net Sales. Comparative net sales by product class were as follows:
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999 FISCAL 1998
(IN THOUSANDS)
<S> <C> <C> <C>
Concord, Movado, Coach and ESQ:
Domestic $ 200,480 $180,909 $153,835
International 56,185 50,940 40,028
Piaget and Corum (726) 13,934 17,045
Other 39,128 32,053 26,097
--------- -------- --------
Net Sales $ 295,067 $277,836 $237,005
========= ======== ========
</TABLE>
Total net sales increased 6.2% for the year ended January 31, 2000. Sales from
ongoing operations, excluding the disposed Piaget and Corum distribution
businesses, increased 13.4% to $295.8 million from $260.9 million in the prior
year. Domestic sales of the Company's core Concord, Movado, ESQ and Coach brands
increased 10.8%. All of the Company's core brands experienced high single or low
double-digit percentage growth rates in the domestic market. International sales
of the Company's core brands increased 10.3% led by the continuing international
rollout of the Coach watch brand in the Far East, which resulted in a near
doubling of Coach watch international sales in fiscal 2000. International sales
of the Concord brand also increased approximately 10%.
Other net sales, which includes the Company's outlet stores, Movado Boutiques
and after sales service business, increased 22% over the prior year. This growth
was primarily attributable to double digit comparable store sales gains in both
the outlets and the Boutiques and new store openings in both of these retail
venues, offset by a decrease in after sales service revenues as a result of the
sale of the Piaget business.
Gross Margins. The gross margin for fiscal 2000 was 57.1% as compared to 59.8%
for fiscal 1999. The fiscal 2000 gross margin included a one-time charge of $5.0
million to write down non-core component inventories. The Company's non-core
component inventory is the result of stockpiling component parts necessary to
support after sales service of core product, which is subsequently discontinued
due to new product model introductions.
15
<PAGE> 17
During fiscal 1999, the Company initiated a project to convert such of its
non-core component inventory that is no longer necessary for after sales service
into finished watches for sale through liquidation channels or the Company's
outlet division. While this program was successful in converting a portion of
such total non-core component inventory into saleable finished watches in fiscal
2000 and the Company expects to continue this program, there will inevitably be
some residual non-core component inventory that will not be cost effective to
attempt to assemble into finished product.
Fiscal 2000 gross margins also reflect a $2.3 million negative adjustment to
inventory following physical counts conducted at year-end. The Company believes
the inventory adjustment was caused by issues associated with the existing
distribution environment and implementation of new information systems in the
U.S. in fiscal 2000. The Company's U.S. sales have increased significantly in
recent years resulting in a corresponding increase in unit volumes processed by
and warehoused in the existing U.S. distribution facility which operates in
converted office space located in Lyndhurst, NJ. Managing the unit volume growth
was also complicated by the implementation in 1999 of new information systems
requiring distribution personnel to adjust to new technology, procedures and
practices in conducting product shipment and warehouse operations. The Company
has transitioned to the new information system environment and will address the
physical space constraints issue by relocating its distribution operations to
more traditional warehouse space (see Operating Expenses below). The new larger
space will permit the Company to employ more effective and efficient product
handling and storage practices.
Excluding the charges described above, gross margins for fiscal 2000 were 59.5%
of sales compared to 59.8% in fiscal 1999. This decrease is primarily
attributable to fourth quarter sales mix, which included a higher level of lower
margin liquidation sales and outlet sales than the previous year. This was due,
in part, to underproduction of higher margin core range products and
substitution of lower margin non-core items to meet demand for product. Higher
levels of liquidation and outlet sales also reflected the Company's commitment
to reduce working capital employed in the business.
The Company's gross margin increased from 58.9% in fiscal 1998 to 59.8% in
fiscal 1999, principally as a result of sales mix, particularly an increase in
the proportion of Concord, Movado and ESQ sales to net sales. The Company's
gross margin also benefited by increases in the U.S. dollar against the Swiss
franc.
Operating Expenses. Operating expenses for fiscal 2000 were $152.6 million or
51.7% of net sales as compared to $133.4 million or 48.0% of net sales in fiscal
1999. Fiscal 2000 operating expenses include a $1.0 million fourth quarter
nonrecurring charge associated with the planned relocation of the Company's U.S.
distribution operations. This charge includes a write-off of assets that are not
transferable to the new facility as well as lease termination costs associated
with exiting the Company's existing facility.
Excluding this charge, operating expenses were $151.6 million or 51.4% of sales
compared to $133.4 million or 48.0% of sales in the prior year. The increase in
operating expenses of approximately 14% or $18 million relates to several areas,
including (1) advertising and marketing expenses, which increased $8.1 million
or 15%; (2) selling expenses, which increased $4.5 million or 12%; (3)
distribution costs, which increased $1.3 million or 21%, and (4) general and
administrative expenses, which increased $4.3 million or 12%.
The increase in advertising costs related to increased media and cooperative
advertising programs with retailers in support of the Company's brands, higher
advertising production costs due to the launch of new media campaigns for both
the Concord and ESQ brands, increased spending on point of sale support material
such as displays and product brochures, and the development of a new advertising
and marketing management team.
16
<PAGE> 18
Selling expenses increased in both the Company's wholesale and retail
businesses. Selling expenses in the wholesale business primarily reflect higher
levels of sales commissions due to sales increases across the Company's brands.
Headcount increases in the Coach and ESQ brands to support growth also resulted
in increased compensation and travel expenses. Selling expenses for fiscal 2000
also reflect the first year of amortization of the Company's major trade show
exhibition facility constructed for use at the annual Basel International Watch
and Jewelry Show.
Increases in selling expenses associated with the Company's retail operations
relate primarily to the addition of four new outlets and one Movado Boutique in
fiscal 2000 as well as the annualization of costs of stores opened during fiscal
1999.
Distribution expenses are largely variable in nature and these expenses grew
proportionately with increases in unit volume shipments.
Increases in general and administrative expenses were primarily in the area of
human resources and information systems. The Company experienced increases in
employee benefit costs associated with a growing workforce as well as recruiting
fees, specifically associated with the hiring of two senior executives in the
fourth quarter. Information systems related expenses increased as the Company
began amortizing its significant investment in its new U.S. core system
effective with the March 1999 implementation date and incurred Year 2000
remediation expenses relative to systems in the Switzerland and its other
international subsidiaries. The Company also added information systems support
personnel in fiscal 2000.
Interest Expense. Net interest expense in fiscal 2000 was consistent with the
previous year amounting to $5.4 million. Gross interest expense increased by
$676,000 or 12.4% due primarily to the first full year of interest expense on
$25 million of 6.9% Series A Senior Notes which were issued in December 1998.
These increases were offset largely by interest income from the investment of
the $28.4 million proceeds from the Company's sale of the Piaget business in
February 1999.
Net interest expense for fiscal 1999 and 1998 was $5.4 million and consisted
primarily of interest on the Company's 6.56% Senior Notes, 6.90% Series A Senior
Notes, revolving lines of credit and borrowings against working capital lines.
Income Taxes. The Company's income tax provision amounted to $1.4 million, $6.3
million, and $4.7 million for fiscal 2000, 1999 and 1998, respectively, or 9.4%
of pretax income for fiscal 2000 and 23.0% for fiscal 1999 and 1998. The 9.4%
effective rate for fiscal 2000 reflects a tax benefit as a result of a current
year net operating loss in the Company's U.S. operations. Also, a portion of the
Company's consolidated operations are located in non-U.S. jurisdictions, and,
therefore, the Company's effective rate differs from U.S. statutory rates. The
majority of the Company's non-U.S. operations are located in jurisdictions with
statutory rates below U.S. rates. The Company believes that the near term future
effective tax rate will increase to the 20% to 28% range reflecting the
Company's current expectation that domestic earnings will gradually increase as
a percentage of the overall earnings mix. However, there can be no assurance of
this result as it is dependent on a number of factors, including the mix of
foreign to domestic earnings, local statutory tax rates and the Company's
ability to utilize net operating loss carryforwards in certain jurisdictions.
17
<PAGE> 19
LIQUIDITY AND FINANCIAL POSITION
Cash flows from operating activities in fiscal 2000 were $28.3 million compared
to a use of cash in operations of $9.1 million in fiscal 1999 and $6.1 million
in fiscal 1998. The improvement in operating cash flows in fiscal 2000 resulted
from a reduction in working capital, in particular, inventories and accounts
receivable. Operating cash flows in fiscal 1999 and 1998 were negative due to
increases in both inventory and accounts receivable.
The Company generated net positive cash flows from investing activities in
fiscal 2000 of $17.5 million primarily as a result of the sale of its Piaget
business to VLG for $28.4 million in cash. This compared to $10.9 million and
$9.1 million cash utilized in investing activities in fiscal 1999 and 1998,
respectively, primarily for capital expenditures.
Capital expenditures amounted to $10.1 million in fiscal 2000 and related
primarily to management information systems projects, the addition of four new
outlet stores and one Movado Boutique, and construction of a major tradeshow
exhibition facility used annually at the Basel International Watch and Jewelry
show. The Company's capital expenditures for fiscal 1999 and fiscal 1998
amounted to $11.7 million and $7.6 million, respectively. Expenditures in fiscal
1999 were primarily related to planned expenditures for the Company's
information systems, including retail information systems, expansion of the
Company's Movado boutiques and further expansion of the Company's network of
outlet stores. Expenditures in fiscal 1998 were primarily related to
improvements in the Company's management and sales management information
systems and costs incurred in connection with the expansion of domestic
distribution operations. The Company expects that annual capital expenditures in
the near term will approximate the levels experienced in fiscal 2000 and 1999
and will relate primarily to relocating its U.S. distribution operations,
various information systems projects and leasehold improvements associated with
additional outlet stores.
Cash used in financing activities amounted to $22.1 million in fiscal 2000. This
compares to $18.6 million and $21.3 million of cash provided by financing
activities in fiscal 1999 and 1998, respectively.
At January 31, 2000 the Company had two series of Senior Notes outstanding.
Senior Notes due January 31, 2005 were originally issued in a private placement
completed in fiscal 1994. These notes have required annual principal payments of
$5.0 million since January 1998. The Company repaid $10 million and $5 million
in principal amount of these notes in fiscal 2000 and fiscal 1999, respectively.
At January 31, 2000, $25 million in principal amount of these notes remained
outstanding.
During fiscal 1999, the Company issued $25 million of Series A Senior Notes
under a Note Purchase and Private Shelf Agreement dated November 30, 1998. This
agreement allows for the issuance for up to two years from the date of the
agreement of Senior Promissory Notes in the aggregate principal amount of up to
$50 million with maturities up to 12 years from their original date of issuance.
The $25 million Series A Senior Notes issued in fiscal 1999 bear interest at
6.90% and mature on October 30, 2010. The Notes are subject to annual repayments
of $5.0 million commencing October 31, 2006.
The Company finances its seasonal working capital requirements through
borrowings under its bank lines of credit. The Company borrows from its bank
group under both a $90 million unsecured revolving line and $31.6 million of
annually renewable working capital lines of credit. Borrowings under the
revolving line are governed by a three-year agreement among the Company and its
bank group. The agreement was originally dated July 23, 1997 and was last
amended in March 2000 to revise certain financial covenants and substantially
increase the Company's ability to purchase shares under its ongoing share
repurchase program. The Company
18
<PAGE> 20
is presently in discussions with its bank group regarding a renewal of the
agreement and expects to complete the renewal by May 2000. Due to significant
increases in market interest spreads since the July 23, 1997 agreement was
completed, the Company expects that interest spreads contained in the new
revolving credit agreement will be significantly higher than those contained in
the current agreement. The Company is also renegotiating its annually renewable
working capital lines coincident with renewal of the revolving credit facility
since these lines are with three members of the Company's bank group that are
party to the revolving credit facility. At January 31, 2000, the Company had
$13.5 million of outstanding borrowings under its bank lines as compared to $7.2
million at January 31, 1999.
Under a series of share repurchase authorizations approved by the Board of
Directors, the Company has maintained a discretionary buy-back program
throughout fiscal 2000. Current year purchases under the repurchase program
amounted to $17.6 million. As of the date of the filing of this report on Form
10-K, the Company had remaining $10.2 million against an aggregate authorization
of $30 million.
During fiscal 1999, the Company repurchased $2.9 million of stock under a
400,000 share program that had been authorized by the Board of Directors in
March 1998. This program had been put in place to mitigate the dilutive impact
of employee compensation programs.
Cash dividends in fiscal 2000 amounted to $1.2 million compared to $1.0 million
in fiscal 1999 and $0.9 million in fiscal 1998.
Cash and cash equivalents at January 31, 2000 amounted to $26.6 million compared
to $5.6 million at January 31, 1999. Net debt to total capitalization at January
31, 2000 was 20% as compared to 27% at January 31, 1999.
In summary, the Company made significant progress in fiscal 2000 improving its
liquidity by selling underperforming assets (Piaget and Corum) and significantly
reducing working capital committed to the business per sales dollar generated,
primarily through the success of its inventory reduction programs. The Company
plans to continue to focus on improving its cash flows in fiscal 2001.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) in June 1998. SFAS 133 requires all derivatives to be
recorded on the balance sheet at fair value and established new accounting
practices for hedge instruments. SFAS 133 was originally scheduled for
implementation for fiscal years ending after June 15, 1999, however, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 137 which defers the effective date of SFAS 133 for one year. For
the Company, SFAS 133 will be effective for the first quarter of fiscal 2002.
Management is currently analyzing the effect that SFAS 133 is expected to have
on the Company's statement of position and results of operations.
MARKET RISKS
The Company's primary market risk exposure relates to foreign currency exchange
risk (see Note 5 to the Consolidated Financial Statements). The majority of the
Company's purchases are denominated in Swiss francs. The Company reduces its
exposure to the Swiss franc exchange rate risk through a hedging program. Under
the hedging program, the Company purchases various financial instruments,
predominately forward and option contracts. Gains and losses on financial
instruments resulting from this hedging activity are offset by the
19
<PAGE> 21
effects of the currency movements on respective underlying hedged transactions.
If the Company did not engage in a hedging program, any change in the Swiss
franc to local currency would have an equal effect on the entities' cost of
sales. As of January 31, 2000, the Company's hedging portfolio consisted of
various dates ranging through January 29, 2001 with an average forward rate of
1.5063 Swiss francs per dollar. The Company has $147.0 million of option
contracts with a maturity date of February 15, 2001. The option contracts have
an average strike price of 1.5621 Swiss francs per dollar. As of January 31,
2000, the carrying value of the options amounted to approximately $2.7 million,
which represents the unamortized premium of the option and a fair market value
of approximately $1.6 million.
In addition, the Company has certain debt obligations with variable interest
rates, which are based on LIBOR plus a fixed additional interest rate. The
Company does not hedge these interest rate risks. The Company also has certain
debt obligations with fixed interest rates. The difference between the market
based interest rates at January 31, 2000 and the fixed rates was minimal.
YEAR 2000
The Company initiated a project in 1997 (the "Project") to improve and
standardize data and computer technology and consequentially all obsolete
hardware and software either have been replaced with systems that are Year 2000
compliant or, in the case of certain business applications software in
Switzerland, Canada and the Far East, have been made Year 2000 compliant pending
replacement. As part of the Project, new client/server core business
applications software supporting manufacturing, distribution, sales, accounting
and after-sales service was implemented in the U.S. in March 1999. The Company
expects to complete the implementation of this software in Switzerland during
fiscal 2001 and in Canada and the Far East thereafter.
The Company monitored the Year 2000 system status of customers and vendors
involved with electronic data interchange ("EDI") with our systems by the use of
questionnaires.
As of the date of filing of this Annual Report on Form 10-K, all of the
Company's mission-critical systems have been successfully tested for Year 2000
compliance, and the Company has not experienced any significant Year 2000
problems with any of those systems or with the systems of any suppliers or
customers with whom the Company is involved in EDI. Although the Company has not
experienced any significant Year 2000 problems to date, it plans to continue to
monitor the situation closely.
While we cannot be sure that we have been completely successful in our efforts
to address the Year 2000 issue or that problems could not still arise that would
cause a material adverse effect on our operating results or financial condition,
we believe that our most reasonably likely worst-case scenario would relate to
problems with the systems of third parties rather that with our internal
systems. We are limited in our efforts to address the Year 2000 issue as it
relates to third parties, however, and rely solely on the assurances of these
third parties as to their Year 2000 preparedness.
Costs associated with systems replacement and modification to become Year 2000
compliant under the contingency plan (outside of the Project) were $0.3 million.
The estimated cost of the Project is approximately $12.0 million. The total
amount expended on the Project through January 31, 2000 was approximately $10.2
million. This estimate assumes that the Company will not incur significant Year
2000 related costs due to the failure of customers, vendors and other third
parties to be Year 2000 compliant.
20
<PAGE> 22
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Schedule Page
Number Number
------ ------
<S> <C> <C>
Report of Independent Accountants F-1
Consolidated Statements of Income for the fiscal years ended
January 31, 2000, 1999 and 1998 F-2
Consolidated Balance Sheets at January 31, 2000 and 1999 F-3
Consolidated Statements of Cash Flows for the fiscal years
ended January 31, 2000, 1999 and 1998 F-4
Consolidated Statements of Changes in Shareholders' Equity
for the fiscal years ended January 31, 2000, 1999 and
1998 F-5
Notes to Consolidated Financial Statements F-6 to F-18
Valuation and Qualifying Accounts and Reserves II S-1
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
21
<PAGE> 23
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is included in the Company's Proxy
Statement for the 2000 annual meeting of shareholders and is incorporated herein
by reference.
Item 11. Executive Compensation
The information required by this item is included in the Company's Proxy
Statement for the 2000 annual meeting of shareholders and is incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is included in the Company's Proxy
Statement for the 2000 annual meeting of shareholders and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is included in the Company's Proxy
Statement for the 2000 annual meeting of shareholders and is incorporated herein
by reference.
22
<PAGE> 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report
1. Financial Statements:
See Financial Statements Index on page 21 included in Item 8 of part
II of this report.
2. Financial Statements Schedules:
Schedule II Valuation and Qualifying
Accounts and Reserves
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
3. Exhibits:
Incorporated herein by reference is a list of the Exhibits contained
in the Exhibit Index on pages 26 through 31 of this report.
(b) Reports on Form 8-K
None.
23
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MOVADO GROUP, INC.
(Registrant)
Dated: April 19, 2000 By: /s/ Gedalio Grinberg
--------------------
Gedalio Grinberg
Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
Dated: April 19, 2000 /s/ Gedalio Grinberg
--------------------
Gedalio Grinberg
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Dated: April 19, 2000 /s/ Efraim Grinberg
-------------------
Efraim Grinberg
President
Dated: April 19, 2000 /s/ Richard J. Cote
-------------------
Richard J. Cote
Executive Vice President of Finance and
Administration
Dated: April 19, 2000 /s/ Kenneth J. Adams
--------------------
Kenneth J. Adams
Senior Vice President and Chief Financial Officer
(Chief Financial Officer)
Dated: April 19, 2000 /s/ Glenn E. Tynan
------------------
Glenn E. Tynan
Vice President and Corporate Controller
(Principal Accounting Officer)
Dated: April 19, 2000 /s/ Margaret Hayes Adame
------------------------
Margaret Hayes Adame
Director
24
<PAGE> 26
Dated: April 19, 2000 /s/ Donald Oresman
------------------
Donald Oresman
Director
Dated: April 19, 2000 /s/ Leonard L. Silverstein
--------------------------
Leonard L. Silverstein
Director
Dated: April 19, 2000 /s/ Alan H. Howard
------------------
Alan H. Howard
Director
25
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
3.1 Restated By-Laws of the Registrant. Incorporated by reference to
Exhibit 3.1 filed with the Registrant's Registration statement on
Form S-1 (Registration No. 33-666000).
3.2 Restated Certificate of Incorporation of the Registrant as amended.
Incorporated herein by reference to Exhibit 3(i) to the Registrant's
Quarterly Report on Form 10-Q filed for the quarter ended July 31,
1999.
4.1 Specimen Common Stock Certificate. Incorporated herein by reference
to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for
the year ended January 31, 1998.
4.2 Note Agreement, dated as of November 9, 1993, by and between the
Registrant and The Prudential Insurance Company of America.
Incorporated herein by reference to Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1993.
4.3 Note Purchase and Private Shelf Agreement dated as of November 30,
1998 between the Registrant and The Prudential Insurance Company of
America. Incorporated herein by reference to Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the year ended January
31, 1999.
10.1 Lease dated August 5, 1998 between Grand Canal Shops Mall
Construction, LLC as landlord and Movado Retail Group, Inc., as
tenant, for premises at Grand Canal Shops, Clark County, Nevada.
Incorporated herein by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter Ended July 31, 1998.
10.2 Amendment Number 1 to License Agreement dated December 9, 1996
between Registrant as Licensee and Coach, a division of Sara Lee
Corporation as Licensor, dated as of February 1, 1998. Incorporated
herein by reference to exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1998.
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
10.3 Agreement, dated January 1, 1992, between The Hearst Corporation and
the Registrant, as amended on January 17, 1992. Incorporated herein
by reference to Exhibit 10.8 filed with Company's Registration
Statement on Form S-1 (Registration No. 33-666000).
10.4 Letter Agreement between the Registrant and The Hearst Corporation
dated October 24, 1994 executed October 25, 1995 amending License
Agreement dated as of January 1, 1992, as amended. Incorporated
herein by reference to Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended October 31, 1995.
10.5 Lease Agreement between the Registrant and Meadowlands Associates,
dated October 31, 1986, for office space in Lyndhurst, New Jersey,
together with the Non-Disturbance and Attornment Agreement, dated
March 11, 1987. Incorporated herein by reference to Exhibit 10.10
filed with Company's Registration Statement on Form S-1
(Registration No. 33-666000).
10.6 Registrant's 1996 Stock Incentive Plan amending and restating the
1993 Employee Stock Option Plan. Incorporated herein by reference to
Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 31, 1996.**
10.7 Line of Credit Letter Agreement dated July 18, 1997 between the
Registrant and Fleet Bank, N.A. Incorporated herein by reference to
Exhibit 10.13 to Registrant's Annual Report on Form 10-K for the
year ended January 31, 1998.
10.8 Line of Credit Letter Agreement dated February 25, 1998 between the
Registrant and Marine Midland Bank, N.A Incorporated herein by
reference to Exhibit 10.14 to Registrant's Annual Report on Form
10-K for the year Ended January 31, 1998.
10.9 Letter Agreement dated May 19, 1993 between Concord Watch Company,
S.A. and Bern Cantonal Bank (English translation). Incorporated
herein by reference to Exhibit Number 10.15 filed with Company's
Registration Statement on Form S-1 (Registration No. 33-666000).
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
10.10 Letter Agreement dated November 25, 1992 between Concord Watch
Company, S.A. and Swiss Bank Corporation (English Translation).
Incorporated herein by reference to Exhibit 10.19 filed with
Company's Registration Statement on Form S-1 (Registration No.
33-666000).
10.11 Letter Agreement dated January 25, 1991 between Concord Watch
Company, S.A. and Union Bank of Switzerland (English Translation).
Incorporated herein by reference to Exhibit 10.20 filed with
Company's Registration Statement on Form S-1 (Registration No.
33-666000).
10.12 Lease dated August 10, 1994 between Rockefeller Center Properties,
as landlord and SwissAm Inc., as tenant for space at 630 Fifth
Avenue, New York, New York. Incorporated herein by reference to
Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 31,1994.
10.13 First Amendment of Lease dated May 31, 1994 between Meadowlands
Associates, as landlord and the Registrant, as tenant for additional
space at 125 Chubb Avenue, Lyndhurst, New Jersey. Incorporated
herein by reference to Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 31, 1994.
10.14 Death and Disability Benefit Plan Agreement dated September 23, 1994
between the Registrant and Gedalio Grinberg, Incorporated herein by
reference to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1994.**
10.15 Registrant's amended and restated Deferred Compensation Plan for
Executives effective January 1, 1998. Incorporated herein by
reference to Exhibit 10.25 to the Registrant's Annual Report on Form
10-K for the year ended January 31, 1998.**
10.16 Policy Collateral Assignment and Split Dollar Agreement dated
December 5, 1995 by and between the Registrant and The Grinberg
Family Trust together with Demand Note dated December 5, 1995.
Incorporated herein by reference to Exhibit 10.30 to the
Registrant's Annual Report on Form 10-K for the year ended January
31, 1996.**
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
10.17 License Agreement dated December 9, 1996 between the Registrant and
Sara Lee Corporation. Incorporated herein by reference to Exhibit
10.32 to the Registrant's Annual Report on Form 10-K for the year
ended January 31, 1997.
10.18 Amended and Restated Credit Agreement dated as of July 23, 1997
among the Registrant, the Chase Manhattan Bank as Agent, Swingline
Bank and Issuing Bank and Fleet Bank, N.A. as Co-Agent and the other
Lenders signatory thereto. Incorporated herein by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 31, 1997.
10.19 Amendment to Amended and Restated Credit Agreement dated as of
August 5, 1997 among the Registrant, the Chase Manhattan Bank as
Agent, Swingline Bank and Issuing Bank and Fleet Bank, N.A. as
Co-Agent and the other Lenders signatory thereto. Incorporated
herein by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 31, 1997.
10.20 First Amendment to Lease dated April 8, 1998 between RCPI Trust,
successor in interest to Rockefeller Center Properties ("Landlord")
and Movado Retail Group, Inc., successor in interest to SwissAm Inc.
("Tenant") amending lease dated August 10, 1994 between Landlord and
Tenant for space at 630 Fifth Avenue, New York, New York.
Incorporated herein by reference to Exhibit 10.37 to the
Registrant's Annual Report on Form 10-K for the year ended January
31, 1998.
10.21 Line of Credit Letter Agreement dated November 10, 1997 between the
Registrant and Fleet Bank, N.A. Incorporated herein by reference to
Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the
year ended January 31, 1998.
10.22 Line of Credit Letter Agreement dated August 5, 1997 between the
Registrant and The Bank of New York, Incorporated herein by
reference to Exhibit 10.39 to the Registrant's Annual Report on Form
10-K for the year ended January 31, 1998.
10.23 Second Amendment dated as of September 1, 1999 to the December 1,
1996 license agreement between Sara Lee Corporation and Registrant.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1999.
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
10.24 License Agreement entered into as of June 3, 1999 between Tommy
Hilfiger Licensing, Inc. and Registrant. Incorporated herein by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1999.
10.25 Amendment and Waiver dated as of February 19, 1999 as to Amended and
Restated Credit Agreement dated as of July 23, 1997 among the
Registrant, the Chase Manhattan Bank as Agent, Swingline Bank and
Issuing Bank and Fleet Bank, N.A. as Co-Agent and the other Lenders
signatory thereto.
10.26 Amendment dated as of June 10, 1998 to Amended and Restated Credit
Agreement dated as of July 23, 1997 among the Registrant, the Chase
Manhattan Bank as Agent, Swingline Bank and Issuing Bank and Fleet
Bank, N.A. as Co-Agent and the other Lenders signatory thereto.
10.27 Amendment and waiver dated as of November 17, 1998 among the
Registrant, the Chase Manhattan Bank as Agent, Swingline Bank and
Issuing Bank and Fleet Bank, N.A. as Co-Agent and the other Lenders
signatory thereto.
10.28 Amendment dated as of March 17, 2000 among the Registrant, the Chase
Manhattan Bank as Agent, Swingline Bank and Issuing Bank and Fleet
Bank, N.A. as Co-Agent and the other Lenders signatory thereto.
10.29 Amendment dated as of March 24, 2000 among the Registrant, the Chase
Manhattan Bank as Agent, Swingline Bank and Issuing Bank and Fleet
Bank, N.A. as Co-Agent and the other Lenders signatory thereto.
10.30 Second Amendment of Lease dated as of December 23, 1998 between
Meadowlands Associates, as landlord and the Registrant, as tenant,
further amending lease dated as of October 31, 1986
10.31 Lease termination agreement dated as of February 1, 2000 between
PW/MS OP SUB I, LLC, successor in interest to Belle Mead
Corporation, landlord, and Movado Group, Inc., tenant, terminating
lease dated as of April 15, 1996, as amended, respecting premises
located at 1200 Wall Street West, Lyndhurst, New Jersey.
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
10.32 Sublease made as of October 26, 1999 between Merck-Medco Managed
Care, L.L.C. as sublessor and Registrant as Sublessee for premises
at 300 Tice Boulevard, Woodcliff Lake, New Jersey.
10.33 Third Amendment of lease dated as of February 17, 2000 between
Meadowlands Associates, as landlord, and the Registrant, as tenant,
further amending lease dated as of October 31, 1986.
10.34 License Agreement entered into as of October 31, 1999 by and Between
Movado Corporation, Movado Watch Company S.A. and Lantis Eyewear
Corporation.*
10.35 Severance Agreement dated December 15, 1999, and entered into
December 16, 1999 between the Registrant and Richard J. Cote.**
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
</TABLE>
* Confidential portions of Exhibit 10.34 have been omitted and filed
separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934.
** Constitutes a compensatory plan or arrangement.
31
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of Movado Group, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 23 presents fairly, in all material
respects, the financial position of Movado Group, Inc. and its subsidiaries at
January 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended January 31, 2000, in
conformity with accounting principles generally accepted in the United States.
In addition, in our opinion, the financial statement schedule listed in the
accompanying index appearing under Item 14(a)(2) on page 23 presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
400 Campus Drive
Florham Park, New Jersey
April 11, 2000
F-1
<PAGE> 34
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
----------------------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 295,067 $ 277,836 $ 237,005
--------- --------- ---------
Costs and expenses:
Cost of sales 126,667 111,766 97,456
Selling, general and administrative 152,631 133,395 113,593
--------- --------- ---------
279,298 245,161 211,049
--------- --------- ---------
Operating income 15,769 32,675 25,956
Net interest expense 5,372 5,437 5,383
Gain on disposition of business 4,752 -- --
--------- --------- ---------
Income before income taxes 15,149 27,238 20,573
Provision for income taxes 1,428 6,265 4,731
--------- --------- ---------
Net income $ 13,721 $ 20,973 $ 15,842
========= ========= =========
Net income per share - Basic $ 1.10 $ 1.63 $ 1.35
========= ========= =========
Net income per share - Diluted $ 1.06 $ 1.58 $ 1.29
========= ========= =========
COMPREHENSIVE INCOME:
Net Income $ 13,721 $ 20,973 $ 15,842
Other comprehensive income, net of tax:
Foreign currency translation adjustment (10,456) (869) (3,281)
--------- --------- ---------
Comprehensive income $ 3,265 $ 20,104 $ 12,561
========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE> 35
MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 31,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 26,615 $ 5,626
Trade receivables, net 103,795 109,102
Inventories, net 77,075 104,027
Assets held for sale -- 22,187
Other 19,341 21,489
--------- ---------
Total current assets 226,826 262,431
Plant, property and equipment, net 27,593 22,998
Other assets 12,767 10,946
--------- ---------
$ 267,186 $ 296,375
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable to banks $ 13,500 $ 2,200
Current portion of long-term debt 5,000 10,000
Accounts payable 17,562 28,999
Accrued liabilities 26,602 20,020
Deferred and current taxes payable 5,432 10,179
--------- ---------
Total current liabilities 68,096 71,398
--------- ---------
Long-term debt 45,000 55,000
Deferred and noncurrent foreign income taxes 5,105 5,728
Other liabilities 1,170 1,641
--------- ---------
Total liabilities 119,371 133,767
--------- ---------
Shareholders' equity:
Preferred Stock, $0.01 par value, 5,000,000 shares
authorized; no shares issued -- --
Common Stock, $0.01 par value, 20,000,000 shares
authorized; 9,496,529 and 9,419,781 shares issued, respectively 95 94
Class A Common Stock, $0.01 par value, 10,000,000 shares
authorized; 3,509,733 and 3,530,922 shares issued and
outstanding, respectively 35 35
Capital in excess of par value 66,113 65,332
Retained earnings 118,615 106,141
Accumulated other comprehensive income (16,462) (6,006)
Treasury stock, 920,690 and 159,019 shares at cost, respectively (20,581) (2,988)
--------- ---------
Total shareholders' equity 147,815 162,608
--------- ---------
Commitments and contingencies (Note 9)
$ 267,186 $ 296,375
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 36
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
-------------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 13,721 $ 20,973 $ 15,842
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 5,189 5,380 4,121
Deferred and noncurrent foreign income taxes (1,636) 1,764 483
Provision for losses on accounts receivable 1,077 1,304 1,005
Provision for losses on inventory 7,263 -- --
Gain on disposition of business (4,752) -- --
Changes in current assets and liabilities:
Trade receivables 2,469 (24,693) (18,699)
Inventories 14,609 (19,925) (12,988)
Other current assets (6,269) (1,265) (2,565)
Accounts payable (7,004) 4,108 263
Accrued liabilities 4,464 3,352 3,841
Deferred and current taxes payable (2,532) 229 3,481
Decrease (increase) in other noncurrent assets 2,305 (314) (592)
Decrease in other noncurrent liabilities (629) (29) (307)
-------- -------- --------
Net cash provided by (used in) operating activities 28,275 (9,116) (6,115)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (10,125) (11,707) (7,638)
Proceeds from disposition of business 28,409 -- --
Goodwill, trademarks and other intangibles (755) (1,835) (1,421)
Sale of subsidiary -- 2,646 --
-------- -------- --------
Net cash provided by (used in) investing activities 17,529 (10,896) (9,059)
-------- -------- --------
Cash flows from financing activities:
Repayment of Senior Notes (10,000) (5,000) --
Proceeds from issuance of Common Stock, net of underwriting discounts -- -- 29,609
and offering expenses
Proceeds from issuance of Series A Senior Notes -- 25,000 --
Net proceeds from (payment of) current bank borrowings 6,300 2,200 (7,570)
Principal payments under capital leases (69) (387) (275)
Stock options exercised 499 627 431
Dividends paid (1,247) (1,026) (939)
Purchase of treasury stock (17,593) (2,860) --
-------- -------- --------
Net cash (used in) provided by financing activities (22,110) 18,554 21,256
-------- -------- --------
Effect of exchange rate changes on cash (2,705) (3,790) (93)
-------- -------- --------
Net increase (decrease) in cash 20,989 (5,248) 5,989
Cash at beginning of year 5,626 10,874 4,885
-------- -------- --------
Cash at end of year $ 26,615 $ 5,626 $ 10,874
======== ======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 37
MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Class A Capital in
Preferred Common Common Excess of Retained
Stock Stock Stock Par Value Earnings
--- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1997 $-- $ 65 $ 48 $ 34,450 $ 71,291
Net income 15,842
Dividends ($0.08 per share) (939)
Stock options exercised 431
Proceeds from issuance of common
stock, net of underwriting discounts
and offering expenses 15 29,594
Foreign currency translation adjustment
Conversion of Class A Common
Stock to Common Stock 13 (12)
--- --------- --------- --------- ---------
Balance, January 31, 1998 -- 93 36 64,475 86,194
Net income 20,973
Dividends ($0.08 per share) (1,026)
Stock options exercised, net of tax
benefit 857
Common stock repurchased
Foreign currency translation adjustment
Conversion of Class A Common
Stock to Common Stock 1 (1)
--- --------- --------- --------- ---------
Balance, January 31, 1999 -- 94 35 65,332 106,141
Net income 13,721
Dividends ($0.10 per share) (1,247)
Stock options exercised, net of tax
benefit 781
Common stock repurchased
Foreign currency translation adjustment
Conversion of Class A Common
Stock to Common Stock 1
--- --------- --------- --------- ---------
Balance, January 31, 2000 $-- $ 95 $ 35 $ 66,113 $ 118,615
=== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Comp-
Rehensive Treasury
Income Stock
--------- ---------
<S> <C> <C>
Balance, January 31, 1997 ($ 1,856) ($ 128)
Net income
Dividends ($0.08 per share)
Stock options exercised
Proceeds from issuance of common
stock, net of underwriting discounts
and offering expenses
Foreign currency translation adjustment (3,281)
Conversion of Class A Common
Stock to Common Stock
--------- ---------
Balance, January 31, 1998 (5,137) (128)
Net income
Dividends ($0.08 per share)
Stock options exercised, net of tax
benefit
Common stock repurchased (2,860)
Foreign currency Translation adjustment (869)
Conversion of Class A Common
Stock to Common Stock
--------- ---------
Balance, January 31, 1999 (6,006) (2,988)
Net income
Dividends ($0.10 per share)
Stock options exercised, net of tax
benefit
Common stock repurchased (17,593)
Foreign currency translation adjustment (10,456)
Conversion of Class A Common
Stock to Common Stock
--------- ---------
Balance, January 31, 2000 ($ 16,462) ($ 20,581)
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 38
MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Movado Group, Inc. (the "Company") is a designer, manufacturer and distributor
of quality watches with prominent brands in almost every price category
comprising the watch industry. In fiscal 2000, the Company marketed five
distinctive brands of watches: Movado, Concord, ESQ, Coach and Corum, which
compete in most segments of the watch market.
The Company designs and manufactures Concord and Movado watches primarily
through its subsidiaries in Switzerland, as well as in the United States, for
sale throughout the world. ESQ watches are manufactured to the Company's
specifications using Swiss movements by independent contractors located in the
Far East. Coach watches are assembled in Switzerland by independent suppliers.
The Company distributes its watch brands through its United States operations as
well as through sales subsidiaries in Canada, Hong Kong, Singapore and
Switzerland and through a number of independent distributors located in various
countries throughout the world.
In addition to its sales to trade customers and independent distributors, the
Company sells Movado watches, Movado jewelry, tabletop accessories and other
product line extensions within the Movado brand directly to consumers in its
Company-operated Movado Boutiques. The Company also operates a number of Movado
outlet stores throughout the United States, through which the Company sells
discontinued and sample merchandise.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany transactions and balances have been eliminated.
Translation of foreign currency financial statements and foreign currency
transactions
The financial statements of the Company's international subsidiaries have been
translated into United States dollars by translating balance sheet accounts at
year-end exchange rates and statement of operations accounts at average exchange
rates for the year. Foreign currency transaction gains and losses are charged or
credited to income as incurred. In fiscal 2000, 1999 and 1998 the Company
recorded foreign currency transaction gains of $0.8 million, $3.6 million and
$5.1 million, respectively. Foreign currency translation gains and losses are
reflected in the equity section of the Company's consolidated balance sheet in
accumulated other comprehensive income.
Sales and trade receivables
The Company's trade customers include department stores, jewelry store chains
and independent jewelers. Movado and Concord watches are also marketed through a
network of independent distributors. Sales are recognized upon shipment of
products to trade customers. Accounts receivable are stated net of allowances
for doubtful accounts of $3,604,000 and $2,567,000 at January 31, 2000 and 1999,
respectively. One individual
F-6
<PAGE> 39
trade customer accounted for 13%, 10% and 12% of the Company's consolidated net
sales in fiscal 2000, 1999 and 1998, respectively. At January 31, 2000 and 1999,
one trade customer accounted for 18% and 15% of consolidated trade receivables,
respectively.
The Company's concentrations of credit risk arise primarily from accounts
receivable related to trade customers during the peak selling seasons. The
Company has significant accounts receivable balances due from major department
store chains. The Company's results of operations could be materially adversely
affected in the event any of these customers or a group of these customers
defaulted on all or a significant portion of their obligations to the Company as
a result of financial difficulties.
Inventories
Inventories are valued at the lower of cost or market. The cost of domestic
finished goods inventories is determined primarily using the first-in, first-out
(FIFO) method. The cost of finished goods inventories held by overseas
subsidiaries and all component parts inventories are determined using average
cost.
Plant, property and equipment
Plant, property and equipment at January 31, at cost, consisted of the following
(in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Furniture and equipment $ 40,820 $ 34,586
Leasehold improvements 11,026 11,096
-------- --------
51,846 45,682
Less: accumulated depreciation (24,253) (22,684)
-------- --------
$ 27,593 $ 22,998
======== ========
</TABLE>
Depreciation of furniture and equipment is provided using the straight-line
method based on the estimated useful lives of assets, which range from three to
ten years. Leasehold improvements are amortized using the straight-line method
over the lesser of the term of the lease or the estimated useful life of the
leasehold improvement.
Goodwill and other intangibles
Other intangible assets consist primarily of trademarks and are recorded at
cost. Trademarks are generally amortized over ten years. Goodwill is amortized
over 40 years. The Company continually reviews goodwill and other intangible
assets to evaluate whether events or changes have occurred that would suggest an
impairment of carrying value. An impairment would be recognized when expected
undiscounted future operating cash flows are lower than the carrying value. At
January 31, 2000 and 1999, goodwill and other intangible assets at cost were
$4,358,000 and $5,448,000, respectively, and related accumulated amortization of
goodwill and other intangibles was $1,068,000 and $2,322,000, respectively.
F-7
<PAGE> 40
Advertising
The Company expenses the production costs of an advertising campaign at the
commencement date of the advertising campaign. Advertising expenses for fiscal
2000, 1999 and 1998, amounted to $61.8 million, $53.8 million and $49.6 million,
respectively.
Income taxes
The Company and its domestic subsidiaries file a consolidated federal income tax
return. Foreign income taxes have been provided based on the applicable tax
rates in each of the foreign countries in which the Company operates. Certain
Swiss income taxes are payable over several years; the portion of these taxes
not payable within one year is classified as noncurrent. Noncurrent foreign
income taxes included in the consolidated balance sheets at January 31, 2000 and
1999 were $1,905,000 and $2,098,000, respectively.
Earnings per share
The Company presents net income per share on a 'basic' and 'diluted' basis.
Basic earnings per share is computed using weighted average shares outstanding
during the period. Diluted earnings per share is computed using the weighted
average number of shares outstanding adjusted for dilutive common stock
equivalents.
The weighted average number of shares outstanding for basic earnings per share
were 12,527,000, 12,842,000, and 11,736,000 for fiscal 2000, 1999 and 1998,
respectively. For diluted earnings per share, these amounts were increased by
363,000, 414,000 and 500,000 in fiscal 2000, 1999 and 1998, respectively, due to
potentially dilutive common stock equivalents issuable under the Company's stock
option plans. There were no anti-dilutive common stock equivalents in the years
presented.
Stock-based compensation
Stock-based compensation is recognized using the intrinsic value method. For
disclosure purposes, pro forma net income and earnings per share are provided as
if the fair value method had been applied.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Stockholders' Equity
Under a series of share repurchase authorizations approved by the Board of
Directors, the Company has maintained a discretionary buy-back program
throughout fiscal 2000. Current year purchases under the repurchase program
amounted to $17.6 million. As of the date of the filing of this report on Form
10-K, the Company had remaining $10.2 million against an aggregate authorization
of $30 million.
F-8
<PAGE> 41
During fiscal 1999, the Company repurchased $2.9 million of stock under a
400,000 share repurchase program that had been authorized by the Board of
Directors in March 1998. This program had been put in place to mitigate the
dilutive impact of employee compensation programs.
New Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) in June 1998. SFAS 133 requires all derivatives to be
recorded on the balance sheet at fair value and established new accounting
practices for hedge instruments. SFAS 133 was originally scheduled for
implementation for fiscal years ending after June 15, 2000, however, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 137 which defers the effective date of SFAS 133 for one year. For
the Company, SFAS 133 will be effective for the first quarter of fiscal 2002.
Management is currently analyzing the effect that SFAS 133 is expected to have
on the Company's statement of position and results of operations.
Reclassification
Certain prior year amounts have been reclassified to conform to the fiscal 2000
presentation.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
------------------------
2000 1999
-------- --------
<S> <C> <C>
Finished goods $ 50,565 $ 64,438
Work-in-process and component parts 26,510 39,589
-------- --------
$ 77,075 $104,027
======== ========
</TABLE>
NOTE 3 - BANK CREDIT ARRANGEMENTS AND LINES OF CREDIT
The Company's revolving credit and working capital lines with its domestic bank
groups were amended in July 1997 to provide for a three-year $90.0 million
unsecured revolving line of credit, pursuant to the Restated Bank Credit
Agreement, and to provide for $31.6 million and $28.3 million of uncommitted
working capital lines of credit at January 31, 2000 and 1999, respectively. The
Restated Bank Credit Agreement provides for various rate options including the
federal funds rate plus a fixed rate, the prime rate or a fixed rate plus the
LIBOR rate. The Company pays a facility fee on the unused portion of the credit
facility. The agreement also contains certain financial covenants based on fixed
coverage ratios, leverage ratios and restrictions which limit the Company on the
sale, transfer or distribution of corporate assets, including dividends and
limit the amount of debt outstanding. The Company amended the agreement in March
2000 to revise certain financial covenants and substantially increase the
Company's ability to repurchase stock. The Company was in compliance with these
restrictions and covenants at January 31, 2000. At January 31, 1999, the Company
included $5.0 million in long-term debt. The domestic unused line of credit was
$108.1 million and $111.1 million at January 31, 2000 and January 31, 1999,
respectively.
