UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the 52-weeks ended February 1, 1997
Commission File No. 1-11161
Nine West Group Inc.
(Exact name of Registrant as specified in its charter)
Delaware 06-1093855
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
9 West Broad Street
Stamford, Connecticut 06902
(Address of Principal (Zip Code)
Executive Offices)
(314) 579-8812
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class: on Which Registered:
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes: X No:
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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. ___
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on April 4, 1997: $1,295,524,514.
Total number of shares of Common Stock, $.01 par value per share,
outstanding as of the close of business on April 4, 1997: 35,792,613.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of Form 10-K is incorporated herein by
reference to the Registrant's definitive proxy statement, filed on April 11,
1997.<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1 Business x
Item 2 Properties xx
Item 3 Legal Proceedings xx
Item 4 Submission of Matters to a Vote of Security Holders xx
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters xx
Item 6 Selected Financial Data xx
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations xx
Item 8 Financial Statements and Supplementary Data xx
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure xx
PART III xx
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K xx
PART I
ITEM 1. BUSINESS.
General
Nine West Group Inc. (together with its subsidiaries, the "Company") is a
leading designer, developer and marketer of quality, fashionable women's
footwear and accessories. The Company markets a full collection of casual,
career and dress footwear and accessories under multiple brand names, each of
which is targeted to a distinct segment of the women's footwear and accessories
markets, from "fashion" to "comfort" styles and from "moderate" to "bridge"
price points. The Company's footwear and accessories are sold to more than
7,000 department, specialty and independent retail stores in more than 16,000
locations and through 1,061 of its own retail stores operating as of February 1,
1997. In addition to its flagship Nine West label, the Company's nationally
recognized brands include Amalfi, Bandolino, Calico, cK/Calvin Klein Shoes and
Bags (under license), Easy Spirit, Enzo Angiolini, Evan Picone (under license),
9 & Co., Pappagallo, Pied a Terre, Selby and Westies. The Company's Jervin
private label division also arranges for the purchase of footwear by major
retailers and other wholesalers for sale under the customers' own labels. The
Company believes that its primary strengths are: (1) its widely-recognized
brand names, (2) the high quality, value and styling of its products, (3) its
ability to respond quickly to changing fashion trends, (4) its established
sourcing relationships with efficient manufacturers in Brazil and other
locations, (5) the broad distribution of its products through both wholesale and
retail channels and (6) its ability to provide timely and reliable delivery to
its customers. The Company believes that it is one of the few established
footwear companies that offer several complete lines of well-known women's
leather footwear in a wide variety of colors, styles and retail price points and
that, as a result, it is able to capitalize on what the Company believes is a
continuing trend among major wholesale accounts to consolidate footwear
purchasing from among a narrowing group of vendors. In addition, the Company
believes that the sale of footwear and accessories through its retail stores
increases consumers' awareness of the Company's brands.
Effective June 27, 1995, the Board of Directors of the Company approved the
change of the Company's fiscal year from December 31 to a 52/53-week period
ending on the Saturday closest to January 31. The change in the Company's
fiscal year created a transition period consisting of the four weeks which began
on January 1, 1995 and ended on January 28, 1995. All references to years in
this Annual Report on Form 10-K relate to fiscal years as defined in the Notes
to Consolidated Financial Statements. See "Item 8 - Financial Statements and
Supplementary Data."
On May 23, 1995, the Company consummated its acquisition (the
"Acquisition") of the footwear business of The United States Shoe Corporation
(the "Footwear Group"). Financial information for 1996, 1995 and 1994 is not
comparable between years, as Footwear Group results are included in the entire
1996 period and are included in 1995 for the 37-week period from May 23, 1995
through February 3, 1996.
Divisions
The Company distributes its footwear and accessories through wholesale
channels and its own retail stores. Prior to March 1997, the Company's business
was operated through two distinct divisions, wholesale and retail. In March
1997, the Company reorganized its business operations to unite its wholesale and
retail operations through vertically-structured business divisions centered
around the Company's brands. Each such division is responsible for the design,
development and management of its branded footwear. Certain branded divisions,
as well as the Company's international division, are responsible for both
wholesale operations and the Company's specialty retail stores. Retail
operations other than specialty retail stores are conducted through a value-
based division. The Company believes that this vertical structure will enhance
brand equities and the consistency of brand image and presentation.
During the periods presented below, the percentage of net revenues
contributed by the Company's wholesale and retail operations is as follows:
1996 1995 1994
---- ---- ----
Wholesale......................... 55% 55% 58%
Retail............................ 45 45 42
--- --- ---
Total........................ 100% 100% 100%
=== === ===
Wholesale Operations
The Company's domestic wholesale operations include the sale of both brand
name and private label footwear and/or accessories through 12 branded divisions,
as well as the Jervin private label division and the Accessories division. The
Jervin private label division earns commissions on an agency basis for arranging
with manufacturers the production of footwear for sale under its customers'
private labels. The Jervin division provides design expertise, selects the
manufacturer, oversees the manufacturing process and arranges the sale of
footwear to the customer. The Accessories division produces and sells handbags
and small leather goods under the names "Nine West" and "Enzo Angiolini" for
sale to department stores and through the Company's retail stores.
The following table summarizes selected aspects of the products sold by the
Company:
Retail Price Range
------------------
Product Market Shoes/
Division Classification Segments Accessories Boots
- -------- -------------- -------- ----------- -----
Amalfi Refined Classics Salon $110 to $140 $125 to $200
Bandolino Modern Classics Better $50 to $85 $80 to $160
Calico Affordable Fashion Moderate $50 to $65 $79 to $99
cK/Calvin Dress Tailored Bridge $50 to $185 $145 to $285
Klein Shoes City/Casual
and Bags Street Athletic
Easy Spirit Comfort/Fit Upper Moderate $60 to $80 $80 to $100
Active Sport/Casuals
Enzo Sophisticated Better $60 to $90 $100 to $165
Angiolini Classics
Evan Picone Fashion Forward Bridge $80 to $110 $120 to $150
9 & Co. Junior/Trend Moderate $30 to $60 $55 to $75
Nine West Contemporary Upper Moderate $49 to $79 $90 to $140
Pappagallo Classic Upper Moderate $60 to $70 $80 to $90
Selby Traditional/Comfort Moderate $60 to $80 $80 to $100
Specialty Traditional/ Moderate/
Marketing/ Contemporary Lower Moderate $25 to $40 $35 to $50
Westies
Jervin Upper Moderate/
Private Label All Moderate $30 to $70 $50 to $140
Accessories Handbags and Moderate/Better $30 to $180
small leather goods
Domestic Specialty Retail Operations of Branded Divisions
The Company's Nine West, Easy Spirit, 9 & Co. and Enzo Angiolini divisions
market footwear and accessories directly to consumers through the Company's
domestic specialty retail stores operating in mall and urban retail center
locations. Each of these branded divisions sells footwear and accessories under
its respective brand name. Certain Nine West stores also offer a selection of
the Bandolino line of footwear. Enzo Angiolini stores also offer a selection of
the Amalfi and Evan Picone lines of footwear.
The following table summarizes selected aspects of the Company's domestic
specialty retail stores:
Enzo
Nine West Easy Spirit 9 & Co. Angiolini
--------- ----------- ------- ---------
Number of locations 285 167 79 66
Anticipated 1997
openings (net of
closings) 15 49 0 14
Brands offered Nine West and, Easy Spirit 9 & Co. Enzo
in selected Angiolini and
locations, in selected
Bandolino locations,
Evan Picone
and Amalfi
Retail price range
of shoes and boots $45 to $175 $45 to $120 $35 to $70 $55 to $195
Type of location Upscale and Upscale and Regional Upscale malls
regional malls regional malls malls and and urban
and urban and urban urban retail
retail centers retail centers retail centers
centers
Average store size
(in square feet) 1,481 1,302 1,591 1,254
Revenues per square
foot during 1996 (a) $529 $538 $308 $571
(a) Determined by dividing total retail net revenues by the annual average
gross retail square footage.
Domestic Value-Based Retail Stores Division
The Company's domestic value-based retail stores are operated by the
Company's Value-Based Retail Stores division under the following names: Nine
West Outlet, Easy Spirit Outlet, Enzo Angiolini Outlet and Banister. This
division also operates leased departments in Stein Mart stores. The outlet
concept was implemented by the Company in order to target more value-oriented
retail customers and to offer a distribution channel for its residual
inventories. In 1996, 25% to 30% of the Nine West and Enzo Angiolini Outlet
stores' merchandise consisted of discontinued styles from the Company's
specialty retail stores and the Company's wholesale operations, with the
remainder of the merchandise consisting of new production of current and proven
prior season's styles. Banister and Stein Mart stores carry the Company's
brands of women's footwear and a limited selection of other suppliers' women's,
men's and athletic footwear. The Easy Spirit Outlet stores sell primarily the
Easy Spirit brand and focus on the size, width and comfort business with a
selection of Selby styles in selected stores.
The following table summarizes selected aspects of certain of the Company's
domestic value-based retail stores:
<TABLE>
<S> <C> <C> <C> <C> <C>
Nine West Easy Spirit Enzo Angiolini
Outlet Outlet Outlet Banister Stein Mart
--------- ----------- -------------- -------- ----------
Number of locations 133 19 8 138 82
Anticipated 1997
openings (net of
closings) 15 15 5 11 18
Brands offered Primarily Easy Spirit Primarily All Company All Company
Nine West and Selby Enzo Angiolini brands brands
Retail price range
of shoes and boots $30 to $125 $30 to $100 $30 to $195 $30 to $125 $30 to $125
Type of location Mfr's Mfr's Mfr's Mfr's Strip
outlet outlet outlet outlet centers
centers centers centers centers
Average store size
(in square feet) 2,654 2,526 2,281 4,844 2,874
Revenues per square
foot during 1996 (a) $368 $195 $340 $162 $171
(a) Determined by dividing total retail net revenues by the annual average gross
retail square footage.
</TABLE>
Domestic Retail Expansion
The Company believes that the expansion of its retail network represents an
opportunity for growth. Proposed sites for the Company's retail stores are
selected based on location, including the area's population density and level of
traffic, average sales per square foot of the shopping mall, urban retail center
or manufacturers' outlet center locations, average household income and other
local demographics. Outlet stores generally are located outside the shopping
radius of the Company's wholesale customers and its specialty retail stores.
The types of stores opened by the Company and the results generated by such
stores depend on various factors, including, among others, general economic and
business conditions affecting consumer spending, the performance of the
Company's wholesale and retail operations, the acceptance by consumers of the
Company's retail concepts, the availability of desirable locations and the
ability of the Company to negotiate acceptable lease terms for new locations,
hire and train personnel and otherwise manage such expansion. See "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for additional information
regarding planned store openings and capital expenditures.
International Division
In 1995, the Company organized an international division for the purpose of
promoting wholesale and retail growth. The Company's international division
sells footwear and accessories under each of the Company's brand names and, in
addition, sells the Pied a Terre brand in Europe. The Company currently markets
its products to customers in more than 40 countries, including Australia,
Canada, Chile, China, France, Mexico and the United Kingdom. During 1996, the
Company acquired 13 specialty retail stores in Canada and 16 specialty retail
stores and one specialty retail concession in the United Kingdom and opened a
net 25 specialty retail locations in Asia, Australia and Canada, bringing the
total number of international specialty retail locations to 84 (62 specialty
retail stores and 22 specialty retail concessions). All international specialty
retail locations operate under the Nine West name, except for the Pied a Terre
specialty retail locations in the United Kingdom. The Company currently
operates 51 of its 84 total international specialty retail locations through
joint ventures in Australia, Hong Kong, Malaysia, Singapore, Taiwan and
Thailand. The expansion of the Company's international specialty retail
locations is expected to continue in 1997, with 180 to 190 international
specialty retail locations anticipated to be operating by the end of 1997. In
addition, subject to the Company's ability to find acceptable partners for its
international specialty retail locations, the Company will continue to establish
its retail presence in certain other international markets through various
arrangements with established retailers in those markets. The Company is
currently developing strategic plans to further penetrate markets in Canada,
Europe, Central and South America, the Middle East and Asia. However, the
Company presently has no commitments to expand into any country other than those
in which it currently operates locations. See "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for additional information regarding planned store openings
and capital expenditures.
Accessories Division
In January 1995, the Company established the Nine West Accessories division
through the acquisition of the operations of L.J.S. Accessory Collections Inc.,
a designer, developer and marketer of quality handbags and small leather goods.
The Accessories division produces and sells handbags and small leather goods
under the names "Nine West" and "Enzo Angiolini" through wholesale channels and
the Company's retail stores.
Design
Separate design teams for each branded division (which are staffed with a
fashion director, line builder and one or two designers) develop the Company's
brands by independently interpreting global lifestyle, clothing, footwear and
accessories trends. To research and confirm such trends, the teams: (1) travel
extensively in Asia, Europe and major American markets; (2) conduct extensive
market research on retailer and consumer preferences; and (3) subscribe to
fashion and color information services. The teams separately develop between 60
and 200 initial designs for each season. Working closely with senior management,
each team selects 20 to 80 styles that maintain each brand's distinct
personality. Samples are refined and then produced. After the samples are
evaluated, lines are modified further for presentation at each season's shoe
shows.
Manufacturing
The Company relies on its long-standing relationships with its Brazilian
and Chinese manufacturers through its independent buying agent, its own domestic
factories, and its third party manufacturers in other countries, to provide a
steady source of inventory. Allocation of production among the Company's
footwear manufacturers is determined based upon a number of factors, including
manufacturing capabilities, delivery requirements and pricing.
Approximately 61% of the Company's footwear products are manufactured by
more than 28 independently owned footwear manufacturers in Brazil. As a result
of the number of entrepreneurial factory owners, the highly skilled labor force,
the modern, efficient vertically-integrated factories and the availability of
high-quality raw materials, the Brazilian manufacturers are able to produce
significant quantities of moderately priced, high-quality leather footwear. The
Company believes that its relationships with its Brazilian manufacturers provide
it with a responsive and active source of supply of its products, and
accordingly, give the Company a significant competitive advantage. The Company
also believes that purchasing a significant percentage of its products in Brazil
allows it to maximize production flexibility while limiting its capital
expenditures, work-in-process inventory and costs of managing a larger
production work force. Because of the sophisticated manufacturing techniques
and vertical integration of these manufacturers, individual production lines can
be quickly changed from one style to another, and production of certain styles
can be completed in as few as four hours, from uncut leather to boxed footwear.
Historically, instability in Brazil's political and economic environment
has not had a material adverse effect on the Company's financial condition or
results of operations. The Company cannot predict, however, the effect that
future changes in economic or political conditions in Brazil could have on the
economics of doing business with its Brazilian manufacturers. Although the
Company believes that it could find alternative manufacturing sources for those
products which it currently sources in Brazil, the establishment of new
manufacturing relationships would involve various uncertainties, and the loss of
a substantial portion of its Brazilian manufacturing capacity before the
alternative sourcing relationships were fully developed could have a material
adverse effect on the Company's financial condition or results of operations.
However, as a result of the Acquisition, the Company now has manufacturing
operations in the United States and additional relationships in other countries
as potential alternative sources for its products.
As a result of the Acquisition, the Company owned and operated five
domestic footwear manufacturing factories and two component factories which,
during 1996, manufactured approximately 11.6% of all footwear products sold by
the Company. In February 1997, the Company announced that, as part of its
continuing program of consolidating operations and optimizing its global
sourcing activities, it would close three of its domestic manufacturing
factories and terminate or reconfigure certain operations conducted at two
additional factories commencing in April 1997 and continuing through late 1997.
See "Item 2 - Properties" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations." As of April 24,
1997, the Company had closed two factories and begun reconfiguring operations at
two other factories. The Company's footwear manufacturing factories can produce
different styles on the same line to increase flexibility to respond to various
demands. The domestic factories source raw materials worldwide, including from
the Company's vendors in Brazil. These factories typically operate with two
shifts but can expand to three when demand is high. The Company also leases and
operates three foreign factories which produce primarily the upper components
used by the Company's domestic factories. Two of these factories are located in
the Dominican Republic and one is located in Honduras.
The Company's footwear is also manufactured by third parties located in
China, Korea and other countries in the Far East, and in Italy, Spain, Mexico
and Uruguay. The Company's accessories are manufactured by third party
manufacturers in the Far East.
The largest Brazilian factories operate tanneries for processing leather
and produce lasts, heels and other footwear components. Raw materials for the
production of footwear and accessories are purchased worldwide by the Company
for its domestic production needs, and by the third party manufacturers, based
on input from the Company.
The price paid by the Company for any style of footwear is determined after
a physical sample of the style is produced, and is dependent on, among other
things, the materials used and the quantity ordered for such style of footwear.
Once a price list by style has been prepared and agreed to with a manufacturer,
changes in prices generally occur only as a result of substitution of materials
at the request of the Company. During the past year, there have been moderate
increases in the general price of leather, which have generally been reflected
in the selling price of the Company's products. Because products are purchased
from the Brazilian manufacturers in pre-set United States dollar prices, the
Company generally has not been adversely affected by fluctuations in exchange
rates.
The Company places its projected orders for each season's styles with its
manufacturers prior to the time the Company has received all of its customers'
orders. Because of the Company's close working relationships with its third
party manufacturers (which allows for flexible production schedules and
production of large quantities of footwear within a short period of time), most
of the Company's orders are finalized only after it has received orders from a
majority of its customers. As a result, the Company believes that, in
comparison to its competitors, it is better able to meet sudden demands for
particular designs, more quickly exploit market trends as they occur, reduce
inventory risk and more efficiently fill reorders booked during a particular
season.
The Company does not have any contracts with any of its manufacturers, but
relies on its long-standing relationships with its Brazilian manufacturers
directly and through its independent buying agent, Bentley Services Inc. (the
"Agent"). The Agent and its affiliates have overseen the activities of the
Brazilian manufacturers for more than ten years. In consultation with the
Company, the Agent selects the proper manufacturer for the style being produced,
monitors the manufacturing process, inspects finished goods and coordinates
shipments of finished goods to the United States. The Company entered into a
five-year contract with the Agent effective January 1, 1992, which has been
extended an additional five years, which provides that the Agent, its owners,
employees, directors and affiliates will not act as a buying agent for, or sell
leather footwear manufactured in Brazil to, other importers, distributors or
retailers for resale in the United States, Canada or the United Kingdom. As
compensation for services rendered, the Agent receives a percentage of the sales
price of the merchandise shipped to the Company. Neither the Agent nor any of
its principals is affiliated with the Company. Paramont Trading S.A., an
affiliate of the Agent, serves as the Company's buying agent in China. In
addition to the Agent and Paramont Trading S.A., the Company utilizes its own
buying offices in Italy and Spain.
Marketing
The Company introduces new collections of footwear at industry-wide shoe
shows, held four times yearly in New York and twice yearly in Las Vegas, and at
regional shoe shows throughout the year. The Company also introduces new
accessory collections at market shows that occur four times each year in New
York. After each show, members of the Company's 184-person direct sales force
visit customers to review the lines and take orders. The Company presently has
footwear showrooms in New York and Dallas, an accessories showroom in New York,
and a cK/Calvin Klein Shoes and Bags showroom in New York, where buyers view and
place orders for the Company's products.
The Company promotes its business with certain department and specialty
retail stores through "concept marketing teams," enabling the Company to bring
its retail and sales planning expertise to individual retailers. Concept
marketing teams are headed by members of branded division management who have
extensive retail backgrounds and include "store rotators" who monitor sales of
the Company's footwear on a daily basis. Under this program, the concept
marketing teams work with the retailer to create a focus area or "concept shop"
within the store that displays the full collection of an entire brand in one
area. Currently, the Company has over 2,000 focus areas and "concept shops". The
concept marketing team assists the department and specialty retail stores by:
(1) recommending how to display the Company's products; (2) educating the store
personnel about the Company and its products; (3) selecting the appropriate
product assortment; (4) recommending when a product should be re-ordered or its
retail price marked-down; (5) providing sales guidance, including the training
of store personnel; and (6) developing advertising programs for the retailers to
promote sales of the Company's products. The goal of the concept marketing teams
is to promote high retail sell-throughs of the Company's products at attractive
profit margins for its retail customers. Through this approach, customers are
encouraged to devote greater selling space to the Company's products and the
Company is better able to assess consumer preferences, the future ordering needs
of its customers and inventory requirements.
Advertising and Promotion
The Company's brands are positioned and marketed through consistent,
integrated communication programs, including national advertising, special
events, product packaging and in-store visual support. Easy Spirit advertises
in lifestyle magazines and on television. The Company's in-house creative
services department works closely with senior management and oversees the
conception, production and execution of virtually all aspects of these
activities. The Company also participates in cooperative advertising programs
in newspapers and magazines with its major wholesale customers and shares the
cost of its wholesale customers' advertising based on total purchases. The
Company produces national advertising campaigns for its Nine West, Enzo
Angiolini and Bandolino brands in major fashion magazines, including Vogue,
Marie Claire, Glamour, Vanity Fair, Elle, Mademoiselle and Harper's Bazaar. In
1996, 1995 and 1994, the Company spent $45.2 million, $33.1 million and $9.3
million, respectively, on advertising. The increase in advertising expenditures
during the last three years was primarily attributable to the addition of
advertising expenditures associated with the Acquisition, of which the
television advertising of the Easy Spirit brand constituted a significant
component. These additional expenditures were included for all of 1996, only
the 37-week period subsequent to the Acquisition in 1995 and none of 1994.
Under the Company's license agreement with Calvin Klein, Inc. (the "License
Agreement"), the Company has agreed to meet certain thresholds based on Revenues
(as defined in the License Agreement) for cooperative, trade and local
advertising for the cK/Calvin Klein retail locations, and consumer advertising
and promotion of licensed products and the licensed trademark.
The Company also believes that an expanded retail network will promote
brand name recognition and support the merchandising of complete lines by, and
the marketing efforts of, its wholesale customers.
Restrictions on Imports
Imports into the United States are affected by, among other things, the
cost of transportation and the imposition of import duties. The United States,
Brazil and other countries in which the Company's products might be manufactured
may, from time to time, impose new quotas, duties, tariffs or other
restrictions, or adjust presently prevailing quotas, duty or tariff levels,
which could affect the Company's operations and its ability to import products
at current or increased levels. The Company cannot predict the likelihood or
frequency of any such events occurring. While the Company is subject to certain
duties, it has not been subject to quotas or other import restrictions.
The Company's imported products are subject to United States customs duties
and, in the ordinary course of its business, the Company may from time to time
be subject to claims for duties and other charges. United States customs duties
currently incurred by the Company are 10% of factory cost on footwear made
principally of leather and between 6% and 37.5% of factory cost on synthetic
footwear. During 1996, approximately 96.3% of the Company's net revenues were
derived from the sale of leather footwear. United States customs duties
currently incurred by the Company are 10% of factory cost on handbags made of
leather, 20% of factory cost on handbags made of synthetic fibers and between 7%
and 19.5% of factory cost on handbags made of fibers.
Distribution
The Company utilizes fully integrated information systems to facilitate the
receipt, processing and distribution of its merchandise through its two
distribution centers located in West Deptford, New Jersey and Cincinnati, Ohio.
Upon completion of manufacturing, the Company's products are inspected, bar
coded, packed and shipped from the manufacturing facilities to the distribution
centers. In 1996, ocean freight of imported products manufactured overseas
accounted for approximately 96% of the Company's shipments. Warehouse personnel
log in shipments utilizing bar codes, which enable easy identification of
products and allow the Company's wholesale customers to participate in its "open
stock" and "quick response" inventory management programs. The Company's open
stock inventory management program allows its wholesale customer to fill their
smaller, single or multiple pair reorders in basic sizes and colors, rather than
purchasing larger case good quantities. The quick response program generally
allows for a 48-hour replenishment with open-stock inventories from the time the
order is placed until it is shipped. Orders for quick response shipments are
typically received via electronic data interchange ("EDI"). Although, the open
stock and quick response programs require the Company to maintain more sizes and
widths of footwear than are normally carried in the pre-packaged cases and,
therefore, increased inventory levels, these programs give the customer the
advantage of carrying smaller inventories and improving inventory turns. The
Company believes its ability to offer this flexibility to its customers gives it
a significant competitive advantage and reduces the incidence of mark-down
allowances and returns.
Management Information Systems
The Company's management information systems provide, among other things,
comprehensive order entry/tracking, production, financial, EDI, distribution,
and decision support information for the Company's marketing, manufacturing,
importing, accounting and distribution functions. Additionally, the Company's
retail information systems provide merchandising/planning, automated
replenishment, inventory control, point-of-sale, store performance/tracking, and
sales audit functions.
During 1996, the Company continued the consolidation of the Footwear
Group's management information systems with those of the Company into one
comprehensive and integrated set of systems. The remaining system
consolidations are anticipated to be completed during 1997. To support this
effort, additional computing and storage capacity has been installed at the
Company's Stamford location.
Competition
Competition is intense in the women's footwear and accessories business.
The principal elements of competition in the footwear and accessories markets
include style, quality, price, comfort, brand loyalty and customer service. The
location and atmosphere of retail stores are additional competitive factors in
the Company's retail division. The Company's competitors include numerous
domestic and foreign manufacturers, importers and distributors of women's
footwear and accessories. The Company's primary retail competitors are large
national chains, department stores, specialty footwear stores and other outlet
stores.
The Company believes that its brand recognition, ability to respond quickly
to fashion trends, expertise in style and color and understanding of consumer
preferences are significant factors in its business. The Company also believes
that its ability to deliver quality merchandise in a timely manner is a major
competitive advantage.
Backlog
At February 1, 1997, the Company had unfilled wholesale orders of
approximately $311.0 million compared to $267.0 million at February 3, 1996. The
backlog at any particular time is affected by a number of factors, including
seasonality and the scheduling of the manufacturing and shipment of products.
Backlog is also affected by a continuing program to reduce the lead time on
orders placed with each manufacturer and by utilization of the Company's EDI
system. Accordingly, a comparison of backlog from period to period is not
necessarily meaningful and may not be indicative of eventual actual shipments.
Credit and Collection
The Company, through its credit department, manages all of its customer
credit functions, including extensions of credit, collections and investigations
of accounts receivable and chargebacks, and the application of cash and credits.
The Company's bad debt expense was 0.03% of net revenues for 1996.
Principal Customers
The Company's ten largest wholesale customers represented 43% of net
revenues for 1996. While no single wholesale customer accounted for more than
10% of net revenues during 1996, certain of the Company's wholesale customers
are under common ownership. When considered as a group under common ownership,
sales to the department store divisions owned by Federated Department Stores,
Inc. (which merged with Broadway stores in February of 1996) represented 13% of
the Company's net revenues in 1996. While the Company believes that purchasing
decisions have generally been made independently by each department store
customer, there is a trend among department stores toward more centralized
purchasing decisions.
Trademarks and Patents
The Company owns federal registrations and pending federal applications in
the United States Patent and Trademark Office for most of the trademarks and
variations thereof that it uses, including Amalfi, Bandolino, Banister, Calico,
Easy Spirit, Enzo Angiolini, 9 & Co., Nine West, Nine West Kids, NW Nine West,
Pappagallo, Pied a Terre, Selby, Westies and others. In addition, the Company
has entered into licensing agreements to produce and sell footwear under the
Evan Picone name and footwear and accessories under the cK/Calvin Klein name.
None of the federal registrations are currently being challenged in any legal
proceedings. In addition, the Company from time to time registers certain of
its trademarks in other countries, including, but not limited to, Australia,
Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan,
Korea, Mexico and the United Kingdom.
The Company regards the trademarks and other proprietary rights that it
owns and uses as valuable assets and intends to defend them vigorously against
infringement. Most of the registrations for the Company's trademarks are
currently scheduled to expire or be canceled at various times between 1997 and
2007; however, trademark registrations can be renewed and maintained if the
marks are still in use for the goods and services covered by such registrations.
The Company has granted licenses to certain companies to manufacture and
market non-footwear products, including hosiery, sunglasses and jewelry, under
various of the Company's trademarks.
The Company also holds several patents and has several patent applications
pending in the United States Patent and Trademark Office and around the world.
Employees
The Company employs approximately 8,799 full-time and 4,282 part-time
employees, 8,277 of whom are employed in the Company's retail stores.
Approximately 182 of the Company's 444 distribution employees are represented by
labor unions. The Company considers its relationships with its employees and
labor unions to be good.
Executive Officers of the Registrant
Jerome Fisher, age 66, has been Chairman of the Board and a director of the
Company since its organization. Mr. Fisher and Vincent Camuto founded the
Company in 1977. Mr. Fisher is principally responsible for long-range corporate
strategy, long-range financial planning, review and evaluation of potential
mergers and acquisitions, and the Company's international expansion.
Vincent Camuto, age 60, has been a director and head of product development
of the Company since its organization. Prior to being named Chief Executive
Officer of the Company in May 1995, Mr. Camuto served as President from February
1993 to May 1995. Mr. Camuto and Jerome Fisher founded the Company in 1977. Mr.
Camuto is principally responsible for the day-to-day management of the Company,
including supervising the design, manufacture, marketing and distribution of the
Company's products.
Noel E. Hord, age 50, has been President and Chief Operating Officer since
May 1995 and is principally responsible for the supervision and coordination of
the Company's retail and wholesale operations, and its administrative and
operational functions. From May 1993 to May 23, 1995, Mr. Hord was President of
the Footwear Group of U.S. Shoe. From 1991 to 1993, Mr. Hord was Group
President of the Nine West and Enzo Angiolini divisions of the Company.
Robert C. Galvin, age 37, has been Executive Vice President and Chief
Financial Officer since April 30, 1996. From October 1995 to April 1996, Mr.
Galvin served as Senior Vice President - Strategic Planning. Prior to October
1995, Mr. Galvin was a partner at Deloitte & Touche LLP in charge of the
Connecticut retail and distribution practice of that firm and specialized in
mergers and acquisitions. In that capacity, Mr. Galvin consulted with the
Company beginning in 1987 and advised the Company with respect to the
Acquisition.
Executive officers of the Company serve at the pleasure of the Board of
Directors.
ITEM 2. PROPERTIES.
The Company's principal executive offices in Stamford, Connecticut consist
of approximately 159,000 square feet of office space. The majority of the space
in the facility is leased by the Company pursuant to a lease that expires on
December 31, 2002. This space is principally used for the Company's executive,
retail, sales and marketing offices.
In February 1997, the Company entered into a 25-year operating lease for
its new 366,460 square foot headquarters facility in White Plains, New York.
This space will replace the Company's Stamford, Connecticut and Cincinnati, Ohio
offices and become its new principal executive offices. The Company has begun
efforts to sublease its Stamford offices upon relocation to the new facility in
White Plains, which is scheduled to occur during the second half of 1997.
Certain of the Company's administrative functions (including accounting,
treasury, credit and collections) are conducted in a 38,000 square foot facility
in St. Louis, Missouri owned by the Company.
The Company currently operates a 493,000 square foot distribution facility
in West Deptford, New Jersey which is situated on approximately 34 acres of
land. The Company consummated a "sale/leaseback" transaction during the first
quarter of 1996, pursuant to which it sold the distribution facility for $20.0
million, and thereafter leased it back under an operating lease having an
initial term of 20 years, subject to six 5-year renewal options. Additionally,
in February 1997, the Company entered into an agreement for the development and
lease of a 226,446 square foot distribution facility in West Deptford, New
Jersey. The construction of such facility is expected to be completed by
September 1997.
The Company currently owns and operates a 224,000 square foot warehouse, a
489,000 square foot distribution center and a 201,000 square foot office
facility located in Cincinnati, Ohio (the "Cincinnati Facilities"). As a result
of changing the distribution of certain acquired Footwear Group brands to the
Company's distribution facility in New Jersey and the future relocation of the
Company's Cincinnati offices to White Plains, the capacity of the Cincinnati
Facilities exceeds the Company's current and anticipated needs. As such, the
Company is currently in negotiations to sell the Cincinnati Facilities and
intends to lease a distribution facility that will better suit its anticipated
needs.
In September 1996, the Company entered into an agreement for the
development and lease of an 88,000 square foot raw materials warehouse and
product development center in Hebron, Kentucky. The construction of such
facility is expected to be completed during the second quarter of 1997.
The Company owns five footwear manufacturing plants, a product development
facility and two component plants, with an aggregate of approximately 499,000
square feet of space, in Kentucky, Indiana and Ohio. As noted above, the
Company has closed two of the footwear manufacturing plants and intends to close
a third plant and reconfigure operations in two component plants during 1997.
The Company intends to sell the closed facilities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The Company
also leases one machinery parts warehouse facility (with approximately 20,000
square feet of space) in Kentucky, two component plants (with approximately
102,000 square feet of space) in the Dominican Republic and one component plant
(with approximately 63,000 square feet of space) in Honduras. During 1996, the
Company's manufacturing plants operated at approximately 86.3% of optimum
production capacity. The Company believes that following the closures referred
to above, its manufacturing and component plants are suitable for its domestic
production needs.
The Company operates a 33,000 square foot showroom in New York, pursuant to
a lease that expires on December 31, 2003 and a 2,300 square foot showroom in
Dallas pursuant to a lease that expired on January 31, 1997. The Company is
currently in negotiations to renew the Dallas showroom lease. The Company also
leases a showroom with 11,000 square feet of space in New York for its
Accessories division and a showroom in New York for its cK/Calvin Klein Shoes
and Bags division. The Company has subleased its former New York showroom for
the remainder of the lease term, which expires on September 30, 1998.
All of the Company's retail stores are leased pursuant to leases that
extend for terms which average ten years. Certain leases allow the Company to
terminate its obligations after three years in the event that a particular store
does not achieve specified sales volume. Many leases include clauses that
provide for contingent payments based on sales volumes, and many leases contain
escalation clauses for increases in operating costs and real estate taxes.
The current terms (including automatic renewal options) of the Company's
retail store leases, including leases for 44 future stores, expire as follows:
Years Lease Number of
Terms Expire Stores
- ------------ ---------
1997-1999............................................... 298
2000-2002............................................... 238
2003-2005............................................... 416
2006 and later.......................................... 153
ITEM 3. LEGAL PROCEEDINGS.
The Company has been named as a defendant in various actions and
proceedings, including actions brought by certain terminated employees, arising
from its ordinary business activities. Although the liability that could arise
with respect to these actions cannot be accurately predicted, in the opinion of
the Company, any such liability will not have a material adverse effect on the
Company's business or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
COMMON STOCK PRICE RANGE AND DIVIDEND POLICY
The Common Stock is listed and trades on the New York Stock Exchange
("NYSE"). The following table sets forth the high and low closing sales prices
per share for the Common Stock, as reported on the NYSE Composite Tape, for the
end of each quarter of the last two years.
High Low
---- ---
Fifty-three weeks ended February 3, 1996:
Thirteen weeks ended April 29, 1995........................ $33 $27-1/8
Thirteen weeks ended July 29, 1995......................... 41 31-1/8
Thirteen weeks ended October 28, 1995...................... 46 39-3/8
Fourteen weeks ended February 3, 1996...................... $48-1/2 $29-1/2
Fifty-two weeks ended February 1, 1997:
Thirteen weeks ended May 4, 1996........................... $44-5/8 $34
Thirteen weeks ended August 3, 1996........................ 52-1/8 42-3/8
Thirteen weeks ended November 2, 1996...................... 57-1/8 49-5/8
Thirteen weeks ended February 1, 1997...................... $52 $44-1/4
As of April 4, 1997, the number of holders of record of the Common Stock
was 233.
The Company has not paid (since its initial public offering in February
1993 (the "Offering")), and does not currently intend to pay in the immediate
future, cash dividends on its Common Stock. Subject to compliance with certain
financial covenants set forth in the Company's existing credit agreement (See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources") and restrictions
contained in any future financing agreements, the payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company and general
business conditions.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected balance sheet and income statement information for
the last three years and the transition period from January 1, 1995 through
January 28, 1995, has been derived from the Consolidated Financial Statements of
the Company audited by Deloitte & Touche LLP, independent auditors, whose report
thereon appears elsewhere in this report. The selected financial data for 1993
and 1992 have been derived from the audited (unless noted otherwise) financial
statements of the Company, not presented herein. This information should be
read in conjunction with and is qualified by reference to the Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere in this report.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Transition
52 Weeks 53 Weeks Period
Ended Ended January 1 to Year Ended December 31
February 1 February 3 January 28 ------------------------
1997 1996 1995 1994 1993 1992
---------- ------- ---- ---- ------- ----
INCOME STATEMENT DATA(a) (in thousands except retail operating data and per share data)
Net revenues.............................................. $1,603,115 $1,258,630 $42,539 $652,457 $552,194 $461,936
Cost of goods sold........................................ 913,946 720,963 24,582 364,533 313,566 263,967
Purchase accounting adjustments to cost of goods sold(b).. - 34,864 - - - -
---------- ---------- ------- -------- -------- --------
Gross profit............................................ 689,169 502,803 17,957 287,924 238,628 197,969
Selling, general and administrative expenses(c)........... 479,284 381,021 16,402 178,916 155,920 138,672
Business restructuring and integration expenses(d)........ 18,970 51,900 - - - -
Amortization of acquisition goodwill and other
intangibles............................................. 9,562 6,637 - - - -
---------- ---------- ------- -------- -------- --------
Operating income from continuing operations............. 181,353 63,245 1,555 109,008 82,708 59,297
Interest expense.......................................... 41,947 29,611 - 2,199 3,255 6,882
---------- ---------- ------- -------- -------- --------
Income from continuing operations before income taxes... 139,406 33,634 1,555 106,809 79,453 52,415
Income tax expense (historical)........................... 55,762 14,658 614 42,919 30,208 4,906
---------- ---------- ------- -------- -------- --------
Income from continuing operations before cumulative
effect of change in accounting principle and pro
forma tax effects .................................... $ 83,644 $ 18,976 $ 941 $ 63,890 $ 49,245 $ 47,509
========== ========== ======= ======== ======== ========
Income from continuing operations (e)................... $ 83,644 $ 18,976 $ 941 $ 63,890 $ 58,656 $ 31,449
========== ========== ======= ======== ======== ========
Net income (f).......................................... $ 81,008 $ 18,976 $ 941 $ 63,890 $ 58,656 $ 31,449
========== ========== ======= ======== ======== ========
Weighted average common shares including equivalents:
Primary............................................... 36,699 35,707 34,655 34,555
Fully diluted......................................... 38,853
Primary earnings per share:
Income from continuing operations..................... $ 2.28 $ 0.53 $ 0.03 $ 1.85
========== ========== ======= ========
Net income............................................ $ 2.21 $ 0.53 $ 0.03 $ 1.85
========== ========== ======= ========
Fully diluted earnings per share:
Income from continuing operations..................... $ 2.26
==========
Net income............................................ $ 2.19
==========
RETAIL OPERATING DATA (unaudited)
Stores open at end of period:
Nine West............................................... 285 268 231 229 203 180
Easy Spirit............................................. 167 131 - - - -
9 & Co.................................................. 79 63 43 43 28 6
Enzo Angiolini.......................................... 66 54 34 34 13 -
----- --- --- --- --- ---
Total mall-based...................................... 597 516 308 306 244 186
----- --- --- --- --- ---
Nine West outlet........................................ 141 123 100 100 62 44
Easy Spirit outlet...................................... 19 11 - - - -
Banister................................................ 138 142 - - - -
Stein Mart.............................................. 82 67 - - - -
----- --- --- --- --- ---
Total value-based..................................... 380 343 100 100 62 44
----- --- --- --- --- ---
Total domestic stores............................... 977 859 408 406 306 230
International stores................................ 84 29 4 4 - -
----- --- --- --- --- ---
Total stores...................................... 1,061 888 412 410 306 230
===== === === === === ===
Revenues per square foot(g):
Nine West............................................... $ 529 $ 543 $ 581 $ 573 $ 554
Easy Spirit............................................. 538 495 - - -
9 & Co.................................................. 308 322 293 274 -
Enzo Angiolini.......................................... 571 552 539 - -
Nine West outlet........................................ 367 359 361 368 381
Easy Spirit outlet...................................... 195 210 - - -
Banister................................................ 162 166 - - -
Stein Mart.............................................. 171 179 - - -
International........................................... $ 774 $ 842 $ - $ - $ -
Square footage of gross store space at end of period...... 2,248,988 1,985,270 691,338 506,100 364,824
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
December 31
February 1 February 3 ----------------------------
1997 1996 1994 1993 1992
BALANCE SHEET DATA ---- ---- ---- ---- ----
Working capital........................................... $ 491,674 $ 297,312 $170,015 $171,482 $105,891
Total assets.............................................. 1,261,063 1,160,092 302,791 292,808 199,068
Long-term debt and due to stockholders.................... 600,407 471,000 2,400 50,951 88,322
Stockholders' equity...................................... $ 360,540 $ 328,326 $234,627 $165,499 $ 54,636
</TABLE>
(footnotes follow)
Notes:
(a) Income statement data for 1996 is not comparable to the prior years, as
such information:(1) reflects a 52-week period (364 days) ended February 1,
1997 while 1995 reflects a 53-week period (371 days) ended February 3, 1996
and prior years are 365-day periods; and (2)includes the results of
operations of the Footwear Group during the full 52-week period, while such
Footwear Group results are only included in the 1995 period for the 37-week
period from May 23, 1995 through February 3, 1996 and are excluded from all
periods prior to the Acquisition. The Transition period was created due to
the change in the Company's fiscal year. See "Basis of Presentation and
Description of Business" and "Acquisitions" in the Notes to Consolidated
Financial Statements.
(b) Reflects a $34.9 million non-recurring increase in cost of goods sold,
attributable to the fair value of inventory over FIFO cost, recorded as a
result of the Acquisition as required by the purchase method of accounting.
(c) Selling, general and administrative expenses include $1.2 million and $11.3
million for 1993 and 1992, respectively, for compensation and net life
insurance expense relating to the Principal Stockholders that would have
been in excess of the amounts existing (including discretionary bonuses)
under arrangements in effect since the consummation of the Offering. In
addition, 1993 includes a one-time payment of $8.5 million ($5.0 million
net of income taxes) made to the Agent for past services occasioned upon
the consummation of the Offering.
(d) Represents business restructuring and integration expenses associated
primarily with the restructuring of North American manufacturing facilities
in 1996 and with the integration of the Footwear Group into the Company in
1995. See "Business Restructuring and Integration Expenses" in the Notes
to Consolidated Financial Statements.
