-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N2GQYaihjbFnBTHB4jM8YxNLjb7v+RLGJY/5Z/lrxm8zUNvAnVAYBaxo6Pb9y/gG EMg4504fBUMOpHiZ8k7CJg== 0000950123-96-001442.txt : 19960401 0000950123-96-001442.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950123-96-001442 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLAIBORNE LIZ INC CENTRAL INDEX KEY: 0000352363 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 132842791 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10689 FILM NUMBER: 96541225 BUSINESS ADDRESS: STREET 1: 1441 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2123544900 MAIL ADDRESS: STREET 1: 1441 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 10-K 1 ANNUAL REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K / X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ............ to................ Commission File Number 0-9831 LIZ CLAIBORNE, INC. (Exact name of registrant as specified in its charter) Delaware 13-2842791 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1441 Broadway, New York, New York 10018 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-354-4900 Securities registered pursuant to Section 12(b) of the Act: Title of class Name of each exchange on which registered -------------- ----------------------------------------- Common Stock, par value $1 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Based upon the closing sale price on the New York Stock Exchange composite tape on March 1, 1996, the aggregate market value of the registrant's Common Stock, par value $1 per share, held by non-affiliates of the registrant on such date was approximately $2,258,015,602. Number of shares of the registrant's Common Stock, par value $1 per share, outstanding as of March 1, 1996: 73,312,003 shares. ------------------------------------ Documents Incorporated by Reference: Registrant's Proxy Statement relating to its Annual Meeting of Stockholders to be held on May 16, 1996 - Part III. 2 PART I Item 1. Business. Overview Liz Claiborne, Inc. designs and markets an extensive range of women's fashion apparel and accessories, with versatile collections appropriate for wearing occasions ranging from casual to dressy. The Company also designs and markets men's apparel and furnishings, as well as fragrances for women and men. A portfolio of products licensed to carry the Company's LIZ CLAIBORNE or CLAIBORNE brand includes women's shoes, home furnishings, optics, sunglasses and men's suits. Products are manufactured to the Company's specifications in the United States and abroad and are marketed through leading department and specialty stores and other channels in the United States, Canada, Europe, Asia, and Central and South America. The Company's products are also marketed through the Company's own retail stores, which operate under a variety of formats in the United States. Although they offer a wide array of styles, all of Liz Claiborne's lines share the common characteristics of innovative fashion and exceptionally high quality and value. The Company believes that it is the largest "better" women's sportswear and dress company in the United States. Generally, the Company's sportswear products are conceived and marketed as "designer" items, but are priced in the "better" apparel range. At March 1, 1996, the Company's order book reflected unfilled customer orders for approximately $536 million of merchandise, as compared to approximately $443 million at March 1, 1995. Order book data at any given date is materially affected by the timing of recording orders and of shipments. Accordingly, order book data should not be taken as indicative of eventual actual shipments or net sales, or as providing meaningful period-to-period comparisons. As used herein, the term the "Company" refers to Liz Claiborne, Inc., a Delaware corporation, together with its consolidated subsidiaries, and its predecessor New York corporation (incorporated in 1976). Narrative Description of Business The Company's business is operated through separate divisions which each have responsibility for sales, production and product development. In the first quarter of 1996, the Company reorganized several of its divisions into four new groupings: Liz Claiborne Casual, which includes the "misses" lines of the LIZSPORT, LIZWEAR and LIZ & CO. casual sportswear divisions; COLLECTION, which includes the STUDIO line; Special Sizes, which includes the ELISABETH (large size) division and the above sportswear divisions' petite lines; and Special Markets Group, which includes the Moderate Division. The Company seeks in its product offerings to offer versatility to its consumers, both in terms of individual items and overall collections. Substantially all items in each sportswear collection are sold as "separates" rather than as ensembles, such as suits. Collections are structured, however, through the use of related styles, color schemes and fabrics, to enable the consumer to assemble outfits consisting of separate items which are designed to be worn together. By offering similar or related styles, color schemes and fabrics over an extended period, the Company intends to provide the consumer with a wardrobe which can be coordinated with other Company items from season to season. - 2 - 3 The following is a comparison of net sales by product/division for each of the five fiscal years ended December 30, 1995.
(Dollars in millions) 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Sportswear-Misses .......................... $ 679.1 $ 772.5 $ 878.0 $ 947.7 $ 903.7 Sportswear-Petites ......................... 213.6 227.6 253.5 268.5 250.7 -------- -------- -------- -------- -------- Total Women's Sportswear .......... 892.7 1,000.1 1,131.5 1,216.2 1,154.4 Accessories and Other Non-Apparel .......... 330.4 368.1 344.3 285.2 253.4 Retail Specialty Stores .................... 195.0 150.0 114.4 92.9 77.4 Outlet Stores .............................. 155.0 140.1 122.4 113.9 84.7 Dana Buchman ............................... 136.2 112.9 90.2 73.5 28.9 Elisabeth .................................. 131.1 137.2 143.5 161.0 130.5 Dresses and Suits .......................... 123.0 121.9 130.0 171.3 180.3 Men's Sportswear and Furnishings ........... 113.1 101.7 80.7 94.0 124.6 Liz & Co. .................................. 83.9 75.8 91.9 96.4 75.9 Moderate Sportswear ........................ 81.3 111.6 78.7 21.2* -- -------- -------- -------- -------- -------- 2,241.7 2,319.4 2,327.6 2,325.6 2,110.1 Intercompany Sales Elimination ............. (160.1) (156.5) (123.3) (131.3) (102.9) -------- -------- -------- -------- -------- Net Sales ......................... $2,081.6 $2,162.9 $2,204.3 $2,194.3 $2,007.2 ======== ======== ======== ======== ======== Net Sales by Geographic Areas Domestic ................................... $1,943.4 $2,039.9 $2,091.0 $2,092.5 $1,923.6 International .............................. 138.2 123.0 113.3 101.8 83.6 -------- -------- -------- -------- -------- Net Sales ......................... $2,081.6 $2,162.9 $2,204.3 $2,194.3 $2,007.2 ======== ======== ======== ======== ========
- ---------- * Partial Year Sales - 3 - 4 Liz Claiborne Casual offers casual sportswear under three of the Company's trademarks. The LIZSPORT Division offers all-American sportswear for less formal work settings and casual occasions. The LIZWEAR Division offers denim and denim-related sportswear, including twills and fashion coordinates. The LIZ & CO. Division offers versatile career and casual knitwear. The COLLECTION Division offers professional careerwear under the LIZ CLAIBORNE trademark with desk-to-dinner versatility. A line of casual careerwear under the STUDIO trademark, initially shipped in January 1996, is now offered by the COLLECTION Division. The COLLECTION Division's products offer the consumer coordinated designs and integrated groupings. The DANA BUCHMAN Division offers collections for the women's "bridge" market, the price range between better sportswear and designer clothing under the Company's DANA BUCHMAN trademark. The Division offers products with elegant styling in distinctive fabrics, in "misses", large and petite sizes. In February 1996, the Division commenced shipment of a new line of sophisticated casual wear under the Company's new DANA B. AND KAREN trademark. The ELISABETH Division offers large-sized classic careerwear, weekend casual, and wardrobe basics in both "misses" and petite proportions under the Company's ELISABETH trademark. The Dress Division offers dresses and suits providing day-into- evening versatility and special occasion dresses under the Company's LIZ CLAIBORNE trademarks in both the "misses" and petite size ranges, as well as special occasion dresses under the LIZ NIGHT trademark. The Menswear Division offers men's business-casual wear, sportswear and furnishings (dress shirts and ties) under the CLAIBORNE trademark. During 1995, each of the above Divisions presented three to six seasonal collections. The Company has announced that commencing in 1996, its major sportswear divisions will present four seasonal collections each year. The Accessories Division offers handbags, small leather goods, hats, belts, scarves, socks, tights and bodywear -- primarily under the LIZ CLAIBORNE trademark -- which mirror major fashion trends and complement many of the Company's other product lines. The Company's Cosmetic and Jewelry Divisions operate under a single management. Cosmetic offerings include fragrance and bath and body-care products under the LIZ CLAIBORNE, REALITIES, VIVID and CLAIBORNE FOR MEN trademarks. In March 1996, the Company introduced new women's and men's fragrance and bath and body product lines under its new CURVE trademark, with shipping to commence in the third quarter of 1996. Jewelry offerings include collections of fashion jewelry, such as earrings, necklaces, bracelets and pins, to complement the Company's women's apparel and accessories lines. In late 1994, the Company announced plans to phase out its First Issue retail store business and to close or convert its 77 First Issue locations to other Company-operated retail formats. As of March 1, 1996, the phase out has been completed. (See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations.") - 4 - 5 The Moderate Sportswear Division offers updated career and casual clothing under the Company's RUSS trademark; traditional mainstream sportswear under the Company's THE VILLAGER trademark; and fashion related separates with a jeanswear attitude under the Company's CRAZY HORSE trademark. These product lines are sold in department stores, national chains and specialty stores. See "Competition and Certain Other Risks." Effective June 30, 1995, the business formerly operated by the Company's Shoe Division was licensed to a third party. (See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations.") Sales and Marketing The Company's wholesale sales are made primarily to department and specialty store customers throughout the United States. Retail sales are also made through the Company's own retail stores and outlet stores, as well as to international customers, direct-mail catalog companies, military exchanges and other outlets. The Company is currently evaluating its methods of doing business internationally. At 1995 year end, LIZ CLAIBORNE products were being sold in over 50 markets outside the United States. The Company expects to continue expansion to additional markets. The Company currently operates a total of 117 prototype and presentational specialty retail stores located throughout the United States which carry exclusively Company products: 46 LIZ CLAIBORNE stores, 64 ELISABETH large- size apparel stores, 6 CLAIBORNE mens' stores and one DANA BUCHMAN store. These stores typically range in size from 2,000 square feet to 12,000 square feet. In 1995, the LIZ CLAIBORNE flagship store, an approximately 17,000 square foot store which carries the full line of Liz Claiborne women's apparel and related items, opened on Fifth Avenue in New York City. The Company's retail stores enable it to closely track sales and other product data, obtain market information and experiment with new products, visual presentation and new ideas for enhancing customer service. This information is used to help the Company's wholesale customers more quickly respond to consumer preferences. In Canada, the Company operates a wholesale business which sells primarily to major department store chains. In addition, during 1995, the Company began its expansion into the Canadian specialty store market. In Western Europe, the Company operates leased or licensed departments, or concessions, at leading specialty stores. These departments are currently the Company's primary method of doing business in Europe. Although the Company plans to add additional concessions in Europe, it is also evaluating options to service European retailers on a wholesale basis. In other international markets, the Company has granted retail licenses to third parties under which they operate LIZ CLAIBORNE stores and shops. During 1995, 22 additional licensed stores and shops were opened in a total of 16 countries. During 1996, the Company plans to grant additional store licenses, as well as open wholesale accounts in new markets. - 5 - 6 Approximately 83% of 1995 sales were made to the Company's 100 largest customers. Except for Dillard's Department Stores, Inc., which accounted for approximately 11% of 1995 and 1994 sales, no single customer accounted for more than 6% of 1995 or 1994 sales. However, certain of the Company's customers are under common ownership; when considered together as a group under common ownership, sales to the eight department store customers which were owned at year-end 1995 by The May Department Stores Company accounted for approximately 18% of 1995 and 17% of 1994 sales. Sales to the eleven department store customers which were owned at year-end 1995 by Federated Stores, Inc. accounted for approximately 17% of 1995 and 16% of 1994 sales. See Note 8 of Notes to Consolidated Financial Statements. Many major department store groups make centralized buying decisions; accordingly, any material change in the Company's relationship with any such group could have a material adverse effect on the Company's operations. The Company expects that its largest customers will continue to account for a significant percentage of its sales. Sales to the Company's department and specialty store customers are made primarily through the Company's New York City showrooms. Orders from the Company's customers generally precede the related shipping periods by several months. The Company's largest customers discuss with the Company retail trends and their plans regarding their anticipated levels of total purchases of Company products for future seasons. These discussions are intended to assist the Company in planning the production and timely delivery of its products. The Company continually monitors retail sales in order to assess directly consumer response to its products. The Company has implemented and continues to expand in-stock reorder programs in several divisions to enable customers to reorder certain items for quick delivery. See "Manufacturing." In 1995, as part of these programs, the Company began implementation of LizRim, an inventory replenishment system, which has been installed at a number of its retail customers. Effective January 1, 1996, the Company lowered the trade discount offered by its LIZWEAR, LIZSPORT, LIZ & CO., ELISABETH, Dress and LIZ CLAIBORNE COLLECTION Divisions from the previous 10% level to 8% (the prevailing standard in the industry). The Company is redeploying the additional funds received as a result of this change towards a national advertising campaign, an expanded in-store presentation program and similar brand-enhancing activities, in an effort to stimulate full price sales at retail. In January 1996, the Company introduced LIZEDGE, an in-store servicing and maintenance program designed to enhance the way the Company's products appear on the selling floor, and in March 1996, introduced LIZVIEW, a special presentation program designed to create a more effective retail presence at department stores. (See "Item 7. - -- Management's Discussion and Analysis of Financial Condition and Results of Operations.") The Company maintains cooperative advertising programs under which it will generally share the costs of each customer's advertising and promotional expenditures, up to a stated percentage of the customer's purchases. The Company incurred costs under these cooperative advertising programs of approximately $39 million in respect of 1995 sales. The Company spent approximately $4 million in 1995 on national advertising. The Company plans to expend significantly greater amounts on national advertising in 1996. The Company currently operates 76 outlet stores, virtually all of which are located in "outlet centers" comprised primarily of manufacturer- operated stores. - 6 - 7 Manufacturing The Company does not own any product manufacturing facilities; all of its products are manufactured in accordance with its specifications through arrangements with independent suppliers. A very substantial portion of the Company's sales is represented by products produced abroad, mainly in the Far East, the Caribbean and Central America. The Company also sources in the United States and other regions. The Company does not itself own quota and therefore must obtain quota from its suppliers and vendors. During 1995, the Company's products were manufactured by several hundred suppliers. The Company's products are currently manufactured in approximately 35 different countries, including China, Sri Lanka, South Korea, the Dominican Republic, Indonesia and Hong Kong. The Company continually seeks additional suppliers throughout the world for its sourcing needs. The Company's largest supplier of finished products manufactured less than 6% of the Company's purchases of finished products during 1995. Approximately 28% of the Company's 1995 purchases of finished products were manufactured by its ten largest suppliers, as compared to 24% of 1994 purchases. The percentage of the Company's production represented by its ten largest suppliers increased in 1995 as compared to 1994, and the Company is planning to allocate even larger portions of its production requirements to suppliers which appear to have superior capacity, quality (of product and operations) and financial resources, thus increasing the percent of purchases accounted for by the Company's leading suppliers. The Company's purchases from its suppliers are effected through individual purchase orders specifying the price and quantity of the items to be produced. Generally, the Company does not have any long-term, formal arrangements with any of the suppliers which manufacture its products. The Company believes that it is the largest customer of many of its manufacturing suppliers and considers its relations with such suppliers to be satisfactory. The Company's fabrics, trimmings and other materials are obtained in bulk from various foreign and domestic suppliers. During 1995, the raw materials used in Company products were purchased from several hundred suppliers, located primarily in South Korea, Japan, Taiwan, Hong Kong and Italy. Approximately 25% of the Company's expenditures for raw materials during 1995 and 1994 were accounted for by its five largest raw material suppliers, with no single raw material supplier accounting for more than 7% of 1995 raw material expenditures. Generally, the Company does not have any long-term, formal arrangements with any supplier of raw materials. The Company has a 50% interest in a joint venture which supplies certain types of domestically dyed and finished fabrics for use in certain Company products; the Company is currently analyzing its options with respect to this venture. To date, the Company has experienced little difficulty in satisfying its raw material requirements and considers its sources of supply adequate. The Company operates under substantial time constraints in producing each of its collections. See "Sales and Marketing." In order to deliver, in a timely manner, merchandise which reflects current tastes, the Company attempts to schedule a substantial portion of its materials and manufacturing commitments relatively late in the production cycle, thereby favoring suppliers able to make quick adjustments in response to changing production needs. However, in order to secure necessary materials and manufacturing facilities, the Company must make substantial advance commitments, often as much as seven months prior to the receipt of firm orders from customers for the items to be produced. The Company has and continues to implement a number of initiatives designed to reduce the time required to move a product from design to the sales floor. - 7 - 8 If the Company should misjudge its ability to sell its products, it could be faced with substantial outstanding fabric and/or manufacturing commitments, resulting in excess merchandise inventories. See "Competition; Certain Risks". The Company was left with significant excess merchandise inventory positions during 1993 and into the first half of 1994 due to the Company's increased 1993 commitments compared to 1992 and the decreased demand for certain of the Company's apparel at retail. The Company's arrangements with foreign suppliers are subject to the risks of doing business abroad, including currency fluctuations and revaluations, restrictions on the transfer of funds and in certain parts of the world, political instability. The Company's operations have not been materially affected by any of such factors to date. However, due to the large portion of the Company's products which are produced abroad, any substantial disruption of its relationships with its foreign suppliers could adversely affect the Company's operations. Import and Import Restrictions Virtually all of the Company's merchandise imported into the United States is subject to United States duties. In addition, bilateral agreements between the major exporting countries and the United States impose quotas that limit the amount of certain categories of merchandise that may be imported into the United States. The majority of such agreements contain "consultation" clauses which allow the United States, under certain circumstances, to impose unilateral restrictions on the importation of certain categories of merchandise that are not subject to specified limits under the terms of an agreement. These bilateral agreements have been negotiated under the framework of the Multi Fiber Arrangement ("MFA"), which has been in effect since 1974. The United States, a participant in international negotiations known as the "Uruguay Round", ratified legislation enacting and implementing the various agreements of the Uruguay Round, effective January 1, 1995, including the Uruguay Round Agreement on Textiles and Clothing which requires World Trade Organization Member countries to phase out textile and apparel quotas in three stages over a ten year period. In addition, it regulates trade in non-integrated textile and apparel quotas during the ten year transition period. However, even with respect to integrated textile and apparel quota categories, the United States remains free to establish numerical restraints in response to a particular product being imported in such increased quantities as to cause (or threaten) serious damage to the relevant domestic industry. The U. S. legislation implementing the Uruguay Round also changes the rule of origin for many textiles and apparel products effective July 1, 1996, with certain minor exceptions. This change would determine country of origin based on "assembly" for most textile and apparel products. The Uruguay Round also incorporates modest duty reductions for textile and apparel products over a ten year staging schedule. This will likely result in a modification of current patterns of international trade with respect to apparel and textiles. In addition, there are various United States initiatives pending concerning the trading status of certain countries, which, if enacted, would likely increase the cost of doing business in such countries. (See "Item 7. -- Management's Discussion and Analysis of Financial Condition and Results of Operations".) - 8 - 9 In addition, each of the countries in which the Company's products are sold have laws and regulations regarding import restrictions and quotas. Because the United States and other countries in which the Company's products are manufactured and sold may, from time to time, impose new quotas, duties, tariffs, surcharges or other import controls or restrictions, or adjust presently prevailing quota allocations or duty or tariff rates or levels, the Company maintains a program of intensive monitoring of import and quota-related developments. The Company seeks continually to minimize its potential exposure to import and quota-related risks through, among other measures, allocation of production to merchandise categories that are not subject to quota pressures, adjustments in product design and fabrication, shifts of production among countries and manufacturers, and otherwise, as well as through geographical diversification of its sources of supply. In light of the very substantial portion of the Company's products which are manufactured by foreign suppliers, the enactment of new legislation or the administration of current international trade regulations, or executive action affecting textile agreements, could adversely affect the Company's operations. Trademarks The Company utilizes a variety of trademarks on its products, including LIZ CLAIBORNE, LIZ, CLAIBORNE, LIZWEAR, LIZSPORT, LIZ CLAIBORNE COLLECTION, LIZ NOW, LIZ NIGHT, LIZ CLAIBORNE STUDIO, its triangular logomark, DANA BUCHMAN, dana b. and karen, ELISABETH, LIZ & CO., LEATHER CO., RUSS, THE VILLAGER, CRAZY HORSE, REALITIES, VIVID and CURVE. The Company has registered or applied for registration of a multitude of trademarks for use on apparel and