F-9
<PAGE> 42
The Company's Swiss subsidiaries maintain secured and unsecured lines of credit
with Swiss banks, a majority of which have an unspecified duration. Available
credit under these lines totaled 10.0 million Swiss francs and 8.0 million Swiss
francs, with dollar equivalents of approximately $6.0 million and $5.6 million
at January 31, 2000 and 1999, respectively, of which a maximum of $5 million can
be drawn. One subsidiary's credit line contains a covenant requiring maintenance
of retained earnings above a specified minimum level. This subsidiary was in
compliance with this covenant at January 31, 2000 and 1999. There are no other
restrictions on transfers in the form of dividends, loans or advances to the
Company by its foreign subsidiaries.
Outstanding borrowings against the Company's aggregate demand lines of credit
were $13.5 million at January 31, 2000 and $7.2 million at January 31, 1999.
Aggregate maximum and average monthly outstanding borrowings against the
Company's lines of credit and related weighted average interest rates during
fiscal 2000, 1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
----------------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Maximum borrowings $61,900 $70,900 $72,560
Average monthly borrowings $40,290 $41,229 $41,564
Weighted average interest rate 6.3% 6.9% 6.4%
</TABLE>
Weighted average interest rates were computed based on average month-end
outstanding borrowings and applicable average month-end interest rates.
NOTE 4 - LONG-TERM DEBT
The components of long-term debt as of January 31 were as follows (in
thousands):
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Senior Notes $25,000 $35,000
Series A Senior Notes 25,000 25,000
Revolving Credit Line -- 5,000
------- -------
$50,000 $65,000
Less current portion 5,000 10,000
------- -------
Long-term debt $45,000 $55,000
======= =======
</TABLE>
Senior Notes due January 31, 2005 (the "Senior Notes") were issued in a private
placement completed in fiscal 1994 and bear interest at 6.56% per annum, payable
semiannually on July 31 and January 31, and are subject to annual payments of
$5.0 million commencing January 31, 1998 (or next business day). Accordingly,
such amounts have been classified as a current liability in fiscal 2000 and
1999. The Company has the option to prepay amounts due to holders of the Senior
Notes at 100% of the principal plus a "make-whole" premium and accrued interest.
The Series A Senior Notes ("Series A Senior Notes") were issued on December 1,
1998 under a Note Purchase and Private Shelf Agreement and bear interest at
6.90% per annum. Interest is payable semiannually on April 30 and October 30.
These notes mature on October 30, 2010 and are subject to annual payments of
$5.0 million commencing on October 31, 2006. The Note Purchase and Private Shelf
Agreement also provides for the
F-10
<PAGE> 43
issuance, up to two years after the date thereof, of senior promissory notes in
the aggregate principal amount of up to an additional $25 million with
maturities up to 12 years from their original date of issuance.
The agreements governing the Senior Notes and Series A Senior Notes contain
certain restrictions and covenants which generally require the maintenance of a
minimum net worth, limit the amount of additional secured debt the Company can
incur and limit the sale, transfer or distribution of corporate assets including
dividends. The Company was in compliance with these restrictions and covenants
at January 31, 2000.
Included in long-term debt at January 31, 1999 was $5.0 million related to the
Company's revolving credit agreement as described in Note 3.
NOTE 5 - FOREIGN CURRENCY MANAGEMENT
A substantial portion of the Company's watches and watch components are sourced
from affiliated and nonaffiliated suppliers in Switzerland. A significant
strengthening of the Swiss franc against currencies of other countries in which
the Company conducts sales activities increases the Company's product cost. This
may adversely impact gross margins to the extent the Company is unsuccessful in
hedging against changes in the currency exchange rates or higher product costs
cannot be recovered through price increases in local markets. Significant
fluctuations in the Swiss franc - U.S. dollar exchange rate can also have a
material impact on the U.S. dollar value of the net assets of the Company's
wholly-owned Swiss subsidiaries.
The Company hedges against foreign currency exposure using only forward exchange
contracts, purchased foreign currency options and open market purchases to cover
identifiable inventory purchase commitments and, occasionally, equity invested
in its international subsidiaries.
The Company has established strict counterparty credit guidelines and only
enters into foreign currency transactions with financial institutions of
investment grade or better. To minimize the concentration of credit risk, the
Company enters into hedging transactions with each of these financial
institutions. As a result, the Company considers the risk of counterparty
default to be minimal.
The following table presents the aggregate contract amounts and fair values,
based on dealer quoted prices, of the Company's financial instruments
outstanding at January 31, 2000 and 1999. Foreign currency forward contracts
included below mature within one year. Currency option contracts at January 31,
2000 generally mature after one year. All financial instruments included below
were held for hedging purposes only. Contract amounts (in thousands) consist
primarily of U.S. dollar - Swiss franc contracts.
<TABLE>
<CAPTION>
AS OF JANUARY 31,
------------------------------------------------------------------
2000 1999
--------------------------- --------------------------
CONTRACT FAIR CONTRACT FAIR
AMOUNTS VALUES AMOUNTS VALUES
------- ------ ------- ------
<S> <C> <C> <C> <C>
Foreign Currency Forward Contracts $47,287 $42,732 $11,399 $11,511
Purchased Options $94,105 $1,638 $38,625 $2,829
</TABLE>
F-11
<PAGE> 44
The contract amounts of these foreign currency forward contracts and purchased
options do not necessarily represent amounts exchanged by the parties and,
therefore, are not a direct measure of the exposure of the Company through its
use of these financial instruments. The amounts exchanged are calculated on the
basis of the contract amounts and the other terms of the financial instruments,
which relate to exchange rates. As of January 31, 2000 and 1999, the (payable
from) receivable to banks recorded in current assets associated with closed
contract positions was ($1,795,000) and $1,547,000, respectively.
The estimated fair values of these foreign currency forward amounts and
purchased options used to hedge the Company's risks will fluctuate over time.
These fair value amounts should not be viewed in isolation, but rather in
relation to the fair values of the underlying hedged transactions and
investments and the Company's overall exposure to fluctuations in foreign
exchange rates.
Gains and losses from and premiums paid for forward or option transactions that
hedge inventory purchase commitments are included in the carrying cost of
inventory and are recognized in cost of sales upon sale of the inventory. Net
deferred charges from hedging amounted to $2.7 million and $3.1 million at
January 31, 2000 and 1999, respectively. These amounts were included in other
current assets on the accompanying balance sheets.
NOTE 6 - FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
The fair value of the Company's 6.56% Senior Notes and 6.9% Series A Senior
Notes approximate 96% and 90% of the carrying value of the notes, respectively,
as of January 31, 2000. The fair value was calculated based upon the present
value of future cash flows discounted at estimated borrowing rates for similar
debt instruments or upon estimated prices based on current yields for debt
issues of similar quality and terms.
F-12
<PAGE> 45
NOTE 7 - INCOME TAXES
The provision for income taxes for the fiscal years ended January 31, 2000, 1999
and 1998 consists of the following components (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Current:
U.S. Federal -- $ 1,500 $ 725
U.S. State and Local 11 444 192
Non-U.S 1,043 1,888 1,542
------- ------- -------
1,054 3,832 2,459
------- ------- -------
Noncurrent:
U.S. Federal -- -- --
U.S. State and Local -- -- --
Non-U.S 1,785 1,924 1,680
------- ------- -------
1,785 1,924 1,680
------- ------- -------
Deferred:
U.S. Federal (1,518) (750) --
U.S. State and Local -- -- --
Non-U.S 107 1,259 592
------- ------- -------
(1,411) 509 592
------- ------- -------
Provision for income taxes $ 1,428 $ 6,265 $ 4,731
======= ======= =======
</TABLE>
Deferred income taxes reflect the tax effect of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes. Deferred income taxes have been
classified as current or noncurrent on the consolidated balance sheets based on
the underlying temporary differences and the expected due dates of taxes payable
upon reversal. Significant components of the Company's deferred income tax
assets and liabilities for the fiscal year ended January 31, 2000 and 1999
consist of the following (in thousands):
<TABLE>
<CAPTION>
2000 DEFERRED TAX 1999 DEFERRED TAX
--------------------------- ---------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Operating loss carryforwards $ 2,706 $ -- $ 2,400 $ --
Rent accrual 291 -- 417 --
Inventory reserve 894 5,340 1,038 6,218
Receivable allowance 1,054 1,278 816 1,370
Depreciation/amortization 1,089 -- 1,191 --
Other 1,355 -- 948 22
------- ------- ------- -------
7,389 6,618 6,810 7,610
Valuation allowance (1,439) -- (2,660) --
------- ------- ------- -------
Total $ 5,950 $ 6,618 $ 4,150 $ 7,610
======= ======= ======= =======
</TABLE>
F-13
<PAGE> 46
As of January 31, 2000, the Company had domestic and foreign net operating loss
carryforwards of approximately $3.5 million and $3.9 million, respectively,
which are available to offset taxable income in future years. The domestic
losses begin to expire in fiscal 2020. As of January 31, 2000, the Company
maintained a valuation allowance with respect to the tax benefit of foreign net
operating loss carryforwards and other tax assets. Since the Company's foreign
deferred tax assets relate primarily to its former sales office in Germany,
which is currently operated by an independent distributor, the Company's
assessment is that a portion of the foreign deferred tax assets will not likely
be utilized in the foreseeable future. Management is continuing to evaluate the
appropriate level of allowance based on future operating results and changes in
circumstances.
The provision for income taxes differs from the amount determined by applying
the U.S. federal statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
--------------------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Provision for income taxes at the U.S. statutory rate $ 5,311 $ 9,533 $ 7,200
Realization of capital and operating loss carryforwards -- -- (88)
Lower effective foreign income tax rate (3,362) (3,685) (2,582)
Change in valuation allowance (1,221) -- --
Tax provided on repatriated earnings of foreign
subsidiaries 238 252 262
State and local taxes, net of federal benefit 8 134 127
Other 454 31 (188)
------- ------- -------
$ 1,428 $ 6,265 $ 4,731
======= ======= =======
</TABLE>
In fiscal 2000 the Company recognized a tax benefit of $1,221 from realization
of certain foreign net operating loss carryforwards.
No provision has been made for taxes on foreign subsidiaries' undistributed
earnings of approximately $121 million at January 31, 2000, as those earnings
are considered to be reinvested for an indefinite period.
NOTE 8 - OTHER ASSETS
In fiscal 1996, the Company entered into an agreement with a trust which owns an
insurance policy issued on the lives of the Company's Chairman and Chief
Executive Officer and his spouse. Under that agreement, the trust has assigned
the insurance policy to the Company as collateral to secure repayment by the
trust of interest-free loans to be made by the Company in amounts sufficient for
the trust to pay the premiums on said insurance policy (approximately $740,000
per annum). Under the agreement, the trust will repay the loans from the
proceeds of the policy. The Company had loaned approximately $3.1 million and
$2.4 million under this agreement at January 31, 2000 and 1999, respectively.
F-14
<PAGE> 47
NOTE 9 - LEASES, COMMITMENTS AND CONTINGENCIES
Rent expense for equipment and distribution, factory and office facilities under
operating leases was approximately $6.6 million, $5.5 million and $4.7 million
in fiscal 2000, 1999 and 1998, respectively. Minimum annual rentals at January
31, 2000 under noncancelable operating leases which do not include escalations
that will be based on increases in real estate taxes and operating costs are as
follows:
YEAR ENDING JANUARY 31,
(IN THOUSANDS):
<TABLE>
<S> <C>
2001 $6,264
2002 5,632
2003 3,383
2004 2,485
2005 2,351
2006 and thereafter 4,172
-------
$24,287
=======
</TABLE>
Due to the nature of its business as a luxury consumer goods distributor, the
Company is exposed to various commercial losses. The Company believes it is
adequately insured against such losses.
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Company maintains an Employee Savings Plan under Section 401(k) of the
Internal Revenue Code. Company contributions and expenses of administering the
Employee Savings Plan amounted to $556,000, $430,000 and $143,000 in fiscal
2000, 1999 and 1998, respectively.
Effective June 1, 1995, the Company adopted a defined contribution supplemental
executive retirement plan ("SERP"). The SERP provides eligible executives with
supplemental pension benefits in addition to amounts received under the
Company's other retirement plan. The Company makes a matching contribution which
vests equally over five years. During fiscal 2000, 1999 and 1998, the Company
recorded an expense related to the SERP of approximately $640,000, $338,000 and
$190,000, respectively.
During fiscal 1999, the Company adopted a Stock Bonus Plan for all employees not
in the SERP. Under the terms of this stock bonus plan, the Company contributes a
discretionary amount to the trust established under the plan. Each plan
participant vests after five years in 100% of their respective pro-rata portion
of such contribution. For fiscal 2000 and 1999 the Company recorded an expense
of $159,000 and $209,000, respectively, related to this plan.
On September 23, 1994, the Company entered into a Death and Disability Benefit
Plan agreement with the Company's Chairman and Chief Executive Officer. Under
the terms of the agreement, in the event of the Chairman's death or disability,
the Company is required to make an annual benefit payment of approximately
$300,000 to his spouse for the lesser of ten years or her remaining lifetime.
Neither the agreement nor the benefits payable thereunder are assignable and no
benefits are payable to the estates or heirs of the Chairman or his spouse.
Results of operations include an actuarially determined charge related to this
plan of approximately $110,000, $101,000 and $92,000 for fiscal 2000, 1999 and
1998, respectively.
F-15
<PAGE> 48
Effective concurrently with the consummation of the Company's public offering in
the fourth quarter of fiscal 1994, the Board of Directors and the shareholders
of the Company approved the adoption of the Movado Group, Inc. 1993 Employee
Stock Option Plan (the "Employee Stock Option Plan") for the benefit of certain
officers, directors and key employees of the Company. The Employee Stock Option
Plan was amended in fiscal 1997 and restated as the Movado Group, Inc. 1996
Stock Incentive Plan (the "Plan"). Under the Plan, the Compensation Committee of
the Board of Directors, which is comprised of the Company's four outside
directors, has the authority to grant incentive stock options and nonqualified
stock options, to purchase, as well as stock appreciation rights and stock
awards, up to 2,000,000 shares of Common Stock. Options granted to participants
under the Plan become exercisable in equal installments on the first through
fifth anniversaries of the date of grant and remain exercisable until the tenth
anniversary of the date of grant. The option price may not be less than the fair
market value of the stock at the time the options are granted.
Transactions in stock options under the Plan since fiscal 1997 are summarized as
follows:
<TABLE>
<CAPTION>
WEIGHTED
OUTSTANDING AVERAGE
OPTIONS EXERCISE PRICE
------- --------------
<S> <C> <C>
January 31, 1997 955,875 $ 9.02
Options granted 227,964 13.49
Options exercised (51,250) 8.43
Options forfeited (6,189) 9.69
---------
January 31, 1998 1,126,400 9.91
Options granted 282,749 25.53
Options exercised (63,250) 9.02
Options forfeited (62,289) 13.39
---------
January 31, 1999 1,283,610 13.23
Options granted 436,550 21.56
Options exercised (54,266) 9.21
Options forfeited (109,477) 16.51
---------
January 31, 2000 1,556,417 $15.65
---------
</TABLE>
Options exercisable at January 31, 2000, 1999 and 1998 were 701,814, 538,216 and
373,684, respectively.
The weighted-average fair value of each option grant estimated on the date of
grant using the Black-Scholes option-pricing model is $11.18, $13.34 and $6.53
per share in fiscal 2000, 1999 and 1998, respectively. The following
weighted-average assumptions were used for grants in 2000, 1999 and 1998:
dividend yield of 0.45% for fiscal 2000, 0.3% for fiscal 1999 and 0.4% for
fiscal 1998; expected volatility of 40% for fiscal 2000, 45% for fiscal 1999 and
38% for fiscal 1998, risk-free interest rates of 6.75% for fiscal 2000, 4.7% for
fiscal 1999 and 5.6% for fiscal 1998, and expected lives of seven years for
fiscal 2000, 1999 and 1998.
F-16
<PAGE> 49
The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the Plan.
Had compensation cost for the Company's fiscal 2000, 1999 and 1998 grants for
stock-based compensation plans been determined based on the fair value at the
grant dates and recognized ratably over the vesting period, the Company's net
income and net income per share for fiscal 2000, 1999 and 1998 would approximate
the pro forma amounts below (in thousands except per share data):
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 13,721 $ 12,216 $ 20,973 $ 19,856 $ 15,842 $ 15,306
Net Income per share-Basic $ 1.10 $ 0.98 $ 1.63 $ 1.55 $ 1.35 $ 1.30
Net Income per share-Diluted $ 1.06 $ 0.95 $ 1.58 $ 1.50 $ 1.29 $ 1.25
</TABLE>
The pro forma impact takes into account options granted since February 1, 1995
and is likely to increase in future years as additional options are granted and
amortized ratably over the vesting period.
The following table summarizes outstanding and exercisable stock options as of
January 31, 2000:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED WEIGHTED-
REMAINING -AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5.00 - $ 9.99 641,734 5.2 $8.48 524,730 $8.17
$10.00 - $14.99 215,133 7.0 $13.16 106,374 $13.16
$15.00 - $19.99 34,000 8.4 $16.08 8,300 $16.12
$20.00 - $24.99 471,000 9.4 $22.49 14,300 $23.08
$25.00 - $29.75 194,550 8.0 $27.35 48,110 $27.26
- -------------------------------------------------------------------------------------------------------------------------
$ 5.00 - $29.75 1,556,417 7.1 $15.65 701,814 $10.63
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 11 - SEGMENT INFORMATION
In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which requires reporting certain
financial information according to the "management approach." This approach
requires reporting information regarding operating segments on the basis used
internally by management to evaluated segment performance. SFAS 131 also
requires disclosures about products and services, geographic areas and major
customers.
The Company divides its business into two major geographic segments: "Domestic",
which includes the result of the Company's United States and Canadian
operations, and "International", which includes the results of all other Company
operations. The Company's international operations are principally conducted in
Europe. The Company's international assets are substantially located in Europe.
Other international operations constituted less than 10% of consolidated total
assets for all periods presented.
F-17
<PAGE> 50
The Company conducts its business primarily in two operating segments:
"Wholesale" and "Other". The Company's wholesale segment includes the designing,
manufacturing and distribution of quality watches. Other includes the Company's
retail and service center operations. The accounting policies of the segments
are the same as those described in "Significant Accounting Policies". The
Company evaluates segment performance based on operating profit.
OPERATING SEGMENT DATA AS OF AND FOR THE FISCAL YEAR ENDED JANUARY 31 (IN
THOUSANDS):
<TABLE>
<CAPTION>
NET SALES OPERATING PROFIT (LOSS)
-------------------------------------- --------------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Wholesale $256,081 $245,783 $210,908 $14,187 $ 34,631 $ 24,277
Other 38,986 32,053 26,097 127 (1,597) 1,963
Elimination (1) -- -- -- 1,455 (359) (284)
-------- -------- -------- ------- -------- --------
Consolidated total $295,067 $277,836 $237,005 $15,769 $ 32,675 $ 25,956
======== ======== ======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
TOTAL ASSETS
---------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Wholesale $214,769 $261,395 $221,634
Other 25,802 29,354 16,561
Corporate (2) 26,615 5,626 10,874
-------- -------- --------
Consolidated total $267,186 $296,375 $249,069
======== ======== ========
</TABLE>
GEOGRAPHIC SEGMENT DATA AS OF AND FOR THE FISCAL YEAR ENDED JANUARY 31 (IN
THOUSANDS):
<TABLE>
<CAPTION>
NET SALES LONG-LIVED ASSETS
------------------------------------------- -----------------------------------
2000 1999 1998 2000 1999 1998
--------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Domestic $ 267,160 $ 245,865 $ 196,064 $16,534 $17,222 $13,324
International 209,217 199,060 152,997 11,059 5,776 5,585
Elimination (3) (181,310) (167,089) (112,056) -- -- --
--------- --------- --------- ------- ------- -------
Consolidated total $ 295,067 $ 277,836 $ 237,005 $27,593 $22,998 $18,909
========= ========= ========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
INCOME (LOSS) BEFORE TAXES
----------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Domestic $ (8,987) $ 2,096 $ 1,796
International 23,780 25,501 19,061
Elimination (3) 356 (359) (284)
-------- -------- --------
Consolidated total $ 15,149 $ 27,238 $ 20,573
======== ======== ========
</TABLE>
(1) Elimination of inter-segment management fees.
(2) Corporate assets include cash.
(3) Elimination of intercompany sales between domestic and international
units.
F-18
<PAGE> 51
NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents unaudited selected interim operating results of the
Company for fiscal 2000 and 1999 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
APRIL JULY OCTOBER JANUARY
30 31 31 31
------- ------- ------- --------
<S> <C> <C> <C> <C>
FISCAL 2000
Net sales $47,653 $69,538 $99,032 $ 78,844
Gross profit $29,035 $41,221 $61,641 $ 36,503
Net income (loss) $ 4,312 $ 4,422 $13,767 ($ 8,780)
PER SHARE:
Net income (loss):
Basic $ 0.34 $ 0.35 $ 1.10 ($ 0.70)
Diluted $ 0.33 $ 0.34 $ 1.07 ($ 0.68)
FISCAL 1999
Net sales $41,650 $68,934 $97,455 $ 69,797
Gross profit $24,714 $39,565 $57,488 $ 44,303
Net income $ 148 $ 3,386 $12,007 $ 5,432
PER SHARE:
Net income:
Basic $ 0.01 $ 0.26 $ 0.94 $ 0.42
Diluted $ 0.01 $ 0.25 $ 0.91 $ 0.41
</TABLE>
As each quarter is calculated as a discrete period, the sum of the four quarters
may not equal the calculated full year amount. This is in accordance with
prescribed reporting requirements.
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
The following is provided as supplemental information to the consolidated
statements of cash flows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
--------------------------------
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $7,559 $5,274 $4,580
Income taxes $7,079 $4,585 $ 565
</TABLE>
F-19
<PAGE> 52
SCHEDULE II
MOVADO GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION
BEGINNING CHARGED TO CURRENCY NET BALANCE AT END
DESCRIPTION OF YEAR OPERATIONS REVALUATION WRITE-OFFS OF YEAR
----------- ------- ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended January 31, 2000:
Allowance for doubtful accounts $2,567 $2,553 ($21) ($1,495) $3,604
Year ended January 31, 1999:
Allowance for doubtful accounts $2,187 $1,304 $ 7 ($ 931) $2,567
Year ended January 31, 1998:
Allowance for doubtful accounts $3,876 $1,005 ($38) ($2,656) $2,187
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT PROVISION
BEGINNING CHARGED TO CURRENCY BALANCE AT END
OF YEAR OPERATIONS REVALUATION ADJUST. OF YEAR
------ ------- ----- ------- ------
<S> <C> <C> <C> <C> <C>
Year ended January 31, 2000:
Inventory reserve $3,308 $5,113 ($436) ($ 950) $7,035
Year ended January 31, 1999:
Inventory reserve $2,853 $ 400 $ 55 $3,308
Year ended January 31, 1998:
Inventory reserve $2,755 $ 500 ($ 56) ($ 346) $2,853
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT PROVISION
BEGINNING OF (BENEFIT) BALANCE AT
YEAR CHARGED ADJUSTMENTS END OF YEAR
---- ------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended January 31, 2000:
Deferred tax assets valuation allowance $2,660 ($1,221) $0 $1,439
Year ended January 31, 1999:
Deferred tax assets valuation allowance $2,370 $ 290 $0 $2,660
Year ended January 31, 1998:
Deferred tax assets valuation allowance $2,580 ($ 210) $0 $2,370
</TABLE>
S-1
<PAGE> 1
Exhibit 10.25
FEBRUARY 1999 AMENDMENT AND WAIVER AS
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT, dated as of the 19th day of February, 1999
among MOVADO GROUP, INC., a New York corporation (the "Borrower"); each of the
Lenders which is a signatory to the Credit Agreement referred to below; THE
CHASE MANHATTAN BANK, as Agent, as Swingline Bank and as Issuing Bank; and FLEET
BANK, N.A., as Co-Agent.
Preliminary Statement
A. Reference is made to the Amended and Restated Credit
Agreement dated as of July 23, 1997 (the "Original Credit Agreement") among the
Borrower, the Lenders signatory thereto, The Chase Manhattan Bank, as Agent, as
Swingline Bank and as Issuing Bank, and Fleet Bank, N.A., as Co-Agent. The
Original Credit Agreement was amended by an Amendment dated as of August 5, 1997
and by a June 1998 Amendment dated as of June 10, 1998 and by an Amendment and
Waiver dated as of November 17, 1998. The Original Credit Agreement, as so
amended, will be called herein the "Credit Agreement". All capitalized terms
used herein and not defined shall have the respective meanings ascribed to them
in the Credit Agreement.
B. The Borrower has requested that certain provisions of the
Credit Agreement be amended or waived.
NOW, THEREFORE, for good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
ARTICLE 1. PARTICULAR AMENDMENTS
Section 1.1. Capital Expenditures. Section 9.05 of the Credit
Agreement is hereby amended to read as follows:
"The Borrower shall not permit Consolidated Capital
Expenditures to exceed $10,000,000 during any fiscal year (on
a noncumulative basis), except that with respect to the fiscal
year ending January 31, 1999 Consolidated Capital Expenditures
shall not exceed $12,500,000; nor shall the Borrower permit
Consolidated Capital Expenditures to exceed $30,000,000 during
the period from the Closing Date until the Maturity Date."
Section 1.2. Reporting as to Special Transaction. (a) With
respect to the Special Transaction only, the Banks hereby waive the requirement
(contained in clause (c) of the definition of "Designated Sales" in Section 1.01
of the Credit Agreement) that the Borrower provide the financial statements and
certificate described in such clause (c) to the Agent at least 20 days before
the effective date of the sale comprising the Special Transaction.
(b) The Borrower covenants and agrees to provide to
the Agent, within 20 days after the effective date of the sale comprising the
Special Transaction, the financial statements and certificate described in the
aforesaid clause (c).
(c) The Borrower represents and warrants to the Bank
that the Borrower, as of the date hereof, reasonably and in good faith believes
that the sale comprising the Special Transaction will not result in a Default
immediately after the consummation of such sale.
<PAGE> 2
Section 1.3. Prepayment Threshold for Special Transaction.
Clause (a) of the definition of "Designated Sales" in Section 1.01 of the Credit
Agreement is hereby amended by changing the amount of "$30,000,000" to
"$31,500,000" (in each of the two places in which such amount appears in such
clause).
ARTICLE 2. MATTERS GENERALLY
Section 2.1. Representations and Warranties. The Borrower
hereby represents and warrants that:
(a) All the representations and warranties set forth
in the Credit Agreement are true and complete on and as of the
date hereof (with the same effect as though made on and as of
such date).
(b) No Default or Event of Default exists.
(c) The Borrower has no offset or defense with
respect to any of its obligations under the Credit Agreement
or any of the Notes or any other Facility Document, and no
claim or counterclaim against any Lender, the Swingline Bank,
the Issuing Bank, the Agent or the Co-Agent whatsoever (any
such offset, defense, claim or counterclaim as may now exist
being hereby irrevocably waived by the Borrower).
(d) This Amendment and Waiver has been duly
authorized, executed and delivered by the Borrower.
Section 2.2. Guarantor Consent. The Guarantors shall execute
this Amendment and Waiver in the space provided below to indicate their consent
to the terms of this Amendment and Waiver.
Section 2.3. Expenses. The Borrower shall pay all reasonable
expenses incurred by the Agent in connection with this Amendment and Waiver,
including (without limitation) the fees and disbursements of counsel for the
Agent.
Section 2.4. Continuing Effect. Except as otherwise expressly
provided in this Amendment and Waiver, all the terms and conditions of the
Credit Agreement shall continue in full force and effect. All the Facility
Documents also shall continue in full force and effect.
Section 2.5. Entire Agreement. This Amendment and Waiver
constitutes the entire agreement of the parties hereto with respect to an
amendment or waiver of the Credit Agreement pertaining to the subject matter
hereof, and it supersedes and replaces all prior and contemporaneous agreements,
discussions and understandings (whether written or oral) with respect to such
amendment and waiver.
Section 2.6. Counterparts. This Amendment and Waiver may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
Section 2.7. Effectiveness. This Amendment and Waiver shall
not become effective unless and until it shall have been executed and delivered
by all the parties hereto (which execution and delivery may be evidenced by
telecopies).
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment and Waiver as of the day and year first above written.
2
<PAGE> 3
MOVADO GROUP, INC.
By: /s/John Rooney
John Rooney
Corporate Controller
THE CHASE MANHATTAN BANK, as Agent,
as Lender, as Swingline Bank and as
Issuing Bank
By: /s/Leonard Noll
Name (Print):Leonard Noll
Title:VP
FLEET BANK, N.A., as Co-Agent and as
Lender
By: /s/Christian J. Covello
Name (Print):Christian J. Covello
Title:Vice President
MARINE MIDLAND BANK
By: /s/Diane M. Zieske
Name (Print):Diane M. Zieske
Title:Assistant Vice President
3
<PAGE> 4
THE BANK OF NEW YORK
By: /s/Linda Mae Coppa
Name (Print):Linda Mae Coppa
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/Karl M. Studer
Name (Print): Karl M. Studer
Title: Director
By: /s/Jamian Hodel
Name (Print): Jamian Hodel
Title: Associate
CONSENTED TO:
SWISSAM INC., as Guarantor
By: /s/Timothy F. Michno
Name (Print):Timothy F. Michno
Title:Secretary
NAW CORPORATION, as Guarantor
By: /s/Timothy F. Michno
Name (Print):Timothy F. Michno
Title:Secretary
NAWC CORUM CORPORATION, as Guarantor
By: /s/ Timothy F. Michno
Name (Print):Timothy F. Michno
Title:Secretary
MOVADO CORPORATION., as Guarantor
By: /s/Timothy F. Michno
Name (Print):Timothy F. Michno
Title:Secretary
4
<PAGE> 1
Exhibit 10.26
JUNE 1998 AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT, dated as of this 10th day of June, 1998 among
MOVADO GROUP, INC., a New York corporation (the "Borrower"); each of the Lenders
which is a signatory to the Credit Agreement referred to below; THE CHASE
MANHATTAN BANK, as Agent, as Swingline Bank and as Issuing Bank; and FLEET BANK,
N.A., as Co-Agent.
Preliminary Statement
A. Reference is made to the Amended and Restated Credit
Agreement dated as of July 23, 1997 (the "Original Credit Agreement") among the
Borrower, the Lenders signatory thereto, The Chase Manhattan Bank, as Agent, as
Swingline Bank and as Issuing Bank, and Fleet Bank, N.A., as Co-Agent. The
Original Agreement was amended by an Amendment dated as of August 5, 1997 (the
"August 1997 Amendment"). The Original Credit Agreement, as amended by the
August 1997 Amendment, will be called herein the "Credit Agreement". All
capitalized terms used herein and not defined shall have the respective meanings
ascribed to them in the Credit Agreement.
B. As more particularly stated therein, the Credit Agreement
provides for the extension by the Lenders to the Borrower of a revolving credit
facility in the maximum principal amount of $90,000,000. Such credit facility
includes a multicurrency component, by which the Borrower may obtain credit of
up to the equivalent of $30,000,000 in Swiss francs.
C. The Borrower has requested that it be permitted to obtain
credit under such revolving credit facility in Japanese Yen, up to a equivalent
of $5,000,000, on substantially the same terms that are provided in the Credit
Agreement for extensions of credit in Swiss francs (and, in all events, without
any increase in the Total Revolving Credit Commitment).
NOW, THEREFORE, for ten dollars and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto agree as follows:
ARTICLE 1. PARTICULAR AMENDMENTS
Section 1.1. Definition. Section 1.01 of the Credit Agreement
is hereby amended by adding the following definition:
"'Japanese Yen' means lawful money of Japan."
Section 1.2. Credit in Japanese Yen. (a) In the first sentence
of Section 2.01 of the Credit Agreement, the phrase "in dollars or Swiss francs"
is hereby changed to read "in dollars or Swiss francs or Japanese Yen".
(b) Also in that same sentence of Section 2.01,
clause "(iii)" is hereby changed to be clause "(iv)", and the following is
hereby added as new clause (iii):
"(iii) the Dollar Equivalent of such Lender's
outstanding Japanese Yen Loans being in excess of such
Lender's Pro-Rata Percentage of $5,000,000, or".
(c) Section 2.02(c) of the Credit Agreement is hereby
changed to read as follows:
<PAGE> 2
"(c) Except with respect to Syndicated Loans that are
L/C Reimbursement Loans, each Lender shall make each
Syndicated Loan to be made by it hereunder on the proposed
date thereof by wire transfer of immediately available funds
to such account as the Agent may designate not later than
12:00 (noon), New York City time, in the case of fundings in
dollars to an account in New York City, or 11:00 a.m., local
time, in the case of fundings in Swiss francs to an account in
London or Switzerland, or 11:00 a.m., Tokyo time, in the case
of fundings in Japanese Yen to an account in Tokyo, and the
Agent shall promptly credit the amounts so received to an
account in the name of the Borrower maintained with the Agent
in New York City or London or Tokyo (as the case may be) or to
another account designated by the Borrower in writing and
approved by the Agent, or, if a Borrowing shall not occur on
such date because any condition precedent herein specified
shall not have been met, return the amounts so received to the
respective Lenders."
(d) In the second sentence of Section 2.03 of the
Credit Agreement, clause (f) is hereby changed to read as follows:
"(f) whether such Borrowing is to be a Borrowing denominated
in dollars or a Swiss Franc Borrowing or a Japanese Yen
Borrowing;".
(e) The second sentence of Section 2.14(a) of the
Credit Agreement is hereby changed to read as follows:
"Each such payment (other than Issuing Bank Fees, which shall
be paid directly to the Issuing Bank) shall be made to the
Agent at its offices at 270 Park Avenue, New York, New York
(or in the case of Swiss Franc Loans, at its offices at
Trinity Tower, 9 Thomas More Street, London England, E19YT; or
in the case of Japanese Yen Loans, at its offices at Akasaka
Park Building, 12th Floor, 5-2-20 Akasaka Minato-ku, Tokyo
107, Japan) or to such other address as the Agent may
designate to the Borrower in writing."
(f) In the first sentence of Section 3.01 of the
Credit Agreement, the phrase "in dollars or Swiss francs" is hereby changed to
read "in dollars or Swiss francs or Japanese Yen".
(g) The last sentence of Section 2.02(a) of the
Credit Agreement is hereby amended to read as follows:
"Except for Syndicated Loans that are L/C Reimbursement Loans
and Syndicated Loans that are made pursuant to Section 2.05(a)
in order to refinance Swingline Loans, the Syndicated Loans
comprising any Borrowing shall be in an aggregate principal
amount that is an integral multiple of $500,000 (in the case
of each Borrowing of dollars or of Swiss francs) or $100,000
(in the case of each Borrowing of Japanese Yen), and not less
than $1,000,000 (in the case of each ABR Borrowing) or
$2,500,000 (in the case of each LIBOR Borrowing of dollars) or
the Swiss Franc Equivalent of $1,250,000 (in the case of each
Swiss Franc Borrowing) or the Japanese Yen Equivalent of
$250,000 (in the case of each Japanese Yen Borrowing)."
(h) In the definition of "L/C Exposure" in Section
1.01, the phrase "plus the Dollar Equivalent at such time of the aggregate
undrawn amount of all outstanding Letters of Credit that are denominated in
Japanese Yen" is hereby added at the end of clause (a); and the phrase "plus the
Dollar Equivalent at such time of the aggregate principal amount of all L/C
2
<PAGE> 3
Disbursements denominated in Japanese Yen that have not yet been reimbursed at
such time" is hereby added at the end of clause (b).
(i) In the definition of "Syndicated Loan Exposure"
in Section 1.01, the phrase "plus the Dollar Equivalent at such time of the
aggregate principal amount of all outstanding Syndicated Loans of such Lender
that are Japanese Yen Loans" is hereby added at the end thereof.
(j) In the definition of "Type" in Section 1.01, the
phrase "and Japanese Yen" is hereby added at the end thereof.
Section 1.3. Conforming Changes. With respect to each
Borrowing that is requested in Japanese Yen and with respect to each Letter of
Credit issued in Japanese Yen, the phrase "Swiss Franc" and the phrase "Swiss
francs" shall be deemed to mean "Japanese Yen" in each and every instance in the
Credit Agreement where such phrase is used (except for the instances specified
in Section 1.2 of this Amendment). Without limiting the generality of the
immediately preceding sentence, with respect to each such Borrowing and each
such Letter of Credit, the phrase "Swiss Franc Borrowing" shall mean "Japanese
Yen Borrowing"; the phrase "Swiss Franc Loans" shall mean "Japanese Yen Loans";
the phrase "Swiss francs" shall mean "Japanese Yen"; and the phrase "Swiss Franc
Equivalent" shall mean "Japanese Yen Equivalent".
Section 1.4. Authorization Letter. The authorization letter as
to oral instructions that was executed and delivered by the Borrower to the
Agent on the Closing Date (in the form of Exhibit B to the Credit Agreement) is
hereby amended by adding to the list of names set forth therein the name of Mr.
Hideaki Moriya.
ARTICLE 2. MATTERS GENERALLY
Section 2.1. Representations and Warranties. The Borrower
hereby represents and warrants that:
(a) All the representations and warranties set forth
in the Credit Agreement are true and complete on and as of the
date hereof (with the same effect as though made on and as of
such date).
(b) No Default or Event of Default exists.
(c) The Borrower has no offset or defense with
respect to any of its obligations under the Credit Agreement
or any of the Notes or any other Facility Document, and no
claim or counterclaim against any Lender, the Swingline Bank,
the Issuing Bank, the Agent or the Co-Agent whatsoever (any
such offset, defense, claim or counterclaim as may now exist
being hereby irrevocably waived by the Borrower).
(d) This Amendment has been duly authorized, executed
and delivered by the Borrower.
Section 2.2. Guarantor Consent. SwissAm shall execute this
Amendment in the space provided below to indicate its consent to the terms of
this Amendment.
Section 2.3. Expenses. The Borrower shall pay all reasonable
expenses incurred by the Agent in connection with this Amendment, including
(without limitation) the fees and disbursements of counsel for the Agent.
3
<PAGE> 4
Section 2.4. Continuing Effect. Except as otherwise expressly
provided in this Amendment, all the terms and conditions of the Credit Agreement
shall continue in full force and effect. All the Facility Documents also shall
continue in full force and effect.
Section 2.5. Entire Agreement. This Amendment constitutes the
entire agreement of the parties hereto with respect to an amendment of the
Credit Agreement pertaining to the subject matter hereof, and it supersedes and
replaces all prior and contemporaneous agreements, discussions and
understandings (whether written or oral) with respect to such amendment.
Section 2.6. Counterparts. This Amendment may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreement.
Section 2.7. Effectiveness. This Amendment shall not become
effective unless and until it shall have been executed and delivered by all the
parties hereto (which execution and delivery may be evidenced by telecopies).
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
MOVADO GROUP, INC.
By:/s/John Rooney
Name (Print):John Rooney
Title:Corp Controller
THE CHASE MANHATTAN BANK, as Agent, as
Lender, as Swingline Bank and as
Issuing Bank
By:/s/Philip A. Mousin
Philip A. Mousin
Vice President
4
<PAGE> 5
FLEET BANK, N.A., as Co-Agent and
as Lender
By: /s/Robert Isaksen
Name (Print):Robert Isaksen
Title:Vice President
MARINE MIDLAND BANK
By: /s/Gary Sarro
Name (Print):Gary Sarro
Title:Vice President
THE BANK OF NEW YORK
By: /s/Frank S. Bridges
Name (Print):
Title:
CREDIT SUISSE FIRST BOSTON
By: /s/Karl Studer
Name (Print): Karl Studer
Title: Director
By: /s/Roger Huwiler
Name (Print): Roger Huwiler
Title: Associate
CONSENTED TO:
SWISSAM INC., as Guarantor
By: /s/David R. Phalen
Name (Print):
Title:
5
<PAGE> 1
Exhibit 10.27
NOVEMBER 1998 AMENDMENT AND WAIVER AS
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT AND WAIVER, dated as of the 17th day of
November, 1998 among MOVADO GROUP, INC., a New York corporation (the
"Borrower"); each of the Lenders which is a signatory to the Credit Agreement
referred to below; THE CHASE MANHATTAN BANK, as Agent, as Swingline Bank and as
Issuing Bank; and FLEET BANK, N.A., as Co-Agent.
Preliminary Statement
A. Reference is made to the Amended and Restated Credit
Agreement dated as of July 23, 1997 (the "Original Credit Agreement") among the
Borrower, the Lenders signatory thereto, The Chase Manhattan Bank, as Agent, as
Swingline Bank and as Issuing Bank, and Fleet Bank, N.A., as Co-Agent. The
Original Credit Agreement was amended by an Amendment dated as of August 5, 1997
and by a June 1998 Amendment dated June 10, 1998. The Original Credit Agreement,
as so amended, will be called herein the "Credit Agreement". All capitalized
terms used herein and not defined shall have the respective meanings ascribed to
them in the Credit Agreement.
B. The Borrower has requested that certain provisions of the
Credit Agreement be amended or waived, in connection with a new issuance by the
Borrower of its note(s) to The Prudential Insurance Company of America in the
aggregate principal amount of $25,000,000.
NOW, THEREFORE, for ten dollars and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto agree as follows:
ARTICLE 1. PARTICULAR AMENDMENT AND WAIVER
Section 1.1. Adjustment in Permitted Debt. Section 8.01 of the
Credit Agreement is hereby amended by changing clause (f) thereof to read as
follows:
"(f) other Debt of the Borrower or of any Subsidiary of the
Borrower, provided that in no event shall the amount thereof
outstanding at any time exceed the sum of:
(A) $25,000,000 as to the Borrower and its
domestic Subsidiaries in the aggregate; plus
(B) $15,000,000 as to the Borrower and its
domestic and non-domestic Subsidiaries in the
aggregate, provided that (in the case of the
Borrower and its domestic Subsidiaries) such Debt
shall be indebtedness for money borrowed, having a
maturity of not later than one year after the
incurrence thereof, and owing to one or more of the
Lenders independently of this Agreement; and (in the
case of non-domestic Subsidiaries of the Borrower)
the amount of such Debt outstanding at any time
shall not exceed $5,000,000 as to all such
non-domestic Subsidiaries in the aggregate;
and provided further that (as to all of the Borrower and its
domestic and non-domestic Subsidiaries in the aggregate):
(x) the amount of outstanding Debt permitted
by this clause (f) consisting of liability in respect
of letters of credit (excluding Letters of Credit
issued under this Agreement) shall not exceed
$3,000,000 at any time (whether such liability is for
outstanding letters of credit that have not yet
<PAGE> 2
been drawn upon, or outstanding reimbursement
obligations as to letters of credit that have been
drawn upon); and
(y) the amount of outstanding Debt permitted
by this clause (f) that is secured by a Lien
permitted by Section 8.03(h) shall not exceed
$8,000,000 at any time; and".
Section 1.2. Subsidiary Guaranties. The Lenders hereby waive
the prohibition contained in Section 8.02 of the Credit Agreement with respect
to the execution and delivery by SwissAm, and by any other Subsidiary of the
Borrower that hereafter becomes a Guarantor pursuant to Section 7.09 of the
Credit Agreement, of an unsecured guaranty of payment of the obligations of the
Borrower under the Prudential Notes and under the additional $25,000,000 in
financing being provided by The Prudential Insurance Company of America to the
Borrower contemporaneously with this Amendment and Waiver. Such waiver is
limited strictly as written, and it does not apply to any other or further
guaranty or transaction whether similar or dissimilar, or to any other provision
of the Credit Agreement.
ARTICLE 2. MATTERS GENERALLY
Section 2.1. Representations and Warranties. The Borrower
hereby represents and warrants that:
(a) All the representations and warranties set forth
in the Credit Agreement are true and complete on and as of the
date hereof (with the same effect as though made on and as of
such date).
(b) No Default or Event of Default exists.
(c) The Borrower has no offset or defense with
respect to any of its obligations under the Credit Agreement
or any of the Notes or any other Facility Document, and no
claim or counterclaim against any Lender, the Swingline Bank,
the Issuing Bank, the Agent or the Co-Agent whatsoever (any
such offset, defense, claim or counterclaim as may now exist
being hereby irrevocably waived by the Borrower).
(d) This Amendment and Waiver has been duly
authorized, executed and delivered by the Borrower.
Section 2.2. Guarantor Consent. SwissAm shall execute this
Amendment and Waiver in the space provided below to indicate its consent to the
terms of this Amendment and Waiver.
Section 2.3. Expenses. The Borrower shall pay all reasonable
expenses incurred by the Agent in connection with this Amendment and Waiver,
including (without limitation) the fees and disbursements of counsel for the
Agent.
Section 2.4. Continuing Effect. Except as otherwise expressly
provided in this Amendment and Waiver, all the terms and conditions of the
Credit Agreement shall continue in full force and effect. All the Facility
Documents also shall continue in full force and effect.
Section 2.5. Entire Agreement. This Amendment and Waiver
constitutes the entire agreement of the parties hereto with respect to an
amendment or waiver of the Credit Agreement pertaining to the subject matter
hereof, and it supersedes and replaces all prior and
2
<PAGE> 3
contemporaneous agreements, discussions and understandings (whether written or
oral) with respect to such amendment and waiver.