(e) Represents unaudited pro forma amounts in 1993 and 1992. Pro forma income
tax adjustments of $2.1 million and $16.1 million are reflected in 1993 and
1992, respectively, related to federal and state income taxes (assuming a
41% effective tax rate in 1993 and 40% in 1992) as if the Company had not
been treated as an S corporation during the periods prior to the Offering.
In connection with the Offering, the Company adopted the provisions of SFAS
No. 109, "Accounting for Income Taxes." The cumulative effect of this
change through February 8, 1993, increased net income by $11.5 million for
1993.
(f) Pro forma net income was $59.3 million, or $1.78 per share, in 1993. Pro
forma adjustments reflect the reduction in selling, general and
administrative expenses by $1.2 million for compensation and net life
insurance expense relating to the Company's three principal stockholders
(the "Principal Stockholders") that would have been in excess of the
amounts existing (including discretionary bonuses) under arrangements in
effect since the consummation of the Offering on February 9, 1993.
Historical net income was $60.7 million and $47.5 million in 1993 and 1992,
respectively.
(g) Revenues per square foot are determined by dividing total retail net
revenues by the annual average gross retail square footage. Revenues per
square foot for 1995 with respect to those retail concepts operated by the
Footwear Group (i.e., Easy Spirit, Easy Spirit Outlet, Banister and Stein
Mart), are based upon pro forma revenues as though the Acquisition was
consummated at the beginning of 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
Effective June 27, 1995, the Board of Directors of the Company approved the
change of the Company's fiscal year from December 31 to a 52/53-week period
ending on the Saturday closest to January 31. The change in the Company's
fiscal year created a transition period consisting of the four weeks which began
on January 1, 1995 and ended on January 28, 1995. All references to years in
the following discussion and analysis relate to fiscal years as defined in the
Notes to Consolidated Financial Statements.
On May 23, 1995, the Company consummated its Acquisition of the Footwear
Group. Financial information for 1996, 1995 and 1994 is not comparable between
years, as Footwear Group results are included in the entire 1996 period and are
included in 1995 for the 37-week period from May 23, 1995 through February 3,
1996.
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and the notes thereto contained elsewhere
in this report.
Results of Operations
Income from continuing operations for 1996 was $83.6 million, or $2.26 per
share on a fully diluted basis, compared to income from continuing operations of
$19.0 million, or $0.53 per share, for 1995. Results for 1996 include a net
pretax charge of $19.0 million (the "Restructuring Charge"), of which
approximately $13.8 million represents non-cash charges, primarily attributable
to costs associated with the restructuring of North American manufacturing
facilities. Excluding the effect of the Restructuring Charge, income from
continuing operations for 1996 would have been $95.0 million, or $2.55 per
share, on a fully diluted basis. Results for 1995 include: (1) a $34.9 million
non-recurring increase in cost of goods sold, attributable to the fair value of
inventory over FIFO cost, recorded as a result of the Acquisition (the "Cost of
Goods Sold Adjustment"); and (2) $51.9 million in business restructuring and
integration expenses and charges associated with the integration of the Footwear
Group into the Company (the "Integration Charge"). Excluding the effect of these
adjustments, income from continuing operations for 1995 would have been $71.6
million, or $2.01 per share.
Since the Acquisition was consummated, the Company has continued to
evaluate all facets of its business, from the sourcing of product to retail
operations. Resulting from this ongoing review and analysis were decisions that
led to the Restructuring Charge. In the fourth quarter of 1996, the Company
recorded a charge of $21.3 million, offset by a reversal of an excess of the
Integration Charge of $2.3 million, resulting in a net pretax charge to earnings
of $19.0 million, for costs associated with: (1) the restructuring of North
American manufacturing facilities; (2)the consolidation and relocation of the
Company's offices in Stamford, Connecticut and Cincinnati, Ohio to a new
facility in White Plains, New York (the "Relocation"); and (3)the repositioning
of the 9 & Co. brand, which included the evaluation of retail site locations and
the resulting closure of fifteen 9 & Co. stores. The major components of the
Restructuring Charge are: (1) write-down of assets of $13.8 million; (2)
accruals for lease and other contract terminations of $4.9 million; and (3)
plant closing costs of $2.6 million. Total cash outlays are expected to be $5.2
million, to be paid over a three-year period beginning in 1997.
The Restructuring Charge reflects plans to close three domestic factories
and discontinue or reconfigure certain operations at two other domestic
manufacturing facilities. Domestic footwear production is expected to decrease
from a current level of 7.5 million pairs to 5.0 million pairs by the end of
1997, as the Company pursues global sourcing opportunities in an effort to
reduce overall product cost. The Company expects to save approximately $0.50 to
$1.75 per pair depending on the construction and style of the shoe, as well as
the global sourcing site, beginning in 1998. This action will affect 1,025
employees, or approximately 50% of the Company's domestic manufacturing work
force. Total severance and termination benefit costs associated with this
action are $9.6 million, which relate to benefits covered by the Company's
existing severance plans. See "Employee Benefit Plans" in the Notes to
Consolidated Financial Statements.
During 1995, the Company began the implementation of its planned business
restructuring and integration activities related to the Acquisition. While some
of the costs associated with the restructuring and integration of the Footwear
Group into the Company were reflected in the allocation of the Acquisition cost,
the Company incurred and accrued expenses for restructuring and integration
costs of $51.9 million in the fourth quarter of 1995. The major components of
the Integration Charge were: (1) severance and termination benefits of $7.7
million; (2) write-down of assets, principally leasehold improvements, of $14.6
million; (3) inventory valuation adjustments of $10.4 million; (4) accruals for
lease and other contract terminations of $7.0 million; and (5) other integration
and consolidation costs of $12.2 million. Total cash outlays related to this
charge are expected to be approximately $20.3 million, of which $14.4 million
and $4.4 million was paid during 1996 and 1995, respectively. The remaining
liability for these activities at February 1, 1997 was $1.5 million, primarily
related to severance payments that exceeded one year. The balance of this
liability will be paid in 1997.
The Integration Charge reflects plans to restructure international sourcing
operations, to consolidate manufacturing and sourcing facilities located in
Italy, Korea and the Far East, and to consolidate and integrate various domestic
corporate and business unit operations and support functions. These business
restructuring and integration actions (collectively, the "Integration Plan") are
expected to save approximately $7.0 million annually. In relation to the
Company's restructuring of its retail operations, the plan includes the
elimination of duplicate product lines, the closing of approximately 40 of the
Company's under-performing Banister retail stores, the conversion of a number of
stores to other nameplates or formats during 1996, and the termination of the
Company's agreement with Burlington Coat Factory for its operation of 84 shoe
departments (the "Burlington Leased Departments") during 1996. The duplicate
product lines mentioned above include: (1) the replacement of several footwear
brands purchased from third party vendors and sold in the Company's Banister and
certain other stores, with the Company's own branded footwear in the same
product classifications and price points, and the elimination of certain product
classifications (such as athletic, children's and men's footwear), from such
stores; and (2) the elimination of one of the Company's footwear brands.
Severance and termination benefits relate to approximately 475 employees,
of which 420 were store managers and associates, 50 were engaged in
manufacturing positions, principally related to the liquidation of the Company's
Far East office as a result of entering into a new agency arrangement, and five
were management employees. As of February 1, 1997, approximately 450 employees
had been terminated, with $6.6 million of severance and termination benefits
being paid and charged against the liability. The remaining separations will be
completed during 1997. See "Employee Benefit Plans" in the Notes to
Consolidated Financial Statements.
The Integration Charge also included period costs of approximately $3.2
million in 1995, which were expensed as incurred and which consisted of
integration-related outside consulting fees paid in connection with the
implementation of major process improvements. The process improvements included
the elimination of redundant operations ($684,000) and certain financial
accounting systems ($995,000) and efficiency improvements in certain warehousing
($564,000) and retail store ($995,000) operations and systems.
In connection with the Acquisition, the Company assumed, and included in
the allocation of the Acquisition cost, accruals for involuntary severance and
termination benefits of $8.6 million and relocation costs of $8.2 million. These
severance and relocation costs relate to the elimination of 295 administrative
positions which had become duplicative through the combination of operations and
process efficiencies realized, and relocation of certain Footwear Group
functional and operational employees. Of these 295 position reductions,
approximately 246 were eliminated by February l, 1997, with the remainder to be
completed in 1997. As of February 1, 1997, approximately $6.3 million of
severance and termination benefits and $7.6 million of relocation costs were
paid and charged against these liabilities. See "Acquisitions" in the Notes to
Consolidated Financial Statements.
The following table sets forth the Company's consolidated statements of
income in thousands of dollars and as a percentage of net revenues for the last
three years. For comparative purposes, 1996 excludes the Restructuring Charge
and 1995 excludes the Cost of Goods Sold Adjustment and the Integration Charge.
<TABLE>
As Adjusted As Adjusted
1996 1995 1994
----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................. $1,603,115 100.0% $1,258,630 100.0% $652,457 100.0%
Cost of goods sold........... 913,946 57.0 720,963 57.3 364,533 55.9
---------- ----- ---------- ----- -------- -----
Gross profit.............. 689,169 43.0 537,667 42.7 287,924 44.1
Selling, general and
administrative expenses... 479,284 29.9 381,021 30.3 178,916 27.4
Amortization of acquisition
goodwill and other
intangibles .............. 9,562 0.6 6,637 0.5 - -
---------- ----- ---------- ----- -------- -----
Operating income from
continuing operations..... 200,323 12.5 150,009 11.9 109,008 16.7
Interest expense............. 41,947 2.6 29,611 2.3 2,199 0.3
---------- ----- ---------- ----- -------- -----
Income from continuing
operations before income
taxes..................... 158,376 9.9 120,398 9.6 106,809 16.4
Income tax expense........... 63,350 4.0 48,761 3.9 42,919 6.6
---------- ----- ---------- ----- -------- -----
Income from continuing
operations................ $ 95,026 5.9% $ 71,637 5.7% $ 63,890 9.8%
========== ===== ========== ===== ======== =====
</TABLE>
Net Revenues
Net revenues were $1.6 billion in 1996 compared to $1.3 billion in 1995, an
increase of $344.5 million, or 27.4%. Net revenues of the Company's wholesale
division increased by $189.8 million, or 27.2%, of which: (1) approximately
$116.0 million is attributable to the increase in net revenues resulting from
the Acquisition, the results of operations of which, for 1995, are included only
for the 37 weeks following the consummation of the Acquisition; and (2) $73.8
million is attributable to the increase in net revenues of the Company's
wholesale division due to increased revenues from virtually all of the footwear
brands and the growth and development of the Company's accessories business.
Sales through the Company's retail stores increased $154.7 million, or 27.6%.
The increase in net revenues of the retail division is attributable to: (1) the
Acquisition of the Footwear Group ($84.9 million); (2) the opening (net of
closings) of 143 domestic and 55 international retail stores ($74.4 million);
and (3) comparable store sales increases ($15.7 million). These increases were
offset by a decrease in sales attributable to the closing of 84 Burlington
Leased Departments and 25 Banister retail stores ($20.3 million). The 84
Burlington Leased Departments and 25 Banister stores have been excluded from the
143 domestic openings (net of closings) mentioned above. Comparable store
sales (including the sales of the acquired Footwear Group stores, had they been
acquired as of the beginning of the comparable period of the prior year)
increased 2.2% for 1996. Comparable store sales, excluding the results of the
Banister stores and Stein Mart leased departments increased 5.2% during 1996.
Comparable store sales for Banister and Stein Mart decreased during 1996 due to
the significant 1995 promotional activity required to dispose of excess
inventory acquired and to begin the repositioning of inventory to more of its
branded product. Comparable store sales, for all periods, exclude the results
of the 84 Burlington Leased Departments, which were closed during the first and
second quarters of 1996.
Net revenues increased by $606.2 million, or 92.9%, in 1995 from net
revenues $652.5 million in 1994. Net revenues of the Company's wholesale
division increased by $317.8 million, or 83.6%, of which: (1) $262.7 million is
attributable to the Acquisition; and (2) $55.1 million is attributable to the
increase in net revenues of the Company's wholesale brands that were marketed by
the Company prior to the Acquisition. Sales through the Company's retail stores
increased $288.4 million, or 105.8%, of which: (1) $193.9 million is
attributable to the acquisition of 425 Footwear Group stores and the opening
(net of closings) of 10 additional Footwear Group stores during 1995; and (2)
$94.5 million is primarily attributable to the opening (net of closings) of 100
additional retail stores in formats operated by the Company prior to the
Acquisition. Comparable store sales (including the sales of the acquired
Footwear Group stores, had they been acquired as of the beginning of the
comparable period of the prior year) decreased 1.1% for 1995. Excluding the
impact of the Banister stores and Stein Mart leased departments, comparable
store sales for 1995 increased 0.6%. The decrease in the Banister and Stein
Mart comparable store sales was due to the repositioning of inventory to more of
the Company's branded products and highly promotional 1994 sales activity,
resulting in the total Company comparable store sales decrease. The weaker than
anticipated retail environment during the fourth quarter holiday season, and the
blizzard conditions both in the Midwest and Northeast, which resulted in 502
store days lost for the fourth quarter, also adversely affected comparable store
results for the year. Comparable store sales, for all periods, exclude the
results of the 84 Burlington Leased Departments, which were closed during the
first and second quarters of 1996.
During 1996, 1995 and 1994, wholesale net revenues accounted for 55.4%,
55.4% and 58.2%, respectively, of the Company's consolidated net revenues, while
retail operations accounted for the remaining 44.6%, 44.6% and 41.8%,
respectively.
Gross Profit
Gross profit was $689.2 million in 1996, an increase of $151.5 million, or
28.2%, from $537.7 million in 1995 (excluding the Cost of Goods Sold
Adjustment). Gross profit as a percentage of net revenues increased to 43.0% in
1996 from 42.7% in 1995. The increase in gross profit as a percentage of net
revenues is primarily attributable to improved gross profit margins in the
Banister and Stein Mart stores, due in part to the Company's repositioning of
the product mix.
Gross profit (excluding the Cost of Goods Sold Adjustment) in 1995
increased $249.7 million, or 86.7%, from $287.9 million in 1994. Gross profit
as a percentage of net revenues decreased to 42.7% in 1995 from 44.1% in 1994.
The decrease in gross profit as a percentage of net revenues is primarily
attributable to the acquisition of the Footwear Group, whose gross margins were
historically five to six percentage points lower than the Company's gross
margins prior to the Acquisition.
During the past two years, there have been moderate increases in the
general price of leather, which have generally been reflected in the selling
price of the Company's products. While the Company is not in a position to
reasonably anticipate or predict how changes in labor, leather, and other raw
material prices will ultimately impact the Company's gross profit margins in the
future, the Company anticipates that such increases will be reflected in the
selling price of the Company's products, to the extent possible under economic
and competitive conditions prevailing at the time.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses (excluding the
amortization of acquisition goodwill and other intangibles related to the
Acquisition and the Restructuring Charge) were $479.3 million in 1996, compared
to $381.0 million in 1995 (excluding the amortization of acquisition goodwill
and other intangibles related to the Acquisition and the Integration Charge), an
increase of $98.3 million, or 25.8%. SG&A expenses expressed as a percentage of
net revenues improved to 29.9% in 1996 from 30.3% in 1995. The decrease in SG&A
expenses expressed as a percentage of net revenues is due primarily to cost
savings resulting from the consolidation and integration of various corporate
and business unit operations and support functions since the Acquisition was
consummated. The decrease in SG&A expenses as a percentage of net revenues was
offset in part by an increase in SG&A expenses as a percentage of net revenues
attributable to higher advertising expenses of the Footwear Group which were
included for the full 52 weeks of 1996 compared to only 37 weeks during the 1995
period. While SG&A expenses as a percentage of net revenues during 1997 and the
foreseeable future are expected to increase as a result of the opening of
additional retail stores by the Company (including the commitments as of March
18, 1997 to open approximately 120 retail stores), such increases are not
expected to have an adverse effect on the Company's operating margin, since
these higher expenses are expected to be offset by the higher gross profit as a
percentage of net revenues achieved by the Company's retail operations. SG&A
expenses as a percentage of net revenues for the Company will increase beginning
in 1997 in connection with: (1) an expanded marketing plan which includes higher
advertising and promotional expenses than those incurred during 1996 and prior
years; (2) the Company's continued international expansion; and (3) costs
associated with the Company's recently launched cK/Calvin Klein Shoes and Bags
division. The Company expects that the initiatives outlined in the
Restructuring and Integration Charges, and the ongoing integration of the
Footwear Group, will continue to produce synergies which will reduce SG&A
expenses.
SG&A expenses (excluding the amortization of acquisition goodwill and other
intangibles related to the Acquisition and the Integration Charge) increased
$202.1 million, or 113.0%, in 1995 from SG&A expenses of $178.9 million in 1994.
SG&A expenses expressed as a percentage of net revenues rose to 30.3% in 1995
from 27.4% in 1994. The increase is due primarily to: (1) higher expenses as a
percentage of net revenues experienced by the Footwear Group which are
attributable to, among other things, significant expenditures by the Footwear
Group for advertising which are included for the 37-week period following the
consummation of the Acquisition; (2) the higher number of retail stores
operating in 1995 which carry a higher expense level as a percentage of net
revenues in relation to the Company's wholesale operations; and (3) the costs
associated with performing duplicate functions and operating duplicate
facilities during the integration of the Footwear Group into the Company.
Operating Income
Operating income (excluding the Restructuring Charge) was $200.3 million,
or 12.5% of net revenues, in 1996 compared to $150.0 million, or 11.9% of net
revenues, in 1995 (excluding the Cost of Goods Sold Adjustment and the
Integration Charge). The increase in operating income as a percentage of net
revenues is attributable to the factors discussed above, offset slightly by the
increase in amortization of acquisition goodwill and other intangibles related
to the Acquisition. Fifty-two weeks of amortization is included in 1996
results, compared to 37 weeks of amortization during 1995.
Operating income (excluding the Cost of Goods Sold Adjustment and the
Integration Charge) in 1995 increased $41.0 million, or 37.6%, from $109.0
million or 16.7% of net revenues in 1994. The reduction in operating income as
a percentage of net revenues in 1995 is attributable to the factors discussed
above, and the amortization of acquisition goodwill and other intangibles
related to the Acquisition of $6.6 million in 1995.
Interest Expense
Interest expense was $41.9 million in 1996 compared to $29.6 million in
1995, an increase of $12.3 million or, 41.7%. The increased expense was
primarily due to Acquisition-related debt, which was outstanding only for the
37-week period subsequent to the Acquisition in 1995, but was outstanding during
all of 1996. The increased expense was partially offset by a decrease in the
weighted average interest rate from 7.4% during 1995 to 6.5% during 1996. In
addition to amending and restating the Company's credit agreement (the "Credit
Agreement") in order to achieve more favorable interest rate terms, the decrease
in the weighted average interest rate is also attributable to refinancing the
Company's bank debt with lower cost alternatives such as: (1) the issuance of
$187.5 million principal amount of 5.5% convertible subordinated notes due July
15, 2003 (the "Notes") during the second quarter of 1996; and (2) the Company's
revolving accounts receivable securitization program (the "Receivables
Facility").
Interest expense increased by $27.4 million in 1995 from $2.2 million in
1994. The increased expense is due to $559.8 million in term loans and a
revolving credit loan incurred by the Company to finance the Acquisition.
Liquidity and Capital Resources
The Company relies primarily upon cash flow from operations and borrowings
under the Company's Credit Agreement to finance operations and expansion. Cash
used by operating activities was $87.9 million in 1996, compared to cash
provided by operating activities of $137.6 million in 1995 and $66.0 million in
1994. The $225.5 million decrease in 1996 cash flow from operations as compared
to 1995 is due primarily to: (1) additional working capital requirements as a
result of the Acquisition and the Company's expansion; (2) $7.8 million of
severance and relocation payments made in 1996 in connection with the
Acquisition compared to $6.1 million of severance and relocation payments in
1995; and (3) $14.4 million of payments made in 1996 in connection with the
Integration Charge compared to $4.4 million in 1995.
The $71.6 million increase in 1995 cash flow from operations as compared to
1994 is due primarily to: (1) proceeds of $61.6 million from the sale of trade
accounts receivable as part of the Receivables Facility; (2) changes in working
capital attributable to the Company's change in fiscal year end; and (3) the
additional working capital requirements of the Footwear Group. Cash flows from
operations in 1995 include the effects of changes in Footwear Group working
capital from the Acquisition date to February 3, 1996. Cash flows from
operations in 1995 include cash outlays of: (1) $6.1 million of severance and
relocation payments that were accrued in connection with the Acquisition; and
(2) $4.4 million of payments made in connection with the Integration Charge.
Working capital was $491.7 million at February 1, 1997 compared to $297.3
million at February 3, 1996. The increase in the working capital balance is due
primarily to: (1) a $105.2 million increase in inventory due to inventory
requirements of 118 additional domestic retail stores and 55 additional
international stores operating at year-end, wholesale on-order requirements and
expansion of open stock programs, early production of inventory for Easy Spirit
in preparation for the domestic factory closings and a shift in the timing of
factory shipments between years; and (2) a $77.1 million decrease in accounts
payable and accrued expenses and other current liabilities. Additionally,
working capital may vary from time to time as a result of seasonal requirements,
the timing of factory shipments and the Company's "open stock" and "quick
response" wholesale programs, which require an increased investment in
inventories.
Total cash outlays related to the Restructuring Charge are estimated to be
$5.2 million and are expected to be paid over a three-year period beginning in
1997. Cash outlays for the Integration Charge are expected to be $20.3 million,
of which $14.4 million was paid during 1996, bringing total payments through
February 1, 1997, made in connection with the Integration Charge, to $18.8
million. In connection with the Acquisition, the Company assumed and included
in the allocation of acquisition cost: (1) accruals for involuntary severance
and termination benefits of $8.6 million; and (2) relocation costs of $8.2
million. As of February 1, 1997, approximately $6.3 million and $7.6 million of
severance and termination benefits, and relocation costs, respectively, were
paid and charged against these liabilities ($4.4 million and $3.4 million of
severance and termination benefits, and relocation costs, respectively, were
paid during 1996). The Company anticipates that the remaining $4.4 million in
cash outlays related to the Acquisition related severance and termination
benefits and relocation costs, and the Integration Charge will be substantially
paid in the first quarter of 1997.
Under the Credit Agreement, the Company has a $322.0 million quarterly
amortizing term loan and may borrow up to $225.0 million under a revolving
credit facility, including letters of credit up to $100.0 million. The Credit
Agreement expires on November 1, 2001. Amounts outstanding under the Credit
Agreement are secured by substantially all assets of the Company, excluding
receivables related to the Receivables Facility, and bear interest, at the
Company's option, at rates based on the Citibank, N.A. base rate or the
Eurodollar index rate. Borrowings under the Credit Agreement will become
unsecured should the Company reach an "investment grade" rating on its long-term
senior indebtedness. The Company has entered into interest rate hedge
agreements to reduce the impact on interest expense from fluctuating interest
rates on variable rate debt. See "Financial Instruments" in the Notes to
Consolidated Financial Statements. As of March 18, 1997, $124.0 million of
borrowings and $35.4 million of letters of credit were outstanding on a
revolving basis and $65.6 million was available for future borrowing.
The Credit Agreement contains various operating covenants which, among
other things, impose certain limitations on the Company's ability to incur
liens, incur indebtedness, merge, consolidate or declare and make dividend
payments. Under the Credit Agreement, the Company is required to comply with
financial covenants relative to net worth, fixed charge coverage and leverage.
Borrowings under the Credit Agreement may be prepaid or retired by the Company
without penalty prior to the maturity date of November 1, 2001. Loans under the
Credit Agreement are subject to mandatory prepayments under certain conditions.
In December 1995, the Company entered into an agreement to create the five-
year Receivables Facility, under which up to $115.0 million of funding may be
obtained based on the accounts receivable of the Company. The principal benefit
of the Receivables Facility is a reduction in the Company's cost of funding
related to its long-term debt. Proceeds from the Receivables Facility of $61.6
million were used to permanently pay-down a portion of the non-amortizing term
loan. The effective interest rate incurred by the Company on funding obtained
under the Receivables Facility was 6.2% as of February 1, 1997.
In June 1996, the Company issued $185.7 million of Notes. The Notes are
convertible into common stock of the Company at a conversion price of $60.76 per
share, subject to adjustment in certain circumstances. The Notes are
redeemable, in whole or in part, at the option of the Company, at any time on or
after July 16, 1999, at declining redemption prices plus any accrued interest.
The Notes are subordinated in right of payment to all existing and future senior
indebtedness of the Company. Proceeds from the issuance of the Notes were
approximately $181.3 million (net of underwriter's discounts of $4.4 million)
and were used to repay a portion of the outstanding indebtedness under the
Credit Agreement.
The weighted average interest rate on the Company's long-term debt
outstanding (including the Notes) as of February 1, 1997 was approximately 6.2%.
The Company continually evaluates its financing alternatives to reduce cost of
capital.
On June 5, 1996, the Company made a net payment of $42.5 million to The
United States Shoe Corporation ("U.S. Shoe"), in connection with: (1) the
settlement of the post-closing balance sheet dispute relating to the
Acquisition; and (2) the repurchase by the Company of the Warrants, which was
financed under the Company's revolving credit facility. See "Acquisitions" in
the Notes to Consolidated Financial Statements.
Capital expenditures totaled $42.8 million in 1996, $39.9 million in 1995
and $23.1 million in 1994. Capital expenditures in 1996 relate primarily to the
Company's retail store expansion and remodeling programs. Capital expenditures
in 1995 relate primarily to the Company's store expansion and remodeling
programs and the construction and equipping of a 170,000 square foot addition to
its New Jersey distribution center, which commenced in October 1994 and was
completed in June 1995 at a total cost of approximately $7.8 million. Capital
expenditures with respect to the distribution center expansion totaled $5.2
million in 1995. Capital expenditures in 1994 relate primarily to the Company's
store expansion and remodeling programs. The Company estimates that its capital
expenditures for 1997 will be approximately $75.0 million to $85.0 million,
relating primarily to: (1) the ongoing expansion of its domestic and
international retail operations (approximately $50.0 million); (2) equipment for
its distribution and manufacturing facilities (approximately $6.0 million); and
(3) leasehold improvements, furniture and fixtures, and equipment associated
with the Relocation (approximately $20.0 million). The actual amount of the
Company's capital expenditures depends, in part, on requirements related to the
integration of the Footwear Group into the Company, the number of new stores
opened, the number of stores remodeled, the amount of any construction
allowances the Company may receive from the landlords of its new stores and any
unexpected costs incurred in connection with the Relocation. The opening and
success of new stores will be dependent upon, among other things, general
economic and business conditions affecting consumer spending, the availability
of desirable locations and the negotiation of acceptable lease terms for new
locations.
The Company expects that its current cash balances, cash flows anticipated
to be generated from operations and availability under its revolving credit
facility will be sufficient to fund the Relocation, business restructuring and
integration of the Footwear Group, and other operating cash needs and growth
opportunities (including planned domestic and international retail store
openings for 1997) for at least the next 12 months. From time to time, the
Company evaluates potential acquisitions of businesses which complement the
business of the Company. Depending on the cash consideration required in such
potential acquisitions, the Company may determine to finance such transactions
with its cash flows from operations, or may pursue raising additional funds
through various financing vehicles, such as additional bank financing or one or
more public or private offerings of the Company's securities, or both.
The Common Stock of Nine West Group Inc. has been listed and traded on the
New York Stock Exchange since February 2, 1993 (trading symbol NIN). The Common
Stock was listed in connection with the Offering.
The Company does not currently intend to pay cash dividends on its Common
Stock in the immediate future. Subject to compliance with certain financial
covenants set forth in the Credit Agreement and restrictions contained in any
future financing agreements, the payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, the general financial
condition of the Company and general business conditions.
SEASONALITY
The Company's footwear and accessories are marketed primarily for each of
the four seasons, with the highest volume of products sold during the last three
fiscal quarters. Because the timing of shipment of products for any season may
vary from year to year, the results for any particular quarter may not be
indicative of results for the full year. The Company has not had significant
overhead and other costs generally associated with large seasonal variations.
INFLATION
The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant impact on the Company's revenues or
profitability. In the past, the Company has been able to maintain its profit
margins during inflationary periods.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Report which are not historical facts
contain forward-looking information with respect to the Company's plans,
projections or future performance, the occurrence of which involve certain risks
and uncertainties that could cause the Company's actual results or plans to
differ materially from those expected by the Company. Certain of such risks and
uncertainties relate to competition in the industry; changes in the prevailing
costs of leather and other raw materials, labor and advertising; changes in
consumer demands and preferences; retail store construction delays; the
availability of desirable retail locations and the negotiation of acceptable
lease terms for such locations; the ability of the Company to place its products
in desirable sections of its department store customers; the level of savings to
be achieved from initiatives outlined in the Restructuring and Integration
Charges and the ongoing integration of the Footwear Group; and unexpected costs
incurred in connection with the Relocation.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which is
required to be adopted in 1997. The general requirements of SFAS No. 128
principally apply to the presentation of earnings per share in the financial
statements. Primary and fully diluted earnings per share will be replaced by
"basic" and "diluted" earnings per share, respectively. The basic calculation
will compute earnings per share based only on the weighted average number of
common shares outstanding as compared to primary earnings per share which
includes common stock equivalents. The diluted earnings per share calculation
will be computed similarly to fully diluted Earnings per share. Earnings per
share for the Company will be affected due to outstanding convertible debt and
equity instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Management's Responsibility for Financial Statements................... XX
Independent Auditors' Report........................................... XX
Consolidated Statements of Income - Fifty-two weeks ended February 1,
1997, Fifty-three weeks ended February 3, 1996, transition period
beginning January 1, 1995 and ending on January 28, 1995, and the year
ended December 31, 1994................................................ XX
Consolidated Balance Sheets - February 1, 1997 and February 3, 1996... XX
Consolidated Statements of Cash Flows - Fifty-two weeks ended
February 1, 1997, Fifty-three weeks ended February 3, 1996, transition
period beginning January 1, 1995 and ending on January 28, 1995, and
the year ended December 31, 1994....................................... XX
Consolidated Statements of Stockholders' Equity - Fifty-two weeks ended
February 1, 1997, Fifty-three weeks ended February 3, 1996, transition
period beginning January 1, 1995 and ending on January 28, 1995, and
the year ended December 31, 1994....................................... XX
Notes to Consolidated Financial Statements (includes certain
supplemental financial information required by Item 8 of Form 10-K).... XX-XX
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated financial statements presented in this report are the
responsibility of the Company's management and have been prepared in conformity
with generally accepted accounting principles. Some of the amounts included in
the consolidated financial information are necessarily based on estimates and
judgments of management.
The Company maintains accounting and related internal control systems
designed to provide, among other things, reasonable assurance that transactions
are executed in accordance with management's authorization and that they are
recorded and reported properly. There are limitations inherent in all systems
of internal control, and the Company weighs the cost of such systems against the
expected benefits.
The consolidated financial statements have been audited by the Company's
independent auditors, Deloitte & Touche LLP. Their primary role is to render an
independent professional opinion on the fairness of the financial statements
taken as a whole. Their audit, which is performed in accordance with generally
accepted auditing standards, includes a study and evaluation of the Company's
accounting systems and internal controls sufficient to express their opinion on
those financial statements.
The Audit Committee of the Board of Directors, which is composed entirely
of directors who are not employees of the Company, meets periodically with
management and the independent auditors to review the results of their work and
to satisfy itself that their responsibilities are being properly discharged. The
independent auditors have full and free access to the Audit Committee and meet
with it (with and without management present) to discuss appropriate matters.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Nine West Group Inc.:
We have audited the accompanying consolidated balance sheets of Nine West
Group Inc. and subsidiaries (the "Company") as of February 1, 1997 and February
3, 1996, and the related consolidated statements of income, stockholders' equity
and cash flows for the fifty-two weeks ended February 1, 1997, the fifty-three
weeks ended February 3, 1996 and the year ended December 31, 1994 and for the
transition period from January 1 to January 28, 1995. Our audits also included
the financial statement schedule listed in the Index at Item 14. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at February 1, 1997
and February 3, 1996, and the results of their operations and their cash flows
for the fifty-two weeks ended February 1, 1997, the fifty-three weeks ended
February 3, 1996 and the year ended December 31, 1994 and for the transition
period from January 1 to January 28, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Stamford, Connecticut
March 17, 1997
NINE WEST GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Transition
1996 1995 Period 1994
---- ---- ---------- ----
(in thousands except per share data)
Net revenues..................... $1,603,115 $1,258,630 $42,539 $652,457
Cost of goods sold............... 913,946 720,963 24,582 364,533
Purchase accounting adjustments
to cost of goods sold........... - 34,864 - -
---------- ---------- ------- --------
Gross profit.................... 689,169 502,803 17,957 287,924
Selling, general and
administrative expenses......... 479,284 381,021 16,402 178,916
Business restructuring and
integration expenses............ 18,970 51,900 - -
Amortization of acquisition
goodwill and other intangibles.. 9,562 6,637 - -
---------- ---------- ------- --------
Operating income from continuing
operations..................... 181,353 63,245 1,555 109,008
Interest expense................. 41,947 29,611 - 2,199
---------- ---------- ------- --------
Income from continuing operations
before income taxes............ 139,406 33,634 1,555 106,809
Income tax expense............... 55,762 14,658 614 42,919
---------- ---------- ------- --------
Income from continuing
operations..................... 83,644 18,976 941 63,890
Loss on disposal of
discontinued operation (net of
tax benefits of $1,419)........ (2,636) - - -
---------- ---------- ------- --------
Net income...................... $ 81,008 $ 18,976 $ 941 $ 63,890
========== ========== ======= ========
Weighted average common shares
and common share equivalents
outstanding:
Primary........................ 36,699 35,707 34,655 34,555
Fully diluted.................. 38,853
Primary earnings per share:
Continuing operations.......... $ 2.28 $0.53 $0.03 $1.85
Loss on disposal of
discontinued operation......... (0.07) - - -
---------- ---------- ------- --------
Primary earnings per share....... $ 2.21 $ 0.53 $ 0.03 $ 1.85
========== ========== ======= ========
Fully diluted earnings per share:
Continuing operations.......... $ 2.26
Loss on disposal of
discontinued operation......... (0.07)
----------
Fully diluted earnings per share. $ 2.19
==========
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
NINE WEST GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 1 February 3
1997 1996
---- ----
(in thousands except share data)
ASSETS
Current Assets:
Cash.............................................. $ 25,176 $ 20,782
Accounts receivable - net......................... 100,718 78,867
Inventories - net................................. 501,830 396,676
Deferred income taxes............................. 38,236 46,088
Assets held for sale - net........................ 13,589 31,118
Prepaid expenses and other current assets......... 42,457 18,249
--------- ----------
Total current assets............................. 722,006 591,780
Property and equipment - net....................... 138,249 136,719
Deferred income taxes.............................. 18,262 21,658
Goodwill - net..................................... 203,020 233,149
Trademarks and trade names - net................... 142,337 146,053
Other assets....................................... 37,189 30,733
---------- ----------
Total assets..................................... $1,261,063 $1,160,092
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................. $ 91,059 $139,731
Accrued expenses and other current liabilities.... 106,273 134,737
Current portion of long-term debt................. 33,000 20,000
---------- ----------
Total current liabilities....................... 230,332 294,468
Long-term debt..................................... 600,407 471,000
Other non-current liabilities...................... 69,784 66,298
---------- ----------
Total liabilities............................... 900,523 831,766
---------- ----------
Stockholders' Equity:
Common stock ($0.01 par value, 100,000,000
shares authorized; 35,792,613 and 35,240,052
shares issued and outstanding)................... 358 352
Warrants.......................................... - 57,600
Additional paid-in capital........................ 140,395 131,595
Retained earnings................................. 219,787 138,779
---------- ----------
Total stockholders' equity...................... 360,540 328,326
---------- ----------
Total liabilities and stockholders' equity..... $1,261,063 $1,160,092
========== ==========
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
<TABLE>
NINE WEST GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C> <C>
Transition
1996 1995 Period 1994
---- ---- ---- ----
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................ $ 81,008 $ 18,976 $ 941 $63,890
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization....................... 32,983 24,409 727 7,558
Provision for losses on accounts receivable......... 6,797 15,762 (822) 2,485
Provision for losses on inventory................... 4,536 11,729 306 2,849
Loss on disposal of property and equipment.......... 2,807 1,660 - 274
Loss on disposal of discontinued operation.......... 2,636 - - -
Business restructuring and integration expenses..... (9,247) 43,779 - -
Deferred income taxes............................... 11,248 (24,177) 521 215
Changes in assets and liabilities excluding effects
of acquisitions:
Increase in balance of accounts receivable sold... 10,610 61,590 - -
Accounts receivable............................... (39,775) (42,474) 4,666 (9,657)
Inventory......................................... (107,388) (48,283) (6,914) 10,660
Prepaid expenses and other assets................. (19,893) (548) 314 (1,075)
Accounts payable.................................. (48,703) 69,946 4,104 (10,926)
Accrued expenses and other current liabilities.... (15,524) 5,256 (4,213) (312)
--------- -------- ------ -------
Net cash provided (used) by operating activities....... (87,905) 137,625 (370) 65,961
--------- -------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................... (42,806) (39,944) (360) (23,096)
Proceeds from sale of property and equipment........... 19,617 - - -
Business acquisitions - net of cash acquired........... (11,580) (581,261) (1,820) -
Acquisition purchase price settlement.................. 25,000 - - -
Proceeds from sale of discontinued operation........... 2,800 - - -
Net (increase) decrease in other assets................ 6,046 (176) (182) (1,477)
--------- -------- ------ -------
Net cash used by investing activities.................. (923) (621,381) (2,362) (24,573)
--------- -------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under financing agreements... 128,000 (11,710) 1,500 (40,971)
Proceeds from issuance of long-term debt............... 232,016 559,810 - -
Repayments of long-term debt........................... (218,000) (61,000) - (7,745)
Repurchase of warrants................................. (67,500) - - -
Net proceeds from issuance of stock.................... 18,706 13,182 - 4,121
--------- -------- ------ -------
Net cash provided (used) by financing activities....... 93,222 500,282 1,500 (44,595)
--------- -------- ------ -------
NET INCREASE (DECREASE) IN CASH........................ 4,394 16,526 (1,232) (3,207)
CASH, BEGINNING OF PERIOD.............................. 20,782 4,256 5,488 8,695
--------- -------- ------ -------
CASH, END OF PERIOD.................................... $ 25,176 $ 20,782 $4,256 $ 5,488
========= ======== ====== =======
The accompanying Notes are an integral part of the Consolidated Financial Statements.
</TABLE>
<TABLE>
NINE WEST GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Common Stock
--------------------
Number of Additional Total
Outstanding Paid-In Retained Stockholders'
Shares Amount Warrants Capital Earnings Equity
----------- ------ -------- ---------- -------- -------------
(in thousands except share data)
Balance at December 31, 1993.... 34,386,450 $344 $ - $110,183 $ 54,972 $165,499
Net income..................... 63,890 63,890
Stock options exercised,
including tax benefit......... 222,095 2 5,236 5,238
---------- ---- ------ -------- -------- --------
Balance at December 31, 1994.... 34,608,545 $346 $ - $115,419 $118,862 $234,627
Net income..................... 941 941
Issuance of stock to effect
L.J.S. acquisition............ 108,060 1 2,999 3,000
---------- ---- ------ -------- -------- --------
Balance at January 28, 1995..... 34,716,605 347 - 118,418 119,803 238,568
Net income..................... 18,976 18,976
Stock options exercised,
including tax benefit......... 523,447 5 13,177 13,182
Issuance of warrants to effect
Footwear Group acquisition.... 57,600 57,600
---------- ---- ------- -------- -------- --------
Balance at February 3, 1996..... 35,240,052 352 57,600 131,595 138,779 328,326
Net income..................... 81,008 81,008
Stock options exercised,
including tax benefit......... 552,561 6 18,700 18,706
Repurchase of warrants......... (57,600) (9,900) (67,500)
---------- ---- ------- -------- -------- --------
Balance at February 1, 1997..... 35,792,613 $358 $ - $140,395 $219,787 $360,540
========== ==== ======= ======== ======== ========
The accompanying Notes are an integral part of the Consolidated Financial Statements.
</TABLE>
NINE WEST GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements include the accounts of Nine West
Group Inc. (the "Company"), its wholly-owned subsidiaries and its controlled-
interest joint ventures. All intercompany transactions and balances have been
eliminated from the consolidated financial statements for all periods presented.
Effective June 27, 1995, the Board of Directors of the Company approved the
change of the Company's fiscal year from December 31 to a 52/53-week period
ending on the Saturday closest to January 31. Fiscal 1996 consists of the
52-week period which ended on February 1, 1997. Fiscal 1995 consists of the
53-week period which began on January 29, 1995 and ended on February 3, 1996.
Fiscal 1994 consists of the 12-month period which ended on December 31, 1994.
References to years in this annual report relate to these fiscal years. The
change in the Company's fiscal year created a transition period consisting of
the four weeks which began on January 1, 1995 and ended on January 28, 1995 (the
"Transition Period").
On May 23, 1995, the Company consummated its acquisition (the
"Acquisition") of the footwear business of The United States Shoe Corporation
(the "Footwear Group"). Financial information for 1996, 1995 and 1994 is not
comparable between years, as Footwear Group results are included in the entire
1996 period and are included in 1995 for the 37-week period from May 23, 1995
through February 3, 1996.