apparel-related products, including accessories, cosmetics and jewelry in the United States as well as numerous foreign territories. The Company also has a number of design patents. The Company regards its trademarks and other proprietary rights as valuable assets and believes that they have significant value in the marketing of its products. The Company vigorously protects its trademarks and other intellectual property rights against infringement. Licensing The Company has five license agreements pursuant to which third party licensees produce merchandise under the Company's trademarks in accordance with designs furnished or approved by the Company. The present terms of these agreements (exclusive of renewal terms) expire at various dates through 2010. Current licenses cover women's and men's sunglasses and readers; women's and men's ophthalmic frames for prescription eyewear; home furnishing products (with the first collections shipped in the first quarter of 1995), men's tailored clothing (with the first collections shipped in the third quarter of 1995), and women's career, career-casual, casual and sport shoes (with the first licensed collections shipped in the third quarter of 1995). Each of the licenses provides for the payment to the Company of a percentage of the licensee's sales of the licensed products against a guaranteed minimum royalty which generally increases over the term of the agreement. - 9 - 10 Competition; Certain Risks The apparel and related product markets are highly competitive, both within the United States and abroad. The Company's ability to effectively compete depends on a number of factors, including the Company's ability to effectively anticipate, gauge and respond to changing consumer demands and tastes, to effectively translate these market trends into appropriate, saleable product offerings relatively far in advance, and to operate within substantial production and delivery constraints. In addition, consumer and customer acceptance and support (especially by the Company's largest customers), depend upon, among other things, product, value and services. The Company believes that, based on sales, it is among the largest apparel companies operating in the United States. Although the Company is unaware of any comprehensive trade statistics, it believes, based on its knowledge of the market and available trade information, that measured by sales, it is the largest "better" women's sportswear and dress company in the United States. A number of apparel companies have announced plans to distribute new collections of women's "better" sportswear through the department store channel of distribution, commencing in 1996. In addition to the competitive factors described above, the Company's business, including its revenues and profitability, is influenced by and subject to a number of factors which are inherently uncertain and therefore difficult to predict, including the general retail environment and general economic conditions; the Company's relationships with its customers, especially its major department store customers; the Company's ability to correctly judge the level of its fabric and/or merchandise commitments; the Company's ability to effectively distribute its products within its targeted markets (including distribution through wholesale accounts and Company operated retail stores and concession locations); and the chance of substantial disruption of the Company's relationships with its suppliers and manufacturers. See "Sales and Marketing." and "Manufacturing." The Company from time to time reviews its possible entry into new markets. The entry into new markets, such as the Company's entry into the moderate market, is accompanied by risks inherent in any new business. New businesses may require methods of operations and marketing strategies different from those employed in the Company's other businesses. Certain new businesses may be lower margin businesses and will require the Company to achieve significant cost efficiencies, in part by using sources of supply different from the Company's sources for other products. In addition, new markets may involve buyers, store customers and/or competitors different from the Company's historical buyers, customers and competitors. - 10 - 11 Employees At December 30, 1995, the Company had more than 7,400 full-time employees, as compared with approximately 8,000 full-time employees at December 31, 1994. As a member of a manufacturers' association, the Company is bound by collective bargaining agreements with affiliates of UNITE, the successor to the International Ladies' Garment Workers' Union and the Amalgamated Clothing and Textile Workers of America, covering, at December 30, 1995, approximately 1,750 of the Company's full-time apparel, accessories and cosmetics employees in the United States and Canada. These collective bargaining agreements expire on various dates through 1997. The Company considers its relations with its employees to be satisfactory and has not experienced any interruption of operations due to labor disputes. Item 2. Properties. The Company's showrooms, sales, merchandising and design staffs, as well as its executive offices, are located at 1441 Broadway, New York, New York, where the Company leases approximately 276,000 square feet under a master lease which expires at the end of 2001 and contains certain renewal options and rights of first refusal for additional space. The Company currently leases office space at two other buildings in New York City covering approximately 60,000 and 24,000 square feet (with terms expiring in 1996 and 2003, respectively). The Company owns its approximately 450,000 square foot principal New Jersey warehouse and distribution facility located at One Claiborne Avenue, North Bergen, New Jersey. This facility also houses the Company's production and certain other administrative personnel. The Company also owns an approximately 300,000 square foot office facility at this location which was completed in 1994. The Company presently leases approximately 969,000 square feet in 6 other New Jersey warehouse facilities, the current terms of which expire through 2008. The Company also owns an approximately 313,000 square foot warehouse and distribution facility located on approximately 80 acres in Mt. Pocono, Pennsylvania. The Company's approximately 270,000 square foot facility in Augusta, Georgia (located on a 98-acre site), has been leased to a joint venture comprised of a wholly-owned subsidiary of the Company and an unrelated third party. This facility is used as a dyeing and finishing operation. The Company occupies an approximately 290,000 square foot warehouse and distribution facility located on an approximately 124 acre site in Montgomery, Alabama. The Company has options to purchase an additional 80 acres adjacent to the facility. The Company currently is planning to expand its operations at this location. The Company is the lessee of the Georgia and Alabama facilities pursuant to industrial development financing. The Company also leases showroom, warehouse and office space in various other domestic and international locations. The Company leases space for its 117 retail specialty stores (aggregating approximately 518,000 square feet in various malls) and for 75 of its outlet stores (aggregating approximately 740,000 square feet). The Company believes that its existing facilities are well maintained, in good operating condition and are adequate for its present level of operations. (See Note 8 of Notes to Consolidated Financial Statements.) - 11 - 12 Item 3. Legal Proceedings. The Company and certain of its present and former officers and directors are parties to several pending legal proceedings and claims, including an action styled Ressler et al. vs. Liz Claiborne, Inc., et al., pending in the United States District Court for the Eastern District of New York. The plaintiffs seek compensatory damages on behalf of a class of purchasers of the Company's Common Stock during the period commencing September 21, 1992 through and including July 16, 1993, and allege that the defendants violated the federal securities laws by, among other things, making misrepresentations or omissions of material facts that artificially inflated the market price of the Common Stock during the class period. An earlier-filed lawsuit before the same court as Ressler, styled Fishbaum vs. Chazen, et. al., made allegations similar to the Ressler complaint and sought damages on behalf of a class of purchasers of the company's Common Stock for the period commencing March 30, 1993, through and including July 16, 1993. An amended complaint was filed in the Ressler action in May 1994 to add Fishbaum as a plaintiff. In June 1994, the court granted the defendants' motion to dismiss the Fishbaum complaint, with leave to amend, on the grounds that the complaint did not adequately set forth the requisite element of scienter. In July 1994, the Company moved to dismiss the Ressler complaint. In August 1995, the Court granted that motion, again with leave to amend, on the grounds that the Ressler complaint failed to comply with pleading requirements of the Federal Rules of Civil Procedure. However, the Court rejected the contention that scienter had not been adequately pled. In response to the defendants' motion for reconsideration of that latter point, the Court indicated that the Company could present the scienter issue again in moving to dismiss a new amended complaint. In October 1995, a second amended complaint was filed in the Ressler action. In December 1995, the defendants moved to dismiss that complaint. In April 1994, two stockholder derivative actions, which contain substantially similar allegations, styled Goldberg Family Trust vs. Chazen, et al. and Liz Claiborne, Inc., nominal defendant, and Laz Schneider vs. Chazen, et al. and Liz Claiborne, Inc., nominal defendant, were brought in the Court of Chancery of the State of Delaware against certain of the Company's directors and two of its former Vice Chairmen. The complaints contain allegations that the individual defendants breached their fiduciary obligations to the Company and its shareholders committed corporate mismanagement and wasted corporate assets in connection with the Company's stock repurchase program and the defense of pending legal proceedings, and were unjustly enriched in connection with the sale of shares of the Company's Common Stock between September 1992 and July 1993 by certain of its present and former officers and directors. In July 1994, the Laz Schneider action was consolidated with the Goldberg action. In August 1994, the defendants moved to dismiss the consolidated complaint. The motion is pending. The Company believes that the litigations described in this Item are without merit and intends to vigorously defend these actions. Although the outcome of any such litigation or claim cannot be determined with certainty, management is of the opinion that the final outcome of these litigations should not have a material adverse effect on the Company's results of operations or financial position. - 12 - 13 Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise. Executive Officers of the Registrant. Information as to the executive officers of the Company is set forth below: Name Age Position(s) - ---- --- ----------- Jerome A. Chazen 69 Chairman of the Board Paul R. Charron 53 President and Chief Executive Officer Jorge L. Figueredo 35 Senior Vice President - Human Resources Samuel M. Miller 58 Senior Vice President - Finance, Chief Financial Officer John R. Thompson 44 Senior Vice President - Service, Systems and Reengineering, Chief Information Officer Robert J. Zane 56 Senior Vice President - Manufacturing and Sourcing - 13 - 14 Executive officers serve at the discretion of the Board of Directors. Mr. Chazen has served in various senior executive positions and as a Director of the Company since 1977. In 1985, he was elected Co-Chairman of the Board of the Company, and became Vice Chairman of the Board in 1987. In 1989, Mr. Chazen became Chairman of the Board. Mr. Chazen also serves on the board of directors of Taubman Centers, Inc., an owner and operator of regional shopping centers. Mr. Charron joined the Company as Vice Chairman and Chief Operating Officer, and became a Director, in May 1994. Effective May 1995, he became President and Chief Executive Officer. Prior to joining the Company, he served as Executive Vice President of VF Corporation, an apparel manufacturer, from 1993, and as a Group Vice President of VF Corporation from 1988 to 1993. Mr. Figueredo joined the Company in 1984 as Administrator, Warehouse Employee Relations and served in various management positions thereafter. In 1992, he was promoted to Vice President, Human Resources Operations. In 1994, he was promoted to Senior Vice President - Human Resources. Mr. Miller, a certified public accountant, joined the Company in 1988 as Senior Vice President - Finance (Chief Financial and Accounting Officer) after more than sixteen years in various senior financial positions within the apparel industry. Mr. Thompson joined the Company in February 1995 as Senior Vice President of Service, Systems and Reengineering and Chief Information Officer. Prior to joining the Company, Mr. Thompson served as Executive Vice President for Business Systems/Logistics and Chief Information Officer of Goody's Family Clothing, Inc., an apparel retailer, from 1993 to 1995. From 1991 to 1993, Mr. Thompson was Vice President Business Systems and Management Information Systems for Lee Apparel Company, an apparel manufacturer. Mr. Thompson also served as Executive Vice President and Chief Information Officer of Quick Response Services, Inc., an information management services company, from 1987 to 1991. Mr. Zane joined the Company in September 1995 as Senior Vice President - Manufacturing and Sourcing. Prior to joining the Company, Mr. Zane owned and operated Medallion Tekstil, a private label manufacturing company he founded in 1989. Prior to that, Mr. Zane was Vice President, Sourcing at Bernard Chaus, Inc. and Executive Vice President at Murjani International, Inc. - 14 - 15 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's Common Stock trades on the New York Stock Exchange ("NYSE") under the symbol LIZ. The table below sets forth the high and low closing sale prices of the Common Stock (based on the NYSE composite tape) for the periods indicated.
Calendar Period High Low --------------- ---- --- 1995: 1st Quarter 18 14 1/2 2nd Quarter 21 1/4 17 3/4 3rd Quarter 25 3/4 21 1/8 4th Quarter 30 23 3/4 1994: 1st Quarter 24 1/8 20 1/2 2nd Quarter 26 1/4 19 7/8 3rd Quarter 23 5/8 20 1/4 4th Quarter 24 1/8 15 5/8
On March 5 1996, the closing sale price of the Common Stock on the NYSE was $35 5/8. As of March 5, 1996, the approximate number of record holders of Common Stock was 11,160. The Company has paid regular quarterly cash dividends since May 1984. Quarterly dividends for the last two fiscal years were paid as follows:
Calendar Period Dividends Paid per Common Share 1995: 1st Quarter $.1125 2nd Quarter $.1125 3rd Quarter $.1125 4th Quarter $.1125 1994: 1st Quarter $.1125 2nd Quarter $.1125 3rd Quarter $.1125 4th Quarter $.1125
The Company plans to continue paying quarterly cash dividends on its Common Stock. The amount of any such dividend will depend on the Company's earnings, financial position, capital requirements and other relevant factors. - 15 - 16 In December 1989, the Board of Directors first authorized the repurchase, as market and business conditions warranted, of the Company's Common Stock for cash in open market purchases and privately negotiated transactions. From time to time thereafter, the Board has authorized additional repurchases. As of March 4, 1996, the Company had expended or had commitments to expend, through the sale of put warrants, (see Note 8 of Notes to Consolidated Financial Statements) approximately $499 million of the $550 million authorized under its stock repurchase program, covering an aggregate of 18.9 million shares. Item 6. Selected Financial Data. The following table sets forth certain information regarding the Company's operating results and financial position and is qualified in its entirety by the consolidated financial statements and notes thereto which appear elsewhere herein: (All dollar amounts in thousands except per common share data)
1995 1994 1993 1992 1991 ------ ------ ------ ------ ------ Net sales $ 2,081,630 $ 2,162,901 $ 2,204,297 $ 2,194,330 $ 2,007,177 Gross profit 790,701 755,207 750,916 830,116 799,675 Net income 126,914 82,849* 126,924** 218,824 222,748 Working capital 758,314 719,132 750,001 832,789 763,851 Total assets 1,329,243 1,289,662 1,236,338 1,256,308 1,170,645 Long-term debt excluding current portion 1,115 1,227 1,334 1,434 1,615 Stockholders' equity 988,226 982,984 978,291 997,775 909,599 Earnings per common share 1.69 1.06* 1.56** 2.61 2.61 Book value at year-end 13.41 12.77 12.41 12.05 10.67 Dividends paid per common share .45 .45 .44 .39 .33 Weighted average common shares outstanding 75,002,861 78,526,724 81,509,120 83,965,342 85,457,204
- -------------------------------------------------------------------------------- * Includes the after tax effect of a restructuring charge of $18,900 ($30,000 pretax) or $.24 per common share in 1994. ** Includes a credit representing the cumulative effect of a change in the method of accounting for income taxes of $1,643 or $.02 per common share in 1993. - 16 - 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations The following table sets forth items in the Consolidated Statements of Income as a percent of net sales and the percentage change of those items as compared to the prior year.
PERCENT OF NET YEAR TO YEAR SALES PERCENTAGE CHANGE - ----------------------------------------------------------------------------------- FISCAL YEARS 1995 1994 1993 1995 VS. 1994 VS. 1994 1993 - ----------------------------------------------------------------------------------- NET SALES 100.0% 100.0% 100.0% (3.8)% (1.9)% ----- ----- ----- Cost of goods sold 62.0 65.1 65.9 (8.3) (3.1) ----- ----- ----- GROSS PROFIT 38.0 34.9 34.1 4.7 .6 Selling, general and administrative expenses 28.8 27.9 25.8 (.7) 6.4 Restructuring charge -- 1.4 -- -- -- ----- ----- ----- OPERATING INCOME 9.2 5.6 8.3 57.5 (33.9) Investment and other income-net .6 .5 .7 20.8 (34.0) ----- ----- ----- INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 9.8 6.1 9.0 54.5 (33.9) Provision for income taxes 3.7 2.3 3.3 56.8 (33.9) ----- ----- ----- INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 6.1 3.8 5.7 53.2 (33.9) Cumulative effect of a change in the method of accounting for income taxes -- -- .1 -- -- ----- ----- ----- NET INCOME 6.1% 3.8% 5.8% 53.2% (34.7)% ===== ===== =====
- 17 - 18 RESULTS OF OPERATIONS continued The Company's net sales for 1995 (52 weeks) were $2.08 billion, compared to $2.16 billion in 1994 (53 weeks) and $2.20 billion in 1993 (52 weeks). The 1995 net sales decline of 3.8% reflected a 9% decrease in domestic net sales of Misses and Petite COLLECTION, LIZSPORT and LIZWEAR (collectively, "Sportswear"), to $861 million, and a 32% decrease in domestic net sales of the Moderate Division to $71 million. The Sportswear net sales decrease reflected planned unit volume declines and slightly lower average unit selling prices due to product mix. The Moderate Division's net sales decline reflected a planned unit volume decrease. Also contributing to the net sales result was a decrease in the net sales of accessories (6%, to $175 million), due primarily to lower average unit selling prices, reflecting lower initial selling prices and changes in product mix, and ELISABETH (4%, to $131 million), principally reflecting lower off-price sales volume, offset by increased sales to the Company's new ELISABETH stores. Effective June 30, 1995, the business formerly operated by the Company's Shoe Division was licensed to a third party. The Shoe Division accounted for $39 million of 1995 net sales (six months), compared to $63 million in 1994 (twelve months) (see Note 3 of Notes to Consolidated Financial Statements). These declines were offset in part by a 30% sales increase within the Company's LIZ CLAIBORNE, ELISABETH, DANA BUCHMAN, CLAIBORNE, First Issue and international retail stores and leased departments (collectively, the "Retail Operations"), to $195 million, reflecting higher average numbers of domestic retail stores and European retail leased departments. In late 1994, the Company announced plans to phase out the First Issue retail store business and to close or convert its 77 First Issue locations to other Company-operated retail formats. As of March 1, 1996, the phase out has been completed; First Issue accounted for $53 million of 1995 net sales, compared to $64 million in 1994 (see Note 2 of Notes to Consolidated Financial Statements). Net sales gains were also posted by DANA BUCHMAN (21%, to $136 million), menswear (11%, to $113 million) and LIZ & CO. (11%, to $84 million). The DANA BUCHMAN net sales increase primarily reflected higher unit volume, as well as slightly higher average unit selling prices. The menswear and LIZ & CO. net sales increases were due to higher unit volume. Net sales of the outlet operations increased 11%, to $155 million, principally reflecting the opening of new stores (76 at 1995 year end compared with 70 at 1994 year end). The 1994 net sales decrease reflected a 12% decline in the net sales of Sportswear, to $1 billion, primarily resulting from substantially lower average unit prices due to weakness in demand, the liquidation during the first half of 1994 of significant prior year excess inventory at distressed prices, and changes in product mix. The net sales result also reflected an 18% decline in LIZ & CO. sales, to $76 million, due primarily to lower unit volume. These decreases were partially offset by increases in sales of the Moderate Division (42%, to $112 million), menswear (26%, to $102 million), and DANA BUCHMAN (25%, to $113 million). These increases primarily reflected higher unit volume, although more than half of the menswear increase was due to higher average unit prices as a result of a higher proportion of regular price sales. In addition, sales of the Retail Operations increased 31%, to $150 million, due to the opening of new domestic retail stores (113 at 1994 year end compared with 78 at 1993 year end) as well as the conversion of most of the Company's European business from a wholesale to a leased department operation. First Issue accounted for $64 million of the Retail Operations' 1994 sales, compared to $51 million in 1993. Sales of the Company's outlet stores increased 14%, to $140 million, in 1994, due - 18 - 19 RESULTS OF OPERATIONS continued to the opening of new stores (70 at 1994 year end compared with 61 at 1993 year end). The 1994 and 1993 results also reflected the delay of certain shipments of 1994 Spring season merchandise into 1994. Gross profit dollars increased $35 million, or 4.7%, in 1995. Gross profit margins were 38.0% in 1995, compared to 34.9% in 1994 and 34.1% in 1993. The margin improvement in 1995 generally reflected lower markdowns resulting from lower excess inventory positions, an increase in average unit selling prices realized on close-out merchandise, and slightly lower average unit costs across substantially all of the wholesale apparel divisions. Significant margin gains were realized by the ELISABETH and LIZ & CO. Divisions, as well as the outlet operations. Although Sportswear margins improved, gross profit dollars declined somewhat, reflecting the lower sales base. Moderate margins remained at depressed levels notwithstanding significant improvement over 1994. Overall margins were favorably impacted by the larger percentage of sales represented by the Retail Operations and the DANA BUCHMAN Division (which are generally higher margin businesses) and the lower percentage of sales represented by the Moderate Division (which is a lower margin business). Margins within the Retail Operations declined slightly from 1994 levels, and DANA BUCHMAN margins improved. Margin improvements were partially offset by margin declines within the menswear and jewelry businesses due to a lower proportion of regular price sales, reflecting weakness in demand. Gross profit dollars increased slightly in 1994, reflecting an improvement in the overall gross profit percentage from the depressed level of 1993, on a slightly lower sales base. Margins were negatively impacted throughout 1994 by the highly promotional retail environment. While Sportswear gross margins showed some improvement, notwithstanding the liquidation during the first half of significant excess prior year inventory, volume declines resulted in lower gross profit dollars. Margin percentages of the Menswear and Dress Divisions improved from depressed 1993 levels, due to a higher proportion of regular price sales. Also contributing to the margin improvement was the higher proportion of the Company's net sales represented by the Retail Operations and the DANA BUCHMAN and Accessories Divisions (which are all generally higher margin businesses). These increases were offset by severely depressed margins within the Moderate Division (which is a lower margin business) due to a very low proportion of regular price sales, and the higher proportion of the Company's sales represented by this Division. In addition, margins declined in the Cosmetics Division, reflecting weak demand and changes in product mix, and in the ELISABETH Division, reflecting a lower proportion of regular price sales due primarily to the liquidation of excess prior year inventory. Legislation which would further restrict the importation and/or increase the cost of textiles and apparel produced abroad has periodically been introduced in Congress. Although it is unclear whether any new legislation will be enacted into law, it appears likely that various new legislative or executive initiatives will be proposed. These initiatives may include a reevaluation of the trading status of certain countries, including Most Favored Nation ("MFN") treatment for the People's Republic of China ("PRC"), which, if enacted, would increase the cost of products purchased from suppliers in such countries. The PRC's MFN treatment was renewed in July 1995 for an additional year. In light of the very substantial portion of the Company's products which are manufactured by foreign suppliers, the enactment of new legislation or the administration of current international trade regulations, or executive action affecting international textile agreements, could adversely affect the Company's operations. - 19 - 20 RESULTS OF OPERATIONS continued Selling, general and administrative ("SG&A") expenses decreased $4 million (0.7%) in 1995 over 1994, compared with an increase of $36 million (6.4%) in 1994 over 1993. These expenses represented 28.8% of net sales in 1995 compared to 27.9% in 1994 and 25.8% in 1993. The 1995 SG&A results reflect lower expense levels as expense reduction initiatives continue; however, the percentage decrease in the sales of certain divisions slightly outpaced their percentage decreases in expense levels. The 1995 results also reflect increases resulting from the continued expansion of the Company's outlets and Retail Operations ($21.8 million increase in 1995), as well as expansion of the DANA BUCHMAN Division and the expansion of in-store retail shop programs at a number of divisions. These results reflect $6 million of direct expenses related to the Shoe Division in 1995 (six months), compared with $12 million in 1994 (twelve months). The 1994 results reflected the continued expansion of the Retail Operations, which accounted for approximately three-quarters of the dollar increase. Also reflected in the 1994 dollar increase was the expansion of the Moderate and DANA BUCHMAN Divisions and outlet operations, partially offset by an overall expense reduction within the wholesale better-apparel businesses; however, the overall percentage decrease in the sales of these businesses slightly outpaced their percentage decrease in expense levels. Investment and other income-net increased on a year-to-year basis by $2 million in 1995, compared with a year-to-year decrease of $5 million in 1994. The 1995 increase reflected an increase in the Company's investment portfolio of cash equivalents and marketable securities, notwithstanding the ongoing stock repurchase program, as well as slightly higher interest rates. The 1994 decrease was due to lower rates of return realized on the investment portfolio, as well as a decrease in the average portfolio, reflecting in part the stock repurchase program. As a result of the factors described above, the Company's income before provision for income taxes and cumulative effect of a change in accounting principle expressed as a percentage of net sales was 9.8% in 1995, compared to 6.1% in 1994 and 9.0% in 1993. The 1995 results included continuing operating losses within the Retail Operations and the Moderate Division. The 1994 results reflected a $30 million charge which was provided to cover the estimated costs associated with the restructuring of the Retail Operations and Moderate Division, as well as the Company's strategic efforts to streamline operating and administrative functions. This charge included estimated losses on the phase out of the First Issue retail business, contract termination costs, severance and the write-off of certain assets (see Note 2 of Notes to Consolidated Financial Statements). 