Section 2.6. Counterparts. This Amendment and Waiver may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
Section 2.7. Effectiveness. This Amendment and Waiver shall
not become effective unless and until it shall have been executed and delivered
by all the parties hereto (which execution and delivery may be evidenced by
telecopies).
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment and Waiver as of the day and year first above written.
MOVADO GROUP, INC.
By: /s/John Rooney
John Rooney
Corporate Controller
THE CHASE MANHATTAN BANK, as Agent,
as Lender, as Swingline Bank and
as Issuing Bank
By: /s/Leonard D. Noll
Name (Print):Leonard D. Noll
Title:VP
FLEET BANK, N.A., as Co-Agent and
as Lender
By: /s/Robert Isaksen
Name (Print):Robert Isaksen
Title:Senior Vice President
MARINE MIDLAND BANK
By: /s/Gary Sarro
Name (Print):Gary Sarro
Title:Vice President
3
<PAGE> 4
THE BANK OF NEW YORK
By: /s/Linda Mae Coppa
Name (Print):Linda Mae Coppa
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/Karl Studer
Name (Print): Karl Studer
Title: Director
By: /s/Bernhard Aellig
Name (Print): Bernhard Aellig
Title: Associate
CONSENTED TO:
SWISSAM INC., as Guarantor
By: /s/David R. Phalen
Name (Print):David R. Phalen
Title:President
4
<PAGE> 1
Exhibit 10.28
MARCH 2000 AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT, dated as of the 17th day of March, 2000, among
MOVADO GROUP, INC., a New York corporation (the "Borrower"); each of the Lenders
which is a signatory to the Credit Agreement referred to below; THE CHASE
MANHATTAN BANK, as Agent, as Swingline Bank and as Issuing Bank; and FLEET BANK,
N.A., as Co-Agent.
Preliminary Statement
A. Reference is made to the Amended and Restated Credit
Agreement dated as of July 23, 1997 (the "Original Credit Agreement") among the
Borrower, the Lenders signatory thereto, The Chase Manhattan Bank, as Agent, as
Swingline Bank and as Issuing Bank, and Fleet Bank, N.A., as Co-Agent. The
Original Credit Agreement was amended by an Amendment dated as of August 5, 1997
and by a June 1998 Amendment dated as of June 10, 1998 and by a November 1998
Amendment and Waiver dated as of November 17, 1998 and by a February 1999
Amendment and Waiver dated as of February 19, 1999. The Original Credit
Agreement, as so amended, will be called herein the "Credit Agreement". All
capitalized terms used herein and not defined shall have the respective meanings
ascribed to them in the Credit Agreement.
B. The Borrower has requested that certain provisions of the
Credit Agreement be amended.
NOW, THEREFORE, for good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
ARTICLE 1. PARTICULAR AMENDMENTS
Section 1.1. Certain Definitions. Section 1.01 of the Credit
Agreement is hereby amended by adding thereto a new defined term as follows:
"'March Amendment Date' means March 17, 2000."
Section 1.2. Margin. Section 1.01 of the Credit Agreement is
hereby further amended by changing the definition of "Margin" to read as
follows:
"'Margin', for a LIBOR Loan, means 1.2% per annum
initially from and after the March Amendment Date; provided,
however, that the Margin shall be subject to change based on
changes in Average Debt Coverage Ratio, as hereinafter
provided. Where the Average Debt Coverage Ratio for a period
consisting of a fiscal quarter and the three preceding fiscal
quarters is within one of the ranges set forth below, the
Margin shall be the amount set forth opposite such range:
<TABLE>
<CAPTION>
Ranges Margin
------ ------
<S> <C>
Greater than 3.00 1.80% per annum
Equal to or less than 1.20% per annum
3.00, but greater than 2.50
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Equal to or less than .80% per annum
2.50, but greater than 1.75
Equal to or less than 1.75 .65% per annum;
</TABLE>
provided, however, that if an Event of Default exists, the
Margin shall be 1.80% per annum (which shall be exclusive of
the 2% incremental increase represented by the Default Rate).
Each change in the Margin following the end of a fiscal
quarter shall become effective on the first day of the
calendar month following the delivery by the Borrower to the
Agent of the financial statements for such fiscal quarter
required by Section 7.08(a) or (b) of this Agreement
(including, without limitation, the delivery of such financial
statements for the fiscal quarter ending January 31, 2000,
which as of the March Amendment Date have not yet been
delivered). No change in the Margin shall be retroactive.
(There is no Margin as to ABR Loans)."
Such change in the definition of "Margin" shall become effective on the March
Amendment Date. Interest on any LIBOR Loan that accrued prior to the March
Amendment Date and that is unpaid as of the March Amendment Date shall be
computed on the basis of the definition of "Margin" as such definition existed
prior to this Amendment.
Section 1.3. Dividends. (a) Section 8.06 of the Credit
Agreement is hereby amended by adding the following at the end of (and as part
of) clause (y) of such Section:
"except that the aggregate amount expended by the
Borrower after January 31, 2000 for all such
dividends and acquisitions may be up to, but not more
than, $20,000,000 plus (after such $20,000,000
allowance shall have been exhausted) the amount of
all Swiss Repatriation Payments (not exceeding
$10,000,00) that shall have been received by the
Borrower after the March Amendment Date and prior to
the payment in question of such dividend or for such
acquisition;".
(b) Section 8.06 of the Credit Agreement is hereby
further amended by adding the following at the end of such Section:
"As used herein, the term 'Swiss
Repatriation Payment' means (x) a repayment after the
March Amendment Date by a Swiss Subsidiary to the
Borrower of any loan made by the Borrower to such
Swiss Subsidiary prior to the March Amendment Date,
or (y) a dividend or distribution made by a Swiss
Subsidiary to the Borrower after the March Amendment
Date, in each case after giving effect to the
deduction therefrom of any and all Taxes that are at
any time required to be paid to any Governmental
Authority (whether domestic or foreign) on the amount
so repaid, dividended or distributed. Upon the
request of the Agent from time to time, the Borrower
shall certify to the Agent and the Lenders in writing
the amount of all Swiss Repatriation Payments made
and the dates thereof.
As used herein, the term 'Swiss Subsidiary'
means any Subsidiary listed on Schedule II to this
Credit Agreement under the heading 'Switzerland'".
Section 1.4. Commitment Fees. (a) Section 2.07 of the Credit
Agreement is hereby amended, in the first sentence thereof, by changing the
phrase "equal to one-fifth of one percent (1/5 of 1%) per annum" so as to read
"accruing at the Applicable Rate".
2
<PAGE> 3
(b) Section 2.07 of the Credit Agreement is hereby
further amended by adding the following as new paragraph (d) thereof:
"(d) As used herein, the term 'Applicable Rate' means
.30% initially from and after the March Amendment Date;
provided, however, that the Applicable Rate shall be subject
to change based on changes in Average Debt Coverage Ratio, as
hereinafter provided. Where the Average Debt Coverage Ratio
for a period consisting of a fiscal quarter and the three
preceding fiscal quarters is within one of the ranges set
forth below, the Applicable Rate shall be the amount set forth
opposite such range:
<TABLE>
<CAPTION>
Ranges Applicable Rate
------ ---------------
<S> <C>
Greater than 3.00 .40% per annum
Equal to or less than .30% per annum
3.00, but greater than 2.50
Equal to or less than .25% per annum
2.50, but greater than 1.75
Equal to or less than 1.75 .20% per annum.
</TABLE>
Each change in the Applicable Rate following the end of a
fiscal quarter shall become effective on the first day of the
calendar month following the delivery by the Borrower to the
Agent of the financial statements for such fiscal quarter
required by Section 7.08(a) or (b) of this Agreement
(including, without limitation, the delivery of such financial
statements for the fiscal quarter ending January 31, 2000,
which as of the March Amendment Date have not yet been
delivered). No change in the Applicable Rate shall be
retroactive."
(c) Such change in the computation of the Commitment
Fees shall become effective on the March Amendment Date. All Commitment Fees
that accrued prior to the March Amendment Date and that are unpaid as of the
March Amendment Date shall be computed on the basis of Section 2.07 of the
Credit Agreement as such Section existed prior to this Amendment.
Section 1.5. Fixed Charge Coverage Ratio. Section 9.03 of the
Credit Agreement is hereby amended by adding the following paragraphs at the end
of such Section:
"For the purpose of determining the Fixed
Charge Coverage Ratio only (and for no other
purpose), the Special Amount shall be excluded from
the consolidated earnings before interest, taxes,
depreciation and amortization of the Borrower and its
Consolidated Subsidiaries for the fiscal quarter
ending January 31, 2000.
As used herein, the term 'Special Amount'
means the aggregate amount of (a) nonrecurring
expenses incurred by the Borrower and its
Consolidated Subsidiaries during the fiscal quarter
ending January 31, 2000, and (b) reserves taken by
the Borrower and its Consolidated Subsidiaries during
such fiscal quarter for future nonrecurring
expenditures (in each case, on a consolidated basis),
as such nonrecurring expenses and reserves for future
nonrecurring expenditures are (i) reflected in the
financial statements described in Section 7.08(a) of
this Credit Agreement for the fiscal year
3
<PAGE> 4
ending January 31, 2000 (although they may not be
specifically identified in detail in such financial
statements), and (ii) specifically identified in
reasonable detail (by nature and amount) in a
certificate signed by the chief financial officer of
the Borrower and delivered to the Agent and the
Lenders simultaneously with the delivery to the Agent
of such financial statements (which certificate shall
be in form reasonably satisfactory to the Agent and
shall expressly state, among other things, that such
expenses and expenditures are expected by the
Borrower to be nonrecurring and that such expenses
and reserves have been incurred and taken in the
fiscal quarter ending January 31, 2000), and (iii)
approved by the Agent as to their apparently
nonrecurring character (which approval shall not be
unreasonably withheld); provided, however, that in no
event shall the Special Amount be more than
$8,000,000."
ARTICLE 2. MATTERS GENERALLY
Section 2.1. Fee. Contemporaneously with the execution and
delivery of this Agreement, the Borrower shall pay a fee to such of the Lenders
as execute and deliver this Amendment on Friday, March 17, 2000, in such amount
as is described in the Fee Letter dated March 17, 2000 from the Agent to the
Borrower.
Section 2.2. Representations and Warranties. The Borrower
hereby represents and warrants that:
(a) All the representations and warranties set forth
in the Credit Agreement are true and complete on and as of the
date hereof (with the same effect as though made on and as of
such date).
(b) No Default or Event of Default exists.
(c) The Borrower has no offset or defense with
respect to any of its obligations under the Credit Agreement
or any of the Notes or any other Facility Document, and no
claim or counterclaim against any Lender, the Swingline Bank,
the Issuing Bank, the Agent or the Co-Agent whatsoever (any
such offset, defense, claim or counterclaim as may now exist
being hereby irrevocably waived by the Borrower).
(d) This Amendment has been duly authorized, executed
and delivered by the Borrower.
Section 2.3. Guarantor Consent. The Guarantors shall execute
this Amendment in the space provided below to indicate their consent to the
terms of this Amendment.
Section 2.4. Expenses. The Borrower shall pay all reasonable
expenses incurred by the Agent in connection with this Amendment, including
(without limitation) the fees and disbursements of counsel for the Agent.
Section 2.5. Continuing Effect. Except as otherwise expressly
provided in this Amendment, all the terms and conditions of the Credit Agreement
shall continue in full force and effect. All the Facility Documents also shall
continue in full force and effect.
Section 2.6. Entire Agreement. This Amendment constitutes the
entire agreement of the parties hereto with respect to an amendment of the
Credit Agreement pertaining to the
4
<PAGE> 5
subject matter hereof, and it supersedes and replaces all prior and
contemporaneous agreements, discussions and understandings (whether written or
oral) with respect to such amendment.
Section 2.7. Counterparts. This Amendment may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreement.
Section 2.8. Effectiveness. This Amendment shall not become
effective unless and until it shall have been executed and delivered by the
Borrower, the Agent and the Required Lenders (which execution and delivery may
be evidenced by telecopies).
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
MOVADO GROUP, INC.
By: /s/Kenneth J. Adams
Name (Print):Kenneth J. Adams
Title:Sr. VP/CFO
THE CHASE MANHATTAN BANK, as Agent,
as Lender, as Swingline Bank and as
Issuing Bank
By: /s/Leonard Noll
Name (Print):Leonard Noll
Title:VP
FLEET BANK, N.A., as Co-Agent and
as Lender
By: /s/Christian J. Covello
Name (Print):Christian J. Covello
Title:Vice President
5
<PAGE> 6
HSBC BANK USA
By:
Name (Print):
Title:
THE BANK OF NEW YORK
By: /s/Frank S. Bridges
Name (Print):Frank S. Bridges
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/Karl Studer
Name (Print): Karl Studer
Title: Director
By: /s/Carole Arn
Name (Print): Carole Arn
Title: Associate
CONSENTED TO:
SWISSAM INC., as Guarantor
By: /s/Howard Regenbogen
Name (Print):Howard Regenbogen
Title:Treasurer
NAW CORPORATION, as Guarantor
By: /s/Robert Gilsenan
Name (Print):Robert Gilsenan
Title:President
NAWC CORUM CORPORATION, as Guarantor
By: /s/Robert Gilsenan
Name (Print):Robert Gilsenan
Title:President
MOVADO CORPORATION., as Guarantor
By: /s/Robert Gilsenan
Name (Print):Robert Gilsenan
Title:President
6
<PAGE> 1
Exhibit 10.29
SECOND MARCH 2000 AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT, dated as of the 24th day of March, 2000, among
MOVADO GROUP, INC., a New York corporation (the "Borrower"); each of the Lenders
which is a signatory to the Credit Agreement referred to below; THE CHASE
MANHATTAN BANK, as Agent, as Swingline Bank and as Issuing Bank; and FLEET BANK,
N.A., as Co-Agent.
Preliminary Statement
A. Reference is made to the Amended and Restated Credit
Agreement dated as of July 23, 1997 (the "Original Credit Agreement") among the
Borrower, the Lenders signatory thereto, The Chase Manhattan Bank, as Agent, as
Swingline Bank and as Issuing Bank, and Fleet Bank, N.A., as Co-Agent. The
Original Credit Agreement was amended by an Amendment dated as of August 5, 1997
and by a June 1998 Amendment dated as of June 10, 1998 and by a November 1998
Amendment and Waiver dated as of November 17, 1998 and by a February 1999
Amendment and Waiver dated as of February 19, 1999 and by a March 2000 Amendment
dated March 17, 2000. The Original Credit Agreement, as so amended, will be
called herein the "Credit Agreement". All capitalized terms used herein and not
defined shall have the respective meanings ascribed to them in the Credit
Agreement.
B. The Borrower has requested that a certain provision of the
Credit Agreement be amended.
NOW, THEREFORE, for good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
ARTICLE 1. PARTICULAR AMENDMENT
Section 1.1. Capital Expenditures. Section 9.05 of the Credit
Agreement is hereby amended to read as follows:
"The Borrower shall not permit Consolidated Capital
Expenditures to exceed $10,000,000 during any fiscal
year (on a noncumulative basis), except that with
respect to the fiscal year ending January 31, 1999
Consolidated Capital Expenditures shall not exceed
$12,500,000 and with respect to the fiscal year
ending January 31, 2000 Consolidated Capital
Expenditures shall not exceed $10,500,000; nor shall
the Borrower permit Consolidated Capital Expenditures
to exceed $30,000,000 during the period from the
Closing Date to the Maturity Date."
ARTICLE 2. MATTERS GENERALLY
Section 2.1. Fee. Contemporaneously with the execution and
delivery of this Agreement, the Borrower shall pay a fee to such of the Lenders
as execute and deliver this Amendment on or before Friday, March 24, 2000, in
the amount of $1,000 each.
Section 2.2. Representations and Warranties. The Borrower
hereby represents and warrants that:
<PAGE> 2
(a) All the representations and warranties set forth
in the Credit Agreement are true and complete on and as of the
date hereof (with the same effect as though made on and as of
such date).
(b) No Default or Event of Default exists.
(c) The Borrower has no offset or defense with
respect to any of its obligations under the Credit Agreement
or any of the Notes or any other Facility Document, and no
claim or counterclaim against any Lender, the Swingline Bank,
the Issuing Bank, the Agent or the Co-Agent whatsoever (any
such offset, defense, claim or counterclaim as may now exist
being hereby irrevocably waived by the Borrower).
(d) This Amendment has been duly authorized, executed
and delivered by the Borrower.
Section 2.3. Guarantor Consent. The Guarantors shall execute
this Amendment in the space provided below to indicate their consent to the
terms of this Amendment.
Section 2.4. Expenses. The Borrower shall pay all reasonable
expenses incurred by the Agent in connection with this Amendment, including
(without limitation) the fees and disbursements of counsel for the Agent.
Section 2.5. Continuing Effect. Except as otherwise expressly
provided in this Amendment, all the terms and conditions of the Credit Agreement
shall continue in full force and effect. All the Facility Documents also shall
continue in full force and effect.
Section 2.6. Entire Agreement. This Amendment constitutes the
entire agreement of the parties hereto with respect to an amendment of the
Credit Agreement pertaining to the subject matter hereof, and it supersedes and
replaces all prior and contemporaneous agreements, discussions and
understandings (whether written or oral) with respect to such amendment.
Section 2.7. Counterparts. This Amendment may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreement.
Section 2.8. Effectiveness. This Amendment shall not become
effective unless and until it shall have been executed and delivered by the
Borrower, the Agent and the Required Lenders (which execution and delivery may
be evidenced by telecopies).
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the day and year first above
written.
MOVADO GROUP, INC.
By:/s/Kenneth J. Adams
Name (Print): Kenneth J. Adams
Title: Sr.VP/CFO
THE CHASE MANHATTAN BANK, as Agent,
as Lender, as Swingline Bank and
as Issuing Bank
2
<PAGE> 3
By: /s/ Leonard Noll
Name (Print):Leonard Noll
Title:VP
FLEET BANK, N.A., as Co-Agent and as
Lender
By: /s/ Christian J. Covello
Name (Print):Christian J. Covello
Title:Vice President
HSBC BANK USA
By: /s/ Gregory
Name (Print):
Title:
THE BANK OF NEW YORK
By:
Name (Print):
Title:
CREDIT SUISSE FIRST BOSTON
By:
Name (Print):
Title:
By:
Name (Print):
Title:
CONSENTED TO:
SWISSAM INC., as Guarantor
By: /s/ Howard Regenbogen
Name (Print):Howard Regenbogen
Title:Treasurer
3
<PAGE> 4
NAW CORPORATION, as Guarantor
By: /s/Robert Gilsenan
Name (Print):Robert Gilsenan
Title:President
NAWC CORUM CORPORATION, as Guarantor
By: /s/Robert Gilsenan
Name (Print):Robert Gilsenan
Title:President
MOVADO CORPORATION, as Guarantor
By: /s/Robert Gilsenan
Name (Print):Robert Gilsenan
Title:President
4
<PAGE> 1
SECOND AMENDMENT OF LEASE
Exhibit 10.30
This SECOND AMENDMENT OF LEASE is made as of the 23rd day of December, 1998
between MEADOWLANDS ASSOCIATES, a New Jersey limited partnership, ("Landlord")
having an address at PW/MS Management Co., Inc., c/o Gale & Wentworth, LLC, Park
Avenue at Morris County, 200 Campus Drive, Suite 200, Florham Park, New Jersey
07932-1007 and MOVADO GROUP, INC., a New York corporation, having an office at
125 Chubb Avenue, Lyndhurst, New Jersey 07071 (hereinafter called "Tenant").
WITNESSETH:
WHEREAS:
A. Landlord and North American Watch Corporation, predecessor-in-interest
to Tenant, heretofore entered into a certain lease dated as of October 31, 1986,
as amended by a certain first amendment of lease dated as of May 31, 1994
("First Amendment") (said lease as it was or may hereafter be amended is
hereinafter called the "Lease") with respect to (i) the entire rentable square
foot area of the fourth (4th) floor and (ii) a portion of the rentable square
foot area of the fifth (5th) floor (collectively, "Demised Premises") of the
building known as and located at 125 Chubb Avenue, Lyndhurst, New Jersey
("Building"); and
B. Tenant is desirous of increasing the size of the Demised Premises by the
addition of 17,862 rentable square feet ("Expansion Space") on the fifth (5th)
floor of the Building, as illustrated on Schedule A, attached hereto and made a
part hereof; and
C. Tenant is desirous of extending by eight (8) months the term for the
10,363 rentable square foot Additional Space
<PAGE> 2
(defined in WHEREAS clause B. of the First Amendment) on the fifth (5th) floor
of the Building; and
D. The parties hereto desire to further modify the Lease in certain
other respects.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the parties hereto modify the Lease as follows:
1. DEFINED TERMS. Except as specifically provided otherwise in this
Second Amendment of Lease, all defined terms contained in this Second Amendment
of Lease shall, for the purposes hereof, have the same meaning ascribed to them
in the Lease.
2. EXPANSION SPACE COMMENCEMENT DATE. The Demised Premises shall be
deemed expanded to include the Expansion Space on the earlier of ("Expansion
Space Commencement Date") (i) the date Tenant takes possession of all or any
part of the Expansion Space or (ii) August 1, 1999. As of the Expansion Space
Commencement Date, the attached Schedule A shall be added to and become a part
of Exhibit A (Rental Plan) to the Lease. On or about the Expansion Space
Commencement Date, Landlord may deliver to Tenant a notice ("Expansion Space
Commencement Date Notice") confirming, among other things, the inclusion of the
Expansion Space within the Demised Premises as of the Expansion Space
Commencement Date. If Tenant receives the Expansion Space Commencement Date
Notice, Tenant shall sign same and return it fully executed to Landlord within
five (5) days after Tenant's receipt thereof. Tenant's failure to timely return
a fully executed unamended original counterpart of the Expansion Space
Commencement Date Notice shall constitute Tenant's express consent with and
agreement to all the terms contained in the Expansion Space Commencement Date
Notice as prepared by Landlord.
2
<PAGE> 3
3. CONDITION OF EXPANSION SPACE. As of the Expansion Space Commencement
Date, Tenant shall be deemed to have accepted the Expansion Space in its then
"as is" physical condition and state of repair. In that regard, Landlord shall
have no obligation to do any work or perform any services with respect to the
Expansion Space or grant Tenant any construction allowance.
4. EXTENSION OF ADDITIONAL SPACE TERM. Pursuant to the First
Amendment, Tenant leased the 10,363 rentable square foot Additional Space on the
fifth (5th) floor of the Building for a period (defined as the "Additional
Space Term" in Paragraph 2. of the First Amendment) commencing on September 8,
1994 and ending on September 30, 1999 (defined as the "Additional Space
Termination Date"). Notwithstanding anything contained to the contrary in
Paragraph 2. of the First Amendment, the Additional Space Termination Date
shall be, and the Additional Space Term shall end on, May 31, 2000.
5. MINIMUM RENT. The Lease is hereby amended to provide that the
Minimum Rent, on an annual basis, shall be:
(i) TWO MILLION TWO HUNDRED SIXTY FIVE THOUSAND SIX HUNDRED EIGHTY
SEVEN AND 50/100 DOLLARS ($2,265,687.50) for the period commencing on
the Expansion Space Commencement Date and ending on September 30,
1999, payable in advance on the first day of each calendar month in
equal monthly installments of ONE HUNDRED EIGHTY EIGHT THOUSAND EIGHT
HUNDRED SEVEN AND 29/100 DOLLARS ($188,807.29);
(ii) TWO MILLION TWO HUNDRED NINETY ONE THOUSAND FIVE HUNDRED NINETY
FIVE AND 00/100 DOLLARS ($2,291,595.00) for the period commencing on
October 1, 1999 and ending on May 31, 2000, payable in advance on the
first day of each calendar month in equal monthly installments of ONE
HUNDRED NINETY THOUSAND NINE HUNDRED SIXTY SIX AND 25/100 DOLLARS
($190,966.25);
(iii) ONE MILLION SIX HUNDRED NINETY EIGHT THOUSAND EIGHT HUNDRED
SEVENTY AND 00/100 DOLLARS ($1,698,870.00) for the period commencing
on June 1, 2000 and ending on the Termination Date, payable in advance
on the
3
<PAGE> 4
first day of each calendar month in equal
monthly installments of ONE HUNDRED FORTY ONE
THOUSAND FIVE HUNDRED SEVENTY TWO AND 50/100
DOLLARS ($141,572.50).
6. SIZE OF DEMISED PREMISES. Section 36.2 of the Lease shall be amended
as of the date hereof to provide that, only for the period beginning on the
Expansion Space Commencement Date until the Actual Surrender Date (hereinafter
defined in Paragraph 7), (i) the Demised Premises shall be deemed to contain a
floor area of 84,854 rentable square feet and (ii) the Occupancy Percentage
shall be 30.5%. For the period beginning on the day following the Actual
Surrender Date until the Termination Date, Section 36.2 of the Lease shall be
amended to provide that (a) the Demised Premises shall be deemed to contain a
floor area of 56,629 rentable square feet and (b) the Occupancy Percentage
shall be 20.3%.
7. SURRENDER OF FIFTH FLOOR SPACE. The Expansion Space and Additional
Space are hereinafter collectively referred to as the "Fifth Floor Space".
Tenant shall deliver the Fifth Floor Space to Landlord by May 31, 2000 in the
same physical condition and state of repair that would apply to the Fifth Floor
Space as if May 31, 2000 were the Termination Date. May 31, 2000 is hereinafter
referred to as the "Scheduled Surrender Date". Subject to the Lease and to the
other provisions of this Second Amendment of Lease, Tenant's obligations with
regard to the Fifth Floor Space shall cease on the Scheduled Surrender Date as
if the Scheduled Surrender Date were the Termination Date. The earliest date
after the Scheduled Surrender Date by when Tenant has delivered to Landlord the
Fifth Floor Space in the physical condition and state of repair as required
hereunder is hereinafter called the "Actual Surrender Date". If the Actual
Surrender Date fails to occur by the Scheduled Surrender Date,
4
<PAGE> 5
then, Tenant shall be deemed a holdover tenant at sufferance for the Fifth
Floor Space and shall be liable to Landlord under Article 55 of the Lease as if
the Scheduled Surrender Date were the Termination Date. As of the Actual
Surrender Date, Exhibit A to the Lease shall be deemed to have excluded
therefrom the Fifth Floor Space. Nothing in this Second Amendment of Lease
shall be deemed to constitute a release or discharge of Tenant with respect to
any outstanding and unsatisfied obligation or liability, whether unbilled or
calculated, accrued or incurred under the Lease, such as, but not limited to,
Minimum Rent, Adjusted Minimum Rent, additional rent and other charges payable
by Tenant in connection with the Fifth Floor Space, up to and including the
Actual Surrender Date.
8. ESCALATIONS ON EXPANSION SPACE. For purposes of computing the additional
rent accruing on and after the Expansion Space Commencement Date solely for the
Expansion Space that is due Landlord under Section 36.4(1) of the Lease, as of
the Expansion Space Commencement Date, (A) Section 36.1(4) of the Lease shall
be deleted and replaced with the following new Section 36.1(4): "First Tax Year
shall mean the calendar year ending December 31, 1999. Tax Year shall mean any
calendar year thereafter;" and (B) Section 36.1(2) of the Lease shall be
deleted and replaced with the following new Section 36.1(2); "Base Tax Rate
shall mean the real estate tax rate in effect on the date of the Second
Amendment of Lease." For purposes of computing the additional rent accruing on
and after the Expansion Space Commencement Date solely for the Expansion Space
that is due Landlord under Section 36.5(1) of the Lease, as of the Expansion
Space Commencement Date, Section 36.1(3) of the Lease shall be deleted and
replaced with the following new Section 36.1(3): "First Operating Year shall
mean the calendar year
5
<PAGE> 6
ending December 31, 1999. Operating Year shall mean any calendar year
thereafter;".
9. ESCALATIONS ON ADDITIONAL SPACE. For purposes of computing the
additional rent accruing on and after October 1, 1999 solely for the Additional
Space that is due Landlord under Section 36.4(1) of the Lease, as of October 1,
1999, (A) Section 36.1(4) of the Lease shall be deleted and replaced with the
following new Section 36.1(4): "First Tax Year shall mean the calendar year
ending December 31, 1999. Tax Year shall mean any calendar year thereafter;" and
(B) Section 36.1(2) of the Lease shall be deleted and replaced with the
following new Section 36.1(2): "Base Tax Rate shall mean the real estate tax
rate in effect on the date of the Second Amendment of Lease." For purposes of
computing the additional rent accruing on and after October 1, 1999 solely for
the Additional Space that is due Landlord under Section 36.5(1) of the Lease as
of October 1, 1999, Section 36.1(3) of the Lease shall be deleted and replaced
with the following new Section 36.1(3): "First Operating Year shall mean the
calendar year ending December 31, 1999. Operating Year shall mean any calendar
year thereafter;".
10. BROKERAGE. Tenant represents that it has had no dealings or
communications with any real estate broker or agent in connection with this
Second Amendment of Lease, except Cushman & Wakefield of New Jersey, Inc. Tenant
agrees to defend indemnify and hold Landlord, its affiliates and/or subsidiaries
and the partners, directors, officers of Landlord and its affiliates and/or
subsidiaries harmless from and against any and all costs, expenses or liability
(including attorney's fees, court costs and disbursements) for any commission or
other compensation claimed by any broker or agent in connection with this Second
Amendment of Lease, except Cushman & Wakefield of New Jersey, Inc.
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<PAGE> 7
11. CORPORATE AUTHORITY. Tenant represents that the undersigned
officer of the Tenant corporation has been duly authorized on behalf of the
Tenant corporation to enter into this Second Amendment of Lease in accordance
with the terms, covenants and conditions set forth herein, and, upon Landlord's
request, Tenant shall deliver an appropriate certification by the Secretary of
the Tenant corporation to the foregoing effect.
12. LEASE RATIFICATION. Except as expressly amended by this Second
Amendment of Lease and the First Amendment, the Lease, and all terms, covenants
and conditions thereof, shall remain in full force and effect and is hereby in
all respects ratified and confirmed.
13. NO ORAL CHANGES. This Second Amendment of Lease may not be
changed orally, but only by a writing signed by both Landlord and Tenant.
14. NO DEFAULT. Tenant confirms that (i) Landlord has complied with
all of its obligations contained in the Lease and (ii) no event has occurred and
no condition exists which, with the passage of time or the giving of notice, or
both, would constitute a default by Landlord under the Lease.
15. NON-BINDING DRAFT. The mailing or delivery of this document by
Landlord or its agent to Tenant, its agent or attorney shall not be deemed an
offer by the Landlord on the terms set forth in such document or draft, and such
document or draft may be withdrawn or modified by Landlord or its agent at any
time and for any reason. The purpose of this section is to place Tenant on
notice that this document or draft shall not be effective, nor shall Tenant have
any rights with respect hereto, unless and until Landlord shall execute and
accept this document. No representations or promises shall be binding on the
parties hereto except those representations and promises contained in a fully
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executed copy of this document or in some future writing signed by Landlord
and Tenant.
16. NOTICES. As of the date hereof, the following provision from
Section 57.1 NOTICES of the Lease shall be deemed deleted:
LANDLORD: Meadowlands Associates
c/o Bellemead Development Corporation
4 Becker Farm Road
Roseland, New Jersey 07068
with copies to: Sanford Grossman, Esq.
Simpson Thacher & Bartlett
One Battery Park Plaza
New York, New York 10004
and shall be replaced by the following new provision:
LANDLORD: Meadowlands Associates
PW/MS Management Co., Inc.
c/o Gale & Wentworth, LLC
Park Avenue at Morris County
200 Campus Drive, Suite 200
Florham Park, New Jersey 07932-1007
Attention: Marc Leonard Ripp, Esq.
General Counsel
17. NO RENEWAL OPTIONS ON ADDITIONAL SPACE. As of the date hereof, (i)
all of Tenant's benefits, entitlements, rights and privileges under Paragraph 10
of the First Amendment shall be deemed without legal force, (ii) any exercise or
attempted exercise of any right or option by Tenant under Paragraph 10 of the
First Amendment shall be deemed ineffective and (iii) all of Landlord's duties,
liabilities, obligations, responsibilities and commitments contained in
Paragraph 10 of the First Amendment shall be deemed null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment of
Lease to be executed on the day and year first written above.
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Signed and delivered
LANDLORD:
MEADOWLANDS ASSOCIATES
WITNESSED BY: By: ARC Meadowlands Associates,
General Partner
By: ARC Meadowlands, Inc.,
General Partner
Fiona G. O'Reilly By: /s/ Michael Futterman
- ------------------------- ----------------------
Name: Fiona G. O'Reilly Michael Futterman
- ------------------------- President
(Please Print)
ATTESTED BY: AGENT FOR LANDLORD:
PW/MS MANAGEMENT CO., INC.
By: Gale & Wentworth, LLC
/s/ Marc Leonard Ripp, Esq. By: /s/ Robert R. Martie
- ------------------------- ----------------------
Marc Leonard Ripp, Esq. Robert R. Martie
Corporate Secretary Senior Vice President
ATTESTED BY: TENANT:
MOVADO GROUP, INC.
/s/ Timothy F. Mizhno By: /s/ Michael J. Bush
- ------------------------- ----------------------
Name: Timothy F. Mizhno Michael J. Bush
- ------------------------- Chief Operating Officer
(Please Print)
Title: Corporate Secretary
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SCHEDULE A
----------
Floor Plan of 17,862
Rentable Square Foot
Expansion Space
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[5TH FLOOR TENANT LAYOUT PLAN WITH MARKED EXPANSION SPACE]
<PAGE> 1
Exhibit 10.31
LEASE TERMINATION AGREEMENT
This LEASE TERMINATION AGREEMENT ("Agreement") dated as of February 1,
2000, is entered into between PW/MS OP SUB I, LLC, a Delaware limited liability
company, having an address c/o PW/MS Management Co., Inc., Gale & Wentworth,
LLC, Park Avenue at Morris County, 200 Campus Drive, Suite 200, Florham Park,
New Jersey 07932-1007 (hereinafter called "Landlord") and MOVADO GROUP, INC.
(f/k/a North American Watch Corporation), a New York corporation, having an
address 125 Chubb Avenue, Lyndhurst, New Jersey 07071 (hereinafter called
"Tenant").
WITNESSETH:
WHEREAS:
A. Belle Mead Corporation (Landlord's predecessor in interest) and Tenant
heretofore entered into a certain lease dated as of April 15, 1996, as amended
by a certain amendment to lease between Landlord and Tenant dated as of October
28, 1998 (said lease, as amended, being hereinafter called the "Lease") with
respect to 8,108 rentable square feet of office space (hereinafter called the
"Demised Premises") located on a portion of the sixth (6 th) floor in the
building known as and located at 1200 Wall Street West, Lyndhurst, New Jersey,
for a term ending on April 15, 2002 or on such earlier date upon which said term
may expire or be terminated pursuant to any conditions of limitation or other
provision of the Lease or pursuant to law; and
B. Tenant desires to surrender the Demised Premises to Landlord and to
terminate the Lease prior to the present expiration date; and
C. Landlord is willing to accept the surrender of the Demised Premises and
to terminate the Lease, subject, however, to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. (a) Subject to the provisions of this Agreement, the Lease, and the term
and estate granted thereunder, shall terminate and expire on the Surrender Date
(as hereinafter defined in Paragraph 1(c)) as fully and completely as if the
Surrender Date were the date originally
<PAGE> 2
fixed in the Lease as the Expiration Date, and Tenant shall surrender the
Demised Premises on the Surrender Date to Landlord, to have and to hold the
same for the unexpired residue of the Term. After the Surrender Date, Tenant
shall have no further obligations or liabilities of any kind or nature under the
Lease with respect to the Demised Premises, except as expressly provided in this
Agreement.
(b)(i) Landlord hereby advises Tenant that Landlord is presently
negotiating a lease amendment with Quest Diagnostics Incorporated ("Quest")
pursuant to which Quest will lease the Demised Premises. Tenant acknowledges and
agrees that (x) this Agreement is contingent upon Landlord and Quest entering
into a lease amendment for the Demised Premises on terms and conditions
satisfactory to Landlord in its sole discretion, and (y) Landlord shall have the
right, for any reason or no reason, to discontinue negotiations with Quest
and/or to refuse to enter into a lease amendment with Quest for the Demised
Premises without incurring any liability whatsoever to Tenant. Tenant hereby
releases Landlord from all liability, claim or expense incurred by Tenant as a
result of the non-occurrence of the contingency described in clause (x) above.
(ii) In the event the contingency described in clause (x) of
Paragraph 1(b)(i) is not satisfied within thirty (30) days after the date of
this Agreement, then Landlord or Tenant shall have the right to cancel this
Agreement by notice given to the other party at any time after the expiration of
said thirty (30) day period. If either party exercises its cancellation right,
then this Agreement shall be deemed cancelled, and of no further force or
effect, as of the date of the other party's receipt of said cancellation notice;
provided, however, if the contingency is satisfied before the other party's
receipt of said cancellation notice, then said cancellation notice shall be
deemed automatically null and void, and of no further force or effect.
(c) If Landlord and Quest execute and unconditionally deliver a lease
agreement with respect to the Demised Premises pursuant to clause (x) of
Paragraph 1(b)(i), then, for the purposes of this Agreement, the term "Surrender
Date" shall mean the later to occur of (i) the thirtieth (30th) day after the
date on which the contingency described in clause (x) of Paragraph 1(b)(i) is
satisfied or (ii) February 29, 2000.
2. In consideration for Landlord's execution of this Agreement, Tenant
agrees to pay to Landlord the sum of
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$56,000.00 (the "Surrender Payment") by certified or bank check simultaneously
with Tenant's execution and delivery of this Agreement. If the contingency
described in clause (x) of Paragraph 1(b)(i) is not satisfied, and if either
party exercises its termination right, then Landlord agrees to promptly refund
to Tenant the Surrender Payment.
3.(a) On or before the Surrender Date, Tenant shall do the following:
(i) Tenant shall remove from the Demised Premises all
trade fixtures, equipment, machinery and personal property belonging to Tenant
and shall repair all damage to the Demised Premises and/or the Building caused
by such removal.
(ii) Tenant shall remove the following Tenant's Work from
the Demised Premises and shall restore the Demised Premises to the condition
existing prior to said installation and shall repair all damage to the Demised
Premises and/or Building caused by such removal: NONE.
(iii) Tenant shall quit and surrender the Demised Premises
broom clean and in good condition and repair, except for ordinary wear and
tear, and except for any damage or other condition which, in accordance with
the terms of the Lease, is not the responsibility of Tenant to repair.
(iv) Tenant shall deliver all keys to the Demised Premises
to Landlord.
(v) Tenant covenants to comply with all of the provisions
contained in the Lease which are applicable to the surrender and termination of
the Lease.
(b) Promptly after Tenant has complied with the provisions of
clauses (i), (ii) and (iii) of Paragraph 3(a) above, Landlord and Tenant shall
conduct a move-out inspection. If there are any repairs or other work which
Tenant is obligated to perform under the terms of this Agreement or under the
terms of the Lease (collectively referred to as the "Move-out Work"), Tenant
shall promptly do such Move-out Work or, alternatively, at Landlord's option,
Tenant shall pay to Landlord the reasonable costs to do such Move-out Work.
(c) The provisions of this Paragraph 3 shall survive the termination
of the Lease.
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4. Tenant agrees to have final meter readings taken as of the Surrender
Date and to pay promptly any and all charges for utility services furnished to
the Demised Premises through the Surrender Date. The provisions of this
Paragraph 4 shall survive the termination of the Lease.
5. Landlord and Tenant acknowledge and agree further that, pursuant to
the provisions of Article 6 of the Lease, Tenant shall be responsible for any
underpayments in Taxes and/or Operating Costs for the portion of calendar year
2000 preceding the Surrender Date, and Landlord shall be responsible for any
overpayments in Taxes and/or Operating Costs for the portion of calendar year
2000 preceding the Surrender Date. The provisions of this Paragraph 5 shall
survive the termination of the Lease.
6. Tenant hereby represents and warrants to Landlord that Tenant used the
Demised Premises solely for general executive and general administrative offices
and for no other use or purpose.
7. Tenant shall not have any legal or equitable right or interest in or
to the Demised Premises after the Surrender Date.
8. Tenant hereby expressly covenants and warrants to Landlord that
Tenant has not done or suffered any act or thing whereby the Demised Premises,
or any part thereof are or may be in any way charged, affected or encumbered.
9. In the event Tenant fails to surrender the Demised Premises on the
Surrender Date, Landlord shall have all the remedies set forth in the Lease, as
well as any other remedies it may have at law or in equity, by statute or
otherwise, to recover possession of the Demised Premises and to obtain money
damages from Tenant.
10. (a) Tenant hereby releases Landlord from and against all claims,
demands, liabilities, costs and expenses arising out of or in connection with
the Lease or the termination thereof which Tenant ever had, now has or shall
hereafter have against Landlord, except with respect to the express obligations
of Landlord under this Agreement, and except with respect to (i) any material
monetary default on the part on Landlord or (ii) any material interruption in
services caused by Landlord, occurring during the period from the date of this
Agreement to and including the Surrender Date, provided Tenant notifies Landlord
of such
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<PAGE> 5
default or interruption by notice given to Landlord within two (2) business days
after the Surrender Date.
(b) Provided (i) Tenant surrenders possession of the Demised
Premises to Landlord in accordance with this Agreement, (ii) Tenant has paid to
Landlord all Minimum Rent and additional rent due under the Lease for the
period preceding, and including, the Surrender Date, (iii) Tenant has paid to
Landlord the Surrender Payment, and (iv) Tenant is not otherwise in default
under the terms and conditions of the Lease as of the Surrender Date, then
Landlord hereby releases Tenant from and against all claims, demands,
liabilities, costs and expenses arising out of or in connection with the Lease
or the termination thereof which Landlord ever had, now has or shall hereafter
have against Tenant, except with respect to the express obligations of Tenant
under this Agreement.
11. Each party hereby acknowledges and agrees that it shall continue to
comply with and/or perform all of its obligations under the Lease (including,
in the case of Tenant, the payment of Minimum Rent and additional rent) to and
including the Surrender Date.
12. Any capitalized term used in this Agreement, but not defined herein,
shall have the meaning ascribed to said term in the Lease.
13. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Signed and LANDLORD:
delivered
IN THE PRESENCE OF PW/MS OP SUB I, LLC
OR ATTESTED BY:
- ------------------------- By:-------------------------
Name: Name:
Title:
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<PAGE> 6
TENANT:
MOVADO GROUP, INC.
/s/ Beverly Ann Giannini By: /s/ Timothy F. Michno
- -------------------------- ------------------------------
Name: Name: Timothy F. Michno
Title: General Counsel
6
<PAGE> 1
Exhibit 10.32
STANDARD FORM OF SUBLEASE AGREEMENT
SUBLEASE made as of October 26, 1999 between MERCK-MEDCO
MANAGED CARE, L.L.C., with an office at 100 Summit Avenue, Montvale, New Jersey
07645 ("SUBLESSOR"), and MOVADO GROUP, INC., with an office at 125 Chubb Avenue,
Lyndhurst, New Jersey 07071 hereinafter ("SUBLESSEE").
PRELIMINARY STATEMENT
Kraft General Foods, Inc., as "Tenant", and Whiteweld Centre, Inc., as
"Landlord", have previously entered into that certain Lease (the "Master
Lease"), dated as of December 28, 1992, providing for the leasing of certain
space, totaling approximately 19,374 rentable square feet (the "Demised
Premises"), and improvements therein, located at 300 Tice Boulevard, Woodcliff
Lake, New Jersey and more particularly described in the Master Lease for a lease
term commencing April 1, 1993 and ending March 31, 2001, unless sooner
terminated as provided in the Master Lease;
SUBLESSOR has subleased, as sublessee, from Tenant, as
sub-lessor the Demised Premises, pursuant to a certain sublease dated December
23, 1994 (the "Major Sublease") for a sublease term commencing April 15, 1994
and ending March 31, 2001, unless sooner terminated as provided therein; and
SUBLESSOR desires to sublet to SUBLESSEE and SUBLESSEE desires
to hire from SUBLESSOR all of the Demised Premises; and
It is agreed as follows:
<PAGE> 2
1. SUBLEASE. SUBLESSOR sublets to SUBLESSEE all of the Demised Premises
consisting of approximately 19,374 square feet as shown on the floor plan
annexed hereto as Exhibit A (the "Sublet Premises"), for general office use and
for no other purpose.
2. TERM. The term of this sublease ("Sublease Term") shall commence on
the date first set forth above and expire on March 30, 2001, or such earlier
date upon which the Sublease Term expires or terminates pursuant to the
provisions of this sublease, or the Master Lease or Major Sublease terminates,
or pursuant to law.