The Company designs, develops, manufactures and markets women's footwear
and accessories. The Company operates in the footwear and accessories industry,
marketing its products through wholesale and retail channels in the United
States as well as in other countries. The Company markets footwear under the
brand names Nine West, Amalfi, Bandolino, Calico, cK/Calvin Klein Shoes and
Bags, Easy Spirit, Enzo Angiolini, Evan Picone, 9 & Co., Pappagallo, Pied a
Terre, Selby and Westies, and under private labels. The Company's products are
manufactured principally in Brazil, and to a lesser extent in Italy, Spain and
China, at independent factories not owned by the Company. The Company's
footwear is also manufactured at five domestic shoe factories, two domestic
component factories and three foreign component factories that are owned by the
Company. The Company has announced a restructuring plan for its North American
manufacturing facilities to be completed in 1997. See "Business Restructuring
and Integration Expenses." The Company has entered into a long-term contract
with its buying agent to oversee its third-party sourcing activities in Brazil
and other countries. The Company does not have any contracts with its
independent manufacturers, but relies on its long-standing relationship with the
Brazilian factories and its buying agent, in addition to its own factories, to
provide an uninterrupted source of inventory.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are valued at the lower of cost or market. Approximately 62%
and 65% of inventories were determined by using the FIFO (first in, first out)
method of valuation as of February 1, 1997 and February 3, 1996, respectively;
the remainder is determined by the weighted average cost method. Inventory is
comprised of (in thousands):
February 1, 1997 February 3, 1996
---------------- ----------------
Raw materials................. $ 27,969 $ 22,450
Work in process............... 3,543 3,890
Finished goods................ 470,318 370,336
-------- --------
Total inventory............. $501,830 $396,676
======== ========
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed on the straight-line method over the estimated useful lives or, if
shorter, the lease terms of the real estate to which the assets relate. The
estimated useful lives by class of asset are:
Estimated Life
In Years
--------------
Buildings and improvements................ 5-30
Machinery, equipment and fixtures......... 2-12
Leasehold improvements.................... 5-10
Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures which materially increase values, improve capacities or
extend useful lives are capitalized. Upon sale or retirement of property and
equipment, the costs and related accumulated depreciation or amortization are
eliminated from the respective accounts and any resulting gain or loss is
included in operations.
Net Revenues
Wholesale revenues, including commissions received in conjunction with
private label footwear, are recognized upon shipment of products to customers.
Retail revenues are recognized when the payment is received from customers.
Revenues are net of returns and exclude sales tax. Licensing revenue is
recognized on the basis of net sales by the licensee. Allowances for estimated
discounts and returns are provided when sales are recorded. Actual discounts
and returns incurred could differ from those estimates.
Retail Store Opening Costs
Costs of opening new retail stores are amortized over the one-year period
immediately following the incurrence of such costs.
Earnings Per Share
Primary earnings per share are computed by dividing net income by the
number of weighted average common shares and common share equivalents
outstanding. Primary weighted average common shares and common share
equivalents for 1996 and 1995 consist of common stock issued and outstanding of
35,647,000 and 35,011,000 shares and primary common stock equivalents of
1,052,000 and 696,000 shares, respectively. Primary weighted average common
shares and common share equivalents for 1994 consist of 34,555,000 common shares
issued and outstanding.
Fully diluted earnings per share assumes conversion to common stock of
$185.7 million principal amount of 5.5% convertible subordinated notes due 2003
(the "Notes"), issued in June 1996, and adjusts net earnings by the
after-tax interest expense related to the Notes.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which is
required to be adopted in 1997. The general requirements of SFAS No. 128
principally apply to the presentation of earnings per share in the financial
statements. Primary and fully diluted earnings per share will be replaced by
"basic" and "diluted" earnings per share, respectively. The basic calculation
will compute earnings per share based only on the weighted average number of
common shares outstanding as compared to primary earnings per share which
includes common stock equivalents. The diluted earnings per share calculation
will be computed similarly to fully diluted earnings per share. Earnings per
share for the Company will be affected due to outstanding convertible debt and
equity instruments.
Reclassifications
Reclassifications have been made to certain prior year amounts to conform
to current year presentation.
Cash Flows
Cash paid for income taxes was $46.0 million, $28.7 million and $45.9
million for 1996, 1995 and 1994, respectively. Cash paid for interest was $39.0
million, $29.4 million and $2.3 million for 1996, 1995 and 1994, respectively.
In 1995, non-cash financing activities included the issuance of warrants, valued
at $57.6 million, in connection with the Acquisition. See "Acquisitions."
During the Transition Period, non-cash financing activities included the
issuance of $3.0 million of Common Stock in connection with the acquisition of
L.J.S. Accessory Collections, Inc.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect: (1) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements; and (2) the reported amounts of revenues and expenses during the
reporting period. While management used the best available information to make
such estimates, future adjustments may be necessary if actual conditions and
results differ substantially from the assumptions used in making the estimates.
Such changes could have a significant effect on the consolidated financial
statements.
Intangible Assets
Intangible assets are amortized on a straight-line basis over their
estimated lives. See "Acquisitions." The carrying values of intangible assets
are periodically reviewed by the Company and impairments are recognized when the
expected future undiscounted operating cash flows derived from such intangible
assets is less than their carrying value.
3. Acquisitions
On May 23, 1995, the Company consummated the Acquisition for a total
purchase price of $560.0 million in cash, plus warrants (the "Warrants"),
exercisable for a period of eight and one-half years from the date of issuance,
to purchase 3.7 million shares of Common Stock at an exercise price of $35.50
per share.
On June 5, 1996, the Company and The United States Shoe Corporation ("U.S.
Shoe") consummated a settlement (the "Settlement") of a post-closing balance
sheet dispute relating to the Acquisition. Pursuant to the Settlement, U.S.
Shoe was obligated to pay the Company $25.0 million, which has been recorded as
a reduction in goodwill. In addition, the Company and U.S. Shoe agreed that the
Company would repurchase the Warrants for $67.5 million. The net payment by the
Company to U.S. Shoe of $42.5 million was financed with borrowings under the
Company's revolving credit facility.
The Acquisition was accounted for under the purchase method of accounting,
whereby the purchase price was allocated to the assets acquired and liabilities
assumed based upon their relative fair values as of May 23, 1995. The relative
fair values of the assets acquired and liabilities assumed are based upon
valuations and other information. In connection with the Acquisition, the
Company assumed and included in the allocation of the acquisition cost accruals
for involuntary severance and termination benefits of $8.6 million and
relocation costs of $8.2 million. These severance and relocation costs were
incurred as a result of the Company's integration plan announced during 1995.
The integration plan relates to the elimination of 295 administrative positions
that became duplicative through the combination of operations and process
efficiencies realized and relocation of certain Footwear Group functional and
operational employees. As of February 1, 1997, approximately 246 of the 295
positions were eliminated, with the remaining reductions to be completed in
1997. As of February 1, 1997, approximately $6.3 million of severance and
termination benefits and $7.6 million of relocation costs were paid and charged
against these liabilities ($4.4 million and $3.4 million, respectively, during
1996). Goodwill, trademarks and trade names are amortized on a straight-line
basis over a 40-year period.
The following table summarizes the allocation of the aggregate
consideration paid (in thousands) to the fair value of the assets acquired and
the liabilities assumed by the Company in connection with the Acquisition:
Current assets
Cash..................................... $ 2,394
Accounts receivable...................... 51,293
Inventories.............................. 212,856
Assets held for sale..................... 34,488
Deferred income taxes.................... 11,892
Other.................................... 1,062
-------------------
Total current assets.................. $313,985
Property and equipment...................... 58,988
Cost in excess of net assets acquired....... 208,862
Trademarks and trade names.................. 148,627
Deferred income taxes....................... 20,521
Other assets................................ 22,550
--------
773,533
Accounts payable............................ (27,656)
Accrued expenses............................ (80,951)
Other non-current liabilities............... (48,671)
------------------
(157,278)
--------
Net consideration paid................ $616,255
========
Included in the assets acquired in the Acquisition were: (1) certain office
and warehouse facilities located in Cincinnati, Ohio (the "Cincinnati
Facilities"); and (2) the Texas Boot division ("Texas Boot"). The Company
consummated the sale of Texas Boot on January 24, 1997. See "Discontinued
Operation." Upon Acquisition, the Company determined that the Cincinnati
Facilities did not meet its long-term strategic objectives and decided to sell
the Cincinnati Facilities within one year from the date of Acquisition. The net
assets related to the Cincinnati Facilities were recorded in the balance sheet
under the caption "Assets held for sale - net" at their estimated net proceeds.
The Company is currently in negotiations to sell the Cincinnati Facilities.
The following unaudited pro forma condensed combined summary of operations
(the "Pro Forma Summary") gives effect to the Acquisition as if such transaction
had occurred at the beginning of the periods presented. The Pro Forma Summary
has been prepared utilizing the historical financial statements of the Footwear
Group. Pro forma adjustments include the amortization of goodwill, trademarks
and trade names, additional interest expense in connection with debt incurred to
finance the Acquisition, the elimination of operating results with respect to
discontinued brands, the elimination of operating results with respect to assets
held for sale, the elimination of expenses associated with contracts not
acquired, and the elimination of transactions between the Footwear Group and its
former parent company. The Pro Forma Summary excludes $34.9 million for the
one-time increase in cost of goods sold attributable to the fair value of
inventory over the FIFO cost as required by the purchase method of accounting.
1995 1994
---------- ----------
(in thousands, except per share amounts)
Net revenues............................. $1,435,679 $1,264,359
Net income............................... 15,115 54,697
Earnings per common share................ $ 0.42 $ 1.58
The foregoing Pro Forma Summary should not be considered indicative of
actual results that would have occurred had the Acquisition been consummated on
the date or for the period indicated, and does not purport to be indicative of
results of operations as of any future date or for any period.
During the past two years, the Company has also completed several smaller
acquisitions, each of which has been accounted for in accordance with the
purchase method of accounting. The consolidated financial statements include
the operating results of each business acquired from its date of acquisition.
Pro forma results of operations have not been presented as the effects of these
acquisitions, both individually and in the aggregate, were not material to the
financial statements taken as a whole.
4. BUSINESS RESTRUCTURING AND INTEGRATION EXPENSES
In the fourth quarter of 1996, the Company recorded a charge of $21.3
million, offset by a reversal of an excess of the Integration Charge (defined
below) of $2.3 million, resulting in a net pretax charge to earnings of $19.0
million (the "Restructuring Charge"), for costs associated with: (1) the
restructuring of North American manufacturing facilities; (2)the consolidation
and relocation of the Company's offices in Stamford, Connecticut and Cincinnati,
Ohio to a new facility in White Plains, New York; and (3) the repositioning of
the 9 & Co. brand, which included the evaluation of retail site locations and
the resulting closure of fifteen 9 & Co. stores. The major components of the
Restructuring Charge are: (1) write-down of assets of $13.8 million; (2)
accruals for lease and other contract terminations of $4.9 million; and (3)
plant closing costs of $2.6 million. The Restructuring Charge balance of $21.3
million at February 1, 1997 is included in accrued expenses and other current
liabilities.
The Restructuring Charge reflects plans to close three domestic factories
and discontinue or reconfigure certain operations at two other domestic
manufacturing facilities. Domestic footwear production is expected to decrease
from a current level of 7.5 million pairs to 5.0 million pairs by the end of
1997, as the Company pursues global sourcing opportunities in an effort to
reduce overall product cost. This action will affect 1,025 employees, or
approximately 50% of the Company's domestic manufacturing work force. Total
severance and termination benefit costs associated with this action are $9.6
million, which relate to benefits covered by the Company's existing severance
plans. See "Employee Benefit Plans."
During 1995, the Company began the implementation of its planned business
restructuring and integration activities related to the Acquisition. While some
of the costs associated with the restructuring and integration of the Footwear
Group into the Company were reflected in the allocation of the Acquisition cost,
the Company incurred and accrued expenses for restructuring and integration
costs of $51.9 million in the fourth quarter of 1995 (the "Integration Charge").
The major components of the Integration Charge were: (1) severance and
termination benefits of $7.7 million; (2) write-down of assets, principally
leasehold improvements, of $14.6 million; (3) inventory valuation adjustments of
$10.4 million; (4) accruals for lease and other contract terminations of $7.0
million; and (5) other integration and consolidation costs of $12.2 million.
Total cash outlays related to this charge are expected to be approximately $20.3
million, of which $14.4 million and $4.4 million was paid during 1996 and 1995,
respectively. The remaining liability for these activities at February 1, 1997
was $1.5 million, primarily related to severance payments that exceeded one
year, and is included in accrued expenses and other current liabilities.
The Integration Charge reflects plans to restructure international sourcing
operations and consolidate certain manufacturing and sourcing facilities located
in Italy, Korea and the Far East, and the consolidation and integration of
various corporate and business unit operations and support functions. In
relation to the Company's restructuring of its retail operations, the plan
included the elimination of duplicate product lines, the closing of
approximately 40 of the Company's under performing Banister retail stores and
conversion of a number of stores to other nameplates or formats during 1996, and
the termination of the Company's agreement with Burlington Coat Factory for its
operation of 84 shoe departments during 1996.
Severance and termination benefits relate to approximately 475 employees,
of which 420 were store managers and associates, 50 were engaged in
manufacturing positions, principally related to the liquidation of the Company's
Far East office as a result of entering into a new agency arrangement, and five
were management employees. As of February 1, 1997, approximately 450 employees
had been terminated, with $6.6 million of severance and termination benefits
being paid and charged against the liability. The remaining separations will be
completed during 1997.
The Integration Charge also included period costs of approximately $3.2
million in 1995, which were expensed as incurred and which consisted of
integration-related outside consulting fees paid in connection with the
implementation of major process improvements. The process improvements included
the elimination of redundant operations ($684,000) and certain financial
accounting systems ($995,000) and efficiency improvements in certain warehousing
($564,000) and retail store ($995,000) operations and systems.
The following table summarizes the activity of the Integration Charge through
February 1, 1997:
<TABLE>
<S> <C> <C> <C> <C> <C>
Other
Lease and Integration
Severance and Asset Contract Inventory and
Termination Write- Termination Valuation Consolidation
(in thousands) Benefits Downs Costs Adjustments Costs Total
-------- ------ ----- ----------- ----- -----
1995 provision........... $7,650 $14,620 $7,046 $10,423 $12,161 $51,900
1995 activity............ (836) (14,620) (235) (-) (4,253) (19,944)
------ ------- ------ ------- ------- -------
February 3, 1996 balance. 6,814 - 6,811 10,423 7,908 31,956
1996 activity............ (5,388) (-) (4,866) (10,423) (7,540) (28,217)
Reversal of excess
Integration Charge...... (335) (-) (1,795) (-) (133) (2,263)
------ ------- ------ ------- ------- -------
February 1, 1997 balance. $1,091 $ - $ 150 $ - $ 235 $ 1,476
====== ======= ====== ======= ======= =======
</TABLE>
In connection with the restructuring of its international sourcing
operations, the Company has substantially completed the liquidation of its
sourcing offices located in the Far East and began to source substantially all
of its Far East production through its new agency arrangement.
In connection with the restructuring of its retail operations, the Company
has completed (1) the closing of all 84 leased departments operated within
Burlington Coat Factory stores; and (2) 35 of 40 planned Banister retail store
closings through February 1, 1997. The remaining five planned Banister retail
store closings are expected to be completed during the first quarter of 1997.
5. DISCONTINUED OPERATION
Upon Acquisition, the Company determined that Texas Boot did not meet its
long-term strategic objectives and decided to sell the business within one year
from the date of the Acquisition. The net assets related to the business were
recorded in the balance sheet under the caption "Assets held for sale - net" at
their estimated net proceeds, as adjusted for estimated cash flows from
operations and estimated interest expense during the holding period
(approximately one year) on the incremental debt incurred to finance the
purchase of these assets. The results of operations related to these assets
held for sale, subsequent to July 29, 1995 and interest expense on the allocated
debt, which aggregate approximately $4.7 million of losses and $4.8 million of
income, have been excluded from the 1996 and 1995 consolidated statements of
income, respectively, as required by Emerging Issues Task Force ("EITF") 87-11.
See "Acquisitions." During the second quarter of 1996, the holding period under
EITF 87-11 had expired and the Company accounted for the expected loss from the
disposal of net assets and anticipated operating losses from the measurement
date through the estimated date of disposal as a discontinued operation,
resulting in a charge of $2.6 million, net of income tax benefits of $1.4
million. The sale of Texas Boot was consummated on January 24, 1997. The
Company received $2.8 million in cash and notes and other financial instruments
in the total amount of $5.2 million in connection with this disposition. See
"Restatement of Quarterly Financial Data."
6. ACCOUNTS RECEIVABLE - NET
Receivables are presented net of reserves for doubtful accounts and other
allowances of $47.3 million and $42.8 million at February 1, 1997 and February
3, 1996, respectively.
7. PROPERTY AND EQUIPMENT - NET
Property and equipment consists of (in thousands):
February 1 February 3
1997 1996
---- ----
Land......................................... $ 629 $ 2,158
Buildings and improvements................... 9,119 21,555
Machinery, equipment and fixtures............ 114,941 101,030
Leasehold improvements....................... 74,928 65,620
Construction in progress..................... 4,557 326
-------- --------
204,174 190,689
Accumulated depreciation and amortization.... 65,925 53,970
-------- --------
Property and equipment - net................. $138,249 $136,719
======== ========
8. SALE/LEASEBACK TRANSACTION
In May 1996, the Company consummated the sale (for $20.3 million) and
leaseback of its distribution facility located in West Deptford, New Jersey.
The lease has been classified as an operating lease.
The cost and accumulated depreciation associated with this facility of
approximately $16.4 million and $2.0 million, respectively, have been removed
from the property and equipment accounts. The net gain realized on the sale of
approximately $5.3 million (net of transaction costs) has been deferred and will
be credited to income as rent expense adjustments over the 20-year initial lease
term. Payments under the lease will approximate $1.7 million annually.
9. FINANCIAL INSTRUMENTS
The Company uses risk management financial instruments to reduce its
exposure to changes in interest rates and foreign exchange rates. The Company
does not hold or issue financial instruments for trading or speculative
purposes. The notional principal amounts of risk management financial
instruments summarized in this note do not represent amounts actually exchanged
by the parties. The amounts exchanged are calculated on the basis of the
notional principal amounts and the other terms of the risk management financial
instruments, which relate to interest rates and exchange rates. While these
financial instruments are subject to risk of loss from changes in exchange and
interest rates, such losses would be generally offset by gains on the related
hedged transactions.
Foreign Currency Transactions - Substantially all purchases of inventory
are made in pre-set U.S. dollar prices. For some inventory purchases which are
denominated in foreign currencies, the Company enters into forward exchange
contracts to protect the Company from the risk that eventual dollar cash
purchases from foreign suppliers will be adversely affected by changes in
exchange rates. Unrealized gains and losses arising from contracts that hedge
firm commitments to purchase inventory from foreign third party suppliers are
deferred and recognized as adjustments to carrying amounts when the hedged
transaction occurs. The fair value of foreign currency contracts as of February
1, 1997 was an unfavorable $4.0 million, based upon third party dealer
valuations as an estimate of the amount the Company would pay upon termination
of the specific contracts. The following table summarizes, by major currency,
the outstanding contractual amounts of the Company's forward exchange contracts
in U.S. dollars (in thousands). The forward exchange contracts outstanding as
of February 1, 1997 mature on various dates through December of 1997.
February 1 February 3
1997 1996
---- ----
Spanish Peseta.............. $34,628 $12,848
Italian Lire................ 42,167 10,757
------- -------
Total..................... $76,795 $23,605
======= =======
Interest Rate Instruments - The Company manages interest rate exposure by
adjusting its mix of floating rate debt and fixed rate debt. As part of the
management of exposure to the fluctuation of interest rates, the Company has
entered into interest rate swaps and collars to effectively fix a portion of its
interest rate exposure on its floating rate debt. At February 1, 1997, the
Company had outstanding interest rate swaps and collars with an aggregate
notional principal amount of $300.0 million with expiration dates ranging from
June 1997 to December 2000. An additional agreement with a notional principal
amount of $100.0 million was entered into on November 26, 1996, but will not
become effective until June 6, 1997. The effect of these transactions is to
limit exposure to interest rate fluctuations with respect to 66% of the
Company's outstanding floating rate debt. The fair value of these instruments
was a favorable $1.2 million, based on a commonly accepted pricing methodology
using market prices as of February 1, 1997.
Accounts Receivable Securitization - In December 1995, the Company entered
into an agreement to create a five-year revolving accounts receivable
securitization facility (the "Receivables Facility"), under which up to $115.0
million of funding may be obtained based upon the sale, without recourse, of the
accounts receivable of the Company. The principal benefit of the Receivables
Facility is a reduction in the Company's cost of funding related to long-
term debt. Proceeds from the transfer of receivables to a trust (the "Trust")
were used to repay long-term debt. During the term of the Receivables Facility,
cash generated by the collection of accounts receivable will be used to purchase
substantially all accounts receivable from the Company on an ongoing basis or
make payments to investors of the Trust.
As of February 1, 1997 and February 3, 1996, the Company had sold $153.9
million and $127.1 million, respectively, of outstanding trade accounts
receivable to Nine West Funding Corporation ("Nine West Funding").
Consequently, Nine West Funding transferred all trade receivables to the Trust
and, as of February 1, 1997 and February 3, 1996, received $72.2 million and
$61.6 million, respectively, from investors who maintain an interest in all of
the assets of the Trust. Nine West Funding maintained a subordinated interest
in the remaining assets of the Trust of $81.7 million and $65.5 million, which
are included in accounts receivable on the Company's balance sheet as of
February 1, 1997 and February 3, 1996, respectively. The Company may terminate
the Receivables Facility at any time. All expenses incurred by the Company with
respect to the Receivables Facility are directly charged to income during the
period in which they are incurred. The effective interest rate incurred by the
Company on amounts transferred by Nine West Funding to the Trust under the
Receivables Facility was 6.2% as of February 1, 1997.
The Company is exposed to credit-related losses in the event of
nonperformance by counter parties to financial instruments, but it does not
expect any counter parties to fail as all counter parties have investment grade
ratings.
10. INCOME TAXES
The components of income from continuing operations before income taxes are
as follows (in thousands):
1996 1995 1994
---- ---- ----
Domestic operations................ $132,063 $27,236 $106,809
Foreign operations................. 7,343 6,398 -
-------- ------- --------
Total......................... $139,406 $33,634 $106,809
======== ======= ========
Income tax expense (benefit) consists of the following (in thousands):
1996 1995 1994
---- ---- ----
Current Provision:
Federal............................ $36,122 $31,663 $34,483
State and local.................... 5,305 6,848 8,221
Foreign............................ 541 156 -
-------- ------- -------
Total......................... 41,968 38,667 42,704
-------- ------- -------
Deferred Provision:
Federal............................ 10,579 (19,937) (28)
State and local.................... 3,364 (4,348) 243
Foreign............................ (149) 276 -
-------- ------- -------
Total......................... 13,794 (24,009) 215
-------- ------- -------
Total Provision $ 55,762 $14,658 $42,919
======== ======= =======
The differences between income tax expense shown in the consolidated
statements of income and the computed income tax expense based on the federal
statutory corporate tax rate are (in thousands):
1996 1995 1994
---- ---- ----
Computed income taxes based on federal
statutory corporate tax rate of 35%.... $48,792 $11,772 $37,383
State and local income taxes, net of
federal benefit........................ 5,635 1,542 5,568
Earnings in jurisdictions taxed at rates
different from U.S. statutory rate..... (2,206) (1,807) -
Foreign dividends....................... 2,288 1,666 -
Other................................... 1,253 1,485 (32)
------- ------- -------
Total income tax expense.............. $55,762 $14,658 $42,919
======= ======= =======
Appropriate U.S. and foreign taxes have been provided for earnings of
subsidiary companies that are expected to be remitted to Nine West Group Inc.
The cumulative amount of unremitted earnings from foreign subsidiaries that are
expected to be indefinitely reinvested was approximately $1,833,000 on February
1, 1997. The taxes that would be paid upon the remittance of these indefinitely
reinvested earnings are approximately $342,000 based on current tax laws.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's net deferred tax asset are (in
thousands):
February 1 February 3
1997 1996
Deferred tax assets: ---- ----
Inventory allowances and capitalization.......... $ 8,737 $ 6,948
Returns and allowances........................... 9,970 9,460
Allowance for bad debts.......................... 2,852 1,741
Business restructuring and integration expenses.. 10,623 17,402
Deferred rent.................................... 3,734 2,762
Pension.......................................... 3,785 3,923
Accrued postretirement and postemployment........ 10,825 11,563
Fixed assets..................................... 7,238 3,901
Other accruals not currently deductible.......... 6,362 13,518
------- -------
Total deferred tax assets...................... $64,126 $71,218
======= =======
Deferred tax liabilities:
Intangible assets................................ $ 7,628 $ 3,472
------- -------
Total deferred tax liabilities................. $ 7,628 $ 3,472
======= =======
11. LONG-TERM DEBT
Long-term debt includes (in thousands):
February 1 February 3
1997 1996
---- ----
Revolving credit facility.......................... $130,000 $ 2,000
Quarterly amortizing term loan..................... 322,000 400,000
Non-amortizing term loan .......................... - 89,000
Convertible notes.................................. 181,407 -
-------- --------
633,407 491,000
Less portion payable within one year............... 33,000 20 000
-------- --------
Total long-term debt............................ $600,407 $471,000
======== ========
In August 1996, the Company amended and restated its credit agreement (the
"Credit Agreement"). Under the Credit Agreement, the Company has a $322.0
million quarterly amortizing term loan and may borrow up to $225.0 million under
a revolving credit facility, including letters of credit up to $100.0 million.
The Credit Agreement expires on November 1, 2001. Amounts outstanding under the
Credit Agreement are secured by substantially all assets of the Company,
excluding receivables related to the Receivables Facility, and bear interest, at
the Company's option, at rates based on the Citibank, N.A. base rate or the
Eurodollar index rate. Borrowings under the Credit Agreement will become
unsecured should the Company achieve an "investment grade" rating on its
long-term senior indebtedness. The Company has entered into interest rate hedge
agreements to reduce the impact on interest expense from fluctuating interest
rates on variable rate debt. As of February 1, 1997, $130.0 million of
borrowings and $37.0 million of letters of credit were outstanding on a
revolving basis and $58.0 million was available for future borrowing.
The Credit Agreement contains various operating covenants which, among
other things, impose certain limitations on the Company's ability to incur
liens, incur indebtedness, merge, consolidate or declare and make dividend
payments. Under the Credit Agreement the Company is required to comply with
financial covenants relative to net worth, fixed charge coverage and leverage.
Borrowings under the Credit Agreement may be prepaid or retired by the Company
without penalty prior to the maturity date of November 1, 2001. Loans under the
Credit Agreement are subject to mandatory prepayments under certain conditions.
In June 1996, the Company issued the Notes. The Notes are due July 15,
2003 and are convertible into Common Stock at a conversion price of $60.76 per
share, subject to adjustment in certain circumstances. The Notes are
redeemable, in whole or in part, at the option of the Company, at any time on or
after July 16, 1999, at declining redemption prices plus any accrued interest.
The Notes are subordinated in right of payment to all existing and future senior
indebtedness of the Company. Proceeds from the issuance of the Notes were
approximately $181.3 million (net of underwriters' discounts of $4.4 million)
and were used to repay a portion of the indebtedness outstanding under the
Credit Agreement. The weighted average interest rate on the Company's long-term
debt outstanding, including the Notes, as of February 1, 1997 was approximately
6.2%. The annual maturities of long-term debt are approximately $33.0 million,
$55.0 million, $75.0 million, $75.0 million, and $84.0 million for 1997 through
2001, respectively.
The carrying value of the Company's long-term debt approximates its fair
value, which was estimated based upon the current rates offered to the Company
for debt with similar terms and remaining maturities.
12. LEASE COMMITMENTS
The Company leases office, distribution center, factory and retail store
space, and equipment under operating leases expiring at various dates through
2016 with renewal options for additional periods. Certain leases require both
contingent payments based on sales volume and contain escalation clauses for
increases in operating costs and real estate taxes.
Rent expense for operating leases was $80.7 million, $59.9 million and
$27.3 million for 1996, 1995 and 1994, respectively. Included in rent expense
are minimum rent payments of $74.3 million, $53.3 million and $24.0 million for
1996, 1995 and 1994, respectively.
Future minimum operating lease payments and sublease income under
noncancelable leases with initial or remaining terms of one year or more at
February 1, 1997 consisted of (in thousands):
Fiscal Minimum Sublease
Year Payments Income Net
---- -------- ------ ---
1997...................... $ 82,872 $ 417 $ 82,455
1998...................... 76,714 305 76,409
1999...................... 64,695 72 64,623
2000...................... 61,068 72 60,996
2001...................... 57,019 72 56,947
2002 and thereafter....... 185,777 246 185,531
-------- ------ --------
Total minimum lease payments $528,145 $1,184 $526,961
======== ====== ========
From February 2, 1997 to March 3, 1997, the Company entered into several
operating lease commitments for additional stores. The additional minimum lease
commitments undertaken for these agreements total approximately $1.4 million,
$2.3 million, $2.3 million, $2.4 million and $2.4 million for 1997 through 2001,
respectively, and aggregate approximately $8.8 million for the years ending
subsequent to 2001.
In February 1997, the Company entered into a 25-year operating lease for
its new 366,460 square foot headquarters facility in White Plains, New York.
The minimum lease commitments undertaken for this agreement total approximately
$4.9 million in 1998 and $5.3 million for each of years 1999 through 2001 and
aggregate approximately $102.7 million for the years ending subsequent to 2001.
13. EMPLOYEE BENEFIT PLANS
In connection with the Acquisition, the Company acquired additional benefit
plans. Benefit plan data is not comparable between the years presented as
benefit plan data for the Footwear Group is included for all of 1996, for only
the 37-week period in 1995 following the Acquisition (May 23, 1995 through
February 3, 1996) and is excluded from all prior periods.
Defined Benefit Plans - As of December 31, 1996, the Company amended its
retirement plans to freeze benefits thereunder, and merged three defined benefit
pension plans acquired in connection with the Acquisition into its previously
existing plan. A new plan is being considered by the Company which would be
based on length of service and compensation, but such plan has not yet been
adopted. It is intended that the new plan would continue to cover substantially
all of the Company's employees while reducing the administrative costs
associated with maintaining multiple plans. The Company's funding policy is to
make the minimum annual contributions required by applicable regulations. The
plans' assets are primarily invested in common stock and government bonds.
Net pension cost related to the plans include the following components (in
thousands):
1996 1995 1994
---- ---- ----
Service cost................................. $ 3,280 $ 2,590 $ 744
Interest cost on projected benefit
obligation.................................. 4,055 2,918 355
Actual return on plan assets................. (5,417) (7,058) 25
Amortization of transition assets............ (19) (19) (17)
Other net amortization and deferral.......... (212) 3,512 (262)
------- ------- -----
Pension cost................................ $1,687 $ 1,943 $ 845
======= ======= =====
The assumptions used to develop net pension expense were:
1996 1995 1994
---- ---- ----
Discount rate................................ 7.5% 7.25% 8.5%
Rate of increase in compensation levels...... 4.5 4.5 5.5
Expected long-term rate of return on assets.. 9.0 9.0 8.1
The plan's funded status and the related accrued pension costs (in
thousands) were:
February 1 February 3
1997 1996
---- ----
Accumulated benefit obligations:
Vested.................................. $(42,058) $(45,427)
Nonvested............................... (2,074) (1,496)
-------- --------
Accumulated plan benefits............. $(44,132) $(46,923)
======== ========
Projected benefit obligation.............. $(44,132) $(56,447)
Plan assets at fair value (principally
marketable securities)................. 58,435 60,294
-------- --------
Projected benefit obligation in
deficiency of plan assets.............. 14,303 3,847
Unrecognized net gain..................... (3,335) (6,121)
Unrecognized prior service cost........... (14,525) (584)
Unrecognized net transition asset......... (197) (216)
-------- --------
Accrued pension cost.................. $ (3,754) $ (3,074)
======== ========
On January 1, 1995, the Company adopted a Supplemental Executive Retirement
Plan ("SERP") in which certain key employees and officers are eligible to
participate. In connection with the Acquisition, the Company acquired an
additional SERP in which certain Footwear Group employees participate. The
SERPs provide supplemental pension benefits that are not available under the
defined benefit pension plan. Benefits paid under the SERPs are based on length
of service and final compensation, without regard to the limitations of the
Internal Revenue Code (the "Code"), and are reduced by the full amount of
benefits payable under the pension plan. The SERPs are unfunded; benefits are
paid from the general assets of the Company. During 1995, the Company recorded a
net curtailment loss of $913,000 in connection with the decision to curtail the
SERPs. The net periodic cost for these SERP plans was $338,000 and $1.2 million
during 1996 and 1995, respectively. The Company's SERP liability as of February
1, 1997 and February 3, 1996 was $5.2 million and $5.1 million, respectively.
Defined Contribution Plans - As of January 1, 1997, the 401(k) savings plan
acquired by the Company in connection with the Acquisition was merged into the
Company's preexisting 401(k) savings plan (the "Savings Plan"). Additionally, a
non-qualified compensation plan, the Supplemental Savings Plan, was established
for employees designated by the Company's retirement committee (the "Retirement
Committee"). The Savings Plan allows each participant to contribute up to 15.0%
(limited to 6.0% for highly compensated employees) of his or her salary for the
year. The Company makes matching contributions to the Savings Plan equal to
50.0% of the participant's contribution up to 6.0% of his or her salary. The
Supplemental Savings Plan allows each participant to contribute up to 15.0% of
his or her salary for the year. The Company makes matching contributions to the
Supplemental Savings Plan equal to 50.0% of the participant's contribution up to
6.0% of his or her salary, limited to a maximum of $4,750 in 1997. At the end
of the plan year, when discrimination testing is completed, the Retirement
Committee will determine the amount of Supplemental Savings Plan contributions,
not to exceed 6.0%, that will be transferred into the Savings Plan. The cost of
these plans to the Company was $2.2 million, $1.5 million and $510,000 for 1996,
1995 and 1994, respectively.
The Company also maintains a non-qualified deferred compensation plan (the
"Deferred Compensation Plan"). The purpose of the Deferred Compensation Plan is
to provide to certain eligible employees of the Company the opportunity to: (1)
defer elements of their compensation (including any investment income thereon)
which might not otherwise be deferrable under the savings plans; and (2) receive
the benefit of additions to their deferral comparable to those obtainable under
the savings plans in the absence of certain restrictions and limitations in the
Code. The Deferred Compensation Plan is unfunded; benefits are paid from the
general assets of the Company. The Company's liability under the Deferred
Compensation Plan as of February 1, 1997 and February 3, 1996 was $4.9 million
and $2.1 million, respectively.
Health Benefit Plans - In connection with the Acquisition, the Company
acquired postretirement benefit plans that partially subsidize healthcare costs
and provide life insurance for certain eligible retirees of the Footwear Group.
Net periodic cost of these benefits includes the following components (in
thousands):
1996 1995
---- ----
Service cost...................... $ 41 $ 56
Interest cost..................... 389 536
Amortization of (gain)/loss....... (447) -
----- ----
Net periodic (benefit) cost....... $ (17) $592
===== ====
The postretirement medical plan was amended on August 1, 1996 to eliminate
coverage for those active employees who were under age 50 as of December 31,
1996. This amendment resulted in a curtailment gain of $461,000 for 1996.
Additionally, the liability associated with this plan was significantly
reduced due to an increase in the premiums paid by participating employees.
The accumulated postretirement benefit obligation was as follows (in
thousands):
February 1 February 3
1997 1996
---- ----
Retirees.......................... $ 4,273 $ 6,005
Fully eligible active employees... 242 145
Other active employees............ 297 611
------- -------
Accumulated postretirement benefit
obligation....................... 4,812 6,761
Unamortized gain.................. 5,547 4,353
------- -------
Accrued postretirement cost..... $10,359 $11,114
======= =======
For 1996, a 12.0% and 10.0% increase in the cost of covered healthcare
benefits was assumed in the pre- and post- age 65 categories, respectively.
This rate was assumed to decrease gradually to 5.5% by 2006 and remain at that
level thereafter. The healthcare cost trend rate assumption has a significant
effect on the amounts reported. For example, a 1.0% increase in the healthcare
trend rate would increase the accumulated postretirement benefit obligation by
6.5% as of February 1, 1997 and the net periodic cost by 8.0% for the year. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at both February 1, 1997
and February 3, 1996. The Company funds these benefits as claims are incurred.
Severance Plans - The Company provides certain severance benefits for
eligible former employees of the Footwear Group. These plans give severance,
health, placement and certain other benefits to the former Footwear Group
employees based on length of service, final compensation, and certain other
factors. The Company's liability under such plans was $16.9 million and $18.0
million at February 1, 1997 and February 3, 1996, respectively. See
"Acquisitions" and "Business Restructuring and Integration Expenses."
14. STOCK OPTION PLANS
Under the Nine West Group Inc. First Amended and Restated 1994 Long-Term
Performance Plan (the "Performance Plan"), stock options and other stock-based
awards are granted to key employees of the Company and other persons performing
significant services for the Company. The total number of shares of Common
Stock originally authorized for issuance under the Performance Plan was
3,000,000 shares. In 1996, the Company amended the Performance Plan to effect
certain changes, including an increase in the total number of shares of Common
Stock that may be issued thereunder to 6,500,000 shares. No person may receive
grants under the Performance Plan which could result in such person receiving
more than 1,500,000 shares of Common Stock over the ten-year life of the
Performance Plan (subject to adjustment). Options may be granted either as
incentive stock options, which permit the deferral of taxable income related to
their exercise, as non-qualified stock options, or as stock appreciation rights
("SARs"). Options outstanding under the Performance Plan become exercisable in
successive annual increments over a period of three to five years, beginning on
the first anniversary of the date the options were granted. The term of each
option or SARs may not exceed ten years from the date of grant. In addition,
the per share option price may not be less than the market value of a share of
Common Stock on the date of grant and is payable to the Company in full upon
exercise. The number of shares available for issuance under the Performance Plan
and the number of shares issuable pursuant to exercise of the outstanding stock
options and SARs is subject to adjustment upon certain changes in the Company's
capitalization.
The Company's Second Amended and Restated Stock Option Plan (the "Stock
Option Plan") provides that stock options may be granted through the year 2003
to management, other employees and other persons performing significant services
for the Company. Three million shares are available for issuance pursuant to
the exercise of stock options under the Stock Option Plan, which provides that
no more than 500,000 shares of Common Stock shall be issuable to any person over
the term of the plan. Options may be granted either as incentive stock options
or as non-qualified stock options. Options outstanding under the Stock Option
Plan become exercisable in successive annual increments over a period of three
to five years, beginning on the first anniversary of the date the options were
granted. The term of each option may not exceed ten years from the date of
grant. In addition, the per share option price may not be less than the market
value of a share of Common Stock on the date of grant and is payable to the
Company in full upon exercise. The number of shares available for issuance
under the Stock Option Plan and the number of shares issuable pursuant to
exercise of the outstanding stock options is subject to adjustment upon certain
changes in the Company's capitalization.
The Nine West Group Inc. Directors' Stock Option Plan (the "Directors'
Plan") provides that options to purchase 5,000 shares of Common Stock will be
granted annually through the year 2003 to "Eligible Directors" (generally,
non-employee directors). All options granted under the Directors' Plan are
granted as of the first business day after the annual stockholders meeting. The
maximum number of shares of Common Stock issuable pursuant to the Directors'
Plan is 172,000.
Activity in the Company's stock option plans was (shares in thousands):
Weighted Average
Shares Exercise Price
------ -----------------
Outstanding at December 31, 1993....... 2,923 $23.95
Granted................................... 193 27.19
Exercised................................. (222) 18.55
Forfeited................................. (93) 25.03
-----
Outstanding at December 31, 1994....... 2,801 24.57
=====
Granted................................... 1,495 30.59
Exercised................................. (463) 22.39
Forfeited................................. (45) 25.10
-----
Outstanding at February 3, 1996........ 3,788 27.20
=====
Granted................................... 1,271 44.55
Exercised................................. (553) 25.28
Forfeited................................. (86) 29.57
-----
Outstanding at February 1, 1997........ 4,420 32.98
=====
Shares exercisable at February 1, 1997.... 813 $27.31
=====
The weighted average range of options outstanding is (shares in thousands):
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Estimated Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- --------- ----------- ----------- -------- ----------- --------
$17 to $27 1,690 6.7 $25.13 373 $24.29
$27 to $37 1,466 8.0 30.28 420 29.24
$37 to $47 1,264 9.5 46.61 20 42.43
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its three stock-based compensation plans. Had
compensation cost for the Company's three stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of FASB Statement No. 123, the Company's net
income and earnings per share on a pro forma basis would have been (in
thousands, except per share amounts):
1996 1995
----------------- -----------------
As Pro As Pro
Reported Forma Reported Forma
-------- ------- -------- ------
Net income....................... $81,008 $69,220 $18,976 $9,338
Primary earnings per share....... 2.21 1.89 0.53 0.26
Fully diluted earnings per share. 2.19 1.89
The fair value of each option grant was estimated using the Black-Scholes
options-pricing model. The following assumptions were used for 1996 and 1995,
respectively: (1) risk-free interest rates of 6.0% and 5.0%; (2) volatility of
33.0% and 35.0%; and (3) expected lives of three years. Results can vary
materially depending on the assumptions applied within the model, and the
resulting compensation expense may not be representative of compensation expense
to be incurred on a pro forma basis in future years.
15. STOCKHOLDERS' EQUITY
The Company has 25,000,000 shares of preferred stock, par value $0.01 per
share, authorized. None of the preferred stock has been issued.
In connection with the Acquisition, the Company issued the Warrants. On
June 5, 1996, the Company repurchased all 3.7 million Warrants from U.S. Shoe
pursuant to the Settlement. See "Acquisitions."
16. RELATED PARTY TRANSACTIONS
The Company's principal executive offices, located in Stamford,
Connecticut, are leased from a partnership in which the Company's principal
stockholders have a 15.5% limited partnership interest. The lease was
renegotiated and extended at current market rates during 1993 and expires on
December 31, 2002. Rent expense related to the Company's principal executive
offices for 1996, 1995 and 1994 was $2.1 million, $1.8 million and $1.6 million,
respectively.
17. COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company has entered into employment agreements with certain key
executives for periods ranging from one to five years. Such agreements provide
for payments and certain allowances of $16.0 million, $10.9 million, $4.1
million, $2.1 million and $361,000 for 1997 through 2001, respectively.
Other Legal Actions
The Company has been named as a defendant in several legal actions,
including actions brought by certain terminated employees, arising from its
normal business activities. Although the amount of any liability that could
arise with respect to these actions cannot be accurately predicted, in the
opinion of the Company, any such liability will not have a material adverse
effect on its financial position, results of operations or liquidity.
18. ADVERTISING EXPENSE
Advertising expense was $45.2 million, $33.1 million and $9.3 million in
1996, 1995 and 1994, respectively. The Company records national advertising
campaign costs as an expense when the advertising takes place and cooperative
advertising costs as incurred. Advertising expense for the Company is expected
to increase by several million dollars in 1997 in connection with expanded
marketing plans for several key brands.
19. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company had a significant customer which accounted for approximately
13.0% and 9.0% of net revenues in 1996 and 1995, respectively. It also had a
different customer which accounted for approximately 10.0% of net revenues for
1994. Like many of its competitors, the Company sells to major retailers. The
Company believes that its broad customer base will reduce the impact that any
financial difficulties of such retailers might have on the Company's operations.
20. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following data for the quarterly periods of 1996 and 1995 are not
comparable due to the impact of the Acquisition, Restructuring Charge and
Integration Charge. See "Basis of Presentation and Description of Business" and
"Business Restructuring and Integration Expenses."
Summarized quarterly financial data for the last two years (in thousands,
except per share data) appears below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings (Loss)
Net Revenues Gross Profit Income(Loss) Per Share*
from Continuing from Continuing
Operations Operations
---------------------- ------------------ ---------------- ---------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
First quarter........ $ 355,911 $ 170,673 $153,673 $ 78,499 $15,050 $14,050 $0.41 $0.40
Second quarter....... 421,509 346,369 176,433 115,583 25,791 3,024 0.69 0.09
Third quarter........ 444,016 392,773 194,460 161,313 35,298 20,798 0.93 0.57
Fourth quarter....... 381,679 348,815 164,603 147,408 7,505 (18,896) 0.20 (0.52)
---------- ---------- -------- -------- ------- ------- ----- -----
Total year......... $1,603,115 $1,258,630 $689,169 $502,803 $83,644 $18,976 $2.26 $0.53
========== ========== ======== ======== ======= ======= ===== =====
*The total of quarterly earnings per share do not equal the annual amount as
earnings per share is calculated independently for each quarter. The fourth
quarter of 1996 reflects primary earnings per share, as the fully diluted
calculation was anti-dilutive.
</TABLE>
In the fourth quarter of 1996, the Company recorded a charge of $21.3
million, offset by a reversal of the excess of the Integration Charge of $2.3
million, resulting in a net pretax charge to earnings of $19.0 million.
Excluding these restructuring expenses, income from continuing operations and
earnings per share would have been $18.9 million, or $0.52 per share, and $95.0
million, or $2.55 per share, for the 1996 fourth quarter and full year,
respectively.
The Company incurred business restructuring and integration expenses of
$51.9 million during the fourth quarter of 1995 and charges to cost of goods
sold during the second, third and fourth quarters of 1995 ($24.0 million, $10.5
million and $344,000, respectively), attributable to the fair value of inventory
over FIFO cost, as required by the purchase method of accounting. Excluding
these business restructuring and integration expenses, and purchase accounting
adjustments, income from continuing operations and earnings per share would have
been $17.0 million or $0.49 per share, $27.3 million or $0.75 per share, $13.3
million or $0.37 per share, and $71.6 million or $2.01 per share for second
quarter, third quarter, fourth quarter and full year of 1995, respectively.
21. RESTATEMENT OF 1996 QUARTERLY FINANCIAL DATA (UNAUDITED)
In the fourth quarter of 1996, the Company corrected its method of
accounting with respect to Texas Boot, which subsequent to July 29, 1995, had
been reflected as an asset held for sale, and the results of operations related
to these assets held for sale and interest expense on the allocated debt had
been excluded from the 1996 and 1995 consolidated statements of income. During
the second quarter of 1996, the holding period under EITF 87-11 had expired. As
a result of this correction, the expected loss from the disposal of net assets
and anticipated operating losses from the measurement date through the date of
disposal were reported retroactive to the second quarter of 1996 as a
discontinued operation. The sale of Texas Boot was consummated on January 24,
1997. See "Discontinued Operation." Accordingly, results for the quarters
ended August 3, 1996 and November 2, 1996 have been restated. The following
financial data has been restated for the quarter ended August 3, 1996: (1)
income from continuing operations from $26.0 million to $25.8 million; (2)
earnings per share from continuing operations from $0.70 to $0.69; (3) net
income from $26.0 million to $23.4 million; and (4)net earnings per share from
$0.70 to $0.62. The following financial data has been restated for the quarter
ended November 2, 1996: (1)income from continuing operations and net income from
$35.6 million to $35.3 million; and (2)earnings per share from continuing
operations and net earnings per share from $0.94 to $0.93.
PART III
Pursuant to General Instruction G(3) of Form 10-K, the information required
by Items 10, 11, 12 and 13 of Part III of Form 10-K is incorporated herein by
reference to the Company's definitive proxy statement to be used in connection
with the Company's 1997 Annual Meeting of Stockholders (other than the portions
thereof not deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934) except for the information regarding the executive
officers of the Company, which is included in Part I of this Annual Report on
Form 10-K under "Item 1 - Business."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
The following financial statements of Nine West Group Inc. are
included in Item 8 of this report:
Independent Auditors' Report
Consolidated Statements of Income - Fifty-two weeks ended February 1,
1997, fifty-three weeks ended February 3, 1996, transition period
beginning January 1, 1995 and ending January 28, 1995, and the year
ended December 31, 1994
Consolidated Balance Sheets - February 1, 1997 and February 3, 1996
Consolidated Statements of Cash Flows - Fifty-two weeks ended
February 1, 1997, fifty-three weeks ended February 3, 1996, transition
period beginning January 1, 1995 and ending January 28, 1995, and
the year ended December 31, 1994
Consolidated Statements of Stockholders' Equity - Fifty-two weeks
ended February 1, 1997, fifty-three weeks ended February 3, 1996,
transition period beginning January 1, 1995 and ending January 28,
1995, and the year ended December 31, 1994
Notes to Consolidated Financial Statements (includes certain
supplemental financial information required by Item 8 of Form 10-K)
2. Financial Statement Schedules:
Schedule II - Valuation and qualifying accounts for the fifty-two
weeks ended February 1, 1997, fifty-three weeks ended
February 3, 1996, transition period beginning January
1, 1995 and ending January 28, 1995, and the year
ended December 31, 1994
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are shown in the
financial statements or are inapplicable, and therefore have been
omitted.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
See Index to Exhibits
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
2.1 Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as of
March 15, 1995, by and among the Registrant, Footwear Acquisition
Corp. and The United States Shoe Corporation (incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K dated March
15, 1995)
2.1.1 Amendment No. 1 to Asset Purchase Agreement, dated May 23, 1995
(incorporated by reference to Exhibit 2.3 to the Current Report on
Form 8-K dated May 23, 1995)
2.1.2 Amendment to Asset Purchase Agreement and Settlement Agreement, dated
as of May 29, 1996, by and among the Registrant, Luxottica Group
S.p.A. and The United States Shoe Corporation (incorporated by
reference to Exhibit 2.1.2 to the Quarterly Report on Form 10-Q for
the quarterly period ended May 4, 1996)
2.2 Form of Warrant Agreement (incorporated by reference to Exhibit 2.2 to
the Current Report on Form 8-K dated March 15, 1995)
3.1 Form of Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to Amendment No. 6 to the
Registration Statement of the Registrant on Form S-1 (Registration No.
33-47556) filed on April 29, 1992 (the "First Registration
Statement"))
3.2 Second Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Current Report on Form 8-K dated May
23, 1995)
*4.1 Specimen stock certificate for shares of Common Stock, $.01 par value,
of the Registrant
4.2 Form of Definitive 5-1/2% Convertible Subordinated Note of the
Registrant Due 2003 (incorporated by reference to Exhibit 4.2 to the
Quarterly Report on Form 10-Q for the quarterly period ended August 3,
1996)
4.3 Form of Restricted Global 5-1/2% Convertible Subordinated Note of the
Registrant Due 2003 (incorporated by reference to Exhibit 4.3 to the
Quarterly Report on Form 10-Q for the quarterly period ended August 3,
1996)
4.4 Form of Regulation S Global 5-1/2% Convertible Subordinated Note of
the Registrant Due 2003 (incorporated by reference to Exhibit 4.4 to
the Quarterly Report on Form 10-Q for the quarterly period ended
August 3, 1996)
4.5 Indenture, dated as of June 26, 1996, between the Registrant, as
issuer, and Chemical Bank, as trustee, relating to the Registrant's
5-1/2% Convertible Subordinated Notes Due 2003 (incorporated by
reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q for the
quarterly period ended August 3, 1996)
4.6 Note Resale Registration Rights Agreement, dated as of June 26, 1996,
by and among the Registrant and the Purchasers Named Therein
(incorporated by reference to Exhibit 4.6 to the Quarterly Report on
Form 10-Q for the quarterly period ended August 3, 1996)
10.1 Registration Rights Agreement (the "Registration Rights Agreement") by
and among the Registrant, Jerome Fisher, Vincent Camuto, and J. Wayne
Weaver (incorporated by reference to Exhibit 10.1 to Amendment No. 2
to the First Registration Statement)
10.1.1 Amendment No. 1 to Registration Rights Agreement (incorporated by
reference to Exhibit 10.1.1 to Amendment No. 6 to the First
Registration Statement)
10.1.2 Amendment No. 2 to Registration Rights Agreement (incorporated by
reference to Exhibit 10.1.2 to Amendment No. 2 to the Registration
Statement of the Registrant on Form S-1 (Registration No. 33-65584) as
filed on July 28, 1993 (the "Second Registration Statement"))
10.1.3 Amendment No. 3 to Registration Rights Agreement (incorporated by
reference to Exhibit 4 to Amendment No. 2 to Schedule 13D filed by
Jerome Fisher, Anne Fisher, Vincent Camuto and J. Wayne Weaver on
January 4, 1994 ("Amendment No. 2 to Schedule 13D"))
10.1.4 Amendment No. 4 to Registration Rights Agreement by and among the
Registrant, Jerome Fisher, Vincent Camuto and J. Wayne Weaver
(incorporated by reference to Exhibit 10.1.4 to Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1994)
10.2 Piggyback Registration Rights Agreement (the "Piggyback Registration
Rights Agreement") between the Registrant and Marc Fisher
(incorporated by reference to Exhibit 10.2 to Amendment No. 2 to the
First Registration Statement)
10.2.1 Amendment No. 1 to Piggyback Registration Rights Agreement
(incorporated by reference to Exhibit 10.2.1 to Amendment No. 6 to the
First Registration Statement)
10.3 Agreement by and among J. Wayne Weaver, Jerome Fisher and The Jerome
Fisher Trust, Vincent Camuto and the Registrant (incorporated by
reference to Exhibit 10.3 to Amendment No. 2 to the First Registration
Statement)**
10.3.1 Amendment No. 1 to agreement by and among J. Wayne Weaver, Jerome
Fisher and The Jerome Fisher Trust, Vincent Camuto and the Registrant
(incorporated by reference to Exhibit 10.3.1 to Amendment No. 6 to the
First Registration Statement)**
10.3.2 Amendment No. 2 to agreement by and among J. Wayne Weaver, Jerome
Fisher and The Jerome Fisher Trust, Vincent Camuto and the Registrant
(incorporated by reference to Exhibit 2 to Amendment No. 2 to Schedule
13D)**
10.4 Shareholders Agreement by and among the Registrant, Vincent Camuto and
Jerome Fisher (incorporated by reference to Exhibit 10.4 to Amendment
No. 2 to the First Registration Statement)**
10.4.1 Amendment No. 1 to Shareholders Agreement (incorporated by reference
to Exhibit 10.4.1 to Amendment No. 6 to the First Registration
Statement)**
10.4.2 Amendment No. 2 to Shareholders Agreement (incorporated by reference
to Exhibit 3 to Amendment No. 2 to Schedule 13D)**
10.5 Buying Agency Agreement between the Registrant and Bentley Services
Inc. (incorporated by reference to Exhibit 10.5 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993 (the
"1993 10-K"))***
*10.5.1 Agreement Regarding Extension of Term, dated March 3, 1997, between
the Registrant and Bentley Services Inc.
10.6 Summary Description of Incentive Bonus Program of the Registrant
(incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the
First Registration Statement)**
10.7 Summary Description of Life Insurance and Medical Reimbursement Plan
for Certain Officers of the Registrant (incorporated by reference to
Exhibit 10.7 to Amendment No. 2 to the First Registration Statement)**
10.8 Employment Agreement (the "Fisher Employment Agreement") between
Jerome Fisher and the Registrant (incorporated by reference to Exhibit
10.8 to Amendment No. 2 to the First Registration Statement)**
10.8.1 Amendment No. 1 to the Fisher Employment Agreement (incorporated by
reference to Exhibit 10.8.1 to Amendment No. 6 to the First
Registration Statement)**
10.9 Employment Agreement (the "Camuto Employment Agreement") between
Vincent Camuto and the Registrant (incorporated by reference to
Exhibit 10.9 to Amendment No. 2 to the First Registration Statement)**
10.9.1 Amendment No. 1 to the Camuto Employment Agreement (incorporated by
reference to Exhibit 10.9.1 to Amendment No. 6 to the First
Registration Statement)**
10.13 Form of S Corporation Termination Agreement among the Registrant,
Jerome Fisher, Vincent Camuto, J. Wayne Weaver, Marc Fisher, Robert V.
Camuto, Andrea M. Camuto and John V. Camuto (incorporated by reference
to Exhibit 10.13 to Amendment No. 7 to the First Registration
Statement)
10.14 Second Amended and Restated Stock Option Plan of the Registrant
(effective as of March 8, 1994) (incorporated by reference to Exhibit
10.14 to the 1993 10-K)**
10.15 Summary of Supplemental Executive Retirement Plan of the Registrant
(incorporated by reference to Exhibit 10.15 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994 (the "1994
10-K"))**
10.15.1 Amendment and Restatement of The United States Shoe Corporation
Supplemental Executive Salaried Employee Benefit Plan (incorporated by
reference to Exhibit 10.15.1 to the Registrant's Annual Report on Form
10-K for the year ended February 3, 1996 (the "1995 10-K"))**
10.16 Deferred Compensation Plan of the Registrant (incorporated by
reference to Exhibit 10.16 to the 1994 10-K)**
10.17 1993 Directors' Stock Option Plan of Registrant (incorporated by
reference to Exhibit 10.18 to Amendment No. 1 to the Second
Registration Statement)**
*10.18 First Amended and Restated 1994 Long-Term Performance Plan**
10.19 Credit Agreement (the "Credit Agreement"), dated as of May 23, 1995,
among the Registrant, Citibank, N.A. and Merrill Lynch Capital
Corporation, as Agents (incorporated by reference to Exhibit 10.21 to
the Quarterly Report on Form 10-Q for the quarterly period ended July
29, 1995)
10.19.1 Amendment No. 1 to the Credit Agreement (incorporated by reference to
Exhibit 10.19.1 to the 1995 10-K)
10.19.2 Amendment No. 2 to the Credit Agreement, dated as of May 29, 1996,
among the Registrant, Citibank, N.A. and Merrill Lynch Capital
Corporation, as agents (incorporated by reference to Exhibit 10.19.2
to the Quarterly Report on Form 10-Q for the quarterly period ended
May 4, 1996)
10.19.3 Amended and Restated Credit Agreement, dated as of August 2, 1996,
among the Registrant, the financial institutions listed on the
signature pages thereof and Citibank, N.A., as administrative agent
(incorporated by reference to Exhibit 10.19.3 to the Quarterly Report
on Form 10-Q for the quarterly period ended August 3, 1996)
10.20 Employment Agreement, dated April 6, 1995, between Noel E. Hord and
the Registrant (incorporated by reference to Exhibit 10.21 to
Quarterly Report on Form 10-Q for the quarterly period ended July 29,
1995)**
*10.21 Nine West Group Inc. First Amended and Restated Incentive Bonus Plan**
10.23 Receivables Purchase Agreement, dated as of December 28, 1995, between
Nine West Funding Corporation and the Registrant (incorporated by
reference to Exhibit 10.23 to the 1995 10-K)
10.24 Nine West Trade Receivables Master Trust Pooling and Servicing
Agreement (the "Pooling Agreement"), dated as of December 28, 1995,
among Nine West Funding Corporation, The Bank of New York and the
Registrant (incorporated by reference to Exhibit 10.24 to the 1995
10-K)
10.25 Series 1995-1 Supplement to Pooling Agreement, dated as of December
28, 1995, among Nine West Funding Corporation, The Bank of New York
and the Registrant (incorporated by reference to Exhibit 10.25 to the
1995 10-K)
10.26 Class A Certificate Purchase Agreement, dated as of December 28, 1995,
among Nine West Funding Corporation, Corporate Receivables
Corporation, the Liquidity Providers Named Therein, Citicorp North
America, Inc., and The Bank of New York (incorporated by reference to
Exhibit 10.26 to the 1995 10-K)
10.27 Class B Certificate Purchase Agreement, dated as of December 28, 1995,
among Nine West Funding Corporation, the Purchasers Named Therein,
Citicorp North America, Inc., and The Bank of New York (incorporated
by reference to Exhibit 10.27 to the 1995 10-K)
*10.28 Lease, dated February 28, 1997, between Westpark I LLC and the
Registrant
*11 Computation of earnings per share
*21 Subsidiaries of the Registrant
*23 Consent of Deloitte & Touche, LLP
24 Power of Attorney (contained herein on signature page)
*Filed herewith
**Management contract or compensation plan arrangement
***Confidential treatment has been granted for marked portions of this exhibit
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, on April 30, 1997.
Nine West Group Inc.
(Registrant)
By: /s/ Robert C. Galvin
-------------------------------
Robert C. Galvin
Executive Vice President, Chief
Financial Officer and Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
this page to this Annual Report on Form 10-K for the fiscal year ended February
1, 1997 (the "Form 10-K") constitutes and appoints Robert C. Galvin, Jeffrey K.
Howald and Joel K. Bedol and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments to Form 10-K, and file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and grants unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might and could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
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 dates indicated.
Name Capacity Date
---- -------- ----
/s/ Jerome Fisher Chairman of the Board April 30, 1997
- ---------------------- and Director
Jerome Fisher
/s/ Vincent Camuto Chief Executive Officer April 30, 1997
- ---------------------- and Director (Principal
Vincent Camuto Executive Officer)
/s/ Robert C. Galvin Executive Vice President, April 30, 1997
- ---------------------- Chief Financial Officer and
Robert C. Galvin Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
/s/ C. Gerald Goldsmith Director April 30, 1997
- ------------------------
C. Gerald Goldsmith
/s/ Henry W. Pascarella Director April 30, 1997
- ------------------------
Henry W. Pascarella
/s/ Salvatore M. Salibello Director April 30, 1997
- ---------------------------
Salvatore M. Salibello
<TABLE>
SCHEDULE II
NINE WEST GROUP INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
For the years ended February 1, 1997, February 3, 1996, and December 31, 1994
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at Charged to Balance
Beginning Balance Costs and at End
Description of Period Acquired Expenses Deductions of Period
----------- --------- -------- -------- ---------- ---------
Year ended February 1, 1997:
Allowance for doubtful accounts.... $ 9,233 $ - $ 430 $2,199 (A) $ 7,464
Reserve for returns and allowances. 33,519 - 6,367 - 39,886
------- ------- ------- ------ -------
$42,752 $ - $ 6,797 $2,199 $47,350
======= ======= ======= ====== =======
Year ended February 3, 1996:
Allowance for doubtful accounts.... $ 1,285 $ 6,725 $ 1,959 $ 736 (A) $ 9,233
Reserve for returns and allowances. 12,178 7,538 13,803 - 33,519
------- ------- ------- ------ -------
$13,463 $14,263 $15,762 $ 736 $42,752
======= ======= ======= ====== =======
Transition Period from Jan 1
to Jan 28, 1995:
Allowance for doubtful accounts.... $ 811 $ - $ 91 $ (383)(A) $ 1,285
Reserve for returns and allowances. 13,091 - (913) - 12,178
------- ------- ------- ------ -------
$13,902 $ - $ (822) $ (383) $13,463
======= ======= ======= ====== =======
Year ended December 31, 1994:
Allowance for doubtful accounts.... $ 806 $ - $ (360) $(365)(A) $ 811
Reserve for returns and allowances. 10,246 - 2,845 - 13,091
------- ------- ------- ----- -------
$11,052 $ - $ 2,485 $(365) $13,902
======= ======= ======= ===== =======
(A) Represents accounts written off, net of recoveries.
</TABLE>
EXHIBIT 4.1
[FORM OF FACE OF CERTIFICATE]
- --------------------------------------------------------------------------------
CERTIFICATE OF STOCK
N 1327 [PICTURE] [SPECIMEN]
NUMBER SHARES
COMMON STOCK COMMON STOCK
CUSIP 65440D 10 2
SEE REVERSE FOR
CERTAIN DEFINITIONS
NINE WEST GROUP INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""
" THIS CERTIFIES THAT "
" "
" [SPECIMEN] "
" "
" IS THE OWNER OF "
"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR
VALUE OF $0.01 PER SHARE OF
Nine West Group Inc., transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
In Witness Whereof, the Corporation has caused this certificate to be
signed by its duly authorized officers and to be sealed with its seal.
Dated: [SPECIMEN]
""""""""""""""""""""""" """"""""""""""""""""""""""""
" COUNTERSIGNED AND " TRANSFER AGENT " /s/Jerome Fisher "
" REGISTERED BY: " AND REGISTRAR " CHAIRMAN OF THE BOARD "
" THE BANK OF NEW YORK" /s/Norm Lawrence " /s/ Vincent Camuto "
""""""""""""""""""""""" AUTHORIZED OFFICER " CHIEF EXECUTIVE OFFICER "
" /s/Robert C. Galvin "
" EXECUTIVE VICE PRESIDENT "
[CORPORATE SEAL] " CHIEF FINANCIAL OFFICER "
" AND TREASURER "
""""""""""""""""""""""""""""
- --------------------------------------------------------------------------------
[FORM OF REVERSE SIDE OF CERTIFICATE]
- --------------------------------------------------------------------------------
NINE WEST GROUP INC. WILL FURNISH TO ITS STOCKHOLDERS WITHOUT CHARGE
UPON REQUEST ADDRESSED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL
OFFICE, A PRINTED-COPY OF THE DESIGNATIONS, TERMS, LIMITATIONS AND
RELATIVE RIGHTS AND PREFERENCES OF ALL CLASSES OF ITS COMMON STOCK.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - .....Custodian.....
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts
of survivorship and not as to Minors act
tenants in common ...................
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________
________________________________________________________________________
________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE,
OF ASSIGNEE)
________________________________________________________________________
________________________________________________________________________
__________________________________________________________________shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________Attorney
to transfer the said shares on the books of the within named Corporation
with full power of substitution in the premises.
Dated, _______________
__________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
- --------------------------------------------------------------------------------
EXHIBIT 10.5.1
NINE WEST GROUP INC.
March 3, 1997
Bentley Services Inc.
Bank America House
308 East Bay Street
Nassau, Bahamas
Attn: Mrs. Mizpah A. Albury
Re: Buying Agency Agreement - Extension of Term
--------------------------------------------
Dear Mrs. Albury:
Reference is made to the Buying Agency Agreement, dated March 21, 1994 (the
"Agreement") between Nine West Group Inc. ("Principal") and Bentley Services
Inc. ("Agent"). The Principal hereby gives notice, pursuant to Section 4.1 of
the Agreement, of the exercise of its option to extend the term of the Agreement
for an additional five years, until January 1, 2002. In connection with the
foregoing, by signing below, the Agent waives compliance by the Principal with
the requirement under Section 4.1 of the Agreement that such notice be given at
least 90 days prior to the termination of the initial five-year term of the
Agreement.
Very truly yours,
Nine West Group Inc.
By: /s/ Alexander Del Cielo
----------------------------
ACCEPTED AND AGREED: Name: Alexander Del Cielo
Title: Executive Vice President
Bentley Services Inc. Operations
By: /s/ Mizpah A. Albury
-------------------------
Name: Mizpah A. Albury
Title: Director
Corporate Headquarters: 9 West Broad Street Stamford, CT 06802 203-324-7567 Fax:
203-328-3550 TLX: 264-735 CAM-FU
Corporate Administration: 11933 Westline Industrial Drive St. Louis, MO 63146
314-434-2202 Fax: 314-434-6941
EXHIBIT 10.18
NINE WEST GROUP INC.
FIRST AMENDED AND RESTATED
1994 LONG-TERM PERFORMANCE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
This is the Nine West Group Inc. First Amended and Restated 1994 Long-
Term Performance Plan (the "Plan"), providing for the grant to certain
designated employees of the Company and certain other persons performing
significant services for the Company of stock-based awards. The purpose of this
Plan is to encourage Participants (as defined below) to acquire Common Stock or
to earn monetary payments based on the value of such Common Stock on a basis
mutually advantageous to Participants and the Company and thus provide an
incentive for continuation of the efforts of Participants for the success of the
Company and for continuity of employment.
SECTION 2. DEFINITIONS.
Whenever used herein, the following terms shall have the respective
meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(b) "Award" means any Stock Option, Stock Appreciation Right or
Restricted Stock granted under the Plan.
(c) "Award Agreement" means the written agreement evidencing an
Award, which shall be executed by the Company and the
Participant.
(d) "Award Date" means the date as of which an Award is granted,
unless another date is specified in the resolution of the
Committee granting such Award.
(e) "Base Price" means, in the case of an Option or a Stock
Appreciation Right, a price fixed by the Committee at which the
Option or the Stock Appreciation Right may be exercised, which
shall not be less than 100% of the Fair Market Value of a share
of Stock on the date of grant of such Option or Stock
Appreciation Right.
(f) "Board" means the Board of Directors of the Company.
(g) "Change of Control" means the merger or consolidation of the
Company with or into another corporation as the result of which
the Company is not the continuing or surviving corporation; the
sale or other disposition of all or substantially all of the
assets of the Company (including the exchange of such assets for
the securities of another corporation); the acquisition by
another person of 80% or more of the Company's then outstanding
shares of voting stock or the recapitalization, reclassification,
liquidation or dissolution of the Company; or other transaction
involving the Company pursuant to which the Common Stock would be
converted into cash, securities or other property.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, together with all rules and regulations promulgated
thereunder.
(i) "Committee" means a committee composed of at least two members of
the Board who, for as long as Rule 16b-3 under the Act and/or any
rules promulgated pursuant to Section 162(m) of the Code, or
their equivalent(s), are then in effect and applicable with
respect to the Plan, shall be "disinterested persons," "non-
employee directors" and/or "outside directors," as respectively
applicable, within the meaning of such rule(s) or their
equivalent(s) as then in effect.
(j) "Common Stock" means the common stock, $.01 par value per share,
of the Company.
(k) "Company" means Nine West Group Inc., a Delaware corporation, and
its subsidiaries, if any.
(l) "Disability" means a physical and/or mental condition that
renders a Participant unable to perform the duties of his
position on a full-time basis for a period of one hundred eighty
(180) consecutive business days. Disability shall be deemed to
exist when certified by a physician selected by the Company or
its insurers and acceptable to the Participant or the
Participant's legal representative (such agreement as to
acceptability not to be withheld unreasonably). The Participant
will submit to such examinations and tests as such physician
deems necessary to make any such Disability determination.
(m) "Employee" means a salaried employee (including officers and
directors who are also employees) of the Company.
(n) "Fair Market Value" means, when a public market for the Common
Stock exists, the average of the high and low reported sales
prices of Common Stock on the exchange on which such Common Stock
is traded (or such other market as shall constitute the principal
trading market for the Common Stock) on the date for which Fair
Market Value is being determined (or, if there is no such trading
on such date, the last preceding date on which there was such
trading). When no public market for the Common Stock of the
Company exists, Fair Market Value shall be determined by the
Board.
(o) "Immediate Family" means a Participant's children, grandchildren,
parents, the spouse of any such person, a trust for the benefit
of any such person, or a partnership in which such persons are
the only partners.
(p) "Incentive Stock Option" shall have the meaning assigned to such
term in Section 422 of the Code.
(q) "Nonqualified Stock Option" means any Option other than an
Incentive Stock Option.
(r) "Option" means the right to purchase Stock at the Base Price for
a specified period of time. For purposes of the Plan, an Option
may be an Incentive Stock Option within the meaning of Section
422 of the Code, a Nonqualified Stock Option, or any other type
of option.
(s) "Participant" means any Employee or other person performing
significant services for the Company designated by the Committee
to participate in the Plan.
(t) "Period of Restriction" means the period during which a grant of
shares of Restricted Stock is restricted pursuant to Section 11
of the Plan.
(u) "Reporting Person" means a person subject to Section 16 of the
Act.
(v) "Restricted Stock" means Stock granted pursuant to Section 11 of
the Plan, but any shares of such Stock shall cease to be
Restricted Stock when the conditions to and limitations on
transferability under Section 11 have been satisfied or have
expired, respectively.
(w) "Retirement" means termination of employment with eligibility for
normal, early or disability retirement benefits under the terms
of the Company's pension plan, as amended and in effect at the
time of such termination of employment.
(x) "Stock" means the authorized and unissued shares of Common Stock
or reacquired shares of Common Stock held in the Company's
treasury.
(y) "Stock Appreciation Right" or "SAR" means the right to receive a
payment from the Company equal to the excess of the Fair Market
Value of a share of Common Stock at the date of exercise over the
Base Price. In the case of a Stock Appreciation Right which is
granted in conjunction with an Option, the Base Price shall be
the Option exercise price.
(z) "Taxable Event" means an event requiring United States Federal,
state or local tax to be withheld with respect to an Award
hereunder, including but not limited to, the exercise of
Nonqualified Stock Options or SARs, the ending of a Period of
Restriction with respect to Restricted Stock, or the making by a
Participant of an election under Section 83(b) of the Code.
(aa) "Vested" or "Vesting" means, with respect to Options and SARs,
that the Options or SARs shall be exercisable; and with respect
to Restricted Stock, that the Period of Restriction has ended.
(bb) "Window Period" means the third through the twelfth business day
following the release for publication of the Company's quarterly
or annual earnings reports.
SECTION 3. ADMINISTRATION.
The Plan will be administered by the Committee. The Committee is
authorized in its sole discretion to determine the individuals to whom Awards
will be granted, the type and amount of such Awards and the terms (including
expiration dates) of grants; to interpret the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; to provide for conditions
and assurance deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for the
administration of the Plan to the extent not contrary to the express provisions
of the Plan. The determinations of the Committee shall be made in accordance
with the judgment of its members as to the best interests of the Company and its
stockholders and in accordance with the purpose of the Plan. A majority of
members of the Committee shall constitute a quorum, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee, by a writing signed by a majority of the committee members.
Determinations, interpretations, or other actions made or taken by the Committee
pursuant to the provisions of the Plan shall be final and binding and conclusive
for all purposes and upon all persons whomsoever.
SECTION 4. SHARES RESERVED; CALCULATION OF SHARE AVAILABILITY.
(a) There is hereby reserved for issuance under the Plan an aggregate
of 6,500,000 shares of Stock, which may be authorized but
unissued or treasury shares.
(b) Calculation of the number of shares remaining available for
issuance under the Plan shall be by those methods permissible
under the Securities and Exchange Commission's interpretations
which result in the greatest number of shares remaining available
for issuance, including any permissible methods less restrictive
than those set forth in the remainder of this paragraph 4(b). As
of the date of adoption of the Plan, these include the following:
Stock underlying outstanding Awards will be counted against the
Plan maximum while such Awards are outstanding. Shares
underlying expired, canceled or forfeited Awards (except
Restricted Stock) may be restored to the Plan maximum. When SARs
are exercised for cash, the number of shares covered by such SARs
may be restored to the Plan maximum. When the exercise price of
Options is paid by delivery or withholding of shares of Common
Stock, the number of shares so delivered may be restored to the
Plan maximum to be available solely for the grants to non-
Reporting Persons. Restricted Stock issued pursuant to the Plan
will be counted against the Plan maximum while outstanding even
while subject to restrictions. Shares of Restricted Stock shall
not be restored to the Plan maximum if such Restricted Stock is
forfeited.
SECTION 5. PARTICIPANTS.
Participants will consist of such employees of the Company and certain
other persons performing significant services for the Company as designated by
the Committee in its sole discretion. Designation as a Participant in any year
shall not require the Committee to designate such person to receive an Award in
any other year or to receive the same type or amount of Award (or on the same
terms) as granted to the Participant in any other year or as granted to any
other Participant in any year. The Committee shall consider such factors as it
deems pertinent in selecting Participants and in determining the type and amount
of their respective Awards. Notwithstanding the foregoing, Performance-Based
Awards (as defined in Section 20) shall be granted only to key employees
selected by the Committee in its sole discretion.
SECTION 6. TYPES OF AWARDS; LIMITATION ON GRANTS.
(a) The following Awards may be granted under the Plan: (i) Incentive
Stock Options, (ii) Nonqualified Stock Options, (iii) Stock
Appreciation Rights or (iv) Restricted Stock, or any combination
thereof, all as described below. Except as specifically limited
herein, the Committee shall have complete discretion in
determining the type and number of Awards to be granted to any
Participant, and the terms and conditions which attach to each
Award, which terms and conditions need not be uniform as between
different Participants. All Awards shall be in writing.
(b) The number of shares with respect to which Awards may be granted
to any Participant pursuant to the Plan over the ten-year term of
the Plan (as defined in Section 17 below), shall not exceed
1,500,000, subject to adjustment as provided in Section 12
hereof.
SECTION 7. AWARD DATE AND AWARD AGREEMENT.
All Awards granted under the Plan shall be granted as of an Award
Date. Promptly after each Award Date, the Company shall notify the Participant
of the grant of the Award, and shall hand deliver or mail to the Participant an
Award Agreement, duly executed by and on behalf of the Company, with the request
that the Participant execute and return the Agreement within 30 days after the
date of mailing or delivery by the Company of the Agreement to the Participant.
The Award Agreement shall set forth the terms of the Award, including without
limitation (to the extent applicable to the particular Award), the amount and
type of Award, exercise period, term, restrictions, Vesting schedule and
conditions, transferability, and procedures to be followed to exercise the
Award. If the Participant shall fail to execute and return the written Award
Agreement within said 30-day period, his or her Award may be terminated in the
discretion of the Committee, except that if the Participant dies within said 30-
day period such Award Agreement shall be effective notwithstanding the fact that
it has not been signed prior to death.
SECTION 8. INCENTIVE STOCK OPTIONS.
Incentive Stock Options shall consist of Options to purchase shares of
Stock at purchase prices not less than 100% of the Fair Market Value of the
shares on the Award Date. Said purchase price may be paid by check or, in the
discretion of the Committee, by the delivery of shares of Common Stock then
owned by the Participant or receivable upon exercise of the Incentive Stock
Option. The applicable Award Agreement shall set forth the Vesting schedule,
exercise terms and expiration date of the Incentive Stock Option, provided that
Incentive Stock Options granted to Reporting Persons shall be exercisable not
earlier than six months after the date they are granted, and no Incentive Stock
Option shall be exercisable after the tenth anniversary of the Award Date. The
aggregate Fair Market Value, determined as of the date an Incentive Option is
granted, of the Common Stock for which any Participant may be awarded Incentive
Stock Options which are first exercisable by the Participant during any calendar
year under the Plan or any other stock option plan maintained by the Company
shall not exceed $100,000. Notwithstanding any contrary provisions of the Plan,
no Incentive Stock Option shall be granted to any Participant who, at the time
such Incentive Stock Option is granted, owns (directly, or within the meaning of
section 424(d) of the Code) more than ten percent of the total combined voting
power of all classes of stock of the Company, unless (a) the exercise price
under such Incentive Stock Option is at least 110 percent of the Fair Market
Value of a share of Common Stock on the date such Incentive Stock Option is
granted and (b) such Incentive Stock Option is not exercisable after the
expiration of five years from the date granted. The Participant shall notify
the Company in writing, within 30 days, of any disposition (whether by sale,
exchange, gift or otherwise) of shares of Common Stock acquired by the
Participant pursuant to the exercise of an Incentive Stock Option, within two
years from the date of the granting of such Option or within one year of the
transfer of such shares to the Participant.
SECTION 9. NONQUALIFIED STOCK OPTIONS.
Nonqualified Stock Options shall consist of Options to purchase shares
of Stock at purchase prices not less than 100% of the Fair Market Value of the
shares on the date the Options are granted. Said purchase price may be paid by
check or, in the discretion of the Committee, by the delivery of shares of
Common Stock then owned by the Participant or receivable upon exercise of the
Nonqualified Stock Option. The terms of the applicable Award Agreement shall
set forth the Vesting schedule, exercise terms and expiration date of the
Nonqualified Stock Option, provided that Nonqualified Stock Options granted to
Reporting Persons shall be exercisable not earlier than six months after the
date they are granted, and no Nonqualified Stock Option shall be exercisable
after the tenth anniversary of the Award Date.
SECTION 10. STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights may be granted which, at the discretion of
the Committee, may be exercised (1) in lieu of exercise of an Option, (2) in
conjunction with the exercise of an Option, (3) upon lapse of an Option, (4)
independent of an Option, or (5) each of the above in connection with a
previously awarded Option under the Plan. If the Option referred to in (1),
(2), or (3) above qualified as an Incentive Stock Option pursuant to Section 422
of the Code, the related SAR shall comply with the applicable provisions of the
Code and the regulations issued thereunder. At the time of grant, the Committee
may establish, in its sole discretion, a maximum amount per share which will be
payable upon exercise of a SAR, and may impose such conditions on exercise of a
SAR (including, without limitation, the right of the Committee to limit the time
of exercise to specified periods) as may be required to satisfy the requirements
of Rule 16b-3 (or any successor rule) under the Act. SARs granted to Reporting
Persons shall be exercisable not earlier than six months after the date they are
granted. At the discretion of the Committee, payment for SARs may be made in
cash or Common Stock, or in a combination thereof, provided, however, that
payment may be made in cash for SARs exercised by Reporting Persons only upon
the condition that such exercise is made during a Window Period. The following
will apply upon exercise of a SAR:
(a) EXERCISE OF SARS IN LIEU OF EXERCISE OF OPTIONS. SARs
exercisable in lieu of Options may be exercised for all or part
of the shares of Stock subject to the related Option upon the
exercise of the right to exercise an equivalent number of
Options. A SAR may be exercised only with respect to the shares
of Stock for which its related Option is then exercisable.
(b) EXERCISE OF SARS IN CONJUNCTION WITH EXERCISE OF OPTIONS. SARs
exercisable in conjunction with the exercise of Options shall be
deemed to be exercised upon the exercise of the related Options.
(c) EXERCISE OF SARS UPON LAPSE OF OPTIONS. SARs exercisable upon
lapse of Options shall be deemed to have been exercised upon the
lapse of the related Options as to the number of shares of Stock
subject to the Options.
(d) EXERCISE OF SARS INDEPENDENT OF OPTIONS. SARs exercisable
independent of Options may be exercised upon whatever terms and
conditions the Committee, in its sole discretion, imposes upon
the SARs.
SECTION 11. RESTRICTED STOCK.
Restricted Stock shall consist of Stock issued or transferred under
the Plan (other than upon exercise of Stock Options or SARs) at any purchase
price less than the Fair Market Value thereof on the date of issuance or
transfer, or as a bonus. The terms and conditions of the Vesting of such
Restricted Stock shall be set forth in the applicable Award Agreement. In the
case of any Restricted Stock:
(a) The purchase price, if any, and the conditions to Vesting will be
determined by the Committee.
(b) Restricted Stock may be subject to (i) restrictions on the sale
or other disposition thereof, provided, however, that Restricted
Stock granted to a Reporting Person shall, in addition to any
other restrictions thereon, not be sold or disposed of for six
(6) months following the date of grant; (ii) rights of the
Company to reacquire such Restricted Stock from a Participant at
the purchase price, if any, originally paid therefor upon
termination of the Participant's service with the Company within
specified periods; (iii) representation by the Participant that
he or she intends to acquire Restricted Stock for investment and
not for resale; and (iv) such other restrictions, conditions and
terms as the Committee deems appropriate.
(c) The Participant shall be entitled to all dividends paid with
respect to Restricted Stock during the Period of Restriction and
shall not be required to return any such dividends to the Company
in the event of the forfeiture of the Restricted Stock.
(d) The Participant shall be entitled to vote the Restricted Stock
during the Period of Restriction.
(e) The Committee shall determine whether Restricted Stock is to be
delivered to the Participant with an appropriate legend imprinted
on the certificate or if the shares are to be deposited in escrow
pending removal of the restrictions.
SECTION 12. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued
shares of Common Stock without new consideration to the Company
(such as by stock dividends or stock splits), the total number of
shares reserved for issuance under this Plan, the maximum number
of shares available to a particular Participant (whether as
Performance-Based Awards or otherwise), and the number of shares
covered by each outstanding Award, shall be adjusted so that the
aggregate consideration payable to the Company, if any, and the
value of each such Award shall not be changed. Awards may also
contain provisions for their continuation or for other equitable
adjustments after changes in the Common stock resulting from
reorganization, sale, merger, consolidation, issuance of stock
rights or warrants or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and without
affecting the number of shares reserved or available hereunder,
the Committee may authorize the equitable adjustment of benefits
in connection with any merger, consolidation, acquisition of
property or stock, or reorganization upon such terms and
conditions as it may deem appropriate.
SECTION 13. CHANGE OF CONTROL.
Notwithstanding any other provision of this Plan, upon a Change of
Control, outstanding Awards shall become immediately and fully exercisable or
payable according to the following terms:
(a) Any outstanding and unexercised Option shall become immediately
and fully exercisable, and shall remain exercisable until it
would otherwise expire by reason of lapse of time.
(b) During the six month and seven day period from and after a Change
of Control (the "Exercise Period"), in the discretion of the
Committee, a Participant may elect, in lieu of the payment of the
Base Price of the Shares of Stock being purchased under an Option
and by giving notice to the Committee, to surrender all or part
of the Option to the Company and to receive in cash, within 30
days of such notice, an amount equal to the amount by which the
Change in Control Price per share of Common Stock on the date of
such election shall exceed the Base Price per share of Stock
under the Option multiplied by the number of shares of Stock
granted under the Option as to which the right granted under this
subsection 13(b) shall have been exercised. Change in Control
Price shall mean the higher of (i) the highest Fair Market Value
during the 60-day period prior to and ending on the date of the
Change of Control and (ii) the highest price per share of the
Common Stock as reflected in a Schedule 13D filed by a person in
connection with the Change in Control); provided, however, that
with respect to any Incentive Stock Option, the Change of Control
Price shall not exceed the market price of a share of Common
Stock (to the extent required pursuant to Section 422 of the
Code) on the date of surrender thereof.