1994 operating income was also reduced by continuing losses within the Company's Moderate Division, Retail Operations and outlets. The provision for income taxes expressed as a percentage of net sales was 3.7% in 1995, 2.3% in 1994 and 3.3% in 1993, reflecting changes in pre-tax income, and in 1995 an increase in the effective income tax rate. The Company adopted the Financial Accounting Standards Board Statement No. 109 "Accounting for Income Taxes" and changed its method of accounting for income taxes as of the beginning of fiscal year 1993. The cumulative effect on prior years of this accounting change is reflected in the consolidated statements of income as a one-time increase in 1993 net income of $1.6 million, or $.02 per common share (see Note 1 of Notes to Consolidated Financial Statements). - 20 - 21 RESULTS OF OPERATIONS continued The earnings per common share computations reflected a lower number of outstanding shares on a period-to-period basis as a result of the Company's stock repurchase program. Net income expressed as a percentage of net sales was 6.1% in 1995, compared with 3.8% in 1994 and 5.8% in 1993. The 1995 increase was principally due to higher operating margins and higher investment and other income-net, offset in part by a higher provision for income taxes. The 1994 decrease was primarily due to lower operating margins and lower investment and other income-net, offset in part by a lower provision for income taxes. The 1995 and 1994 year-to-year results also reflected the restructuring charge discussed above, which reduced 1994 after-tax net income by $19 million. The retail environment remains highly promotional, and the tone of business continues to be difficult. The Company continues the process of implementing a comprehensive business transformation effort which includes process reengineering and profit improvement programs, and is progressing towards a number of previously announced three-year goals for this initiative. The Company continues to expect that earnings for the first half of 1996 will show improvement over 1995 levels although any such improvement will be moderated by continuing losses within certain operations. As part of its ongoing strategic review process, the Company continues to evaluate certain business operations. Effective January 1, 1996, the Company lowered the trade discount offered by its Sportswear, Dress, LIZ & CO. and ELISABETH Divisions from the previous 10% level to 8% (the prevailing standard in the industry). The Company is redeploying the additional funds received as a result of this change towards a national advertising campaign, an expanded in-store presentation program and similar brand-enhancing activities, in an effort to stimulate full price sales at retail. As a result of this change, the net sales of the affected divisions will increase by approximately 2% over the results they would have reported without the change in trade discount, with corresponding dollar increases in gross margin and SG&A expenses. FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY Net cash provided by operating activities was $222 million in 1995, compared to $173 million in 1994 and $120 million in 1993. The year-to-year increase in 1995 primarily reflects higher net income, a larger decrease in accounts receivable ($34 million in 1995 compared to $15 million in 1994), a smaller increase in deferred income tax benefits ($0.4 million in 1995 compared to $15 million in 1994) and a $5 million increase in income taxes payable compared to an $8 million decrease in 1994, offset by a decrease in accrued expenses of $1 million compared to an increase in 1994 (including accruals associated with the restructuring charge) of $59 million. The 1994 increase was due primarily to a decrease in inventory levels in 1994 compared to an increase in 1993 and a larger increase in accrued expenses in 1994 (including accruals associated with the restructuring charge), offset in part by lower net income. Net cash used in investing activities was $134 million in 1995, compared to $131 million in 1994 and net cash provided by investing activities of $1 million in 1993. The year-to-year fluctuations in net cash used in or provided by investing activities is related to the increase or decrease in marketable securities and capital expenditures, as well as the cash proceeds from the sale of certain Shoe Division assets realized in 1995. Net cash used in financing activities was $104 million in 1995, compared to $75 million in 1994 and $148 million in 1993. The - 21 - 22 RESULTS OF OPERATIONS continued changes in net cash used in financing activities principally reflects amounts expended in the Company's stock repurchase program. As of March 4, 1996, the Company had expended or had commitments to expend, through the sale of put warrants (see Note 8 of Notes to Consolidated Financial Statements), approximately $499 million of the $550 million authorized under its stock repurchase program, covering an aggregate of 18.9 million shares. The decrease in 1995 year end inventory levels over the prior year end reflected the sale of inventory related to the Company's former Shoe Division and the reduction of ongoing inventory levels within the outlet operations, offset in part by planned earlier receipt of spring merchandise across substantially all of the Company's wholesale apparel divisions and the expansion of in-stock reorder programs in several divisions. The higher inventory levels required by the expanded in-stock reorder programs and, to a lesser degree the expansion of the Retail Operations, had a negative impact on the Company's 1995 inventory turnover rate. The existence of excess inventory (which takes additional time to liquidate) during the first half of 1994 had a negative impact on the Company's 1994 inventory turnover rate and gross profit margin. The Company's anticipated capital expenditures for 1996 currently approximate $45 million. These expenditures consist primarily of certain building and equipment expenses, including expansion of the Company's Alabama distribution facility and the upgrading of management information systems. These expenditures will be financed through available capital and future earnings. Any increased working capital needs will be met by current funds. Bank lines of credit, which are available to finance import transactions and direct borrowings, were decreased by the Company from $282 million at December 31, 1994 to $270 million at December 30, 1995 to reduce excess lines. The Company expects to be able to adjust these lines as required. INFLATION The moderate rate of inflation over the past few years has not had a significant impact on the Company's sales and profitability. Item 8. Financial Statements and Supplementary Data. Information called for by this Item 8 is included following the "Index to Consolidated Financial Statement Schedules" appearing at the end of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. - 22- 23 PART III Item 10. Directors and Executive Officers of the Registrant. Information with respect to Executive Officers of the Company is set forth in Part I of this Annual Report on Form 10-K. Information with respect to Directors of the Company which is called for by this Item 10 is incorporated by reference to the information set forth under the heading "Election of Directors" in the Company's Proxy Statement relating to its 1996 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A (the "Company's 1996 Proxy Statement"). Item 11. Executive Compensation. Information called for by this Item 11 is incorporated by reference to the information set forth under the heading "Executive Compensation" in the Company's 1996 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management. Information called for by this Item 12 is incorporated by reference to the information set forth under the headings "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Company's 1996 Proxy Statement. Item 13. Certain Relationships and Related Transactions. Information called for by this Item 13 is incorporated by reference to the information set forth under the headings "Election of Directors" and "Employment Arrangements" in the Company's 1996 Proxy Statement. - 23 - 24 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) 1. Financial Statements.
PAGE REFERENCE 1995 FORM 10-K REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 FINANCIAL STATEMENTS Consolidated Balance Sheets of December 30, 1995 and December 31, 1994 F-3 Consolidated Statements of Income for the Three Fiscal Years Ended December 30, 1995 F-4 Consolidated Statements of Stockholders' Equity for the Three Fiscal Years Ended December 30, 1995 F-5 Consolidated Statements of Cash Flows for the Three Fiscal Years Ended December 30, 1995 F-6 Notes to Consolidated Financial Statements F-7 to F-17 UNAUDITED QUARTERLY RESULTS F-18
NOTE: Schedules other than those referred to above and parent company condensed financial statements have been omitted as inapplicable or not required under the instructions contained in Regulation S-X or the information is included elsewhere in the financial statements or the notes thereto. - 24 - 25 3. Exhibits. Exhibit No. Description - ------- ----------- 3(a) - Restated Certificate of Incorporation of Registrant (incorporated herein by reference from Exhibit 3(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 26, 1993). 3(b) - By-laws of Registrant, as amended (incorporated herein by reference from Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1992 [the "1992 Annual Report"]). 4(a) - Specimen certificate for Registrant's Common Stock, par value $1.00 per share (incorporated herein by reference from Exhibit 4(a) to the 1992 Annual Report). 4(b) - Rights Agreement, dated December 7, 1988, as amended, between Registrant and First Chicago Trust Company of New York, as Rights Agent (successor to The Chase Manhattan Bank, N.A.) (incorporated herein by reference from Exhibit 4(d) to Registrant's Report on Form 8-A dated January 29, 1991). 4(b)(i) - Amendment to Rights Agreement, dated March 1990, between Registrant and First Chicago Trust Company of New York, as Rights Agent (successor to The Chase Manhattan Bank, N.A.) (incorporated herein by reference from Exhibit 4(d)(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1989 [the "1989 Annual Report"]). 4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992, between Registrant and First Chicago Trust Company of New York, as Rights Agent (incorporated herein by reference from Exhibit 4(b)(ii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [the "1991 Annual Report"]). 10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder, which are incorporated herein by this reference. 10(b)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated herein by reference from Exhibit 10(hh) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1983 [the "1983 Annual Report"]). 10(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein by reference from Exhibit 10(d)(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 [the "1988 Annual Report"]). - --------------------------------------------------------------------- + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). - 25 - 26 Exhibit No. Description - ------- ----------- 10(c)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock Option Plan (the "1984 Option Plan") (incorporated herein by reference from Exhibit 10(nn) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1984). 10(c)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan (incorporated herein by reference from Exhibit 10(e)(i) to the 1992 Annual Report). 10(d)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended and restated (incorporated herein by reference from Exhibit 10(f) to the 1989 Annual Report). 10(d)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz Claiborne, Inc. and IDS Trust Company (incorporated herein by reference from Exhibit 10(b) to Registrant's Quarterly Report on Form 10-Q for the period ended July 2, 1994). 10(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein by reference from Exhibit 10(g) to the 1992 Annual Report). 10(e)(i)+ - Amendment Nos. 3 and 4 to the Savings Plan (incorporated herein by reference from Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1993 [the "1993 Annual Report"]). 10(e)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended July 2, 1994). 10(f)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement Plan (the "Profit-Sharing Plan") (incorporated herein by reference from Exhibit 10(h) to the 1992 Annual Report). 10(g) - Trust Agreement related to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(jj) to the 1983 Annual Report). 10(g)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(i)(i) to the 1993 Annual Report). 10(g)(ii)+ - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended October 1, 1994). 10(g)(iii)+ - Amendment No. 4 to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended July 1, 1995). - --------------------------------------------------------------------- + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). - 26 - 27 Exhibit No. Description - ------- ----------- 10(h)* - Collective Bargaining Agreement, dated June 1, 1994, between New York Skirt and Sportswear Association, Inc. (of which Registrant is a member) and Amalgamated Ladies' Garment Cutters' Union, Local 10, I.L.G.W.U. and Blouse, Skirt, Sportswear, Children's Wear & Allied Workers' Union, Local 23-25, I.L.G.W.U. 10(i) - Executive Liability and Indemnification Policy No. 81035379F, with Chubb Group of Insurance Companies (the "Insurance Policy") (incorporated herein by reference from Exhibit 10(l) to Registrant's Annual Report on Form 10-K for Fiscal Year ended December 31, 1994 [the "1994 Annual Report"]. 10(i)(i)* - Summary of Extension of the Insurance Policy. 10(j)* - Excess Coverage Directors and Officers Liability Insurance Policy No. ZKA9400406, with Lloyds of London (the "Excess Insurance Policy"). 10(j)(i)* - Summary of Extension of the Excess Insurance Policy. 10(k)+* - Description of 1995 Salaried Employee Incentive Bonus Plan. 10(l) - Lease, dated as of January 1, 1990 for premises located at 1441 Broadway, New York, New York between Registrant and Lechar Realty Corp. (incorporated herein by reference from Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1990). 10(m)+* - Liz Claiborne, Inc. Amended and Restated Outside Directors' 1991 Stock Ownership Plan. 10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan") (incorporated herein by reference from Exhibit 10(p) to the 1991 Annual Report). 10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by reference from Exhibit 10(p)(i) to the 1993 Annual Report). 10(o)+ - Form of Option Agreement under the 1992 Plan for premium-priced options (incorporated herein by reference from Exhibit 10(q) to the 1992 Annual Report). 10(p)+ - Form of Option Agreement under the 1992 Plan (incorporated herein by reference from Exhibit 10(r) to the 1992 Annual Report). 10(q)+ - Form of Restricted Career Share Agreement under the 1992 Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report of Form 10-Q for the period ended September 30, 1995). - --------------------------------------------------------------------- * Filed herewith. + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). - 27 - 28 Exhibit No. Description - ------- ----------- 10(r)+ - Description of unfunded deferred compensation arrangement for Jerome A. Chazen (incorporated herein by reference from Exhibit 10(s) to the 1992 Annual Report). 10(s)+* - Description of Supplemental Life Insurance Plans. 10(t)+ - Description of unfunded death/disability benefits for certain executives (incorporated herein by reference from Exhibit 10(u) to the 1992 Annual Report). 10(u)+ - Form of the Liz Claiborne Section 162(m) Cash Bonus Plan (incorporated herein by reference from Exhibit 10(v) to the 1994 Annual Report). 10(v)+ - Liz Claiborne Supplemental Executive Retirement Plan (the "SERP") (incorporated by reference from Exhibit 10(w) to the 1994 Annual Report). 10(w)+* - Description of the Liz Claiborne, Inc. Bonus Deferral Plan. 10(x)+ - Employment Agreement dated as of May 9, 1994, between Registrant and Paul R. Charron (the "Employment Agreement") (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended April 2, 1994). 10(x)(i)+* - Amendment to the Employment Agreement, dated as of November 20, 1995, between Registrant and Paul R. Charron. 10(y) - Agreement dated as of January 2, 1995, between Registrant and Harvey Falk (incorporated herein by reference from Exhibit 10(y) to the 1994 Annual Report). 21* - List of Registrant's Subsidiaries. 23* - Consent of Independent Public Accountants. 27* - Financial Data Schedule. 29* - Undertakings. (b) Reports on Form 8-K. Not applicable. - --------------------------------------------------------------------- * Filed herewith. + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). - 28 - 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on March 28, 1996. LIZ CLAIBORNE, INC. By /s/Samuel M. Miller ---------------------- Samuel M. Miller, Senior Vice President-Finance/ Principal Financial and Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on March 28, 1996. Signature Title --------- ----- /s/Paul R. Charron Chief Executive Officer, Principal Executive - ------------------------ Paul R. Charron Officer, President and Director /s/Jerome A. Chazen - ------------------------ Jerome A. Chazen Chairman of the Board and Director /s/Lee Abraham - ------------------------ Lee Abraham Director - ------------------------ Eileen H. Bedell Director /s/Ann M. Fudge - ------------------------ Ann M. Fudge Director /s/J. James Gordon - ------------------------ J. James Gordon Director /s/Sherwin Kamin - ------------------------ Sherwin Kamin Director /s/Kay Koplovitz - ------------------------ Kay Koplovitz Director /s/Louis Lowenstein - ------------------------ Louis Lowenstein Director /s/Paul E. Tierney, Jr. - ------------------------ Paul E. Tierney, Jr. Director - 29 - 30 INDEX LIZ CLAIBORNE, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page Number ------ REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 FINANCIAL STATEMENTS Consolidated Balance Sheets as of December 30, 1995 and December 31, 1994 F-3 Consolidated Statements of Income for the Three Fiscal Years Ended December 30, 1995 F-4 Consolidated Statements of Stockholders' Equity for the Three Fiscal Years Ended December 30, 1995 F-5 Consolidated Statements of Cash Flows for the Three Fiscal Years Ended December 30, 1995 F-6 Notes to Consolidated Financial Statements F-7 to F-17 UNAUDITED QUARTERLY RESULTS F-18
NOTE: Schedules other than those referred to above and parent company condensed financial statements have been omitted as inapplicable or not required under the instructions contained in Regulation S-X or the information is included elsewhere in the financial statements or the notes thereto. F-1 31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Liz Claiborne, Inc.: We have audited the accompanying consolidated balance sheets of Liz Claiborne, Inc. (a Delaware corporation) and subsidiaries as of December 30, 1995 and December 31, 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three fiscal years in the period ended December 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Liz Claiborne, Inc. and subsidiaries as of December 30, 1995 and December 31, 1994, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 30, 1995 in conformity with generally accepted accounting principles. As explained in Note 1 to the consolidated financial statements, effective December 27, 1992, the Company changed its method of accounting for income taxes. /s/ Arthur Andersen New York, New York February 19, 1996 F-2 32 CONSOLIDATED BALANCE SHEETS LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ALL AMOUNTS IN THOUSANDS EXCEPT SHARE DATA DECEMBER 30, 1995 DECEMBER 31, 1994 ----------------- ----------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 54,722 $ 71,419 Marketable securities 383,128 258,932 Accounts receivable - trade 126,053 159,766 Inventories 393,363 423,003 Deferred income tax benefits 30,235 32,547 Other current assets 77,710 76,864 ----------- ----------- Total current assets 1,065,211 1,022,531 ----------- ----------- PROPERTY AND EQUIPMENT - NET 239,467 236,560 OTHER ASSETS 24,565 30,571 ----------- ----------- $ 1,329,243 $ 1,289,662 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 138,800 $ 138,581 Accrued expenses 155,449 156,924 Income taxes payable 12,648 7,894 ----------- ----------- Total current liabilities 306,897 303,399 ----------- ----------- LONG-TERM DEBT 1,115 1,227 DEFERRED INCOME TAXES 7,722 2,052 COMMITMENTS AND CONTINGENCIES PUT WARRANTS 25,283 -- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, authorized shares- 50,000,000, issued shares-none -- -- Common stock, $1 par value, authorized shares - 250,000,000, issued shares - 88,218,617 88,219 88,219 Capital in excess of par value 35,075 56,714 Retained earnings 1,255,325 1,164,850 Cumulative translation adjustment (1,256) (1,637) ----------- ----------- 1,377,363 1,308,146 Common stock in treasury, at cost - 14,526,922 shares in 1995 and 11,214,688 shares in 1994 (389,137) (325,162) ----------- ----------- Total stockholders' equity 988,226 982,984 ----------- ----------- $ 1,329,243 $ 1,289,662 =========== ===========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. 33 CONSOLIDATED STATEMENTS OF INCOME
LIZ CLAIBORNE, INC. AND SUBSIDIARIES FISCAL YEARS ENDED ---------------------------------------------------- (52 WEEKS) (53 WEEKS) (52 WEEKS) ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER COMMON SHARE DATA DECEMBER 30, DECEMBER 31, DECEMBER 25, 1995 1994 1993 ------------ ------------ ------------ NET SALES $2,081,630 $2,162,901 $2,204,297 Cost of goods sold 1,290,929 1,407,694 1,453,381 ---------- ---------- ---------- GROSS PROFIT 790,701 755,207 750,916 Selling, general and administrative expenses 600,471 604,421 568,286 Restructuring charge -- 30,000 -- ---------- ---------- ---------- OPERATING INCOME 190,230 120,786 182,630 Investment and other income - net 12,884 10,663 16,151 ---------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 203,114 131,449 198,781 Provision for income taxes 76,200 48,600 73,500 ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 126,914 82,849 125,281 Cumulative effect of a change in the method of accounting for income taxes -- -- 1,643 ---------- ---------- ---------- NET INCOME $ 126,914 $ 82,849 $ 126,924 ========== ========== ========== EARNINGS PER COMMON SHARE: INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE $ 1.69 $ 1.06 $ 1.54 Cumulative effect of a change in the method of accounting for income taxes -- -- .02 ---------- ---------- ---------- NET INCOME PER COMMON SHARE $ 1.69 $ 1.06 $ 1.56 ========== ========== ========== DIVIDENDS PAID PER COMMON SHARE $ .45 $ .45 $ .44 ========== ========== ==========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. 34 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY LIZ CLAIBORNE, INC. AND SUBSIDIARIES