3. RENT. The rent for the Sublease Term shall be $329,358.00 per annum
and shall be payable monthly, in advance, commencing sixty (60) days after
possession of the Sublet Premises is delivered to SUBLESSEE and on the first
(1st) day of each calendar month thereafter, in equal monthly installments of
$27,446.50, except that the installment for the first month of the Sublease Term
(or partial month in the event the date which is sixty (60) days after delivery
of possession of the Sublet Premises to SUBLESSEE occurs on any day other than
the first day of a month) shall be payable upon the execution hereof. SUBLESSOR
shall deliver possession of the Sublet Premises to SUBLESSEE no later than the
first business day after the date that both Landlord and Tenant shall have
executed the consents set forth at the end of this Sublease or shall have
executed such other consents which in form and substance are satisfactory to
SUBLESSEE. SUBLESSEE shall pay as additional rent, including tenant electric,
100% of any payments or expenses, except Base Rent, required to be made by
SUBLESSOR under the Major Sublease which relate to the Sublet Premises. All
payments called for under
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this sublease shall be made within twenty (20) days after SUBLESSEE'S receipt of
a statement from SUBLESSOR setting out such items of additional rent then due
and without setoff or deduction, at SUBLESSOR'S office or at such other address
as SUBLESSOR may designate.
4. SUBORDINATION TO MASTER LEASE AND MAJOR SUBLEASE. This sublease is
subordinate to, and SUBLESSEE accepts this sublease subordinate to, the Master
Lease and Major Sublease and the matters to which the Master Lease and Major
Sublease are subordinate, provided that Landlord and Tenant agree not to disturb
the quiet enjoyment and possession of the Sublet Premises by SUBLESSEE as long
as SUBLESSEE is not in default hereunder, SUBLESSOR is not in default under the
Major Sublease or Tenant is not in default under the Master Lease. This sublease
is also subordinate to, and SUBLESSEE accepts this sublease subordinate to, any
amendments to the Master Lease hereafter made between Tenant and Landlord and
the Major Sublease hereafter made between Tenant and SUBLESSOR, provided that
Landlord and Tenant agree not to disturb the quiet enjoyment and possession of
the Sublet Premises by SUBLESSEE as long as SUBLESSEE is not in default
hereunder, SUBLESSOR is not in default under the Major Sublease or Tenant is not
in default under the Master Lease. Copies of the documents comprising the Master
Lease and Major Sublease have been delivered to and reviewed by SUBLESSEE.
SUBLESSEE acknowledges that SUBLESSOR cannot convey to SUBLESSEE any greater
estate than SUBLESSOR has been granted pursuant to the Major Sublease.
The provisions of the Master Lease and Major Sublease are incorporated
herein by reference with the same force and effect as
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if they were fully set forth herein, except as otherwise specifically provided
herein, and the provisions of the Major Sublease and the Master Lease shall, as
between SUBLESSOR and SUBLESSEE (as if they were, respectively, SUBLESSOR and
SUBLESSEE under the Major Sublease, and Landlord and Tenant under the Master
Lease) constitute the terms of this sublease, except for those relating to Base
Rent, additional rent or any other amounts payable either by SUBLESSOR to Tenant
under the Major Sublease or by Tenant to Landlord under the Master Lease, and
those which are otherwise inapplicable to, inconsistent with or modified by the
terms of this sublease. This incorporation by reference specifically includes
the indemnification provisions of Paragraph 9(b) of the Major Sublease, which
will run from SUBLESSEE to SUBLESSOR, Tenant and Landlord.
SUBLESSEE covenants that SUBLESSEE will not do anything in or with
respect to the Sublet Premises or omit to do anything which SUBLESSEE is
obligated to do under the terms of the sublease which would constitute a default
under the Master Lease or Major Sublease or might cause the Master Lease or
Major Sublease to be cancelled, terminated or forfeited or might make Tenant or
SUBLESSOR liable for any damages, claims or penalties.
5. DAMAGE OR INJURY. Landlord, Tenant and SUBLESSOR shall not be liable
for any damage to property or injury to persons, sustained by SUBLESSEE or
others, caused by conditions or activities on the Sublet Premises, provided,
however, that notwithstanding the foregoing, SUBLESSOR shall be liable to
SUBLESSEE to the same extent that Tenant may be liable to SUBLESSOR under the
Major Sublease and, provided further, that
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SUBLESSOR shall be liable for any such damage to the extent it arises out of any
act or omission of SUBLESSOR or any of its employees, agents, officers,
directors, representatives or contractors. SUBLESSEE shall indemnify the
Landlord, Tenant and SUBLESSOR against all claims arising from the negligence or
intentional misconduct of SUBLESSEE or any of its employees, agents, officers,
directors, representatives or contractors or arising from any breach by
SUBLESSEE of any of the terms and conditions contained herein and shall carry
insurance as required by the Master Lease or the Major Sublease, whichever is
greater, which shall name Landlord, Tenant and SUBLESSOR as additional insureds.
6. REPAIRS BY TENANT. SUBLESSOR shall not do or permit to be done any
act or thing which is a default under this sublease or the Major Sublease or the
Master Lease. SUBLESSOR agrees that SUBLESSEE shall be entitled to receive all
services and repairs to be provided by Tenant to SUBLESSOR under the Major
Sublease. SUBLESSEE shall look only to SUBLESSOR for any services to be
furnished to SUBLESSEE in accordance with this sublease. SUBLESSOR shall use its
reasonable efforts to obtain for SUBLESSEE any services which are the obligation
of Tenant or Landlord.
7. BROKER. SUBLESSEE warrants and represents that it has dealt with no
broker or any other person except for Alexander Summer LLC who would legally
claim to be entitled to receive a brokerage commission or finder's or
consultant's fee with respect to this transaction. SUBLESSEE shall indemnify
SUBLESSOR, Landlord and Tenant against the claim of any person, firm or
corporation arising out of any inaccuracy or alleged inaccuracy of
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the above representation.
8. SUBLESSEE'S COVENANTS. SUBLESSEE covenants with SUBLESSOR to hire
the Sublet Premises and to pay the rent therefore as aforesaid, that it will
commit no waste, nor suffer the same to be committed thereon, nor injure nor
misuse the same; and also that it shall not make alterations therein, nor use
the same for any purpose but that hereinbefore authorized. SUBLESSEE has
inspected the Sublet Premises and accepts same in their present condition
subject to the representations and warranties contained herein and subject to
delivery of the Sublet Premises by SUBLESSOR in broom clean condition, without
any warranties or representations (express or implied) being relied upon, except
for such representations and warranties made to or for the benefit of SUBLESSOR
as SUBLESSEE under the Major Sublease and, further, SUBLESSOR's representations
and warranties that (1) all of the Building's electrical, plumbing, HVAC and
other systems serving the Sublet Premises (excluding any electrical systems
installed by and subsequently removed by SUBLESSOR) shall be operational and in
good working order on the date the Sublet Premises are delivered to SUBLESSEE
and (2) each of the Major Sublease and the Master Lease is, and will be on the
date the Sublet Premises are delivered to SUBLESSEE, in full force and effect,
without modification, and neither SUBLESSOR, Tenant nor Landlord is in default
thereunder, and SUBLESSOR has received no notice of default thereunder which
remains uncured and is not aware of any act or occurrence which, but for the
passage of time or the giving of notice or both, would constitute a default
under the Major Sublease or the Master Lease; and (3) SUBLESSOR has not made any
claim upon Tenant or Landlord.
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9. CONSENT. No rights as a tenant of the Sublet Premises are conferred
upon SUBLESSEE until (i) this sublease has been signed by SUBLESSOR and an
executed copy has been delivered to SUBLESSEE and (ii) the consents of Tenant
and Landlord have been obtained. SUBLESSOR shall promptly after the execution of
this sublease by both SUBLESSOR and SUBLESSEE submit this sublease to Landlord
and Tenant for their consent. If the Landlord or Tenant refuse to grant consent
or if the Master Lease or Major Sublease is cancelled for any reason whatsoever
prior to the first day of the Sublease Term, all sums received hereunder by
SUBLESSOR shall be returned to SUBLESSEE without interest and without any
further liability on the part of the SUBLESSOR or SUBLESSEE and this sublease
shall be deemed void and of no effect.
10. SUBLESSOR shall indemnify and hold SUBLESSEE harmless from and
against any and all liability, loss, damage, claim or expense of any kind
whatsoever (including, without limitation, reasonable attorney's fees and
disbursements) in any way arising out of or connected with any breach, default
or failure to perform on SUBLESSOR's part under this Sublease (from and after
the date hereof) and, to the extent same does not result from a failure of
SUBLESSEE to perform its obligations under the Sublease, under the Major
Sublease. SUBLESSOR agrees that, so long as this Sublease shall continue in
effect and SUBLESSEE shall not be in default as to any of its obligations
hereunder, (a) it shall pay all rent as and when due under the Major Sublease,
and (b) it shall not take any action or omit to take any action within its
control, if such actions or omissions would result in a default under, or
cancellation or termination of, the Major Sublease or the Master
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Lease. Notwithstanding any other provision of this Sublease, SUBLESSOR shall not
be liable to SUBLESSEE for any consequential damages suffered by SUBLESSEE.
11. NOTICES. SUBLESSOR agrees to forward to SUBLESSEE, promptly upon
receipt thereof by SUBLESSOR, a copy of each notice of default received by
SUBLESSOR in its capacity as SUBLESSEE under the Major Sublease. SUBLESSEE
agrees to forward to SUBLESSOR, promptly upon receipt thereof, copies of any
notices received by SUBLESSEE from Tenant or Landlord or from any governmental
authorities. All notices, demands and requests shall be in writing and shall
sent either by hand delivery, or certified mail/return receipt requested or by a
nationally recognized overnight courier service, such as FedEx or UPS, to the
address of the appropriate party. Notices, demands and requests so sent shall be
deemed given when the same are received. Notices to the SUBLESSOR shall be sent
to the attention of:
Merck-Medco Managed Care, L.L.C.
100 Summit Avenue
Montvale, New Jersey 07645
Attn: Andrew A. Munroe, Esq.
Assistant Counsel
Notices to SUBLESSEE shall be sent to attention of:
Movado Group, inc.
300 Tice Blvd.
Woodcliff Lake, NJ 07675
Attn: Richard Buonocore, V.P. Admin.
Copy to: Timothy F. Michno, Esq., General Counsel
12. There are no oral agreements between the parties hereto affecting
this sublease and this sublease supercedes and cancels
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any and all previous negotiations, agreements and understanding between the
parties hereto with respect to the subject matter hereof. This sublease contains
all of the terms, covenants, conditions, warranties and agreements of the
parties relating in any manner to the rental, use and occupancy of the Sublet
Premises. This agreement may not be modified or amended except in writing signed
by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals this 26 day of October, 1999.
MERCK MEDCO MANAGED CARE, L.L.C. MOVADO GROUP, INC.
As SUBLESSOR As SUBLESSEE
By: /s/Richard T. Clark By: /s/Efraim Grinberg
Name:Richard T. Clark Name: Efraim Grinberg
Title:President Title:President
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CONSENT BY 300 TICE REALTY ASSOCIATES LLC
300 TICE REALTY ASSOCIATES LLC HEREBY consents to the above sublease.
Nothing contained herein shall be deemed a consent to any further subletting of
the Demised Premises or assignment of the Master Lease, Major Sublease or this
Sublease.
Landlord further agrees that in the event the Master Lease is
terminated prior to the expiration date of this sublease, Landlord will not
disturb SUBLESSEE's possession and quiet enjoyment of the Sublet Premises
provided that SUBLESSEE makes full and complete attornment to Landlord for the
balance of the term of this sublease.
300 TICE REALTY ASSOCIATES L.L.C.
As LANDLORD
By: Mack-Cali Realty, L.P., member
By: Mack-Cali Realty Corporation,
its general partner
By: /s/John J. Crandall
John J. Crandall
Vice President - Leasing
10
<PAGE> 11
Exhibit ???
================================================================================
WHITEWELD CENTRE, INC.
Landlord,
KRAFT GENERAL FOODS, INC.
Tenant.
L E A S E
---------------------------
Dated: December 28, 1992
---------------------------
Premises: Portion of Second Floor
Whiteweld Centre, Inc.
300 Tice Boulevard
Woodcliff Lake, New Jersey 07675
================================================================================
<PAGE> 12
=============================================================================
I N D E X
<TABLE>
<CAPTION>
ARTICLE Page
<S> <C> <C>
1 DEMISE, PREMISES, TERM, RENT, PARKING.................... 1
2 USE...................................................... 3
3 PREPARATION OF DEMISED PREMISES FOR TENANT............... 3
4 COMPLETION OF DEMISED PREMISES........................... 4
5 ADJUSTMENT OF RENTS...................................... 5
6 SUBORDINATION, NOTICE TO MORTGAGEES...................... 8
7 QUIET ENJOYMENT.......................................... 9
8 ASSIGNMENT AND SUBLETTING................................ 9
9 COMPLIANCE WITH LAWS AND REQUIREMENTS
OF GOVERNMENTAL AUTHORITIES............................. 12
10 INSURANCE................................................ 13
11 TENANT'S ALTERATIONS..................................... 14
12 TENANT'S PROPERTY........................................ 15
13 REPAIRS AND MAINTENANCE.................................. 16
14 ELECTRICITY.............................................. 17
15 HEAT, VENTILATION AND AIR CONDITIONING................... 17
16 LANDLORD'S OTHER SERVICES................................ 18
17 ACCESS, BUILDING NAME.................................... 19
18 NOTICE OF ACCIDENTS...................................... 20
19 INDEMNIFICATION.......................................... 21
20 DESTRUCTION OR DAMAGE.................................... 21
21 CONDEMNATION............................................. 22
22 LIENS.................................................... 23
23 SURRENDER................................................ 23
24 TENANT'S DEFAULT OR BANKRUPTCY/
LANDLORD'S DEFAULT....................................... 24
25 LANDLORD'S RIGHT TO PERFORM TENANT'S
OBLIGATIONS............................................ 27
26 BROKER................................................... 27
27 OMITTED.................................................. 27
28 NOTICES.................................................. 27
29 FLOOR LOAD............................................... 28
30 MISCELLANEOUS............................................ 28
31 TENANT'S RIGHT TO TERMINATE LEASE........................ 31
32 TENANT'S OPTION TO EXTEND TERM........................... 32
33 TENANT'S RIGHT OF FIRST REFUSAL.......................... 33
34 HEALTH AND FITNESS CLUB.................................. 34
ACKNOWLEDGEMENTS......................................... 35
RULES AND REGULATIONS.................................... 36
EXHIBIT A - FLOOR PLAN
EXHIBIT B - TENANT'S PLAN
EXHIBIT C - JANITORIAL SERVICES
EXHIBIT D - OFFERED SPACE
</TABLE>
<PAGE> 13
LEASE ("Lease"), dated December 28, 1992, by and between WHITEWELD CENTRE,
INC., a New Jersey corporation, with offices at 300 Tice Boulevard, Woodcliff
Lake, New Jersey 07675 ("Landlord") and KRAFT GENERAL FOODS INC., a Delaware
corporation, with offices at Three Lakes Drive, Northfield, Illinois 60093
("Tenant").
W I T N E S S E T H :
ARTICLE 1
DEMISE, PREMISES, TERM, RENTS, PARKING
1.01. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord, upon the terms hereinafter set forth, the premises described in
Section 1.02, in the building ("Building") known as Whiteweld Centre, located at
300 Tice Boulevard, Woodcliff Lake, New Jersey 07675.
1.02. Such premises constitute a portion of the Second Floor of the
Building, as shown on the floor plan annexed as Exhibit A and have a rentable
area of 19,374 square feet. The Building has a total rentable area of 230,000
square feet. The premises, together with all fixtures and equipment now or
hereafter defined), are hereinafter referred to as the "Demised Premises."
1.03. The term of the Lease ("Term") shall commence on the Commencement
Date (as hereinafter defined), and shall end (unless sooner terminated pursuant
hereto or by law) on the last day of the calendar month in which the day
immediately preceding the ninth (9th) anniversary year of the Commencement Date
occurs ("Expiration Date"). The entry of Tenant upon the Demised Premises solely
for the purpose of fixturing, utilities hook-up, computer installation and the
like shall not be deemed occupancy hereunder. The term "Commencement Date" shall
mean the date on which all of the following shall have occurred:
(i) The Demised Premises shall have been completed in accordance with
Section 4.01 (subject to Section 4.02); and
(ii) Landlord shall have delivered exclusive possession of, and right to
occupancy to, the Demised Premises to Tenant.
Notwithstanding anything to the contrary herein contained, the operation, force
and effect of this Lease shall be contingent upon receipt by Tenant, within
fifteen (15) days following execution of the Lease, of a fully executed
Non-Disturbance and Attornment Agreement from Midlantic Bank. In the event that
Tenant fails to receive such Agreement within such time, then upon notice to
Landlord by Tenant, effective as of the date of such notice, this Lease shall be
deemed of no further force or effect, and neither party shall have any liability
to the other, except that Landlord shall refund all monies theretofore paid by
Tenant pursuant to the Lease.
<PAGE> 14
1.04. Tenant shall pay to Landlord during the Term:
(a) annual fixed rent ("Fixed Rent")* as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual Monthly Rental
Lease Year Sq. Footage Sq. Ft. Rental** Fixed Rent Installments
- ---------- ----------- -------------- ----------- --------------
1-4 19,374 $20.25 $392,323.50 $32,693.63
5-8 19,374 22.25 431,071.50 35,922.63
</TABLE>
Monthly installments shall be payable in advance (without notice, deduction or
setoff) on the first day of each month during the Term (except that the first
installment shall be paid on the execution of the Lease); and
(b) additional rent ("Additional Rent") consisting of all other sums
which are payable by Tenant to Landlord hereunder (for default in payment
of which Landlord shall have the same rights and remedies as for a default
in payment of Fixed Rent).
All Fixed Rent and Additional Rent shall be paid, in lawful money of
the United States of America by check, to Landlord at its office, or at such
other place as Landlord may designate by notice to Tenant.
1.05. The rentable area set forth in Section 1.02 has been determined from
the plans for the Building. If any change in such plans modifies the rentable
area of the Demised Premises or the Building, the parties shall promptly execute
and exchange a recordable agreement, specifying the resulting modifications of
the rentable area of the Demised Premises, the common area space included
therein, the annual Fixed Rent and monthly installments thereof, the Tenant's
Proportionate Share and Tenant's Proportionate Share of Increase (as hereinafter
defined). If the parties cannot so agree within fifteen (15) days after Landlord
notified Tenant of any such modification, the matter shall be determined by
arbitration as hereinafter provided.
1.06. If the Commencement Date occurs on a day other than the first day of
a calendar month, the Fixed Rent for such partial month shall be prorated.
1.07. On the Commencement Date, Landlord shall allot to Tenant, at no
additional cost, a minimum of 71 automobile parking spaces in the parking zone
or ______________.
* Tenant shall pay no Fixed Rent for the following months of the Lease
Term: 7 (but no later than December 1993), 13, 24, 38, 52, 63, 72, 79 and 89.
Landlord, in its sole discretion, upon not less than thirty (30) days' written
notice, may choose to accelerate the months in which no Fixed Rent is due,
provided that the net effect of such acceleration does not impact the total
amount of Fixed Rent due hereunder. Notwithstanding the foregoing, Tenant shall
be and remain obligated to pay any and all amounts of Additional Rent accrued
prior to or accruing during such months, including Tenant's electric costs, Tax
Payments and Tenant's Proportionate Share of Increase of Operating Expenses.
** Includes $1.25 per square foot for Tenant's electricity.
2
<PAGE> 15
structure adjoining the Demised Premises ("Parking Area"), of which parking
spaces 18 shall be reserved, below ground and for Tenant's exclusive use.
Landlord shall adequately light the Parking Area, maintain it in good
condition and remove all rubbish and snow therefrom.
1.08. Landlord shall supply Tenant with 19 access control cards for use
to enter the Building. Such cards shall be and remain the property of
Landlord. Tenant shall return the same to Landlord in accordance with Article
23. Additional cards shall be provided to Tenant, upon request, at Tenant's
expense.
ARTICLE 2
USE
2.01. Tenant shall use and occupy the Demised Premises only for general
offices ("Permitted Use") but, without limitation, not for retail business
operations or which, in Landlord's sole judgement, involve excessive use of the
Parking Area by patrons or invitees of Tenant. Landlord represents and warrants
that Tenant's Permitted Use of the Demised Premises complies with all applicable
federal, state and local laws, ordinances, rules and regulations. For the
purpose hereof, Permitted Use shall include storage by Tenant of supplies
incidental to the operation of Tenant's business, including, without limitation,
point-of-purchase displays and samples.
ARTICLE 3
PREPARATION OF DEMISED PREMISES
FOR TENANT
3.01. The Demised Premises shall be prepared by Landlord for Tenant's use
and occupancy at Landlord's sole cost and expense on or before March 15, 1993 in
accordance with Tenant's signed final plans and specifications ("Tenant's
Plans"), attached hereto as Exhibit B, which shall be prepared at Landlord's
sole cost and expense and shall contain complete information, details and
dimensions necessary for the construction and finishing of the Demised Premises
and for the engineering in connection therewith. Landlord shall deliver Tenant's
Plans to Tenant for approval no later than ten (10) days following the date of
this Lease first set forth above. Tenant's Plans shall be approved and signed by
Tenant and delivered to Landlord no later than five (5) days following receipt
by Tenant thereof. Tenant's Plans shall be substantially in accordance with the
preliminary plans, dated 1/6/93, and prepared by The Environments Group.
After consultation with Tenant, Landlord may make such changes in
Tenant's Plans as shall be necessary to comply with the requirements of
governmental authorities having jurisdiction and of the applicable Board of
Fire Underwriters. The work to be performed by Landlord pursuant to Tenant's
Plans is hereinafter referred to as "Landlord's Work." The cost of Landlord's
Work shall be
3
<PAGE> 16
borne by Landlord. Landlord represents and warrants that Landlord's Work shall
comply with all applicable laws, ordinances, rules and regulations, including,
but not limited to The Americans With Disabilities Act, Title III (42 U.S.C.
12181 et seq.).
ARTICLE 4
COMPLETION OF DEMISED PREMISES
4.01. The preparation of the Demised Premises for Tenant's occupancy shall
be deemed completed when Landlord's Work has been substantially completed
(except for insubstantial details of construction, mechanical adjustment or
decoration which do not materially interfere with Tenant's use of the Demised
Premises ["Punchlist Items"]).
Landlord shall give Tenant ten (10) days' advance notice of the date of
completion of the Demised Premises in accordance with Section 4.01. Upon receipt
of such notice Tenant may enter upon the Demised Premises for the sole purpose
of fixturing and finishing same in preparation for its occupancy. Such
activities shall be so performed as not to materially interfere with or impede
Landlord's Work or increase the costs thereof.
Notwithstanding anything to the contrary herein contained, any and all
telecommunications cabling and wiring and local area networks required by Tenant
shall be installed only by Landlord's designated telecommunications cabling
contractor.
4.02. If any act or omission of Tenant (including late delivery of Tenant's
Plans) delays Landlord's satisfaction of the conditions referred to in Section
4.01, the Commencement Date shall be deemed the date when such conditions would
have been satisfied but for such act or omission, and all rights and obligations
under the Lease which, reasonably, stem from or relate to the Commencement Date
shall be construed accordingly.
4.03. If the preparation of the Demised Premises is not completed (as
provided in Section 4.01) by April 1, 1993, subject to extension for any period
of late delivery of Tenant's Plans (or other fault of Tenant) and any period of
"Unavoidable Delays" (as hereinafter defined) (the "Target Date"), then Tenant
shall receive an abatement of 200% of all rent (Fixed and Additional) from and
after the Commencement Date for each day occurring after the Target Date through
and including the Commencement Date. If the preparation of the Demised Premises
is not completed (as provided in Section 4.01) by April 30, 1993, subject to
extension for any period of late delivery of Tenant's Plans (or other fault of
Tenant) and any period of "Unavoidable Delays" (as hereinafter defined), Tenant
may, by notice to Landlord, given within ten (10) days after April 30, 1993 (or
such extended date), terminate the Lease, in which event, unless Landlord so
completes the Demised Premises within thirty (30) days after Landlord's receipt
of such notice, the Lease shall terminate upon the expiration of such thirty
(30)-day period. If Tenant fails to give such notice of termination within such
ten (10)-day period, it may thereafter terminate the Lease only if Landlord
fails diligently to proceed to complete the Demised Premises. Upon any
termination pursuant to this Section, neither party shall have any liability to
the other, except that Landlord shall refund all monies
4
<PAGE> 17
theretofore paid by Tenant pursuant to the Lease. Notwithstanding anything to
the contrary herein contained, the Target Date is predicted upon Landlord
receiving executed copies of the Lease not later than December 29, 1992. The
Target Date and the April 30, 1993 date shall be extended by one day for each
day following December 29, 1993, until the date that Landlord receives executed
copies of the Lease from Tenant.
4.04 The preparation of the Demised Premises shall be conclusively deemed
to have been satisfactorily completed pursuant to Articles 3 and 4 hereof
(except for latent defects and Punchlist Items) unless, within thirty (30) days
after the Commencement Date, Tenant notifies Landlord, in detail, of any
respects in which the Demised Premises shall not have been satisfactorily
completed.
4.05 Landlord shall deliver to Tenant, no later than 30 days following
delivery of the Demised Premises to Tenant, a certificate of occupancy
(temporary or permanent) permitting use of the Demised Premises as provided in
Article 2, and a Fire Underwriter's Certificate for the Demised Premises.
ARTICLE 5
ADJUSTMENT OF RENTS
5.01 For all purposes hereof:
(a) "Taxes" shall mean real estate taxes, assessments, sewer rents,
water and other governmental charges of every description, including
special assessments, imposed upon the Building and/or the land upon which
it is situated ("Land"), or which Landlord becomes obligated to pay by
reason of or in connection with the ownership, leasing, management, control
or operation of the Land or Building or of the fixtures, equipment or
personal property located in or used in connection therewith (including any
rental and mortgage taxes) and any governmental charges, however
denominated, levied in lieu of any of the foregoing; provided, however,
Taxes shall not include any late fees, penalties or other charges for the
payment of delinquent Taxes and shall be based upon a fully assessed
building. Notwithstanding the foregoing, any assessments shall be prorated
over the useful life of the improvements for which the assessments are
levied. Such useful life shall be determined by the authority installing
the improvements. Tenant shall pay only that portion of the assessments
falling due within the Term (as it may be extended);
(b) "Base Taxes" shall mean the Taxes for the twelve month period
commencing on the first day of the month in which the Commencement Date
occurs;
(c) If any impost within the definition of Taxes shall be eliminated
by the applicable taxing authority and shall not be replaced by an
equivalent impost, it shall be eliminated also from the Base Taxes; and
(d) "Tenant's Proportionate Share" shall mean 8.4%.
5
<PAGE> 18
5.02. If the Taxes payable for any calendar year during the Term exceed
the Base Taxes, Tenant shall pay to Landlord Tenant's Proportionate Share of
such excess ("Tax Payment"), prorated for any portion of a calendar year which
is not within the Term. Tenant shall pay the Tax Payment within thirty (30)
days after receipt of Landlord's demand therefor made at any time during or
after such calendar year, such demand to be accompanied by a computation of
the Tax Payment. Landlord shall use its best efforts to make such demand within
sixty (60) days after receipt of a bill for such taxes.
5.03. No provision hereof shall be deemed to require Tenant to pay
municipal, state or federal income, capital levy, estate, succession,
inheritance or corporate franchise taxes imposed upon Landlord, unless such
taxes are reasonably deemed imposed in substitution for Taxes, and then only as
if the Land and Building were the only property of Landlord and the income
derived therefrom were Landlord's sole income.
5.04. If Base Taxes are reduced, any Tax Payments made on the basis of
Base Taxes prior to their reduction shall be appropriately adjusted.
5.05. If Landlord receives a refund of Taxes for any calendar year for
which Tenant has made a Tax Payment, Landlord shall, within thirty (30) days
after receipt thereof, repay to Tenant Tenant's Proportionate Share of the net
refund after deducting Landlord's reasonable expenses incurred in obtaining such
refund. Tenant shall pay to Landlord, within thirty (30) days after demand,
Tenant's Proportionate Share of the expenses incurred by Landlord in effecting
any reduction in the assessed valuation of the Land or Building (where no refund
is involved), not to exceed, however, Tenant's Proportionate Share of the amount
of the reduction in Taxes resulting therefrom.
5.06. For the purposes hereof:
(a) "Operating Expenses" shall mean all expenses incurred by
Landlord in connection with the operation, management, maintenance and
repair of the Land, Building, Parking Area and structures, Building
systems, curbs, walkways and other installations during any calendar year,
including, without limitation, (i) salaries, wages and fringe benefit
payments to or from persons engaged in such operation, management,
maintenance and repair and all taxes relating to their employment; (ii) the
costs of supplies and services and maintenance contracts with independent
contractors (including sales, use and similar taxes); (iii) the charges for
insurance carried on the Land, Building and appurtenances and fixtures and
equipment; (iv) the charges for electrical and other utilities provided for
all Building and appurtenant areas; (v) the cost of any security services;
(vi) reasonable legal fees incurred in connection with the preparation and
enforcement of leases.
Operating expenses shall not include Taxes, Landlord's Work
hereunder, fit-up work for other tenants, executive salaries, amortization
of mortgages, materials and services provided to other Building tenants the
actual charges for which are directly reimbursed to Landlord (other than by
way of rent-inclusion or any adjustment of rents such as provided in this
Article 5), and expenses incurred for any capital improvements or capital
6
<PAGE> 19
repairs made to the Land, Building or appurtenant areas or structures
(collectively, "Capital Improvements"), other than those which, in accordance
with general real estate practice, are expended or treated as deferred expenses.
Capital Improvements which are required by law or which serve to reduce or
eliminate Operating Expenses shall be included in the Operating Expenses for the
year in which the costs thereof are incurred and in subsequent years, on a
straight line basis, to the extent that such costs are amortized over the useful
life of the improvements calculated in accordance with Generally Accepted
Accounting Principals, with an interest factor equal to the prime rate of
interest of Citibank of New York in effect at the time when Landlord incurs such
costs.
If in the Base Year (as hereinafter defined) or in any
Operational Year (as hereinafter defined) the Building is to any extent
unoccupied, the Operating Expenses for such year shall consist of the Operating
Expenses actually paid in such year plus such additional amount as Landlord, in
consultation with Tenant, reasonably determines would have been paid for
Operating Expenses in such year if the Building had been ninety-five (95%)
percent occupied for all of such year. Any dispute as to such determination
shall be resolved by arbitration as hereinafter provided;
(b) "Base Year" shall mean the twelve month period commencing of the
first day of the month in which the Commencement Date occurs;
(c) "Operational Year" shall mean each calendar year during the Term
after the Base Year; and
(d) "Tenant's Proportionate Share of Increase" shall mean 8.4% of the
increase in Operating Expenses for the Operational Year over Operating Expenses
for the Base Year.
5.07. Landlord shall furnish to Tenant on or about September 1 of each
Operational Year a statement setting forth (i) the Base Year Operating
Expenses, (ii) the estimated Operating Expenses for the applicable Operational
Year, and (iii) Tenant's Proportionate Share of Increase computed on the basis
of such estimate. Within thirty (30) days thereafter, Tenant shall pay one-half
of Tenant's Proportionate Share of Increase as so estimated.
At Landlord's option, Landlord may furnish to Tenant at or after
the beginning of each Operational Year the statement referred to in the
preceding paragraph. In such case, Tenant shall pay to Landlord, together with
each monthly installment of Fixed Rent, an amount equal to one-twelfth (1/12th)
of Tenant's Proportionate Share of Increase as so estimated.
In either case, Landlord shall furnish to Tenant as soon as
practicable following the close of the Operational Year a detailed statement
prepared by Landlord's certified public accountant and setting forth with
respect to such Operational Year (i) the actual amount of the Operating Expenses
and (ii) the actual amount of Tenant's Proportionate Share of Increase, adjusted
to reflect the payments on account theretofore made by Tenant; and within thirty
(30) days after receipt of
7
<PAGE> 20
such statement, Tenant shall pay to Landlord the amount, if any, so shown to be
payable by Tenant.
The Operating Expenses for any Operational Year which is only partly within
the Term shall be prorated. If the Operating Expenses for any Operational Year
shall be less than the Operating Expenses for the Base Year, Landlord shall
credit Tenant with the amount of Tenant's Proportionate Share of the decrease in
Operating Expenses, such credit to be available only by application against any
payments due from Tenant hereunder for increases in Operating Expenses in
succeeding Operational Years, provided that a credit becoming available to
Tenant for the final year of the occupancy shall be refunded to Tenant within
thirty (30) days of delivery of the statement set forth herein.
The Operating Expenses for the last year or partial year of the Term shall
be estimated by Landlord and, as so estimated, Tenant's Proportionate Share of
Increase, if any, shall be paid by Tenant on the first day of the month in which
the end of the Term (as it may be extended or earlier terminated) occurs,
subject to adjustment and refund or additional payment, as the case may be, when
the actual Operating Expenses have been ascertained.
5.08. Tenant and its authorized representatives (including, without
limitation, Tenant's accountants) shall have the right, once in any calendar
year, upon reasonable prior notice to Landlord, and at reasonable time, at the
office of Landlord, to audit Landlord's records (limited to the year of and the
year prior to such audit) only with respect to Operating Expenses and Taxes.
Landlord's records shall include, but shall not be limited to, reasonably
detailed records setting forth all maintenance and repair work performed by
Landlord at the Building, including the date and nature of the work or service
performed. Every statement forwarded by Landlord to Tenant pursuant to this
Article 5 shall be binding upon Tenant if Tenant shall fail to audit such
statement as herein provided, or, if Tenant so audits and within one (1) year
following completion of Tenant's audit as herein provided, Tenant fails to
notify Landlord, in detail, of Tenant's objections thereto.
ARTICLE 6
SUBORDINATION, NOTICE TO MORTGAGEES
6.01. The Lease shall be subject and subordinate to all mortgages and
ground leases, and any modifications, consolidations or extensions thereof, now
or hereafter affecting the Land and/or the Building, provided in each instance
such mortgagee or ground lessor agrees in writing that Tenant's possession of
the Demised Premises shall not be disturbed (all of such mortgages and leases
being hereinafter collectively referred to as "Superior Mortgages"). Tenant
shall execute and deliver any truthful instrument confirming such subordination
which Landlord or the holders of any Superior Mortgages ("Superior Mortgagees")
reasonably request.
6.02. In the event of any act or omission of Landlord by reason of which
Tenant claims the right to terminate the Lease or the existence of a partial or
total eviction, Tenant shall not attempt to exercise such claimed right of
termination or to act upon such claim of eviction until
8
<PAGE> 21
(a) it has given notice of such act or omission to all Superior
Mortgagees whose names and addresses have been furnished to Tenant, and
(b) it has permitted such Superior Mortgagees a reasonable period
within which to remedy such act or omission, and they have not done so (or
have not commenced to do so, if such act or omission cannot be remedied
within such period, and proceeded diligently to remedy same).
6.03. If any Superior Mortgagee (or other person claiming through or under
a Superior Mortgagee) succeeds to Landlord's interest in the Lease, Tenant shall
attorn to such successor ("Successor Landlord") if requested by the latter, and
shall promptly execute and deliver any reasonably requested truthful instrument
confirming such attornment; provided said successor agrees in writing that
Tenant's possession of the Demised Premises shall not be disturbed. The
Successor Landlord, however, shall not be:
(a) liable for any previous act or omission of Landlord under the
Lease;
(b) subject to any offset or counterclaim which theretofore shall have
accrued to Tenant against Landlord; or
(c) bound by any previous modification of the Lease not expressly
provided for in the Lease, or by any prepayment of more than one month's
Fixed Rent, unless such modification or prepayment shall have been
expressly approved in writing by the Superior Mortgagee.
6.04. If a Superior Mortgagee or a prospective mortgagee of the Land
and/or the Building shall require minor modifications of the Lease as a
condition precedent to granting a mortgage or an extension of a Superior
Mortgage, Tenant shall, if requested by Landlord, agree to such modifications,
provided they neither materially impair or restrict Tenant's rights or interests
nor materially expand Tenant's obligations hereunder; and provided Landlord pays
Tenant's reasonable attorney's fees (not to exceed $1,000) incurred in respect
of such modifications.
ARTICLE 7
QUIET ENJOYMENT
7.01. So long as Tenant performs its obligations under the Lease, it shall,
subject to the provisions of the Lease, quietly have and enjoy the Demised
Premises during the Term.
ARTICLE 8
ASSIGNMENT AND SUBLETTING
8.01. Tenant shall neither assign the Lease nor sublet all or any portion
of the Demised Premises without Landlord's prior consent, which shall not be
unreasonably withheld or delayed. Landlord may withhold such consent if, without
limitation, in the reasonable exercise of its judgment, it determines that:
9
<PAGE> 22
(a) the proposed use of the Demised Premises is for retail business
operations or is otherwise not appropriate to the Building or in keeping with
the character of its existing tenancies; or
(b) the proposed assignee's or subtenant's occupancy will cause a
density of traffic or make demands on Building utilities, services, maintenance
or facilities in excess of those related to Tenant's occupancy; or
(c) the proposed assignee's or subtenant's financial condition is
not adequate to meet its obligations undertaken in such assignment or sublease;
or
(d) the proposed assignee or sublessee is (i) a government or
subdivision or agency thereof, or (ii) a school or other educational institution
of any type, whether for profit or non-profit, or (iii) an employment or
recruitment agency, (iv) a health services provider, or (v) a banking,
financing, lending or similar institution; or
(e) there is any default by Tenant under the Lease at the time
Landlord's consent is requested or on the effective date of the proposed
assignment or sublease; or
(f) Landlord wishes to accept Tenant's offer, as provided in Section
8.04.
No sub-subleasing will be permitted except in Landlord's uncontrolled
and absolute discretion.
Any claim by Tenant of unreasonableness of Landlord in refusing any
consent requested by Tenant under this Article shall be resolved by arbitration
in Hackensack, New Jersey, before a qualified arbitrator appointed by the
American Arbitration Association in accordance with its accelerated arbitration
rules then obtaining, and judgment may be entered on the award of the
arbitrator in any court of competent jurisdiction. The arbitrator may only
interpret and apply the terms of the Lease and may neither change such terms
nor deprive either party to the Lease of any of its rights hereunder. Except
for attorneys' fees, experts' fees and costs of transcripts (as to each, each
party to bear its own), the expenses of arbitration shall be borne equally by
Landlord and Tenant. The existence of any dispute or the submission thereof to
arbitration shall not affect or delay the performance by the parties of their
obligations under the Lease. Tenant waives any claim for damages for Landlord's
refusal of consent.
8.02. Any request by Tenant for Landlord's consent to an assignment of
the Lease shall state the proposed assignee's business address and be
accompanied by a duplicate original of the instrument of assignment (wherein
the assignee assumes, jointly and severally with Tenant, the performance of
Tenant's obligations hereunder), together with a verified statement of all
consideration, in any form, received or to be received by Tenant for such
assignment. No assignment shall release Tenant from its obligations under the
Lease, unless such assignee has a net worth of at least $25,000,000.00 Dollars
and such assignee accepts all of Tenant's obligations hereunder in which case
Tenant shall automatically be released from all
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of its covenants, conditions and obligations arising thereafter.
8.03. Any request by Tenant for Landlord's consent to a sublease shall
state the proposed subtenant's business address and be accompanied by a
duplicate original of the instrument of sublease (wherein Tenant and the
proposed subtenant agree that such sublease is subject to the Lease and such
subtenant agrees that, if the Lease is terminated because of Tenant's default,
such subtenant shall, at Landlord's option, attorn to Landlord), together with a
verified statement of all consideration, in any form, received or to be received
by Tenant for such sublease.
8.04. Any request by Tenant for Landlord's consent to a sublease of less
than fifty (50%) percent of the rentable area of the Demised Premises shall
constitute an offer from Tenant to terminate the Lease with respect to that
portion of the Demised Premises sought to be sublet. Any request by Tenant for
Landlord's consent to an assignment of the Lease or to a sublease of more than
50% of the rentable area of the Demised Premises (or of any lesser percentage
which, when added to the rentable area of portions of the Demised Premises
previously subleased, shall aggregate more than fifty (50%) percent of the
Demised Premises) shall constitute an offer from Tenant to terminate the Lease.
In any of the foregoing events, Landlord, by notice to Tenant sent within ten
(10) days after receipt of Tenant's request for Landlord's consent, shall inform
Tenant whether it accepts such offer. If Landlord accepts, Tenant, by notice to
Landlord sent within ten (10) days after receipt of Landlord's acceptance, shall
have the right to withdraw its request to assign or sublet. If Tenant fails to
so withdraw its request, the Lease shall terminate (or be modified to reflect
the reduced area of the Demised Premises, as the case may be) as of the end of
the month following the month in which Landlord's notice is sent (with the same
effect as if such date were the date fixed herein for the natural expiration of
the Term), Fixed Rent and Additional Rent shall be apportioned to such date,
Tenant shall surrender the Demised Premises (or such affected portion thereof,
as the case may be) on such date, and the parties shall have no further
liability hereunder for subsequently accruing obligations with respect to the
Lease or such terminated space, as the case may be. Notwithstanding the
foregoing, this Section 8.04 shall not apply to any assignment or sublease made
pursuant to Section 8.10 herein.
The notice to Tenant provided for in the preceding paragraph, if it does
not contain an acceptance of Tenant's offer to terminate the Lease, shall either
consent or refuse consent to the proposed assignment or sublease. If consent is
given by Landlord, Tenant shall within thirty (30) days after receipt of such
consent, assign the Lease to, or consummate the sublease with, the proposed
assignee or subtenant in accordance with the documents submitted to Landlord.
Should Tenant fail to so act within such thirty (30)-day period, Tenant may not
assign the Lease or consummate the sublease but shall be required to initiate a
new request for consent in accordance with, and subject to Landlord's rights
under, this Article.
8.05. In the event of a permitted assignment or sublease, Tenant shall be
entitled to retain all consideration in any form received or receivable by
Tenant from the assignee or subtenant in excess of the Fixed Rent and Additional
Rent payable by Tenant hereunder.
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8.06. Landlord's consent to any assignment or sublease shall not be deemed
a consent to any further proposed assignment or sublease, which shall be
governed by this Article.
8.07. If required by law, Tenant, at its expense, shall notify the
appropriate governmental authorities of any proposed assignment or sublease and
obtain all necessary approvals as well as a new certificate of occupancy, if
required.
8.08. Tenant shall reimburse Landlord for its reasonable expenses,
including, without limitation, reasonable legal expenses, in connection with any
proposed assignment or sublease.
8.09. For the purposes of this Article 8, a transfer of a fifty (50%)
percent or greater interest (whether of stock, a partnership interest or
otherwise) in Tenant, either in one transaction or in any aggregation or series
of transactions, shall be deemed to be an assignment of the Lease.
8.10. Notwithstanding the foregoing provisions of this Section 8, Tenant
shall have the right, without Landlord's consent (but on notice to Landlord and
to the appropriate governmental authorities, if required), to assign the Lease
or to sublet and/or permit occupancy of all or any portion of the Demised
Premises to or by any corporate affiliate of Tenant. As used herein, "corporate
affiliate" means a corporate entity controlling, controlled by or under common
control with Tenant. Subject to the provisions of Section 8.02, evidence
reasonably satisfactory to Landlord of the affiliate's ability to meet the
obligations of Tenant hereunder shall be submitted to Landlord prior to the
assignment or sublease but Tenant shall, nevertheless, remain liable for the
performance of all of its obligations hereunder.
ARTICLE 9
COMPLIANCE WITH LAWS AND REQUIREMENTS
OF GOVERNMENTAL AUTHORITIES
9.01. Tenant shall give prompt notice to Landlord of any notice it receives
of the violation of any law or ordinance or of any requirement of a governmental
or quasi-governmental authority, including the New Jersey Fire Insurance Rating,
Organization or any similar body, and shall, at its expense, comply with all
laws and requirements which impose any obligations on Landlord or Tenant arising
from or relating to (i) the manner in which Tenant conducts it business or uses
its property therein; or (ii) the breach of any of Tenant's obligations
hereunder. Landlord shall, at its expense, comply with all such laws and
requirements which otherwise impose an obligation upon Landlord or Tenant with
respect to the Building or the Demised Premises. Without limitation of any of
its obligations under the Lease, Tenant shall neither do nor permit anything to
be done in or about the Demised Premises which would constitute a violation of
any environmental laws, codes, ordinances or rules or regulations of any
governmental agency or authority having jurisdiction, and Tenant shall not
bring, store or use any hazardous or toxic substance or material on the Demised
Premises. The obligations of Tenant hereunder shall survive the termination of
the Lease. (See also Section 30.22.)
9.02. Tenant may, at its expense (and, if necessary, in the name of, but
without expense to, Landlord), contest, by appropriate proceedings prosecuted
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diligently and in good faith, the validity or applicability of any such law or
requirement with which Tenant is required to comply and may defer compliance
therewith pending the determination of such contest, provided that:
(a) Landlord shall not thereby be subjected to criminal penalty
or prosecution;
(b) the Demised Premises, Land and/or Building shall not thereby be
subjected to forfeiture;
(c) Tenant obtains the written consent, if required, of Superior
Mortgagees; and
(d) Tenant keeps Landlord currently informed of the status of such
proceedings.