(c) Any outstanding and unexercised Stock Appreciation Rights (other
than such rights which arise pursuant to Section 13(d) hereof)
shall become immediately and fully exercisable.
(d) Any Restricted Stock granted pursuant to Section 11 (and not
forfeited prior to the Change in Control) shall become
immediately and fully Vested, and the Committee shall have sole
discretion to waive any automatic forfeitures provided with
respect to such Restricted Stock arising from the Change in
Control. Any shares held in escrow shall be delivered to the
Participant, and the share certificates shall not contain the
legend referred to in Section 11(e) hereof.
SECTION 14. TRANSFERABILITY.
(a) Except as otherwise expressly provided in the applicable Award
Agreement, each Award granted under the Plan to a Participant
shall not be transferable otherwise than by will or the laws of
descent and distribution or pursuant to a Qualified Domestic
Relations order (as defined in Section 206(d)(3) of the Employee
Retirement Income Security Act of 1974, as amended, and the rules
promulgated thereunder), and shall be exercisable, during the
Participant's lifetime, only by the Participant. In the event of
the death of a Participant, exercise or payment shall be made
only:
(i) By or to the persons named as beneficiaries pursuant to
Section 18(a) hereof, or, if none, by or to the executor or
administrator of the estate of the deceased Participant or
the person or persons to whom the deceased Participant's
rights under the Award shall pass by will or the laws of
descent and distribution; and
(ii) To the extent that the deceased Participant was entitled
thereto at the date of his death.
(b) An Award Agreement may expressly provide that an Award may be
transferable to members of the Participant's Immediate Family.
(c) Other than as expressly set forth herein, Awards shall not be
transferable.
SECTION 15. TAXES.
(a) The Company shall be entitled to withhold the amount of any tax
attributable to any amounts payable or shares of Stock
deliverable under the Plan after giving the person entitled to
receive such payment or delivery notice as far in advance as
practicable, and the Company may defer making payment or delivery
as to any Award if any such tax is payable until indemnified to
its satisfaction. The person entitled to any such delivery,
whether due to exercise of an Option or SAR, or lapse of
restrictions on Restricted Stock, or any other Taxable Event may,
by notice to the Company at the time the requirement for such
delivery is first established, elect to have such withholding
satisfied by a reduction of the number of shares otherwise so
deliverable (a "Stock Withholding Election"), or by delivery of
shares of Stock already owned by the Participant, with the amount
of shares subject to such reduction or delivery to be calculated
based on the Fair Market Value on the date of such Taxable Event.
(b) Reporting Persons may make a Stock Withholding Election only in
accordance with the least restrictive methods then permitted
under applicable Securities and Exchange Commission
interpretations (including any methods less restrictive than
those set forth in the remainder of this Section 15(b)), which
currently provide that such election must be made either (i)
during a Window Period, or (ii) six months in advance of the
Taxable Event, which Taxable Event need not occur during a Window
Period, and which election may not be suspended or revoked except
by another such election which shall not become effective until
six months after it is made.
SECTION 16. NO RIGHT TO EMPLOYMENT.
A Participant's right, if any, to continue to serve the Company as an
officer, employee, or otherwise, shall not be enlarged or otherwise affected by
his or her designation as a Participant under the Plan.
SECTION 17. DURATION, AMENDMENT AND TERMINATION.
No Award shall be granted more than ten years after May 8, 1994;
provided, however, that, subject to applicable law, the terms and conditions
applicable to any Award granted within such period may thereafter be amended or
modified by mutual agreement between the Company and the Participant or such
other person as may then have an interest therein. Also, by mutual agreement
between the Company and a Participant hereunder, Stock Options or other Awards
may be granted to such Participant in substitution and exchange for, and in
cancellation of, any Awards previously granted such Participant under this Plan.
To the extent that any Stock Options or other Awards which may be granted within
the terms of the Plan would qualify under present or future laws for tax
treatment that is beneficial to a recipient, then any such beneficial treatment
shall be considered within the intent, purpose and operational purview of the
Plan and the discretion of the Committee, and to the extent that any such Stock
Options or other Awards would so qualify within the terms of the Plan, the
Committee shall have full and complete authority to grant Stock Options or other
Awards that so qualify (including the authority to grant, simultaneously or
otherwise, Stock Options or other Awards which do not so qualify) and to
prescribe the terms and conditions (which need not be identical as among
recipients) in respect to the grant or exercise of any such Stock Option or
other Award under the Plan. The Board may amend the Plan from time to time or
terminate the Plan at any time. However, no action authorized by this Section
17 shall reduce the amount of any existing Award or change the terms and
conditions thereof without the Participant's consent. No amendment of the Plan
shall, without approval of the stockholders of the Company (a) increase the
total number of shares of Stock which may be issued under the Plan, the amount
or type of Awards that may be granted under the Plan or the individual limit set
forth in Section 6(b) hereof; (b) reduce the minimum purchase price, if any, of
shares of Stock which may be made subject to Awards under the Plan; or (c)
modify the requirements as to eligibility for Awards under the Plan.
SECTION 18. MISCELLANEOUS PROVISIONS
(a) In connection with an Award, a Participant may name one or more
beneficiaries to receive the Participant's benefits, to the
extent permissible pursuant to the various provisions of the
Plan, in the event of the death of the Participant.
(b) All obligations of the Company under the Plan with respect to
Awards issued hereunder shall be binding on any successor to the
Company.
SECTION 19. STOCKHOLDER APPROVAL.
The Plan has an effective date of May 8, 1994. The amendments have an
effective date as of May 28, 1996, subject to approval by the stockholders of
the Company at the Annual Meeting of Stockholders in 1996. If the stockholders
do not approve the amendments to the Plan, such amendments, and any actions
taken conditioned on such approval or in reliance on the amendments shall be
void and of no effect.
SECTION 20. PERFORMANCE-BASED AWARDS.
Certain Awards granted under the Plan may be granted in a manner
constituting "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code. Such Awards (the "Performance-Based Awards") are to
be based upon one or more of the following factors: net sales, pretax income
before allocation of corporate overhead and bonus, budget, earnings per share,
net income, division, group or corporate financial goals, return on
stockholders' equity, return on assets, attainment of strategic and operational
initiatives, appreciation in and/or maintenance of the price of Common Stock or
any other publicly-traded securities of the Company, market share, gross
profits, earnings before interest and taxes, earnings before interest, taxes,
dividends and amortization, economic value-added models and comparisons with
various stock market indices. With respect to Performance-Based Awards, (i) the
Committee shall establish in writing the objective performance-based goals
applicable to a given fiscal period no later than 90 days after the commencement
of such fiscal period (but in no event after 25% of such period has elapsed) and
(ii) no Awards shall be payable to any Participant for a given fiscal period
until the Committee certifies in writing that the objective performance goals
(and any other material terms) applicable to such period have been satisfied.
SECTION 21. GOVERNING LAW.
The Plan and all rights thereunder shall be governed by and construed
in accordance with the laws of the State of Connecticut, without giving effect
to the choice-of-law principles thereof.
EXHIBIT 10.21
NINE WEST GROUP INC. FIRST AMENDED AND RESTATED
INCENTIVE BONUS PLAN
This is the Nine West Group Inc. First Amended and Restated Incentive
Bonus Plan (the "Plan"), as approved by the Board of Directors (the "Board") of
Nine West Group Inc. (together with its subsidiaries, the "Company"), for the
awarding of bonus compensation to designated employees of the Company.
1. DEFINITIONS
As used in the Plan, the following terms have the following meanings:
"Bonus" shall mean any compensation awarded under the Plan (including, without
limitation, a Performance-Based Bonus).
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time, together with all rules and regulations promulgated thereunder.
"Committee" shall mean the Compensation Committee of the Board.
"Common Stock" shall mean the common stock, $.01 par value per share, of the
Company.
"Outside Directors" shall have the meaning ascribed to it in Section 162(m) of
the Code.
"Participant" shall have the meaning ascribed to it in Section 4 hereof.
"Performance-Based Bonuses" shall mean a bonus that constitutes "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code.
"Permanent and Total Disability" shall have the meaning ascribed to it in
Section 22(e)(3) of the Code; provided that the Committee shall in its sole
discretion determine whether the requirements of such Section are met.
"Plan Year" shall mean the fiscal year of the Company.
2. OBJECTIVE
The objective of the Plan is to attract, retain and motivate employees
of the Company.
3. ADMINISTRATION
The Plan will be administered by the Committee. The Committee will
consist of at least two Outside Directors. Subject to the provisions of the
Plan, the Committee will have full authority to interpret the Plan, to establish
and amend rules and regulations relating to it, to determine the terms and
provisions for awarding Bonuses and to make all other determinations necessary
or advisable for the administration of the Plan. Notwithstanding the foregoing,
the Committee will administer the Plan with respect to Performance-Based Bonuses
in accordance with Section 162(m) of the Code.
4. PARTICIPATION
Participation in the Plan in any Plan Year will be limited to officers
and certain other employees of the Company selected by the Committee in its sole
discretion (collectively, the "Participants"). Notwithstanding the foregoing,
Performance-Based Bonuses will be granted only to key employees designated by
the Committee in its sole discretion.
5. PERFORMANCE GOALS
(a) Performance-Based Bonuses awarded pursuant to the Plan will be
determined in the manner set forth in this Section 5, and as otherwise set forth
in the Plan. Prior to the 90th day of a Plan Year, the Committee will establish
in writing the amount of Bonus (expressed as a percentage of a Participant's
weighted average base salary during the Plan Year) payable to each Participant
to the extent that the performance-based goals set forth below are met for such
Plan Year. The performance-based goals are to be based upon one or more of the
following factors: net sales, pretax income before allocation of corporate
overhead and bonus, budget, earnings per share, net income, division, group or
corporate financial goals, return on stockholders' equity, return on assets,
attainment of strategic and operational initiatives, appreciation in and/or
maintenance of the price of Common Stock or any other publicly-traded securities
of the Company, market share, gross profits, earnings before interest and taxes,
earnings before interest, taxes, dividends and amortization, economic value-
added models and comparisons with various stock market indices. In the event of
any change in the outstanding shares of Common Stock by reason of any stock
dividend or split, recapitalization or other similar corporate change, any of
the foregoing performance-based goals that are based on such Common Stock will
be appropriately adjusted by the Committee.
(b) Bonuses that are not Performance-Based Bonuses may be awarded
pursuant to the attainment of certain financial goals and other discretionary
factors.
6. MAXIMUM
The maximum Performance-Based Bonus that may be awarded to a
Participant with respect to a given Plan Year shall be $2,500,000.
7. TIMING OF PAYMENT
Bonuses will be paid following (i) the ascertainment by the Company of
its financial results for a fiscal year and (ii) written certification from the
Committee, with respect to Performance-Based Bonuses, that the goals described
in Section 5 hereof have been met.
8. MISCELLANEOUS
(a) AMENDMENT AND TERMINATION OF THE PLAN. The Committee, with the
approval of the Board, may amend, modify or terminate this Plan at any time and
from time to time. Notwithstanding the foregoing, no such amendment,
modification or termination shall affect the payment of a Bonus for a Plan Year
that has already ended.
(b) NO ASSIGNMENT. Except as otherwise required by applicable law,
no interest, benefit, payment, claim or right of any Participant or beneficiary
under the Plan shall be subject in any manner to any claims of any creditor of
any Participant or beneficiary, nor to alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of
any kind, and any attempt to take or enforce any such action shall be null and
void.
(c) NO RIGHT TO EMPLOYMENT. Nothing contained in the Plan shall (i)
give any Participant the express or implied right to be retained in the
employment of the Company or its affiliates or (ii) affect the right of the
Company or its affiliates to terminate the employment of such Participant.
(d) BENEFICIARY DESIGNATION. The Committee shall establish such
procedures as it deems necessary in its sole discretion for a Participant to
designate a beneficiary to whom any amounts would be payable in the event of the
Participant's death.
(e) COMMUNICATIONS.
(i) All notices and communications to the Committee in
connection with the Plan shall be in writing, shall be delivered by first class
mail, by courier or by hand, shall be addressed to the Committee and shall be
deemed to have been given and delivered only upon actual receipt thereof by the
Committee. All notices and communications from the Committee to Participants or
beneficiaries which the Committee deems necessary in connection with the Plan
shall be in writing and shall be delivered to the Participant or beneficiary or
other person at the person's address last appearing on the records of the
Company.
(ii) Each participant shall file with the Committee such
pertinent information concerning the Participant or the Participant's
beneficiary as is required by the Committee.
(f) APPLICABLE LAW. The Plan and all rights thereunder shall be
governed by and construed in accordance with the laws of the State of
Connecticut, without giving effect to the choice-of-law principles of such
state.
(g) EFFECTIVENESS. The Plan, as amended and restated, shall be
submitted for approval by the stockholders of the Company at the Annual Meeting
of Stockholders in 1996 and, if so approved, shall be effective as of the fiscal
year beginning on February 4, 1996. If the stockholders do not approve the
amendments to the Plan, such amendments, and any actions taken conditioned on
such approval or in reliance on the amendments shall be void and of no effect.
EXHIBIT 10.28
LEASE
BETWEEN
WESTPARK I LLC,
a Delaware limited liability company
AS LANDLORD
AND
NINE WEST GROUP INC.,
a Delaware corporation
AS TENANT
DATED FEBRUARY 28, 1997
<PAGE>
TABLE OF CONTENTS
1. Demise of Premises....................................................... 2
2. Title and Condition...................................................... 3
3. Use of Premises.......................................................... 4
4. Primary Term............................................................. 4
5. Primary Term Minimum Rent................................................ 5
6. Renewal.................................................................. 5
7. Additional Rent.......................................................... 6
8. Net Lease; Obligations Unconditional..................................... 7
9. Lease Non-Terminable..................................................... 7
10. Taxes and Utility Charges................................................ 8
11. Tax and Insurance Escrow................................................. 9
12. Compliance with Legal Requirements....................................... 10
13. Environmental Matters.................................................... 11
14. Indemnification.......................................................... 13
15. Liens.................................................................... 14
16. Maintenance and Repair................................................... 15
17. Encroachments, Violations................................................ 16
18. Inspections.............................................................. 17
19. Alterations.............................................................. 17
20. Insurance................................................................ 19
21. Casualty................................................................. 23
22. Condemnation............................................................. 25
23. Material Taking; Material Title Defect................................... 27
24. Assignment and Subletting................................................ 29
25. Financial Statements..................................................... 30
26. Permitted Contests....................................................... 32
27. Default Provisions....................................................... 33
28. Additional Rights of Landlord............................................ 37
29. Notices, Demands and Other Instruments................................... 41
30. Transfer by Landlord..................................................... 42
31. Mortgaging by Landlord................................................... 43
32. Estoppel Certificate..................................................... 46
33. No Merger................................................................ 47
34. Surrender................................................................ 47
35. Severability............................................................. 48
36. Savings Clause........................................................... 48
37. Binding Effect; Benefit.................................................. 48
38. Memorandum of Lease...................................................... 48
39. Table of Contents; Headings.............................................. 48
40. Governing Law............................................................ 49
41. Lease.................................................................... 49
42. Assignment of Intangibles................................................ 49
43. Exhibits................................................................. 50
44. Exculpatory Clause....................................................... 50
45. Counterparts............................................................. 50
46. Holding Over............................................................. 50
47. Effect of Certain Approvals, Etc......................................... 51
48. Brokers.................................................................. 51
49. Waiver of Jury Trial..................................................... 51
50. Landlord's Assignment of Certain Rights.................................. 51
<PAGE>
LEASE
This LEASE is made as of February 28, 1997 between WESTPARK I LLC, a
Delaware limited liability company (herein called "Landlord"), having an address
at c/o Westpark Associates, 445 Broad Hollow Road, Melville, New York 11747, and
NINE WEST GROUP INC., a Delaware corporation (herein, called "Tenant"), having
an address at 9 West Broad Street, Stamford, Connecticut 06902.
R E C I T A L S
A. Pursuant to that certain deed dated as of the date hereof (the "Agency
Deed"), Landlord conveyed its estate, title and interest in the Premises (as
defined below) to the County of Westchester Industrial Development Agency (the
"Agency"), which conveyance is subject to a reverter provision in favor of
Landlord and its successors and assigns.
B. The Agency and Landlord entered into that certain overlease agreement
dated as of the date hereof (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Overlease") pursuant to which the
Agency leased to Landlord its interest in the Premises.
C. Contemporaneously with the execution and delivery of the Overlease, the
Agency and Tenant, with the consent of Landlord, entered into that certain
payment-in-lieu of tax agreement (as amended, amended and restated, supplemented
or otherwise modified from time to time, the "PILOT Agreement"), pursuant to
which Tenant agreed to make certain payments in lieu of real estate taxes, and,
to secure such payments, Landlord and the Agency delivered a mortgage dated as
of the date hereof (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "PILOT Mortgage") to the County of Westchester,
the City of White Plains and the White Plains School District. The PILOT
Mortgage, the Agency Deed, the PILOT Agreement, the Overlease and all documents,
agreements and other instruments executed and delivered in connection therewith
or related thereto (other than this Lease and any other document, agreement or
other instrument by and between Landlord and Tenant executed and delivered in
connection herewith) are herein sometimes collectively called, the "Project
Documents".
D. Landlord desires to sublease to Tenant, and Tenant desires to sublease
from Landlord, the entire Premises upon the terms set forth herein.
A G R E E M E N T
The parties hereto agree as follows:
1. Demise of Premises.
(a) Premises, Demise, Etc. In consideration of the covenants and
agreements set forth herein, Landlord hereby leases to Tenant, and Tenant hereby
accepts and leases from Landlord, for the term and at the rent herein described,
the premises (herein called the "Premises") consisting of Landlord's estate in
(a) the land located in White Plains, Westchester County, New York described in
Exhibit I hereto, consisting of approximately 25.77 acres (herein called the
"Land"); (b) all buildings, structures and other improvements (including,
without limitation, all existing parking areas, driveways and entranceways)
constructed and any hereafter constructed thereon (herein called the
"Improvements"); and (c) all easements, rights and appurtenances relating
thereto, all upon the terms and conditions herein specified. The Improvements
include two (2) buildings (herein called, individually a "Building", and
collectively the "Buildings") consisting of (i) a four-story office building
containing approximately 234,281 square feet of floor area and commonly known as
1113 Westchester Avenue (herein called "Building I"), and (ii) a four-story
office building containing approximately 132,179 square feet of floor area and
commonly known as 1111 Westchester Avenue (herein called "Building II"). The
Buildings and related parking areas, driveways and entranceway(s) are depicted
generally on Exhibit 1-A hereto.
(b) Cooperation Re: Agency Assistance. Tenant hereby unconditionally and
absolutely assumes and agrees to pay and perform, for the benefit of Landlord,
all covenants and obligations of Landlord under the Overlease and the other
Project Documents, other than any Retained Obligations (as defined below), to
the end and intent that (i) Landlord shall have no responsibility to Tenant, the
Agency or any other person for compliance with the provisions of the Overlease
and the other Project Documents, other than the Retained Obligations, and (ii)
Tenant shall have no obligation to indemnify the Agency or any other person or
pay any Damages (as defined below) resulting from (x) any breach by Landlord of
any Retained Obligation or (y) the gross negligence or willful misconduct of
Landlord or its officers, directors, partners, members, owners, agents or
employees. Landlord shall not purport to exercise any of its rights under the
Overlease or the other Project Documents, other than the Retained Rights (as
hereinafter defined)) without the prior written consent of Tenant. Landlord
hereby authorizes Tenant and appoints Tenant as its attorney-in-fact with an
interest to comply with, and exercise its rights under, the Overlease and the
other Project Documents (other than the Retained Rights (except the Retained
Rights set forth in Sections 3.9 (a) and (j), 3.10 and 3.11 of the Overlease
which may be exercised by Tenant in accordance with the proviso set forth in
this sentence) and the Retained Obligations); provided, however, that (i) such
power of attorney may, with respect to the Retained Rights set forth in Sections
3.9(a) and (j), 3.10 and 3.11 of the Overlease, be exercised by Tenant if
Landlord does not enforce its rights thereunder diligently and in good faith;
(ii) with respect to all rights exercisable by Tenant in accordance with the
provisions of this sentence, Tenant may not, without the prior written consent
of Landlord (which may not unreasonably be withheld), exercise any such rights
of Landlord if such exercise by Tenant would subject Landlord to any liability
or expense (provided that no such consent of Landlord shall be required with
respect to liabilities and expenses that are not material and which are assumed
by Tenant under this Lease) or would impair Landlord's rights to a reversion of
title to the Premises or the quality or extent of Landlord's title to the
Premises (other than to a de minimis degree) upon the occurrence of such
reversion, and (iii) Tenant shall, subject to the provisions of Section 14
hereof, hold Landlord harmless from all Damages resulting from the exercise by
Tenant of such rights. Landlord shall not take (to the extent within the
control of Landlord) any action which would cause a reversion or termination of
the Overlease or any loss of benefits under the Project Documents. Landlord
hereby agrees (at the sole cost and expense of Tenant, including without
limitation payment by Tenant of all reasonable legal fees incurred by Landlord)
to cooperate with Tenant in all reasonable respects and execute and deliver such
further instruments and take such further action as Tenant may reasonably
request from time to time in order to implement, effectuate, confirm or assure
unto Tenant the rights and benefits intended to be granted under the Project
Documents. As used herein "Retained Obligations" shall mean (i) the
representations and warranties of Landlord (in its capacity as tenant under the
Overlease) set forth in Section 2.2 of the Overlease (other than subsection (D)
thereof), (ii) the indemnification obligations of Landlord (in its capacity as
tenant under the Overlease) set forth in Section 3.4 of the Overlease to the
extent Landlord has taken or caused to be taken any action causing the harm
giving rise to such obligation, and (iii) the obligations of Landlord set forth
in Sections 3.7(a), 3.8, 3.13 and 4.2(b) of the Overlease. As used herein,
"Retained Rights" shall mean Landlord's rights under (i) Section 3.6, 3.8, 3.9
(a), (c), (d), (e), (f) and(j), 3.10, 3.11, 3.12 (but only, in the case of
Section 3.12, to the extent necessary for Landlord to exercise and enforce its
Retained Rights), 3.13, 4.1, 4.2, 4.7(b), 4.8(b) and 4.9 of the Overlease, and
(ii) Sections 7, 9, 14 and 22 of the PILOT Mortgage.
2. Title and Condition.
Tenant acknowledges that the Premises are subject to (a) the rights of any
parties in possession and the existing state of the title as of the Commencement
Date (as defined below), (b) any state of facts which an accurate survey or
physical inspection thereof might show, (c) all zoning regulations,
restrictions, easements, agreements of record, rules and ordinances, building
restrictions and other laws and regulations (including, without limitation,
Environmental Laws, as defined below) now in effect or hereafter adopted by any
governmental authority having jurisdiction, and (d) the condition of any
buildings, structures and other improvements located thereon, as of the
Commencement Date, all without representation or warranty of any kind by
Landlord or by any agent of Landlord. Tenant represents that, prior to entering
into this Lease, it examined all such studies, reports, inspections, surveys,
title reports, land records, zoning ordinances, building codes, laws, public
records and other documents and information, and conducted all such independent
inspections and investigations, as Tenant deemed necessary with respect to all
the foregoing and other restrictions applicable to and the condition of the
Premises and has found the same to be satisfactory to it. Tenant acknowledges
that no study, report, survey, books, records or other information provided by
Landlord or provided by any third-party, whether or not paid for by Landlord,
shall constitute any representations or warranty by Landlord. Tenant
unconditionally accepts the Premises "As Is" as of the Commencement Date;
provided, however, the foregoing shall not limit Tenant's rights under Section
23 in the event of any Material Title Defect (as defined below). THE PROVISIONS
OF THIS SECTION 2 HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE
EXCLUSION AND NEGATION BY THE LANDLORD OF, AND THE LANDLORD DOES HEREBY
DISCLAIM, ANY AND ALL WARRANTIES BY THE LANDLORD, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PREMISES OR ANY PORTION THEREOF, WHETHER ARISING PURSUANT TO THE
UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE
AND TENANT HEREBY ACKNOWLEDGES AND ACCEPTS SUCH EXCLUSION, NEGATION AND
DISCLAIMER.
3. Use of Premises.
Tenant may use the Premises for offices or for any other purpose, as and to
the extent permitted by Legal Requirements (as defined below). Tenant shall not
conduct its business operation in the Premises unless and until (and only during
such time as) all necessary certificates of occupancy, permits, licenses and
consents from any and all appropriate governmental authorities have been
obtained by Tenant and are in full force and effect.
4. Primary Term.
(a) Scheduled Primary Term. Subject to the terms and conditions hereof,
Tenant hereby leases the Premises for a primary term of twenty-five (25) years
(herein called the "Primary Term") commencing on February 28, 1997 (herein
called the Commencement Date), and ending on February 28, 2022. "Term" means
the then current term of this Lease, including the Primary Term, together with
any Renewal Term (as defined below) which has come into effect whether pursuant
to exercise of any renewal right expressly granted in this Lease or pursuant to
any future agreement between Landlord and Tenant). If for any reason the
Overlease shall terminate prior to the end of the Term of this Lease, this Lease
shall remain in full force and effect as a primary lease between Landlord and
Tenant.
(b) Early Termination Right. If no Event of Default exists either at the
time of exercise of such termination option or on the date any termination
pursuant thereto would take effect, Tenant shall have the right, subject to all
provisions of this Section 4(b), to elect to terminate this Lease by written
notice to Landlord (herein called the "Early Termination Notice") at any time on
or before (but not after) the date which is the fourteenth (14th) anniversary of
the Commencement Date (herein called the "Latest Termination Notice Date"). Any
such election, once made by Tenant, shall be irrevocable. If Tenant shall not
have given the Early Termination Notice on or before the Latest Termination
Notice Date, Tenant's right to terminate this Lease pursuant to this Section
4(b) shall automatically expire and be of no further force or effect. Any
termination of this Lease pursuant to this Section 4(b) shall be effective as of
the date which is the fifteenth (15th) anniversary of the Commencement Date
(herein called the "Early Termination Date"). As payment for and in
consideration of any such early termination, Tenant shall pay to Landlord the
amount determined in accordance with Exhibit 4 attached hereto (herein called
the "Early Termination Fee"). This Lease shall remain in full force and effect
to and including the Early Termination Date and until consummation of the
transactions hereafter described. On the Early Termination Date, Tenant shall,
by wire transfer of immediately available funds, pay to Landlord, or as Landlord
shall have directed, the Early Termination Fee together with all Minimum Rent,
Additional Rent and other sums due and payable hereunder to and including the
Early Termination Date, whereupon this Lease shall terminate, except with
respect to obligations and liabilities of Tenant hereunder, actual or
contingent, (including, without limitation, any arising pursuant to Section 13)
which have arisen on or prior to the Early Termination Date.
5. Primary Term Minimum Rent.
Tenant covenants to pay to Landlord during the Primary Term of this Lease
fixed minimum annual rent in the amounts set forth on Exhibit 5 hereto (herein
called the "Minimum Rent") in equal monthly installments in advance on the first
day of each calendar month (herein called the "Minimum Rent Payment Dates") by
wire transfer of immediately available funds to the Landlord at such place or
account and/or to such other person or such other place or account as Landlord
from time to time may designate to Tenant in writing. If the Commencement Date
shall occur on a day other than the first day of a calendar month or if the Term
terminates on a day other than the last day of a calendar month, then the
Minimum Rent payable for such partial month shall be appropriately prorated on
the basis of a thirty (30) day month. "Business Day" means any day other than a
Saturday, Sunday, or holiday on which national banks in the state where the
Premises are located are required by law to be closed for business. If any
Minimum Rent Payment Date (whether during the Primary Term or any Renewal Term)
falls on a day which is not a Business Day, then the installment of Minimum Rent
due and payable on such Minimum Rent Payment Date shall be due and payable on
the next succeeding Business Day.
6. Renewal.
If no monetary Event of Default has occurred and is continuing either at
the time of exercise of the renewal option or at the time the Renewal Term would
commence, then, subject to all provisions of this Section 6, Tenant shall have
the right to renew the Term of this Lease for four (4) successive periods of
five (5) years each (each herein called a "Renewal Term"). The option for each
Renewal Term, if exercised, must be exercised by the giving of written notice
thereof to Landlord not later than three hundred sixty-five (365) days prior to
the end of the then current Term. The timely providing of such written notice
is a material condition precedent to renewal and failure by Tenant to timely
provide such written notice shall result in automatic expiration of all renewal
rights. Tenant covenants to pay to Landlord during each Renewal Term fixed
minimum annual rent in the amounts determined in accordance with Exhibit 6
hereto (herein also called the "Minimum Rent") in equal monthly installments on
the first day of each calendar month during such Renewal Term (herein also
called the "Minimum Rent Payment Dates") by wire transfer as provided in Section
5. If any Renewal Term of this Lease shall commence on a day other than the
first day of a calendar month or if such Renewal Term terminates on a day other
than the last day of a calendar month, then the Minimum Rent payable for such
partial month shall be appropriately prorated on the basis of a thirty (30) day
month.
7. Additional Rent.
Tenant assumes and agrees to pay and discharge, in addition to Minimum
Rent, all costs, expenses and other amounts, liabilities and obligations
relating to the Premises, including, without limitation, each and all thereof
which Tenant expressly assumes or agrees to pay or discharge pursuant to Section
10 and all other provisions of this Lease, together with every fine, penalty,
interest and cost which may be added for nonpayment or late payment thereof, all
of which shall constitute additional rent hereunder (herein called "Additional
Rent"). Anything in the preceding sentence to the contrary notwithstanding,
Tenant shall not be obligated to pay, and Additional Rent shall not include, (i)
any principal, interest or other amount payable by Landlord to any Mortgagee, as
such, (ii) any fine, penalty, interest or cost referred to in the preceding
sentence to the extent arising out of Landlord's failure to apply to payment of
Taxes and insurance premiums amounts received by Landlord from Tenant for such
purposes pursuant to Section 11, (iii) any costs or expenses payable for
services provided to or for the Premises attributable to the periods of time
prior to the Commencement Date and after the expiration or termination of the
Term, or (iv) any amounts owing in respect of any Retained Obligation or in
respect of breach by Landlord of any Retained Obligations. In the event of any
failure by Tenant to pay or discharge any Additional Rent owing to Landlord,
Landlord shall have all rights, powers and remedies provided herein or by law in
the case of nonpayment of Minimum Rent. Tenant also covenants to pay to
Landlord on demand, as Additional Rent, a late charge in an amount equal to
five percent (5%) of the amount then due on all installments of Minimum Rent not
paid within five (5) Business Days after the date when due. The actual amount
of Landlord's administrative expenses arising by reason of a late payment will
be difficult to ascertain and the parties agree that the late charge as
calculated above is a reasonable estimate thereof and is not a penalty. Tenant
further covenants to pay to Landlord on demand, as Additional Rent, interest at
the per annum rate of interest equal to one percent (1%) plus the "prime rate"
as reported by the Wall Street Journal, or at the maximum rate permitted by
applicable law, whichever is less, on all Minimum Rent and Additional Rent due
to Landlord from the date due until such amount is paid in full and received in
good funds by Landlord or its designee. If the Wall Street Journal discontinues
publication or publication of "prime rate," then Landlord shall substitute a
comparable prime rate published in a comparable publication.
8. Net Lease; Obligations Unconditional.
(a) Net Lease. It is the express intent and agreement of the parties
hereto that the Minimum Rent payable under this Lease shall be an absolutely net
return to the Landlord and that the Tenant shall pay all costs and expenses, and
perform all obligations, of every kind relating to the Premises and the business
carried on therein, unless otherwise (and then only to the extent) expressly
declared in this Lease. Any cost, expense or obligation relating in any way to
the Premises which is not expressly declared in this Lease to be that of the
Landlord shall be the obligation of the Tenant to be performed by the Tenant at
the Tenant's expense.
(b) Obligations Unconditional. Minimum Rent and Additional Rent owing to
Landlord shall be paid by Tenant without notice or demand (except as expressly
provided herein as to any item of Additional Rent), set off, counterclaim,
abatement, suspension, deduction, deferment, diminution, reduction or defense.
The obligations of Tenant hereunder shall be separate and independent covenants
and agreements, the Minimum Rent and the Additional Rent owing to Landlord shall
continue to be payable in all events and the obligations of Tenant hereunder
shall continue unaffected, (unless, and then only to the extent, the requirement
to pay or perform the same shall have been terminated pursuant to termination of
this Lease as expressly provided in Section 4(b) and in Section 23).
Notwithstanding anything to the contrary contained above, Tenant shall have a
separate and independent right to sue Landlord with respect to any claim Tenant
may have against Landlord under this Lease; provided, however, any judgment in
favor of Tenant shall not abate or otherwise affect Tenant's obligation to pay
Minimum Rent or Additional Rent or terminate or otherwise affect any of Tenant's
obligations hereunder, or give rise to any lien, charge or other encumbrance on
any Minimum Rent or Additional Rent.
9. Lease Non-Terminable.
This Lease shall not terminate, nor shall Tenant have any right to
terminate this Lease (except as otherwise expressly provided in Section 4(b) and
in Section 23), nor shall Tenant be entitled to any abatement of Minimum Rent or
Additional Rent owing to Landlord, nor shall the obligations of Tenant under
this Lease be affected, by reason of any of the following: (i) any damage to or
destruction of all or any part of the Premises from whatever cause; (ii) the
taking of the Premises or any portion thereof by condemnation, requisition or
otherwise; (iii) the prohibition, limitation or restriction of Tenant's use of
all or any part of the Premises, or any interference with such use; (iv) any
eviction by paramount title or otherwise; (v) Tenant's acquisition or ownership
of all or any part of the Premises otherwise than as expressly provided herein;
(vi) any default on the part of Landlord under this Lease, or under any other
agreement to which Landlord and Tenant may be parties; (vii) the failure of
Landlord to deliver possession of the Premises on the commencement of the term
hereof, or (viii) any other cause whether similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding. Tenant
will not take any action seeking to terminate, rescind or avoid this Lease,
notwithstanding the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, or winding up or other proceeding
affecting Landlord or its successors in interest or any action with respect to
this Lease which may be taken by any trustee or receiver of Landlord or its
successors in interest or by any court in any such proceeding. Tenant waives
all rights which may now or hereafter be conferred by law to quit, terminate or
surrender this Lease or the Premises or any part thereof (except for Tenant's
rights of termination as expressly provided in Section 4(b) and in Section 23)
or to any abatement, suspension, deferment or reduction of the Minimum Rent or
Additional Rent.
10. Taxes and Utility Charges
"Taxes" means all real estate and ad valorem taxes which become due or
which accrue during or with respect to the Term and all other assessments
(including assessments for benefits from public works or improvements, whether
or not begun or completed prior to the commencement of the Term of this Lease
and whether or not to be completed within said Term), levies, fees, water and
sewer rents and charges, and all other governmental charges of every kind,
general and special, ordinary and extraordinary, whether or not the same shall
have been within the express contemplation of the parties hereto, together with
any interest and penalties thereon which are, at any time, imposed or levied
upon or assessed against the Premises or any part thereof, any Minimum Rent or
any Additional Rent, or this Lease, or in respect of the operation, possession,
occupancy or use of the Premises, together with (i) transfer taxes, recording
fees, or similar charges payable in connection with a conveyance to Tenant
pursuant to this Lease, the execution of this Lease or the recording of any
memorandum or notice of this Lease, (ii) sales, use, gross receipts or similar
taxes imposed or levied upon, assessed against or measured by the Minimum Rent
or Additional Rent or levied upon or assessed against or with respect to the
Premises or the acquisition, leasing or use thereof, (iii) any tax, assessment,
charge or levy imposed or levied upon or assessed against Landlord in
substitution for or in place of any item specifically described herein as
constituting "Taxes," and (iv) all payments from time to time due under the
PILOT Agreement. Except for any item specifically referred to in the preceding
sentence, "Taxes" shall not include any franchise, corporate, inheritance,
income, profits or revenue tax payable by Landlord. "Utility Charges" means all
charges for water, gas, light, heat, telephone, electricity, power and other
utilities and communications services rendered to or used on or about the
Premises during the Term. All contracts and accounts for the services described
in the preceding sentence shall, unless otherwise required by Landlord, be
established in the name of Tenant or its designee, and any and all charges for
the installation of meters, connections, or other equipment for the providing or
monitoring of any such services shall be at Tenant's expense. Tenant shall
arrange for all bills for Taxes to be sent directly to Tenant, unless otherwise
required by Landlord. Landlord hereby agrees to cooperate with Tenant and
execute and deliver such instruments and take such actions as may be necessary
to ensure that Taxes are so billed to Tenant. Subject to the provisions of
clause (ii) of the second sentence of Section 7, Section 11 and Section 26,
Tenant shall pay all Taxes and Utility Charges to the proper governmental
authorities and providers of utilities, as applicable, prior to the time any of
the same would become delinquent, and shall furnish to Landlord, within thirty
(30) days after written request therefor, evidence of the payment of all
Impositions (as defined below). Taxes shall be prorated at the end of the Term
and Tenant shall pay its estimated share of accrued Taxes with the last
installment of Minimum Rent due hereunder (such share to be prorated upon
issuance of the actual bill therefor). In the event that any Tax may be legally
paid in installments, Tenant shall have the option to pay such in installments.
Taxes and Utility Charges are sometimes herein collectively called
"Impositions."
11. Tax and Insurance Escrow.
If required by Landlord following the occurrence and during the continuance
of an Event of Default, Tenant shall pay all Taxes and insurance premiums for
the Required Insurance (as defined below) accruing during the Term to Landlord
in monthly installments on or before the first day of each calendar month, in
advance, in an amount reasonably estimated by Landlord to be sufficient to
create an available fund to pay such Taxes and premiums as they become due. In
the event Landlord shall exercise its right to cause Tenant to make the payments
contemplated in the immediately preceding sentence, Landlord shall pay, or cause
to be paid, such Taxes and insurance premiums to the proper governmental
authorities and insurance carriers, as applicable, prior to the time any of the
same would become delinquent, and shall furnish to Tenant within thirty (30)
days after written request therefor, evidence of the payment of such Taxes and
premiums; provided that, in no event shall Landlord be required to make, or
cause to be made, any payment in excess of the sums actually received from
Tenant for such purpose pursuant to this Section 11, together with interest
earned and received thereon. Upon receipt of bills for Taxes and/or insurance
premiums due during a calendar year, Tenant shall submit to Landlord a written
statement of the actual amount of the Taxes and insurance premiums then due. If
the total amount theretofore deposited by Tenant hereunder in respect thereto
shall be less than the actual amount due from Tenant for such year, as shown in
such statement, Tenant shall pay to Landlord the shortfall at the time of
submission of such statement. If it appears, in the reasonable judgment of the
Landlord, that the monthly deposits made by Tenant have created a reserve in
excess of the amount necessary to pay Taxes and insurance premiums as they
become due, the excess shall be credited against the next deposit or deposits of
Taxes and insurance premiums due from Tenant to Landlord hereunder. All amounts
due hereunder shall be payable to Landlord at the place where the Minimum Rent
is payable and shall be held for the benefit of Tenant in an interest-bearing
account (x) at a federally insured bank or trust company designated by Landlord,
or (y) with First Mortgagee or the servicer of a First Mortgagee or at a
federally insured bank or trust company designated by First Mortgagee or such
servicer (any entity described in clauses (x) or (y) of this sentence which
holds such amounts, the "Depository"); provided, however, that the Depository
shall at all times be rated A3 or higher by Standard & Poor's Rating Service.
Said amounts payable by Tenant hereunder may be held in commingled accounts or
segregated accounts, provided that such accounts are interest-bearing with
interest earned on amounts escrowed hereunder being credited to such escrow. A
copy of a bill for Taxes or insurance premiums shall at all times be sufficient
evidence of the amount of Taxes levied, assessed or imposed against the Premises
to which such bill relates or the amount of insurance premiums for some or all
of the Required Insurance. Landlord's and Tenant's obligations under this
Section 11 shall survive the expiration or early termination of this Lease. Any
balance of funds remaining on deposit with the Depository at the expiration of
the Term and satisfaction of all obligations of Tenant under this Lease shall be
returned to Tenant by Landlord, together with all interest earned thereon. In
the event of the loss for any reason of any funds held by the Depository, (i)
Tenant shall be entitled to (and Landlord hereby assigns Tenant the right to)
exercise against the Depository all rights and remedies, if any, that Landlord
may have against the Depository with respect thereto and (ii) Landlord hereby
agrees to cooperate, at Tenant's expense, with Tenant in all reasonable respects
in connection with the enforcement by Tenant of such rights and remedies against
the Depository.
12. Compliance with Legal Requirements.
"Legal Requirements" means collectively (i) all laws, rules, regulations,
ordinances, notices, decrees and orders in effect from time to time, of all
federal, state, local, county and other governmental authorities having
authority over the Premises, any portion thereof, the use thereof, Tenant or
Landlord, including without limitation, the Americans With Disabilities Act of
1990, 42 U.S.C. Section 12101 et seq., (ii) all covenants, restrictions and
agreements to which the Premises are subject as of the date hereof, or hereafter
shall become subject with the consent or acquiescence of Tenant, and (iii) all
matters required in order to obtain and maintain in effect the Required
Insurance. Tenant shall, at its expense, subject to the provisions of Section
26, comply in all material respects with and shall cause the Premises to comply
in all material respects with all Legal Requirements, including those which
require the making of any structural, unforeseen or extraordinary changes,
whether or not any of the same involve a change of policy on the part of any
governmental body or insurance provider enacting the same; provided, however, if
(i) Tenant is otherwise in compliance with all obligations on its part under
this Section 12 and under Sections 16, 17, and 19, and (ii) the requirement to
make a structural, unforseen or extraordinary change did not result from any
alteration made or change of use by Tenant which caused the Premises not to be
in material compliance with any Legal Requirement, and (iii) if, the requirement
to make such structural, unforeseen or extraordinary change arises when a period
of three (3) years or less remains in the Term and it would be commercially
unreasonable for Tenant to make such structural, unforseen or extraordinary
change in order so to cause such compliance, Tenant may elect not to make such
change, provided that (A) Tenant shall have provided Landlord with evidence
reasonably satisfactory to it that the failure to make such change will not (1)
expose any Indemnified Party to risk of any civil or criminal liability or
result in any lien or charge against the Premises, or (2) pose any danger to any
persons or property, and (B) no such election by Tenant shall result in any
abatement or reduction of Minimum Rent or Additional Rent or diminish or
otherwise affect any of Tenant's obligations under this Lease (including,
without limitation, its obligations under Section 14 which shall in no way be
diminished by Tenant's election not to make the structural, unforseen or
extraordinary change).