Common Stock Capital in Cumulative Common -------------------- Number of Excess of Retained Translation Stock in ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total ---------- ------- ---------- ----------- ------- --------- --------- BALANCE, DECEMBER 26, 1992 88,218,617 $88,219 $55,528 $ 1,034,280 $(1,410) $(178,842) $ 997,775 Net income -- -- -- 126,924 -- -- 126,924 Exercise of stock options and related tax benefits -- -- 1,171 (2,134) -- 6,687 5,724 Cash dividends paid -- -- -- (35,657) -- -- (35,657) Translation adjustment -- -- -- -- 131 -- 131 Purchase of 4,179,800 shares of common stock -- -- -- -- -- (116,606) (116,606) ---------- ------- ------- ----------- ------- --------- --------- BALANCE, DECEMBER 25, 1993 88,218,617 88,219 56,699 1,123,413 (1,279) (288,761) 978,291 Effect of a change in accounting for available-for-sale securities, net of tax -- -- -- 2,848 -- -- 2,848 Net income -- -- -- 82,849 -- -- 82,849 Exercise of stock options and related tax benefits -- -- 15 (134) -- 431 312 Cash dividends paid -- -- -- (35,304) -- -- (35,304) Adjustment to unrealized gains (losses) on available-for-sale securities, net of tax -- -- -- (6,787) -- -- (6,787) Translation adjustment -- -- -- -- (358) -- (358) Purchase of 1,960,300 shares of common stock -- -- -- -- -- (39,591) (39,591) Issuance of common stock under restricted stock and employment agreements, net -- -- -- (2,035) -- 2,759 724 ---------- ------- ------- ----------- ------- --------- --------- BALANCE, DECEMBER 31, 1994 88,218,617 $88,219 $56,714 $ 1,164,850 $(1,637) $(325,162) $ 982,984 Net income -- -- -- 126,914 -- -- 126,914 Exercise of stock options and related tax benefits -- -- 27 (132) -- 659 554 Cash dividends paid -- -- -- (33,627) -- -- (33,627) Proceeds from sale of put warrants -- -- 3,617 -- -- -- 3,617 Reclassification of put warrant obligations -- -- (25,283) -- -- -- (25,283) Adjustment to unrealized gains (losses) on available-for-sale securities, net of tax -- -- -- 4,549 -- -- 4,549 Translation adjustment -- -- -- -- 381 -- 381 Purchase of 3,749,900 shares of common stock -- -- -- -- -- (74,800) (74,800) Issuance of common stock under restricted stock and employment agreements, net -- -- -- (7,229) -- 10,166 2,937 ---------- ------- -------- ----------- ------- --------- --------- BALANCE, DECEMBER 30, 1995 88,218,617 $88,219 $ 35,075 $ 1,255,325 $(1,256) $(389,137) $ 988,226 ========== ======= ======== =========== ======= ========= =========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. 35
CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED LIZ CLAIBORNE, INC. AND SUBSIDIARIES ------------------------------------------------ (52 WEEKS) (53 WEEKS) (52 WEEKS) DECEMBER 30, DECEMBER 31, DECEMBER 25, ALL DOLLAR AMOUNTS IN THOUSANDS 1995 1994 1993 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 126,914 $ 82,849 $ 126,924 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39,043 35,039 32,278 Other-net 7,524 513 (5,231) Change in current assets and liabilities: Decrease in accounts receivable - trade 33,713 14,669 25,748 Decrease (increase) in inventories 12,362 13,590 (50,714) (Increase) in deferred income tax benefits (416) (15,169) (1,403) (Increase) in other current assets (846) (7,809) (13,671) Increase (decrease) in accounts payable 219 (2,545) 2,388 (Decrease) increase in accrued expenses (1,475) 59,159 10,435 Increase (decrease) in income taxes payable 4,754 (7,653) (6,562) --------- --------- --------- Net cash provided by operating activities 221,792 172,643 120,192 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investment instruments (344,626) (181,739) (375,748) Disposals of investment instruments 227,119 121,713 466,069 Purchases of property and equipment (34,357) (70,594) (91,407) Purchase of trademarks (2,595) (3,193) (1,817) Proceeds from sale of certain assets 17,872 -- -- Other-net 2,102 2,935 4,336 --------- --------- --------- Net cash (used in) provided by investing activities (134,485) (130,878) 1,433 --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt (112) (107) (100) Proceeds from exercise of common stock options 537 297 4,553 Dividends paid (33,627) (35,304) (35,657) Purchase of common stock, net of put warrant premiums (71,183) (39,591) (116,606) --------- --------- --------- Net cash used in financing activities (104,385) (74,705) (147,810) --------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 381 (361) 184 --------- --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS (16,697) (33,301) (26,001) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 71,419 104,720 130,721 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 54,722 $ 71,419 $ 104,720 ========= ========= =========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE STATEMENTS. 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- NOTE 1 SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Liz Claiborne, Inc. and its wholly-owned subsidiaries (the "Company"). All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in accordance with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company is primarily engaged in the design and marketing of a broad range of apparel, as well as accessories and fragrances. The principal market for the products is the United States. CASH EQUIVALENTS All highly liquid investments with a remaining maturity of three months or less at the date of acquisition are classified as cash equivalents. MARKETABLE SECURITIES Investments are stated at market in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities" which was adopted by the Company at the beginning of the 1994 fiscal year. Gains and losses on investment transactions are recognized in income based on settlement dates. Unrealized gains and losses are included in retained earnings until realized. Dividends on equity securities are recorded in income based on payment dates. Interest is recognized when earned. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out for wholesale operations and retail method for retail and outlet operations) or market. PROPERTY AND EQUIPMENT - NET Property and equipment is stated at cost less accumulated depreciation and amortization. Buildings and building improvements are depreciated using the straight-line method over their estimated useful lives of 20 to 39 years. Machinery and equipment and furniture and fixtures are depreciated using the straight-line method over their estimated useful lives of five to seven years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. FOREIGN CURRENCY TRANSLATION Assets and liabilities of non-U.S. subsidiaries have been translated at year-end exchange rates. Revenues and expenses have been translated at average rates of exchange in effect during the year. Resulting translation adjustments have been recorded as a separate component of stockholders' equity. Gains and losses on translation of intercompany transactions with foreign subsidiaries of a long-term investment nature are also included in this component of stockholders' equity. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- FOREIGN EXCHANGE CONTRACTS The Company enters into foreign exchange contracts to hedge transactions denominated in foreign currencies for periods up to 12 months and to hedge expected payment of intercompany transactions with its non-U.S. subsidiaries. Gains and losses on contracts which hedge specific foreign currency denominated commitments are recognized in the period in which the transaction is completed. Transaction gains and losses included in income were not significant in fiscal 1995, 1994 and 1993. As of December 30, 1995, the Company had contracts maturing through December 1996 to purchase at contracted forward rates 42,427,000 Japanese yen and to sell 37,000,000 Canadian dollars and 4,600,000 British pounds sterling. The aggregate U.S. dollar value of all foreign exchange contracts is approximately $35,000,000 at year end 1995, as compared with approximately $50,000,000 at year end 1994. Unrealized gains and losses for outstanding foreign exchange contracts were not material at December 30, 1995 and December 31, 1994. REVENUE RECOGNITION Revenue within wholesale operations is recognized at the time merchandise is shipped from the Company's distribution centers. Retail and outlet store revenues are recognized at the time of sale. CHANGE IN ACCOUNTING PRINCIPLES - INCOME TAXES The Company adopted the provisions of SFAS No. 109 "Accounting for Income Taxes" as of the beginning of fiscal 1993. The effect of this accounting change in fiscal 1993 was an increase in net income of $1,643,000, or $.02 per common share. EARNINGS PER COMMON SHARE Earnings per common share have been computed using the weighted average number of shares outstanding during each period. The inclusion of shares subject to unexercised stock options would not have a material dilutive effect. FISCAL YEAR In 1994, the Company changed its fiscal year to the Saturday closest to December 31 from the last Saturday in December. This change had no effect on the 1995 or 1994 year end date. The 1994 fiscal year reflects a 53-week period, while the 1995 and 1993 fiscal years each reflect a 52-week period. NOTE 2 RESTRUCTURING CHARGE In December 1994, the Company recorded a $30.0 million restructuring charge. The amount included $16.8 million related to the phase out of its First Issue business, $10.2 million for the streamlining of operating and administrative functions and $3.0 million for the restructuring of its Moderate Division. Principal items included in the charge are estimated contract termination costs, severance and related benefits for staff reductions, losses on contracts and the write-off of certain assets. This charge reduced net income by $18.9 million, or $.24 per common share, in the fourth quarter of 1994. The remaining balance of the restructuring charge as of December 30, 1995 was $13.3 million. Of the $16.7 million expended for restructuring costs, $7.1 million was related to severance costs, $5.5 million to losses on contracts and write-off of certain assets and $4.1 million to other miscellaneous costs. The majority of the remaining liabilities should be paid or settled during 1996. First Issue accounted for $53.3 million of fiscal 1995 net sales, as compared with $63.9 million in 1994, and incurred operating losses of $8.9 million in fiscal 1995, as compared with $17.3 million in 1994. The 26 First Issue locations remaining at December 30, 1995 will be converted to other Company-operated retail formats or closed during the first quarter of 1996. 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- NOTE 3 LICENSE AGREEMENT Effective June 30, 1995, the Company entered into an agreement with a third party to operate under license the shoe business formerly operated by the Company's Shoe Division. As part of the transaction, the Company received $18.0 million in cash, plus other consideration valued at $4.9 million, in exchange for inventory and other assets. The Shoe Division had net sales of $38.9 million in the first half of fiscal 1995 and $62.7 million in fiscal 1994. The operating results of the shoe business for each period were not material to the Company's overall operating results. NOTE 4 MARKETABLE SECURITIES The Company adopted the provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" as of the beginning of fiscal 1994. In accordance with SFAS No. 115, prior period financial statements have not been restated to reflect the change in accounting principle. The effect as of December 26, 1993 of adopting SFAS No. 115 was an increase in the opening balance of stockholders' equity of $2,848,000 (net of $1,673,000 in deferred income taxes) to reflect the net unrealized gains on securities classified as available-for-sale, which were previously carried at amortized cost. This increase in stockholders' equity was included in retained earnings. The following are summaries of available-for-sale marketable securities and maturities:
DECEMBER 30, 1995 ----------------------------------------------------------- Gross Unrealized Estimated ----------------------- (DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value - ---------------------- ---- ----- ------ ---------- Tax exempt notes and bonds ......... $409,763 $ 1,285 $ (86) $410,962 U.S. & foreign government securities 12,124 187 (129) 12,182 Collateralized mortgage obligations 7,118 -- (231) 6,887 -------- ------- --------- -------- 429,005 1,472 (446) 430,031 Equity securities .................. 1,721 -- -- 1,721 -------- ------- --------- -------- $430,726 $ 1,472 $ (446) $431,752 ======== ======= ========= ========
DECEMBER 31, 1994 ----------------------------------------------------------- Gross Unrealized Estimated ----------------------- (DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value - ---------------------- ---- ----- ------ ---------- Tax exempt notes and bonds ......... $309,126 $ 83 $ (3,060) $306,149 U.S. & foreign government securities 11,323 -- (905) 10,418 Collateralized mortgage obligations 8,569 3 (1,785) 6,787 -------- ------- --------- -------- 329,018 86 (5,750) 323,354 Equity securities .................. 2,528 -- (588) 1,940 -------- ------- --------- -------- $331,546 $ 86 $ (6,338) $325,294 ======== ======= ========= ========
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - --------------------------------------------------------------------------------
DECEMBER 30, 1995 ------------------------- Estimated (DOLLARS IN THOUSANDS) Cost Fair Value - ---------------------- ---- ---------- Due in one year or less .......................... $128,827 $128,823 Due after one year through three years ........... 244,245 245,206 Due after three years ............................ 55,933 56,002 -------- -------- 429,005 430,031 Equity securities ................................ 1,721 1,721 -------- -------- $430,726 $431,752 ======== ========
These investments include $46,903,000 in 1995 and $64,422,000 in 1994 of tax exempt notes and bonds which are classified as cash and cash equivalents and equity securities which are included in other long-term assets in the consolidated balance sheets. For the fiscal years 1995 and 1994, gross realized gains of available-for-sale securities totaled $956,000 and $674,000, respectively, and gross realized losses totaled $1,167,000 and $412,000, respectively. The adjustment to unrealized gains and losses on available-for-sale securities which was included in retained earnings was a credit of $4,549,000 (net of $2,729,000 in deferred income taxes) and a charge of $6,787,000 (net of $3,986,000 in deferred income taxes) in fiscal 1995 and 1994, respectively. NOTE 5 INVENTORIES Inventories are summarized as follows:
DECEMBER 30, DECEMBER 31, (DOLLARS IN THOUSANDS) 1995 1994 - -------------------------------------------------------------------------------- Raw materials .................... $ 41,972 $ 55,724 Work in process .................. 17,018 21,527 Finished goods ................... 334,373 345,752 -------- -------- $393,363 $423,003 ======== ========
40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- NOTE 6 PROPERTY AND EQUIPMENT Property and equipment consists of the following:
DECEMBER 30, DECEMBER 31, (DOLLARS IN THOUSANDS) 1995 1994 - ---------------------------------------------------------------------------------- Land and buildings ........................... $124,195 $123,746 Machinery and equipment ...................... 137,847 117,686 Furniture and fixtures ....................... 52,848 50,518 Leasehold improvements ....................... 127,422 117,104 -------- -------- 442,312 409,054 Less-accumulated depreciation and amortization 202,845 172,494 -------- -------- $239,467 $236,560 ======== ========
The Company's land and building located in Mount Pocono, Pennsylvania is pledged as collateral against long-term debt of $1,115,000. NOTE 7 INCOME TAXES
The provisions for income taxes are as follows: FISCAL YEARS ENDED (52 WEEKS) (53 WEEKS) (52 WEEKS) DECEMBER 30, DECEMBER 31, DECEMBER 25, (DOLLARS IN THOUSANDS) 1995 1994 1993 - ----------------------------------------------------------------------------- Current: Federal ........... $57,617 $ 48,117 $ 63,273 Foreign ........... 3,003 1,962 4,139 State and local ... 9,300 8,950 12,250 ------- -------- -------- 69,920 59,029 79,662 Deferred - net ......... 6,280 (10,429) (6,162) ------- -------- -------- $76,200 $ 48,600 $ 73,500 ======= ======== ========
Liz Claiborne, Inc. and its U.S. subsidiaries file a consolidated federal income tax return. Deferred income tax benefits and deferred income taxes represent the tax effects of revenues, costs and expenses which are recognized for tax purposes in different periods from those used for financial statement purposes. The current income tax provisions have not been reduced by $27,000 in 1995, $15,000 in 1994 and $1,171,000 in 1993, of tax benefits arising from the exercise of nonqualified stock options. These amounts have been credited to capital in excess of par value. 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- The effective income tax rate differs from the statutory federal income tax rate as follows:
FISCAL YEARS ENDED -------------------------------------------- (52 WEEKS) (53 WEEKS) (52 WEEKS) DECEMBER 30, DECEMBER 31, DECEMBER 25, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------ Federal tax provision at statutory rate ............... 35.0% 35.0% 35.0% State and local income taxes, net of federal benefit .. 3.0 4.4 4.0 Tax-exempt interest income ............................ (3.2) (2.3) (1.5) Other-net ............................................. 2.7 (0.1) (0.5) ---- ---- ---- 37.5% 37.0% 37.0% ==== ==== ====
The components of net deferred taxes arising from temporary differences as of December 30, 1995 and December 31, 1994 are as follows:
(DOLLARS IN THOUSANDS) DECEMBER 30, 1995 DECEMBER 31, 1994 - -------------------------------------------------------------------------------------------------------------------------------- DEFERRED DEFERRED DEFERRED DEFERRED TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY --------- ------------- --------- ------------- Inventory valuation ................................... $ 14,235 $ -- $14,515 $ -- Unremitted earnings from foreign subsidiaries ......... -- 13,481 -- 12,906 Restructuring liability ............................... 4,988 -- 9,857 -- Accounts receivable valuation ......................... 5,486 -- 4,485 -- Unrealized investment (gains)/losses .................. (384) -- 2,313 -- Depreciation .......................................... -- (7,430) -- (6,749) Other-net ............................................. 5,910 (1,671) 1,377 (4,105) -------- -------- ------- -------- $ 30,235 $ 7,722 $32,547 $ 2,052 ======== ======== ======= ========
Management believes that the deferred tax benefits will be fully realized through future taxable income and reversals of deferred tax liabilities. 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- NOTE 8 COMMITMENTS, CONTINGENCIES AND OTHER MATTERS The Company leases office, showroom, warehouse/distribution and retail space, computers and other equipment under various noncancellable operating lease agreements which expire through December 2013. Rental expense for 1995, 1994 and 1993 was approximately $74,902,000, $67,208,000 and $56,664,000, respectively. At December 30, 1995, the minimum aggregate rental commitments are as follows:
(DOLLARS IN THOUSANDS) FISCAL YEAR OPERATING LEASES 1996 ............................................ $ 52,357 1997 ............................................ 48,357 1998 ............................................ 45,855 1999 ............................................ $ 44,607 2000 ............................................ 42,885 Thereafter ...................................... 144,611
Certain rental commitments have renewal options extending through the year 2029. Some of these renewals are subject to adjustments in future periods. Many of the leases call for additional charges, some of which are based upon various escalations, and, in the case of outlet and retail leases, the gross sales of the individual stores above base levels. At December 30, 1995, the Company had entered into commitments for the purchase of raw materials and for the production of finished goods totaling approximately $565,681,000. In 1995, in connection with its stock repurchase program, the Company sold put warrants on 2.0 million shares of common stock in privately negotiated transactions based on the then-current market price of the common stock. The warrants give the holders the right at maturity to require the Company to repurchase shares of its common stock at specified prices. As of December 30, 1995, warrants on 1.0 million shares of common stock had expired unexercised and warrants on an additional 1.0 million shares remained outstanding, which, if exercised, will require the Company to purchase up to 1.0 million shares of its common stock at various dates in 1996. The proceeds of $3.6 million from the sale of put warrants have been recorded in capital in excess of par value. The Company's potential $25.3 million obligation to buy back 1.0 million shares of common stock has been charged to capital in excess of par value and is reflected as put warrants on the consolidated balance sheets as of December 30, 1995. In the normal course of business, the Company extends credit, on open account, to its retail store customers, after a credit analysis based on a number of financial and other criteria. In recent years, a number of corporate groups which include certain of the Company's largest department store customers have been involved in highly leveraged financial transactions and certain of these customers have filed for protection under Chapter 11 of the Federal Bankruptcy Code. Subsequently, certain customers have emerged from protection under Chapter 11. In 1995, three corporate groups of department store customers accounted for 18%, 17% and 11%, respectively, of net sales. In 1994, two corporate groups of department store customers accounted for 17% and 11%, respectively, of net sales. In 1993, two corporate groups of department store customers accounted for 18% and 11%, respectively, of net sales. The Company does not believe that this concentration of sales and credit risk represents a material risk of loss with respect to its financial position as of December 30, 1995. The Company is a party to several pending legal proceedings and claims. Although the outcome of such actions cannot be determined with certainty, management is of the opinion that the final outcome should not have a material adverse effect on the Company's results of operations or financial position. 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- NOTE 9 LINES OF CREDIT As of December 30, 1995, the Company had bank lines of credit aggregating $270,000,000 which were available to cover letters of credit issued by the banks and direct borrowings. The Company has not used these facilities for direct borrowings. At December 30, 1995 and December 31, 1994, the Company had outstanding letters of credit of $210,145,000 and $204,113,000, respectively. NOTE 10 STOCK PLANS In February 1984 and March 1992, the Company adopted plans under which nonqualified options to acquire shares of common stock may be granted to officers, other key employees and directors selected by the plans' administrative committee. Payment by option holders upon exercise of an option may be made in cash or, with the consent of the committee, by delivering previously acquired shares of Company common stock. Stock appreciation rights may be granted in connection with all or any part of any option granted under the plans, and may also be granted without a grant of a stock option. The grantee of a stock appreciation right has the right, with the consent of the committee, to receive either in cash or in shares of common stock, an amount equal to the appreciation in the fair market value of the covered shares from the date of grant to the date of exercise. Options and rights are exercisable over a period of time designated by the committee (but not prior to one year from the date of grant) and are subject to such other terms and conditions as the committee determines. Vesting schedules will be accelerated upon merger of the Company or the happening of certain other events. Options and rights may not be transferred during the lifetime of a holder. Awards under the 1992 plan may also be made in the form of stock appreciation rights, incentive stock options, dividend equivalent rights, restricted stock, unrestricted stock and performance shares. To date, no stock appreciation rights, incentive stock options, dividend equivalent rights, unrestricted stock or performance shares have been granted under the plan. Exercise prices for awards under the plans are determined by the committee; to date, all stock options have been granted at an exercise price not less than the fair market value of the underlying shares on the date of grant. The 1992 plan provides initially for the issuance of up to 2,500,000 shares of common stock with respect to options, stock appreciation rights and other awards granted under the plan, and provides that the Board of Directors may increase such number by an amount equal to 1% of the common stock outstanding as of January 1, 1994 and each January 1st thereafter. At December 30, 1995, there were available for future grant 1,632,892 shares under the 1992 plan. The 1992 plan expires in 2002. The 1984 plan has expired; awards made thereunder prior to its termination remain in effect in accordance with their terms. Since January 1990, the Company has delivered treasury shares upon the exercise of stock options. The difference between the cost of the treasury shares, on a first-in, first-out basis, and the exercise price of the options has been reflected in retained earnings. 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- Changes in common shares under option for the three fiscal years in the period ended December 30, 1995 are summarized as follows:
1995 1994 1993 ----------------------------- ------------------------------ ----------------------------- PRICE RANGE PRICE RANGE PRICE RANGE SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE - ---------------------------------------------------------------------------------------------------------------------------------- Beginning of year....... 2,450,421 $15.75-$58.50 3,728,249 $19.00-$58.50 3,698,417 $15.13-$58.50 Granted................... 1,085,875 15.00- 28.63 123,000 15.75- 25.63 1,125,575 19.00- 42.38 Exercised................. (30,502) 19.00- 29.25 (13,496) 21.00- 22.00 (244,196) 15.13- 40.00 Cancelled................. (923,924) 17.13- 58.50 (1,387,332) 20.13- 58.50 (851,547) 15.50- 58.50 --------- ------------- ---------- ------------- --------- ------------- End of year.............. 2,581,870 $15.00-$58.50 2,450,421 $15.75-$58.50 3,728,249 $19.00-$58.50 ========= ============= ========== ============= ========= ============= Exercisable at end of year............. 829,253 $15.75-$49.50 1,019,674 $19.00-$49.50 892,529 $22.00-$49.50 ========= ============= ========= ============= ========= =============
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 "Accounting for Stock-Based Compensation." This Statement is effective beginning in 1996. Adoption of SFAS No. 123 will require the Company to disclose additional information relating to the stock option plans and the Company's pro forma net income and earnings per share, as if the options granted were expensed at their fair value at the time of grant. On January 11, 1996, 660,750 nonqualified options to acquire shares of common stock were granted to officers and other key employees with an exercise price of $26.88. In June 1995, the committee granted 416,000 shares of common stock to a group of key executives in connection with a "Career Share Program" under the 1992 Plan. These shares are subject to restrictions on transfer and subject to risk of forfeiture until earned by continued employment. The restrictions expire on December 20, 2004. The expiration of the restrictions may be accelerated if the total return of the common stock exceeds that of a predetermined group of competitors or upon the happening of certain other events. The unearned compensation related to this restricted stock grant as of December 30, 1995 was $5,373,000 and is included in retained earnings on the consolidated balance sheets. The unearned compensation amount is currently being amortized over a period of three years in anticipation of the accelerated expiration of the restrictions. In May 1994, the committee granted 85,000 shares of common stock in connection with the hiring of a key executive. These shares are subject to restrictions on transfer and subject to risk of forfeiture until earned by continued employment. The restrictions expire on the last day of each of the Company's fiscal years 1994 through 2001, at the rate of 10,000 shares of common stock per year through the year 2000 and 15,000 shares in the year 2001. The expiration of the restrictions may be accelerated if the market value of the common stock attains certain predetermined levels or upon the happening of certain other events. The unearned compensation related to this restricted stock grant as of December 30, 1995 was $1,560,000 and is included in retained earnings on the consolidated balance sheets. 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- In 1992, options were granted to certain of the Company's senior officers at a price of $58.50 per share, representing 150% of the market price at the date of grant. At December 30, 1995, 50,000 of these options remained outstanding; they will become exercisable on October 21, 1998 and expire on October 21, 2000, subject to certain exceptions. In November 1991, the Company adopted an outside directors' stock ownership plan under which non-employee directors automatically receive, as part of their annual retainer, shares of common stock with a value of $10,000 on each January 1. The shares so issued are nontransferable for a period of three years following the grant date, subject to certain exceptions. In 1995, 4,116 shares of common stock were issued under this plan. Not more than one twentieth of one percent (0.05%) of the shares of common stock outstanding from time to time may be issued under the plan, which will expire in 2002. NOTE 11 PROFIT-SHARING RETIREMENT, SAVINGS AND DEFERRED COMPENSATION PLANS The Company adopted a noncontributory, defined contribution profit-sharing retirement plan in January 1983. The plan covers all eligible U.S. employees who are 21 years of age with one or more years of service and who are not covered by collective bargaining agreements. The plan pays benefits based on an employee's vested account balance in accordance with qualification rules set out in the plan. Vesting begins at 20% after two years of service, and from the 3rd through 6th years, vesting increases by 20% each year until full vesting occurs. Each year, profit-sharing contributions, if any, are determined by the Board of Directors. The Company's 1995, 1994 and 1993 plan contribution expenses, which are included in selling, general and administrative expenses, were $5,572,000, $6,166,000 and $5,646,000, respectively. The Company adopted a 401(k) savings plan effective January 1985. The plan covers all eligible US employees who are 21 years of age with one or more years of service and who are not covered by collective bargaining agreements. The plan pays benefits based on an employee's vested account balance. Subject to Internal Revenue Code limitations, participants may contribute from 1% to 15% of their salary on a before-tax basis. Such contributions are fully and immediately vested. Vesting of the Company's matching contribution is on the same basis as the profit sharing retirement plan. The Company's 1995, 1994 and 1993 plan contribution expenses, which are included in selling, general and administrative expenses, were $2,044,000, $2,082,000 and $2,015,000, respectively. The Company has established an unfunded deferred compensation arrangement for a senior executive which accrues for four years at the rate of $375,000 per year commencing on January 1, 1993. The accrued amount, plus interest, will be payable upon retirement. In 1993, the Company adopted a supplemental retirement plan for executives whose benefits under the profit-sharing retirement plan and the savings plan are constrained by the operation of certain Internal Revenue Code limitations. The supplemental plan provides a benefit equal to the difference between the contribution that would be made for an executive under the two tax-qualified plans absent such limitations and the actual contribution under those plans. Supplemental benefits vest on the same schedule applicable under the tax-qualified plans. The supplemental plan is not funded. The plan as amended also allows participants to contribute up to 100% of their annual bonus and up to 15% of their salary. Eligible executives employed on August 5, 1993 were credited with a retroactive supplemental plan benefit for the prior years in which the legal limitations had affected their tax-qualified plan benefits. The Company's plan expenses, which are included in selling, general and administrative expenses, were $405,000, $362,000 and $773,000 in 1995, 1994 and 1993, respectively. 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LIZ CLAIBORNE, INC. AND SUBSIDIARIES - -------------------------------------------------------------------------------- NOTE 12 STOCKHOLDER RIGHTS PLAN The Company has adopted a Stockholder Rights Plan under which one preferred stock purchase right is attached to each share of common stock outstanding. Pursuant to the Rights Agreement covering the Stockholder Rights Plan, the rights become exercisable ten days, subject to extension, after a party or group acquires or makes a tender offer for 20% or more of the Company's common stock. Each right entitles its holder, under certain circumstances, to buy 1/100 share of a newly created Series A Junior Participating Preferred Stock for $85. If 20% of the Company's common stock is acquired by a party or group, each right not owned by a 20%-or-more stockholder will entitle the holder to purchase Company common stock having a market value of twice the exercise price of the right. In addition, if the Company is involved in a merger or certain other business combinations in which it is not the surviving corporation, each right not owned by a 20%-or-more stockholder will entitle the holder to purchase common stock of the surviving corporation having a market value of twice the exercise price of the right. The rights, which expire on December 21, 1998 and do not have voting rights, may be redeemed by the Company at $.01 per right prior to their becoming exercisable. NOTE 13 CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES During fiscal 1995, 1994 and 1993, the Company made income tax payments of $65,590,000, $72,415,000 and $84,689,000, respectively. Non-cash investing activities which are not included in the cash flow statements for 1995 and 1994 include a direct financing lease receivable with a disposition of property and equipment of $1,120,000 and $1,177,000, respectively, and in 1995, a reversal of the remaining direct financing lease receivable and acquisition of property and equipment of $9,738,000. NOTE 14 ACCRUED EXPENSES Accrued expenses at December 30, 1995 and December 31, 1994 consisted of the following:
DECEMBER 30, DECEMBER 31, (DOLLARS IN THOUSANDS) 1995 1994 ------------------------------------------------------------------------ Payroll and bonuses ................ $ 40,070 $ 27,103 Taxes, other than taxes on income .. 8,072 8,190 Employee benefits .................. 19,153 17,232 Advertising ........................ 15,461 15,807 Restructuring reserve .............. 13,316 28,163 Common stock in transit ............ -- 11,083 Other .............................. 59,377 49,346 -------- -------- $155,449 $156,924 ======== ========
47 UNAUDITED QUARTERLY RESULTS Unaudited quarterly financial information for 1995 and 1994 is set forth in the table below:
March June September December -------------------- -------------------- -------------------- --------------------- All dollar amounts in thousands except per common share data 1995 1994 1995 1994 1995 1994 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- Net sales $527,076 $541,368 $474,849 $490,043 $582,572 $616,788 $497,133 $ 514,702 Gross profit 192,067 187,620 176,698 168,910 228,315 226,408 193,621 172,269 Net income (loss) 28,085 27,437 17,022 15,895 48,165 42,887 33,642 (3,370)* Earnings (loss) per common share $ .37 $ .35 $ .23 $ .20 $ .64 $ .55 $ .45 $ (.04)* Dividends paid per common share $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 - ---------------------------------------------------------------------------------------------------------------------------------
* Includes the after tax effect of a restructuring charge of $18,900 ($30,000 pretax) or $.24 per common share in 1994. 48 INDEX TO EXHIBITS Exhibit No. Description - ------- ----------- 3(a) - Restated Certificate of Incorporation of Registrant (incorporated herein by reference from Exhibit 3(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 26, 1993). 3(b) - By-laws of Registrant, as amended (incorporated herein by reference from Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1992 [the "1992 Annual Report"]). 4(a) - Specimen certificate for Registrant's Common Stock, par value $1.00 per share (incorporated herein by reference from Exhibit 4(a) to the 1992 Annual Report). 4(b) - Rights Agreement, dated December 7, 1988, as amended, between Registrant and First Chicago Trust Company of New York, as Rights Agent (successor to The Chase Manhattan Bank, N.A.) (incorporated herein by reference from Exhibit 4(d) to Registrant's Report on Form 8-A dated January 29, 1991). 4(b)(i) - Amendment to Rights Agreement, dated March 1990, between Registrant and First Chicago Trust Company of New York, as Rights Agent (successor to The Chase Manhattan Bank, N.A.) (incorporated herein by reference from Exhibit 4(d)(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1989 [the "1989 Annual Report"]). 4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992, between Registrant and First Chicago Trust Company of New York, as Rights Agent (incorporated herein by reference from Exhibit 4(b)(ii) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [the "1991 Annual Report"]). 10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder, which are incorporated herein by this reference. 10(b)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated herein by reference from Exhibit 10(hh) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1983 [the "1983 Annual Report"]). 10(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein by reference from Exhibit 10(d)(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 [the "1988 Annual Report"]). - -------------------------------------------------------------------------------- + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). 49 Exhibit No. Description - ------- ----------- 10(c)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock Option Plan (the "1984 Option Plan") (incorporated herein by reference from Exhibit 10(nn) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1984). 10(c)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan (incorporated herein by reference from Exhibit 10(e)(i) to the 1992 Annual Report). 10(d)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended and restated (incorporated herein by reference from Exhibit 10(f) to the 1989 Annual Report). 10(d)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz Claiborne, Inc. and IDS Trust Company (incorporated herein by reference from Exhibit 10(b) to Registrant's Quarterly Report on Form 10-Q for the period ended July 2, 1994). 10(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein by reference from Exhibit 10(g) to the 1992 Annual Report). 10(e)(i)+ - Amendment Nos. 3 and 4 to the Savings Plan (incorporated herein by reference from Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1993 [the "1993 Annual Report"]). 10(e)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended July 2, 1994). 10(f)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement Plan (the "Profit-Sharing Plan") (incorporated herein by reference from Exhibit 10(h) to the 1992 Annual Report). 10(g) - Trust Agreement related to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(jj) to the 1983 Annual Report). 10(g)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(i)(i) to the 1993 Annual Report). 10(g)(ii)+ - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended October 1, 1994). 10(g)(iii)+ - Amendment No. 4 to the Profit-Sharing Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended July 1, 1995). - -------------------------------------------------------------------------------- + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). 50 Exhibit No. Description - ------- ----------- 10(h)* - Collective Bargaining Agreement, dated June 1, 1994, between New York Skirt and Sportswear Association, Inc. (of which Registrant is a member) and Amalgamated Ladies' Garment Cutters' Union, Local 10, I.L.G.W.U. and Blouse, Skirt, Sportswear, Children's Wear & Allied Workers' Union, Local 23-25, I.L.G.W.U. 10(i) - Executive Liability and Indemnification Policy No. 81035379F, with Chubb Group of Insurance Companies (the "Insurance Policy") (incorporated herein by reference from Exhibit 10(l) to Registrant's Annual Report on Form 10-K for Fiscal Year ended December 31, 1994 [the "1994 Annual Report"]. 10(i)(i)* - Summary of Extension of the Insurance Policy. 10(j)* - Excess Coverage Directors and Officers Liability Insurance Policy No. ZKA9400406, with Lloyds of London (the "Excess Insurance Policy"). 10(j)(i)* - Summary of Extension of the Excess Insurance Policy. 10(k)+* - Description of 1995 Salaried Employee Incentive Bonus Plan. 10(l) - Lease, dated as of January 1, 1990 for premises located at 1441 Broadway, New York, New York between Registrant and Lechar Realty Corp. (incorporated herein by reference from Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1990). 10(m)+* - Liz Claiborne, Inc. Amended and Restated Outside Directors' 1991 Stock Ownership Plan. 10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan") (incorporated herein by reference from Exhibit 10(p) to the 1991 Annual Report). 10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by reference from Exhibit 10(p)(i) to the 1993 Annual Report). 10(o)+ - Form of Option Agreement under the 1992 Plan for premium-priced options (incorporated herein by reference from Exhibit 10(q) to the 1992 Annual Report). 10(p)+ - Form of Option Agreement under the 1992 Plan (incorporated herein by reference from Exhibit 10(r) to the 1992 Annual Report). 10(q)+ - Form of Restricted Career Share Agreement under the 1992 Plan (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report of Form 10-Q for the period ended September 30, 1995). - -------------------------------------------------------------------------------- * Filed herewith. + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). 51 Exhibit No. Description - ------- ----------- 10(r)+ - Description of unfunded deferred compensation arrangement for Jerome A. Chazen (incorporated herein by reference from Exhibit 10(s) to the 1992 Annual Report). 10(s)+* - Description of Supplemental Life Insurance Plans. 10(t)+ - Description of unfunded death/disability benefits for certain executives (incorporated herein by reference from Exhibit 10(u) to the 1992 Annual Report). 10(u)+ - Form of the Liz Claiborne Section 162(m) Cash Bonus Plan (incorporated herein by reference from Exhibit 10(v) to the 1994 Annual Report). 10(v)+ - Liz Claiborne Supplemental Executive Retirement Plan (the "SERP") (incorporated by reference from Exhibit 10(w) to the 1994 Annual Report). 10(w)+* - Description of the Liz Claiborne, Inc. Bonus Deferral Plan. 10(x)+ - Employment Agreement dated as of May 9, 1994, between Registrant and Paul R. Charron (the "Employment Agreement") (incorporated herein by reference from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the period ended April 2, 1994). 10(x)(i)+* - Amendment to the Employment Agreement, dated as of November 20, 1995, between Registrant and Paul R. Charron. 10(y) - Agreement dated as of January 2, 1995, between Registrant and Harvey Falk (incorporated herein by reference from Exhibit 10(y) to the 1994 Annual Report). 21* - List of Registrant's Subsidiaries. 23* - Consent of Independent Public Accountants. 27* - Financial Data Schedule. 29* - Undertakings. (b) Reports on Form 8-K. Not applicable. - -------------------------------------------------------------------------------- * Filed herewith. + Compensation plan or arrangement required to be noted as provided in Item 14(a)(3). EX-10.H 2 COLLECTIVE BARGAINING AGREEMENT 1 COLLECTIVE AGREEMENT NEW YORK SKIRT AND SPORTSWEAR ASSOCIATION, INC. with AMALGAMATED LADIES' GARMENT CUTTERS' UNION, LOCAL 10, I.L.G.W.U. and BLOUSE, SKIRT, SPORTSWEAR, CHILDREN'S WEAR & ALLIED WORKERS' UNION, LOCAL 23-25, I.L.G.W.U. JUNE 1, 1994-MAY 31, 1997 2 CONTENTS
ARTICLE NUMBER PAGE - -------------------------------------------------------------------------------- 1. DEFINITIONS ...................................................... 1 2. UNION RESPONSIBILITY ............................................. 2 3. BARGAINING UNIT AND UNION RECOGNITION ............................ 3 4. UNION MEMBERSHIP ................................................. 3 5. MUTUAL OBLIGATIONS ............................................... 4 6. EMPLOYERS' OBLIGATIONS ........................................... 4 7. EMPLOYERS' CONTINUING OBLIGATIONS ................................ 5 8. SUBSIDIARY, AUXILIARY AND AFFILIATED FIRMS ....................... 6 9. ASSOCIATION LIST ................................................. 6 10. OBLIGATION TO MAINTAIN AND DEAL ONLY WITH UNION SHOPS ................................................. 7 11. IMPORTS AND PURCHASES OF GARMENTS ................................ 7 12. CONTRACTOR DESIGNATION-INTEGRATED PRODUCTION ....................................................... 9 13. TRIAL PERIOD ..................................................... 12 14. HOURS-OVERTIME ................................................... 13 15. WAGE INCREASE .................................................... 14 16. RISE IN COST OF LIVING ........................................... 14 17. HOLIDAYS-BEREAVEMENT PAY ......................................... 15 18. MINIMUM WAGE SCALES .............................................. 17 19. CHANGE IN LEGAL MINIMUMS ......................................... 19 20. PIECE RATES ...................................................... 19 21. CHECK-OFF ........................................................ 20
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ARTICLE NUMBER PAGE - -------------------------------------------------------------------------------- 22. EMPLOYERS' RESPONSIBILITY FOR CONTRACTORS PAYMENTS ...................................................... 20 23. SHOP STANDARDS ..................................................... 22 24. CUTTING ............................................................ 24 25. WORKING CARD ....................................................... 26 26. SHOP CHAIRPERSON ................................................... 26 27. DIVISION OF WORK ................................................... 27 28. ASSIGNMENT TO OTHER WORK ........................................... 27 29. CALL-IN PAY-REPORTING TO SHOP ...................................... 28 30. DISCHARGES ......................................................... 28 31. LEAVE OF ABSENCE -VACATION ......................................... 28 32. SPORTSWEAR INDUSTRY TRUST FUND ..................................... 28 33. TIME CLOCKS-MAINTENANCE OF RECORDS- EXAMINATION-FALSIFICATION-ACCESS TO SHOP ......................... 29 34. STRUCK WORK-LABOR DISPUTE-CROSSING PICKET LINES ..................................................... 30 35. ACCESSORIES ........................................................ 31 36. REORGANIZATION-DISCONTINUANCE OF INSIDE SHOP OR REDUCTION OF WORKERS ..................................... 31 37. UNION LABEL ........................................................ 32 38. JURY DUTY .......................................................... 32 39. MOVING SHOPS ....................................................... 32 40. LIQUIDATED DAMAGES ................................................. 33 41. NEW APPLICATIONS FOR MEMBERSHIP IN ASSOCIATION ..................................................... 33 42. BENEFIT FUNDS ...................................................... 34
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ARTICLE NUMBER PAGE - -------------------------------------------------------------------------------- 43. NO-STRIKE, NO-LOCKOUT PLEDGE ...................................... 48 44. ARBITRATION AND ADJUSTMENT OF DISPUTES ............................ 50 45. WORKERS OF OUT-OF-TOWN SHOPS ...................................... 54 46. NO WAIVER OR MODIFICATION OF PROVISIONS ........................... 54 47. EFFICIENCY-NEW MACHINERY .......................................... 55 48. PROVISIONAL REPLACEMENT WORKERS ................................... 55 49. DISABILITY BENEFITS ............................................... 56 50. CONFORMITY TO LAW-SAVING CLAUSE ................................... 56 51. PARENTING/FAMILY LEAVE ............................................ 57 52. COUNCIL FOR AMERICAN FASHION ...................................... 57 53. TERM .............................................................. 59