Landlord shall, if requested by Tenant and at Tenant's expense,
cooperate with Tenant in any such proceeding.
ARTICLE 10
INSURANCE
10.01. Tenant shall not knowingly violate or permit the violation of any
provision of any insurance policy covering the Building and shall not take or
permit any action which would increase any insurance rate applicable to the
Building or which would result in the refusal of insurance carriers to insure
the Building in amounts reasonably satisfactory to Landlord.
10.02. If any action taken or permitted by Tenant (other than Tenant's
occupancy for the use set forth in Article 2) results in an insurance rate
increase, Tenant shall, without prejudice to any other rights of Landlord,
reimburse Landlord therefor on demand. The schedule of rates for the Building,
issued by the New Jersey Fire Insurance Rating Organization or other body
exercising similar functions, shall be conclusive evidence of the rates then
applicable to the Building.
10.03. Landlord shall not be required to carry insurance on Tenant's
Property and shall not be obligated to repair any damage thereto or to replace
same.
10.04. All insurance policies carried by either party with respect to the
Demised Premises or the contents thereof shall contain a waiver of all rights
of subrogation against the other, and the agents, employees, contractors and
invitees of the other. If payment of additional premiums is required to obtain
a waiver of subrogation, the other party shall be given the opportunity to make
such payment, failing which the waiver in its favor shall not be required.
10.05. Landlord and Tenant each shall look first to any insurance policies
in its favor before making any claim against the other and each hereby waives
all insured claims against the other, except insofar as such waiver would void
any insurance.
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10.06. Tenant shall carry public liability insurance, naming Landlord as
additional insured, with an insurance carrier licensed by the State of New
Jersey, with minimum limits of $1,000,000.00/3,000,000.00 for bodily injury and
$500,000.00 for property damage per occurrence.
10.07. Notwithstanding anything contained in the Lease to the contrary,
Landlord and Tenant hereby agree that in lieu of the insurance coverages or
policies required to be obtained hereunder, Tenant shall have the right to
self-insure against the risks and perils required to be insured against under
this Lease.
ARTICLE 11
TENANT'S ALTERATIONS
11.01. Tenant may, with Landlord's prior consent, which shall not be
unreasonably withheld or delayed, make non-structural interior alterations,
additions, installations, substitutions, improvements and decorations
(collectively, "Alterations") in and to the Demised Premises, subject to the
following conditions:
(a) the Alterations shall be made, at Tenant's expense, by contractors
selected by Tenant from a list furnished by Landlord, or by contractors
otherwise approved by Landlord (which approval shall not be unreasonably
withheld or delayed);
(b) the Building's appearance, value and structural strength shall not
be adversely affected;
(c) any Alteration which is reasonably estimated to cost more than
$25,000.00 or which affects the interior partitions in the Demised Premises
shall be made in accordance with plans and specifications prepared by
Tenant at its expense and approved by Landlord (which approval shall not be
unreasonably withheld or delayed);
(d) the proposed and completed Alterations shall be subject, at
Landlord's discretion and at Tenant's expense, to HVAC, electrical,
engineering and architectural review and to the imposition of reasonable
conditions and requirements based on such review;
(e) Tenant, at its expense, shall first obtain all necessary
governmental permits and authorizations and upon completion of the
Alterations shall procure a certificate of occupancy, if required;
(f) Alterations shall be performed in compliance with all applicable
laws, requirements of governmental authorities having jurisdiction, and
insurance requirements, and in a workmanlike manner, using new materials
and installations at least equal in quality to the original Building
materials and installations;
(g) no Alteration shall interfere with the construction, maintenance
or operation of the Building, with the performance of any work by Landlord
or with the business operations of any other tenant of the Building, or
cause
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any labor discord in the Building;
(h) The cost of Alterations shall be so paid that the Land and
Building remain free of liens. If any Alteration (excluding initial fit-up, if
Tenant is obligated to perform same) will, as reasonably estimated, entail a
cost in excess of $75,000.00, Tenant shall post a surety company payment and
performance bond, bank letter of credit or other undertaking satisfactory to
Landlord guaranteeing Landlord completion of the Alterations free of liens;
(i) Tenant, at its expense, shall cause its contractors to maintain
builder's risk insurance and such other insurance as is then customarily
maintained for such work, in such limits as Landlord reasonably requires, as
well as workers compensation insurance, in statutory limits, all with insurers
licensed by the State of New Jersey;
(j) Tenant shall, promptly upon demand, furnish Landlord with such
proof of compliance with this Article 11 as Landlord reasonably requests; and
(k) upon completion of the Alterations, Tenant shall furnish Landlord
with complete as-built mylar drawings thereof.
11.02. Notwithstanding anything to the contrary herein contained, any
and all telecommunications cabling and wiring and local area networks required
by Tenant shall be installed only by Landlord's designated telecommunications
cabling contractor.
11.03. Provided Tenant does not exercise its option to terminate the
Lease pursuant to Article 32 below, and at any time after the 60th month of the
Lease Term, Tenant, at its option, may refurbish the Demised Premises. Landlord
shall reimburse Tenant up to $2.00 per square foot of rentable space, not to
exceed $35,700, for costs actually incurred by Tenant for such refurbishment.
Any refurbishment shall be performed in accordance with the terms of this
Article 11. Reimbursement hereunder shall be paid to Tenant within thirty (30)
days following completion of said refurbishment, upon at least twenty (20) days'
prior written request therefor submitted to Landlord together with reasonable
substantiation of costs being reimbursed.
ARTICLE 12
TENANT'S PROPERTY
12.01. All fixtures, equipment, improvements and appurtenances attached
to or built into the Demised Premises at the commencement of or during the Term,
whether at Landlord's or at Tenant's expense, shall be deemed Landlord's
property and shall not be removed by Tenant, except as otherwise hereinafter
provided.
12.02. All movable paneling, partitions, lighting fixtures, special
cabinet work and business and trade fixtures and office equipment which are
installed in the Demised Premises by Tenant without contribution by Landlord,
and all furniture, furnishings and other articles of movable personal property
owned by Tenant and located in the Demised Premises (all of which are herein
referred to as "Tenant's
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Property") shall belong to Tenant, may be removed by Tenant at any time during
the Term, and shall be removed by Tenant at the end of the Term. Tenant shall
repair any damage resulting from such removal and restore the Demised Premises
to their condition as existing prior thereto.
12.03. Tenant shall indemnify and hold Landlord harmless from and against
all loss, liability or damage to the Demised Premises or other property or
persons caused by or relating to the removal of Tenant's Property other than
due to the unlawful or negligent acts or omissions of Landlord. This obligation
shall survive termination of the Lease.
12.04. Any item of Tenant's Property not so removed may, at Landlord's
option, be deemed abandoned and either retained by Landlord as its property, or
disposed of, without accountability and at Tenant's expense, in such manner as
Landlord determines.
ARTICLE 13
REPAIRS AND MAINTENANCE
13.01. Tenant, at its expense, shall maintain the Demised Premises in good
condition and, subject to Landlord's rights under Section 13.02, shall promptly
make (i) all nonstructural repairs within the Demised Premises (excluding
overhead plumbing lines, sprinklers, HVAC duct work, and exterior windows)
necessary to maintain such condition, provided such repairs are not necessitated
by the fault of Landlord, its agents, employees, contractors or invitees, and
(ii) all structural repairs, as well as all repairs to the nonstructural items
excluded above, necessitated by the fault of Tenant, its agents, employees,
contractors, or invitees or by the making of Alterations.
Landlord, at its expense, shall make repairs for which Tenant is not
responsible that are necessary to maintain the Demised Premises and Building in
good condition.
13.02. Landlord shall give Tenant reasonable notice of Landlord's intention
to make repairs for which Landlord is responsible and shall so make them as to
minimize interference with Tenant's business operations to the extent within
Landlord's reasonable control (but the foregoing shall not be construed to
obligate Landlord to make such repairs outside of Business Hours, as hereinafter
defined).
Tenant shall give Landlord and other affected tenants in the Building
reasonable notice of Tenant's intention to make repairs for which Tenant is
responsible and shall so make them as to minimize interference with other
tenants' business operations and with the operation and maintenance of the
Building.
Notwithstanding, the foregoing provisions of this Section, Landlord
may, on notice to Tenant and at Tenant's expense, elect to perform any repair
for which Tenant is responsible, whereupon Tenant shall deposit with Landlord
the amount estimated by Landlord to be the reasonable cost of such repairs,
subject to refund to Tenant or additional payment to Landlord when the actual
cost (which shall be reasonable) is determined at the completion of the repairs.
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13.03. Landlord shall not be liable to Tenant for any inconvenience,
annoyance or interruption of or injury to business arising from Landlord's
making repairs or alternations, storing material or performing any work in the
Demised Premises or the Building, unless due to the negligence or wilful
misconduct of Landlord, and the same shall not constitute an eviction or entitle
Tenant to any rent abatement. Landlord shall use its best efforts to the extent
practicable to minimize interference with Tenant's use and occupancy of the
Demised Premises.
ARTICLE 14
ELECTRICITY
14.01 Landlord shall furnish all requisite electricity to the Demised
Premises. If Landlord determines that the Tenant consumes an amount of
electricity which exceeds by at least ten (10%) percent, on a regular basis, the
charge to Tenant for electricity set forth in Section 1.04 above, then the
charge for electricity (included in the Fixed Rent) shall be increased to
reflect the increased power consumption, as determined from time to time by an
independent reputable electrical engineering consultant selected by Landlord and
reasonably satisfactory to Tenant, and applying the then applicable public
utility rates. The consultant's fee shall be shared equally by Landlord and
Tenant. If such consultant determines that the actual cost of electricity as
then surveyed is less than ten (10%) percent, there shall be no increase in the
electricity charge and Landlord shall be solely responsible for the consultant's
fee. Any such increase in the charge for electricity shall be deemed Additional
Rent and shall be payable in monthly installments together with the installments
of Fixed Rent. If Tenant determines that it consumes an amount of electricity
which is ninety (90%) percent or less, on a regular basis, than the charge to
Tenant for electricity set forth in Section 1.04 above, then the charge for
electricity (included in the Fixed Rent) shall be decreased to reflect the
decreased power consumption, as determined from time to time by an independent
reputable electrical engineering consultant selected by Landlord and reasonably
satisfactory to Tenant, and applying the then applicable public utility rates.
The consultant's fee shall be shared equally by Landlord and Tenant. If such
consultant determines that the actual cost of electricity as then surveyed is
greater than ninety (90%) percent, there shall be no decrease in the electricity
charge and Tenant shall be solely responsible for the consultant's fee. Any such
decrease in the charge for electricity shall be reflected by a credit to Tenant
against Fixed Rent and deducted in monthly installments.
ARTICLE 15
HEAT, VENTILATION AND AIR CONDITIONING
15.01. Landlord shall, at its expense and in accordance with Exhibit B,
furnish to the Demised Premises year-round air conditioning (heated or cooled as
may be required seasonally for comfortable occupancy) between 8:00 a.m. and 6:00
p.m., prevailing time, on business days from Monday through Friday ("Business
Hours").
15.02 Tenant shall abide by all reasonable regulations which Landlord
promulgates for the proper functioning and protection of the HVAC System and for
compliance with applicable governmental energy regulations and guidelines.
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15.03. Landlord shall, when requested by Tenant, supply air
conditioning to the Demised Premises at times other than during Business Hours,
for which Tenant shall pay to Landlord, upon demand, the following amounts
("Overtime Charges"):
(a) $75.00 per hour or part thereof (but for not less than one (1)
hour if requested for periods immediately prior to or after Business Hours;
and
(b) $75.00 per hour or part thereof (but for not less than four (4)
hours if requested for any other times, including Saturdays, Sundays and
Holidays.
A request for air conditioning for a period immediately after Business Hours on
any day shall be made before noon of such day. In all other cases requests
shall be made before noon of the day preceding the day for which such overtime
services are desired.
15.04. For each twelve-month period during the Term, commencing with
the twenty-fifth month of the Term, Overtime Charges shall consist of the
greater of:
(a) the applicable Overtime Charge as set forth in Section 15.03, or
(b) such Overtime Charge increased by the percentage of increase in
the CPI*** for the calendar month immediately preceding the applicable
twelve-month period over the CPI for the calendar month immediately
preceding the Commencement Date.
15.05. Any modification of the HVAC system necessitated by any arrangement
of partitioning in the Demised Premises, other than for Tenant's initial
occupancy of the Demised Premises, which interferes with the normal operation
of such system shall be made by Landlord at Tenant's expense.
ARTICLE 16
LANDLORD'S OTHER SERVICES
16.01. Landlord shall provide elevators (passenger and service) during
Business Hours, and at least one passenger elevator at all other times.
16.02. Landlord, at its expense, shall furnish the janitorial services
set forth in Exhibit C. Tenant shall reimburse Landlord, promptly upon demand,
for any additional expense for janitorial services incurred by Landlord as a
result of any neglect or unusual use of the Demised Premises by Tenant or
non-compliance by Tenant with the Rules and Regulations annexed hereto,
including, without limitation, the failure to keep any horizontal blinds
lowered.
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*** Consumer Price Index (All Urban Consumers - 1982-84 = 100) for the New
York-Northeastern New Jersey Area, issued by the U.S. Department of Labor,
Bureau of Labor Statistics.
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16.03. Landlord, at its expense, shall list Tenant's company name on the
Building directory.
16.04. Except as otherwise provided herein, Landlord shall not be liable
to Tenant for interruption or curtailment of any services to be furnished by
Landlord under the Lease, to the extent resulting from any cause beyond
Landlord's reasonable control (other than for lack of funds, and/or labor
disputes affecting only the Property and/or other properties owned by Landlord
and its affiliates) or by reason of repairs to the Building which Landlord is
required to make or reasonably determines are necessary, provided Landlord
commences and completes such repairs and restores such services with reasonable
diligence in the circumstances (subject to Unavoidable Delays) and gives Tenant
reasonable notice, when practicable, of the commencement of such interruption
or curtailment and performs such repairs in accordance with the terms hereof.
In the event that the services are not restored within five (5) business days
(or two (2) business days in the event of an emergency), whether or not through
the fault of Landlord or Unavoidable Delays (other than due to a fire, casualty
or taking which is covered by Articles 20 and 21), Tenant may restore such
service on behalf and at the expense of Landlord and deduct from rent the cost
and expense thereof, subject to the offset limitation set forth in Section
24.08 hereof (unless the liability for same lies with Tenant pursuant to
Article 19 below). If any of the services specified in Articles 14, 15 and 16
are not restored within five (5) business days, or if Tenant is deprived for
any reason of its ability to utilize all or any material portion of the Demised
Premises, whether or not through the fault of Landlord (other than when due to
the fault of Tenant or when due to a fire, casualty or taking which is covered
by Articles 20 and 21), to the extent that same interferes with Tenant's use of
all or any part of the Demised Premises, rent and other charges shall abate as
to such part (without limitation) effective on the sixth (6th) business day and
continue abated until such service is restored. In the event the Landlord is
unable to provide any of the services specified in Articles 14, 15 and 16, for
any reason other than the fault of Tenant, and as a result of such interruption
the Demised Premises are completely or substantially unusable by Tenant, and
such interruption continues for a period of sixty (60) consecutive days (other
than when due to a fire, casualty or taking which is covered by Articles 20 and
21), then Tenant shall have the right to terminate this Lease upon ten (10)
days' written notice to Landlord, and thereafter Tenant shall be relieved of
all further liability under this Lease. For the purposes of this Section 16.04,
if more than thirty (30%) percent of the Demised Premises is rendered unusable
for any reason (other than those reasons specifically excepted out by the terms
of this Section 16.04), then the Demised Premises shall be deemed totally
unusable, and rent and other charges shall thereafter completely abate until
such service is restored.
ARTICLE 17
ACCESS, BUILDING NAME
17.01. Landlord and its authorized representatives may enter the Demised
Premises during Business Hours for inspection or for exhibiting the Demised
Premises to Superior Mortgagees or to prospective purchasers or mortgagees and,
during the last twelve months of the Term, to prospective tenants of the
Demised Premises. Landlord shall give Tenant reasonable advance notice of any
such entry and shall not unreasonably interfere with Tenant's use and occupancy
of the Demised
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Premises.
17.02. Landlord and its authorized representatives may enter the Demised
Premises at any time to make repairs to or installations in the Demised
Premises or any Building system or facility or to cure any Event of Default (as
hereinafter defined) and may, in such event, store within the Demised Premises
any necessary equipment and materials.
In the event Landlord so enters the Demised Premises, it shall,
(a) except in the case of emergency, give Tenant reasonable advance
notice of such entry;
(b) so effect such repairs (except emergency repairs) and
installations as to minimize, so far as practicable, interference with
Tenant's normal business operations (but the foregoing shall not be
construed to obligate Landlord to effect such repairs or installations
outside of Business Hours); and
(c) complete such repairs or installations with reasonable
promptness.
17.03. Throughout the Term, the Building shall be known as Whiteweld
Centre.
Landlord may, however, upon reasonable notice to Tenant, change the
Building's name and address. In such event, Landlord shall pay the reasonable
and necessary costs of Tenant for replacing its stationery, bills and other
business materials containing Tenant's address.
ARTICLE 18
NOTICE OF ACCIDENTS
18.01. Tenant shall promptly notify Landlord of:
(a) any accident occurring in or about the Demised Premises;
(b) any fire or other casualty occurring in or about the Demised
Premises; and
(c) all damage or defects in or to the Demised Premises or any
Building system, facility or installation therein.
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ARTICLE 19
INDEMNIFICATION
19.01. Each party ("Indemnitor") shall indemnify the other party
("Indemnitee") against all liability and expense (including reasonable
architects' and attorneys' fees) incurred by Indemnitee by reason of:
(a) any wrongful or negligent act undertaken by Indemnitor, its
agents, contractors, employees, licensees or invitees;
(b) any injury or damage to any person or property of any personnel
or invitee of Indemnitor occurring in or immediately adjacent to the
Demised Premises or the Building which is not due to the fault of
Indemnitee, its agents, employees, contractors or invitees; and
(c) any failure by Indemnitor to perform its obligations under the
Lease.
The obligations of the parties hereunder shall survive the
termination of the Lease.
ARTICLE 20
DESTRUCTION OR DAMAGE
20.01. If the Demised Premises are damaged by fire or other casualty
("Casualty"), the Lease shall continue in full force, subject, however, to the
following:
(a) Subject to subdivision (c) hereinbelow, if the Demised Premises
are partially damaged by Casualty, the damage shall be repaired by Landlord
and, during the period from the day following the Casualty until such
repair is substantially completed, the Fixed Rent (and Additional Rent,
insofar as applicable) shall be equitably reduced, taking into account the
portion of the Demised Premises which remains usable.
(b) Subject to subdivision (c) hereunder, if the Demised Premises
are totally damaged or rendered inaccessible by Casualty, the Fixed Rent
and Additional Rent (as apportioned) shall be paid to the date of the
Casualty and thenceforth shall not be payable until the Demised Premises
have been repaired or access has been restored.
(c) If the Demised Premises are totally damaged or if the Building
shall be so damaged that Landlord decides to demolish or rebuild it or if
the cost of repair or restoration resulting from such Casualty, as
reasonably estimated by Landlord, will exceed 25% of the replacement value
of the Building prior to the Casualty, then (whether or not the Demised
Premises have been damaged) Landlord may elect to terminate the Lease by
notice to Tenant (and if the Building is totally damaged, then Tenant may
also elect to terminate the Lease by notice to Landlord) given within sixty
(60) days after the Casualty, specifying a date for the termination of the
Lease, which date shall not be more than ninety (90) days after the giving
of such notice and, upon the specified date, the Term shall expire and
Tenant shall vacate the Demised
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Premises, without prejudice, however, to Landlord's and Tenant's respective
rights against the other accruing prior to the expiration date, and, as
hereinabove provided, Fixed Rent and Additional Rent shall be paid to the
date of the Casualty or, if the Demised Premises have not been damaged or
have been only partially damaged, then Fixed Rent and Additional Rent
(equitably reduced in the case of partial damage) shall be paid to the
expiration date.
If Landlord does not serve such termination notice within sixty (60)
days after the Casualty, and if the Demised Premises have been damaged to
any extent, Landlord shall, within ten (10) days following such sixty
(60)-day period, inform Tenant whether or not the necessary repairs to the
Demised Premises can be reasonably made within five (5) months following
the Casualty. If Landlord informs Tenant that the repairs cannot be made
within such period, Tenant may elect to terminate the Lease by notice given
within ten (10) days after being so informed by Landlord. If they can be so
made or if they cannot be so made but Tenant does not elect to terminate,
the Lease shall continue and Landlord shall proceed diligently to make the
necessary repairs, either, as the case may be, within five (5) months
following the Casualty, subject to Unavoidable Delays and delays due to
adjustment of insurance claims. If Landlord fails to complete the repairs
within such five (5)-month period (subject to extension for such delays),
Tenant may terminate the Lease on notice to Landlord given within ten (10)
business days following the expiration of such period (as extended for such
delays). If the Casualty occurs during the last year of the Term, Tenant
may terminate the Lease if the repairs cannot be completed within three (3)
months.
Nothing hereinabove contained shall relieve Tenant from any liability that may
exist as a result of damage from Casualty, and, without limitation, if a
Casualty results from the fault of Tenant, its agents, contractors, employees or
invitees, Tenant shall not be entitled to any abatement or reduction of rent
under this Article, except to the extent that Landlord receives the proceeds of
any rent interruption insurance in lieu of such rent.
ARTICLE 21
CONDEMNATION
21.01. If the Building or any part thereof is condemned or conveyed to a
condemning authority ("Condemnor") under threat of condemnation (collectively,
"Condemnation"), Landlord shall promptly notify Tenant thereof. If the
Condemnation involves:
(a) the entire Demised Premises, the Lease shall terminate on the date
title vests in the Condemnor; or
(b) such portion of the Building and/or Land as, in Landlord's
reasonable judgment, renders uneconomic the utilization of the balance of
the Building and Land, Landlord may terminate the Lease upon thirty (30)
days' notice to Tenant at any time after title vests in the Condemnor.
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21.02. If a portion of the Demised Premises is condemned, as a result of
which the balance of the Demised Premises cannot be reconstituted to enable
Tenant to conduct its business substantially as theretofore, Tenant may
terminate the Lease, by notice to Landlord given within thirty (30) days after
the date when Tenant receives notice from Landlord that the title has vested in
the Condemnor. If Tenant does not so terminate the Lease, Additional Rent,
Tenant's Proportionate Share and Tenant's Proportionate Share of Increase shall
be equitably reduced.
21.03. In the event of termination of the Lease under this Article, the
Fixed Rent and Additional Rent shall be apportioned as of the effective date of
termination and the parties shall have no liability for subsequently accruing
obligations.
21.04. Tenant hereby waives all rights to any award in Condemnation,
including, without limitation, rights arising from termination of all or any
part of Tenant's leasehold interest. Tenant may, however, file a separate claim
for its fixtures (covered by Section 12.02) and relocation expenses, but not for
the value of the unexpired balance of the Term or any leasehold interest.
ARTICLE 22
LIENS
22.01. If, because of any act or omission of Tenant or anyone claiming
through or under Tenant, any mechanic's or other lien or order for the payment
of money shall be filed against the Demised Premises or the Building, or against
Landlord (whether or not such lien or order is valid or enforceable), Tenant
shall, at its expense, either post a bond or other security reasonably
satisfactory to Landlord in an amount sufficient to remove such lien or cause
the same to be canceled and discharged of record within thirty (30) days after
the date of filing thereof, and shall also indemnify and hold harmless Landlord
from and against any and all costs, expenses, claims, losses and damages,
including, without limitation, reasonable attorney's fees and all other costs
incurred by Landlord, in its sole discretion, to discharge and satisfy any such
lien or the underlying claim in the event Tenant fails to discharge such lien.
Nothing in the Lease nor any action or inaction by Landlord shall be construed
to grant to Tenant, expressly or impliedly, any right or authority to do
anything that might give rise to any lien, charge or other encumbrance upon
Landlord's estate in the Demised Premises.
ARTICLE 23
SURRENDER
23.01 Upon the expiration of the Term or any earlier termination of the
Lease, Tenant shall remove all exposed and concealed computer, telephone and
other communications wiring and cables and equipment from the plenum, and
Tenant's Property, shall return to Landlord the 19 access control cards referred
to in Section 1.08, and shall surrender the Demised Premises to Landlord
broom-clean and in good condition, ordinary wear and tear and damage from causes
beyond Tenant's reasonable control excepted. In the event of Tenant's failure to
so remove such equipment or Tenant's Property, Landlord shall have the option
either to retain such property without obligation to Tenant or to dispose
thereof at Tenant's expense, including all reasonable charges for removal of
wiring and equipment. In the event Tenant fails to return the access control
cards to Landlord in accordance herewith,
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Landlord shall charge Tenant for the replacement costs for same.
If Tenant retains possession of the Demised Premises or any part
thereof after the expiration of the Term or earlier termination of the Lease,
Tenant shall become a tenant from month-to-month until such possession shall
cease and Tenant shall pay to Landlord, on a daily basis, (i) an amount equal to
150% of the immediately preceding Fixed Rent for the time Tenant thus remains in
possession, (ii) all Additional Rent for such period, including any adjustment
of rents pursuant to Article 5, and (iii) all damages, consequential and direct,
sustained by Landlord by reason of Tenant's retention of possession.
Nothing contained in the Lease shall be construed as a consent by
Landlord to the occupancy or possession by Tenant of the Demised Premises beyond
the expiration or prior termination of the Term, and Landlord, upon such
expiration or prior termination of the Term shall be entitled to the benefit of
all legal remedies now in force or hereafter enacted relating to the speedy
repossession of the Demised Premises.
ARTICLE 24
TENANT'S DEFAULT OR BANKRUPTCY/LANDLORD'S DEFAULT
24.01. If any one or more of the following events (herein sometimes called
"Events of Default") occurs:
(a) If Tenant defaults in the payment of Fixed Rent or Additional
Rent, when due, and such default continues for five (5) days after notice from
Landlord to Tenant; or
(b) If Tenant defaults in the performance of any other obligation
hereunder (including, without limitation, compliance with the Rules and
Regulations annexed to the Lease) and such default continues for thirty (30)
days (or appropriate shorter period in the event of an emergency) after notice
from Landlord to Tenant (except for default, not involving an emergency, which
cannot diligently be cured within such thirty (30)-day period and which is
diligently cured by Tenant within a suitable longer period); or
(c) If a petition in bankruptcy, for a reorganization or for the
appointment of a receiver for all or any portion of Tenant's property is filed
against Tenant and is not discharged within sixty (60) days thereafter; or
(d) If Tenant acquiesces in the appointment of such a receiver, files
any such petition, makes an assignment for the benefit of its creditors, or
otherwise seeks the benefit of any insolvency laws.
Upon the occurrence of an Event of Default, Landlord, notwithstanding any other
right or remedy it may have under the Lease, at law or in equity, may terminate
the Lease, by notice to Tenant setting forth the basis therefor and to be
effective not less than five (5) days after the date of giving such notice,
whereupon the Lease shall terminate upon such effective date (with the same
effect as if such date were the date fixed herein for the natural expiration of
the Term), Tenant shall surrender
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the Demised Premises to Landlord, and Tenant shall have no further rights
hereunder but shall remain liable as hereinafter provided. In such event,
Landlord may, without further notice, enter the Demised Premises, repossess
same and dispossess Tenant and all other persons and property therefrom.
24.02. If Landlord so terminates the Lease, Tenant shall pay to Landlord,
as damages, any rent of which Tenant may have been relieved pursuant to any
provision of the Lease, and:
(a) If an Event of Default occurs pursuant to subdivision (c) or (d)
of Section 24.01 hereof, a sum which represents any excess of (i) the
aggregate of the Fixed Rent and Additional Rent for the balance of the Term
(as if the Lease were not so terminated) over (ii) the net fair rental
value of the Demised Premises at the effective date of such termination,
both discounted at the rate of eight (8%) percent per annum; and
(b) In all other cases, sums equal to the Fixed Rent and Additional
Rent, at such times as they would have been payable if not for such
termination of the Lease, less the net rents received by Landlord from any
reletting, after deducting from such rents all costs incurred in connection
with such termination and reletting (but Tenant shall not be entitled to
receive any excess of such net rents over such sums).
Landlord may commence actions or proceedings from time to time to
recover such damages or installments thereof. No provision hereof shall be
construed to preclude Landlord's recovery from Tenant of any other damages to
which Landlord may be entitled under applicable law.
In the event of a breach or threatened breach by Tenant of any of its
obligations under the Lease, Landlord shall also have the right of injunction.
The special remedies to which Landlord may resort hereunder are cumulative and
concurrent and are not intended to be exclusive of any other remedies or means
of redress to which Landlord may lawfully be entitled at any time, and Landlord
may invoke any remedy allowed at law or in equity as if specific remedies were
not provided for herein.
24.03. Tenant, on behalf of itself and all persons claiming through
Tenant, including creditors, waives all rights, under present or future laws,
to repossess the Demised Premises.
24.04. Neither Landlord's nor Tenant's failure to insist upon the strict
performance of the other's obligations hereunder or to exercise any remedy
consequent upon a default, nor Landlord's acceptance of any Fixed Rent or
Additional Rent during a continuance of any default of Tenant (with or without
knowledge thereof) shall constitute a waiver of any such obligations or default.
24.05. Rent (Fixed or Additional) paid more than three (3) business days
after receipt of notice that same is overdue shall bear interest at the
Citibank (New York) prime rate, plus 1% from the date of such notice until paid
(without prejudice to any other rights or remedies of Landlord).
Notwithstanding the foregoing, in the event that Tenant fails to pay Rent
(Fixed or Additional) within ten (10) days after
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the due date more than two (2) times in any twelve (12)-month period, then
thereafter such amount(s) shall bear interest at the Citibank (New York) prime
rate, plus one (1%) percent without the requirement of notice by Landlord and
without prejudice to any other rights or remedies of Landlord.
24.06. In the Event of Default under the Lease Landlord shall use
reasonable efforts to mitigate its damages thereunder.
24.07. The occurrence of any one or more of the following events shall
constitute an event of default by Landlord:
(a) The failure by Landlord to make any payment required to be made by
Landlord hereunder, as and when due, where such failure shall continue for
a period of ten (10) days after receipt of written notice thereof from
Tenant to Landlord.
(b) The failure by Landlord to observe or perform any of the
covenants, conditions or provisions of this Lease where such failure shall
continue for a period of twenty (20) days after receipt of written notice
thereof from Tenant to Landlord (except for a default which cannot
diligently be cured within such twenty (20)-day period and which is
diligently cured by Landlord within a suitable longer period.)
24.08. Upon the occurrence of an event of default under this Lease by
Landlord, then Tenant in addition to other rights or remedies it may have, at
Tenant's option, may set off any amount owed to Tenant by Landlord against any
rent or other payment due or to become due hereunder or perform, at Landlord's
reasonable expense, any obligations of Landlord (which Landlord has failed to
perform), in which event Tenant shall have the right to set off any reasonable
expense incurred thereby against any rent or other payment due or to become due
hereunder; provided, however, after the expiration of the cure period afforded
to Landlord pursuant to Section 24.07(b) hereof, Tenant shall give Landlord
twenty (20) days prior written notice of Tenant's intent to cure, whereupon
Landlord shall allow Tenant to cure or Landlord may elect to cure such alleged
defaults, without waiver of prejudice to Landlord's rights to file such against
Tenant to recover all losses, damages and expense (including reasonable
attorney's fees) incurred in curing such alleged defaults, filing law suit and
conducting litigation if Landlord prevails on its claim that the alleged default
was not a default of Landlord under the terms of the Lease. Notwithstanding
anything to the contrary contained in this Section 24.08, any and all rights of
Tenant contained in this Section or otherwise subject to this Section by the
terms of this Lease to set off from or to abate Fixed Rent or Additional Rent
payments due under this Lease, shall be limited to a maximum per month equal to
fifteen (15%) percent of such monthly amounts due hereunder from Tenant to
Landlord; provided, however, that if there are not enough months remaining in
the Lease Term (excluding any unexercised options to extend the Term) so that
Tenant may fully recover the amount owed, Tenant shall be entitled to increase
the set off so as to be able to recoup the full amount in equal monthly
installments over the balance of the Term of the Lease. If, at the end of the
Term (as may be extended or earlier terminated hereunder) Tenant has not
received the full value of its abatement, then at such time Landlord shall
promptly refund to Tenant any balance then owed to Tenant.
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ARTICLE 25
LANDLORD'S RIGHT TO PERFORM
TENANT'S OBLIGATIONS
25.01. If Tenant fails to perform any of its obligations hereunder and such
failure continues after any applicable grace periods (or an appropriate shorter
period in the event of an emergency) after notice thereof by Landlord, Landlord
may (but shall not be obligated to) perform such obligation, in which event the
cost of such performance, together with interest from the date of payment
thereof, at the Citibank (New York) prime rate, plus one (1%) percent, shall be
reimbursed by Tenant to Landlord upon demand (and shall constitute additional
rent). The performance by Landlord of such obligation of Tenant shall not
constitute a waiver of any right or remedy of Landlord arising from such failure
of Tenant.
ARTICLE 26
BROKER
26.01. Landlord and Tenant represent that they have dealt only with William
A. White/Grubb & Ellis ("Broker"), and with no other broker or salesperson in
connection with the Lease. Broker's commissions are to be paid in accordance
with the terms of Landlord's agreement, dated December 28, 1992, with Broker in
connection with this Lease. In the event Landlord does not make any of said
commission payments when due, and such default is not cured within thirty (30)
days after written demand from Broker, then in such event, upon notification to
Tenant of such election by Broker, Tenant shall pay directly to Broker the
commission payments in default out to the next rental payments due under the
Lease and, notwithstanding any contrary provision of the Lease, offset such
payments against rent due. Upon receipt of notice of such election from Broker,
Tenant shall promptly notify Landlord.
Should any claim for commissions in connection with the Lease be made
against Landlord by any other broker based on any acts of Tenant or its
representatives, including an exclusive brokerage arrangement (other than an
exclusive arrangement between the Landlord and a broker), Tenant shall indemnify
Landlord against all liability and expenses (including reasonable attorney's
fees) incurred in connection therewith. Should any such claim be made against
Tenant on account of any acts of Landlord or its representatives, Landlord shall
indemnify Tenant against all such liability and expenses (including reasonable
attorneys' fees).
ARTICLE 27
OMITTED
ARTICLE 28
NOTICES
28.01. All notices, demands, requests, approvals and consents hereunder
(collectively, "Notices") shall be in writing and shall be deemed to have been
properly made or given if delivered in person, by overnight courier or sent by
registered or certified mail, return receipt requested, as follows:
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To Landlord: WHITEWELD CENTRE, INC.
300 Tice Boulevard
Woodcliff Lake, NJ 07675
with copy to: WHITEWELD, BARRISTER & BROWN, INC.
345 Kinderkamack Road
Westwood, New Jersey 87675
with copy to: All Superior Mortgagees of which
Tenant has notice.
To Tenant: Kraft General Foods, Inc.
Three Lakes Drive
Northfield, Illinois 60093
Attn: Commercial and Industrial Real Estate Department
with copy to: Kraft General Foods, Inc.
Three Lakes Drive
Northfield, Illinois 60093
Attn: Legal Department, Real Estate Counsel
Either party may, by notice given pursuant to this Section, specify a different
address. Mailed notices shall be deemed to have been given as of the date which
is two (2) days after the date on which they are mailed. Overnight courier and
personally delivered notices shall be effective as of the date of delivery.
Notices may be given by an attorney-at-law or other authorized agent on behalf
of Landlord or Tenant with the same effect as if given by the party itself.
ARTICLE 29
FLOOR LOAD
29.01. Tenant shall not place a load upon any floor of the Demised
Premises exceeding the load specified in Exhibit B, or, if none is so specified,
then exceeding the load permitted by law or building design.
ARTICLE 30
MISCELLANEOUS
30.01. Tenant shall comply with the annexed Rules and Regulations (as
the same may be reasonably amended in accordance with its provisions), which
are an integral part of the Lease, which shall be non-discriminatorially
enforced and the violation of which by Tenant shall constitute an Event of
Default, as provided in Section 24.01 (b). Any reasonable costs incurred by
Landlord to compel compliance with such Rules and Regulations by Tenant shall
be repayable by Tenant to Landlord, on demand, as additional rent.
30.02. Tenant, within twenty (20) days after a request from Landlord,
shall execute and deliver to Landlord a statement in such form as may be
required by Landlord or a Superior Mortgagee, certifying, without limitation,
that (a) the Lease
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has not been modified and is in full force (or, if there have been
modifications, that the Lease is in full force as modified, and stating the
modifications), (b) the date to which the Fixed Rent has been paid, (c) (if any
option to extend the Term is provided for in the Lease) whether Tenant has
exercised its option to extend the Term, (d) whether or not, to the best of the
knowledge of the party executing such statement, Landlord is then in default in
the performance of any of its obligations under the Lease and, if so, specifying
each such default, (e) whether Tenant has any defenses, offsets or counterclaims
against Landlord with respect to the Lease or the Demised Premises, and if so,
specifying each such defense, offset or counterclaim, and (f) whether any
security has been deposited by Tenant with Landlord, and, if so, the amount
thereof; and any other facts within the knowledge of Tenant reasonably requested
by Landlord or a Superior Mortgagee.
If reasonably required in connection with a permitted assignment by Tenant,
Landlord, within twenty (20) days after a request from Tenant, shall execute and
deliver to Tenant a statement certifying the applicable information pursuant to
subdivisions (a), (c) and (f).
30.03. The term "Landlord" means the Landlord named herein and any
successor to its interest in the Lease. If Landlord assigns such interest and
the assignee assumes Landlord's obligations hereunder, Landlord shall thereupon
cease to be liable for any subsequently accruing obligations under the Lease,
which shall be the sole liability of the assignee of such interest.
30.04. Without limiting Article 8 hereof, the term "Tenant" means the
named Tenant herein, any permitted assignee of the Lease and/or any permitted
subtenant of all or any portion of the Demised Premises (without hereby creating
any relationship or privity between Landlord and such subtenant).
30.05. The term "Unavoidable Delays" means delays or prevention due to
strikes, lock-outs or other labor difficulties, acts of God, shortages of labor,
materials, supplies, fuel or utilities, governmental restrictions, enemy action,
war, civil commotion, fire or other casualty, emergency, holdover of tenants, or
any other causes beyond Landlord's or Tenant's reasonable control, as the case
may be.
30.06. Landlord and Tenant hereby waive trial by jury in any action or
proceeding and with respect to any counterclaim arising under or in connection
with the Lease.
30.07. The Lease shall be governed by the Laws of the State of New Jersey.
30.08. The invalidity or unenforceability of any provision of the Lease in
any instance shall have no effect upon the validity or enforceability of the
remainder of the Lease or the validity or enforceability of such provision in
any other instance.
30.09. The Lease contains the entire agreement between the parties
concerning the Demised Premises, and the parties acknowledge that its execution
has not been induced by any representation or warranty by Landlord or Tenant (or
any representative or broker) not set forth herein.
30.10. The Lease may not be modified or terminated (except as otherwise
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provided herein) and its provisions may not be waived except by a written
agreement signed by the parties.
30.11. The Lease shall be binding upon and inure to the benefit of the
parties and their respective heirs, administrators, successors, executors and
permitted assigns, and shall be deemed to run with the Land.
30.12. The captions herein are for convenience of reference only and shall
not be deemed to define, limit or describe the scope or intendment of any
provision of the Lease.
30.13. During the period when the Demised Premises are being prepared for
Tenant's occupancy and during Tenant's move-in, Tenant shall do nothing in or
about the Demised Premises which might create labor discord affecting Landlord
or the Building.
30.14. Tenant shall look solely to Landlord's estate and property in the
Land and Building (as the same may be subject to any ground leases or mortgages)
for the enforcement of any judgment or decree requiring the payment of money to
Tenant by reason of any default or breach by Landlord under the Lease. In no
event shall there be any personal liability on the part of Landlord (or any of
the entities comprising Landlord) beyond such estate and property and no other
assets of Landlord (or of any constituent entity thereof) shall be subject to
levy, execution, attachment or any other legal process.
30.15. Landlord and Tenant represent (each for itself) that they have full
authority to enter into the Lease and that the person or persons signing on
their behalf are duly authorized to execute the Lease with binding effect upon
Landlord and Tenant.
30.16. The Lease shall not become effective or binding until signed by
Landlord, and a counterpart, so signed, has been delivered to Tenant.
30.17. Neither the Lease nor any memorandum of lease shall be recorded.
30.18. Tenant's sole remedy in connection with any dispute as to
Landlord's reasonableness in exercising its judgment or withstanding its consent
or approval hereunder or in any separate agreement relating to the Lease (if
Landlord is required to act reasonably) shall be an action for an injunction, a
declaratory judgment or specific performance, all rights and claims to money
damages or other remedies hereby being waived by Tenant.
30.19. The Exhibits annexed hereto shall be deemed part of the Lease with
the same force as if set forth as numbered Articles herein.
30.20. Landlord shall furnish hot and cold water for drinking, lavatory
and toilet purposes.
30.21. Neither party shall (negligently or otherwise) cause or permit the
escape, disposal or release of any hazardous or toxic substances or materials at
or about the property. Neither party shall allow the storage or use of such
substances
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or materials in any manner not sanctioned by law and by the highest standards
prevailing in the industry for the storage and use of such substances or
materials, nor allow to be brought onto the Demised Premises any such materials
or substances. Without limitation, hazardous substances and materials shall
include those described in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901) et seq., and all applicable state and local laws, ordinances, rules and
regulations. If any lender or governmental agency shall ever require testing to
ascertain whether or not there has been a release of hazardous materials, the
test discloses that there has been a release of hazardous substances at or about
the property around or upon which the Building is situated and it is established
that the release of hazardous substances, if present, was due to the cause or
permission of Tenant, then to the extent of such fault, the reasonable costs
thereof shall be reimbursed by Tenant to Landlord, upon demand, as Additional
Rent, if such requirement applies to the Demised Premises. Otherwise, as between
Landlord and Tenant, such cost shall be borne by Landlord. In addition, the
parties shall execute affidavits, representations and the like, from time to
time, at the parties' request, concerning the parties' best knowledge and belief
regarding the presence of hazardous and toxic substances or materials on the
Demised Premises. Subject to the terms of the next two sentences, at all events,
Tenant shall indemnify and hold Landlord harmless from and against all
liability, damages, costs, claims, judgments and expenses arising out of or
relating to the presence, use or release of hazardous or toxic materials on the
Demised Premises caused by Tenant, Tenant's agents, contractors, employees,
licensees or invitees, while Tenant is in possession, or elsewhere if caused by
Tenant or persons acting under Tenant, or out of or relating to the violation of
or non-compliance with the provisions of this Article or of any applicable laws,
ordinances or rules or regulations, including but not limited to, the New Jersey
Environmental Cleanup Responsibility Act. Landlord warrants and represents that
the Demised Premises, the Building and the property are free from asbestos and
all other toxic or hazardous materials. Landlord agrees to indemnify and hold
Tenant harmless from and against all liability, damages, costs, claims,
judgments and expenses arising out of or relating to the presence, use or
release of hazardous or toxic materials on or about the property which does not
arise out of the acts or omissions of Tenant, its employees, agents or invitees.
The provisions of this Section 30.21 shall survive the expiration or earlier
termination of the Term.
ARTICLE 31
TENANT'S RIGHT TO TERMINATE LEASE
31.01. Tenant may terminate the Lease, effective as of sixty-one (61)
months after the Commencement Date, upon giving Landlord at least twelve (12)
months' advance notice, provided as follows:
(a) Tenant is not in default under the Lease beyond any applicable
grace period at the time of giving such notice or on the designated
termination date, and all monetary obligations of Tenant accruing to the
designated termination date are paid to Landlord on or before such date, or
if not then determinable, Tenant secures to Landlord the payment of such
undischarged obligations;
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(b) Tenant, in addition to all other monetary obligations, shall
pay to Landlord on or before the designated termination date that amount
representing the sum of (i) twelve (12) months' rental payments at the rate
then applicable, and (ii) the unamortized portion of the cost of Landlord's
Work, and (iii) the unamortized portion of any brokerage commission earned
and actually paid or obligated to be paid by Landlord, each amortized at a
rate of eight (8%) percent over the Initial Term. Such sum represents full
compensation to Landlord for the loss of its bargain and for its expenses
for reletting and loss of rents;
(c) All Lease provisions applicable as of the natural expiration
of the Lease shall apply to the effective earlier termination date; and
(d) Tenant shall deliver the Demised Premises to Landlord vacant
and broom clean and in accordance with Article 23 on the designated
termination date.