13. Environmental Matters.
(a) Certain Defined Terms. "Hazardous Material" means any hazardous or
toxic material, substance or waste which is defined by those or similar terms or
is regulated as such under any Environmental Laws, including, without
limitation, asbestos, asbestos containing materials, polychlorinated biphenyl,
radon gas, petroleum, petroleum by products, medical or biological waste, urea
formaldehyde foam, pollutants, contaminants, volatile organic compounds,
explosive or radioactive materials. "Environmental Laws" means all present and
future statutes, laws, ordinances, notices, orders, decrees, rules and
regulations of any local, county, state or federal agency, department, court or
other authority having jurisdiction over the Premises or any portion thereof or
its use, relating to the existence, use, handling, disposal, manufacture,
generation, transportation, storage, migration, discharge, clean-up, removal
and/or remediation of any Hazardous Materials and/or other regulation of
environmental and health matters relating to the Premises, including but not
limited to: (A) the Federal Water Pollution Control Act (33 U.S.C. Section 1317
et seq.) as amended; (B) the Federal Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.) as amended; (C) the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) as
amended; (D) the Toxic Substance Control Act (15 U.S.C. Section 2601 et seq.),
as amended; (E) the Clean Air Act (42 U.S.C. Section 7401 et seq.), as amended;
and (F) all statutes relating to any of the foregoing or similar matters enacted
by the state, county and any other political subdivision in which the Premises
are located. "Prohibited Event" means any of the existence, use, generation,
manufacture, production, storage, release, discharge or disposal on, under,
within, from or about the Premises, or transportation to or from the Premises,
of any Hazardous Material, except only to the extent such occurs in the ordinary
course of Tenant's use of the Premises as permitted by Section 3 and in
compliance with all Environmental Laws.
(b) Environmental Compliance. Tenant shall: (i) subject to the
provisions of Section 26 of this Lease, at all times comply, and cause the
Premises to comply, with all Environmental Laws (as well as with any
recommendations contained in any environmental report), and not cause, suffer or
permit the occurrence or continued existence of any Prohibited Event; (ii)
permit Landlord and any First Mortgagee and any representatives designated by
Landlord or any First Mortgagee to visit and inspect the Premises or any part
thereof, and to sample and monitor soil and groundwater and to inspect for
Hazardous Materials all without unreasonably interfering with Tenant's use of
the Premises and at such reasonable times and intervals as from time to time may
be requested provided that (x) Landlord or any First Mortgagee reasonably
believes that Tenant or the Premises is not in compliance with Environmental
Laws as required by the foregoing clause (i), (y) the reasonable costs and
expenses incurred by Landlord and First Mortgagee for such visits, inspections,
sampling and monitoring shall be borne by Tenant only if such inspections,
sampling and monitoring reveal that Tenant or the Premises is, in fact, not in
such compliance in which case such reasonable costs and expenses shall be
payable by Tenant on demand by Landlord and constitute Additional Rent), and (z)
neither Landlord nor any First Mortgagee shall have any duty to make any such
inspection nor shall incur any liability or obligation for not making any such
inspection or, once having undertaken any such inspection, for not making the
same carefully or properly, or for not completing the same; nor shall the fact
that such inspection may not have been made by Landlord or any First Mortgagee
relieve Tenant of any obligations under this Lease; and (iii) notify Landlord
and any First Mortgagee within ten (10) days after Tenant first has knowledge of
(A) any actual or threatened occurrence or existence of any Prohibited Event, or
(B) any actual or threatened inquiry, demand, notice, judicial or administrative
proceeding, or claim, or any similar action, by any regulatory authority or
other governmental body or any other person, relating to Hazardous Materials on,
under within or about the Premises, or emanating from the Premises, or emanating
from any property adjacent to or abutting the Premises and either affecting or
having any potential to affect the Premises, such notice by Tenant to Landlord
and any First Mortgagee to set forth in reasonable detail the circumstances
giving rise to such notice and, describe any action proposed to be taken by
Tenant in connection with such event, and be accompanied by copies of all
correspondence, reports, legal pleadings and other documents in Tenant's
possession relating to such event.
(c) Response, Indemnification, Etc.. If any Prohibited Event shall occur
or exist, or if at any time Tenant or the Premises or any part thereof shall not
be in compliance with all Environmental Laws, or if any court, regulatory body
or other governmental authority shall require Landlord or Tenant to take any
action with respect to any Environmental Laws, then Tenant shall promptly,
subject to the provisions of Section 26 of this Lease, (i) take all such action,
whether by way of removal and disposal of Hazardous Materials, remediation or
mitigation with respect to the Premises or any other property, or otherwise,
necessary to satisfy all requirements of Environmental Laws and (ii) pay any and
all fines, levies, judgements, damages, costs, interest and penalties relating
thereto and discharge any and all liens, charges and other impositions affecting
the Premises or any part thereof or any interest therein. Tenant will protect,
indemnify, save harmless and defend the Indemnified Parties (as defined below)
from and against any and all liabilities, obligations, claims, losses, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (herein collectively called
"Environmental Claims") imposed upon, suffered or incurred by or asserted
against any Indemnified Party by reason of the presence, release, threatened
release or removal of any Hazardous Materials at, upon, under, within or about
the Premises or any noncompliance with an Environmental Laws, whether arising
prior to the date of this Lease or at any time thereafter, whether arising
before, during or after enforcement of Landlord's rights and remedies, or the
rights and remedies of any First Mortgagee, upon default and whether or not
Tenant is responsible therefor, including, without limitation, any imposition by
any governmental authority of any lien or so-called "super priority lien" upon
the Premises, investigation costs, clean-up costs, response costs, liability for
personal injury or property damage or damage to the environment and any fines,
penalties and punitive damages with respect thereto. The obligations of Tenant
under this Section 13 (c) shall survive any expiration or termination of this
Lease, the payment of any Mortgage, any discharge, satisfaction, release or
assignment of any Mortgage, any transfer of the Premises or any part thereof,
any exercise of remedies by Landlord or any Mortgagee, including, without
limitation, the appointment of a receiver, any foreclosure of any Mortgage or
any transfer of the Premises (or any part thereof) by deed in lieu of
foreclosure, and any other event or circumstance whatsoever. Notwithstanding
the foregoing, Tenant shall not be liable under this Section 13(c) with respect
to any Environmental Claims (i) which relate to the presence, release or
threatened release or removal of any Hazardous Materials at, upon, under, within
or about the Premises or any non-compliance with any Environmental Laws which
Tenant proves (x) first occurred after the Term of this Lease ended and at a
time when neither Tenant nor anyone claiming by, through or under Tenant was in
occupancy or possession of or otherwise using or in control of any portion of
the Premises, and (y) did not result, directly or indirectly, from any condition
or circumstances existing prior to the latest time referred to in the foregoing
clause (x) or (ii) to the extent such Environmental Claim suffered by an
Indemnified Party is caused by the gross negligence or willful misconduct of
such Indemnified Party.
14. Indemnification.
(a) Duty to Indemnify. "Indemnified Party" and "Indemnified Parties"
means, individually and collectively, Landlord, all First Mortgagees, and their
respective officers, directors, partners, owners, agents and employees. In
addition to and not in limitation of Tenant's obligations under Section
13(c),Tenant agrees to pay, and to protect, defend (with counsel reasonably
acceptable to Landlord), indemnify and hold harmless the Indemnified Parties
from and against any and all liabilities, losses, damages, costs, expenses
(including, without limitation, all reasonable attorneys fees and expenses, but
not including principal, interest or other amounts payable by Landlord to any
First Mortgagee, as such), causes of action, suits, claims, demands or judgments
of any nature (herein collectively called "Damages") whatsoever arising from (i)
any use, condition or event occurring on the Premises during the Term, (ii) any
injury to, or the death of, any person or damage to property on the Premises or
upon adjoining sidewalks, streets or right of ways, in any manner growing out of
or connected with the use, non-use, condition or occupation of the Premises,
adjoining sidewalks, streets or right of ways, (iii) any violation by Tenant of
any provision of this Lease, or any contract or agreement to which Tenant is a
party or which pertains to the Premises or any part thereof or the ownership,
occupancy or use thereof, including, without limitation, the Overlease and the
other Project Documents, (iv) any violation by Tenant of any Legal Requirement,
and (v) any material inaccuracy or misstatement in any representation or
warranty of Tenant set forth in this Lease or in any document, notice,
certificate, demand or request delivered to any Indemnified Party by Tenant
pursuant to or in connection with this Lease, except to the extent such Damages
suffered by an Indemnified Party are caused by the gross negligence or willful
misconduct of such Indemnified Party. If an Indemnified Party shall be made a
party to any such litigation commenced against Tenant, and if Tenant, at its
expense, shall fail to provide such Indemnified Party with counsel (upon
Landlord's request) reasonably approved by Landlord, Tenant shall pay all
reasonable costs and attorneys' fees and expenses incurred or paid by Landlord
or such other Indemnified Party in connection with such litigation, it being
agreed that Tenant may provide one counsel for all such Indemnified Parties
unless Tenant and such Indemnified Parties have been advised by such counsel
that representation of such Indemnified Parties by the same counsel would be
inappropriate under applicable standards of professional conduct due to actual
or potential differing interests between the Indemnified Parties, in which case
Tenant shall provide such additional counsel to such Indemnified Parties,
reasonably approved by Landlord, as may be necessary to avoid actual or
potential conflicts of interest. To the maximum extent permitted by law, Tenant
hereby waives any and all right of recovery which Tenant or anyone claiming by,
through or under Tenant may have against any Indemnified Party for any loss,
damage or liability arising from or in connection with Tenant's leasing of the
Premises notwithstanding that such loss, damage or liability may result from the
negligence or fault of such Indemnified Party; it being understood, however, (i)
that neither Tenant nor anyone claiming by, through or under Tenant is hereby
waiving any right of recovery against any Indemnified Party for any loss, damage
or liability to the extent such loss, damage or liability arises from or is a
result of the gross negligence or willful misconduct of such Indemnified Party
and (ii) that Tenant shall have the right to assert a claim against any
Indemnified Party for declaratory judgment, specific performance, or actual
damages incurred by Tenant, as a result of failure by such Indemnified Party, in
violation of Section 21 or 22 hereof, as applicable, to make available to Tenant
any Net Proceeds or Net Award required to be made available to Tenant for repair
or restoration of the Premises. The Tenant's obligations and liabilities under
this Section 14 shall survive expiration or earlier termination of this Lease.
15. Liens.
(a) Except to the extent expressly permitted by Section 15(b), Tenant will
not, directly or indirectly, create or permit to be created or to remain, and
will promptly discharge, at its expense, any mortgage, lien, encumbrance or
charge on, pledge of, or conditional sale or other title retention agreement
with respect to, the Premises or any part thereof or Tenant's interest therein
or the Minimum Rent, Additional Rent owing to Landlord or other sums payable by
Tenant under this Lease, other than (i) any Mortgage (as defined herein) or
other encumbrance created by Landlord, (ii) the lien created by this Lease,
(iii) liens or other encumbrances created or granted under or evidenced by the
Project Documents, and (iv) the liens and other encumbrances set forth in
Exhibit 23-A annexed hereto. Nothing contained in this Lease shall be construed
as constituting the consent or request, expressed or implied, by Landlord to or
for the performance of any labor or services or of the furnishing of any
materials for any construction, alteration, addition, repair or demolition of or
to the Premises or any part thereof by any contractor, subcontractor, laborer,
materialman or vendor. Notice is hereby given that Landlord will not be liable
for any labor, services or materials furnished or to be furnished to Tenant, or
to anyone holding the Premises or any part thereof, and that no mechanic's,
construction or other liens for any such labor, services or materials shall
attach to or affect the interest of Landlord in and to the Premises.
(b) "Contest Lien" means any lien, encumbrance or charge referred to in
Section 15(a) which (i) has not been affirmatively created or granted by Tenant
on a consensual basis and has arisen as a result of a claim that Tenant has
failed to pay or perform an obligation owing to the person benefitted thereby,
and (ii) as a matter of law does not have priority over the lien of any recorded
Mortgage then existing against the Premises (or if it does or could have such
priority over the lien of any such Mortgage, would constitute a default or event
of default under any such Mortgage). Notwithstanding Section 15(a), the
existence of any Contest Lien shall not constitute an Event of Default so long
as (x) within thirty (30) days after the filing of such Contest Lien Tenant has
commenced to contest the same in accordance with Section 26, and (y) in all
events, Tenant, at its expense, shall cause each Contest Lien to be released and
discharged of record (by bonding or otherwise) as of the earlier of the
following times: (1) upon any termination or expiration of the Term, (2) within
fifteen (15) days after demand by Landlord if any Event of Default shall have
occurred, or (3) within thirty (30) days after demand by Landlord in the event
of Landlord's then pending refinancing of any First Mortgage or sale of the
Premises.
16. Maintenance and Repair.
Tenant agrees that, at its expense, it shall keep and maintain the
Premises, including, without limitation, the roof, foundation, walls and
structural components; all electrical, plumbing, HVAC and other mechanical
systems; all parking areas and garages, driveways, curbs and similar
improvements; and including any altered, rebuilt, additional or substituted
buildings, structures and other improvements thereto, in good repair and
appearance, (and to the standards of a Class A office building in the White
Plains area used as a major corporate headquarters facility or as a multi-tenant
office building) except for ordinary wear and tear arising by reason of any
permitted use (but consistent with maintenance standards of such a Class A
office building; or, to the extent the Premises are permitted under this Lease
to be used, and are used, for another lawful purpose, then, consistent with the
standards prevailing in the White Plains area for a building of the same
quality, size and type as the Premises used for such other purpose). Subject to
the provisions of Section 12, Tenant shall also make promptly all structural and
nonstructural, foreseen and unforeseen, ordinary and extraordinary changes and
repairs of every kind and correct any patent or latent defects in the Premises
which may be required to be made to keep and maintain the Premises in good
condition, repair and appearance (except for ordinary wear and tear arising by
reason of any permitted use) and it will keep the Premises orderly and free and
clear of rubbish. All replacements of materials, parts, equipment and
components shall be at least equal in quality to those being replaced. Tenant
covenants to in all material respects promptly perform or observe all terms,
covenants or conditions of any reciprocal easement or maintenance agreement to
which it may hereafter at any time be a party, or to which the Premises are
subject as of the Commencement Date or to which the Premises thereafter become
subject with the prior written approval of Tenant. Tenant shall, at its
expense, use its best efforts (and Landlord agrees to cooperate reasonably with
Tenant, at Tenant's expense, in connection with such efforts) to enforce
compliance with any reciprocal easement or maintenance agreement benefiting the
Premises by any other person subject to such agreement. Landlord shall not be
required to maintain, repair or rebuild, or to make any alterations,
replacements or renewals of any nature to the Premises, or any part thereof,
whether ordinary or extraordinary, structural or nonstructural, foreseen or not
foreseen, or to maintain the Premises or any part thereof in any way or to
correct any patent or latent defect therein. Tenant hereby expressly waives any
right to make repairs at the expense of Landlord which may be provided for in
any law in effect at the time of the commencement of the Term or which may
thereafter be enacted. Tenant at its expense may engage such contractors or
agents as it elects to provide maintenance, janitorial and similar services to
the Premises, provided that such contractors and agents are recognized within
the industry to have substantial experience with buildings of similar quality,
size and type as the Premises and are financially sound. Upon any expiration or
earlier termination of this Lease, Tenant shall, upon written demand of
Landlord, cause all contracts and agreements with such persons to be cancelled
at no expense or obligation to Landlord.
17. Encroachments, Violations.
If any Improvements situated on the Premises at any time during the Term
shall encroach upon any property, street or right-of-way adjoining or adjacent
to the Premises, shall violate any Legal Requirement or shall impair the rights
of others under or hinder or obstruct any easement or right-of-way to which the
Premises are subject, then, promptly after the written request of any applicable
governmental authority, Landlord or any person affected by any such
encroachment, violation, impairment, hindrance or obstruction (which other party
may be Landlord with respect to any such encroachment, violation or impairment
which first arises after the date of this Lease), Tenant shall, at its expense,
subject to the provisions of Section 12 and Section 26 either (i) obtain legally
effective variances of such legal requirements or waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment,
violation, impairment, hindrance or obstruction whether the same shall affect
Landlord, Tenant or both, or (ii) make such changes in the improvements on the
Premises and take such other action as shall be necessary to remove such
encroachments, hindrances or obstructions and to end such violations or
impairments, including, if necessary, the alteration or removal of any
improvement on the Premises. Any such alteration or removal shall be made in
conformity with the requirements of Section 19 to the same extent as if such
alteration or removal were an alteration under the provisions of Section 19.
18. Inspections.
Landlord, any First Mortgagee and their respective agents and designees may
enter upon and examine the Premises at reasonable times and on reasonable notice
and show the Premises to prospective First Mortgagees, tenants and/or
purchasers. Tenant may designate an employee to accompany Landlord, any First
Mortgagee and their respective agents and designees on such examinations.
Tenant will provide, upon Landlord's request, records in Tenant's possession
with respect to all expenses paid to utility companies and third party vendors
relating to the operation of the Premises, as such, as opposed to Tenant's
business.
19. Alterations.
(a) Limitations, Conditions. "Alterations" means any alterations,
additions, renovations or improvements in, on or to the Premises or any part
thereof, and "Material Alterations" means any Alterations which would (i) alter
the footprint of any buildings or other enclosed structures constituting a
portion of the Improvements, (ii) adversely affect the foundation, roof, any
load-bearing walls or other material structural elements of any buildings or
other enclosed structures constituting a portion of the Improvements, (iii)
alter in any material way the configuration or location of elevators, core area
bathrooms, electrical or plumbing closets, lobbies, entrances, garages, loading
docks, driveways, retention and decorative ponds, parking lots, plazas,
retaining walls or outside site lighting fixtures, (iv) reduce or eliminate any
buildings or other enclosed structures constituting a portion of the
Improvements or (v) materially adversely affect any major mechanical systems.
Without limiting any of Tenant's rights elsewhere set forth herein, Tenant shall
have the right to reconstruct and redecorate (in their existing locations) all
or any of the bathrooms and/or lobbies in the Premises. Except as otherwise
hereafter provided with respect to Material Alterations, Landlord's consent
shall not be required for the making of such Alterations as Tenant may deem
appropriate during the Term (including without limitation Tenant's signage on or
about the Buildings on the Land). Tenant shall not make or suffer to be made
any Material Alterations without in each case the prior written consent of
Landlord which consent shall not be unreasonably withheld or delayed by
Landlord. Before commencing work on any Material Alterations, Tenant shall
submit to Landlord copies of final plans and specifications for the work, any
engineer's or consultant's reports prepared in connection therewith, a proposed
schedule for performance of the work, a list identifying the architect, general
contractor or construction manager and major subcontractors engaged to perform
the work, and such other information as Landlord may reasonably require (all the
foregoing, collectively, the "Alteration Plans"). Landlord shall have thirty
(30) days following submission of the Alteration Plans to notify Tenant (the
"Landlord Disapproval Notice") if Landlord does not approve the Alteration Plans
(and indicating its reasons for disapproval). If Landlord fails to timely
provide the Landlord Disapproval Notice, it shall be deemed to have approved the
Alteration Plans. If Landlord approves (or as provided in the preceding
sentence is deemed to have approved) the Alteration Plans, Tenant may proceed
with the proposed Material Alterations in accordance with the Alteration Plans.
Anything in this Section 19 to the contrary notwithstanding, the making of any
Alterations by Tenant (whether or not such Alterations constitute Material
Alterations) shall be subject to satisfaction of all of the following
conditions: (i) no Event of Default shall have occurred and shall be continuing
under this Lease; (ii) Tenant shall pay or cause to be paid the entire cost of
such Alterations; (iii) Tenant shall subject to the provisions of Section 26
take all necessary steps to prevent the imposition of liens against the Premises
as a result of such Alterations; (iv) Tenant shall in accordance with and
subject to the limitations set forth in Section 14, indemnify and hold Landlord
and any First Mortgagee harmless from all Damages resulting from such
Alterations, and provide to Landlord evidence of all insurance required under
Section 20(a)(iv) during any period of construction; (v) Tenant shall, prior to
commencement of any work, obtain and pay for all necessary permits, licenses and
certificates and provide Landlord copies of the same, and shall comply in all
material respects with all applicable governmental requirements and insurance
rating bureau recommendations; (vi) all Alterations shall be constructed in a
good and workmanlike manner in compliance in all material respects with all
Legal Requirements; and (vii) Tenant shall cause the construction of
Alterations, once commenced, to be diligently pursued to completion. Landlord
shall, without charge to Tenant, cooperate reasonably in the obtaining of such
permits, approvals or licenses from governmental authorities as may be required
by Tenant for the making of any Alterations, provided Landlord shall incur no
liability with respect thereto and provided Tenant shall pay any and all costs
and expenses (including, without limitation, reasonable attorney's fees)
incurred by Landlord in connection therewith. In the case of any Material
Alterations proposed by Tenant, Tenant shall pay all reasonable fees and
expenses (including without limitation reasonable fees of engineers and other
professionals engaged by Landlord) incurred by Landlord to review plans and
specifications submitted by Tenant for Landlord's approval.
(b) Alterations for Legal Requirements. Subject to the provisions of
Section 12 and Section 26, in the event Tenant is required to make Alterations
to the Premises in order to comply with any Legal Requirements, Tenant may make
or cause to be made such Alterations without the prior written consent of
Landlord, provided Tenant shall satisfy the conditions specified above with
respect to such Alterations and Tenant shall make or cause to be made such
Alterations in the manner which will have the least negative impact on the
market value of the Premises.
(c) Ownership, Survival. Subject to any provisions of the Project
Documents to the contrary, all Alterations, except for movable furniture,
furnishings, decorations and trade fixtures paid for by Tenant at the time of
installation, shall at once become a part of the realty and belong to Landlord.
Movable furniture, furnishings, decorations and trade fixtures paid for by
Tenant at the time of installation may (subject to the rights and remedies of
Landlord if an Event of Default has occurred and is continuing) be removed from
the Premises at any time prior to the expiration or earlier termination of this
Lease, provided that Tenant shall repair any damage to the Premises resulting
from such removal. The obligations of Tenant under this Section 19 shall
survive expiration or earlier termination of this Lease.
(d) Tenant Allowance. On the Commencement Date, Landlord has paid to
Tenant the sum of Two Million Dollars ($2,000,000.00) to be used by Tenant for
making Alterations to the Premises required by Tenant in connection with its use
thereof, receipt of which sum Tenant hereby acknowledges. To the extent any
such Alterations would constitute Material Alterations, the making thereof shall
be subject to all provisions of this Section 19 relating to Material
Alterations.
20. Insurance.
(a) Coverages Required. Tenant shall maintain, or cause to he maintained,
at its sole expense, the following insurance on the Premises (herein called the
"Required Insurance"):
(i) Property. Property insurance insuring the Buildings and all
other Improvements for perils covered by the causes of loss- special extended
coverage form (all risk) or comparable broad form coverage reasonably
satisfactory to Landlord and any First Mortgagee and in addition, vandalism and
malicious mischief, ordinance or law coverage (including demolition cost,
increased cost of construction, and loss to undamaged improvements), and boiler
and machinery and computer/EDP-related damages (if applicable). Such insurance
shall be written on a 100% replacement cost basis with an agreed value equal to
the full insurable replacement value of the foregoing and shall be in such form
or with such endorsements as necessary to prevent the operation of any
co-insurance penalty. The policy shall name Landlord and any First Mortgagee as
additional insureds and loss payees as their respective interests may appear.
The deductible for coverage under this Section 20(a)(i) shall not exceed One
Hundred Thousand Dollars ($100,000).
(ii) Liability. Commercial general liability insurance naming the
Landlord and any First Mortgagee as additional insureds against any and all
claims as are customarily covered under a standard policy form (which must
provide for claims to be made on an occurrence basis) routinely accepted, for
bodily injury, death and property damage occurring in, or about the Premises and
adjoining streets and sidewalks arising out of Tenant's use and occupancy of the
Premises. Such insurance shall have a primary policy limit of not less than One
Million Dollars ($1,000,000) per occurrence with a Two Million Dollar
($2,000,000) aggregate limit per location (subject to an aggregate policy limit
of Twenty-Five Million Dollars ($25,000,000)) and excess umbrella liability
insurance covering all business locations of Tenant in the amount of at least
One Hundred Million Dollars ($100,000,000); provided, however, that in the event
it shall become commercially unreasonable to maintain such excess umbrella
liability insurance, Tenant shall maintain at least Fifteen Million Dollars
($15,000,000) excess liability insurance covering the Premises alone. Tenant
shall be required to increase its insurance limits from time to time consistent
with coverage that would be maintained by a prudent operator of property similar
in use, size and construction to the Premises and located in the White Plains
area. Such liability insurance shall be primary and not contributing to any
insurance available to Landlord and Landlord's insurance, if any, shall be in
excess thereto. In no event shall the limits of such insurance be considered as
limiting the liability of Tenant under this Lease. The deductible for coverage
under this Section 20(a)(ii) shall not exceed One Hundred Thousand Dollars
($100,000).
(iii) Workers Compensation, Etc. Workers compensation insurance in
accordance with statutory law and employers liability insurance with a limit of
not less than One Hundred Thousand Dollars ($100,000) per employee and Five
Hundred Thousand Dollars ($500,000) per occurrence.
(iv) Builder's Risk, Etc. During any period of construction on the
Premises, builder's risk insurance insuring perils covered by the causes of
loss-special extended coverage form (all risk), non-reporting form, shall be
purchased for the value of the alteration and/or additions made to the Premises
when the work is not insured under the Tenant's property insurance policy,
together with general liability and worker's compensation insurance covering all
persons engaged in such construction in amounts reasonably required by Landlord.
The deductible for coverage under this Section 20(a)(iv) shall not exceed Fifty
Thousand Dollars ($50,000).
(v) Flood. Flood insurance in the highest available amount if the
Premises are located in a special flood hazard zone as designated by the Federal
Emergency Management Agency.
(vi) Earthquake. If the Premises are located in an earthquake zone,
earthquake insurance in amounts sufficient to prevent Landlord and Tenant from
becoming a coinsurer of any loss but in any event in amounts equal to 100% of
the actual replacement value of the Improvements including foundations, and
excavations. The deductible for coverage under this Section 20(a)(vi) shall not
exceed Fifty Thousand Dollars ($50,000).
(vii) Other. Such other insurance as Landlord may, from time to
time, reasonably require, or which may, from time to time, be required by any
First Mortgagee so long as such other insurance is customarily required to be
carried on properties similar in use, size and construction to the Premises and
located in the White Plains area by institutional lenders.
(b) Company/Policy Requirements. The policies required to be maintained
by Tenant shall be with companies having an insurance company claims paying
rating equal to or greater than A by Standard & Poor's Rating Service or A2 by
Moody's Investment Service or be considered equivalent to an NAIC I or other
rating acceptable to the Securities Valuation Office of the National Association
of Insurance Commissioners. If any insurance company providing any insurance
policy hereunder shall cease to have a rating at least equal to that required by
the preceding sentence, Tenant shall, within sixty (60) days following such
insurance company's loss of such minimum rating, replace the policy issued by
such company with a policy meeting the requirements of this Section 20 issued by
an insurance company having a rating at least equal to that required by the
preceding sentence. Certificates of insurance, in a standard industry form
which entitles Landlord and any First Mortgagee to rely thereon shall be
delivered to Landlord prior to the commencement date of this Lease and
thereafter at least thirty (30) days prior to the expiration date of each
required policy. Copies of actual insurance policies (or, in case of blanket
policies, portions of such policies applicable to the Premises but in all
events, sufficient to reasonably satisfy Landlord that all Required Insurance
has been obtained and is in full force and effect) if required by Landlord shall
be delivered to Landlord as soon as practicable but in no event later than
thirty (30) days following the expiration date of each required policy. Tenant
shall have the right to provide insurance coverage which it is obligated to
carry pursuant to the terms hereof in a blanket policy, provided such blanket
policy expressly affords coverage to the Premises and to Landlord and any First
Mortgagee as required by this Lease, and contains an endorsement to the effect
that coverage will not be affected by failure to pay any portion of the premium
not allocable to the Premises or by any other matter not relating to the
Premises which would otherwise permit the insurer to cancel coverage. Each
policy of insurance shall provide notification to Landlord and any First
Mortgagee appearing in the loss payee clause at least thirty (30) days prior to
any cancellation (whether due to non-payment of premium or otherwise) or
modification to reduce the insurance coverage. All insurance policies shall
contain a standard, non-contributory, first mortgagee clause in favor of any
First Mortgagee. Tenant shall cause the insurers to include in Tenant's
insurance policies appropriate clauses pursuant to which the insurance companies
(i) waive all right of subrogation against all Indemnified Parties with respect
to losses payable under such policies, and (ii) agree that such policies shall
not be invalidated should the insured waive in writing prior to a loss any or
all right of recovery against any party for losses covered by such policies.
Each policy shall provide, or be endorsed to provide, that (1) the coverage and
protection afforded Landlord and any First Mortgagee shall not be invalidated or
otherwise affected by breach of any declaration, warranty or condition made by
or imposed on Tenant in connection with the policy or by any act or omission of
Tenant, Landlord, any First Mortgagee or other person having any interest in the
Premises, nor by any change in the use of or title to the Premises nor by any
foreclosure of any First Mortgage, (2) the insurance provided shall be primary
without right of contribution from other insurance carried by any person, and
(3) the making of Landlord and any First Mortgagee an additional insured shall
not impose on any such additional insured any obligation to pay premiums or any
other obligation imposed on the insured, all of which shall be the sole
responsibility of Tenant.
(c) Landlord's Right to Procure. In the event Tenant shall fail to
purchase the Required Insurance or keep the same in full force and effect,
Landlord may, but shall not be obligated to, purchase the necessary insurance
and pay the premium. The Tenant shall repay to Landlord, as Additional Rent,
the amount so paid promptly upon demand. In addition, Landlord may recover from
Tenant and Tenant agrees to pay, as Additional Rent, any and all expenses
(including reasonable attorneys, fees) and actual damages which Landlord may
sustain by reason of the failure of Tenant to obtain and maintain such
insurance.
(d) Certain Landlord Rights. Landlord shall not be limited in the proof
of any damages which Landlord may claim against Tenant arising out of or by
reason of Tenant's failure to provide and keep in force any of the Required
Insurance to the amount of the insurance premium or premiums not paid or
incurred by Tenant and which would have been payable under such insurance; but
Landlord shall also be entitled to recover as damages for such breach, the
uninsured amount of any loss, to the extent of any deficiency in the Required
Insurance and damages, costs and expenses of suit suffered or incurred by reason
of or damage to, or destruction of the Premises, occurring during any period
when the Tenant may have failed or neglected to obtain the Required Insurance.
Tenant shall in accordance with and subject to the limitations set forth in
Section 14, indemnify and hold harmless Landlord and any First Mortgagee for all
Damages incurred by Landlord or any First Mortgagee arising out of any
deductibles for Required Insurance.
(e) Self Insurance. Notwithstanding Section 20(b), subject to all terms
and conditions of this Section 20(e), Tenant shall have the right to self-insure
for any of the insurance required under Section 20(a) above. "Self-insure"
means that Tenant is itself acting as though it were the insurance company
providing the insurance required under the foregoing provisions hereof, and that
if an event or claim occurs for which a defense and/or coverage would have been
available from the insurance company, Tenant shall: (a) undertake the defense
of any such claim, including a defense of each Indemnified Party which is a
defendant, at Tenant's sole cost and expense, and (b) use its own funds to pay
any claim or replace any property or otherwise provide the funding which would
have been available from insurance proceeds but for such election by Tenant to
self-insure, which amounts shall be treated as insurance proceeds for all
purposes under this Lease. If Tenant elects to self-insure, Tenant shall
provide Landlord and First Mortgagee with certificates of self-insurance
specifying the extent of self-insurance coverage hereunder and containing a
waiver of subrogation provision in accordance with Section 20(b). Any
self-insurance coverage provided by Tenant shall be for the benefit of Tenant,
Landlord and First Mortgagee, in accordance with Sections 20(a) and (b), and
shall name any First Mortgagee under a standard, non-contributory, first
mortgagee provision. Loss or damage payable under any self-insurance shall not
be invalidated by (A) any act, omission, default or negligence of any
Indemnified Party, (B) any foreclosure, deed in lieu of foreclosure, or other
proceedings relating to the sale or other transfer of the Premises, (C) any
change in the title or ownership of the Premises or, (D) the occupation of the
Premises for purposes more hazardous than are permitted by this Lease. All
amounts which Tenant pays or is required to pay and all loss or damages
resulting from risks for which Tenant has elected to self-insure shall be
subject to the waiver of subrogation provisions of Section 20(b) hereof and
shall not limit Tenant's indemnification obligations set forth in Section 14
hereof. Tenant's right to self-insure and to continue to self-insure is
conditioned upon (A) all arrangements among Tenant, its affiliates, and/or any
third-party, relating to administration of Tenant's self-insurance program being
reasonably satisfactory to Landlord and any First Mortgagee and, further, upon
(B) the Reporting Person (as defined below) (1) having stockholders' equity of
at least Two Hundred Fifty Million Dollars ($250,000,000) as at the end of each
of its fiscal years (as reflected in the financial information required pursuant
to Section 25), (2) maintaining at all times a Rating (as defined below) not
lower than A, and (3) maintaining appropriate loss reserves which are
actuarially derived in accordance with accepted standards of the insurance
industry and accrued (i.e. charged against earnings) or otherwise funded. In
the event at any time any one or more of the requirements of the immediately
preceding sentence is not satisfied, Tenant shall immediately lose the right to
self insure and shall, within sixty (60) days after loss of such right, provide
the insurance pursuant to insurance company policies as specified in Section
20(b). "Rating" means the rating ascribed by Standard & Poor's Rating Service
to the outstanding senior unsecured debt of the Reporting Person, provided that,
if no such rated debt is outstanding, then "Rating" shall mean the senior
implied debt rating ascribed by Standard & Poor's Rating Service to the
Reporting Person.
21. Casualty.
(a) "Casualty," Claims Adjustment. "Casualty" means the occurrence of any
fire or other casualty which results in damage to or destruction of all or any
part of the Premises. The term "property insurance proceeds" means all
insurance proceeds payable as a result of any Casualty other than those payable
pursuant to insurance maintained by Tenant covering Tenant's personal property
and trade fixtures and under any business interruption insurance policy
maintained by Tenant. "Net Proceeds" means the amount of all property insurance
proceeds, if any, payable as a result of a Casualty, less all expenses of
adjusting any insurance claim and collecting any such proceeds not otherwise
paid by Tenant, plus all interest earned on such proceeds held pending
completion of the work necessary to rebuild, replace and repair the Premises as
a result of such Casualty. All property insurance proceeds payable by reason of
any Casualty shall be held by First Mortgagee or Landlord in an interest-bearing
account pending their application as provided in this Section 21. If this Lease
permits Tenant to self-insure the loss occasioned by such Casualty and Tenant
has elected to so self-insure, Tenant shall pay to First Mortgagee or Landlord
from Tenant's own funds an amount equal to the property insurance proceeds which
would have been paid under the insurance policy described in Section 20(a)(i)
had Tenant not elected to self-insure, which amount shall be deemed to
constitute property insurance proceeds for all purposes hereof. Subject to the
rights of Tenant set forth in this Section 21, Tenant hereby irrevocably assigns
to Landlord all property insurance proceeds to which Tenant may be or become
entitled with respect to any Casualty. If any Casualty occurs which involves
(in the reasonable judgment of Tenant) a loss in excess of Three Hundred Seventy
Thousand Dollars ($370,000), Tenant shall promptly notify Landlord. Insurance
claims by reason of any Casualty shall be adjusted by Tenant if an Event of
Default does not then exist and by Landlord if an Event of Default then exists.
Tenant shall consult with Landlord and any First Mortgagee throughout the
process of adjusting any such claim which involves (in the reasonable judgment
of Tenant) a loss in excess of Three Hundred Seventy Thousand Dollars
($370,000). Landlord shall not be required to prosecute any claim against, or
to contest any settlement proposed by, an insurer. Tenant may, at its expense,
prosecute any such claim or contest any such settlement in the name of Landlord,
Tenant or both, and Landlord will join therein at Tenant's written request upon
the receipt by Landlord of an indemnity from Tenant against all liabilities and
all reasonable costs and expenses in connection therewith.
(b) Duty to Restore. If any Casualty occurs, this Lease shall continue in
full force and effect without abatement or reduction of Minimum Rent or
Additional Rent notwithstanding such Casualty and (whether or not any property
insurance proceeds are or will ever be available therefor) Tenant shall, with
reasonable promptness and diligence, rebuild, replace and repair any damage or
destruction to the Premises, at its expense, in conformity with the requirements
of Section 19 and Sections 21(c) and (d) in such manner as to restore the same
to the same or better condition and equivalent or better value, as nearly as
possible, as existed immediately prior to such Casualty. The provisions hereof
constitute "an express agreement to the contrary" within the meaning of Section
227 of the New York Real Property Law.
(c) Application if No Default. As used in this Section 21 and in Section
22, "Applicable Base Amount" means the following respective amounts, depending
on the Rating as of the date any Net Proceeds or Net Award (as defined below),
as applicable, are received by Landlord or First Mortgagee: (i) Three Hundred
Seventy Thousand Dollars ($370,000) if the Rating is BB- or below; (ii) One
Million Dollars ($1,000,000) if the Rating is above BB- up to and including BB+;
(iii) Two Million Dollars ($2,000,000) if the Rating is above BB+ up to and
including BBB+; and (iv) Three Million Five Hundred Thousand Dollars
($3,500,000) if the Rating is above BBB+. Subject to the provisions of Section
21(d), any Net Proceeds received by Landlord or First Mortgagee shall be made
available to Tenant to make such repair, but only upon submission to Landlord
and any First Mortgagee of the following if the estimated cost of repair exceeds
the Applicable Base Amount: (A) prior to commencement of work, plans and
specifications covering all repair and restoration work in form and substance
reasonably acceptable to Landlord and First Mortgagee but which shall be deemed
acceptable if accompanied by (x) a certificate of a licensed architect stating
that the proposed work as set forth in such plans and specifications complies in
all material respects with all Legal Requirements, and (y) reasonable evidence
that, upon completion of such work, the Premises will have an equivalent or
better value, as nearly as possible, than immediately prior to the Casualty, and
(B) prior to each periodic disbursement: (1) Tenant's and contractor's sworn
statements in customary form and appropriate waivers of mechanic's or
construction liens, and (2) architect's certificates in customary form covering
the work for which payment is requested. So long as (i) no Event of Default
shall have occurred and be continuing and (ii) the Casualty in question gives
rise to Net Proceeds in an amount less than or equal to the Applicable Base
Amount, Tenant shall be entitled to receive such Net Proceeds from any Casualty
and shall apply same to restore the Premises in accordance with the provisions
of this Lease. Subject to the provisions of Section 21(d), any Net Proceeds
remaining after Tenant has repaired the Premises shall be delivered to Tenant.
If the cost of any repairs required to be made by Tenant pursuant to Section
21(a) shall exceed the amount of any Net Proceeds available to Tenant, the
deficiency shall be paid by Tenant.
(d) Application if Default. During any period of time when there
continues to exist any Event of Default, and without limiting Tenant's
obligations under this Section 21, Landlord or First Mortgagee shall make any
Net Proceeds available to Tenant for the rebuilding or restoration of the
Premises in accordance with the provisions of Section 21(c); provided that, if
at any time or from time to time prior to completion of such rebuilding or
restoration, the estimated cost of rebuilding or restoration, as reasonably
determined by Landlord, exceeds the amount of Net Proceeds then remaining, it
shall be a condition to any disbursement of Net Proceeds to Tenant that Tenant
shall deliver to Landlord or First Mortgagee funds in cash equal to the amount
of such excess, which funds shall thereupon be deemed to constitute part of the
Net Proceeds for purposes of this Section 21. So long as any Event of Default
is continuing, and without waiving any Event of Default or any right or remedy
of Landlord or any obligation of Tenant under this Lease, Landlord may cause any
Net Proceeds to be applied to any Minimum Rent or Additional Rent owing to
Landlord which remains unpaid beyond any applicable grace period.
22. Condemnation.
(a) "Taking," Participation. "Taking" means any taking of the Premises or
any part thereof, by condemnation or other eminent domain proceedings pursuant
to any law, general or special, or by reason of the temporary taking of the use
or occupancy of the Premises or any part thereof, by any governmental authority,
civil or military, and includes any conveyance made in settlement of or under
threat of any of the aforesaid proceedings. "Net Award" means all amounts
payable as a result of any Taking, less all expenses for such proceeding not
otherwise paid by Tenant in the collection of such amounts; provided "Net Award"
shall not include any amount paid with respect to a Separate Claim (as defined
below). Subject to the rights of Tenant set forth in this Section 22, Tenant
hereby irrevocably assigns to Landlord any award or payment to which Tenant may
be or become entitled with respect to any Taking; provided, however, that the
foregoing shall not prohibit Tenant from (i) prosecuting a separate claim
(herein called a "Separate Claim") against the taking authority for Tenant's
relocation expenses (if this Lease has been terminated pursuant to Section 23 as
a result of the Taking) or for the interruption of or damages to Tenant's
business or as compensation for Tenant's personal property, trade fixtures,
alterations or other improvements paid for by Tenant provided, further, that
such claims do not reduce the amount which otherwise would be payable to
Landlord as a result of the Taking and (ii) subject to the provisions of Section
22(d) of this Lease, Tenant shall be entitled to collect any and all awards
payable by reason of any temporary Taking. If Tenant receives notice of any
Taking or proposed Taking, Tenant shall promptly notify Landlord thereof.
Landlord and any First Mortgagee at their expense shall be entitled to
participate in any such proceeding.