5 THIS AGREEMENT, made and entered into this 1st day of June 1994, by and between NEW YORK SKIRT AND SPORTSWEAR ASSOCIATION, INC., hereinafter designated as "Association", and AMALGAMATED LADIES' GARMENT CUTTERS' UNION, LOCAL 10, I.L.G.W.U., hereinafter designated as "Local 10," and Blouse, Skirt, Sportswear, Children's Wear and Allied Workers Union, Local 23-25, ILGWU, hereinafter designated as "Local 23-25". Local 10 and 23-25 are hereinafter collectively designated as "the UNION". WITNESSETH: WHEREAS, the Association is an organization composed of manufacturers and jobbers who are engaged in the manufacture and production of garments either on their own premises or in their inside shops or in the shops of contractors or in both, an objective of the Association being to deal collectively with Local 10 and/or Local 23-25; and WHEREAS, Local 10 and Local 23-25 represent a majority of the workers employed, directly or indirectly, in the manufacture and production of garments, for the members of the Association and for other employers in the Metropolitan District (as herein defined); and WHEREAS, the parties hereto recognize that employers and workers alike have much to gain through cooperative effort in establishing conditions that will tend to secure to the workers continuity of employment, a fair living wage, and fair conditions of labor, and in providing methods for an equitable and peaceful adjustment of all disputes that may arise between the parties hereto and the workers and firms they represent so as to secure uninterrupted operation of work. NOW, THEREFORE. the parties thereto agree as follows: ARTICLE FIRST: DEFINITIONS For the purposes of this agreement: 1. "Employer" means a member of the Association. 2. "Manufacturer" means one that produces all or part of its garments on its premises or in its inside shop and from its own materials and, when needed, uses contractors for its surplus production. 3. "Jobber" means one that does not produce garments on its premises or in its inside shop but that has them manufactured by contractors 1 6 and that may or may not employ cutters and/or samplemakers. 4. "Contractor" means one that manufactures garments from cut or uncut materials for a manufacturer or jobber. A contractor also means one that is engaged exclusively in the business of cutting material for garments. 5. "Non-Union Contractor" means one that is not in contractual relations with Local 10 and Local 23-25 or with Local 23-25 or with International Ladies Garment Workers' Union (herein "International") or any of its affiliates. 6. "Inside shop" means a shop wherever situated, owned, operated or controlled by an Employer in which garments are produced and shipped. 7. "Union shop" means one whose owner is bound under collective agreement with Local 10 and Local 23-25 or with Local 23-25 and complies with its terms. 8. "Workers" mean workers in the bargaining unit covered by this agreement as defined in ARTICLE THIRD as well as those who may hereafter be included therein. 9. "Metropolitan District" means the City of New York and all areas in the States of New York, New Jersey, Connecticut and Pennsylvania where garments are manufactured by or for an Employer or any other manufacturer or jobber doing business in the City of New York. ARTICLE SECOND: UNION RESPONSIBILITY 1. The Union shall be the proper party to administer, enforce and obtain compliance with the provisions of this Agreement on behalf of itself, and all bargaining unit workers who are employed by the Employer on its premises or in its inside shop and who are employed in the shops of its contractors. The sole persons authorized or having the power to bind Local 23-25 and/or Local 10 legally with respect to matters arising out of this Agreement or arising out of the relations between the Association, Employers, and Local 23-25 and/or Local 10, or to subject Local 23-25 and/or Local 10 to any liability whatever by reason of any act or omission are the respective Managers of Local 23-25 and/or Local 10 and the respective designated business agents 2 7 servicing the shop (or such substitute or additional persons as Local 23- 25 and/or Local 10 may hereafter formally designate by written notice to the Employer). The Union shall not be responsible for the acts or omissions of any other persons, including shop chairpersons, members and employees of Local 23-25 and/or Local 10. Neither Local 23-25 nor Local 10, in entering into or administering this agreement, is an agent of or acting on behalf of the International. ARTICLE THIRD: BARGAINING UNIT AND UNION RECOGNITION The bargaining unit consists of all workers in the crafts set forth in ARTICLE EIGHTEENTH employed by all firms in the Metropolitan District under collective bargaining agreements with the Union, or with Local 23-25, including all members of the Association. It is agreed that the Union represents the overwhelming majority of such workers as well as the overwhelming majority of workers employed by members of the Association and that the Union or Local 23-25 shall be the sole and exclusive bargaining agent for all workers in the aforesaid bargaining unit. The Employer further agrees that neither it nor any of its members, their officers, agents or other representatives shall, directly or indirectly, discourage membership in the Union or in any of the affiliates of the International. ARTICLE FOURTH: UNION MEMBERSHIP 1. Good standing membership in International shall be a condition of employment with an Employer for all bargaining unit workers who have such membership on the date of execution of this Agreement; it shall also be a condition of employment with an Employer for all other bargaining unit workers on and after the thirtieth (30th) day following the execution or effective date of this agreement, or on or after the thirtieth (30th) day following the beginning of their employment, whichever is the later. 2. "Good standing membership in International", for purposes of this ARTICLE, means such membership in International through membership in Local 23-25 or in Local 10 or in any other affiliate of International. 3 8 ARTICLE FIFTH: MUTUAL OBLIGATIONS 1. The Association by this agreement contracts for and in behalf of itself and all of its members. Local 10 and Local 23-25 by this agreement each contracts for and in behalf of itself, its affiliates and all workers now employed or hereafter to be employed in the bargaining unit by members of the Association, directly or indirectly. 2. The Association obligates itself and its members to observe all the provisions of this agreement in good faith. Local 10 and Local 23-25 each obligates itself and its members that all such provisions will be observed in good faith and that workers in the bargaining unit will perform their work conscientiously, faithfully and efficiently under the terms of this agreement. ARTICLE SIXTH: EMPLOYERS' OBLIGATIONS (a) This Agreement shall be binding upon each Employer and its transferee, successor and assign. The Employer shall give written notice of the existence of this agreement to any transferee, successor or assign and shall provide a copy thereof to the union at least thirty (30) days prior to the effective date of any sale, transfer or assignment. (b) If an Employer sells or transfers the business or the shop or substantially all of its assets, the Employer shall nevertheless continue to be liable for the complete performance of this agreement until the transferee, successor or assign expressly agrees in writing with the Union that it is fully bound by the terms of this agreement. The Impartial Chairman shall have the power to determine whether any person, firm or corporation is a transferee, successor or assign of an Employer. (c) If the Employer opens or obtains a facility which may not be lawfully accreted to the existing bargaining unit, the Employer shall: (i) Not oppose the Union's attempt to organize the facility, but rather shall be neutral and shall issue to its employees a statement of its neutrality in a form acceptable to both parties subject to local laws; and (ii) Agree to recognize the Union as the exclusive collective bargaining representative for the employees in an appropriate bargaining 4 9 unit if the Union obtains authorization cards signed by a majority of the employees in the bargaining unit as verified by an agreed upon third party. Unresolved disputes shall be subject to arbitration under this Agreement. ARTICLE SEVENTH: EMPLOYERS' CONTINUING OBLIGATIONS 1. All members of the Association at the time of execution of this Agreement, and their successors and assigns, and the persons, firms and corporations becoming members thereof subsequent to the execution of this agreement, shall be and continue to remain personally and individually liable under this Agreement for and during the term thereof, irrespective of whether the said member shall cease to be members of the Association prior to the date of expiration of this Agreement, and such liability shall be deemed to have survived the termination of such membership and shall continue for and during the term thereof. The Impartial Chairman shall have the right to determine whether any firm is a successor or an assign of an Employer. Furthermore, an Employer who ceases to be a member of the Association shall deal with the Union individually and shall not be entitled to representation by the Association in adjustment of disputes hereunder or otherwise. Accordingly, the Union shall have the right to require such Employer to post with the Union a bond with surety in an amount determined by the Union, which shall be reasonably computed, to secure the full payment of such Employer's proportionate share of the Impartial Chairman's compensation and the full performance of its other obligations under this Agreement. 2. In order to protect and preserve the rights of employees of the Employer and employees of contractors who manufacture all or part of the Employer's garments, or who manufacture all or part of the garments of the Employer's purchaser or transferee, or who manufacture all or part of the garments of a company, firm or partnership with which the Employer has merged or consolidated, in each case as part of the integrated process of production: a) The Employer shall not enter into partnership or consolidate or merge with or become the successor or assign of another person, firm or concern in the industry unless the new firm assumes all accrued obligations to Local 10 and Local 23-25, to the benefit funds hereinafter 5 10 named, and to the workers of the constituent concern. b) Upon the formation of such a partnership or upon such consolidation or merger, such new firm shall give preference in employment to the workers of the absorbed concern over all other workers except those then employed by the firm that continues in business. c) The Employer shall continue to be liable for the complete performance of this Agreement until and unless said purchaser or transferee expressly acknowledges in writing that it is fully bound by the terms of this Agreement; and d) The company, firm, or partnership with which the merger, consolidation or partnership has taken place shall be fully bound by this Agreement and shall be deemed to have assumed all accrued obligations of the Employer under this Agreement. ARTICLE EIGHTH: SUBSIDIARY, AUXILIARY AND AFFILIATED FIRMS 1. Subsidiary, auxiliary and affiliated firms or corporations of an Employer shall, for the purpose of this Agreement, be deemed to be members of the Association and bound by all the terms of this agreement. In addition, each Employer shall be liable for any violation of this Agreement by its subsidiary, auxiliary or affiliate. 2. The Impartial Chairman shall have the right to determine whether any firm or corporation is a subsidiary, auxiliary or affiliate of an Employer, and shall be guided by proof of facts tending to establish any direct or indirect connection or interest between them, or tending to establish a plan, scheme, or device by an Employer to avoid or evade the provisions of this Agreement by or through such subsidiary, auxiliary or affiliate, directly or indirectly. ARTICLE NINTH: ASSOCIATION LIST The Association shall immediately submit to the Union a full list of its members, together with the names of the officers of such members as are corporations and of the individual members of such as are copartners, and shall notify the Union of all changes in and additions to the list of members as they may occur, as well as all cases of resignations, suspensions and expulsions from the Association. 6 11 ARTICLE TENTH: OBLIGATION TO MAINTAIN AND DEAL ONLY WITH UNION SHOPS The Association agrees that all of its members who manufacture all or part of any garments on their premisses or in their inside shops will maintain Union shops, and that all of its members who have such garments produced by contractors will deal only with such firms as are in contractual relations with the Union or with International or an affiliate thereof. ARTICLE ELEVENTH: IMPORTS AND PURCHASES OF GARMENTS 1. In order to safeguard working standards and employment opportunities of the workers covered by this and other agreements in the apparel industry, it is agreed that garments, whether finished or partly finished, or any component garment or garments, which are to be sold or handled by the Employer separately or together with or as a companion piece to garments, shall not be imported by it as sales agent or in any other capacity, directly or indirectly. No Employer shall otherwise purchase any garments unless its inside shop and the shops of its regularly designated contractors are fully supplied with work, and no purchase shall be made if the purpose of such purchase is to avoid any of the Employer's obligations to all the workers in the crafts covered by this agreement employed on its premises, in its inside shop, or in the shops of its regularly designated contractors and unless the same is bona fide and genuine and made by a firm in contractual relations with the Union or with International or an affiliate thereof. The foregoing garments shall be deemed to include belts, covered buttons, buckles, neckwear, artificial flowers, bias binding, tubular piping, shoulder pads, embroideries, hemstitching, pleating and tucking on garments, as well as other garment accessories. 2. (a)(i) The parties agree that an Employer and its affiliates and subsidiaries (hereafter collectively referred to as the "Employer") engaged in the United States in the production of wholly or partly finished garments or parts thereof, and also engaged in importing a substantial amount of wholly or partly finished garments or parts thereof (hereafter referred to as "imported garments"), violate this Agreement and damage the workers and the interests of the workers protected by the Union by impairing and depreciating the labor standards, employment 7 12 opportunities and stability of employment provided by this agreement, its predecessors and other collective agreements with the Union. The parties also agree that the specific amount of damages to the interests of the workers protected by the Union is difficult if not impossible to ascertain. Accordingly, it is agreed that upon such a violation, the Employer shall pay to the Union liquidated damages equal to one and one-half (1 1/2%) percent of the first cost of a substantial amount of imported garments. (ii) For the purpose of this agreement (1) the first cost of imported garments means the price at which they are sold or offered for sale in the exporting country in the ordinary course of the export trade to the United States plus the cost of packaging for shipment to the United States plus the price of delivery to the side of the overseas vessel, and (2) a substantial amount of imported garments means imported garments that exceed twelve and one half (12 1/2%) percent of the dollar amount of the Employer's total annual volume of net sales calculated by using the imports during the Employer's current fiscal year as compared to the Employer's total annual volume of net sales in the previous fiscal year. (b) Wholly or partly finished garments or parts thereof brought into the United States in any amount pursuant to Item 807 of the Tariff Code or its successor or other similar authority (hereafter collectively referred to as "Item 807 Garments") shall also be deemed imported garments, but the measure of liquidated damages and the deductible hereinabove provided for importing a substantial amount of garments shall not be applicable to any Item 807 Garments. With respect to Item 807 Garments, it is agreed that importation of any such garments violates this Agreement by damaging the interests of the workers as set forth in subsection (A)(i) of this paragraph. The parties also agree that the specific amount of damages resulting from such violation is difficult, if not impossible, to ascertain. Accordingly. it is agreed that upon such violation, the Employer shall pay to the Union liquidated damages equal to eight and one-half (8 1/2%) percent of the labor cost of the Item 807 Garments as set forth on the United States Government Custom Documents or other documents acceptable to the Union. (c) The provision of this Paragraph 2 shall not apply to imports of piece goods, laces, buttons and the like, and to garments and accessories, if, at the time an Employer desires to purchase or manufacture or otherwise obtain such garments or accessories, they could not be 8 13 manufactured in shops under contract with the Union or International or any affiliate thereof. ARTICLE TWELFTH: CONTRACTOR DESIGNATION - INTEGRATED PRODUCTION International, Local 23-25 and Local 10, I.L.G.W.U. have a bona fide interest in the labor conditions existing in all shops manufacturing garments and a close unity of interest exists among the workers manufacturing garments regardless of the respective shops where they are employed. Each Employer and the contractors that manufacture garments or perform work for it or with whom it otherwise deals are closely allied and have a close unity of interest with each other in the manufacture of garments, and in any labor dispute, to the extent of any work performed on garments, an Employer and its contractors are not "neutrals" with respect to each other but are jointly engaged in an integrated production effort. For the purpose of eliminating substandard labor conditions, protecting the employment opportunities and labor standards of all workers in the bargaining unit, whether employed in inside shops or in contractors' shops, achieving greater stability of employment through equitable distribution of work among such workers, and enforcing the provisions of this agreement, the Association and each Employer agree: 1. An Employer that uses contractors' workers to manufacture all or part of its garments, shall confine its production to workers employed (a) on its premises or in its inside shop, if it has one, arid (b) in as many contractors' shops as it actually requires to produce its garments. 2. Every Employer shall have its garments manufactured only in shops under contract with the Union or International or an affiliate thereof. 3. An Employer shall use only contractors that it has duly designated by registering their names and addresses and filing the same with Local 23-25. No designation shall be effective unless approved by Local 23-25. 4. An Employer with an inside shop may designate contractors only if its inside shop is fully supplied with work. 9 14 5. No contractor may be, or continue to be, designated unless it complies with all the terms of its agreement with the Union or International or an affiliate thereof, as the case may be. 6. All contractors designated by an Employer as of May 31, 1994, shall continue to be so designated during the term of this agreement so long as they and each of them continue to maintain shops under agreement with the Union, or the International or an affiliate thereof. 7. Local 23-25 shall immediately submit to the Association a list of all Union shops and shall regularly notify the Association of any changes in the list. 8. The number of contractors that an Employer may designate upon becoming a member of the Association and the number of additional contractors, if any, that an Employer may designate shall be based on (a) the annual volume of its production and (b) the capacity of its designated contractors to produce. If the Employer has just gone into business, it shall designate only so many contractors as it actually requires. 9. A contractor and the workers thereof shall work exclusively for the Employer who designates it unless otherwise approved by Local 23-25. 10. Each Employer shall distribute its work equitably among the workers employed in its inside shop and in its contractors' shops, with due regard to the ability of the contractors and the workers in their shops to produce and perform. 11. If an Employer at any time changes the character of its product and contractors designated by it or any of them and the workers thereof are incapable of meeting its changed requirements, the Employer may substitute or add another contractor in place of, or in addition to, such designated contractor. Such substitution and/or addition may not be made until Local 23-25 and the Association shall agree in writing that the Employer may make such substitution and/or addition. 12. (a) Should a contractor designated by an Employer abandon its designation or stop operating its business, through collusion or by agreement with the Employer, or should the Impartial Chairman terminate the contractor's designation, such contractor's workers shall immediately be absorbed either by the Employer's inside shop or by the 10 15 Employer's remaining designated contractors. (b) In any other case where an Employer's contractor abandons its designation or stops operating its business, the Impartial Chairman shall make such determination concerning the contractor's workers as the merits of each case warrant. If absorption of workers is directed by the Impartial Chairman, it shall be limited to no more than the existing facilities of the Employer's inside shop and of its remaining designated contractors. 13. (a) Whenever it shall appear that an Employer gives work to a non-Union contractor, including a non-Union cutting contractor, or to a non-designated or "struck" contractor, such Employer shall upon notice to it and the Association immediately withdraw such work which has not been put into production and shall within five (5) days withdraw work which has been put into production. (b) Should an Employer be found giving work to or dealing with a non-Union contractor (which shall for all purposes hereunder be deemed to include a non-Union cutting contractor), or to a non-designated contractor, or to a "struck" contractor after notice that such contractor is being struck, such Employer shall pay to Local 23-25 and/or Local 10 an amount of damages measured as follows: (i) Sufficiently high to offset any advantage gained by an Employer through such transaction, giving due regard to the amount involved, and upon which any amount paid under (iii) hereof shall be credited on account; (ii) To pay the costs of any investigations made in connection therewith; (iii) To remunerate all the workers in the crafts covered by this agreement employed on the premises of the Employer or in its inside shop, if it maintains one, and the workers of its regularly designated contractors who have sustained damages by reason of the above violations; (iv) To remunerate the Union for the harm suffered by it as an institution. In the event of the inability of the Association and Local 23-25 and/or Local 10 to agree upon the amount of damages, the same shall be determined by the Impartial Chairman. 11 16 In addition to being required to pay the amounts herein specified, an Employer who shall be twice found to have given work to or dealt with a non-Union or non-designated or struck contractor during the term of this agreement shall automatically lose all rights and privileges under this agreement to the extent of giving the Union the right to take such action as it may deem necessary, including the right to strike against such Employer. Recognizing the difficulty of ascertaining the amounts payable under subdivisions (i), (ii) and (iv) of this paragraph, the sum determined to be payable hereunder shall for all purposes be deemed liquidated damages. All damages hereunder shall be paid to Local 23-25 and/or Local 10 and shall become its sole and exclusive property and part of its general funds, except for such portions thereof expressly stated to be for remuneration to the workers in the crafts covered by this Agreement employed by an Employer on its premises or in its inside shop, if it maintains one, and to the workers of its regularly designated contractors who have sustained damages by reason of the above violations; such portion shall be paid over by Local 23-25 and/or Local 10 to the workers involved. The Association shall in no event be deemed the guarantor or surety of a defaulting member, and the failure of any individual member to pay the amounts due hereunder shall not be deemed a breach of this agreement by the Association or any of its non-defaulting members. 14. Nothing contained in this Article shall be deemed to create or enlarge any existing obligation to the workers employed in any contractor's shop. Nothing herein shall be interpreted as making any Employer responsible for any of the acts of its contractors, except to the extent expressly set forth in this agreement. ARTICLE THIRTEENTH: TRIAL PERIOD The first two weeks of employment of newly hired workers shall be deemed their trial period during which time they may be discharged without regard to cause. Thereafter, they shall be deemed regular employees. During the trial period, workers shall be entitled to the full protection of this agreement, except against discharge. The trial period may be extended for an additional two weeks with the written consent of 12 17 the Union and the affected worker. ARTICLE FOURTEENTH: HOURS - OVERTIME 1. A regular week's work shall consist of thirty-five (35) hours per week divided equally into the first five working days, Monday to Friday inclusive. Work shall begin at 9:00 A.M. and end at 5:00 P.M. unless an earlier hour has been agreed upon between the Employer and the Union for the beginning and ending of the work day, with one hour interval for lunch. 2. There shall be no more than one (1) shift a day. 3. All work outside of the daily regular hours or on Saturday by either a piece worker or a week worker shall be overtime work. All overtime shall be paid at the rate of time and one half. 4. Notwithstanding anything stated to the contrary, where a worker (except for a cutter, marker and grader) voluntarily is late for work on one of the first five working days, overtime for that worker for that day may be paid after seven hours of work; provided, however, any work performed after 6:00 P.M. of that day shall be paid at the worker's overtime rate. This provision shall be inapplicable if a worker is not required by the Employer to commence working at the regular starting time. 5. Overtime shall be voluntary. No overtime shall be performed without the consent of the Union. However, no overtime work shall be performed on Sunday. 