ARTICLE 32
TENANT'S OPTION TO EXTEND TERM
32.01. Tenant may extend this Lease for two (2) additional terms of three
(3) years each ("Extended Terms"), to commence on the date of the expiration of
the Term and the first Extended Term, respectively, subject to compliance with
the following conditions precedent:
A. Tenant, at the time of exercising each option as well as at the
time fixed for the commencement of each Extended Term, shall not be in
default under the Lease and the Lease shall at such times be in force;
B. Tenant shall have given notice of election to extend no later than
twelve (12) months prior to the date of expiration of the Term or of the
first Extended Term, as the case may be. The failure to do so shall be
deemed an irrevocable waiver by Tenant of its right to extend or further
extend the Term, as the case may be.
C. The Fixed Rent for each Extended Term, if any, shall be ninety-five
(95%) percent of the then fair market rental value of the Demised Premises.
If the parties are unable to agree as to such fair market rental value not
later than six (6) months before the commencement date of the first or
second Extended Term, as the case may be, if any, each party shall promptly
appoint a qualified real estate appraiser or leasing broker ("appraiser")
having at least ten (10) years' full-time commercial real estate (rental
and fee) appraisal experience in the area in which the Office Building is
located. If either party fails to designate an appraiser within ten (10)
days after demand by the other party, the appraiser appointed by the other
party shall alone make the determination. The appraisers appointed by the
parties shall meet and promptly fix the fair market rental value of the
Demised Premises as of the commencement date of such Extended Term. If they
are unable to do so within thirty (30) days after the appointment of the
second appraiser, they shall select a third appraiser with similar
qualifications. If they are unable to agree on a third appraiser, either
party may apply to the assignment judge of the
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Superior Court of the county in which the Office Building is located, for
the selection of a third appraiser having the indicated qualifications and
who has not previously acted for either party in any capacity. Within
thirty (30) days after selection of the third appraiser, the appraisers
shall meet and, by majority vote, determine the fair market rental value of
the Demised Premises.
In establishing the fair market rental value, the Demised
Premises shall be considered as if being leased at the commencement of the
first or second Extended Term, as the case may be, and then constituted but
unoccupied, to a third party, and the parties or the appraisers, as the
case may be, shall be guided principally by rentals then being charged for
office space of similar rentable area, layout and location in buildings of
nearly comparable construction, size and age, located in comparable areas
in northern New Jersey. For such purposes, any building owned or leased by
Landlord, alone or with others, may be considered. Any special features of
the Demised Premises and the accessory facilities (but not Tenant's
Property) shall be considered and the appraisers shall receive and consider
all pertinent evidence and testimony offered by the parties or their
representatives, including evidence of Landlord's operating expenses and
real estate taxes.
If a majority of the appraisers are unable to agree on the fair
market rental value, the mean average of the appraisals shall be taken as
such value, provided that if either the highest or the lowest appraisal is
more than fifteen (15%) percent above or below the middle appraisal, such
highest or lowest appraisal shall be disregarded and the mean average of
the remaining appraisals shall be used and if both the highest and lowest
appraisals are thus disregarded, the middle appraisal shall govern. The
parties shall bear the costs of their own appraisers and shall share the
costs of the third appraisers.
Ninety-five (95%) percent of the fair market rental value, as so
determined, shall constitute the Fixed Rent for the Extended Term.
D. All of the provisions of the Lease (other than such as are
manifestly or by fair construction inapplicable or inconsistent) shall
apply to each of the Extended Terms, except that the Fixed Rent shall be as
above provided and Tenant shall have no right to any further extension.
E. Tenant shall pay for its electricity as provided in
Article 14.
F. The Fixed Rent for each of the Extended Term shall be payable
in addition to Additional Rent, as defined in Section 1.04(b), and shall be
subject to annual adjustment in accordance with Article 5.
ARTICLE 33
TENANT'S RIGHT OF FIRST REFUSAL
33.01. During the term of the Lease, as it may be extended, Landlord shall
apprise Tenant of square feet of contiguous space (the "Offered Space")
on the second floor of the South Wing of the Building, as set forth in Exhibit D
attached hereto, should the same become available for leasing after the
expiration of any
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<PAGE> 46
existing leases of the Offered Space (including any extended terms and any
rights of first refusal with respect thereto). Subject to any existing tenant's
rights of first refusal, Tenant shall have the option, exercisable by notice to
Landlord sent within five (5) business days after receipt of Landlord's
notification of availability of the Offered Space, to lease the Offered Space
"as is" for the balance of the Term on the then standard terms for leases in the
Building, other than rental and business terms requiring modifications by reason
of different or peculiar factors relating to the Offered Space. The rental for
the Offered Space shall be the then fair market rental value thereof as agreed
upon by Landlord and Tenant at such time. Such rental value, if not agreed to by
the parties, shall be subject to determination as set forth in Section 32.01
above. If Tenant shall fail to exercise its option within the five (5)-business
day period above provided, Tenant's right of first refusal shall terminate and
be of no further force or effect, and Landlord shall be free to lease such
Offered Space to any other party on such terms as Landlord in its sole
discretion shall determine.
The fair market rental value, as so determined, shall constitute the Fixed
Rent for the Offered Space.
ARTICLE 34
HEALTH AND FITNESS CLUB
34.01. During the first anniversary year of the Term only, Tenant shall
be entitled to enroll no more than 19 employees as members of the Health and
Fitness Club located in the Building at an annual cost of $200 per employee.
Membership fees for (i) all other employees during the first anniversary year
of the Term, and (ii) all employees for each anniversary year thereafter, shall
be the then prevailing rates for such membership.
IN WITNESS WHEREOF, Landlord and Tenant have executed the Lease the
date first above written.
ATTEST: WHITEWELD CENTRE, INC.
/s/ /s/ (L.S.)
(SEAL) ------------------------- By: ----------------------------
ATTEST: KRAFT GENERAL FOODS, INC.
(SEAL) /s/ Sandra F. Hermil By: /s/ Mike Cissell (L.S.)
------------------------- ----------------------------
Assistant Controller
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<PAGE> 47
STATE OF NEW JERSEY )
: ss.:
COUNTY OF BERGEN )
I CERTIFY that on this day of , 1992, edged
under oath, to my satisfaction, that this person signed, sealed and delivered
the attached documents as of WHITEWELD CENTRE, INC.; that the proper
corporate seal was affixed; and that this document was signed and made by the
corporation as its voluntary act and deed by virtue of authority from its Board
of Directors.
Sworn to and subscribed before
me, the date aforesaid.
STATE OF ILLINOIS )
: ss.:
COUNTY OF COOK )
I CERTIFY that on this 29th day of December, 1992, Mike Cissell personally
came before me and this person acknowledged under oath, to my satisfaction, that
this person signed, sealed and delivered the attached document as Dir., R.E. of
KRAFT GENERAL FOODS, INC.; that the proper corporate seal was affixed; and that
this document was signed and made by the corporation as its voluntary act and
deed by virtue of authority from its Board of Directors.
Sworn to and subscribed before
me, the date aforesaid.
- ---------------------------------
OFFICIAL SEAL
Deborah A. McCarthy /s/ Deborah A. McCarthy
NOTARY PUBLIC STATE OF ILLINOIS
MY COMMISSION EXPIRES 1/29/94
- ---------------------------------
35
<PAGE> 48
RULES AND REGULATIONS
1. Tenant shall not (a) obstruct or permit its employees, agents,
servants, invitees or licensees to obstruct, in any way, the sidewalks,
entrances, passages, fire exits, corridors, halls, stairways or elevators of
the Office Building, or use the same in any way other than as a means of
passage to and from the offices of Tenant; (b) bring in, store, test or use any
materials in the Office Building which could cause a fire or an explosion or
produce any fumes or vapor; (c) make or permit any improper noises in the
Office Building; (d) smoke in any elevator; throw substances of any kind out of
windows or doors, or down the passages of the Office Building, or in the halls
or passageways, sit on or place anything upon the window sills; or (e) clean
the windows.
2. Waterclosets and urinals shall not be used for any purpose other than
those for which they were constructed, and no sweepings, rubbish, ashes,
newspaper or any other substances of any kind shall be thrown into them. Waste
and excessive or unusual use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit light
into the halls or other places of the Office Building shall not be obstructed.
4. No signs, lettering, advertisements or notices shall be inscribed,
painted, affixed or displayed in, on, upon or behind any windows. Tenant's
interior signage which is exterior to the Demised Premises shall conform to
Building standard, and shall, in any event, be subject to Landlord's prior
written consent, which shall not be unreasonably withheld or delayed.
5. No curtains, blinds, shades or screens shall be attached to or hung
in, or used in connection with, any window or door of the Demised Premises,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, provided that on exterior windows or glass there shall
be no deviation from the Building standard. Such curtains, blinds and shades
must be of a quality, type, design and color, and attached in a manner approved
by Landlord.
6. No bottles, parcels, or other articles shall be placed on the
windowsills, in the halls, or in any other part of the Building (other than the
Demised Premises). No articles of Tenant's Property shall be placed against the
glass walls of the Demised Premises exposed to the Atrium of the Building. No
article shall be thrown out of the doors or windows of the Demised Premises.
7. No contract of any kind with any supplier of towels, ice, toilet
articles, waxing, rug shampooing, venetian blind washing, furniture polishing,
lamp servicing, cleaning of electrical fixtures, removal of waste paper,
rubbish or garbage, or other like service shall be entered into by Tenant.
Tenant shall not employ any person or persons for the purpose of cleaning the
Demised Premises, without the prior written consent of Landlord, which shall
not be unreasonably withheld or delayed. Tenant may install vending machines
and shall use Landlord's vendor, if competitive.
8. Plumbing facilities shall not be used for any purpose other than
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<PAGE> 49
those for which they were constructed; and no sweepings, rubbish, ashes,
newspaper or other substances of any kind shall be thrown into them. Waste and
excessive or unusual amounts of electricity or water is prohibited. When
electric wiring of any kind is introduced, it must be connected as directed by
Landlord, and no stringing or cutting of wires will be allowed, except with the
prior written consent of Landlord, and shall be done only by contractors
approved by Landlord. No tenant shall lay floor covering so that the same shall
be in direct contact with the floor of the Demised Premises; and if floor
covering is desired to be used, an interlining of builder's deadening felt shall
be first affixed to the floor by a paste or other material soluble in water, the
use of cement or other similar adhesive material being expressly prohibited.
9. Landlord shall have the right to prescribe the weight, size and
position of all safes and other bulky or heavy equipment and all freight brought
into the Office Building by any tenant; and the time of moving the same in and
out of the Office Building. All such moving shall be done under the supervision
of Landlord. Landlord will not be responsible for loss or damage to any such
equipment or freight from any cause; but all damage done to the Office Building
by moving or maintaining any such equipment or freight shall be repaired at the
expense of Tenant. All safes shall stand on a base of such size as shall be
designated by Landlord. Landlord reserves the right to inspect all freight to be
brought into the Office Building and to exclude from the Office Building all
freight which violates any of these Rules and Regulations or the Lease of which
these Rules and Regulations are a part.
10. No machinery of any kind or articles of unusual weight or size
will be allowed in the Office Building, without the prior written consent of
Landlord. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense, in settings sufficient, in Landlord's
judgment, to absorb and prevent vibration, noise and annoyance to other tenants.
11. No additional lock or locks shall be placed by Tenant on any
door or window in the Office Building, without the prior written consent of
Landlord. Twenty-five keys will initially be furnished to Tenant by Landlord;
two additional keys will be supplied to Tenant by Landlord, without charge; any
additional keys requested by Tenant shall be paid for by Tenant. Tenant, its
agents and employees, shall not have any duplicate key made and shall not
change any lock. All keys to doors and washrooms shall be returned to Landlord
on or before the end of the term of this Lease, and, in the event of a loss of
any keys furnished, Tenant shall pay Landlord the cost thereof. Tenant shall,
on the termination of Tenant's tenancy, deliver to Landlord, all keys to any
space within the Building, either furnished to or otherwise procured by Tenant,
and in the event of the loss of any keys furnished, Tenant shall pay to
Landlord the cost thereof.
12. No bicycles, vehicles (except wheelchairs) or animals or pets of
any kind shall be brought into or kept in or about the Demised Premises.
13. The requirements of Tenant will be attended to only upon
application at the office of Landlord. Employees of Landlord shall not perform
any work for Tenant or do anything outside of their regular duties, unless
under special instructions from Landlord.
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14. The Demised Premises shall not be used for lodging or sleeping
purposes, and cooking therein is prohibited, but Tenant may use a microwave
oven.
15. Tenant shall not conduct, or permit any other person to conduct, any
auction upon the Demised Premises; manufacture or store goods, wares or
merchandise upon the Demised Premises (other than as provided in Section 2.01
of the Lease), without the prior written approval of Landlord, except the
storage of usual supplies and inventory to be used by Tenant in the conduct of
its business at the Demised Premises; permit the Demised Premises to be used
for gambling; make any unusual noises in the Office Building; permit to be
played any musical instrument in the Demised Premises; permit to be played any
radio, television, recorded or wired music in such a loud manner as to disturb
or annoy other tenants; or permit any odors to emanate from the Demised
Premises; or otherwise interfere with other tenants or occupants of the
Building (or those having business with them).
16. No awnings, air conditioning units or other fixtures or projections
shall be attached to the outside walls, windows or window sills of the Office
Building.
17. Canvassing, soliciting and peddling in the Office Building are
prohibited, and Tenant shall cooperate to prevent same.
18. There shall not be used in the Demised Premises or in the Office
Building either by Tenant or by others in the delivery or receipt of
merchandise, supplies or equipment, any hand trucks except those equipped with
rubber tires and side guards. No hand trucks will be allowed in passenger
elevators.
19. OMITTED.
20. Landlord shall have the right to prohibit any advertising by Tenant
which in Landlord's opinion tends to impair the reputation of the Office
Building or its desirability for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
21. Landlord hereby reserves to itself any and all rights not granted to
Tenant hereunder, including, but not limited to, the following rights which are
reserved for Landlord's purposes in operating the Office Building: (a) the
exclusive right to the use of the name of the Office Building for all purposes,
for himself or anyone he might designate, except that Tenant may use the name as
its business address and for no other purpose; (b) the right to change the name
or address of the Office Building, without incurring any liability to Tenant for
so doing, other than to compensate Tenant for letterhead and business cards; (c)
the right to install and maintain a sign or signs on the exterior of the Office
Building; (d) the executive right to use or dispose of the use of the roof of
the Office Building; (e) the right to limit the space on the directory of the
Office Building allotted to Tenant; (f) the right to grant to anyone the right
to conduct any particular business or undertaking in the Office Building.
22. Tenant shall list all articles to be taken from the Office Building
(other than those taken out in the usual course of business of Tenant) on
Tenant's
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letterhead, or a blank which will be furnished by Landlord. Such list shall be
presented at the office of the Office Building for approval before such
articles are taken from the Office Building.
23. Except as provided in Article 35, Tenant shall have the nonexclusive
right to use in common with Landlord and other tenants of the Office Building
and their employees and invitees the portion of the parking area provided by
Landlord for the common parking of passenger automobiles. Landlord may issue
parking permits, install a gate system, and impose any other system as Landlord
deems necessary for the use of the parking area. Tenant agrees that it and its
employees and invitees shall not park their automobiles in parking spaces
allocated to others by Landlord and shall comply with such rules and regulations
for use of the parking area as Landlord may from time to time prescribe.
Landlord shall not be responsible for any damage to or theft of any vehicle in
the parking area and shall not be required to keep parking spaces clear of
unauthorized vehicles or to otherwise supervise the use of the parking area.
Landlord reserves the right to change any existing or future parking area, roads
or driveways, and may temporarily revoke or modify the parking rights granted to
Tenant hereunder for the purpose of undertaking any repairs or alterations it
deems necessary to the parking area, roads and driveways. Landlord shall use its
best efforts to minimize the requirement for any such revocation or modification
of such parking rights.
24. No Common Office Facilities within the Office Complex shall be
obstructed or encumbered by any Tenant or used for any purpose other than
ingress and egress to and from the Demised Premises, and no Tenant shall permit
any of its employees, agents, licensees or invitees to congregate or loiter in
any of the Common Office Facilities. No Tenant shall invite to, or permit to
visit, the Demised Premises, persons in such number or under such conditions as
may interfere with the use and enjoyment by others of the Common Office
Facilities. Fire exits and stairways are for emergency use only, and they shall
not be used for any other purposes by any tenant, to the employees, agents,
licensees or invitees of Tenant. Landlord reserves the right to control and
operate, and to restrict and regulate the use of, the Common Office Facilities
and the public facilities, as well as facilities furnished for the common use of
tenants, in such manner as it deems best for the benefit of the tenants
generally, including the right to allocate certain elevators for delivery
service, and the right to designate which Office Building entrances shall be
used by persons making deliveries in the Office Building. No doormat of any kind
whatsoever shall be placed or left in any public hall or outside any entry door
of the Demised Premises.
25. Tenant shall, at all times maintain the Demised Premises in a neat,
clean and sanitary condition.
26. Landlord reserves the right to exclude from the Building between the
hours of 6:00 p.m. and 8:00 a.m., after 2:00 p.m. Saturdays, and at all hours on
Sundays and Legal Holidays, all persons who do not present a pass to the
Building signed by the Tenant. Each tenant shall be responsible for all persons
for whom such a pass is issued and shall be liable to the Landlord for the acts
of such persons.
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EXHIBIT "C"
JANITORIAL SERVICES
Nightly Services:
1. Empty and clean ash trays.
2. Empty waste baskets.
3. Clean cigarette urns.
4. Remove trash to areas designated.
5. Wipe drinking fountains.
6. Sweep floors.
Weekly Services:
1. Dust desks and tables.
2. Dust desk accessories not of material value and replace in proper
place.
3. Dust cabinets, files, chairs and window sills.
4. Vacuum carpets.
Outside Service, as required:
1. Sweep driveways - curbs.
2. Sweep and clean sidewalks.
3. Snow removal from driveways, sidewalks, steps and parking area.
Occasional Service, when necessary:
1. Dust paneling.
2. Dust picture frames.
3. Dust diffusers.
4. High dust door tops, tops of partitions and high ledges.
5. Damp mop floor.
Nightly Service - Rest Room Area (on floor leased by Tenant):
1. Sweep, mop and sanitize floors.
2. Clean commodes and toilet seats.
3. Empty and clean towel and sanitary disposal receptacles.
4. Clean urinals.
5. Clean mirrors.
6. Clean sinks.
7. Sanitize plumbing fixtures.
Occasional Service - Rest Room Area (on floor leased by Tenant):
1. High dust walls and ceilings.
2. Completely clean ceramic tile.
3. Replenish soap, toilet tissue and paper towels.
4. Spot clean ceramic wall tiles.
Public Areas and Multiple Tenancy Floors - Supplemental Service:
1. Flooring on stairs, corridors, foyers and elevators washed and
waxed as necessary.
2. Elevator, stairway and utility doors washed with clear water or
approved cleanser, as necessary.
3. Dust and clean electric fixtures and fittings in public corridors,
foyers, stairways, as necessary.
WINDOW CLEANING SERVICE:
Exterior windows and glass and interior doors and partition glass will
be washed inside and outside as required, but not more than four (4)
times per year.
<PAGE> 53
KGF Sublease Premises: Portion of the Second Floor
Entire Premises Whiteweld Centre, Inc.
300 Tice Boulevard
Woodcliff Lake, New Jersey 07675
Date: December 23, 1994
SUBLEASE AGREEMENT
This Sublease Agreement (this "Sublease") is made and entered into as of
the 23 day of December, 1994, by and between KRAFT GENERAL FOODS, INC., a
Delaware corporation ("Sublessor"), Three Lakes Drive, Northfield, Illinois
60093, and MEDCO CONTAINMENT SERVICES, INC., a Delaware corporation
("Sublessee"), 100 Summit Avenue, Montvale, New Jersey 07645 (Sublessor and
Sublessee hereinafter collectively referred to as the "Parties" and individually
referred to as "Party").
WITNESSETH:
WHEREAS, Sublessor, as tenant, and Whiteweld Centre, Inc., a New Jersey
corporation, as landlord ("Lessor"), have heretofore entered into that certain
Lease (the "Master Lease"), dated as of December 28, 1992, providing for the
leasing of certain space, totalling approximately 19,374 rentable square feet,
and improvements therein, located at Whiteweld Centre, 300 Tice Boulevard,
Woodcliff Lake, New Jersey 07675 and more particularly described in the Master
Lease (collectively the "Premises") for a lease term commencing April 1, 1993
and ending March 31, 2001, unless sooner terminated as provided in the Master
Lease:
WHEREAS, Sublessor and Sublessee previously have entered into that certain
Sublease Agreement (the "Prior Sublease") dated April 11, 1994, a copy of which
is attached hereto as Exhibit A, whereby Sublessor subleased to Sublessee the
Premises for a sublease term commencing April 15, 1994 and ending March 1,
2001, unless sooner terminated as provided in the Prior Sublease; and
<PAGE> 54
WHEREAS, Sublessor and Sublessee desire to terminate the Prior Sublease and
execute a new sublease with respect to the Premises upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing preambles, the payment of
Ten Dollars ($10.00) by Sublessee to Sublessor, the occupancy of the Premises by
Sublessee pursuant to the terms hereof, the covenants and agreements hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereby covenant, acknowledge,
represent and agree as follows:
1. TERMINATION OF THE PRIOR SUBLEASE. Sublessor and Sublessee hereby
agree that, as of the date hereof, the Prior Sublease shall be terminated and
shall be null and void and of no further force and effect regarding the rights,
duties and obligations of the Parties with respect to the subject matter hereof
(except for any unfulfilled indemnities and obligations as stated in Paragraph
31(i) of the Prior Sublease to survive the termination thereof), and the rights,
duties and obligations of the Parties with respect to the subject matter hereof
shall be governed hereafter by the terms and provisions of this Sublease.
2. DEMISE: TERM. Sublessor hereby subleases the Premises to Sublessee,
and Sublessee hereby subleases the Premises from Sublessor, for a term
commencing as of the date on which Sublessee shall receive a fully executed copy
of the Recognition and Attornment Agreement attached hereto as Exhibit B (the
"Attornment Agreement") (hereinafter such date shall be referred to as the
"Sublease Commencement Date"), and expiring March 31, 2001, or on such earlier
date upon which said term may expire or terminate (the "Sublease Term") pursuant
to any of the conditions of limitation or other provisions of the Master Lease
or this Sublease or pursuant to the provisions of any present or future
constitution, law, statute, ordinance, rule, regulation, other governmental
order or controlling judicial determination of any federal, state, local,
municipal or other governmental body, agency or authority having or asserting
jurisdiction and all departments, commissions, boards and officers thereof
(collectively the "Laws"). Unless expressly stated to the contrary herein,
Sublessee and Sublessor agree that no extension rights or renewal options have
been granted to Sublessee.
3. TERMINATION OPTION. Sublessee shall have the right, in its sole
discretion, to terminate this Sublease effective March 31, 1998, upon (i) not
less than twelve (12) months prior written notice of such termination to
Sublessor and (ii) payment of a termination fee to Sublessor in the amount of
One Hundred Fifty Thousand and no/100 Dollars ($150,000.00), payable to
Sublessor not less than six (6) months prior to such termination date.
4. RENT. Sublessee agrees to pay to Sublessor, without previous demand
therefor and without set-off, abatement, credit, deduction or claim of offset,
except as provided in Paragraph 5 below, annual base rent for the Premises
("Base Rent") in the amount of Two Hundred Sixty One Thousand Five Hundred
Forty-Nine and no/100 Dollars ($261,549.00).
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<PAGE> 55
payable in equal consecutive monthly installments of Twenty-One Thousand Seven
Hundred Ninety-Five and 75/100 Dollars ($21,795.75) ($1.125 per square foot),
payable in lawful money of the United States of America, in advance, on the
first day of each month commencing on the Sublease Commencement Date, and
continuing on the first day of each month thereafter until March 31, 1998 or the
earlier termination of this Sublease; thereafter, Sublessee shall pay to
Sublessor Base Rent in the amount of Two Hundred Eighty Thousand Nine Hundred
Twenty-Three and no/100 Dollars ($280,923.00), payable in equal consecutive
monthly installments of Twenty-Three Thousand Four Hundred Ten and 25/100
Dollars ($23,410.25) ($1.21 per square foot), in advance, on the first day of
each month for the period commencing April 1, 1998, and continuing on the first
day of each month thereafter until the expiration or earlier termination of this
Sublease. Base Rent and all other amounts due Sublessor hereunder shall be
payable to Sublessor at the address of Sublessor set forth in Paragraph 29 of
this Sublease or at such other address as Sublessor may from time to time
designate by notice to Sublessee. In the event the Sublease Term commences or
expires on any day other than the first or last day of a month, respectively,
then the Base Rent for such month shall be paid for the fraction of the month
during which a portion of the Sublease Term exists. In addition to the Base
Rent, Sublessee agrees to pay to Sublessor, as additional rent (the "Sublease
Additional Rent"), the sums specified in Paragraph 11 and otherwise in this
Sublease, in the same manner as provided for the payment of the Base Rent
herein.
5. RENT ABATEMENT. Notwithstanding anything to the contrary contained in
Paragraph 4 above, Sublessee shall be entitled to an abatement of Base Rent in
an amount equal to Ninety Thousand Two Hundred Ninety-Nine and 63/100 Dollars
($90,299.63), which represents an adjustment of Base Rent payable by Sublessee
to Sublessor, retroactive to the commencement date of the Prior Sublease, which
amount shall be credited against Sublessee's rental obligations next becoming
due hereunder until such abatement amount has been fully exhausted.
Additionally, in the event Sublessee fails to exercise its termination option
provided in Paragraph 3 above, and provided Sublessee has paid its broker the
balance of its commission due in connection herewith, Sublessee shall be
entitled to an abatement of Base Rent in an amount equal to Thirty-Four Thousand
Six Hundred Thirty-Eight and 45/100 ($34,638.45), which amount shall be
credited, commencing as of April 1, 1998, against Sublessee's rental obligations
next becoming due hereunder until such abatement amount has been fully
exhausted.
6. SECURITY DEPOSIT. [Intentionally Deleted]
7. ASSIGNMENT; SUBLETTING. Sublessee will not sublet the Premises, or any
portion thereof, or assign this Sublease in whole or in part, for collateral
purposes or otherwise, or permit use or occupancy of the Premises, or any
portion thereof, by others without the prior written consent of Sublessor in
each instance being first obtained, which consent shall not be unreasonably
withheld provided Sublessee remains liable under this Sublease; and if Sublessee
shall not remain liable under this Sublease, Sublessor may withhold its consent
in its sole discretion and with or without cause or reason. In the event
Sublessee desires to assign this
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<PAGE> 56
Sublease or further sublet all or any part of the Premises to (a) any entity
resulting from a sale of assets, merger or consolidation with Sublessee or (b)
its parent or any subsidiary or affiliate of Sublessee, Sublessor shall be
deemed to have consented to such assignment or subletting; provided, however,
that (i) Sublessee shall provide Sublessor with thirty (30) days prior written
notice of said assignment or sublease, (ii) said assignment or sublease shall
not release Sublessee from any of its liabilities or obligations pursuant to the
terms of this Sublease, and (iii) such sub-sublessee or assignee shall execute
and deliver to Sublessor a written acceptance and assumption of the rights,
duties and obligations of Sublessee hereunder. However, any assignment or
sublease under this Paragraph 7 is further subject to the consent of the Lessor
under the terms and conditions of the Master Lease. For the purposes of this
Paragraph 7, the sale of stock of Sublessee or its parent shall not be deemed an
assignment. In the event Sublessee shall assign or sublet all or any part of the
Premises, such assignment, subletting, or grant of any other right of occupancy
shall not be construed as relieving Sublessee from any liability under this
Sublease or from responsibility for obtaining Sublessor's prior written consent
to any further assignment, subletting or occupancy.
8. REFERENCE TO MASTER LEASE; SUBORDINATION; ESTOPPEL. Sublessee hereby
acknowledges that it has received and fully reviewed a copy of the Master Lease,
a copy of which is attached hereto as Exhibit C. Sublessee furthermore hereby
assumes and agrees to fully adhere to, perform and comply with all covenants,
agreements, terms, provisions, conditions, duties and obligations contained in
the Master Lease and imposed upon the tenant named therein (other than the
payment of the base rent and additional rent and Sublessor's termination option
specified therein) as fully and completely as though it were the tenant named
therein. Sublessee acknowledges and agrees that the lien of this Sublease is,
and at all times shall be, expressly subject and subordinate to the Master
Lease, and all present or future (i) ground and underlying leases of all or any
portion of the Premises, (ii) mortgages or trust deeds which affect all or any
portion of the Premises, (iii) advances under such mortgages or trust deeds and
(iv) renewals, modifications, replacements and extensions of any such lease,
mortgage or trust deed. Upon the request of Sublessor, Sublessee shall execute
and deliver, within ten (10) days after receipt of the request, such
certificates of subordination and estoppel as reasonably may be requested by
Sublessor, or Lessor under the Master Lease, to evidence the subordination set
forth above and provide information concerning the status of this Sublease.
9. INDEMNIFICATION. The rights and liabilities of the Parties with respect
to indemnification, unless otherwise provided herein, shall be controlled by the
terms and definitions of Article 19 of the Master Lease except that "Lease"
shall mean "Sublease" and "Master Lease".
10. HAZARDOUS MATERIALS. Sublessor represents and warrants that Sublessor
did not introduce or bring any hazardous material (hereinafter defined) onto the
Premises prior to the commencement date of the Prior Sublease. Sublessor further
represents and warrants that, to the best of its knowledge the Premises were
free of hazardous material prior to the
4
<PAGE> 57
commencement date of the Prior Sublease. Sublessor shall indemnify, hold
harmless and defend Sublessee from and against any and all actions, claims,
costs, damages, demands, expenses (including reasonable attorneys' fees),
inquiries, judgments, liabilities, losses and suits with respect to and arising
out of any breach of its representations and warranties contained under this
Paragraph 10. Sublessee hereby indemnifies Sublessor and Lessor and agrees to
defend and hold Sublessor and Lessor harmless from and against any and all
actions, claims, costs, damages, demands, expenses (including attorneys' fees),
injuries, judgments, liabilities, losses and suits of any and every kind,
whatsoever paid, sustained, suffered or incurred, including all foreseeable and
all unforeseeable damages arising out of or in connection with, or as a direct
or indirect result of, Sublessee's or its agents', suppliers', guests',
employees', invitees' or contractors' use, manufacture, generation, storage,
disposal, release or presence, on or under the Premises, or Sublessee's or its
agents', suppliers', guests', employees', invitees' or contractors'
transportation to, across, or from the Premises, of any hazardous material (as
defined herein), or the escape, seepage, leakage, spillage, discharge, emission,
discharging or release of any hazardous material introduced by Sublessee, its
agents, employees, designees, invitees or guests, or allowed to be introduced by
Sublessee onto the Premises, Building or the land on which the same are located.
As used herein, the term "hazardous material" shall mean petroleum or any
fraction thereof, natural gas, liquefied synthetic gas, any mixture of natural
and synthetic gas, and asbestos, and any material defined as "hazardous
substances," "hazardous waste," "hazardous constituents," "solid waste,"
"hazardous materials," "extremely hazardous waste," or "toxic substances," or
words of similar meaning or import in any federal, state or local statute, rule
or regulation, as they may be amended, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 6901 et seq., and in the regulations
adopted and publications promulgated pursuant to said laws (the "Environmental
Laws").
11. TAXES, OPERATING EXPENSES AND OTHER CHARGES. During the term of this
Sublease (comprised of the Sublease Term and any and all extensions, renewals
or modifications of this Sublease which may be granted by Sublessor,
hereinafter referred to as the "Term"), Sublessee shall pay Sublessor, as
Sublease Additional Rent, an amount reasonably estimated from time to time by
Lessor under the Master Lease or by Sublessor prior to or during any calendar
year in the Term and communicated to Sublessee by written notice (an
"Estimate"), as being equal to the Taxes and Operating Expenses (as defined in
Article 5 of the Master Lease) and all other impositions, assessments and
charges incurred by Lessor in its management, control, operation, maintenance,
leasing and repair of the Premises and other amounts specified in the Master
Lease relating to the management, control, operation, maintenance, leasing and
repair of the Premises and the property of which the Premises are a part, the
charge for which is passed through to Sublessor, as tenant, under the Master
Lease ("Other Charges"), for each calendar year of the Term in excess of the
amount of such Taxes, Operating Expenses and Other Charges for the twelve (12)
month period beginning April 11, 1994 ("Sublease Base Year") provided that the
amount to be paid by Sublessee with respect to each of the calendar years
during which the Term begins and ends shall be apportioned pro rata between
Sublessor and
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Sublessee on the basis of the number of days of the Term falling within said
calendar years ("Estimated Expenses"). All amounts to be paid by Sublessee
hereunder shall be paid in monthly installments in advance on the first day of
each calendar month during each calendar year of the Term in an amount
sufficient to satisfy payment of the Estimated Expenses as based on the Estimate
and all other payments described above. Upon receipt of an expense statement
from Lessor with respect to actual Taxes, Operating Expenses and Other Charges,
Sublessor shall deliver the same to Sublessee with a detailed statement setting
forth (i) Sublease Base Year Taxes, Operating Expenses and Other Expenses and
(ii) the amount of Sublease Additional Rent previously paid by Sublessee to
Sublessor for the period of time covered by such expense statement. If
Sublessee's payments under this Paragraph 11 exceed Sublessee's share as
indicated on said statement, Sublessee shall be entitled to credit the amount of
such overpayment against Sublessee's share of such Taxes, Operating Expenses or
Other Charges, as the case may be, next falling due. If such overpayment occurs
in the final year of the Term, Sublessee has vacated the Premises and is not in
default hereunder or under the Master Lease, Sublessor shall pay to Sublessee
the amount of the overpayment (or the balance thereof not used by Sublessor to
cure any Sublessee defaults hereunder or under the Master Lease) within thirty
(30) days of the date of the later to occur of (i) expiration or other
termination of this Sublease, (ii) vacation of the Premises or (iii) cure of any
default hereunder or under the Master Lease. If Sublessee's payments under this
Paragraph 11 were less than Sublessee's share as indicated on said statement,
Sublessee shall pay to Sublessor the amount of such deficiency within twenty-one
(21) days after delivery by Sublessor to Sublessee of said expense statement.
12. EXPENSES AND COSTS.
(a) With respect to the Premises, Sublessee agrees to do the
following at its sole cost and expense:
1. Make all repairs necessitated by the negligence of or abuse
by Sublessee its agents and employees;
2. To the extent required of Sublessor under the Master Lease,
provide maintenance of all systems and equipment located within the
Premises;
3. To the extent required of Sublessor under the Master Lease,
replace all broken or damaged plate glass and provide a certificate of
plate glass insurance;
4. Except to the extent Lessor is required to do so under the
terms of the Master Lease, make all repairs to the interior of the
Premises necessary to keep them in good condition excepting reasonable
wear and tear;
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5. To the extent required of Sublessor under the Master
Lease, provide and maintain in good repair all water, sewer, gas,
electrical and other utility services to the Premises;
6. To the extent required of Sublessor under the Master
Lease, pay for all permit and inspection fees imposed by
governmental authorities; and
7. Comply with all rules and regulations governing the use
and occupation of the Premises now existing or hereafter promulgated
by Sublessor or Lessor.
13. LATE CHARGES. Provided Sublessee pays all rental and other sums due
hereunder in a timely manner, Sublessor shall timely pay to Lessor the rent
payable under the Master Lease. To the extent Sublessee has not made all
payments due hereunder when due, Sublessee shall be responsible for all late
charges and all other fees and costs imposed by Lessor under the Master Lease
for late payments. If Sublessee fails to make any payment of Base Rent or
Sublease Additional Rent hereunder when due, in addition to the foregoing,
Sublessee shall pay and be liable to Sublessor for, interest on any such
delinquent amount, calculated at an annual rate equal to the Citibank, N.A.
(New York) prime rate plus one percent (1%) from and after the due date of said
payment until paid in full, without regard to whether Sublessor has incurred
or paid any late charges or penalties under the Master Lease.
14. CONDITION AND USE OF PREMISES. SUBLESSEE CURRENTLY OCCUPIES AND IS IN
POSSESSION OF THE PREMISES AND SUBLESSEE ACKNOWLEDGES THAT IT IS TAKING THE
PREMISES IN AN "AS IS, WHERE IS" CONDITION AS OF THE DATE HEREOF, EXCEPT FOR
LATENT DEFECTS KNOWN TO SUBLESSOR THAT WOULD NOT HAVE BEEN DISCOVERED BY A
REASONABLE VISUAL INSPECTION CONDUCTED PRIOR TO THE COMMENCEMENT DATE OF THE
PRIOR SUBLEASE. Sublessor represents and warrants that with respect to
Sublessor's use and occupancy of the Premises prior to the commencement date of
the Prior Sublease, the Premises and tenant improvements constructed thereon
were built in accordance with all laws, zoning codes, rules, regulations,
ordinances, statutes, guidelines and other requirements applicable thereto,
including, but not limited to the Americans with Disabilities Act. No promise of
Sublessor to alter, remodel or improve the Premises, or any portion thereof, and
no representation respecting the condition of the Premises or its compliance
with the Americans with Disabilities Act (except as provided in this Paragraph
14) has been made by Sublessor or any employee, agent or representative of
Sublessor to Sublessee. Notwithstanding any provision of the Master Lease to the
contrary, Sublessee hereby agrees that the Premises shall at all times be used
and occupied for the purpose of general offices and for no other use or purpose
whatsoever.
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15. ALTERATIONS: IMPROVEMENTS. Sublessee agrees that any and all
alterations and improvements to the Premises shall be subject to the Sublessor's
prior written consent, which shall not be unreasonably withheld or delayed, and
to the provisions of the Master Lease, if any, relating to alterations and
improvements. Sublessor shall be entitled to all of the rights afforded Lessor
under the Master Lease with respect to such alterations and improvements
without diminishing any of the rights of Lessor thereunder. All alterations and
improvements undertaken and performed by Sublessee shall be in made in a good
and workmanlike manner in compliance with all applicable federal, state and
local laws, zoning codes, rules, regulations, ordinances, statutes, guidelines
and other requirements and the terms of this Sublease and the Master Lease.
Further, unless otherwise directed under the terms of the Master Lease, all
structural and/or permanent alterations and improvements undertaken and
performed by Sublessee and approved, in advance, by Lessor and Sublessor
specifically in writing may, at Sublessee's option, remain upon the Premises
upon termination of the Sublease Term; provided that if Sublessee shall elect
to remove said structural and/or permanent improvements, Sublessee shall repair
and restore, at its sole cost and expense (including any and all permits or
certificates that may be required to be obtained), the Premises to the same
condition as existed immediately prior to the installation of such structural
and/or permanent alteration or improvement.
Sublessee shall indemnify, defend and hold harmless Sublessor, its
successors and assigns against any and all actions, claims, costs, damages,
demands, expenses (including attorneys' fees), injuries, judgments, liabilities,
liens, losses and suits of every kind and nature paid, sustained, suffered or
incurred in connection with and arising out of the removal, under the terms of
the Master Lease, of any structural or permanent alterations and improvements
performed by Sublessee and left on the Premises upon the expiration of the
Sublease Term.
16. INSURANCE.
(a) Liability and Property Damage Insurance. Sublessee shall, at its
sole cost and expense, obtain and maintain in effect during the Sublease Term,
with a reputable and financially sound company acceptable to Sublessor and
Lessor, comprehensive general liability and property damage or casualty
insurance insuring Sublessee (and naming Lessor, Sublessor and the holder of
any mortgage or trust deed on the Premises as additional insureds, with a
severability of interest endorsement) with combined single limit coverage of
$2,000,000.00 (or more if required by the Sublessor, Lessor or terms of the
Master Lease) for each occurrence. Said insurance also shall fully cover the
indemnities provided for in Paragraphs 9 and 10 above. The aforesaid insurance
policy shall not be subject to cancellation except after at least thirty (30)
days prior written notice to Sublessor, Lessor and the holder of any mortgage
or trust deed on the Premises. An original certificate of insurance evidencing
coverage in compliance with this Paragraph 16 shall be deposited with Sublessor
within fifteen (15) days of execution of this Sublease, and Sublessee shall
deliver to Sublessor original certificates
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of renewal or replacement policies not less than thirty (30) days prior to
the expiration of any such insurance coverage.
(b) Sublessee agrees that it shall pay any increase in Lessor's or
Sublessor's insurance premiums caused by Sublessee's occupancy of the
Premises.
(c) Sublessor shall maintain such insurance as it is obligated to
maintain under the Master Lease and shall deliver, on or before the
Sublease Commencement Date, to Sublessee certificates evidencing such
coverage or, in the alternative, Sublessor may elect to self-insure against
any risk under the terms of the Master Lease in which event Sublessor shall
deliver to Sublessee evidence of such self-insurance before the Sublease
Commencement Date. Prior to the Sublease Commencement Date, Sublessor shall
also deliver to Sublessee copies of all certificates of insurance Sublessor
has received from Lessor under the Master Lease. Sublessor's insurance or
self-insurance shall fully cover the indemnities of Paragraphs 9 and 10.
17. WAIVER OF CLAIMS. Sublessee hereby waives any claim which may arise
against Lessor or Sublessor during the Sublease Term for any loss or damage to
any of Sublessee's property or the property of any of its agents, employees or
invitees, located upon or constituting a part of the Premises, or for any
liability relating to personal injury or death in or about the Premises which
loss, damage or liability is covered by valid and collectible fire and extended
coverage, personal property or public liability coverage under insurance
policies. Inasmuch as the aforesaid wavier will preclude the assignment of any
such claim by way of subrogation or otherwise to an insurance company or any
other person, Sublessee agrees to give each insurance company which has issued
fire and extended coverage, personal property, property or public liability
coverage, written notice of the terms of said waiver immediately and shall have
said insurance policies properly endorsed with a waiver of subrogation. Evidence
of said wavier shall be forwarded to Sublessor upon request.
18. COMPLIANCE WITH LAWS; NO ABATEMENT.
(a) Subject to the terms and limitations of this Sublease and the
Master Lease, Sublessee shall, throughout the Sublease Term, and at
Sublessee's sole cost and expense, promptly comply or cause compliance
with, and in any event shall not commit any act or omission within
Sublessee's control which would result in any breach or violation of any
and all laws which impose an obligation on Sublessee arising from or
relating to the manner in which Sublessee conducts its business or uses the
Premises including, without limitation, the Americans with Disabilities
Act, or result in a breach of Sublessee's obligations under this Sublease
or the Master Lease, whether present or future, foreseen or unforeseen,
ordinary or extraordinary, whether or not the same shall be presently
within the contemplation of Sublessor and Sublessee or shall involve any
change of governmental policy, or require structural or extraordinary
repairs, alterations, or additions, irrespective of the cost thereof, which
may be applicable to the Premises.
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(b) Subject to the terms and limitations of this Sublease and the
Master Lease, and except as expressly provided in the Master Lease or this
Sublease, no abatement, diminution or reduction in Base Rent or Sublease
Additional Rent required to be paid by Sublessee shall be claimed by or
allowed to Sublessee for any reason whatsoever, including but not limited
to any inconvenience or interruption, cessation, or loss of business caused
directly or indirectly by any present or future laws including, without
limitation, the Americans with Disabilities Act, or by priorities,
rationing or curtailment of labor or materials, or by war, civil commotion,
strikes or riots, or any manner of thing resulting therefrom, or by any
other cause or causes beyond the control of Sublessor or Sublessee, nor
shall this Sublease be affected by any such causes; and no diminution in
the amount of the space used by Sublessee caused by legally required
changes in the construction, equipment, fixtures, motors, machinery,
operation or use of the Premises shall entitle Sublessee to any abatement,
diminution or reduction of the rent required to be paid by Sublessee
pursuant to the terms of this Sublease.
19. DEFAULT. For purposes of this Sublease and notwithstanding the cure
periods provided in the Master Lease, the Sublessee's cure periods for a default
shall be as follows: (i) Sublessee shall have five (5) days, after written
notice, to cure a default in the payment of any monies required to be paid
hereunder; (ii) Sublessee shall have twenty-one (21) days to cure a default by
Sublessee of any other provision of the Master Lease or this Sublease (provided,
however, that Sublessee shall cure immediately any default for which it is
responsible involving a hazardous condition); in the event said default cannot
diligently be cured within such twenty-one (21) day period, such longer time as
is suitable and reasonable shall be provided (however, no longer than is granted
under the Master Lease) so long as Sublessee continuously and diligently pursues
a cure; and (iii) Sublessee shall have fifty (50) days to obtain the dismissal
of any bankruptcy or insolvency proceedings that may be commenced against
Sublessee and the discharge of any receiver, trustee or assignee that may be
appointed in any bankruptcy or insolvency proceedings. If Sublessee shall
default in the fulfillment of any of its covenants and agreements set forth
herein or under the Master Lease, and Sublessee shall fail to cure the default
within the aforesaid periods, Sublessor shall have the following rights and
remedies with respect to such default:
(a) Terminate this Sublease pursuant to the terms herein, in
which event Sublessee shall immediately surrender the Premises to
Sublessor; and
(b) Sue periodically to recover damages during the period
corresponding to the portion of the Sublease Term for which suit is
instituted.