(b) Duty to Restore. If any Taking occurs, this Lease shall continue in
full force and effect without abatement or reduction of Minimum Rent or
Additional Rent notwithstanding such Taking, and (whether or not any award from
such Taking is or ever will be available therefor) Tenant shall, promptly and
with diligence after any such Taking (or after any temporary taking ceases), at
its expense, repair any damage caused thereby in conformity with the
requirements of Section 19 and Sections 22(c) and d so that, thereafter, the
Premises shall be, as nearly as possible, in a condition as good as the
condition thereof immediately prior to such Taking.
(c) Application if No Default. Subject to the provisions of Section
22(d), any Net Award received by Landlord or First Mortgagee shall be made
available to Tenant to make such repair but, only upon submission to Landlord
and any First Mortgagee of the following if the estimated cost of repairs
exceeds the Applicable Base Amount: (A) prior to commencement of work, plans
and specifications covering all repair work in form and substance reasonably
acceptable to Landlord and First Mortgagee but which shall be deemed acceptable
if accompanied by (x) a certificate of a licensed architect stating that the
proposed work as set forth in such plans and specifications complies in all
material respects with all Legal Requirements, and (y) reasonable evidence that,
upon completion of such work, the Premises will have an equivalent or better
value, as nearly as possible, than immediately prior to the Taking, and (B)
prior to each periodic disbursement: (1) Tenant's and contractor's sworn
statements in customary form and appropriate waivers of mechanic's or
construction liens, and (2) architect's certificates in customary form covering
the work for which payment is requested. So long as (i) no Event of Default
shall have occurred and be continuing and (ii) the amount of Net Awards shall be
less than or equal to the Applicable Base Amount, Tenant shall be entitled to
receive such Net Awards and shall apply same to restore the Premises in
accordance with the provision hereof. Subject to Section 22(d), any Net Award
remaining after such repairs have been made, shall be the property of Tenant.
Subject to the provisions of Section 22(d), in the event of a temporary taking,
Tenant shall be entitled to receive the entire Net Award payable by reason of
such temporary taking or portion of such temporary taking occurring during the
Term hereof, less any costs incurred by the Landlord in connection therewith.
If the cost of any repairs required to be made by Tenant pursuant to Section
22(b) shall exceed the amount of the Net Award available to Tenant, the
deficiency shall be paid by Tenant.
(d) Application if Default. During any period of time when there
continues to exist an Event of Default, and without limiting Tenant's
obligations under this Section 22, Landlord or First Mortgagee shall make any
Net Award available to Tenant for the rebuilding or restoration of the remaining
portion of the Premises in accordance with the provisions of Section 22(c);
provided that, if at any time or from time to time prior to completion of such
rebuilding or restoration, the estimated cost of rebuilding or restoration, as
reasonably determined by Landlord, exceeds the amount of the Net Award then
remaining, it shall be a condition to any disbursement of any Net Award to
Tenant that Tenant shall deliver to Landlord or First Mortgagee funds in cash
equal to the amount of such excess, which funds shall thereupon be deemed to
constitute part of the Net Award for purposes of this Section 22. So long as
any Event of Default is continuing, and without waiving any Event of Default or
any right or remedy of Landlord or any obligation of Tenant under this Lease,
Landlord may cause any Net Awards to be applied to any Minimum Rent or
Additional Rent owing to Landlord which remains unpaid beyond any applicable
grace period.
(e) Termination/Purchase. Notwithstanding anything in this Section 22 to
the contrary, if as provided in Section 23 a Material Taking (as defined
therein) shall occur and Tenant shall have timely delivered the Termination
Notice Documents (as defined therein), the provisions of Section 23(c) shall
apply.
23. Material Taking; Material Title Defect.
(a) Tenant's Right to Give Notice. "Material Taking" means any Taking
(other than a temporary taking) which, taking into account the nature, size, and
configuration of the Premises remaining subsequent to such Taking, renders it
commercially unreasonable for Tenant to utilize the remaining Premises for
continued use and occupancy in Tenant's business. "Material Title Defect" means
any defect in Landlord's title to the Premises (other than (i) any exception to
title or other matter shown in Exhibit 23-A attached hereto (the "Listed Title
Matters"), and (ii) any other matter approved by Tenant, or arising due to any
act or omission by Tenant), which either results in Tenant's being dispossessed
of occupancy of the Premises under this Lease, or which otherwise so interferes
with Tenant's use of the Premises at the time as to render it commercially
unreasonable for Tenant to utilize the Premises for continued use and occupancy
in Tenant's business. If a Material Taking or Material Title Defect occurs,
then Tenant may at its option deliver to Landlord, not later than ninety (90)
days after the date of such Material Taking, or if applicable the date on which
the Material Title Defect first results in the interference described in the
preceding sentence, all (but not less than all) of the following documents
(herein collectively called the "Termination Notice Documents"): (A) notice (a
"Termination Notice") of its intention to terminate this Lease on the next
Minimum Rent Payment Date which occurs not less than sixty (60) days after the
delivery of such notice the ("Termination Date"); (B) a certificate of an
authorized officer of Tenant describing the event giving rise to such
Termination Notice and stating in reasonable detail the basis on which Tenant
has determined that such Material Taking or Material Title Defect, as the case
may be, has rendered it commercially unreasonable for Tenant to utilize the
Premises for continued use and occupancy in Tenant's business; (C) an instrument
of assignment from Tenant, in form and substance acceptable to Landlord and
acknowledged by the condemning authority, evidencing the assignment to Landlord
of all condemnation awards; and (D) if the Termination Date is a date within the
Primary Term, an irrevocable offer ("Tenant Purchase Offer") by Tenant to
Landlord to purchase the Premises (including, in the case of a Material Taking,
Landlord's interest in the Net Award) on the Termination Date.
(b) Failure to Give Notice. If Tenant shall fail to timely deliver any or
all of the Termination Notice Documents, it shall be deemed conclusively to have
waived any right to seek to terminate this Lease as a result of such Material
Taking or Material Title Defect, as the case may be, and this Lease, (including,
without limitation, Tenant's obligations under Section 22) shall remain in full
force and effect without abatement of Minimum Rent or Additional Rent.
Notwithstanding the preceding sentence, in the case of any Material Taking which
constitutes a Taking of the entire Premises, Tenant shall be deemed conclusively
to have timely delivered all of the Termination Notice Documents (including,
without limitation, the Tenant Purchase Offer) whether or not Tenant shall have
timely delivered any or all of such documents. If Tenant timely delivers (or,
pursuant to the preceding sentence, shall be deemed to have timely delivered)
the Termination Notice Documents, the provisions of Section 23(c) shall apply.
(c) Rights/Obligations Following Notice.
(i) Termination. If either (A) Landlord shall reject the Tenant
Purchase Offer by written notice given to Tenant not later than fifteen (15)
days prior to the Termination Date, which notice to be effective must be joined
in by any First Mortgagee, or (B) the Termination Date occurs during any Renewal
Term, this Lease shall terminate on the Termination Date, except with respect to
obligations and liabilities of Tenant or Landlord hereunder, actual or
contingent, which have arisen on or prior to the Termination Date, upon payment
by Tenant of all Minimum Rent and Additional Rent owing to Landlord and other
sums then due and payable hereunder to and including the Termination Date and
all condemnation awards shall belong to Landlord. Tenant shall, on or before
the Termination Date, execute and deliver to Landlord an instrument evidencing
the outright assignment of such condemnation awards in form and substance
reasonably acceptable to Landlord.
(ii) Purchase. If the Termination Date occurs during the Primary
Term, and if Landlord shall not have rejected the Tenant Purchase Offer in
accordance with this Section 23(c), Landlord shall be conclusively deemed to
have accepted the Tenant Purchase Offer. In the event Landlord accepts the
Tenant Purchase offer, then, on the Termination Date, (1) Tenant shall pay to
Landlord a price equal to the amount applicable for the Termination Date
pursuant to Exhibit 23-1 attached hereto, (2) Landlord shall convey to Tenant or
its designee Landlord's estate in the Premises then remaining (if any) and (3)
in the case of a Material Taking, Landlord shall assign to Tenant or its
designee all of Landlord's interest in the Net Award in form and substance
reasonably acceptable to Tenant. Such sale shall otherwise be consummated in
accordance with Section 23(d) below (herein called the "Closing Terms").
(d) Closing Terms. If Tenant shall purchase Landlord's interest in the
Premises pursuant to this Section 23 (or pursuant to any other provision of this
Lease providing for purchase of Landlord's interest by Tenant), Landlord shall
convey or cause to be conveyed title thereto, the state of which shall be as
good as the state of title which existed in Landlord on the date on which the
Term of this Lease commenced (subject to any divestment of Landlord's title if
the purchase occurs following any Taking, or subject to the Material Title
Defect if the purchase follows the occurrence thereof), and Tenant or its
designee shall accept such title, subject, however, to (i) the condition of the
Premises on the date of purchase, (ii) all charges, liens, security interests
and encumbrances on the Premises and (iii) all applicable Legal Requirements,
but free of the lien of any Mortgage and any charges, liens, security interests
and encumbrances arising after the date on which the Term commenced resulting
from acts of Landlord taken without the consent of Tenant. Upon the date fixed
for purchase, Tenant shall, by wire transfer of immediately available funds, pay
to Landlord, or as Landlord shall have directed, the purchase price applicable
for such purchase together with all Minimum Rent, Additional Rent owing to
Landlord and other sums then due and payable hereunder to and including such
date of purchase, and there shall be delivered to Tenant a deed to or other
conveyance of Landlord's interests in the Premises being sold to Tenant and any
other instruments necessary to convey the title thereto, and to assign any other
property then required to be assigned by Landlord pursuant to this Lease.
Tenant shall pay all charges incident to such conveyance and assignment,
including, without limitation, reasonable counsel fees, escrow fees, recording
fees, title insurance premiums and all applicable Taxes (other than any income
or franchise taxes of Landlord) which may be imposed by reason of or in
connection with such conveyance and assignment and the delivery of said deed or
conveyance and other instruments. Upon the completion of any purchase but not
prior thereto (whether or not any delay or failure in the completion of such
purchase shall be the fault of Landlord), this Lease shall terminate, except
with respect to obligations and liabilities of Tenant hereunder, actual or
contingent, which have arisen on or prior to such completion of purchase.
24. Assignment and Subletting.
(a) Rights, Restrictions. Provided no Event of Default has occurred and
is continuing, Tenant may, subject to the conditions and limitations set forth
in this Section 24, assign this Lease or sublet all of any portion of the
Premises without Landlord's consent. Without limiting the generality of the
foregoing, Landlord's consent shall not be required for any assignment or
sublease to any corporation controlling, controlled by, or under common control
with the Tenant under this Lease ("control" meaning the right to vote fifty
percent (50%) or more of the outstanding voting securities of the entity with
respect to which control is claimed), any which corporation being herein called
an "Affiliate". Each such assignment or sublease shall be, and shall expressly
be made, subject to all the provisions of this Lease and shall require that the
assignee or sublessee use the Premises only for those purposes utilized by
Tenant at the time of the assignment or sublease, or, with Landlord's consent,
which shall not be unreasonably withheld or delayed, for any other use permitted
by applicable Legal Requirements which would not result in any material adverse
impact on the value of the Premises. In addition to all other conditions to
assignment provided in this Section 24, it shall be a condition precedent to
each assignment that the assignee shall deliver to Landlord an instrument, duly
authorized and executed and in recordable form, (i) assuming all covenants and
obligations of Tenant under this Lease, and (ii) joining in any acknowledgment,
consent or agreement theretofore given or entered into by Tenant with respect to
any First Mortgage existing as of the date of such assignment, including,
without limitation, any acknowledgment, consent or agreement relating to
Landlord's assignment of this Lease to the First Mortgagee. Without limiting
the foregoing, in case of any proposed assignment pursuant to a merger in which
Tenant is not the surviving corporation or as part of a consolidation or sale of
assets, Tenant shall cause the assignee to comply with the conditions set forth
in the preceding sentence. No assignment or sublease shall affect or reduce any
of the obligations of the original Tenant hereunder and the original Tenant
(together, jointly and severally, with its successors and assigns) shall remain
primarily and unconditionally liable for all such obligations, and all such
obligations shall continue in full force and effect as obligations of a
principal and not as obligations of a guarantor or surety, to the same extent as
though no assignment or sublease had been made; provided that, in the case of
any assignment or sublease made as permitted by this Section 24, performance by
the assignee or sublessee of any of the obligations of Tenant under this Lease
shall be deemed to be performance by Tenant. No assignment or sublease shall
impose any obligations on Landlord or otherwise affect any of the rights of
Landlord under this Lease. This Lease shall not be mortgaged or pledged by
Tenant, nor shall Tenant mortgage or pledge the interest of Tenant in and to any
sublease of the Premises or the rentals payable thereunder. Any mortgage,
pledge, sublease or assignment made in violation of this Section 24 shall be
void. Tenant shall, not later than fifteen (15) days prior to the execution and
delivery of any proposed assignment or sublease, deliver a copy thereof to
Landlord and any First Mortgagee.
(b) Profits. In the event of any assignment of this Lease or any
subletting of all or any portion of the Premises by Tenant in accordance with
the provisions of this Section 24, Landlord shall not be entitled to receive any
profits in connection therewith.
25. Financial Statements.
The term "Reporting Person" means NINE WEST GROUP INC., including, without
limitation, each successor by merger or otherwise to all or substantially all of
the assets and liabilities of such named Reporting Person. Tenant will deliver
to Landlord copies of all the following documents filed by the Reporting Person
with the Securities and Exchange Commission ("SEC"): all 8-K, 10-K and 10-Q
reports, annual reports, effective registration statements, and proxy statements
sent by the Reporting Person to its stockholders, in each case within fifteen
(15) days following delivery to the SEC or its stockholders, as the case may be;
provided, however, that if the Reporting Person does not file such statements
and reports with the SEC, Tenant will deliver to Landlord the following:
(a) Quarterly Statements. Within sixty (60) days after the end of each
quarterly fiscal period (except the last) in each fiscal year of the Reporting
Person, duplicate copies of: (i) a consolidated balance sheet of the Reporting
Person and its consolidated subsidiaries as at the end of such quarter, (ii) a
consolidated statement of profits and losses of the Reporting Person and its
consolidated subsidiaries for the current quarter and the portion of the fiscal
year ending with such quarter, and (iii) a consolidated statement of cash flows
of the Reporting Person and its consolidated subsidiaries for the portion of the
fiscal year ending with the current quarter; setting forth in each case in
comparative form the figures for the corresponding periods a year earlier, all
in reasonable detail and certified as having been prepared in accordance with
generally accepted accounting principles consistently applied and certified as
complete and correct by a senior financial officer of the Reporting Person;
(b) Annual Statements. Within ninety-five (95) days after the end of each
fiscal year of Tenant, duplicate copies of: (i) a consolidated balance sheet of
the Reporting Person and its consolidated subsidiaries as at the end of such
year, (ii) consolidated statements of profits and losses and cash flows of the
Reporting Person and its consolidated subsidiaries for such year, and (iii) a
consolidated statement of cash flows of the Reporting Person and its
consolidated subsidiaries for such year; setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by the report thereon, containing an opinion unqualified
as to limitations imposed by the Reporting Person on the scope of the audit, of
a firm of independent certified public accountants of recognized national
standing selected by the Reporting Person which opinion shall state that the
consolidated financial statements of the Reporting Person and its consolidated
subsidiaries fairly present the financial condition of the companies (including
the results of their operations and changes in financial position) being
reported upon, have been prepared in accordance with generally accepted
accounting principles consistently applied and that the examination of such
accounts in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and accordingly included
such tests of the accounting records and such other auditing procedures as were
considered necessary in the circumstances; and
(c) Additional Information. Each set of annual financial statements shall
be accompanied by a certificate of a senior financial officer of the Reporting
Person stating whether or not an Event of Default has occurred since the later
of the date of this Lease or the date of the last such statement submitted to
Landlord pursuant to this sentence. In addition, Tenant shall submit to
Landlord copies of all financial information submitted by the Reporting Person
to its institutional lenders, bondholders and other institutional investors as
and when such information is delivered to such other parties; provided, however,
Tenant shall not be required to provide any information in the nature of
business or financial projections, business plans or other information which
could be useful to competitors of Tenant or its Affiliates. Upon the prior
written request of Landlord, Tenant shall cause a senior financial officer of
the Reporting Person to meet with representatives of Landlord to discuss the
business and financial affairs of the Reporting Person (other than any
information in the nature of that not required to be disclosed pursuant to the
proviso in the sentence immediately preceding) and the financial statements and
other information submitted to Landlord or any First Mortgagee pursuant to this
Lease.
Landlord hereby agrees that it shall not disclose and shall keep
confidential (and shall cause First Mortgagee to execute and deliver an
agreement pursuant to which First Mortgagee shall agree that it shall not
disclose and shall keep confidential) any and all statements, documents and
information acquired in accordance with the provisions of this Section 25 (other
than any such statements, documents and information that are filed with the SEC,
otherwise publicly available or generally known other than by breach of the
provisions of this sentence), except (i) with the prior written consent of the
Reporting Person, or (ii) to the extent necessary to comply with law or the
valid order of a court of competent jurisdiction, in which event Landlord or
First Mortgagee, as the case may be, shall notify the Reporting Person as
promptly as practicable (and, if possible, prior to making such disclosure) and
shall seek confidential treatment of such statements, documents and information,
or (iii) disclosures to any Affiliate of, or to any professional advisor to,
Landlord or First Mortgagee in connection with the transactions contemplated by
this Lease, or (iv) disclosure to any Successors and Assigns and any Rating
Agency in connection with any Secondary Market Transactions (all as defined
below) in connection with the loan secured by any First Mortgage (herein called
the "Loan"), provided that, in the case of any disclosure pursuant to the
preceding clauses (iii) and (iv), to the extent reasonably practicable under the
particular circumstances, Landlord shall endeavor to have the person to whom
disclosure is made agree to treat as confidential any statements, documents or
information disclosed. "Successors and Assigns" means those entities which (i
at any time acquire a direct or indirect interest in the Loan and (ii) are
institutional investors (including banks, savings institutions, trust companies,
insurance companies, investment companies as defined in the Investment Company
Act of 1940, pension or profit-sharing trusts, and other financial institutions
or institutional buyers); "Rating Agency" means any of Standard & Poor's Rating
Service (a division of the McGraw-Hill Companies), Moody's Investors Service,
Fitch Investors Service, Duff & Phelps Credit Rating Co., and the National
Association of Insurance Commissioners; and "Secondary Market Transaction" means
any of the following transactions with a Successor or Assign: (a) sale of the
Loan as a whole loan, (b) participating the Loan to one or more investors, (c)
deposit of the documents evidencing the Loan with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (d) otherwise sell the Loan or any direct or indirect interest therein to
investors.
26. Permitted Contests.
So long as Tenant shall contest, in good faith and at its expense, the
existence, the amount or the validity thereof, the amount of the damages caused
thereby, or the extent of its liability therefor, by appropriate proceedings,
Tenant shall not be required to (i) pay any Imposition or any claim by any
contractor or vendor; (ii) comply with any statute, law, rule, order, regulation
or ordinance; or (iii) obtain any waivers or settlements or make any changes to
take any action with respect to any encroachment, hindrance, obstruction,
violation or impairment involving the Premises, provided that (A) during the
pendency of the contest there is prevented (1) the imposition (or if imposed,
the continued existence) on the Premises, or any part thereof, or on the Minimum
Rent or any Additional Rent owing to Landlord, or any portion thereof, of any
levy, lien, encumbrance or charge; except to the extent the imposition or
continued existence thereof is permitted pursuant to Section 15(b); (2) the
sale, forfeiture or loss of the Premises, or any part thereof, or the Minimum
Rent or any Additional Rent owing to Landlord, or any portion thereof; (3) any
interference with the use or occupancy of the Premises or any part thereof; and
(4) any interference with the payment of the Minimum Rent or any Additional
Rent, or any portion thereof, (B) Tenant provides to Landlord such security
against any such lien, encumbrance or charge as Landlord shall reasonably
request and (C) such contest shall not subject any Indemnified Party to the risk
of any civil or criminal liability. Tenant further agrees that it shall
promptly, with due diligence and in good faith, in a commercially reasonable
manner, prosecute each such contest to a final conclusion. Tenant shall in
accordance with and subject to the limitations set forth in Section 14,
indemnify and hold harmless the Indemnified Parties against, any and all Damages
in connection with any such contest and shall, promptly after the final
settlement, compromise or determination of such contest, fully pay and discharge
the amounts which shall be levied, assessed, charged or imposed or be determined
to be payable therein or in connection therewith, together will all penalties,
fines, interests, costs and expenses thereof or in connection therewith, and
perform all acts, the performance of which shall be ordered or decreed as a
result thereof; provided, however, that nothing herein contained shall be
construed to require Tenant to pay or discharge any lien, encumbrance or other
charge created by any act or failure to act of Landlord or the payment of which
by Tenant is not otherwise required hereunder.
27. Default Provisions.
(a) Events of Default. Any of the following occurrences or acts shall
constitute an event of default (herein called an "Event of Default") under this
Lease:
(i) Failure to Pay/Perform. If Tenant (and regardless of the
pendency of any bankruptcy, reorganization, receivership, insolvency or other
proceedings, at law, in equity, or before any administrative tribunal, which
have or might have the effect of preventing Tenant from complying with the terms
of this Lease), shall (A) fail to make any payment when due of Minimum Rent or
of any Imposition or any insurance premium for any Required Insurance and such
failure continues for five (5) days, or (B) fail to make any payment when due of
any item of Additional Rent owing to Landlord not specified in the foregoing
clause (A) and such failure continues for thirty (30) days following the date
Tenant received any bill or invoice for such item, or (C) fail to observe or
perform any other provision of Section 20 of this Lease for seven (7) days after
notice of such failure has been given, or (D) fail to comply with any provision
of Section 15, or (E) fail to observe or perform any other provision of this
Lease for thirty (30) days after notice to Tenant of such failure has been
given, provided, that in the case of any default referred to in this clause (E)
which is reasonably susceptible of cure but cannot with diligence be cured
within such 30-day period, then upon receipt by Landlord of a certificate from
an executive officer of Tenant stating the reason such default cannot be cured
within thirty (30) days, describing the efforts being undertaken by Tenant to
cure such default and reasonably estimating the cure period and provided that
Tenant is proceeding with due diligence to cure such default, the time within
which such failure may be cured shall be extended for such period, as may be
necessary to complete the curing of the same with diligence (provided that, if
such default has not been cured by the date one (1) year after notice to Tenant
of its default, any extension of the cure period beyond such date (i) shall be
conditioned on Tenant's demonstrating to Landlord that such failure to cure has
had no adverse impact on the condition or value of the Premises, and (ii) shall
be only for such period of time as such failure to cure continues to have no
adverse impact on the condition or value of the Premises; or
(ii) Breach of Representation/Warranty. If any representation or
warranty of Tenant set forth in any notice, certificate, demand, request or
other instrument delivered pursuant to, or in connection with, this Lease shall
prove to be either false or misleading in any material respect as of the time
when the same shall have been made and the existence of such false or misleading
statement shall give rise to a default under any Mortgage (as defined below) or
permit any Mortgagee (as defined below) to cause the indebtedness owing to it to
become due and payable prior to its stated maturity; or
(iii) Voluntary Bankruptcy, Etc. If Tenant shall file a petition
commencing a voluntary case under the United States Bankruptcy Code (hereinafter
called the "Bankruptcy Code") or any other federal or state law (as now or
hereafter in effect) relating to bankruptcy, insolvency, reorganization,
winding-up or adjustment of debts (hereinafter collectively called "Bankruptcy
Law") or if Tenant shall (A) apply for or consent to the appointment of, or the
taking of possession by, any receiver, custodian, trustee, United States Trustee
or liquidator (or other similar official) of the Premises or any part thereof or
of any substantial portion of Tenant's property, or (B) generally not pay its
debts as they become due, or admit in writing its inability to pay its debts
generally as they become due or(C) make a general assignment for the benefit of
its creditors, or (D) fail to controvert in timely and appropriate manner, or in
writing acquiesce to, any petition commencing an involuntary case against Tenant
or otherwise filed against Tenant pursuant to any Bankruptcy Law, or (E) take
any action in furtherance of any of the foregoing; or
(iv) Involuntary Bankruptcy, Etc. If an order for relief against
Tenant shall be entered in any involuntary case under the Bankruptcy Code or any
similar order against Tenant shall be entered pursuant to any other Bankruptcy
Law, or if a petition commencing an involuntary case against Tenant or proposing
the reorganization of Tenant under any Bankruptcy Law shall be filed and not be
discharged or denied within sixty (60) days after such filing, or if a
proceeding or case shall be commenced in any court of competent jurisdiction
seeking (A) the liquidation, reorganization, dissolution, winding-up or
adjustment of debts of Tenant, or (B) the appointment of a receiver, custodian,
trustee, United States Trustee or liquidator (or any similar official) of the
Premises or any part thereof or of Tenant or of any substantial portion of
Tenant's property, or (C) any similar relief as to Tenant pursuant to any
Bankruptcy Law, and any such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect for sixty (60) days; or
(b) Landlord's Rights/Remedies. If an Event of Default shall have
happened and be continuing, Landlord shall have, in its sole discretion, the
right to exercise any one or more of the following rights and remedies:
(i) Terminate Lease. To give Tenant written notice of Landlord's
intention to terminate the Term of this Lease on a date specified in such notice
(which shall not be less than ten (10) days from the date of giving of such
notice). Thereupon, the Term of this Lease and the estate hereby granted shall
terminate on such date as completely and with the same effect as if such date
were the date fixed herein for the expiration of the term of this Lease, and all
rights of Tenant hereunder shall terminate, but Tenant nonetheless shall remain
liable as provided herein.
(ii) Re-Enter, Etc. To (A) re-enter and repossess the Premises or
any part thereof by force, summary proceedings, ejections or otherwise and (B)
remove all persons and property therefrom, whether or not the Lease has been
terminated pursuant to clause(i) above, Tenant hereby expressly waiving any and
all notices to quit, cure or vacate provided by current or any future law.
Landlord shall have no liability by reason of any such re-entry, repossession or
removal. No such re-entry or taking of possession of the Premises by Landlord
shall be construed as an election on Landlord's part to terminate the Term of
this Lease unless a written notice of such intention be given to Tenant pursuant
to clause(i) above.
(iii) Relet, Etc. To the extent required by law, to use reasonable
efforts to relet the Premises or any part thereof for the account of Tenant, in
the name of Tenant or Landlord or otherwise, without notice to Tenant, for such
term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the term of this Lease) and on such
conditions (which may include concessions or free rent) and for such uses
Landlord, in its absolute discretion, may determine. Landlord may collect and
receive any rents payable by reason of such reletting. Landlord shall not be
responsible or liable for any failure to relet the Premises or any part thereof
or for any failure to collect any rent due upon any such reletting.
(iv) Current Damages. In the event of re-entry or repossession of
the Premises or removal of persons or property therefrom by reason of the
occurrence of an Event of Default, Tenant shall pay to Landlord all Minimum Rent
and Additional Rent, in each case to and including the date of such re-entry,
repossession or removal; and, thereafter, until the Term has expired or has been
terminated, Tenant shall, whether or not the Premises shall have been relet, be
liable to Landlord for, and shall pay to Landlord, as liquidated and agreed
current damages (A) all Minimum Rent and all Additional Rent as and when such
amounts would be payable under this Lease by Tenant in the absence of any such
re-entry, repossession or removal, together with all reasonable expenses of
Landlord in connection with such reletting (including, without limitation, all
repossession costs, brokerage commissions related to balance of term, reasonable
attorneys' fees and expenses (including, without limitation, fees and expenses
of appellate proceedings if Landlord prevails), employee's expenses, alteration
costs and expenses of preparation for such reletting), less (B) the net
proceeds, if any, of any reletting effected for the account of Tenant pursuant
to Section 27(b)(iii) above. Notwithstanding the foregoing, in the event any
such reletting is for a term longer than the balance of the Term, Tenant shall
be responsible for only a proportionate part of the expenses based on the
balance of the Term as compared to the fixed minimum term of the reletting.
Tenant shall pay such liquidated and agreed current damages on the dates on
which Minimum Rent would be payable under this Lease in the absence of such
re-entry, repossession or removal, and Landlord shall be entitled to recover the
same from Tenant on each such date.
(v) Rental Value Damages. In the event of the termination of the
Term by reason of the occurrence of an Event of Default, whether or not Landlord
shall have collected any damages pursuant to clause (iv) above with respect to
the period prior to such termination, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay Landlord on demand, as and for liquidated and
agreed final damages for Tenant's default and in lieu of all liquidated and
agreed current damages in respect of Minimum Rent and Additional Rent due beyond
the date of such termination (it being agreed that it would be impracticable or
extremely difficult to fix the actual damages), an amount equal to the excess,
if any, of (A) the aggregate of all Minimum Rent and Additional Rent, in each
case from the date of such termination for what is or would have been, in the
absence of such termination, the then unexpired Term, discounted on a monthly
basis at the then quoted semi-annual yields (which shall be converted to monthly
yields) on U.S. Treasury securities maturing nearest the end of the Term (as if
no termination had occurred) (the "Discount Rate") over (B) the then fair rental
value of the Premises for the same period, discounted on a monthly basis at the
Discount Rate. If any applicable law shall limit the amount of liquidated final
damages to less than the foregoing amount, Landlord shall be entitled to the
maximum amount allowable under such law. In no event will Landlord be obligated
to pay any amount to Tenant or otherwise account to Tenant if the amount
specified in clause (B) of this Section 27 (b)(v) is greater than the amount
specified in clause (A) of this Section 27(b)(v). Tenant agrees that the credit
provided to Tenant under clause (B) of this Section 27(b)(v) shall fulfill any
obligation imposed by law on Landlord to mitigate its damages.
(vi) Default Purchase. To accept Tenant's irrevocable purchase offer
(the "Default Purchase Offer") to purchase the Premises (which offer Tenant
shall be conclusively deemed to have made) at the price equal to the sum of (x)
the amount applicable for the Minimum Rent Payment closest to the date of the
Event of Default pursuant to Exhibit 23-1 attached hereto plus (y) the amount
determined pursuant to the formula set forth in Exhibit 27 attached hereto
(herein called the "Make-Whole Amount"). The Default Purchase Offer shall be
deemed to contain a closing date which is sixty (60) days following the date of
the Event of Default and the purchase shall be governed by the Closing Terms.
(c) Tenant not Released. No termination of this Lease pursuant to Section
27(b)(i), by operation of law or otherwise, and no repossession of the Premises
or any part thereof pursuant to Section 27(b)(ii) or otherwise, and no
reletting of the Premises or any part thereof pursuant to Section 27(b)(iii),
shall relieve Tenant of either (i) its liabilities and obligations hereunder,
all of which shall survive such expiration, termination, repossession or
reletting or (ii) any liabilities under this Lease which by express provision of
this Lease survive such expiration, termination, repossession or reletting.
28. Additional Rights of Landlord.
(a) No Limitation, Waiver, Etc. The rights and remedies set forth in
Section 27(b) may be exercised in any order and in any combination whatsoever.
No right or remedy herein conferred upon or reserved to Landlord is intended to
be exclusive of any other right or remedy, and each and every right and remedy
shall be cumulative and in addition to any other right or remedy given hereunder
or now or hereafter existing at law or in equity or by statute (provided,
however, Landlord's rights and remedies under Section 27(a)(v) and Section
27(a)(vi) shall be deemed mutually exclusive and its exercise and satisfaction
of rights and remedies under either said Section shall preclude its exercise of
rights and remedies under the other Section). Without limiting the foregoing,
in the event Tenant shall fail to perform any covenant, agreement or obligation
on its part, and such failure shall constitute an Event of Default (or, if it
does not yet constitute an Event of Default, shall in Landlord's reasonable
judgment pose threat of harm to the Premises or of the incurring of liability by
Landlord prior to the time it would constitute an Event of Default) Landlord
shall have the right, but not the obligation, to take any such action (without
any liability to Tenant whatsoever, and without waiving any default by Tenant or
affecting Tenant's indemnification obligations) as Landlord may deem necessary
or appropriate to remedy any circumstance or threatened circumstance occasioned
by Tenant's failure, and all reasonable costs and expenses (including, without
limitation, reasonable costs of litigation and reasonable attorneys' fees)
incurred by Landlord in connection therewith shall constitute Additional Rent
and shall be payable on demand by Landlord. The failure of Landlord to insist
at any time upon the strict performance of any covenant or agreement or to
exercise any option, right, power or remedy contained in this Lease shall not be
construed as a waiver or a relinquishment thereof for the future. A receipt by
Landlord of any Minimum Rent, any Additional Rent or any other sum payable
hereunder with knowledge of the breach of any covenant or agreement contained in
this Lease shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made unless
expressed in writing and signed by Landlord. In addition to other remedies
provided in this Lease, Landlord shall be entitled, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the covenants, agreements, conditions or
provisions of this Lease, or to a decree compelling performance of any of the
covenants, agreements, conditions or provisions of this Lease, or to any other
remedy allowed to Landlord at law or in equity.
(b) Certain Waivers by Tenant. Tenant hereby waives and surrenders for
itself and all those claiming under it, including creditors of all kinds, (i)
any right or privilege which it or any of them may have under any present or
future constitution, statute or rule of law to redeem the Premises or to have a
continuance of this Lease for the term hereof after termination of Tenant's
right of occupancy by order or judgment of any court or by any legal process or
writ, or under the terms of this Lease or after the termination of the term of
this Lease as herein provided, and (ii) the benefits of any present or future
constitution, statute or rule of law which exempts property from liability for
debt or for distress for rent.
(c) Bankruptcy or Insolvency. (i) In the event that Tenant shall become a
debtor in a case filed under Chapter 7 of the Bankruptcy Code and Tenant's
trustee or Tenant shall elect to assume this Lease for the purpose of assigning
the same or otherwise, such election and assignment may be made only if the
provisions of Sections 28(c)(ii) and 28(c)(iv) are satisfied as if the election
to assume were made in a case filed under Chapter 11 of the Bankruptcy Code. If
Tenant or Tenant's trustee shall fail to elect to assume this Lease within sixty
(60) days after the filing of such petition or such additional time as provided
by the court within such sixty (60) day period, this Lease shall be deemed to
have been rejected. Immediately thereupon Landlord shall be entitled to
possession of the Premises without further obligation to Tenant or Tenant's
trustee and this Lease upon the election of Landlord shall terminate, but
Landlord's right to be compensated for damages (including, without limitation,
liquidated damages pursuant to any provision hereof) or the exercise of any
other remedies in any such proceeding shall survive, whether or not this Lease
shall be terminated.
(ii) (A) In the event that Tenant shall become a debtor in a case
filed under Chapter 11 of the Bankruptcy Code, or in a case filed under Chapter
7 of the Bankruptcy Code which is transferred to Chapter 11, Tenant's trustee or
Tenant, as debtor-in-possession, must elect to assume this Lease within one
hundred twenty (120) days from the date of the filing of the petition under
Chapter 11 or the transfer thereto or Tenant's trustee or the debtor-in-
possession shall be deemed to have rejected this Lease. In the event that
Tenant, Tenant's trustee or the debtor-in-possession has failed to perform all
of Tenant's obligations under this Lease within the time periods (excluding
grace periods) required for such performance, no election by Tenant's trustee or
the debtor-in-possession to assume this Lease, whether under Chapter 7 of
Chapter 11, shall be permitted or effective unless each of the following
conditions has been satisfied:
(1) Tenant's trustee or the debtor-in-possession has cured all
defaults under this Lease, or has provided Landlord with Assurance (as defined
below) that it will cure all defaults susceptible of being cured by the payment
of money within ten (10) days from the date of such assumption and that it will
cure all other defaults under this Lease which are susceptible of being cured by
the performance of any act promptly after the date of such assumption.
(2) Tenant's trustee or the debtor-in-possession has compensated
Landlord, or has provided Landlord with Assurance that within ten (10) days from
the date of such assumption it will compensate Landlord, for any actual
pecuniary loss incurred by Landlord arising from the default of Tenant, Tenant's
trustee, or the debtor-in-possession as indicated in any statement of actual
pecuniary loss sent by Landlord to Tenant's trustee or the debtor-in-possession.
(3) Tenant's trustee or the debtor-in-possession has provided
Landlord with Assurance of the future performance of each of the obligations of
Tenant, Tenant's trustee or the debtor-in-possession under this Lease, and, if
Tenant's trustee or the debtor-in-possession has provided such Assurance,
Tenant's trustee or the debtor-in-possession shall also (i) deposit with
Landlord, as security for the timely payment of rent hereunder, an amount equal
to three (3) installments of Minimum Rent (at the rate then payable) which shall
be applied to installments of Minimum Rent in the inverse order in which such
installments shall become due provided all the terms and provisions of this
Lease shall have been complied with, and (ii) pay in advance to Landlord on the
date each installment of Minimum Rent is payable a pro rata share of Tenant's
annual obligations for additional rent and other sums pursuant to this Lease,
such that Landlord shall hold funds sufficient to satisfy all such obligations
as they become due. The obligations imposed upon Tenant's trustee or the
debtor-in-possession by this paragraph shall continue with respect to Tenant or
any assignee of this Lease after the completion of bankruptcy proceedings.
(4) The assumption of this Lease will not breach or cause a
default under any provision of any other lease, mortgage, financing arrangement
or other agreement by which Landlord is bound.
(B) For purposes of this Section 28(c), Landlord and Tenant
acknowledge that "Assurance" shall mean no less than: Tenant's trustee or the
debtor-in-possession has and will continue to have sufficient unencumbered
assets after the payment of all secured obligations and administrative expenses
to assure Landlord that sufficient funds will be available to fulfill the
obligations of Tenant under this Lease and (x) there shall have been deposited
with Landlord, or the Bankruptcy Court shall have entered an order segregating,
sufficient cash payable to Landlord, and/or (y) Tenant's trustee or the debtor-
in-possession shall have granted a valid and perfected first lien and security
interest and/or mortgage in property of Tenant, Tenant's trustee or the debtor-
in-possession, acceptable as to value and kind to Landlord, to secure to
Landlord the obligation of Tenant, Tenant's trustee or the debtor-in-possession
to cure the defaults under this Lease, monetary and/or non-monetary, within the
time periods set forth above.
(iii) In the event that this Lease is assumed in accordance with
Section 28(c)(ii) and thereafter Tenant is liquidated or files or has filed
against it a subsequent petition under Chapter 7 or Chapter 11 of the Bankruptcy
Code, Landlord may, at its option, terminate this Lease and all rights of Tenant
hereunder by giving Tenant notice of its election to so terminate within thirty
(30) days after the occurrence of any such event.
(iv) If Tenant's trustee or the debtor-in-possession has assumed this
Lease pursuant to the terms and provisions of Sections 28(c)(i) or 28(c)(ii) for
the purpose of assigning (or elects to assign) this Lease, this Lease may be so
assigned only if the proposed assignee (Assignee) has provided adequate
assurance of future performance of all of the terms, covenants and conditions of
this Lease to be performed by Tenant. Landlord shall be entitled to receive all
cash proceeds of such assignment. As used herein, "adequate assurance of future
performance" shall mean no less than that each of the following conditions has
been satisfied:
(1) the Assignee has furnished Landlord with either (i) (x) a
copy of a credit rating of Assignee which Landlord reasonably determines to be
sufficient to assure the future performance by Assignee of Tenant's obligations
under this Lease and (y) a current financial statement of Assignee audited by a
certified public accountant indicating a net worth and working capital in
amounts which Landlord reasonably determines to be sufficient to assure the
future performance by Assignee of Tenant's obligations under this Lease or (ii)
a guarantee or guarantees, in form and substance satisfactory to Landlord, from
one or more persons with a credit rating and net worth equal to or exceeding the
credit rating and net worth of Tenant as of the date hereof.
(2) Landlord has obtained all consents or waivers from others
required under any lease, mortgage, financing arrangement or other agreement by
which Landlord is bound to permit Landlord to consent to such assignment.
(3) The proposed assignment will not release or impair any
guaranty of the obligations of Tenant (including the Assignee) under this Lease.
(v) When, pursuant to the Bankruptcy Code, Tenant's trustee or the
debtor-in-possession shall be obligated to pay reasonable use and occupancy
charges for the use of the Premises, such charges shall not be less than the
Minimum Rent, additional rent and other sums payable by Tenant under this Lease.
(vi) Neither the whole nor any portion of Tenant's interest in this
Lease or its estate in the Premises shall pass to any trustee, receiver,
assignee for the benefit of creditors, or any other person or entity, by
operation of law or otherwise under the laws of any state having jurisdiction of
the person or property of Tenant unless Landlord shall have consented to such
transfer. No acceptance by Landlord or rent or any other payments from any such
trustee, receiver, assignee, person or other entity shall be deemed to
constitute such consent by Landlord nor shall it be deemed a waiver of
Landlord's right to terminate this Lease for any transfer of Tenant's interest
under this Lease without such consent.
(vii) In the event of an assignment of Tenant's interests pursuant to
this Section 28(c), the right of Assignee to extend the term of this Lease for
an extended term beyond the then term of this Lease shall be extinguished.
29. Notices, Demands and Other Instruments.
All notices, demands, requests, consents, approvals and other instruments
required or permitted to be given pursuant to the terms of this Lease (any of
which herein called a "notice")shall be in writing and shall be deemed to have
been properly given if sent by (i) certified mail, return receipt requested,
postage prepaid, (ii) or sent by telegram, overnight express courier, or (iii)
delivery by hand, addressed as follows (in case of clauses (i) through (iii) or
(iv) telephonic facsimile transmission (fax) (followed by a confirmation hard
copy) to the following fax numbers:
If to Tenant:
Nine West Group Inc.
9 West Broad Street
Stamford, Connecticut 06902
Attn: Mr. Alexander V. Del Cielo
Executive Vice President - Operations
Telephone: 203 -328-4366
Telecopier: 203 -978-6020
With a copy to:
Nine West Group Inc.
9 West Broad Street
Stamford, Connecticut 06902
Attn: Joel K. Bedol, Esquire
Senior Vice President/General Counsel
Telephone: 203 -328-4386
Telecopier: 203 -978-6020
and
Nine West Group Inc.