6. Should an Employer violate this ARTICLE, the Association and the Union shall agree on the amount of damages the Employer shall pay for each violation. Such amount shall be based on the extent of the violation and shall take into consideration the cost of the enforcement of this ARTICLE, and be sufficiently high to offset any advantage gained by the Employer by such violation. If the Association and the Union cannot agree immediately upon such amount, it shall be determined by the Impartial Chairman. Such amount shall be paid to the Union to defray its cost in enforcing this ARTICLE. 13 18 Since the exact amount of damages is difficult to ascertain, such damages shall, for all purposes, be deemed liquidated damages. ARTICLE FIFTEENTH: WAGE INCREASE Each Employer shall pay all its bargaining unit piece and week workers employed on its premises, in its inside shop and in the shops of its contractors the following increases in wages: 1. Effective with the work week beginning June 6, 1994, all week workers and piece workers shall receive a general increase in wages of four (4%) percent per hour above their then present regular wage. For time workers, the increase shall be given above their then existing wages and for piece workers it shall be added to the prevailing method of computing piece rates in the industry but not compounded. 2. Effective with the work week beginning June 5, 1995, all week workers and piece workers shall receive an additional three (3%) percent per hour above their then regular wages. For time workers, the increase shall be given above their then existing wages and for piece workers it shall be added to the prevailing method of computing piece rates in the industry but not compounded. 3. Effective with the work week beginning June 3, 1996, all week workers and piece workers shall receive a general increase in wages of three (3%) percent per hour above their then present regular wage. For time workers, the increase shall be given above their then existing wages and for piece workers it shall be added to the prevailing method of computing piece rates in the industry but not compounded. ARTICLE SIXTEENTH: RISE IN COST OF LIVING 1. Should the cost of living, as reflected in the U.S. Consumer Price Index for the period June 1994, through November 1995, increase 8 1/2%, over the Consumer Price Index for May 1994, as published in June 1994, then the regular hourly wages of all piece and week workers shall be increased ten (10 cents) cents per hour. Additional hourly increases of five (5 cents) cents per hour shall be paid for each additional increase in the cost of living of 1/2 of 1%. Cost of living increases payable under this provision shall not exceed twenty-five (25 cents) cents per hour. Rises in the Consumer Price Index under this Article Sixteenth shall be measured 14 19 over an eighteen (18) month period, as set forth above, by utilizing the Consumer Price Indexes for Urban Wage Earners and Clerical Workers, U.S. Cities Average, printed and released in the months of June 1994 through December 1995. 2. Wage increases due hereunder shall be effective the first Monday in January, 1996. ARTICLE SEVENTEENTH: HOLIDAYS - BEREAVEMENT PAY (a) 1. All week workers and piece workers shall be paid for the following holidays: (i) New Year's Day, (ii) Chinese New Year or Martin Luther King, Jr.'s Birthday, (iii) Washington's Birthday, (iv) Good Friday, (v) Memorial Day, (vi) Independence Day, (vii) Labor Day, (viii) Columbus Day, (ix) Election Day, (x) Thanksgiving Day, (xi) The Day After Thanksgiving, and (xii) Christmas Day. All such holidays shall be observed. Workers may also refrain from working one day each year on a national or ethnic holiday of their choice, but without pay. 2. Each Employer shall be responsible for and guarantees the payment of full holiday pay for each of the said holidays to all bargaining unit week and piece workers employed by it on its premises or attached to its inside shop, and to the shops of its contractors, irrespective of the day of the week on which the holiday falls and irrespective of whether there is work in the shop during the week in which the holiday occurs, and the workers shall receive payment therefor. 3. Should an Employer give work to a contractor whose shop is located in an area where a holiday fund exists to assure payment of holiday pay by contractors to workers covered by the collective agreement with the International or any of its affiliates, or should the Employer give work to a contractor that is bound by an agreement to participate in such a holiday fund, the Employer agrees to participate in the applicable holiday fund and to be bound by the agreement that governs it. 4. A week worker's holiday pay shall be based on his/her regular weekly wage for a 35 hour week divided by five (5). 15 20 5. A piece worker's holiday pay shall be as follows: EFFECTIVE DATES
CRAFT 09/01/94 09/01/95 09/01/96 - --------- -------- -------- -------- Operators & Finishers $58.00 $58.00 $58.00 Pressers $65.00 $65.00 $65.00 Underpressers $58.00 $58.00 $58.00
6. A worker shall not be eligible for holiday pay if: (i) he or she is absent from work on the work day immediately before or after the holiday, except for a justifiable cause; or (ii) he/she has not been working any time during ten (10) working days immediately before or ten (10) working days immediately after the holiday; or (iii) he or she becomes disabled and the holiday falls on a day beyond the thirtieth (30) day after the said worker last worked in the shop. "Justifiable cause" as used in clause (i) above shall include absence from work on the work day immediately before or after a holiday when the shop is not in operation. (b) BEREAVEMENT PAY An employee who suffers the death of a member of his immediate family and who loses time from scheduled work shall be entitled to be paid by the Employer for up to three (3) such days in accord with rules established by the parties. To be eligible for bereavement pay, an employee must: (i) have been attached to the industry for six months prior to the date of death of the member of the immediate family; (ii) have been scheduled to work on the above-defined bereavement days and except for the death, would otherwise have worked; (iii) when requested, furnish proof of the death and/or date of the funeral. 16 21 Bereavement pay shall be at the holiday pay rate of such worker. For the purposes of this Article, a member of the immediate family shall mean only the employee's legal spouse, natural or legally adopted child, natural or legally adoptive mother and father. (iv) All workers shall be entitled to one (1) day bereavement pay for the death of a grandparent, grandchild, mother or father-in-law which day shall be the day of the funeral. Eligibility for this benefit shall be consistent with existing procedure. ARTICLE EIGHTEENTH: MINIMUM WAGE SCALES 1. Workers in the crafts below shall be employed on a week work basis and shall receive not less than the following guaranteed minimum wage for a 35 hour week: EFFECTIVE DATES
CRAFT 06/06/94 06/05/95 06/03/96 - ----- -------- -------- -------- Cutters, Markers, $396.90 $402.85 $408.80 Graders $11.34/hr $11.51/hr $11.68/hr Samplemakers $259.00 $262.50 $266.00 $7.40/hr $7.50/hr $7.60/hr Finishers $225.75 $229.25 $232.75 $6.45/hr $6.55/hr $6.65/hr Piece Goods Workers & Workers in and about $220.50 $224.00 $227.50 the Cutting Department $6.30/hr $6.40/hr $6.50/hr Floor Workers $199.50 $203.00 $206.50 $5.70/hr $5.80/hr $5.90/hr
2. Workers in the crafts below shall be employed on a piece work basis and shall receive not less than the following guaranteed minimum hourly wage for a 35 hour week: 17 22 EFFECTIVE DATES
06/06/94 06/05/95 06/03/96 -------- -------- -------- Operators $215.25 $218.75 $222.25 $6.15/hr $6.25/hr $6.35/hr Pressers $262.50 $266.00 $269.50 $7.50/hr $7.60/hr $7.70/hr Underpressers $217.00 $220.50 $224.00 $6.20/hr $6.30/hr $6.40/hr
3. Newly hired inexperienced workers, (except for piece work operators, cutters, markers and graders), may be paid fifty (50 cents) cents per hour less than the craft minimum noted in Paragraphs 1 and 2 during the first thirty days of employment. On the thirty-first day after such worker is hired the required craft minimum shall be paid such worker. 4. Where workers in any of the crafts set forth in this numbered ARTICLE receive wages or earnings in excess of the minimums stated herein for such craft, the same shall not be reduced during the term of this agreement. 5. Workers in piece work crafts who perform week work in such crafts shall receive at least ten (10%) percent above the applicable craft minimum. In no event shall workers be transferred from piece work to week work without the consent of Local 23-25. 6. (a) Piece work operators may be designated sub-standard workers only upon the prior written consent of Local 23-25. Consent to such designation will not be granted unless, in the sole opinion of Local 23-25, the following conditions have been satisfied with respect to the piece work operator in question: (i) Work is being performed at a fair and proven piece rate. A piece rate is fair and proven if other piece workers doing the same work have consistently earned substantially above the minimum rate therefor. (ii) The conditions of work, such as work flow, work continuity, and work familiarity are not prejudicial to normal earnings. (iii) The operator has consistently earned less than $4.95 per hour. (b) The minimum hourly rates for substandard workers shall be $5.25 per hour. 18 23 (c) A worker duly designated substandard may continue to be so designated only so long as in the sole opinion of Local 23-25 the conditions of this numbered ARTICLE EIGHTEENTH, paragraph 6 are being fully complied with. In no event may a worker be designated substandard for more than eight (8) weeks without the further prior written consent of Local 23-25. 7. Operators may be employed as learners only with the consent of Local 23-25. Learner operators may be hired and paid pursuant to the following progression schedule: EFFECTIVE DATES
06/06/94 06/05/95 06/03/96 -------- -------- -------- 1st 4 weeks $5.15/hr $5.25/hr $5.35/hr 2nd 4 weeks $5.45/hr $5.55/hr $5.65/hr 3rd 4 weeks $5.75/hr $5.85/hr $5.95/hr after 12 weeks $6.15/hr $6.25/hr $6.35/hr
Regardless of the above, at no time shall operators be paid less than their regular piece work earnings and increments thereon. ARTICLE NINETEENTH: CHANGE IN LEGAL MINIMUMS Whenever the federal legal minimum wage is increased, minimum wages under this Agreement shall be increased so that each will be at least fifteen (15%) percent higher than such legal minimum wage. ARTICLE TWENTIETH: PIECE RATES 1. All piece rates on garments shall be settled on the premises of the Employer in its or its representative's presence, in the presence of a representative of Local 23-25, a representative of the Association and the representative of the workers of the shop. All may participate in the settlement. 2. Piece rates for each separate operation or section in the Employer's shop shall be set to yield a worker of average skill and ability on the specific operation or section, as performed in the shop of the Employer, average straight-time hourly earnings of not less than the 19 24 following: EFFECTIVE DATES
CRAFT 06/06/94 06/05/95 06/03/96 - --------- -------- -------- -------- Operators & Finishers $9.65/hr $9.80/hr $9.95/hr Pressers $11.30/hr $ 11.45/hr $11.60/hr Underpressers $9.65/hr $9.80/hr $9.95/hr
3. Workers shall not be required to work on garments before the piece rates have been adjusted or settled with respect thereto and such refusal to work shall not be deemed a violation of ARTICLE FORTY-THIRD of this Agreement. When piece rates are finally set or settled, such rates shall be retroactive to the inception of the work. ARTICLE TWENTY-FIRST: CHECK-OFF 1. Subject to the requirements of law concerning authorization and assignment by the workers individually, the Employer shall deduct membership dues (which shall be deemed to include periodic fixed dues, initiation fees, and assessments) or, to the extent permitted by law, service charges, from the earnings of its workers monthly and transmit the same to Local 23-25 within 48 hours thereafter. 2. The Employer agrees to honor check-off authorizations for political contributions to the ILGWU Campaign Committee and AFL-CIO COPE from workers who are members of Local 23-25 and Local 10. 3. Sums deducted by the Employer under the provisions of Paragraphs 1 and 2 of this ARTICLE TWENTY-FIRST shall be kept separate and apart from general funds of the Employer and shall be held in trust by the Employer for the benefit of Local 23-25 and Local 10, or the ILGWU Campaign Committee, and AFL-CIO COPE, as the case may be. ARTICLE TWENTY-SECOND: EMPLOYERS' RESPONSIBILITY FOR CONTRACTORS' PAYMENTS To safeguard employment opportunities and labor standards and to 20 25 provide for the full payments of all amounts due to and on behalf of workers who manufacture an Employer's garments in its contractors' shops: 1. (a) Each Employer whose garments are manufactured by workers in any of its contractors' shops, whether in contractual relations with the Union or with any other affiliate of International, shall pay to each such contractor an amount at least sufficient to enable it to provide such workers with the wages, earnings, overtime, and holiday pay provided in this agreement. (b) No part of the amount so paid by the Employer to its contractor shall be used by the contractor as payment for overhead and services. To insure against such diversion of monies intended for such workers, each Employer shall, in addition to the foregoing amount, pay to its contractor a reasonable amount to cover its overhead and/or services that shall be separately agreed upon between them or their representatives. (c) If an Employer fails to pay a contractor the foregoing amount in full and, as a result there is an underpayment of wages, earnings, overtime, or holiday pay to workers in the contractor's shops, the amount of such underpayment shall be paid by the Employer to Local 23-25 and/or Local 10 on behalf of the workers so underpaid. In addition, the employer shall be subject to such additional liquidated damages as may be agreed upon between the Association and Local 23-25 and/or Local 10, or, upon their failure to agree, as may be determined by the Impartial Chairman. 2. (a) If an Employer's contractor fails to pay the wages, earnings, overtime, or holiday pay due to bargaining unit workers in its shop for work manufactured for the Employer, the latter shall be liable to its contractor's workers for the payment of the above. Such Employer's liability shall be limited to such payment for ten (10) full days' work in every instance. (b) If the Employer, however, fails to pay its contractors on or before Tuesday following the week that such work was done, the Employer's liability for wages, earnings, overtime, and holiday pay shall be deemed extended beyond the ten (10) days by one (1) additional day for each additional day that such workers were not so paid because the Employer failed to make such payments to the contractor. 21 26 (c) Where the workers in the shop of a contractor do not receive their holiday pay on or before the Tuesday following the week in which the holiday occurred, by reason of the fact that the shop was closed because of lack of work, the liability of the Employer for the ten (10) full working days shall commence to run in every instance from the Tuesday following the day on which production in such shop is resumed. (d) Local 23-25 shall give the Employer notice of the contractor's failure to make such payments under subparagraphs (a), (b) and (c) above within ten (10) days after the default. Where such payment has been made by check, notice of the default shall be given promptly after the date Local 23-25 receives notice that the check has been dishonored. Notice given by Local 23-25 any time within ten (10) working days after Local 23-25 has actual knowledge of dishonor of the check (excluding Saturdays, Sundays and holidays) shall be deemed promptly given. ARTICLE TWENTY-THIRD: SHOP STANDARDS 1. The Employer shall not reduce wages or settle piece rates. 2. (a) All wages, earnings, overtime and holiday pay shall be paid on the day they were customarily paid, but no later than the Friday following the week in which they were earned. (b) If the Employer pays by check, the Employer shall allow the workers to take time off for cashing the checks. 3. The Employer shall not charge a worker for any damage to materials, unless caused wilfully. 4. All homework is prohibited. The Employer shall not permit any work to be done or performed on garments or parts thereof in tenement houses, basements or in any unsanitary or unsafe building. 5. (a) Employers shall fully comply with all standards of health, sanitation, and safety, including all regulations of the local fire department, as may be required by law. Semi-annual shop fire drills are to be held (preferably in March and September) in which workers are to leave the building or move into safety or fire towers as recommended by the local fire department. Workers hired in the period between drills are to be instructed as to the location of all means of egress from the shop. The Union shall have access to an Employer's shop to determine if an 22 27 Employer is complying with this provision. (b) Nothing herein contained shall be deemed to make the Union, its agents or representatives, liable for any worker's job-related injury, illness or death. (c) Toilets, washrooms, work and rest areas will be kept in a clean condition and will be adequately lighted. (d) The Union and the Association shall designate representatives to a Joint Advisory Committee on Garment Industry Health, Safety and Sanitation, comprised of an equal number of Association and Union representatives. The Committee shall meet periodically. The Committee may in its discretion engage in, but is not limited to, the following activities: (i) Recommendations for the correction of unsafe or harmful conditions and practices, and (ii) Review and analysis of reports of industrial injury or illness, investigation of same, and recommendations for rules and procedures to prevent accidents and disease and for the promotion of the health, safety and sanitation of the workers. (e) A worker may refuse to perform work which she reasonably believes would pose an immediate serious threat of injury or illness. 6. No contracting or subcontracting within a shop shall be permitted. 7. There shall be no dual system of work in the same branch of work in any shop. 8. The Employer shall not make any individual contract with a worker or group of workers. 9. The Employer shall supply necessary machines, tools and thread to its workers. 10. The Employer shall duly comply with all federal, state and local laws, as amended, that relate to employment discrimination or child labor. 11. No owner or officer of the Employer, supervisory employee or any other person outside of the bargaining unit shall perform any work 23 28 of any craft covered by this agreement. The Employer shall pay to the Union as damages for each such violation a sum equal to the minimum weekly wage of the craft involved. 12. The Employer shall not use private employment agencies or any other method of obtaining workers that results in the payment of a fee by workers for obtaining employment. 13. The employment rights of veterans, reservists and members of the National Guard guaranteed by law are incorporated into this Agreement and are enforceable under the grievance and arbitration provisions of this Agreement. 14. (a) It is in the interest of the Employer, the Union and the workers represented by the Union that cooperative relationships be established and promoted, including labor-management committees, in order to improve the welfare of such workers and the success of the Employer's business. The parties agree, however, that such cooperative relationships can only be truly effective with the full involvement of the Union. Accordingly, the Employer agrees to develop and implement such cooperative relationships only in cooperation with the Union, and affording the Union the opportunity to participate meaningfully. (b) The parties also agree that actions and decisions resulting from cooperative relationships shall not be binding upon the employer or upon the Union, or change or modify the provisions of the collective bargaining agreement or other agreements between the parties unless the parties agree thereto in writing. ARTICLE TWENTY-FOURTH: CUTTING 1. (a) An Employer that maintains an inside shop or cutting department shall not send out any goods to be cut unless all of the cutters in its inside shop and/or its cutting department are fully supplied with work. For this paragraph only the term "fully supplied with work" means 35 hours of work equally divided in the first five days of a week. (b) Subject to compliance with the provisions of subparagraph (a) above, or if it does not have an inside shop or cutting department, an Employer may have cutting done on the premises of such of its designated permanent sewing contractors that are equipped to do so on their own premises. No work shall be sent to a sewing contractor for cutting unless said contractor sews that work. 24 29 2. An Employer may send goods to be cut by an individual, firm or corporation that is engaged exclusively in the business of cutting garments (a "cutting contractor"), only upon compliance with each of the following conditions: (a) Each of the cutters in the Employer's inside shop or cutting department and in the cutting department of its sewing contractors that cut for the Employer has been fully employed during a representative period immediately prior thereto. The term "fully employed" as used in this ARTICLE TWENTY-FOURTH shall mean thirty-five (35) hours of work during the first five (5) days of the regular work week plus five (5) hours of overtime during said regular work week. The term "fully employed" shall also mean that where cutters are regularly employed in excess of the foregoing hours, their hours of employment shall not be reduced. (b) Sending or continuing to send goods to a cutting contractor does not result in reducing the number of cutters in the inside shop and/or cutting department and in the shop of its designated permanent sewing contractors who cut for the Employer, their hours of work or earnings. (c) The cutting contractor has been duly designated in advance with Local 23-25 and Local 10 by registering its name and address and filing the same with Local 23-25 and Local 10. No designation shall be effective unless approved by Local 23-25 and Local 10. (d) The cutting contractor is under written contract with International or an affiliate thereof. 3. An Employer that sends work to a cutting contractor shall have the same responsibilities with respect to the employee of such cutting contractor as it has under this agreement with respect to the employees of a sewing contractor. 4. An Employer shall, before sending uncut goods to either a sewing contractor or a cutting contractor, furnish Local 23-25 and Local 10 a written statement setting forth the following information: (a) The names and locations of the contractors to which the goods will be sent; and (b) The quantity and style numbers of the garments to be cut therefor by each contractor. 25 30 5. No Employer shall discontinue cutting in its inside shop or in its cutting department unless by agreement of Local 23-25 and Local 10 or decision of the Impartial Chairman. 6. If an Employer shall install a cutting department, it shall employ cutters first from among those who work for its sewing contractors and second from among those who work for its cutting contractors. Such cutters shall not be subject to any trial period. 7. An Employer shall not send out tracing, marking or grading work without the written consent of Local 23-25 and Local 10. 8. Photomarking machines may be used by an Employer only if the machines are located on the premises of its cutting department, and photocopies of markers shall not be made except by cutters covered by this agreement. 9. Temporary cutters, markers and graders shall be employed only with the written consent of Local 10 for a period to be jointly determined by Local 10 and the Employer but not for longer than three (3) months. Local 10 may agree to extend such temporary employment for an additional three (3) month period. ARTICLE TWENTY-FIFTH: WORKING CARD 1. Concerning only workers represented by Local 10, each Employer agrees that in engaging new workers it will not continue the employment of any worker who is not a member in good standing of International as set forth in ARTICLE FOURTH, unless such worker shall, on the morning following the commencement of such employment, exhibit a temporary working card from Local 10, I.L.G.W.U., directed to the Employer engaging such worker. 2. Each Employer further agrees that it will not permit a new worker who is a member of International to begin work unless and until said worker shall first have presented a working card from Local 10, I.L.G.W.U., directed to the Employer engaging such worker. 3. Local 10, I.L.G.W.U. agrees to issue a working card immediately upon application and without discrimination. ARTICLE TWENTY-SIXTH: SHOP CHAIRPERSON 1. There shall be in the shop of the Employer a shop chairperson 26 31 designated by the Union. ARTICLE TWENTY-SEVENTH: DIVISION OF WORK 1. (a) In the event of lack of work, trial period workers, provisional replacement workers, and temporary cutters, markers and graders shall be laid off first. (b) Assorters, porters, piece goods handlers and workers employed in and about cutting rooms (other than graders, cutters and markers) shall be laid off in order of their seniority with the Employer, the junior worker being laid off first. As work becomes available, laid off workers shall be recalled to work in inverse order of their layoff before any new employees are hired. 2. (a) In all crafts other than the crafts enumerated in subparagraph 1.