In addition to the foregoing, and not in limitation thereof, Sublessor shall
have the right, but shall not be obligated, to cure, after all cure periods
provided Sublessee hereunder have expired, any breach or default of Sublessee
under this Sublease, or the Master Lease, and any and all costs incurred by
Sublessor in connection with the curing any such breach or default, together
with interest at an annual rate equal to the Citibank N.A. (New York) prime
rate plus one
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percent (1%) calculated from the date of payment thereof by Sublessor to the
date of reimbursement thereof from Sublessee to Sublessor, shall become
immediately due and payable to Sublessor.
20. SUBLESSOR'S DEFAULT; REMEDIES OF SUBLESSEE. In the event Sublessor
fails to comply with a material obligation under the Master Lease and such
failure results in a default thereunder. Sublessor shall reimburse Sublessee for
any reasonable out-of-pocket expenses incurred by Sublessee in connection
therewith upon receipt of evidence from Sublessee of the amount and payment of
such out-of-pocket expenses.
21. DAMAGE OR DESTRUCTION. If the Premises become partially damaged by fire
or other casualty ("Casualty"), repairs or restoration shall be made in
accordance with the terms of the Master Lease. The Master Lease also shall
govern to what extent, if any, the rent payable by Sublessee to Sublessor
hereunder shall be abated. If the Premises become destroyed or rendered
inaccessible by Casualty at any time during the Sublease Term, the Base Rent and
Additional Rent shall be paid to Sublessor to the date of Casualty and shall not
be payable to Sublessor until the Premises substantially have been restored to
the condition immediately prior to the occurrence of said Casualty. Sublessee
agrees to be bound by Sublessor's or Lessor's decision, or the provisions of the
Master Lease, as the case may be, as to whether or not the Premises are to be
repaired or restored. If the Premises are not repaired or restored, and whether
or not the Master Lease and the Sublease shall remain in effect, Sublessee shall
pay rent to the date of Casualty.
22. CONDEMNATION. If, as the result of any condemnation proceeding,
Sublessor has the right to terminate the Master Lease, Sublessor shall
immediately notify Sublessee of such right and of its recommendation with regard
to the exercise of such termination rights. Sublessor shall decide, in its sole
discretion, whether or not to terminate said Master Lease and shall provide
Sublessee with written notice of such decision. If Sublessor elects to terminate
the Master Lease, this Sublease, notwithstanding the language of Paragraph 8,
shall automatically terminate on the earlier of (i) thirty (30) days after such
written notice or (ii) the effective date of the termination of the Master
Lease. If the Master Lease is not terminated as aforesaid, the extent to which,
if any, rent due hereunder shall be abated shall be dependent upon whether or to
what extent the rent due from Sublessor to Lessor under the Master Lease is
abated.
23. QUIET ENJOYMENT. So long as Sublessee is not in breach or default of
the terms of this Sublease or the Master Lease, Sublessee quietly shall have and
enjoy the Premises and all rights under this Sublease during the Sublease Term
and Sublessor shall not interfere with Sublessee's use and enjoyment of the
Premises by reason of any activities at the Premises, except as provided in this
Sublease and the Master Lease.
24. PARKING. As part of this Sublease, Sublessee shall be entitled to all
and no greater rights for parking granted to Sublessor, as tenant, under Section
1.07 of the Master
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Lease. Specifically, Sublessor shall grant to Sublessee for no additional
payment and as part of Base Rent, the right to use the 18 parking spaces granted
to Sublessor under the Master Lease which shall be reserved for Sublessee's
exclusive use in the underground enclosed parking garage of the building in
which the Premises are a part. In addition, and for no additional payment and as
part of Base Rent, Sublessor shall grant to Sublessee the right to use 53
unreserved surface parking spaces in the parking zone adjoining the Premises
granted to Sublessor under the Master Lease.
25. BROKERS. The Parties hereby agree and represent that they have not
dealt with any real estate brokers in connection with this transaction except
Living Earth Realty Corp., representing Sublessee, and Wm. A. White/Grubb &
Ellis, representing Sublessor. Sublessor and Sublessee shall be individually and
solely responsible for any brokerage commissions or claims by their own broker
in connection with this transaction. Sublessor agrees to indemnify Sublessee and
hold Sublessee harmless from any loss, liability, damage, cost or expense
(including, without limitation, reasonable attorney's fees) paid or incurred by
Sublessee by reason of any claim to any broker's, finder's or other fee in
connection with this transaction by any party claiming by, through or under
Sublessor. Sublessee agrees to indemnify Sublessor and hold Sublessor harmless
from any loss, liability, damage, cost or expense (including, without
limitation, reasonable attorney's fees) paid or incurred by Sublessor by reason
of any claim to any broker's, finder's or other fee in connection with this
transaction by any party claiming by, through or under Sublessee.
26. HOLDING OVER. If Sublessee retains possession of the Premises or any
part thereof after the effective date of any termination of the Sublease Term,
Sublessor may exercise any and all remedies provided in this Sublease or at law
or in equity to recover possession of the Premises, and for damages. For each
and every month or partial month Sublessee remains in occupancy of all or a
portion of the Sublease Term, Sublessee shall pay monthly rental at a rate equal
to 150% of Base Rent and Sublease Additional Rent.
27. NON-WAIVER. Failure of either Party to declare any default immediately
upon occurrence thereof, or delay in taking any action in connection therewith,
shall not waive such default, but said Party shall have the right to declare any
such default at any time and take such action in law or in equity, as might be
lawful or authorized hereunder. No waiver by either Party of a default by the
other Party shall be implied, and no express waiver by either Party shall affect
any default other than the default specified in such waiver and then only for
the time and extension therein stated. All rights and remedies specifically
granted to either Party herein, shall be cumulative and not mutually exclusive.
28. SURRENDER. Upon expiration of the Sublease Term hereof, or if, at any
time prior to expiration of the Sublease Term this Sublease shall be terminated
as a result of the Sublessee's default hereunder or otherwise, Sublessee
immediately shall quit and surrender to Sublessor possession of the Premises,
and all of Sublessor's furnishings and items of property
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therein, in a broom-clean condition and in good order and repair, ordinary wear
and tear excepted, and Sublessee shall remove all of its property therefrom, and
at the option of and upon notice from Sublessor, any Lessor and Sublessor
approved non-structural or non-permanent alterations or improvements made by or
on behalf of Sublessee, all in accordance with the terms of the Master Lease.
Sublessee's obligation to observe or perform this covenant shall survive the
expiration or termination of this Sublease.
29. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be given by personal delivery or two (2) days after deposit in
the U.S. mail, by certified or registered mail, postage prepaid, return receipt
requested, addressed to the Party to receive same at the address of such Party
shown below or such other address as such Party may, by notice, hereafter
furnish to the other:
Sublessor: Sublessee:
KRAFT GENERAL FOODS, INC. MEDCO CONTAINMENT SERVICES, INC.
Three Lakes Drive 100 Summit Avenue
Northfield, Illinois 60093 Montvale, New Jersey 07645
Attn: Commercial & Industrial Real Attn: General Counsel
Estate Department
with copies to:
Real Estate Counsel
Three Lakes Drive
Northfield, Illinois 60093
Sublessor agrees to provide Sublessee with copies of all notices forwarded to
and received from Lessor pursuant to the Master Lease simultaneously and within
one (1) day of Sublessor's forwarding or receipt, respectively.
30. RECORDING. It shall be deemed an automatic default hereunder
entitling Sublessor to immediately and without notice terminate this Sublease if
Sublessee should record this Sublease, or any memorandum or summary thereof.
31. MISCELLANEOUS.
(a) This Sublease constitutes the entire agreement of the Parties
relative to the subject matter hereof, and all prior negotiations,
conversations, representations, agreements and understandings are
specifically merged herein and superseded hereby. This Sublease may be
modified only by a written instrument executed by the Parties hereto. This
Sublease is the result of the prior negotiations, conversations,
representations,
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agreements and understandings of the Parties and is to be construed as the
jointly prepared product of the Parties.
(b) The terms and provisions of this Sublease shall inure to the benefit
of and shall be binding upon the Parties and their respective successors,
representatives and assigns (subject to the provisions of Paragraph 7 hereof).
(c) In the event of a conflict between the terms of this Sublease and the
terms of the Master Lease as to and between the Parties, the terms of this
Sublease shall govern.
(d) Time is of the essence of this Sublease.
(e) This Sublease shall be construed in accordance with and governed by
the laws of the State of New Jersey.
(f) The paragraph headings used in this Sublease have been inserted for
convenience and reference only and should not be construed to limit or restrict
the terms and provisions, covenants and conditions hereof.
(g) If any term or provision of this Sublease or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Sublease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each remaining term and
provision of this Sublease shall be valid and be enforced to the fullest extent
permitted by law.
(h) This Sublease and any modifications or amendments thereof shall not
take effect and be binding upon Sublessor until Sublessor obtains the approval
or consent of the Lessor under the Master Lease if such approval or consent is
required under the Master Lease.
(i) Any and all unfulfilled duties, indemnities and obligations of the
Parties shall specifically survive termination of this Sublease.
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IN WITNESS WHEREOF, the Parties have executed this Sublease as of the
date set forth above.
SUBLESSOR: SUBLESSEE:
KRAFT GENERAL FOODS, INC., a MEDICO CONTAINMENT SERVICES, INC.,
Delaware corporation a Delaware corporation
By: /s/ By: /s/ Joseph V. Valesio
----------------------------- ------------------------------
Its: Assistant Treasurer Its: Joseph V. Valesio
Executive Vice President
Division Management/
Information Strategy
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Exhibit 10.33
This THIRD AMENDMENT OF LEASE is made as of the 17th day of February, 2000
between MEADOWLANDS ASSOCIATES, a New Jersey limited partnership, ("Landlord")
having an address at PW/MS Management Co., Inc., c/o Gale & Wentworth, LLC,
Park Avenue at Morris County, 200 Campus Drive, Suite 200, Florham Park, New
Jersey 07932-1007 and MOVADO GROUP, INC., a New York corporation, having an
office at 125 Chubb Avenue, Lyndhurst, New Jersey 07071 (hereinafter called
"Tenant").
WITNESSETH:
WHEREAS:
A. Landlord and North American Watch Corporation, predecessor-in-interest
to Tenant, heretofore entered into a certain lease dated as of October 31,
1986, as amended by a certain first amendment of lease dated as of May 31, 1994
("First Amendment") and a certain second amendment of lease dated as of
December 23, 1998 ("Second Amendment") (said lease as it was or may hereafter
be amended is hereinafter called the "Lease") with respect to (i) the entire
rentable square foot area of the fourth (4th) floor and (ii) a portion of the
rentable square foot area of the fifth (5th) floor (collectively, "Demised
Premises") of the building known as and located at 125 Chubb Avenue, Lyndhurst,
New Jersey ("Building"); and
B. Tenant is desirous of extending by nineteen (19) months the term for
(i) the 10,363 rentable square foot Additional Space (defined in WHEREAS clause
B. of the First Amendment) on the fifth (5th) floor of the Building and (ii)
the 17,862 rentable square foot Expansion Space (defined in WHEREAS clause B.
of the Second Amendment) on the fifth (5th) floor of the Building; and
C. The parties hereto desire to further modify the Lease
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in certain other respects.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the parties hereto modify the Lease as follows:
1. DEFINED TERMS. Except as specifically provided otherwise in this
Third Amendment of Lease, all defined terms contained in this Third Amendment
of Lease shall, for the purposes hereof, have the same meaning ascribed to them
in the Lease.
2. CONDITION OF ADDITIONAL SPACE AND EXPANSION SPACE. As of May 31,
2000, Tenant shall be deemed to have accepted both the Additional Space and the
Expansion Space in their then "as is" physical condition and state of repair,
except for (i) any damage caused by Landlord, (ii) any damage that Landlord is
otherwise expressly required to repair under the Lease and (iii) fire and
casualty damage subject to and in accordance with Article 9 of the Lease. In
that regard, except as otherwise expressly provided to the contrary in the
Lease, Landlord shall have no obligation to do any work or perform any services
with respect to the Additional Space and/or the Expansion Space or grant Tenant
any construction allowance.
3. EXTENSION OF ADDITIONAL SPACE AND EXPANSION SPACE TERMS. Pursuant to
the First Amendment, Tenant leased the 10,363 rentable square foot Additional
Space on the fifth (5th) floor of the Building for a period (defined as the
"Additional Space Term" in Paragraph 2. of the First Amendment) commencing on
September 8, 1994 and ending on September 30, 1999 (defined as the "Additional
Space Termination Date"). Pursuant to Paragraph 4. of the Second Amendment, the
Additional Space Termination Date of the Additional Space Term was changed from
September 30, 1999 to May 31, 2000. Notwithstanding anything contained to the
contrary in Paragraph 4.
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of the Second Amendment, the Additional Space Termination Date shall be, and the
Additional Space Term shall end on, December 31, 2001. Similarly, the last day
of the term for the Expansion Space, measuring 17,862 rentable square feet,
shall also be December 31, 2001.
4. SURRENDER OF ADDITIONAL SPACE AND EXPANSION SPACE. Tenant shall deliver
both the Additional Space and the Expansion Space to Landlord by December 31,
2001 in the same physical condition and state of repair that would apply to them
as if December 31, 2001 were the Termination Date. December 31, 2001 is
hereinafter referred to as the "Scheduled Surrender Date". The earliest date
after the Scheduled Surrender Date by when Tenant has delivered to Landlord both
the Additional Space and the Expansion Space in the physical condition and state
of repair as required hereunder is hereinafter called the "Actual Surrender
Date". If the Actual Surrender Date fails to occur by the Scheduled Surrender
Date, then, Tenant shall be deemed a holdover tenant at sufferance for both the
Additional Space and the Expansion Space and Tenant shall be liable to Landlord
under Article 55 of the Lease as if the Scheduled Surrender Date were the
Termination Date. As of the Actual Surrender Date, Exhibit A to the Lease shall
be deemed to have excluded therefrom both the Additional Space and the Expansion
Space. Nothing in this Third Amendment of Lease shall be deemed to constitute a
release or discharge of Tenant with respect to any outstanding and unsatisfied
obligation or liability, whether unbilled or calculated, accrued or incurred
under the Lease, such as, but not limited to, Minimum Rent, Adjusted Minimum
Rent, additional rent and other charges payable by Tenant in connection with the
Additional Space and/or the Expansion Space, up to and including the Actual
Surrender Date.
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5. MINIMUM RENT. The Lease is hereby amended to provide that the Minimum
Rent, on an annual basis shall be:
(i) TWO MILLION THREE HUNDRED SIXTY TWO THOUSAND ONE HUNDRED FIFTY SEVEN
AND 50/100 DOLLARS ($2,362,157.50) for the period commencing on June 1,
2000 and ending on December 31, 2001, payable in advance on the first day
of each calendar month in equal monthly installments of ONE HUNDRED NINETY
SIX THOUSAND EIGHT HUNDRED FORTY SIX AND 46/100 DOLLARS ($196,846.46); and
(ii) ONE MILLION SIX HUNDRED NINETY EIGHT THOUSAND EIGHT HUNDRED SEVENTY
AND 00/100 DOLLARS ($1,698,870.00) for the period commencing on January 1,
2002 and ending on the Termination Date of May 31, 2002, payable in advance
on the first day of each calendar month in equal monthly installments of
ONE HUNDRED FORTY ONE THOUSAND FIVE HUNDRED SEVENTY TWO AND 50/100 DOLLARS
($141,572.50).
6. SIZE OF DEMISED PREMISES. Section 36.2 of the Lease shall be amended as
of the date hereof to provide that (A) for the period beginning on the Expansion
Space Commencement Date until the day prior to the Actual Surrender Date, (i)
the Demised Premises shall be deemed to contain a floor area of 84,854 rentable
square feet and (ii) the Occupancy Percentage shall be 30.5% and (B) for the
period beginning on the Actual Surrender Date until the Termination Date of May
31, 2002, (i) the Demised Premises shall be deemed to contain a floor area of
56,629 rentable square feet and (ii) the Occupancy Percentage shall be 20.3%.
7. BROKERAGE. Tenant represents that it has had no dealings or
communications with any real estate broker or agent in connection with this
Third Amendment of Lease, except Gale & Wentworth Real Estate Advisors, LLC.
Tenant agrees to defend indemnify and hold Landlord, its affiliates and/or
subsidiaries and the partners, directors, officers of Landlord and its
affiliates and/or subsidiaries harmless from and against any and all costs,
expenses or liability (including attorney's fees, court costs and disbursements)
for any commission or other
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compensation claimed by any broker or agent in connection with this Third
Amendment of Lease, except Gale & Wentworth Real Estate Advisors, LLC.
8. CORPORATE AUTHORITY. Tenant represents that the undersigned officer
of the Tenant corporation has been duly authorized on behalf of the Tenant
corporation to enter into this Third Amendment of Lease in accordance with the
terms, covenants and conditions set forth herein, and, upon Landlord's request,
Tenant shall deliver an appropriate certification by the Secretary of the
Tenant corporation to the foregoing effect.
9. LEASE RATIFICATION. Except as expressly amended by this Third
Amendment of Lease, the Second Amendment and the First Amendment, the Lease,
and all terms, covenants and conditions thereof, shall remain in full force and
effect and is hereby in all respects ratified and confirmed.
10. NO ORAL CHANGES. This Third Amendment of Lease may not be changed
orally, but only by a writing signed by both Landlord and Tenant.
11. NO DEFAULT. Tenant confirms that (i) Landlord has complied with all
of its obligations contained in the Lease and (ii) no event has occurred and no
condition exists which, with the passage of time or the giving of notice, or
both, would constitute a default by Landlord under the Lease.
12. NON-BINDING DRAFT. The mailing or delivery of this document by
Landlord or its agent to Tenant, its agent or attorney shall not be deemed an
offer by the Landlord on the terms set forth in such document or draft, and
such document or draft may be withdrawn or modified by Landlord or its agent at
any time and for any reason. The purpose of this section is to place Tenant on
notice that this document or draft shall not be effective, nor shall Tenant
have any rights with respect hereto, unless and until
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Landlord shall execute and accept this document. No representations or promises
shall be binding on the parties hereto except those representations and
promises contained in a fully executed copy of this document or in some future
writing signed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment of
Lease to be executed on the day and year first written above.
Signed and delivered
LANDLORD:
MEADOWLANDS ASSOCIATES
By: ARC Meadowlands Associates,
WITNESSED BY: General Partner
By: ARC Meadowlands, Inc.,
General Partner
By:
- ------------------------------- ------------------------------
Michael Futterman
Name: President
--------------------------
(please print)
ATTESTED BY: AGENT FOR LANDLORD:
PW/MS MANAGEMENT CO., INC.
By: Gale & Wentworth Real Estate
Advisors, LLC
By:
- ------------------------------- ----------------------------------
Marc Leonard Ripp, Esq. Robert R. Martie
Corporate Secretary Senior Vice President
APPLY CORPORATE SEAL HERE
ATTESTED BY: TENANT:
MOVADO GROUP, INC.
By: /s/ Richard A. Buonocore
- ------------------------------- --------------------------------------
Name: Name: Richard A. Buonocore
-------------------------- --------------------------------
(please print) (please print)
Title: Corporate Secretary Title: Senior Vice President--
Administration
-------------------------------
(please print)
APPLY CORPORATE SEAL HERE
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EXHIBIT 10.34 **
LICENSE AGREEMENT
This Agreement is entered into as of October 31, 1999, by and between
Movado Corporation, a Delaware corporation with offices at 501 Silverside Drive,
Suite 25, Wilmington, Delaware 19809 (sometimes hereinafter referred to as "U.S.
Licensor"); Movado Watch Company SA, a Swiss corporation with offices at 8
Bettlachstrasse, CH-2540 Grenchen, Switzerland (sometimes hereinafter referred
to as "International Licensor") and Lantis Eyewear Corporation, a New Jersey
corporation with offices at 461 Fifth Avenue, New York, New York 10017
(hereinafter referred to as "Licensee").
WHEREAS, U.S. Licensor is the owner of the Licensed Trademarks (as
hereinafter defined) in the United States and International Licensor is the
owner of the Licensed Trademarks in the rest of the world (U.S. Licensor and
International Licensor are sometimes hereinafter referred to together as
"Licensor"); and
WHEREAS, the Licensed Trademarks have been used by Licensor and/or by
related and predecessor entities in connection with the manufacture, sale,
distribution, marketing and advertising of watches, clocks and other goods and
accessories and are the subject of pending applications and/or registrations for
various goods including without limitation optical frames and sunglasses, and
have thereby acquired very valuable good will and secondary meaning and;
(** CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED FROM PAGES 3, 5, 14,
15, 17, 19, 22-24, 27, 31, 38, 43, 45 AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION ("SEC") PURSUANT TO RULE 24b-2 OF THE SECURITIES
EXCHANGE ACT OF 1934 ("1934 Act")).
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WHEREAS, Licensee manufactures, make and sells non-prescription
sunglasses, ophthalmic frames and other eyewear products and accessories, and
desires to use the Licensed Trademarks in connection with the manufacture,
marketing and sale of Licensed Products (as hereinafter defined); and
WHEREAS, U.S. Licensor is willing to grant Licensee the right to use
the Licensed Trademarks in the United States and International Licensor is
willing to grant Licensee the right to use the Licensed Trademarks in the rest
of the world, in each case, under the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
As used herein the term(s):
1.1 "Acquiror" shall mean a Person or group of Persons acting in
concert, but shall not include the Person(s) in Control of Licensee on the date
hereof or any Affiliate of any such Persons.
1.2 "Affiliate" of any Person shall mean a Person that, directly or
indirectly through one or more intermediaries, Controls, is Controlled by, or is
under common Control with such Person.
1.3 "Authorized Marks" shall have the meaning as set forth in Section
2.2 hereof.
1.4 "Authorized Retailer" shall mean any retail outlet approved for the
sale of Licensed Products pursuant to Section 8.2. hereunder.
1.5 "Bankruptcy shall have the meaning as set forth in Section 15.7.
1.6 "Change of Control" with respect to Licensee shall be deemed to
occur if (i) an Acquiror obtains Control of Licensee; or (ii) Licensee sells,
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conveys or otherwise transfers to an Acquiror all or substantially all of its
assets involved in the Exploitation of Products.
1.7 "Change Of Control Notice" shall mean a written notice to Licensor
of a proposed or completed Change of Control and which explains with reasonable
specificity the nature and extent of the Change of Control and the anticipated
effect of the Change of Control on the Licensee.
1.8 "Closeout" shall mean any Licensed Product sold (i) to a retailer
at a sales price which is * or (ii) to any Person other than a retailer at a
sales price *.
1.9 "Contract Quarter" shall mean a three-month period ending on the
last day of the third, sixth, ninth and twelfth full calendar months of a
Contract Year, provided that if Market Roll-Out does not occur on the first day
of August, November, February or May then the first Contract Quarter shall mean
the period from Market Roll-Out until the last day of the three (3) month period
following the first day of whichever August, November, February or May is the
first to occur after Market Roll-Out.
1.10 "Contract Year" shall mean each twelve (12) month period following
Market Roll-Out if Market Roll-Out occurs on the first day of August, November,
February or May, provided that if Market Roll-Out does not occur on the first
day of August, November, February or May, then "Contract Year" shall mean the
period from Market Roll-Out until the last day of the twelve (12) month period
following the first day of whichever August, November, February or May is the
first to occur after Market Roll-Out and each twelve (12) month period
thereafter.
1.11 "Consumer Advertising Payments" shall have the meaning set forth
in section 11.3.
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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1.12 "Control" shall mean the possession, direct or indirect, of the
power to cause the direction of the management and policies of the Person,
whether through the ownership of voting securities, by contract or otherwise.
1.13 "Exploit" shall mean manufacture, publicize, use, or distribute,
and "Exploitation" shall have a correlative meaning.
1.14 "International Minimum Sales" shall have the meaning set forth in
section 8.5.
1.15 "International Plan" shall have the meaning set forth in section
11.1.
1.16 "Licensor Affiliate" shall mean any Affiliate of Licensor.
1.17 "Licensed Products" shall mean Products bearing or sold under or
in connection with any of the Licensed Trademarks.
1.18 "Licensed Trademarks" shall mean any of the trademarks listed on
Schedule A annexed hereto.
1.19 "Manufacturers" shall have the meaning set forth in section 5.4
1.20 "Market Roll-Out" shall mean the date of Licensee's initial
distribution of Licensed Products in the Territory to Authorized Retailers.
1.21 "Minimum Communication Expenditures" shall have the meaning set
forth in section 11.3.
1.22 "Minimum Royalty" shall have the meaning set forth in Section
10.1.
1.23 "Minimum Sales" shall have the meaning set forth in Section 8.6
1.24 "Net Sales" during any period shall mean (a) the sum of the sales
all Licensed Products invoiced to customers during such period, less (b) the sum
of all sales previously included in Net Sales for Licensed Products returned by
customers during such period. The sales price invoiced to customers shall not be
deemed to include amounts invoiced for sales, use, excise, or other taxes,
freight, insurance, and normal and customary trade discounts so long as
separately stated.
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1.25 "North America" shall mean the United States, Canada and the
Caribbean Islands listed on Schedule C annexed hereto and "North American" shall
have a correlative meaning.
1.26 "North American Minimum Sales" shall have the meaning set forth in
section 8.4.
1.27 "North American Plan" shall have the meaning set forth in section
11.1.
1.28 "Packaging" with respect to Licensed Products shall mean labels,
packaging, containers and displays utilized with such Licensed Products.
1.29 "Person" shall mean any individual, corporation, association,
partnership or limited liability company, trust or other entity.
1.30 "Plan" shall have the meaning set forth in section 11.1.
1.31 "Products" shall mean ophthalmic eyeglasses, spectacles, readers,
sunglasses, eyeglass and sunglass cases, eyeglass and sunglass cords, eyeglass
and sunglass frames and eyeglass and sunglass lenses.
1.32 "Royalty Rate" shall have the meaning set forth in Section 10.1.
1.33 "Term" shall mean the duration of this Agreement, as determined
pursuant to section 15.1 hereof.
1.34 "Territory" shall mean the world except to the extent otherwise
limited pursuant to Sections, 2.1, 8.6 and 15.1.
1.35 "United States" shall mean the United States of America and all
territories and possessions within its jurisdiction including all United States
military bases and installations wherever located and further including *.
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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2. GRANT OF LICENSE
2.1 Upon the terms and conditions hereinafter set forth, (a) U.S.
Licensor grants to Licensee a license to use the Licensed Trademarks in
connection with the Exploitation of Licensed Products in the United States
and(b) International Licensor grants to Licensee a license to use the Licensed
Trademarks in connection with the Exploitation of Licensed Products in (i) the
remainder of North America outside the United States and (ii) the rest of the
world subject to agreement with Licensee on an International Plan for the first
Contract Year as provided in section 11.1 hereof and, further, subject to
agreement with Licensee, no later than the last date by which International
Licensor may object to such International Plan as originally submitted or as
revised, on International Minimum Sales which such agreement shall be evidenced
by International Licensor and Licensee causing such International Minimum Sales
as agreed upon to be set forth on and executing a schedule which shall be
annexed hereto in the form of Schedule D annexed hereto. The licenses granted
hereunder shall be exclusive to Licensee.
2.2 Licensee shall not use other marks, including without limitation,
trademarks, trade names, sub-brands, line names, collection names, model names,
designs, logos or endorsements (hereinafter referred to as "Authorized Marks")
in connection with the Exploitation of the Licensed Products, except as
specifically authorized by Licensor pursuant to the terms of this Agreement.
Licensee acknowledges that Licensor is and at all times shall be the owner of
all right, title, and interest in and to such Authorized Marks and that all use
thereof shall inure to the benefit of Licensor. To the extent any rights in and
to such Authorized Marks, or with respect to any materials used in the
Exploitation of the Licensed Products, including without limitation, copy,
artwork, and photographs, are deemed to accrue to Licensee pursuant to this
Agreement or otherwise, Licensee hereby assigns any and all such rights, at such
time as they may be deemed to accrue, to Licensor. Licensee agrees that it will
execute and deliver to Licensor any
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documents reasonably requested by Licensor necessary to effect any such
assignment.
2.3 Licensor reserves the right to Exploit and to grant to other
Persons the right to Exploit the Licensed Trademarks on any products or
merchandise or services other than Products.
3. OWNERSHIP OF LICENSED TRADEMARKS
3.1 Licensee recognizes the great value of the good will associated
with the Licensed Trademarks and acknowledges that the Licensed Trademarks and
all right, title and interest therein, and good will pertaining thereto, belong
exclusively to U.S. Licensor in the United States and to International Licensor
in the rest of the world and agrees that it will not, during the term of this
Agreement or thereafter, challenge Licensor's rights in and to the same or do or
knowingly permit to be done any act or thing by any Person that will, in any
way, impair the rights of Licensor in and to the Licensed Trademarks or which
will affect the validity thereof. Licensee further agrees that it will not
attack the validity of the license granted hereunder. Licensee further
acknowledges that all use of the Licensed Trademarks by Licensee shall inure to
the benefit of Licensor.
3.2 Licensee agrees promptly to notify Licensor in writing of any
infringement of any of the Licensed Trademarks which comes to Licensee's
attention and to cooperate with Licensor, but at Licensor's expense, in such
legal actions as Licensor may take to compel cessation of such infringement.
Licensee shall have no right whatsoever itself to sue any Person for
infringement of any of the Licensed Trademarks; such right and the election to
sue or not to sue shall belong exclusively to Licensor.
3.3 Licensor shall take such steps as Licensor in its sole discretion
believes appropriate to cause cessation of any infringement of the Licensed
Trademarks, or any of them, which substantially and adversely affects the
business of Licensee in the sale of Licensed Products; provided, however, that
if
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Licensor shall fail to cause the cessation, substantially, of any infringement
in any country or countries within the Territory and such infringement continues
for at least 12 months after notice by Licensee as provided in section 3.2 then
the North American Minimum Sales requirements in section 8.4 (if such
infringement is in North America) or the International Minimum Sales
requirements in section 8.5 (if such infringement is outside North America)
shall be decreased from the date of such notice but only for so long as such
infringement continues to fairly reflect the adverse impact on Licensee's Net
Sales of such continuing infringement in the country or countries affected.
3.4 At Licensor's request, Licensee will execute and deliver any and
all documents necessary or desirable to record the license granted hereunder in
all jurisdictions in which Licensor in its sole discretion deems appropriate or
necessary.
4. RELATIONSHIP OF PARTIES
4.1 No party is an agent or employee of the other nor shall any party
in any event be liable for any acts or omissions of any other. This Agreement
does not, and shall not, be deemed to make any party hereto the agent, partner,
joint venturer or legal representative of any other party for any purpose
whatsoever. Neither Licensor nor Licensee shall have the right or authority to
assume or create any obligations or responsibility whatsoever, express or
implied, on behalf of, or in the name of, the other, or to bind the other in any
respect whatsoever, except as may otherwise be expressly herein provided.
5. USE OF THE LICENSED TRADEMARKS
5.1 Licensee recognizes and acknowledges that the favorable reputation
and goodwill attached to the Licensed Trademarks are valuable property rights of
Licensor and are dependent for their preservation upon the proper manufacture
and quality of the products on or in connection with which such trademarks are
used. Accordingly, Licensee agrees that it will not use any of
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the Licensed Trademarks except as expressly permitted hereunder and in the form
approved by and in accordance with the standards and requirements established by
Licensor from time to time and that it will not use any trademark, trade name or
commercial name on or in connection with products if such trademark, trade name
or commercial name is confusingly similar to any of the Licensed Trademarks in
sound, appearance or meaning, or if it possesses such similarity that confusion,
deception, mistake or dilution may result. The provisions of this section 5.1
shall survive any termination or cancellation of this Agreement.
5.2 Licensee agrees that its every use of the Licensed Trademarks shall
be strictly in accordance with the requirements as to marking, labeling and
advertising established from time to time by Licensor, which requirements
Licensor will not modify without giving Licensee at least sixty (60) days prior
written notice. Licensee will not make any use whatsoever of any Packaging,
product literature, advertising or promotional matter or any other materials in
connection with the Licensed Products without the prior written approval of
Licensor which Licensor shall have the right to grant or withhold on its sole
and absolute discretion. Licensee will submit samples of all such materials to
Licensor for advance approval at least ten (10) business days before the
proposed use thereof unless such matter is a copy of identical matter previously
submitted to Licensor for approval pursuant to this Section 5.2 and approved by
Licensor in writing. Licensor shall respond promptly to submissions under this
Section 5.2; such responses shall be in writing and any objections shall be
stated together with the reason therefor. Notwithstanding the foregoing,
Licensor and Licensee acknowledge that on occasion due to special circumstances
it may be necessary for Licensor to approve or disapprove of proposed
advertising or promotional material within twenty four (24) hours of their
submission to Licensor, and in such cases Licensor will use its reasonable
commercial efforts to respond, but shall not be obligated to respond, to such
submission within such period.
5.3 Licensee shall prepare and submit to U.S. Licensor for its review
and comments specific suggested retail prices for the Licensed Products in the
United States and shall prepare and submit to International Licensor for its
review
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and comments specific suggested retail prices for the Licensed Products in the
rest of the world. Subject to the next two sentences, all initial suggested
retail prices, and any subsequent changes thereto, must be approved, in writing,
by U.S. Licensor or by International Licensor as appropriate, such approval not
to be unreasonably withheld or delayed. Licensee acknowledges that in order to
preserve the good will attached to the Licensed Trademarks, the suggested retail
prices for the Licensed Products should reflect the prestigious nature of the
Licensed Trademarks, it being understood, however, that Licensor is not
empowered to fix or regulate the prices at which the Licensed Products are to be
sold. Nothing contained in this Agreement is intended or will be construed as
giving either party any right of approval with respect to any of the prices at
which the other party sells or offers to sell any of the Licensed Products.
5.4 Subject to Section 5.5, Licensee will have the right to engage one
or more third party manufacturers, subcontractors or vendors to produce the
Licensed Products or any component parts thereof exclusively on Licensee's
behalf (collectively "Manufacturers") provided that (a) each such Manufacturer
is approved in advance in writing by Licensor, which approval Licensor shall not
unreasonably withhold (with the reason for any such nonapproval to be provided
in writing to Licensee) and (b) each such Manufacturer enters into an agreement
with Licensee which is approved by Licensor and which contains such provisions
as Licensor shall approve, including a covenant prohibiting the Manufacturer
from selling or otherwise disposing of Licensed Products (or components thereof)
except to Licensee, Licensor or any Licensor Affiliate.
5.5 Licensor requires and Licensee warrants that all Licensed Products
shall be manufactured and/or produced in accordance with the terms of the
manufacturing agreement referred to in section 5.4 (b) hereof and with all
applicable laws, rules and regulations in the country where the Licensed
Products are manufactured, including, but not limited to, such laws, rules and
regulations related to minimum age of employment, minimum wages, forced labor,
safety, sanitation, building codes and working conditions. Licensee shall adopt
a program to ensure that each Manufacturer complies with the aforesaid which
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program shall be in writing and submitted to Licensor for review and approval.
At a minimum, such program shall include a physical inspection of each
Manufacturer and interview with the owner and/or senior management of
Manufacturer prior to the first performance of any work on the Licensed Products
and each Contract Year thereafter. A written report of the inspection signed by
Licensee and setting forth the scope of the inspection and the results thereof
shall be provided to Licensor as a condition precedent to Licensee's right to
sell the Licensed Products produced by such Manufacturer. Such inspections,
together with a written report, shall be required at least once annually
thereafter during the Term and any subsequent term, to ensure compliance. In the
event Licensee fails to implement or, once implemented, to abide by and to
continue, such a program, Licensor may, at its option, terminate the License
and/or require Licensee to terminate its relationship with Manufacturer. In the
event that it is determined by Licensor, or any other entity, whether or not a
party to this License, and upon notice to Licensee, that a Manufacturer does not
meet applicable laws, rules and/or regulations, Licensee shall demand such
Manufacturer to come into compliance with such laws, rules and/or regulations
within the sooner of thirty (30) days of notice of such noncompliance or the
time period required by the local governing body. In the event that such
Manufacturer fails to comply, Licensee shall terminate its relationship with
such Manufacturer. In the event Licensee fails to terminate its relationship
with such Manufacturer, Licensor may, at its option, terminate this License. In
no event shall Licensee or any Manufacturer utilize forced labor or establish a
minimum age of employment below the age of completion of compulsory education in
the applicable country.
6. QUALITY CONTROL
6.1 Before Licensee commences the manufacture of any one or more of the
Licensed Products, Licensee shall submit to Licensor one prototype piece for
approval which Licensor shall have the right to grant or withhold in its sole
and absolute discretion. Following such approval, Licensee shall submit to
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Licensor production samples of Licensed Product from the initial production run
for such examination and testing as Licensor may reasonably require. Licensee
shall not commence the sale of any Licensed Product until Licensor has given
written approval of the production samples submitted by Licensee for approval,
which approval Licensor shall have the right to grant or withhold in its
absolute discretion for quality reasons and which Licensor shall not
unreasonably withhold for any other reason. Under no circumstances shall
Licensor have any obligation to approve any production sample that does not
strictly conform to the approved prototype and any applicable specifications
approved by Licensor. Written approval of the prototype piece and of the
production samples or written reasons for disapproval (including, in the case of
disapproval of production samples for any quality reason, an explanation of such
reason) shall be given to Licensee reasonably promptly after submission of the
prototype piece and the production samples to Licensor; in general, Licensor
shall endeavor, but shall not be obligated to give written approval or
disapproval within ten (10) business days after receipt of such prototype piece
or the samples, whichever is the case. Unless within such ten (10) business day
period Licensor has either approved or disapproved the prototype piece or
production samples as provided above or informed Licensee in writing that it
requires additional time, then if Licensee continues to want Licensor to approve
such prototype or samples, as the case may be, it will send Licensor a written
notice to that effect and Licensor shall have ten (10) business days after
receipt of such notice to approve or disapprove of such prototype or samples or
to notify Licensee that proper testing of the prototype or production samples
requires a longer period and in the event Licensor does not so respond within
such ten (10) business day period then approval of such prototype piece or
production samples will be deemed to have been given upon the expiration of such
period, regardless of whether approval otherwise has been given by the Licensor.
6.2 Licensee agrees that all Licensed Products sold by Licensee under
this Agreement, shall be identical in all material respects to the prototypes
and samples approved by Licensor under Section 6.1 and shall be of a high
quality
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relative to other like products on the market and shall be manufactured in
strict compliance with such standards and requirements applicable thereto as
established by Licensor and as in effect from time to time. Licensor shall have
the right at any time and from time to time on written notice to Licensee to
alter or amend said standards and requirements, but no such alteration or
amendment shall take effect as to any Licensed Products until Licensee shall
have had a reasonable time (not more than ninety (90) days after such written
notice) to effect corresponding manufacturing or marketing changes and such
alteration or amendment shall apply only to Licensed Products manufactured after
the date which is ninety (90) days after the date of such notice. Licensee
agrees to submit to Licensor for approval prior to sale at least two (2)
representative samples of any Licensed Product manufactured by Licensee which
differ in any respect from the Licensed Products previously approved under
Section 6.1 hereof; approval or disapproval by Licensor shall be communicated to
Licensee as provided for in Section 6.1 hereof.
6.3 Licensor shall have the right to inspect each manufacturing
facility for the Licensed Products up to two times per Contract Year. Any such
inspection will occur during business hours and only after giving Licensee at
least ten (10) business days written notice of such inspection.
6.4 Licensee shall be solely responsible, whether or not the same shall
be covered by the applicable warranty, for the handling of all customer
inquiries, complaints and service relating to the Licensed Products. Such
service shall include all necessary repair and replacement of all the Licensed
Products and all costs associated therewith shall be borne exclusively by
Licensee. Licensee will submit to Licensor for approval after sales service
guidelines and a manufacturer's limited warranty relating to the Licensed
Products and will adhere to such guidelines and offer such warranty as approved
by Licensor. Licensor may require Licensee to recall any Licensed Products sold
by Licensee which do not comply with the quality standards and specifications
established for such products pursuant
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to sections 6.1 and 6.2. Licensee shall provide replacement products for the
recalled products at Licensee's expense, including shipping expense.
7. PRODUCT DEVELOPMENT
7.1 Licensee shall prepare and submit to Licensor for approval all
proposed designs and prototypes relating to the Licensed Products, provided
however, that Licensor may from time to time, at its option and without any
obligation to do so or to continue to do so, furnish Licensee with proposed
designs, sketches, samples and other materials to assist Licensee in the design
and production of the Licensed Products. All product designs, prototypes,
sketches, samples, drawings and copyrights relating to the Licensed Products,
whether prepared by Licensee or by Licensor, shall be owned exclusively by
Licensor provided, however, that any such designs, prototypes, sketches,
samples, drawings and copyrights developed exclusively by Licensee and not used
on or as any part of any Licensed Product any time during the term hereof shall
remain the property of Licensee. Nothing herein shall be construed as preventing
or limiting Licensee from using in its business any design attributes in respect
of which Licensor does not have exclusive rights (provided that use of any
design attributes on or in connection with the Licensed Products is first
approved by Licensor as provided under this Agreement) provided that such design
attributes, if used on the Licensed Products, have been in use * and that, in
any event, such design attributes have become widely employed by Persons other
than Licensee in sunglass and/or ophthalmic frame designs. Licensee will execute
and deliver all documents necessary or desirable to confirm Licensor's ownership
of such designs, prototypes, sketches, samples, drawings and copyrights. All
costs associated with the design and production of the Licensed Products, shall
be the sole responsibility of Licensee.
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 of the 1934 ACT.)
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7.2 Subject to Sections 5.1, 5.2 and 6.1 the Licensor and Licensee
shall use their best efforts to reach agreement on the styles of the Licensed
Products that will comprise the seasonal collections to be sold by Licensee. The
Licensor and Licensee acknowledge that subjectivity and taste are major elements
involved in the design and development of new products, and in that context that
Licensee's understanding of the eyewear market will have to be balanced with
Licensor's perception of what eyewear bearing the Licensed Trademarks needs to
be, if saleable collections of the Licensed Products are to be introduced.
Accordingly, if (i) after following the procedures in Section 7.1 and using
their best efforts as above provided, Licensor and Licensee in good faith fail
to agree on * and (ii) Licensee, by notice to Licensor within thirty (30) days
after the date of Licensee's last design submission under Section 7.1, sets
forth in reasonable detail a description of how said design submission, together
with all other designs comprising the same collection, * and (iii) thereafter
Licensee, having used its best efforts to exploit the right and license granted
under this Agreement as provided in Section 8.1, fails to make the North
American Minimum Sales for the Contract Year when such collection was
introduced, then Licensee shall have the right to terminate this Agreement as of
the end of the next ensuing Contract Year by giving Licensor written notice
thereof within sixty (60) days following the end of the Contract Year in which
it failed to make such Minimum Sales.
7.3 Licensee may discontinue production of any one or more of the
models of Licensed Products previously approved by Licensor on at least thirty
(30) days prior notice to Licensor. Licensor may disapprove any one or more of
the models of Licensed Products previously approved at least two (2) years
earlier
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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by Licensor on at least ninety (90) days prior notice to Licensee; after which
time Licensee shall cease all production of and make no further use of the
Licensed Trademarks in connection with such disapproved model in the United
States, if such disapproval was by U.S. Licensor, or outside the United States,
if such disapproval was by International Licensor, except that Licensee shall
provide Licensor with a complete list of its inventory thereof and shall have
the right to sell its remaining inventory of such model.
8. SALES AND DISTRIBUTION
8.1 Licensee will use its best efforts in Exploiting the right and
license granted hereunder.
8.2 Licensee will sell Licensed Products only to such retailers or
other accounts (i) as Licensor shall approve in writing in its sole and absolute
discretion or (ii) which are department stores authorized to sell Movado watches
and in which Movado watches are sold or (iii) which are authorized to sell, and
only for so long as any such retailer or account continues to sell, optical
eyewear sold under at least three (3) of the brand names listed on Schedule B
annexed hereto and made a part hereof, which Schedule Licensor shall have the
right to modify in its sole and absolute discretion on thirty (30) days prior
notice to Licensee ("Authorized Retailers"). Any such retailer or account which
is an Authorized Retailer by reason of 8.2 (iii) above shall cease to be so
authorized at such time as it shall no longer sell at least three (3) brands of
the optical eyewear listed on Schedule B, either by reason of modification of
Schedule B or otherwise. Licensee will sell Licensed Products only to Authorized
Retailers within the Territory and will not sell Licensed Products to any
account which Licensee has reason to know will ship or resell any of such
Licensed Products outside the Territory or sell all or any of such Licensed
Products to anyone other than consumers.
8.3 Licensee will not sell or offer for sale or permit any Authorized
Retailer or any other Person to sell or offer for sale any Licensed Products
directly
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to consumers through catalogs, television, the Internet or otherwise
without the express prior written approval of Licensor.