9 West Broad Street
Stamford, Connecticut 06902
Attn: Robert C. Galvin
Executive Vice President and Chief Financial Officer
Telephone: 203 -328-4373
Telecopier: 203 -978-6020
If to Landlord:
c/o Westpark Associates
445 Broad Hollow Road
Melville, New York 11747
Attn: Charles R. Feinbloom, Esquire
Lawrence A. Levine, Esquire
Telephone: 516-293-7800
Telecopier:516-293-7886
Any notice so sent shall be deemed conclusively to have been received by the
addressee at the following time: (A) certified mail - on the third (3rd) day
after deposit in the mail unless earlier actual receipt is shown; (B) overnight
express courier - on the next Business Day following deposit with the courier;
(C) hand delivery - on any Business Day actually delivered to addressee; and (D)
fax - on the date of transmission (if such date is a Business Day), unless
transmission is completed later than 5:00 p.m., recipient's local time, in which
case receipt shall be effective the next Business Day. Landlord and Tenant
shall each have the right from time to time to specify as its address for
purposes of this Lease any other address in the United States of America upon
five (5) days written notice thereof, similarly given, to the other party.
Notwithstanding anything herein to the contrary, for any notice by Tenant to
Landlord to be effective, copies of such notices to Landlord must be given
simultaneously to any First Mortgagee of which Tenant has received notice
pursuant to Section 31 hereof at the address and/or fax number specified by such
First Mortgagee.
30. Transfer by Landlord.
Upon any transfer by Landlord of its estate in the Premises, Landlord
making such transfer shall be released from the responsibility for the
performance of any liabilities and obligations which shall arise under the
terms, covenants and conditions of this Lease subsequent to the date of any such
transfer. In the event that Landlord transfers its interest in this Lease,
Tenant agrees to attorn to such assignee or transferee with respect to Tenant's
obligations under this Lease.
31. Mortgaging by Landlord.
(a) Right to Mortgage, Etc. Tenant acknowledges that Landlord may grant
one or more mortgages, deeds of trust or like security interests in the Premises
and this Lease and in connection therewith (whether in the mortgage instrument
and/or in any separate instrument of assignment) assign its interest in this
Lease and all rents and other amounts payable hereunder (any of which, grants
and assignments, as modified, amended, extended, or restated from time to time,
a "Mortgage") to one or more mortgagees, deed of trust trustees or other
grantees and assignees (individually, together with each holder of any note,
bond or other obligation secured thereby, and all such persons' successors and
assigns, a "Mortgagee"). Landlord shall cause each Mortgage (other than the
PILOT Mortgage) to contain a provision providing in substance that (i) any
exercise by Mortgagee of any consent or approval under its Mortgage, including
any approval deemed to have been given as a result of inaction by Landlord or
such Mortgagee, which relates to any provision of this Lease where Landlord has
a right of consent or approval, shall be subject to the same standards as are
provided in this Lease for exercise thereof by Landlord; and (ii) the Mortgagee,
and any assignee of the Mortgagee by such assignee's acceptance of the benefit
of such Mortgage, shall be subject to and be deemed to have agreed to such
standards for the benefit of the Tenant. Without limiting the foregoing or any
right or remedy Tenant may have against Landlord, Landlord hereby grants to
Tenant an irrevocable power of attorney to enforce against any Mortgagee all
rights and remedies of Landlord in respect of any provision of the type
described in clause (i) above. Unless a Mortgagee elects in writing that this
Lease shall be superior to its Mortgage, this Lease (and each right, option and
power granted Tenant under this Lease, including without limitation any option
or right of refusal (if any is granted by this Lease) with respect to purchase
of the Premises or any portion thereof) shall be subordinate to each Mortgage,
provided that Tenant receives from the Mortgagee an agreement to the effect
that, (x) if such Mortgagee becomes the owner of the Premises by foreclosure,
deed in lieu of foreclosure or otherwise, this Lease shall remain in effect and
Tenant's possession of the Premises will not be disturbed so long as no Event of
Default shall have occurred and be continuing and Tenant pays all Minimum Rent,
Additional Rent and any other sums payable hereunder as and when due and
otherwise timely complies with and performs all Tenant's obligations under this
Lease, (y) so long as this Lease is in force and effect, such Mortgagee shall
cause all property insurance proceeds and condemnation awards received by it as
a result of any Casualty or Taking to be paid, applied and made available for
restoration in accordance with the provisions of Section 21 and 22 of this
Lease; and (z) any exercise by Mortgagee of any consent or approval of the type
described in clause (i) of the immediately preceding sentence shall be subject
to the standards provided in said clause (i), provided further, Tenant
acknowledges that any such agreement shall contain such provisions for the
protection and benefit of such Mortgagee as are typically contained in a
"subordination, non-disturbance and attornment agreement" utilized by
institutional commercial mortgage lenders, including, without limitation, a
provision that Tenant agrees to attorn to such Mortgagee or other transferee
upon a transfer of title by reason of foreclosure of such Mortgage or deed in
lieu of foreclosure thereof, and provisions to the effect of the matters set
forth in Section 31(b), (c) and (d), and such other provisions as such Mortgagee
may reasonably require. At the direction of Landlord, Tenant shall execute any
such agreement provided by a Mortgagee, provided, however, that such agreement
shall be in form and substance reasonably acceptable to Tenant. In connection
with any proposed transfer, pledge or mortgage of Landlord's fee interest in the
Premises or any portion of the interests in Landlord, Tenant shall, within
fifteen (15) days after Landlord's written request therefor, provide Landlord
and the proposed transferee and/or Mortgagee with confirmation in writing that
Tenant shall recognize such transferee and Mortgagee as such in the event of the
consummation of the transaction described in such notice.
(b) First Mortgage. "First Mortgage" means any Mortgage which constitutes
a first mortgage lien on the Premises (but shall not include the Pilot Mortgage
constituting part of the Project Documents), and "First Mortgagee" means each
Mortgagee which is the beneficiary of a First Mortgage. Tenant acknowledges in
respect of each First Mortgage, that the First Mortgagee thereunder is a direct
assignee of the Landlord's interest under this Lease pursuant to an absolute
assignment of this Lease and all rents and other amounts payable hereunder, and
agrees, for the benefit of the First Mortgagee thereunder, (i) that all payments
of Minimum Rent and Additional Rent owing to Landlord, all property insurance
proceeds and all condemnation awards (subject to the provisions of Sections 21
and 22 concerning application thereof), all amounts payable in consideration for
or in respect of any termination of this Lease prior to the end of the then
current Term, and all amounts payable in respect of any conveyance of the
Premises to Tenant pursuant to any provision of this Lease, shall be made as set
forth in a written direction given by Landlord to Tenant and approved in writing
by the First Mortgagee, (ii) that Tenant shall not be credited with any such
payment not made as set forth in said direction, (iii) that, except as otherwise
stated in said direction or in the First Mortgage or any assignment of this
Lease in connection with the First Mortgage, no consent, approval or
determination permitted to be given or made by Landlord, and no right, power or
remedy permitted to be exercised by Landlord, under this Lease may be given,
made or exercised (as the case may be) without the prior written consent of the
First Mortgagee (provided that any exercise by First Mortgagee of any such
consent, approval, determination, right, power or remedy of Landlord shall be
subject to the same standards as are provided in this Lease for exercise thereof
by Landlord), and (iv) that no subsequent direction by Landlord shall be honored
by Tenant until Tenant receives written notice from the First Mortgagee that
either (A) said First Mortgage has been released of record or (B) the First
Mortgagee has consented to such subsequent direction. At the request of
Landlord, in respect of each First Mortgage, and for the benefit of the First
Mortgagee thereunder, Tenant shall execute such written instrument as the First
Mortgagee may reasonably require acknowledging the foregoing.
(c) Mortgagee/Assignee Not Liable, Etc. "Assignee" means any Mortgagee
which acquires title to the Premises, whether by foreclosure of a Mortgage or
pursuant to a deed in lieu thereof or otherwise, any successor to such
Mortgagee, including without limitation, any person which acquires title to the
Premises from such Mortgagee, and any purchaser of the Premises at a foreclosure
sale in respect of a Mortgage (or transferee pursuant to a deed in lieu of such
a foreclosure). No Assignee shall be obligated to perform, or otherwise be
liable in any way for, (i) any representation or warranty of any kind made by
any Landlord, or (ii) any other obligation of any Landlord (except for such
obligations that arise from such Assignee's failure to perform any duty,
covenant or condition required by this Lease to be performed by Landlord after
the time such Assignee acquires title to the Premises). Tenant and Landlord, by
their respective executions hereof each acknowledge and agree that
notwithstanding any such foreclosure, deed in lieu of foreclosure, or other
transfer, each and all of such duties, covenants or conditions required to have
been performed by Landlord prior to such transfer shall survive any such
transfer and shall be and remain the sole liability of Landlord. No Assignee
shall be obligated to account for or be subject to any offset in respect of any
payment of rent made in advance of the due date thereof unless and then only to
the extent such rental payment is actually received by such person. Without
limiting the foregoing, Tenant acknowledges and agrees that the rights of all
Assignees, in and to Minimum Rent, Additional Rent owing to Landlord and all
other amounts payable under this Lease shall not be subject to any abatement
whatsoever, or be subject to any defense, set off, counterclaim, recoupment,
deferment, diminution or reduction of any kind by reason of any event or
circumstance whatsoever, whether occurring on, after or prior to the date upon
which any such Assignee acquired title to the Premises. Tenant shall pay on
demand all reasonable fees and expenses of any Mortgagee and its attorneys which
are payable by Landlord pursuant to the terms of the Mortgage and which arise by
reason of any request by Tenant for any amendment or modification of, or waiver
or consent relating to, the terms of this Lease or otherwise affecting the
Premises.
(d) Additional Mortgagee Provisions.
(i) Required Consent. Landlord and Tenant agree that no First
Mortgagee shall be bound or affected by any of the following (whether purported
to be effected by written or oral agreement, consent, course of dealing, or
otherwise) which occurs without the express, prior written consent of such First
Mortgagee: (A) any surrender of the Premises or any portion thereof, or any
cancellation or termination of this Lease or the Term hereof, or any other
alteration of the Term of this Lease, or any agreement to do any of the
foregoing (except any termination expressly provided for in Section 4(b) or in
Section 23) or; (B) any modification or amendment to this Lease which could have
the effect of (1) altering the amount of any Minimum Rent, Additional Rent or
other sum payable by Tenant hereunder, or the time, circumstances or manner of
payment thereof, (2) imposing any material obligation on Landlord, (3)
eliminating or diminishing, or altering the time for performance of, any
material obligation of Tenant, or (4) diminishing in any way the economic value
of this Lease as security for the obligations secured by the First Mortgage
benefitting such First Mortgagee.
(ii) Right to Cure. Notwithstanding anything to the contrary
contained in this Lease (and without admitting Tenant has any such rights as
hereafter described),Tenant hereby agrees that in the event of any default by
Landlord under any obligation on its part under this Lease (a "Landlord
Default"), which Tenant claims would give Tenant the right, either immediately
or after the lapse of a period of time, to terminate this Lease, or to claim a
partial or total eviction, or to reduce any rent or other amount payable
hereunder, Tenant will not seek to exercise any such right until it has given
notice of such Landlord Default to First Mortgagee and provided to First
Mortgagee such period of time after such notice as may be reasonably necessary
to cure such Landlord Default, as long as First Mortgagee has commenced and is
diligently pursuing remedies to cure such Landlord Default. Tenant shall also
give a copy of any such notice hereunder to any successor to First Mortgagee's
interest under the First Mortgage, provided that First Mortgagee or such
successor notifies Tenant of the name and address of the party Tenant is to
notify. If in attempting to cure any such Landlord Default, First Mortgagee
requires access to the Premises, Tenant shall provide such access at all
reasonable times and upon reasonable prior notice. Nothing in this Section
31(d)(ii) shall be construed as (A) creating any right on the part of Tenant to
terminate this Lease, claim any eviction, or reduce any rent or other amount
payable under this Lease; (B) obligating any First Mortgagee to cure any
Landlord Default; or (C) releasing or diminishing any obligation of Tenant under
this Lease.
(iii) Benefit. All provisions of this Lease providing for any right
of approval or consent by any Mortgagee, limiting any liability of any
Mortgagee, providing for indemnification of any Mortgagee, granting any right to
cure or other right or remedy to any Mortgagee, or otherwise conferring any
benefit or protection on any Mortgagee, are made by Landlord and Tenant for the
express and intended benefit of each Mortgagee, its successors and assigns, as
an inducement to each such Mortgagee to provide the financing secured by its
Mortgage, and with the intent that each Mortgagee may rely thereon. No
amendment or modification of this Lease which could have the effect of altering
any such provision shall be effective without the express prior written consent
of each Mortgagee which could be affected thereby.
32. Estoppel Certificate.
Tenant shall at any time and from time to time, within thirty (30) days
after written request by Landlord or any First Mortgagee, execute, acknowledge
and deliver to such requesting party an executed Tenant estoppel certificate
substantially to the following effect: (a) that this Lease is unmodified and in
force and effect (or if there have been modifications, that this Lease is in
force and effect as modified, and identifying the modification, or if Tenant
claims this Lease is not in full force and effect in any respect, so
specifying); (b) the date the Term commenced and the date the Term will end
(disregarding any unexercised renewal rights), the Minimum Rent due and payable
for each year of the then current Term, and the date to which Minimum Rent has
been paid; (c) whether or not there is any existing default by the Tenant in the
payment of any Minimum Rent or Additional Rent, and whether or not there is any
other existing default by Tenant, or to the knowledge of Tenant any existing
default by Landlord, and, if there is any such default, specifying the nature
and extent thereof; (d) whether or not Tenant claims any set offs, defenses or
counterclaims against enforcement of the obligations to be performed by Tenant
under this Lease, and if so the basis for such claims, (e) whether to the
knowledge of Tenant there are any actions or proceedings pending against the
Premises before any governmental authority to condemn the Premises or any
portion thereof or any interest therein and whether, to the knowledge of Tenant,
any such actions or proceedings have been threatened, and if so specifying the
nature and extent thereof (f) whether there exists any unrepaired damage to the
Premises from fire or other casualty and if so specifying the nature and extent
thereof, (g) whether Tenant is a party to any sublease or other arrangement
permitting any person to use or occupy any or the Premises, and if so specifying
the nature and extent thereof (h) whether to the knowledge of Tenant any breach,
violation or default by Tenant or concerning the Premises exists with respect to
any Legal Requirements and whether Tenant has received notice from any person
claiming any such breach, violation or default, and if so, specifying the nature
thereof, (i) that all representations and warranties made by Tenant in the Lease
and all financial information provided by the Reporting Person are true and
complete in all material respects, or if not specifying those matters which are
not true and complete, and (j) such other items that may be reasonably
requested. Any such certificate may be relied upon by any First Mortgagee,
prospective purchaser or prospective First Mortgagee of the Premises. In
addition, Tenant will obtain and submit, at Tenant's expense, such certificates,
opinions of counsel and other documents, including without limitation, estoppel
certificates of and opinions of counsel with respect to any guarantor of
Tenant's obligations under this Lease, as may be reasonably requested by
Landlord or First Mortgagee for the benefit of any such prospective purchaser or
First Mortgagee.
33. No Merger.
There shall be no merger of this Lease or the leasehold estate hereby
created with the fee estate in the Premises or any part thereof by reason of the
same person acquiring or holding, directly or indirectly, this Lease or any
interest in this Lease as well as the fee estate in the Premises or any portion
thereof.
34. Surrender.
Upon the termination of this Lease, Tenant shall peaceably surrender the
Premises to Landlord in the same condition in which they were received from
Landlord at the commencement of this Lease, except as altered, repaired or
restored as permitted or required by this Lease, and except for ordinary wear
and tear arising by reason of any permitted use. Provided that Tenant is not in
default hereunder, Tenant shall remove from the Premises prior to or within a
reasonable time (not to exceed fifteen (15) days) after such termination all
property not owned by Landlord, and, at Tenant's expense, shall at such times of
removal, repair any damage caused by such removal. Property not so removed
shall become the property of Landlord. Landlord may thereafter cause such
property to be removed and disposed of and the cost of repairing any damage
caused by such removal shall be borne by Tenant. Notwithstanding anything to
the contrary contained herein, upon termination of this Lease, all fixtures
(other than Tenant's trade fixtures), including, but not limited to, the
heating, ventilation, air conditioning, plumbing, electrical and security
systems, and restaurant or eating facilities shall remain on the Premises and
shall become the property of Landlord.
35. Severability.
Each and every covenant and agreement contained in this Lease is separate
and independent, and the breach of any thereof by Landlord shall not discharge
or relieve Tenant from any obligation hereunder. If any term or provision of
this Lease or the application thereof to any person or circumstances shall at
any time be invalid and unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances or at any time
other than those to which it is invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Lease shall be valid and shall be
enforced to the extent permitted by law.
36. Savings Clause.
No provision contained in this Lease which purports to obligate the Tenant
to pay any amount of interest or any fees, costs or expenses which are in excess
of the maximum permitted by applicable law, shall be effective to the extent
that it calls for payment of any interest or other sums in excess of such
maximum.
37. Binding Effect; Benefit.
All of the covenants, conditions and obligations contained in this Lease
shall be binding upon and inure to the benefit of the respective successors and
assigns of Landlord and Tenant.
38. Memorandum of Lease.
Simultaneously with the execution and delivery hereof, Landlord and Tenant
shall enter into and record, at Tenant's expense, a memorandum of this Lease in
the form of Exhibit 38 attached hereto.
39. Table of Contents; Headings.
The table of contents and headings used in this Lease are for convenient
reference only and shall not to any extent have the effect of modifying,
amending or changing the provisions of this Lease.
40. Governing Law.
This Lease shall be governed by and interpreted under the laws of the state
in which the Premises are located.
41. Lease.
"Lease" means this Lease, as amended and modified from time to time,
together with any memorandum or short form of Lease entered into for the purpose
of recording. This Lease constitutes the fully integrated agreement of Landlord
and Tenant with respect to the subject matter hereof and supersedes all prior
negotiations and understandings. No amendment, modification, cancellation,
termination of this Lease or surrender of the Premises or any part thereof shall
be effective unless (i) it is contained in a written instrument signed by
Landlord and Tenant, and (ii) has been consented to in writing by any First
Mortgagee in its sole discretion to the extent such consent shall be required
pursuant to the provisions of clause (i) of Section 31(d).
42. Assignment of Intangibles.
No later than ninety (90) days following the expiration or earlier
termination of this Lease, Landlord may request in a written notice to Tenant
that Tenant assign to Landlord, effective as of such expiration or earlier
termination of the Term, all rights of Tenant in and to such intangible personal
property used by Tenant in connection with the Premises as is designated by
Landlord in such notice, (provided, however, that the intangible personal
property so designated by Landlord is integral to the occupancy or customarily
used by occupants in connection with the occupancy of the land or the operation
of the buildings, structures and improvements thereon as such, as opposed to the
occupants' business operations conducted therein or therefrom) including,
without limitation, any contract rights, guaranties, licenses, permits,
registrations and warranties (including without limitation licenses, permits and
registrations pertaining to any clean-up or remediation of Hazardous Materials
on or about the Premises to the extent such licenses, permits and registrations
may be assigned to Landlord) but excluding any trade names, service marks or
corporate names used by Tenant in the operation of its business. Except any
obligation of Tenant to Landlord under this Lease which by the terms of this
Lease survives the termination or expiration of this Lease, including without
limitation Tenant's indemnity obligations under this Lease, Landlord shall
assume any future obligations of Tenant in respect of any such assigned
intangible personal property in form reasonably acceptable to Landlord and
Tenant. Tenant shall execute such assignments and/or bills of sale of the
intangible personal property as Landlord may reasonably request, provided the
same do not impose any additional liability on Tenant and are otherwise
reasonably acceptable to Tenant. The obligations of Tenant under this Section
42 shall survive the expiration or earlier termination of this Lease.
43. Exhibits.
The following Exhibits attached hereto are hereby incorporated by reference
in this Lease and made a part hereof:
Exhibit 1 Legal Description of Land
Exhibit 1-A Plat Depicting Premises
Exhibit 4 Early Termination Fee
Exhibit 5 Primary Term Minimum Rent
Exhibit 6 Procedure to Determine Renewal Term Minimum Rent
Exhibit 23-A Listed Title Matters
Exhibit 23-1 Schedule of Applicable Amounts
Exhibit 27 Make-Whole Amount Formula
Exhibit 38 Form of Memorandum of Lease
44. Exculpatory Clause.
Notwithstanding any provision of this Lease to the contrary, the liability
of Landlord (including, without limitation, each assignee, purchaser and/or
transferee of Landlord's interest in this Lease) under and with respect to this
Lease shall be limited to the interest of Landlord in the Premises, any judgment
in favor of Tenant or any party claiming by, through or under Tenant against
Landlord shall be collectible only out of Landlord's interest in the Premises,
and in no event shall any judgment for damages be entered against Landlord which
is in excess of the value of such interest.
45. Counterparts.
This Lease may be executed in two or more counterparts and shall be deemed
to have become effective when and only when one or more of such counterparts
shall have been signed by or on behalf of each of the parties hereto (although
it shall not be necessary that any single counterpart be signed by or on behalf
of each of the parties hereto, and all such counterparts shall be deemed to
constitute but one and the same instrument), and shall have been delivered by
each of the parties to each other.
46. Holding Over.
If Tenant, or any person claiming by, through or under Tenant, shall remain
in occupancy of the Premises, or any portion thereof, following expiration of
the Term, including, but not limited to, any personal property or fixtures left
by Tenant upon expiration of the Term, then at Landlord's option (but without
limiting any rights or remedies available to Landlord) this Lease shall
constitute a month-to-month tenancy on all of the same terms, covenants and
conditions contained in this Lease, except that the Minimum Rent payable during
such month-to-month tenancy shall be at a rate equal to two (2) times the
Minimum Rent which was last in effect immediately prior to expiration of the
Term.
47. Effect of Certain Approvals, Etc.
No examination, inspection or approval by Landlord or any First Mortgagee
of any plans and specifications, other documentation, or of any construction
work, relating to any alterations, additions, repairs or restoration to the
Premises made or caused to be made by Tenant (whether pursuant to any of
Sections 19, 21, or 22 or otherwise) shall be deemed to constitute any approval
by Landlord or First Mortgagee as to the legal sufficiency, safety, structural
integrity or other adequacy of any such work, and neither Landlord nor any First
Mortgagee shall have any liability to Tenant or any other person in any way with
respect to any such work or any matter related thereto, all of which shall be
the sole responsibility of Tenant.
48. Brokers.
Tenant and Landlord each represents and warrants to the other that it has
not entered into any agreement with, nor otherwise had any dealings with, any
broker or agent except for Rostenberg-Doern Company, Inc. and R.S. Silver &
Company (herein collectively called the "Broker(s)") in connection with the
negotiation or execution of this Lease which could form the basis of any claim
by any such broker or agent for a brokerage fee or commission, finder's fee, or
any other compensation of any kind or nature in connection herewith, and Tenant
and Landlord each shall indemnify, defend and hold the other harmless from and
against any costs (including, but not limited to, court costs and attorneys'
fees), expenses, or liability for commissions or other compensation claimed by
any broker or agent other than the Broker(s) listed above in this Section 48
with respect to this Lease which arises out of any agreement or dealings, or
alleged agreement or dealings, between Tenant or Landlord (as the case may be)
and any such agent or broker. Landlord agrees to pay any commission to said
Broker(s) listed above in this Section 48 in accordance with a separate letter
agreement.
49. Waiver of Jury Trial.
Landlord and Tenant irrevocably and unconditionally waive trial by jury in
any legal action or proceeding relating to this lease.
50. Landlord's Assignment of Certain Rights. (a) Landlord hereby
covenants that it shall not elect to treat the Overlease Agreement as terminated
under 11 U.S.C. Section 365(h) or any similar or successor law or right without
the written consent of Tenant and hereby assigns to Tenant the sole and
exclusive right to make or refrain from making any such election, in conformity
with and as limited by Section 3.9(i) of the Overlease, and Landlord agrees
that any such election, if made by Landlord, shall be void and of no force and
effect. In furtherance of the foregoing, Landlord hereby assigns to Tenant the
sole and exclusive right to exercise its rights under subsection 3.9(i) of the
Overlease provided, however, that Tenant may not, without the prior written
consent of Landlord (which may not unreasonably be withheld), exercise any such
rights of Landlord if such exercise by Tenant would subject Landlord to any
liability or expense (provided that no such consent of Landlord shall be
required with respect to liabilities and expenses that are not material and
which are assumed by Tenant under this Lease) or impair Landlord's rights to a
reversion of title to the Premises or the quality or extent of Landlord's title
to the Premises (other than to a de minimis degree) upon the occurrence of such
reversion.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above set forth.
ATTEST/WITNESS: LANDLORD:
WESTPARK I LLC, a Delaware
limited liability company,
By: a Member, Westpark Associates,
a New York general partnership,
/s/ Dean Erger By: /s/ Lawrence A. Levine
- ------------------- ---------------------- (SEAL)
Name: Dean Erger Name: Lawrence A. Levine
--------------
Title: Title: General Partner
--------------
By: Levine Family Melville Trust
Rachel Laser Special Trust
Adam Laser Special trust
Jessica Laser Special trust
Seth Hanlon Special Trust
Gregory Hanlon Special Trust
Rebecca Giat Special Trust
Julian Giat Special Trust
Cagen Youngest Grandchildren Trust
Cagen Youngest Grandchildren Trust II,
each a General Partner
/s/ Dean Erger By: /s/ Charles R. Feinbloom
- --------------------- --------------------(SEAL)
Name: Dean Erger Name: Charles R. Feinbloom
----------------
Title: Title: Trustee
---------------
TENANT:
NINE WEST GROUP INC., a Delaware corporation
/s/ Philip A. Gosch By: /s/ Alexander V. Del Cielo
- -------------------- ------------------------
Name: Philip A. Gosch Name: Alexander V. Del Cielo
---------------
Title: Title: Executive Vice President - Operations
--------------
<PAGE>
EXHIBIT 5
PRIMARY TERM MINIMUM RENT
Exhibit 5
Date Month Minimum Rent
- ---- ----- ------------
3/1/1997 1 0.00
4/1/1997 2 0.00
5/1/1997 3 0.00
6/1/1997 4 0.00
7/1/1997 5 0.00
8/1/1997 6 0.00
9/1/1997 7 0.00
10/1/1997 8 0.00
11/1/1997 9 0.00
12/1/1997 10 0.00
1/1/1998 11 0.00
2/1/1998 12 0.00
3/1/1998 13 440,973.53
4/1/1998 14 440,973.53
5/1/1998 15 440,973.53
6/1/1998 16 440,973.53
7/1/1998 17 440,973.53
8/1/1998 18 440,973.53
9/1/1998 19 440,973.53
10/1/1998 20 440,973.53
11/1/1998 21 440,973.53
12/1/1998 22 440,973.53
1/1/1999 23 440,973.53
2/1/1999 24 440,973.53
3/1/1999 25 440,973.53
4/1/1999 26 440,973.53
5/1/1999 27 440,973.53
6/1/1999 28 440,973.53
7/1/1999 29 440,973.53
8/1/1999 30 440,973.53
9/1/1999 31 440,973.53
10/1/1999 32 440,973.53
11/1/1999 33 440,973.53
12/1/1999 34 440,973.53
1/1/2000 35 440,973.53
2/1/2000 36 440,973.53
3/1/2000 37 440,973.53
4/1/2000 38 440,973.53
5/1/2000 39 440,973.53
6/1/2000 40 440,973.53
7/1/2000 41 440,973.53
EXHIBIT 5
Date Month Minimum Rent
- ---- ----- ------------
8/1/2000 42 440,973.53
9/1/2000 43 440,973.53
10/1/2000 44 440,973.53
11/1/2000 45 440,973.53
12/1/2000 46 440,973.53
1/1/2001 47 440,973.53
2/1/2001 48 440,973.53
3/1/2001 49 440,973.53
4/1/2001 50 440,973.53
5/1/2001 51 440,973.53
6/1/2001 52 440,973.53
7/1/2001 53 440,973.53
8/1/2001 54 440,973.53
9/1/2001 55 440,973.53
10/1/2001 56 440,973.53
11/1/2001 57 440,973.53
12/1/2001 58 440,973.53
1/1/2002 59 440,973.53
2/1/2002 60 440,973.53
3/1/2002 61 440,973.53
4/1/2002 62 440,973.53
5/1/2002 63 440,973.53
6/1/2002 64 440,973.53
7/1/2002 65 440,973.53
8/1/2002 66 440,973.53
9/1/2002 67 440,973.53
10/1/2002 68 440,973.53
11/1/2002 69 440,973.53
12/1/2002 70 440,973.53
1/1/2003 71 440,973.53
2/1/2003 72 440,973.53
3/1/2003 73 440,973.53
4/1/2003 74 440,973.53
5/1/2003 75 440,973.53
6/1/2003 76 440,973.53
7/1/2003 77 440,973.53
8/1/2003 78 440,973.53
9/1/2003 79 440,973.53
10/1/2003 80 440,973.53
11/1/2003 81 440,973.53
12/2/2003 82 440,973.53
1/1/2004 83 440,973.53
2/1/2004 84 440,973.53
3/1/2004 85 440,973.53
4/1/2004 86 440,973.53
5/1/2004 87 440,973.53
6/1/2004 88 440,973.53
EXHIBIT 5
Date Month Minimum Rent
- ---- ----- ------------
7/1/2004 89 440,973.53
8/1/2004 90 440,973.53
9/1/2004 91 440,973.53
10/1/2004 92 440,973.53
11/1/2004 93 440,973.53
12/1/2004 94 440,973.53
1/1/2005 95 440,973.53
2/1/2005 96 440,973.53
3/1/2005 97 440,973.53
4/1/2005 98 440,973.53
5/1/2005 99 440,973.53
6/1/2005 100 440,973.53
7/1/2005 101 440,973.53
8/1/2005 102 440,973.53
9/1/2005 103 440,973.53
10/1/2005 104 440,973.53
11/1/2005 105 440,973.53
12/1/2005 106 440,973.53
1/1/2006 107 440,973.53
2/1/2006 108 440,973.53
3/1/2006 109 440,973.53
4/1/2006 110 440,973.53
5/1/2006 111 440,973.53
6/1/2006 112 440,973.53
7/1/2006 113 440,973.53
8/1/2006 114 440,973.53
9/1/2006 115 440,973.53
10/1/2006 116 440,973.53
11/1/2006 117 440,973.53
12/1/2006 118 440,973.53
1/1/2007 119 440,973.53
2/1/2007 120 440,973.53
3/1/2007 121 440,973.53
4/1/2007 122 440,973.53
5/1/2007 123 440,973.53
6/1/2007 124 440,973.53
7/1/2007 125 440,973.53
8/1/2007 126 440,973.53
9/1/2007 127 440,973.53
10/1/2007 128 440,973.53
11/1/2007 129 440,973.53
12/1/2007 130 440,973.53
1/1/2008 131 440,973.53
2/1/2008 132 440,973.53
3/1/2008 133 440,973.53
4/1/2008 134 440,973.53
5/1/2008 135 440,973.53
EXHIBIT 5
Date Month Minimum Rent
- ---- ----- ------------
6/1/2008 136 440,973.53
7/1/2008 137 440,973.53
8/1/2008 138 440,973.53
9/1/2008 139 440,973.53
10/1/2008 140 440,973.53
11/1/2008 141 440,973.53
12/1/2008 142 440,973.53
1/1/2009 143 440,973.53
2/1/2009 144 440,973.53
3/1/2009 145 440,973.53
4/1/2009 146 440,973.53
5/1/2009 147 440,973.53
6/1/2009 148 440,973.53
7/1/2009 149 440,973.53
8/1/2009 150 440,973.53
9/1/2009 151 440,973.53
10/1/2009 152 440,973.53
11/1/2009 153 440,973.53
12/1/2009 154 440,973.53
1/1/2010 155 440,973.53
2/1/2010 156 440,973.53
3/1/2010 157 440,973.53
4/1/2010 158 440,973.53
5/1/2010 159 440,973.53
6/1/2010 160 440,973.53
7/1/2010 161 440,973.53
8/1/2010 162 440,973.53
9/1/2010 163 440,973.53
10/1/2010 164 440,973.53
11/1/2010 165 440,973.53
12/1/2010 166 440,973.53
1/1/2011 167 440,973.53
2/1/2011 168 440,973.53
3/1/2011 169 440,973.53
4/1/2011 170 440,973.53
5/1/2011 171 440,973.53
6/1/2011 172 440,973.53
7/1/2011 173 440,973.53
8/1/2011 174 440,973.53
9/1/2011 175 440,973.53
10/1/2011 176 440,973.53
11/1/2011 177 440,973.53
12/1/2011 178 440,973.53
1/1/2012 179 440,973.53
2/1/2012 180 440,973.53
3/1/2012 181 440,973.53
EXHIBIT 5
Date Month Minimum Rent
- ---- ----- ------------
4/1/2012 182 440,973.53
5/1/2012 183 440,973.53
6/1/2012 184 440,973.53
7/1/2012 185 440,973.53
8/1/2012 186 440,973.53
9/1/2012 187 440,973.53
10/1/2012 188 440,973.53
11/1/2012 189 440,973.53
12/1/2012 190 440,973.53
1/1/2013 191 440,973.53
2/1/2013 192 440,973.53
3/1/2013 193 440,973.53
4/1/2013 194 440,973.53
5/1/2013 195 440,973.53
6/1/2013 196 440,973.53
7/1/2013 197 440,973.53
8/1/2013 198 440,973.53
9/1/2013 199 440,973.53
10/1/2013 200 440,973.53
11/1/2013 201 440,973.53
12/1/2013 202 440,973.53
1/1/2014 203 440,973.53
2/1/2014 204 440,973.53
3/1/2014 205 440,973.53
4/1/2014 206 440,973.53
5/1/2014 207 440,973.53
6/1/2014 208 440,973.53
7/1/2014 209 440,973.53
8/1/2014 210 440,973.53
9/1/2014 211 440,973.53
10/1/2014 212 440,973.53
11/1/2014 213 440,973.53
12/1/2014 214 440,973.53
1/1/2015 215 440,973.53
2/1/2015 216 440,973.53
3/1/2015 217 440,973.53
4/1/2015 218 440,973.53
5/1/2015 219 440,973.53
6/1/2015 220 440,973.53
7/1/2015 221 440,973.53
8/1/2015 222 440,973.53
9/1/2015 223 440,973.53
10/1/2015 224 440,973.53
11/1/2015 225 440,973.53
12/1/2015 226 440,973.53
EXHIBIT 5
Date Month Minimum Rent
- ---- ----- ------------
1/1/2016 227 440,973.53
2/1/2016 228 440,973.53
3/1/2016 229 440,973.53
4/1/2016 230 440,973.53
5/1/2016 231 440,973.53
6/1/2016 232 440,973.53
7/1/2016 233 440,973.53
8/1/2016 234 440,973.53
9/1/2016 235 440,973.53
10/1/2016 236 440,973.53
11/1/2016 237 440,973.53
12/1/2016 238 440,973.53
1/1/2017 239 440,973.53
2/1/2017 240 440,973.53
3/1/2017 241 389,363.75
4/1/2017 242 389,363.75
5/1/2017 243 389,363.75
6/1/2017 244 389,363.75
7/1/2017 245 389,363.75
8/1/2017 246 389,363.75
9/1/2017 247 389,363.75
10/1/2017 248 389,363.75
11/1/2017 249 389,363.75
12/1/2017 250 389,363.75
1/1/2018 251 389,363.75
2/1/2018 252 389,363.75
3/1/1028 253 389,363.75
4/1/2018 254 389,363.75
5/1/2018 255 389,363.75
6/1/2018 256 389,363.75
7/1/2018 257 389,363.75
8/1/2018 258 389,363.75
9/1/2018 259 389,363.75
10/1/2018 260 389,363.75
11/1/2018 261 389,363.75
12/1/2018 262 389,363.75
1/1/2019 263 389,363.75
2/1/2019 264 389,363.75
3/1/2019 265 389,363.75
4/1/2019 266 389,363.75
5/1/2019 267 389,363.75
6/1/2019 268 389,363.75
7/1/2019 269 389,363.75
8/1/2019 270 389,363.75
9/1/2019 271 389,363.75
10/1/2019 272 389,363.75
EXHIBIT 5
Date Month Minimum Rent
- ---- ----- ------------
11/1/2019 273 389,363.75
12/1/2019 274 389,363.75
1/1/2020 275 389,363.75
2/1/2020 276 389,363.75
3/1/2020 277 389,363.75
4/1/2020 278 389,363.75
5/1/2020 279 389,363.75
6/1/2020 280 389,363.75
7/1/2020 281 389,363.75
8/1/2020 282 389,363.75
9/1/2020 283 389,363.75
10/1/2020 284 389,363.75
11/1/2020 285 389,363.75
12/1/2020 286 389,363.75
1/1/2021 287 389,363.75
2/1/2021 288 389,363.75
3/1/2021 289 389,363.75
4/1/2021 290 389,363.75
5/1/2021 291 389,363.75
6/1/2021 292 389,363.75
7/1/2021 293 389,363.75
8/1/2021 294 389,363.75
9/1/2021 295 389,363.75
10/1/2021 296 389,363.75
11/1/2021 297 389,363.75
12/1/2021 298 389,363.75
1/1/2022 299 389,363.75
2/1/2022 300 389,363.75
<TABLE>
EXHIBIT 11
<S> <C> <C> <C> <C>
NINE WEST GROUP INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(in thousands except per share data)
Transition
1996 1995(1) Period(2) 1994(2)
-------- -------- --------- --------
PRIMARY EARNINGS PER SHARE
- --------------------------
Computation for Consolidated Statements of Income
-------------------------------------------------
Income from continuing operations available for common stock.... $83,644 $18,976 $ 941 $63,890
Loss on disposal of discontinued operation...................... (2,636) - - -
------- ------- ------ -------
Net income.................................................... $81,008 $18,976 $ 941 $63,890
======= ======= ====== =======
Shares:
Weighted average number of common shares outstanding............ 35,647 35,011 34,655 34,555
Add:
Net effect of dilutive stock options based on the
treasury stock method........................................ 1,052 696 - -
------- ------- ------ -------
Weighted average number of shares outstanding
including common stock equivalents............................. 36,699 35,707 34,655 34,555
======= ======= ====== =======
Primary earnings per share:
Income from continuing operations, as adjusted................ $ 2.28 $ 0.53 $ 0.03 $ 1.85
Loss on disposal of discontinued operation, as adjusted....... (0.07) - - -
------- ------- ------ -------
Net income.................................................. $ 2.21 $ 0.53 $ 0.03 $ 1.85
======= ======= ====== =======
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
Computation for Consolidated Statements of Income
-------------------------------------------------
Reconciliation of net income to amount used for fully diluted
computation in Consolidated Statements of Income:
Income from continuing operations per primary
calculation above............................................ $83,644
Add:
Interest on 5.5% convertible debentures, net of tax effect.. 4,063
-------
Adjusted income from continuing operations................ 87,707
Loss on disposal of discontinued operation................ (2,636)
-------
Net income.............................................. $85,071
=======
Reconciliation of weighted average common shares outstanding
to amount used for fully diluted computation in Consolidated
Statements of Income:
Weighted average number of common shares outstanding.......... 35,647
Add:
Weighted average shares issuable from assumed exercise of
5.5% convertible debentures................................ 1,855
Net effect of dilutive stock options based on the treasury
stock method............................................... 1,351
-------
Fully diluted shares outstanding.......................... 38,853
=======
Fully diluted earnings per share:
Income from continuing operations............................... $ 2.26
Loss on disposal of discontinued operation...................... (0.07)
-------
Net Income.................................................... $ 2.19
=======
(1) Fully diluted earnings per share are equal to primary earnings per share for the 1995 period.
(2) Primary earnings per share for 1994 and the Transition Period, as disclosed on the face of the Consolidated
Statements of Income, do not include the effect of common stock equivalents, as their dilutive effect was
less than 3%.
</TABLE>
EXHIBIT 21
JURISDICTION OF
SUBSIDIARIES INCORPORATION
Community Urban Redevelopment of Duck Creek, Inc. Ohio
Compania de Calzados de Exportacion, S.L. Spain
Conca Del Sol International Cayman Islands
Nine West Asia Ltd. Bermuda
Nine West Boot Corporation Delaware
Nine West Canada Corporation Ontario
Nine West Development Corporation Delaware
Nine West Distribution Corporation Delaware
Nine West Footwear Corporation Delaware
Nine West France S.A.R.L. France
Nine West Funding Corporation Delaware
Nine West Group Italy S.r.l. Italy
Nine West - Honduras d/b/a U.S. Shoe - Honduras Cayman Islands
Nine West Hong Kong Limited Hong Kong
Nine West Manufacturing Corporation Delaware
Nine West Manufacturing II Corporation Delaware
Nine West Melbourne Pty Ltd Australia
Nine West Servicos de Assessoria de Compras Ltda. Brazil
Nine West Singapore Pte Ltd Singapore
Nine West UK Holdings Limited United Kingdom
Nine West UK Limited United Kingdom
Pied a Terre Group Limited United Kingdom
The Shops for Pappagallo, Inc. Ohio
U.S. Shoe Far East Limited Hong Kong
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (No. 33-72746 and No. 333-2262) and in the Registration Statement on
Form S-3 (No. 333-2656) of Nine West Group Inc. of our report dated March 17,
1997, appearing in this Annual Report on Form 10-K of Nine West Group Inc. for
the fiscal year ended February 1, 1997.
Deloitte & Touche LLP
Stamford, Connecticut
April 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> FEB-01-1997
<CASH> 25,176
<SECURITIES> 0
<RECEIVABLES> 100,718
<ALLOWANCES> 0
<INVENTORY> 501,830
<CURRENT-ASSETS> 722,006
<PP&E> 204,174
<DEPRECIATION> (65,925)
<TOTAL-ASSETS> 1,261,063
<CURRENT-LIABILITIES> 230,322
<BONDS> 181,407
0
0
<COMMON> 358
<OTHER-SE> 360,182
<TOTAL-LIABILITY-AND-EQUITY> 1,261,063
<SALES> 1,603,115
<TOTAL-REVENUES> 1,603,115
<CGS> 913,946
<TOTAL-COSTS> 913,946
<OTHER-EXPENSES> 507,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,947
<INCOME-PRETAX> 139,406
<INCOME-TAX> 55,762
<INCOME-CONTINUING> 83,644
<DISCONTINUED> (2,636)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,008
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.19
</TABLE>