8.4 Each Contract Year during the term of this Agreement, Licensee
shall make no less than the following total Net Sales of Licensed Products in
North America ("North American Minimum Sales").
*
8.5 Each Contract Year during the term of this Agreement, provided that
International Licensor shall have granted Licensee the license to Exploit the
Licensed Trademarks outside North America as provided in section 2.1 (b) (ii)
hereof, Licensee shall make no less than the total Net Sales of Licensed
Products outside North America as set forth on Schedule D annexed hereto
("International Minimum Sales"). For purposes of determining whether
International Minimum Sales have been achieved in any Contract Year, the
equivalent U.S. Dollar amount of total Net Sales invoiced in any currency other
than the U.S. Dollar shall be the average of the spot prices for the relevant
foreign currency on the first and last days for each Contract Quarter as
reported in THE WALL STREET JOURNAL.
8.6 In the event Licensee fails to achieve either North American
Minimum Sales or International Minimum Sales (together "Minimum Sales") in any
Contract Year then U.S. Licensor and International Licensor, respectively, shall
have the right at any time, upon thirty (30) days prior written notice to
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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Licensee, (i) to terminate the license granted hereunder as provided in
Article 15 or (ii) to appoint one or more other Persons, including without
limitation, one or more Licensor Affiliates, to Exploit the Licensed Products in
all or any portion of North America (in the event North American Minimum Sales
were not achieved) and in all or any portion of the Territory outside North
America (in the event International Minimum Sales were not achieved) in which
case the North American Minimum Sales and/or the International Minimum Sales, as
appropriate, be adjusted to reflect the non-exclusivity of the licenses granted
herein. Licensor's sole recourse if Licensee fails to achieve either North
American Minimum Sales or International Minimum Sales, or both in any Contract
Year shall be as provided in the preceding sentence provided, however, that the
foregoing shall not be deemed to in any way limit or waive Licensor's right to
any and all available remedies as a result of any breach by Licensee of any
other provision hereof.
9. MARKET ROLL-OUT
It is the intention of the parties that the Market Roll-Out of the Licensed
Products will commence on or about August 1, 2000. Licensee shall provide
Licensor with written notice of the actual date Market Roll-Out occurs. If by
March 1, 2001 the Market Roll-Out has not occurred, and if such delay is not due
to the act or acts of Licensor or Licensor's failure to act, or by reason of
force majeure, then Market Roll-Out shall be deemed to have occurred in August
1, 2000 and Licensee shall be in material breach of this Agreement.
10. ROYALTIES
10.1 Within forty-five (45) days following the end of each Contract
Quarter during each Contract Year, Licensee shall pay a royalty in an amount
equal to: (i) the greater of: (A) the Minimum Royalty which became due since the
beginning of that Contract Year and (B) the product of the Royalty Rate
multiplied by all Net Sales during that Contract Year less (ii) all royalty
payments
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previously made relating to Net Sales during that Contract Year. The Minimum
Royalty shall be deemed to accrue on a quarterly basis in an amount equal to
one-fourth of the Minimum Royalty for the applicable Contract Year. The Minimum
Royalty due for any Contract Year shall equal the product of the Royalty Rate
multiplied by the applicable Minimum Sales for such Contract Year. The Royalty
Rate in effect as of any date during any Contract Year ("Determination Date")
shall be determined in accordance with the following table based on the greater
of (x) the highest total cumulative Net Sales made in any prior Contract Year
and (y) total cumulative Net Sales made since the beginning of such Contract
Year through the Determination Date and (z) the highest applicable Minimum Sales
required in any prior Contract Year:
*
For example, if Licensee's total Net Sales for each of the first three (3)
Contract Quarters of Contract Year 3 are * and Net Sales in no prior Contract
Year exceeded * , then the Royalty Rate in effect as to all Net Sales made in
Contract Year 3 totaling less than * and the Royalty Rate in effect as to all
Net Sales made in Contract Year 3 exceeding * will be the Royalty Rate in effect
as to all Net Sales made after Contract Year 3 until the Royalty Rate is next
increased. In no event will the Royalty Rate ever decrease after it has
increased.
10.2 Royalties calculated on Net Sales made in the United States shall
be paid to U.S. Licensor; royalties calculated on Net Sales made in the rest of
the world shall be paid to International Licensor. In the event the North
American
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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Minimum Royalty to be paid for any Contract Quarter exceeds the product
of the Royalty Rate multiplied by all applicable Net Sales for such Contract
Quarter made in North America, then such excess shall be paid to U.S. Licensor
and to International Licensor, respectively, in the same proportions as the
respective proportions of Net Sales made for such Contract Quarter in the United
States and to Authorized Retailers in the rest of the world. The "North American
Minimum Royalty" due for any Contract Year shall equal the product of the
Royalty Rate multiplied by the applicable North American Minimum Sales for such
Contract Year. For the purpose of calculating royalties, Net Sales in foreign
currencies shall be converted to United States Dollars as provided in section
8.5.
10.3 If the license shall terminate other than on the last day of a
Contract Year, the royalty due for such Contract Year shall be an amount equal
to (i) the greater of (A) the Minimum Royalty for such Contract Year multiplied
by a fraction, the numerator of which shall be the number of days in such
Contract Year to and including the date of termination of the license and the
denominator of which shall be 365 and (B) the product of the Royalty Rate
multiplied by all Net Sales during that Contract Year less (ii) all royalty
payments previously made relating to Net Sales during that Contract Year.
10.4 Together with each royalty payment due each Contract Quarter,
Licensee shall provide Licensor with a written statement certified as accurate
by Licensee's Chief Financial Officer and setting forth (i) total Net Sales of
all Licensed Products made by Licensee both in the United States and such total
Net Sales made by Licensee outside the United States (with the latter broken out
by country and by geographic region as described in Schedule D) since the
beginning of such Contract Year through the last day of such Contract Quarter;
and (ii) the computation of the applicable Royalty Rate and the royalty due on
such Net Sales. Each such statement shall also identify by model number or SKU
number, or in such other appropriate manner as Licensor shall reasonably
request, the different
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Licensed Products and the total units sold of each included in such statement
and sub totals of each sold to each Authorized Retailer separately identified by
name and address. All products shall be deemed to have been sold when invoiced,
shipped or paid for, whichever first shall occur.
11. MARKETING AND ADVERTISING
11.1 No later than ninety (90) days prior to the beginning of each
Contract Year during the term of this Agreement, Licensee shall prepare and
present (i) to U.S. Licensor for feedback and input and, as required hereunder,
approval, an annual marketing plan setting forth the information described below
with respect to the United States (the "U.S. Plan") and (ii) to International
Licensor for feedback and input and approval, an annual marketing plan setting
forth the information described below with respect to the Territory outside the
United States (the "International Plan"). The U.S. Plan and the International
Plan are sometimes hereinafter referred to as the "Plan". The Plan shall set
forth in reasonable detail, Licensee's plans for conducting the Licensed
Products business for the next Contract Year, with particular emphasis on the
marketing, promotion and sales of the Licensed Products. The Plan shall include,
without limitation, (a) a description (including timing) of the types and
numbers of designs intended to be developed or manufactured (including any new
products); (b) sales volume projections by channel and country, in units and
dollars; (c) marketing strategies, including wholesale and suggested retail
pricing by collection and market; (d) assessment of customer base and customers;
(e) distribution, including distribution outlets; (f) advertising and sales
promotion plans, including number of and cost of advertisements and promotions
already scheduled, where advertisements will be published or promotions will be
scheduled, the proposed media schedule and costs of any and all advertising
campaigns, the format and the structure for all advertising not already approved
by Licensor; (g) Packaging, point of sale and trade exhibition plans; (h) the
results of any market research relating to the Licensed Products and similar
products, and market trends; and (i)
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any other information Licensor shall reasonably request. Licensor shall promptly
review and shall not unreasonably withhold approval of such marketing Plan each
Contract Year and shall notify Licensee that it either approves or objects to
such Plan, which notice shall specify the objection or objections in reasonable
detail. Licensor and Licensee shall communicate with respect to such objections
and shall develop a mutually acceptable marketing Plan for such Contract Year.
Licensee shall thereafter submit a revised marketing Plan which Licensor shall
review. At such time as a mutually acceptable marketing Plan is completed,
Licensor shall notify Licensee of its approval of the Plan. If Licensor fails to
notify Licensee of its approval or objections to the marketing Plan within
thirty (30) days following submission of the initial marketing Plan, or fifteen
(15) days following submission of any revised marketing Plan, such marketing
Plan shall be deemed approved by Licensor. Licensee shall abide by and adhere to
the Plan as finally approved provided, however, that in the event of any
conflict between any provision contained in the Plan and this Agreement, the
latter shall control. In the event International Licensor timely disapproves of
the International Plan and it is unable to agree with Licensee on an
International Plan prior to the beginning of the relevant Contract Year, then
International Licensor shall have the right upon notice to Licensee, to
terminate this Agreement as between International Licensor and Licensee as to
all or any portion of the Territory outside of the United States. In the event
U.S. Licensor timely disapproves of the U.S. Plan and it is unable to agree with
Licensee on a U.S. Plan prior to the beginning of the relevant Contract Year,
then U.S. Licensor shall have the right upon notice to Licensee to terminate
this Agreement as between U.S. Licensor and Licensee.
11.2 As soon as possible upon the execution hereof and thereafter at
all times during the term hereof, * .
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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11.3 Each Contract Year Licensee will make, at a minimum, advertising
and marketing expenditures exclusively in connection with the Licensed Products
equal to: * ("Minimum Communication Expenditures"). Licensee further agrees to
pay the following portions of such Minimum Communication Expenditures directly
to Licensor (such direct payments hereinafter referred to as "Consumer
Advertising Payments"):
*
The Consumer Advertising Payments shall be paid to U.S. Licensor and to
International Licensor each Contract Year in the same proportions, respectively,
as Net Sales estimated to be made in the United States and outside the United
States bear to total estimated Net Sales based on the Plan for such Contract
Year. The Consumer Advertising Payments shall be made to Licensor in equal
quarterly payments no later than the beginning of each Contract Year Quarter.
Licensor will spend an amount equal to the Consumer Advertising Payments for the
creation, production and placement of consumer advertising of the Licensed
Products for which it shall be solely responsible; provided, however, that
Licensor will furnish Licensee within sixty (60) days after each Contract Year
with a statement of such expenditures made by Licensor and a list of all such
consumer advertising placed in such Contract Year. Notwithstanding the
foregoing, Licensee will pay Licensor * against the Consumer Advertising
Payments due in the first Contract Year no later than one hundred twenty (120)
days prior to Market Roll-Out.
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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For purposes of this section 11.3 Minimum Communications Expenditures, other
than the portion thereof paid to Licensor as Consumer Advertising Payments,
shall be deemed to include only those expenditures incurred by Licensee for
marketing and promotion purposes involving the display of the Trademark (other
than for purposes of packaging the Licensed Product), including, but not limited
to, * . Such expenditures shall be in accordance and consistent with the
marketing Plan as approved by Licensor or otherwise as expressly approved by
Licensor in writing.
11.4 Together with the final royalty statement due following each
Contract Year pursuant to section 10.4 hereof, Licensee shall include a final
calculation and statement of the total Consumer Advertising Payments and total
Minimum Communication Expenditures due for such Contract Year and shall,
together therewith, remit to Licensor any underpayment of the Consumer
Advertising Payments and either spend in the next succeeding two (2) Contract
Quarters any underpayment of Minimum Communication Expenditures or set off from
the Minimum Communication Expenditures due in the next succeeding two (2)
Contract Quarters any overpayment of Minimum Communications Expenditures; and
Licensor, within thirty (30) days after receipt of such statement, shall pay to
Licensee any overpayment of Consumer Advertising Payments to the extent Licensor
agrees with Licensee's statement and calculation thereof.
11.5 Licensee shall use such advertising agency or agencies as Licensor
shall require in connection with the Exploitation of the Licensed Products;
provided the charges of any such agency are reasonable and customary.
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* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
12. BOOKS AND RECORDS
12.1 Licensee shall keep and maintain at its regular place of business
complete and accurate records and accounts on the basis of which, it prepares
financial statements that are in accordance with GAAP, showing the business
transacted in connection with the Licensed Products manufactured and sold
pursuant to this Agreement, including without limitation records and accounts
relating to Net Sales, shipments and orders for Licensed Products and
expenditures on marketing, promotion and advertising. In the case of termination
of this Agreement, such information shall be provided for the period ending at
termination. Such records and accounts shall be kept until the earlier to occur
of (i) the third year following the Contract Year in which such Net Sales were
received and (ii) two years following the termination or expiration of this
Agreement.
12.2 Licensor, or its duly authorized agents or representatives, shall
have access to and the right to examine and make copies of all records and
accounts that Licensee is required to maintain pursuant to Section 12.1 at
Licensee's premises, provided that any such examination (a) shall be at
Licensor's expense, (b) shall be during normal business hours upon reasonable
prior notice which shall be no less than five (5) business days, and (c) shall
not unreasonably interfere with Licensee's operations and activities. Should an
audit disclose that Licensee underpaid royalties for any given Contract Year,
Licensee shall forthwith and upon written demand pay Licensor the amount owed,
together with interest thereon, at a rate of ten percent (10%) per annum
calculated from the due date of such royalties. Should an audit disclose that
Licensee's actual advertising and marketing expenditures in any given Contract
Year failed to meet the
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Minimum Communication Expenditures required hereunder, Licensee shall forthwith
and upon written demand pay Licensor the difference. Further, Licensee shall pay
for the cost of the audit, if it should be disclosed that Licensee underpaid
royalties by a margin exceeding five percent (5%) in any given Contract Year, or
that Licensee's actual advertising and marketing expenditures failed to meet the
Minimum Communication Expenditures required hereunder by a margin exceeding five
percent (5%) and Licensee had not obtained Licensor's approval to apply such
deficiency in advertising expenditures to the next Contract Year.
12.3 Promptly after the date hereof, Licensee will furnish Licensor
with copies of Licensee's audited financial statements for its 1998 and 1999
fiscal years together with the opinion of Licensee's independent certified
public accountants thereon. In addition, for so long as Licensee is not subject
to or in compliance with the reporting requirements of section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, ("1934 Act") Licensee shall
provide Licensor in writing (a) a statement certified by Licensee's Chief
Financial Officer to be delivered to Licensor within four (4) months after the
end of each fiscal year of Licensee and (b) a six (6) month interim statement
certified by Licensee's Chief Financial Officer to be delivered to Licensor
within sixty (60) days after the end of the six (6) month period, both
evidencing all of the following:
(i) There is no default or event of default which has not been
affirmatively waived under any agreement covering Licensee's
indebtedness as of the end of the period to which the certified
statement relates. (Licensee shall provide Licensor with copies of all
quarterly officer's certifications simultaneously with the sending of
the same by Licensee to Licensee's lenders);
(ii) After the date hereof, Licensee has not had Operating Losses
(defined as income/losses before interest and taxes) for two (2)
consecutive fiscal quarters;
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(iii) At the end of each fiscal year of Licensee, Licensee has not
had Operating Losses for such fiscal year;
(iv) Licensee's net shipments of all of its products during the
period to which the certified statement relates were * which by their
terms were to be filled prior to the end of such period; and
(v) Cash flow, defined as operating income plus depreciation and
amortization, is * .
In addition, in the event Licensee's net worth for any period covered by any of
the foregoing statements is less than Licensee's net worth for its fiscal year
1999, then Licensee will provide Licensor with copies of Licensee's audited
financial statements and accompanying opinions of its independent certified
public accountants for each fiscal year thereafter for the duration of this
Agreement unless Licensee becomes subject to the 1934 Act reporting requirements
referred to above.
13. REPRESENTATIONS AND WARRANTIES OF LICENSEE
Licensee represents and warrants to Licensor as follows:
13.1 Licensee is a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey.
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
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13.2 Licensee has corporate power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement. The
execution and delivery of this Agreement by Licensee have been duly and validly
authorized by all necessary corporate action. This Agreement has been duly
authorized, executed and delivered by Licensee and constitutes a valid and
binding obligation of Licensee, enforceable against Licensee in accordance with
its terms, except that (i) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditor's rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and the discretion of the court in which any proceeding therefor may be
brought.
13.3 The execution, delivery and performance of this Agreement by
Licensee will not (i) violate any provision of the Articles of Incorporation or
By-Laws of Licensee, (ii) violate, or be in conflict with, or constitute a
default of or termination event (or an event which, with notice or lapse of time
to both, would constitute a default or a termination event) under, any agreement
to which Licensee is a party, or (iii) violate any applicable statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority binding on Licensee.
13.4 No consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority or other Person
is required in connection with the execution, delivery and performance of this
Agreement by Licensee.
13.5 Licensee has provided to Licensor a copy of its audited financial
statements for its 1998 and 1999 fiscal years (the "Licensee Financial
Statements"). The Licensee Financial Statements have been prepared from the
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books and records of Licensee in accordance with generally accepted accounting
principles, consistently applied, and present fairly in all material respects,
the financial condition of Licensee at July 31, 1999 and the results of
operations and cash flows for Licensee for each of the two years in the period
ended July 31, 1999. Since the date of the Licensee Financial Statements, there
has not been any material adverse change in the business, operations, financial
condition, assets or liabilities of Licensee.
14. REPRESENTATIONS AND WARRANTIES OF LICENSOR.
Licensor represents and warrants to Licensee as follows:
14.1 U. S. Licensor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and International
Licensor is a corporation duly organized, validly existing and in good standing
under the laws of Switzerland.
14.2 Licensor has corporate power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement. The
execution and delivery of this Agreement by Licensor have been duly authorized,
executed and delivered by Licensor and constitutes a valid and binding
obligation of Licensor, enforceable against Licensor in accordance with its
terms, except that (i) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditor's rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and the discretion of the court in which any proceeding therefor may be
brought.
14.3 The execution, delivery and performance of this Agreement by
Licensor will not (i) violate any provision of the Articles of Incorporation or
By-Laws of Licensor, (ii) violate, or be in conflict with, or constitute a
default of or termination event (or an event which with notice or lapse of time
or both, would
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constitute a default or a termination event) under, any agreement to which
Licensor is a party, or (iii) violate any applicable statute or law or any
judgment, decree, order, regulation or rule or any court or governmental
authority binding on Licensor.
14.4 No consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority or other Person,
except any which have already been obtained, is required in connection with the
execution, delivery and performance of this Agreement by Licensor.
14.5 U.S. Licensor is the sole and exclusive owner of the Licensed
Trademarks and the goodwill attached thereto in the United States and has the
sole and exclusive right to grant to Licensee the rights purported to be granted
hereunder to use the Licensed Trademarks in connection with the Exploitation of
Licensed Products in the United States. International Licensor is the sole and
exclusive owner of the Licensed Trademarks and the goodwill attached thereto in
the rest of the world and has the sole and exclusive right to grant to Licensee
the rights purported to be granted hereunder to use the Licensed Trademarks in
connection with the Exploitation of Licensed Products in the rest of the world.
No proceedings have been instituted, are pending or, to the knowledge of
Licensor, threatened, which challenge the rights of Licensor in respect to the
Licensed Trademarks or the validity thereof which, if resulting in a judgment
adverse to Licensor, would materially and adversely affect the rights granted to
Licensee hereunder; to the knowledge of Licensor, none of the Licensed
Trademarks infringes upon or otherwise violates the rights of others or is being
infringed by others and none is subject to any outstanding order, decree,
judgment, stipulation or charge which will materially and adversely affect the
rights granted to Licensee hereunder.
15. TERM AND TERMINATION
15.1 This Agreement shall remain in full force and effect from the date
this Agreement is entered into by the parties until the end of the fifth
Contract
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Year unless earlier terminated as provided herein. Licensee shall have the right
to renew this Agreement for an additional five (5) years upon notice to the
Licensor given at least 180 days prior to the end of the initial Term if during
the initial Term the Minimum Sales have been achieved, no event has occurred
that upon the giving of notice or lapse of time, or both, would entitle the
Licensor to terminate this Agreement and Net Sales in North America for the
fourth Contract Year were at least double the North American Minimum Sales
required for such Contract Year; provided, however, that there shall be excluded
from the Territory in the renewal Term any geographic region set forth on
Schedule D hereof (i.e.,Europe, Asia/Australia, and Other) in which Licensee's
Net Sales in the fourth Contract Year were not at least double the required Net
Sales for such region as set forth on Schedule D. In the event this Agreement is
renewed as provided above in this section 15.1 then the Minimum Sales for each
Contract Year in such renewal Term shall be no less than the greater of *
Contract Year. The allocation of Minimum Sales for each Contract Year during the
renewal Term as between North American Minimum Sales and International Minimum
Sales shall be determined by Licensor in accordance with the foregoing and set
forth in a notice which Licensor shall deliver to Licensee as soon as reasonably
practicable after Licensee's exercise of its renewal right as set forth above.
15.2 No right of Licensor or obligation of Licensee accruing under this
Agreement prior to any termination thereof shall be affected by such
termination; without limiting the generality of the foregoing, Licensee agrees
promptly after termination (i) to make all payments that became due hereunder on
or before the effective date of termination and (ii) render all statements
required hereunder through the effective date of termination.
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
31
<PAGE> 32
15.3 In addition to its rights to terminate under Section 15.4 and 15.5
Licensor shall have the right to terminate this Agreement immediately upon
notice to Licensee if Licensee shall breach or default in the observance or
performance of any one, or more provisions hereof and (a) if such breach or
default is remediable, Licensee shall have failed to effect such remedy to
Licensor's reasonable satisfaction within thirty (30) days after notice of such
breach or default from Licensor or (b) such breach or default is not remediable
to the reasonable satisfaction of Licensor and is not immaterial.
15.4 U.S. Licensor shall have the right to terminate this Agreement
immediately upon notice to Licensee in the event this Agreement is terminated by
International Licensor except in the case of termination by International
Licensor under Section 8.6. International Licensor and/or Licensee shall have
the right to terminate this Agreement immediately upon notice to the other party
in the event this Agreement is terminated by U.S. Licensor.
15.5 Licensor will have the right to terminate this Agreement forthwith
upon notice to Licensee in the event:
(a) Licensee fails to achieve Minimum Sales in any Contract Year;
or
(b) Licensee breaches any of the provisions set forth in Article 5
hereof; or
(c) Licensee fails to procure Licensor's prior approval as
provided in Sections 6.1, 6.2, 7.1, 8.2; or
(d) Licensee fails to make timely payment of all royalties due
hereunder more than twice during any eight (8) consecutive
Contract Year quarters; or
(e) Licensee underpays royalties more than once by more than 5%.
15.6 Licensee shall have the right to terminate this Agreement as
follows:
32
<PAGE> 33
(a) By giving Licensor at least six (6) months written notice of such
termination in the event that Licensor shall breach or default in the observance
or performance of any one, or more provisions hereof and (i) if such breach or
default is remediable, Licensor shall have failed to effect such remedy to
Licensee's reasonable satisfaction within thirty (30) days after notice of such
breach or default from Licensee or (ii) such breach or default is not remediable
to the reasonable satisfaction of Licensee and is not immaterial
(b) If the U.S. Licensor's rights in the trademark MOVADO in the United
States are canceled, defeated or limited to items that do not include watches
and/or eyewear or determined to be invalid in a non-appealable judgment of a
court of competent jurisdiction, Licensee shall have the right to terminate this
Agreement upon notice to Licensor. If the International Licensor's rights in the
trademark MOVADO in any country included within the Territory outside the United
States are cancelled, defeated or limited to items that do not include watches
and/or eyewear or are determined to be invalid in a non-appealable judgment of a
court of competent jurisdiction then International Minimum Sales for each
Contract Year following the Contract Year in which such rights have been so
affected shall be reduced by an amount equal to the Net Sales made in such
country in the immediately preceding Contract Year.
15.7 In the event Licensee files a petition in bankruptcy, or is
adjudicated a bankrupt, or if a petition in bankruptcy is filed against Licensee
and is not dismissed within thirty (30) days or if Licensee becomes insolvent or
makes an assignment for the benefit of creditors or any arrangement pursuant to
any bankruptcy law, or if Licensee discontinues its business or if a receiver is
appointed for Licensee (any of the foregoing hereinafter referred to as a
"Bankruptcy"), this Agreement shall automatically terminate without any notice
whatsoever being necessary, to the full extent allowed by applicable law. All
royalties on sales made prior to such Bankruptcy shall become immediately due
and payable. In the event this Agreement is terminated pursuant to this section,
Licensee, its receivers, representatives, trustees, agents, administrators,
successors
33
<PAGE> 34
and/or assigns, shall have no right to sell any of the Licensed Products covered
by this Agreement, except with the special consent in accordance with the
written instructions of Licensor. The non-assumption of this Agreement by or on
behalf of the debtor in connection with any Bankruptcy, shall operate to
automatically terminate this Agreement, without any notice whatsoever being
necessary, effective as of the date of the commencement of the Bankruptcy.
15.8 In the event that this Agreement is terminated for any reason
whatsoever, Licensee shall immediately discontinue all use of the Licensed
Trademarks or any of them in any form and/or in any manner whatsoever; and shall
promptly provide Licensor with a list of its inventory of Licensed Products
provided that Licensee shall have the right for a nine (9) month period after
such termination to continue to sell Licensed Products then in Licensee's
inventory at the date of such termination in accordance with the terms hereof,
subject, however, to Licensor's repurchase option. Licensee hereby grants to
Licensor the right and option, exercisable by Licensor upon notice at any time
and from time to time after the effective date of termination, to purchase at
cost (excluding any intercompany markups) from Licensee all or any portion
selected by Licensor of unused labels, wrappers, tags, cartons, bags, boxes,
advertising material and Licensed Products on which any Licensed Trademark
appears. No Royalty shall be payable on sales of Licensed Products to the
Licensor as provided in this section 15.8. This Section 15.8 shall survive any
termination of this Agreement.
16. INSURANCE; INDEMNITY
16.1 Except as to such matters in respect of which Licensor is required
to indemnify Licensee under Section 16.2, Licensee will indemnify and hold
Licensor harmless from any claim, suit, loss, damage or expense (including
reasonable attorney's fees) arising out of the breach of this Agreement by
Licensee or the manufacture, labeling, sale, distribution or advertisement of
any
34
<PAGE> 35
Licensed Product by Licensee. Licensor shall give to Licensee timely notice of
any such claim or suit.
16.2 Licensor will indemnify and hold Licensee harmless from any claim,
suit, loss, damage or expense (including, without limitation, reasonable
attorneys' fees) arising out of the alleged infringement by any of the Licensed
Trademarks of the trademarks, patents or copyrights owned by any third party.
Licensee will give Licensor timely notice of any such claim or suit.
16.3 Licensee shall maintain, at its own expense, in full force and
effect at all times during which Licensed Products bearing a Licensed Trademark
are being sold, with a responsible insurance carrier acceptable to Licensor
comprehensive general liability insurance which includes, among other things,
products liability insurance with coverage limits of no less than $2,000,000 per
occurrence and $10,000,000 in the aggregate. Such insurance shall provide
primary insurance protection to Licensor and shall name Licensor as an
additional insured and Licensee shall give at least thirty (30) days prior
written notice to Licensor of the cancellation of, or any substantial
modification in, such insurance policy. Licensee shall, from time to time, upon
reasonable request by Licensor, promptly furnish or cause to be furnished to
Licensor evidence in form and substance satisfactory to Licensor of the
maintenance of the insurance required hereunder, including, but not limited to,
originals or, copies of policies, certificates of insurance (with applicable
riders and endorsements) and proof of premium payments.
17. NO ASSIGNMENT OR SUBLICENSE BY LICENSEE
17.1 This Agreement and all its rights and duties hereunder are
personal to the Licensee and shall not, without the prior written consent of
Licensor, which consent Licensor shall have the right to grant or withhold in
its sole and absolute discretion, be assigned, sublicensed or otherwise
encumbered by Licensee whether
35
<PAGE> 36
by operation of law or otherwise. Any such purported assignment, sublicense or
encumbrance without such consent shall be void and of no effect whatsoever.
17.2 At least 60 days prior to the completion of any proposed Change of
Control of Licensee, Licensee shall send a Change of Control Notice to Licensor
who may terminate the License by written notice to Licensee within 20 days after
Licensor receives a Change of Control Notice effective upon the later to occur
of the Change of Control and the date specified in any such termination notice;
provided, however, that the License shall not be terminated if such Change of
Control shall not occur. If Licensor does not exercise its right to terminate
the License within such 60 day period, Licensor shall not have the right to
terminate the License as a result of such Change of Control. In the event that
Licensor learns of a completed Change of Control for which Licensor did not
receive a Change of Control Notice, Licensor may terminate the License forthwith
by written notice to Licensee.
18. MISCELLANEOUS
18.1 In the event that Licensor or Licensee shall, at any time, waive
any of its rights under this Agreement, or the performance by the other party of
any of its obligations hereunder, such waiver shall not be construed as a
continuing waiver of the same rights or obligations or a waiver of any other
rights or obligations.
18.2 Each party acknowledges that all information relating to the
business and operations of the other party and its affiliates which either party
learns during the term, or has learned during negotiation, of this Agreement,
subject to section 7.1 all special design concepts which either party or its
affiliates provide to the other party hereunder and all sketches and designs
received by either party from the other party or its affiliates (hereinafter
referred to as "Confidential Data"), are valuable property of the party from
whom obtained.
36
<PAGE> 37
Confidential Data shall not include publicly available information unless the
same becomes publicly available through a breach of this Agreement. Each party
acknowledges the need to preserve the confidentiality and secrecy of
Confidential Data and agrees that, both during and after the term of this
Agreement neither shall, and shall not permit any third party to, use or
disclose Confidential Data except to the extent any such disclosure is required
by a count of competent jurisdiction or by a lawfully issued subpoena, in which
event such party shall immediately notify the other party of such required
disclosure and use reasonable efforts to obtain an appropriate stipulation under
which the confidentiality of the disclosed Confidential Data is preserved to the
extent practicable. Each party shall take all necessary steps to ensure that all
use of Confidential Data by it or its authorized representatives and employees
(which use shall be solely as necessary for, and in connection with, performance
of its obligations under this Agreement) shall preserve in all respects the
confidentiality of Confidential Data.
18.3 Licensee shall sell all Licensed Products ordered by Licensor or
by Licensor Affiliate to Licensor or such Licensor Affiliate at the lowest price
the same Licensed Products have been sold by Licensee or by any Affiliate of
Licensee to any other Person within the preceding twelve (12) months. If, within
six (6) months subsequent to any such sale to Licensor or any Licensor
Affiliate, Licensee or any Affiliate of Licensee sells any of the same Licensed
Products purchased by Licensor or any Licensor Affiliate in such prior six (6)
month period to any other Person at a price less than that paid by Licensor or
any such Licensor Affiliate, then Licensee will issue a credit note to Licensor
or such Licensor Affiliate, as the case may be, equal to the per unit difference
paid multiplied by the total number of units purchased by Licensor or Licensor
Affiliate within thirty (30) days after the date of such sale to such other
Person or, at the request of Licensor or such Licensor Affiliate, Licensee will
refund to Licensor or such Licensor Affiliate the amount of such price
difference.
37
<PAGE> 38
18.4 In no event will sales of Closeouts * any Contract Year. All
Closeouts shall be sold only with Licensor's prior written approval, which
Licensor may withhold in its sole discretion, * terms and conditions as
Licensee, in its reasonable discretion, determines appropriate and shall not be
sold to any Person which Licensee knows, or has reason to know, will export such
Closeouts from the country in which the Licensed Products were to have been
sold.
18.5 This Agreement constitutes the entire Agreement between the
parties as to the subject matter hereof and no modifications or revisions hereof
shall be of any force or effect unless the same are in writing and executed by
the parties hereto.
18.6 Any provisions of this Agreement which are, or shall be determined
to be, invalid shall be ineffective, but such invalidity shall not affect the
remaining provisions hereof. Section headings herein are for convenience only
and have no substantive effect.
18.7 This Agreement is binding upon the parties hereto, and their
permitted successors and assigns. Licensor shall have the right to assign this
Agreement including without limitation any or all of its rights or obligations
hereunder to any other person upon notice to Licensee.
18.8 This Agreement shall be construed in accordance with and be
governed by the laws of the State of New York, applicable to contracts made and
to be wholly performed therein without regard to its conflict of laws rules. Any
action or proceeding arising out of or relating in any way to this Agreement,
shall be brought and enforced in the courts of the United States for the
Southern
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
38
<PAGE> 39
District of New York, or, if such courts do not have, or do not accept, subject
matter jurisdiction over the action or proceeding, in the courts of the state of
New York for New York County and each party hereby consents to the personal
jurisdiction of each such court in respect of any action or proceeding. Each
party consents to service of process in any such action or proceeding by the
mailing of copies thereof by Registered or Certified Mail, postage prepaid,
return receipt requested, to it at its address provided for notices hereunder.
The foregoing shall not limit the right of any party of the parties to serve
process in any other manner permitted by law or to obtain execution or
enforcement of any judgment in any other jurisdiction. Each party hereby waives
(a) any objection that it may now or hereafter have to the laying of venue in
any action or proceeding arising under or related to this Agreement in any court
located in the Borough of Manhattan, City and State of New York, (b) any claim
that a court located in the Borough of Manhattan, City and State of New York is
not a convenient forum for any action or proceeding, and (c) any claim that it
is not subject to the personal jurisdiction of the United States of District
Court for the Southern District of New York or of the courts of the State of New
York located in the Borough of Manhattan, City and State of New York.
18.9 All notices and authorizations hereunder shall be in writing and,
together with all statements, reports and payments, shall be dispatched by
overnight courier, or certified mail/return receipt requested or hand delivered
or faxed (with a confirmation copy sent by overnight courier, hand delivered or
registered mail) addressed to Licensee or Licensor as set forth below, and shall
be effective upon receipt:
Licensee: Executive Vice President
Lantis Eyewear
461 Fifth Avenue
New York, New York 10017
39
<PAGE> 40
Copies to: General Counsel
Lantis Eyewear Corporation
461 Fifth Avenue
New York, NY 10017
U.S. Licensor: President
Movado Corporation
501 Silverside Road, Suite 25
Wilmington, DE 19809
Copies to: Executive Vice President
Movado Group, Inc.
125 Chubb Avenue
Lyndhurst, NJ 07071
General Counsel
Movado Group, Inc.
125 Chubb Avenue
Lyndhurst, NJ 07071
International Licensor: President
Movado Watch Company SA
8 Bettlachstrasse
CH-2540 Grenchen, Switzerland
Copies to: Executive Vice President
Movado Group, Inc.
125 Chubb Avenue
Lyndhurst, NJ 07071
General Counsel
Movado Group, Inc.
125 Chubb Avenue
Lyndhurst, NJ 07071
40
<PAGE> 41
18.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
MOVADO CORPORATION LANTIS EYEWEAR CORPORATION
By: /s/ Timothy F. Michno By: /s/ Stephen Clarke
----------------------------- -------------------------------
Name: Timothy F. Michno Name: Stephen Clarke
--------------------------- -----------------------------
Title: General Counsel/Secretary Title: Executive VP
-------------------------- ----------------------------
MOVADO WATCH COMPANY S.A.
By: /s/ Michael Bush
-----------------------------
Name: Michael Bush
---------------------------
Title: Director
--------------------------
41
<PAGE> 42
SCHEDULE A
LICENSED TRADEMARKS
MOVADO
M Logo
42
<PAGE> 43
SCHEDULE B
BRAND NAMES
*
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. )
43
<PAGE> 44
CARIBBEAN ISLANDS
The Bahamas
Cayman Islands
Jamaica
Haiti
Dominican Republic
Puerto Rico
British Virgin Islands
Anguilla
St. Martin
St. Barthelemy
St. Kitts & Nevis
Antigua & Barbuda
Montserrat
Guadeloupe
Dominica
Martinque
St. Lucia
Barbados
Grenada
Trinidad & Tobago
Aruba
Curacao
Cuba
Turks & Caicos Islands
Bermuda
St. Vincent & The Grenadines
Netherlands Antilles
Tortola
Virgin Gorda
44
<PAGE> 45
SCHEDULE D
International Minimum Sales (in thousands)
*
MOVADO CORPORATION
By: /s/ Timothy F. Michno
- ----------------------------------
Name: Timothy F. Michno
- ----------------------------------
Title: General Counsel/Secretary
- ----------------------------------
LANTIS EYEWEAR CORPORATION
By: /s/ Steve Clarke
- ----------------------------------
Name: Steve Clarke
- ----------------------------------
Title: E.V.P. Lantis Eyewear
- ----------------------------------
MOVADO WATCH COMPANY S.A.
By: /s/ Michael J. Bush
- ----------------------------------
Name: Michael J. Bush
- ----------------------------------
Title: Director
- ----------------------------------
* (CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE
SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT.)
45
<PAGE> 1
EXHIBIT 10.35
December 15 , 1999
Mr. Richard Cote
2 Toboggan Ridge
Saddle River, NJ 07458
Dear Rick:
This will confirm the agreement between you and Movado Group, Inc. (the
"Corporation") concerning the payment of severance by the Corporation to you
under certain circumstances as hereinafter set forth.
1. For purposes of this Agreement, a "Change of Control" of the
Corporation shall mean the occurrence of any of the following events:
(a) the acquisition by any single individual or entity or group (within
the meaning of Section 13(d)(3) or 14(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) ("Person") of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of more than fifty
percent (50%) of the combined aggregate voting power of the Corporation's then
outstanding voting securities other than (i) any acquisition directly from the
Corporation, excluding an acquisition by virtue of the exercise of a conversion
privilege, unless the security being so converted was itself acquired directly
from the Corporation , (ii) any acquisition by the Corporation or by any Person
controlled by, under common control with or controlling the Corporation
("Affiliate"), (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or by an Affiliate, (iv) any
acquisition by any Person, or any entity controlled by any such Person, who, as
of May 12, 1999 was the beneficial owner of at least fifteen percent (15%) of
the combined aggregate voting power of the Corporation's then outstanding voting
securities, or (v) any acquisition that complies with subsection b(i) of this
section 1; or
(b) the approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, or the sale or other disposition of all
or substantially all the assets of the Corporation ("Corporate Transaction");
excluding, however, any Corporate Transaction (i) as a result of which the
Persons, each of whom was, as of May 12, 1999, the beneficial owner of more than
fifteen percent (15%) of the combined aggregate voting power of the then
outstanding voting securities of the Corporation, or any entity controlled by
such Persons, will beneficially own, directly or indirectly, more than thirty
percent (30%) of the combined aggregate voting power of the then outstanding
voting securities of the corporation resulting from such Corporate Transaction;
or
<PAGE> 2
(c) the complete liquidation or dissolution of the Corporation.
2. In the event of your Qualified Termination of Employment, you shall be
entitled, as compensation for services rendered (subject to any applicable
payroll or other taxes required to be withheld) to continue to receive regular
bi-weekly payments of base salary for twenty four months following the date of
such Qualified Termination of Employment.
3. (a) "Qualified Termination of Employment" shall mean your termination
of employment with the Corporation, other than as a consequence of your death or
Disability, within two years after a Change of Control of the Corporation,
(i) by the Company for any reason other than for Cause, or
(ii) by you by reason of an Adverse Change in Conditions of
Employment.
(b) For the purpose of this Section 3, "Cause" shall mean gross negligence
or willful misconduct in respect of your obligations to the Corporation
(including but not limited to final conviction for a felony or perpetration of a
common law fraud) that has or is likely to result in material economic damage to
the Corporation.
(c) An "Adverse Change in Conditions of Employment" shall mean the
occurrence of any of the following events:
(i) change by the Corporation of your functions, duties or
responsibilities, which change would cause your position with the
Corporation to become one of substantially less dignity,
responsibility, importance or scope;
(ii) a reduction by the Corporation of your monthly base salary as
in effect immediately preceding the Change of Control or as the same
may thereafter be increased from time to time;
(iii) failure by the Corporation to continue you in any compensation
or benefit plan in which, and on at least as favorable a basis, as, you
were participating immediately preceding the Change of Control or, if
more favorable to you, failure by the Corporation to provide for you
participation in any compensation or benefit plan on a comparable basis
and as in effect at any time thereafter with respect to other key
employees;
(iv) the Corporation's requiring you to be based anywhere other
than fifty (50) miles of your principal office location prior to the
Change of Control, except for required travel on the Corporation's
business to an extent substantially consistent with your business
travel obligations prior to the Change of Control.
4. Termination by the Corporation of your employment based on Disability
shall mean termination because of your absence from duties with the Corporation
on a full time basis for six (6) consecutive months, as a result of your
incapacity due to physical or mental illness which is determined to be total and
permanent by a physician selected by the Corporation or its insurers and
acceptable to you or your legal representative (such Agreement as to
acceptability not to be withheld unreasonably).
2
<PAGE> 3
5. You shall hold, in a fiduciary capacity for the benefit of the
Corporation, all secret or confidential information, knowledge or data relating
to the Corporation and its businesses which shall have been obtained by you
during your employment by the Corporation and which shall not be public
knowledge (other than by your acts in violation of this provision). After
termination of your employment with the Corporation, you shall not, without the
prior written consent of the Corporation use, communicate or divulge any such
information, knowledge or data to any one other than the Corporation and those
persons designated by it.
6. If one or more of the covenants or agreements provided for in this
Agreement is contrary to any express provision of law or contrary to the policy
of expressed law, though not expressly prohibited, then such covenant or
covenants, agreement or agreements shall be null and void and shall be deemed
separable from the remaining covenants and agreements and shall in no way affect
the validity of this Agreement or the effect of any remaining covenant or
agreement.
7 All notices required or permitted hereunder shall be in writing and
sent by fax and first class mail or overnight courier to the parties at their
respective addresses first set forth above.
8. This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof, and no representations, inducements,
promises or agreements, oral or otherwise, between the parties not embodied
herein shall be of any force and effect.
9. No amendment or modification of this Agreement or any of its terms
shall be binding on either of the parties to this Agreement unless such
amendment or modification is in writing and is executed by both parties to this
Agreement.
10. It is the intention of the Corporation and you that no portion of the
payments made hereunder be deemed to be an excess parachute payment as defined
in Section 280G of the Internal Revenue Code of 1986, as amended, or any
successor thereto ( the "Code"). It is agreed that the total amount of such
payments and any other payment to or for the benefit of you in the nature of
compensation, receipt of which is contingent on a Change in Control, and to
which Section 280G of the Code applies, shall not exceed an amount equal to one
dollar less than the maximum amount which you may receive without becoming
subject to the tax imposed by Section 4999 of the Code or any successor
provision or which the Corporation may pay without the loss of deduction under
Section 280G of the Code or any successor provisions.
3
<PAGE> 4
11. This Agreement shall be governed by the law of New York without
reference to any conflict of laws rules and the parties consent to the personal
jurisdiction of the federal and state courts sitting in New York county and
agree that any dispute arising hereunder shall be resolved in such courts.
Very truly yours,
MOVADO GROUP, INC.
By :/s/ Vivian D'Elia
Name: Vivian D'Elia
Title: Sr. VP HR
Agreed and accepted
this 16 day of December,
/s/ Richard Cote
Richard Cote
4
<PAGE> 1
SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1.
California:
North American Watch Service Corporation
New Jersey:
EWC Marketing Corp.
SwissAm Inc.
Movado Retail Group, Inc
Delaware:
Movado International, Ltd.
Movado Corporation
NAW Corporation
NAWC Corum Corporation
Movado Group Delaware Holdings Corporation
Switzerland:
Concord Watch Company, S.A.
Movado Watch Company, S.A.
N.A. Trading, Ltd.
Montres Movado Bienne, S.A.
Grandjean GmbH
Canada:
Movado Group of Canada, Inc.
Japan:
Concord Movado Japan Co., Ltd.
Singapore:
Swissam Pte. Ltd.
Hong Kong:
Swissam Ltd.
Swissam Products Ltd.
Germany:
Movado Deutschland G.m.b.H.
Concord Deutschland G.m.b.H.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos 33-72232, 333-13927 and 333-80789) of Movado Group,
Inc. of our report dated April 11, 2000, appearing on page F-1 of this Form
10-K.
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
April 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT FOR THE FISCAL YEAR ENED JANUARY 31, 2000 AND
IS QUALIFIED IT ITS ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<EXCHANGE-RATE> 1
<CASH> 26,615
<SECURITIES> 0
<RECEIVABLES> 103,795
<ALLOWANCES> 0
<INVENTORY> 77,075
<CURRENT-ASSETS> 226,826
<PP&E> 51,846
<DEPRECIATION> (24,253)
<TOTAL-ASSETS> 267,186
<CURRENT-LIABILITIES> 68,096
<BONDS> 0
0
0
<COMMON> 130
<OTHER-SE> 147,685
<TOTAL-LIABILITY-AND-EQUITY> 267,186
<SALES> 295,067
<TOTAL-REVENUES> 295,067
<CGS> 126,667
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 152,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,372
<INCOME-PRETAX> 15,149
<INCOME-TAX> 1,428
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,721
<EPS-BASIC> 1.10
<EPS-DILUTED> 1.06
</TABLE>