(b) above, the work available in the shop shall be divided as equally as possible among all the workers competent to do the work. Equal division of work may include dividing the workers into groups that are alternately supplied with work. (b) If there is not a full week's work for all cutters in the shop, the work available shall be divided equally among them by the week. (c) The lead presser shall not be entitled to more work than other pressers in the shop. ARTICLE TWENTY-EIGHTH: ASSIGNMENT TO OTHER WORK 1. Workers who are requested to perform work other than their regular work while their regular work is available shall receive for such other work their average hourly earnings during their last four (4) weeks of full employment on their regular work or their earnings in the new work, whichever is greater. 2. Workers who are requested to perform work other than their regular work while their regular work is unavailable shall receive for such other work the established piece or time rate therefor or a mutually agreed on guaranteed rate, but in no event less than the applicable craft minimum wage for such work provided in this agreement. 27 32 ARTICLE TWENTY-NINTH: CALL-IN PAY - REPORTING TO SHOP 1. A worker who does not have any unfinished work in his or her basket shall not be required to report to the shop to perform less than one-half (1/2) day's work, unless he or she is paid wages or earnings for one-half (1/2) day. 2. A worker who has unfinished work in his or her basket, however small, shall report to the shop for work even though there is less than one-half (1/2) day's work and shall be paid for the amount of work actually performed or for the hours consumed. 3. Notwithstanding the above, a marker, cutter or grader who is required to report to the shop for work shall be supplied with or paid for one full day's work. ARTICLE THIRTIETH: DISCHARGES No worker shall be discharged without good and sufficient cause. A worker unjustly discharged shall be compensated for full loss of time. ARTICLE THIRTY-FIRST: LEAVE OF ABSENCE - VACATION 1. The Employer shall grant reasonable leaves of absence to workers for a justifiable cause. Workers on leaves of absence shall not lose any job rights and shall be entitled to their regular job prior to such absence. 2. Each worker may take three (3) weeks vacation each year during periods mutually agreed upon by the Employer and the worker, but in no event shall such vacation period unreasonably interfere with the Employer's production requirements. ARTICLE THIRTY-SECOND: SPORTSWEAR INDUSTRY TRUST FUND Each Employer shall pay monthly to the Sportswear Industry Trust Fund, a sum equivalent to.15% of the total gross weekly payroll of all the workers set forth in ARTICLE EIGHTEENTH thereof who are employed by it and shall also pay .1125% of the gross amount paid by or due from it to each of its union contractors for direct labor, overhead and 28 33 services. The term "payroll" and "gross amount" used herein shall mean the same as these terms are defined in ARTICLE FORTY-SECOND, paragraph 3(a) and 3(b) hereof. With each payment, the Employer shall file accurate reports on forms prescribed by the Fund. The Sportswear Industry Trust Fund has been established for the purpose of funding the promotion of the sportswear industry and other industry activities in such manner, in such amounts and in all other respects as shall be determined by the Board of Trustees of said Sportswear Industry Trust Fund in its sole discretion. The Board of Trustees shall be composed only of representatives of the Association. The Board of Trustees shall have power to adopt by-laws, rules, regulations and decisions thereunder as it may deem advisable. Local 23-25 shall be the proper party in interest to enforce the payments provided for herein. ARTICLE THIRTY-THIRD: TIME CLOCKS-MAINTENANCE OF RECORDS - EXAMINATION-FALSIFICATION-ACCESS TO SHOP 1. The Employer shall install and maintain a time clock on the premises and each worker covered by this agreement shall punch his or her time card before starting work and at the completion of work and before and after lunch. 2. The Employer shall maintain, during the entire term of this agreement, a full and complete set of records in accordance with regularly accepted accounting practices. Such records shall include, but shall not be limited to, the following: The number of garments manufactured; weekly wages and earnings paid to all of the workers in the crafts covered by this agreement employed by it on its premises or in its inside shop; the number of regular hours worked by each covered worker in each week and the number of overtime hours worked, if any, by each covered worker each week and the wages and earnings paid therefor; the names and addresses of all its contractors; the amount paid to each such contractor and the date of each such payment; all contractors' bills; and all bank statements and cancelled checks for all of its business bank accounts. 3. On request of the Union, each Employer shall permit a duly authorized agent of the Union to have access to the place of business of the Employer at all reasonable times for the purpose of investigating the conditions in the shop, and shall promptly submit to the Union for 29 34 examination such books and records as the Union deems pertinent in order to ascertain whether the provisions of this agreement are being fully complied with. Such examination may be made through an accountant or any other designated representative of the Union. 4. Should an Employer refuse to produce books and records that representatives of the Union and the Association agree should be produced or that are directed by the Impartial, Chairman to be produced, such refusal shall be deemed an admission of the violation of the agreement charged against it by the Union and the Employer shall be liable for the damages including liquidated damages and other relief requested by the Union in its complaint. In such event, the Union shall also have a right to strike the Employer, notwithstanding any provision to the contrary in this agreement. 5. Should it appear to the satisfaction of the Impartial Chairman that the records of an Employer have been falsified in order to conceal dealings with a non-Union or non-designated contractor or a cutting contractor in violation of this agreement or a "struck" shop, or in order to conceal other violations of this agreement, or otherwise to mislead the Union, such Employer shall be deemed to be in non-compliance with this agreement. ARTICLE THIRTY-FOURTH: STRUCK WORK-LABOR DISPUTE - CROSSING PICKET LINES To the extent that a contractor's manufacturing work involves the integrated process of production of the Employer's garments, the Employer and its contractors have a close unity of interest with each other and in any labor dispute, and to such extent, the Employer and its contractors are not neutrals with respect to each other but are jointly engaged in an integrated production effort. Accordingly, the parties agrees, as follows: 1. The Employer shall not, directly or indirectly, give any work to or deal with any of its contractors engaged in the apparel and clothing industry in the integrated process of production against which a lawful strike has been declared or approved by the Union or the International or any of its affiliates or with which any of them has a lawful labor dispute. 2. To the extent permitted by law, it shall not be considered a breach of this agreement on the part of the Union or the International or 30 35 on the part of any worker of any of its contractors performing part of the integrated process of production of the Employer's garments, if such worker refuses to cross any lawful picket line recognized by the Union or the International or to enter upon the lawfully picketed premises of said contractor, either of his or her own volition or by direction of the Union or the International. ARTICLE THIRTY-FIFTH: ACCESSORIES Whenever Local 23-25 notifies the Association that any of its members cause to be manufactured belts, covered buttons, buckles, neckwear, artificial, flowers, bonnaz embroideries, hemstitching, pleating and tucking on garments by, or purchases such articles from a firm that is not in contractual relations with International or an affiliate thereof, or against whom the said International has declared or sanctioned a strike, the Association will immediately order its member to cease further dealings with such firm and the member of the Association shall cease further dealings after receiving such notice, until such strike is settled and/or until such firm enters into a collective Agreement with International or an affiliate thereof. ARTICLE THIRTY-SIXTH: REORGANIZATION-DISCONTINUANCE OF INSIDE SHOP OR REDUCTION OF WORKERS 1. Either party to this Agreement shall have the right to request a change in the time work, piece work, whole garment or section work system of production in an Employer's inside shop. Should the parties fail to agree, the dispute shall be subject to arbitration under ARTICLE FORTY-FOURTH of this agreement. 2. An Employer shall not discontinue the operation of its inside shop, including its cutting room, sample room, or shipping department, or reduce the number of sewing machines in its inside shop, except as otherwise provided in this ARTICLE THIRTY-SIXTH. 3. (a) Upon written notice to the Union, an Employer may in good faith make a bona fide reorganization of its shop if it is required by a permanent curtailment of its business or a fundamental change in its character. (b) Should workers be displaced in the event of such a 31 36 reorganization, they shall be laid off in order of their seniority by the department or operation with the Employer, the junior workers being laid off first; providing the senior workers can perform the available work. If more work becomes available, such laid off workers shall be recalled in inverse order of their lay-off before any new employees are hired. ARTICLE THIRTY-SEVENTH: UNION LABEL Each Employer shall affix the I.L.G.W.U. Union Label to all garments manufactured on its premises, in its inside shop, and in the shops of its contractors in accordance with rules, regulations and procedures promulgated by International, which, together with any amendments thereof, shall be deemed incorporated in this agreement with the same force and effect as if fully set forth herein. All such labels shall be purchased by the Employer from Local 23-25. ARTICLE THIRTY-EIGHTH: JURY DUTY Once during the life of this Agreement for up to five working days, the Employer shall pay a worker who serves jury duty on regularly scheduled work days the difference between such worker's holiday pay rate and the pay (less travel allowance) received for jury service. The Employer shall pay jury duty pay upon presentation by the worker of the voucher he received for jury services. ARTICLE THIRTY-NINTH: MOVING SHOPS 1. During the term of this Agreement, no Employer shall move its factory or cutting department or other operations if it be located within the City of New York, to any place outside of the five boroughs of the City of New York, and if it be located outside of the City of New York, to any place beyond which the public carrier fare is more than the regular single fare established by the Metropolitan Transit Authority. 2. Notwithstanding Paragraph (1) above, an Employer may move its factory, cutting department, or other operations from a location within the City of New York to a location outside of the City of New York if it first obtains the written permission of the Union. The Union may give such permission if, in its sole opinion, the new shop or factory meets the following criteria: 32 37 (a) The Union is given at least thirty (30) days prior written notice. (b) It is just as accessible to the workers employed in the old shop as was the old location. (c) If in an urban community, the public carrier fare between the new shop and the old shop is no more than the regular single fare established by the local transit authority. (d) The labor standards and other conditions of employment are no less favorable to the workers than those which prevail at the old location. 3. If the new location does not meet the above criteria, the Union may nevertheless give written permission if, in its sole opinion, there are extenuating circumstances that justify relocation. ARTICLE FORTIETH: LIQUIDATED DAMAGES Should the Employer intentionally or deliberately violate any provision of this agreement where it is difficult or impossible to ascertain the specific amount of damages suffered by the workers or the Union, then the Employer may be liable to Local 23-25 and/or Local 10 for liquidated damages. In fixing these damages, there shall be taken into account any advantages gained by the Employer through its violation, any deprivation of earnings suffered by workers, any contributions lost by the benefit funds, any institutional harm suffered by the Union and such other factors as are fair under the circumstances. If the Union and the Association are unable to agree upon the amount of liquidated damages for such violation, then the matter shall be treated as a dispute under ARTICLE FORTY-FOURTH. The proceeds of any such liquidated damages shall be paid to Local 23-25 and/or Local 10. ARTICLE FORTY-FIRST: NEW APPLICATIONS FOR MEMBERSHIP IN ASSOCIATION 1. (a) Before admitting a new member to membership in the Association, which membership includes contract coverage with the Union, the Association shall inform the Union in writing of the application for membership, including, in the case of a corporation, the names and resident addresses of the officers, directors and major shareholders of the corporation. In the case of unincorporated 33 38 businesses, the Association shall supply the names and resident addresses of the owners who have an interest in the business. (b) If a strike or dispute exists at the time of application for said membership, involving the applicant and the Union, or International or any affiliate thereof, the Union shall inform the Association in writing within ten (10) working days after the receipt of said notice of application. In such event, the Association shall not admit such applicant to membership until the Union informs the Association that the strike or dispute is settled. 2. After an applicant is admitted to membership in the Association, this Agreement shall supersede any individual agreement it may have with the International or any affiliate thereof, or with the Union, but in no event shall this requirement operate to lower wages or standards presently in force in the applicant's shop. ARTICLE FORTY-SECOND: BENEFIT FUNDS 1. The term "benefit funds" is the collective designation of the I.L.G.W.U. Eastern States Health and Welfare Fund (hereafter "Eastern States, Health and Welfare Fund") Health and Vacation Fund of Amalgamated Ladies' Garment Cutters' Union, Local 10, I.L.G.W.U. (hereafter "Health and Vaction Fund or Local 10"), ILGWU National Retirement Fund (hereafter "Retirement Fund"), I.L.G.W.U. Health Services Plan (hereafter "Health Services Plan"). 2. Until June 30, 1994, the Employer shall be obligated to make the same payments monthly to Local 23-25 for and on behalf of the benefit funds, as heretofore. 3. (a) The term "payroll", hereafter used, means the gross wages (including direct holiday pay, vacation pay, and bonuses), regardless of the period for which payment is made or due, before deductions for taxes, of all the workers in the bargaining unit whether Union workers or non-union workers and whether regular, trial period, provisional replacement workers or temporary markers, cutters and graders. (b) The term "gross amount", hereafter used, means the amount paid or due a contractor for labor, overhead and services, regardless of the period for which payment is made or due, on garments or items manufactured by it for the Employer, whether or not such contractor is under contract with Local 23-25 or with another affiliate of 34 39 the International, or operates a non-union shop and whether or not such contractor has been duly designated in the manner provided in this agreement. With respect to a contractor that is under contract with the Union, or with another affiliate of International, said gross amount shall not include State Unemployment Taxes, Federal Unemployment Taxes, Federal Social Security Taxes; but it shall include, without exception, all other amounts paid or due to the contractor. 4. (a) Beginning July 1, 1994, the Employer shall pay monthly to Local 23-25 on behalf of the benefit funds a sum equivalent to twenty-eight and five-eighths (28.625%) percent and effective July 1, 1995, a sum equivalent to twenty-nine and seven eighths (29.875%) percent and effective July 1, 1996, a sum equivalent to thirty and seven eighths (30.875%) percent of its weekly payroll, excluding the payroll of workers covered by the Northeast Department or other I.L.G.W.U. affiliates. (b) Beginning July 1, 1994, the Employer shall also pay monthly to Local 23-25 on behalf of the benefit funds a sum equivalent to 21.46875% and effective July 1, 1995, a sum equivalent to 22.40625% and effective July 1, 1996, a sum equivalent to 23.15625% of the gross amount paid by or due from it to each of its contractors, excluding contractors whose workers are covered by the former Northeast Department Health and Welfare Fund or other I.L.G.W.U. affiliates. 5. (a) Beginning July 1, 1994, the Employer shall pay monthly to Local 23-25 on behalf of the benefit funds a sum equivalent to 27.625% and beginning July 1, 1995, a sum equivalent to twenty-eight and seven- eighths (28.875%) percent and beginning July 1, 1996, a sum equivalent to twenty-nine and seven eighths (29.875%) percent of the weekly payroll of all the workers who are covered by the Northeast Department. (b) Beginning July 1, 1994, the Employer shall also pay to Local 23-25 monthly on behalf of the benefit funds a sum equivalent to 20.71875% and, beginning July 1, 1995, a sum equivalent to 21.65625% and beginning July 1, 1996, a sum equivalent to 22.40625% of the gross amount paid by or due from it to each of its contractors whose workers are covered by the Northeast Department. (c) Beginning July 1, 1994, when an Employer sends work to, or pays statements rendered by, a contractor whose workers are covered 35 40 by a collective agreement in effect with another affiliate of the International, (other than Local 10 or the Northeast Department, I.L.G.W.U.), such Employer shall pay to Local 23-25, on behalf of the benefit funds, the following rate of contribution: 20.34375% effective July 1, 1994; 21.28125% effective July 1, 1995; and 22.03125% effective July 1, 1996 of the statement rendered by the contractor. 6. (a) Each Employer shall, in addition, pay monthly to Local 23-25 on behalf of the Health and Welfare Funds, an additional sum equivalent to .40% of the Employer's total payroll to enable the Funds to make payment of the Employer's share of federal social security taxes (FICA), on certain benefits paid by the Funds to the workers eligible there for. (b) Each Employer shall also pay monthly to Local 23-25 on behalf of the Health and Welfare Funds, a sum equivalent to.30% of the gross amount paid by or due from it to each of its contractors for the purpose set forth in the preceding paragraph. (c) If there is an increase in the Employer's share of federal social security taxes (FICA), the Employer will pay such additional sum to Local 23-25 to enable the Funds to make full payment of the Employer's share of federal social security taxes (FICA). 7. No worker shall be required by the employer to make any contributions whatsoever to the benefit funds. 8. The aforesaid payments shall be allocated among and paid over by Local 23-25 as follows: (a) To the Eastern States Health and Welfare Fund For Contributions Related to Local 23-25 Members or Contractors (i) 15.40% and effective July 1, 1994, 16.65% and effective July 1, 1995, 17.90% and effective July 1, 1996, 18.90% received from each Employer on the payroll of all workers in the bargaining unit (except markers, graders, cutters, and all other workers covered by health and welfare funds of other affiliates of International). (ii) 11.55% and effective July 1, 1994, 12.4875% and effective July 1, 1995, 13.425% and effective July 1, 1996, 14.175% received from each Employer on the gross amount paid by or due from it to each 36 41 of its contractors (except for the amount received for markers, graders, cutters, and all other workers covered by health and welfare funds of other affiliates of International). (b) To the Health and Vacation Fund or Local 10 The percentages set forth in 8(a) (1) and (ii) above received from each Employer for markers, graders and cutters employed on its premises, in its inside shop, in its cutting department or in its contractors' shops who are covered by the Health and Vacation Fund of Local 10. (c) To the Eastern States ILGWU Health and Welfare Fund For Workers Covered By the former Northeast Department (i) Until June 30, 1994, 14.40% and beginning July 1, 1994, 15.65% and beginning July 1, 1995, 16.90% and beginning July 1, 1996, 17.90% received from each Employer on the payroll of all workers covered by the former Northeast Department Health and Welfare Fund. (ii) Until June 30, 1994, 10.80% and beginning July 1, 1994, 11.7375% and beginning July 1, 1995, 12.675% and beginning July 1, 1996, 13.425%, on the gross amount paid by it to each of its contractors whose workers are covered by the former Northeast Department Health and Welfare Fund. (d) To Health and Welfare Funds of Other Affiliates of International The balance of monies collected after allocation is first made to the Retirement Fund, Health Services Plan and for FICA, shall be allocated to the Health and Welfare Funds of other affiliates of International. (e) To the Retirement Fund (i) 9.0% received from each Employer on the payroll of all workers in the bargaining unit. (ii) 6.75%, received from each Employer on the gross amount paid by or due from it to each of its contractors. (f) To the Health Services Plan: (i) Three and three-eighths (3.375%) percent received from 37 42 each Employer on the payroll of all workers in the bargaining unit. (ii) 2.53125%, received from each Employer on the gross amount paid by or due from it to each of its contractors. (iii) In the last half year of this Agreement Local 23-25 may request a re-opener concerning contributions to the Health Services Plan if the Trustees of that Plan determine that the Plan requires additional contributions; provided that any contributions to become payable hereunder will not be effective prior to January 1, 1997 and not be greater than one-half (1/2%) of one (1%) percent. (g) Collection: The sums paid to Local 23-25 on behalf of and allocated by it to the various funds referred to above shall be subject to a reasonable collection fee. (h) To Local 23-25: To the extent, if any, that an Employer's payments to the benefit funds are computed upon payments made for garments manufactured by non-Union or "struck" contractors or upon piece goods cut by cutting contractors in violation of this agreement, such payments whether made to Local 23-25 or to any of the benefit funds, shall be received solely as payment of liquidated damages for such violation to and on behalf of Local 23-25 and not as payments for and on behalf of the benefit funds. Such liquidated damages shall be paid over to Local 23-25 and the same shall become its sole and exclusive property and part of its general funds. 9. The benefits paid by each benefit fund shall not constitute or be deemed wages. 10. The requirement that Employers' payments to Local 23-25 on behalf of the benefit funds be made on the basis of a specified percentage of their total gross weekly payroll and a lesser percentage on the total gross amount paid to each of their contractors is merely the measuring rod that determines the extent and the amount of the Employers' obligations and has no relation to eligibility of workers for benefits from the benefit funds. 38 43 11. (a) Each Employer shall remit its payments to Local 23-25 together with two statements on forms heretofore approved by it not later than the 15th of each month for all monies due for the calendar month immediately preceding. One statement shall set forth the names of all the workers in the crafts covered by this agreement employed by it, their social security numbers, their crafts, their sex, the weekly period for which the wages were paid, the straight-time and overtime pay (before deduction for taxes), and the number of straight-time and overtime hours worked within that period; the other statement shall state the full amount of the payment remitted, how much thereof is allocated to the payroll of all of the workers in the crafts covered by this agreement employed by it, how much thereof is allocated to payments to its contractors and the period which the payment covers. (b) Should an Employer fail to remit such reports or payments to Local 23-25 by the 15th of each month for the calendar month immediately preceding, Local 23-25 shall have the right to deem such Employer in non-compliance with this agreement after Local 23-25 has given the Association ten (10) days written notice of the Employer's default and the report or payment from such Employer has not been received by Local 23-25 within such ten (10) days. Local 23-25 shall also have the right to proceed against such Employer directly before the Impartial Chairman (a) for an award directing it to remit its reports, and (b) for an award for the amount due. In exceptional cases, the Association may, within ten (10) days after the date of Local 23-25's notice to it of its member's default, apply to the Impartial Chairman for a hearing and if the Impartial Chairman finds there are justifiable reasons therefor he may order such hearing, but the hearing must be held and the Impartial Chairman's decision must be rendered within the aforementioned ten (10) days. (c) If the required payment of employee benefit fund contributions due under this Article are not actually received by Local 23-25 as such contributions are required to be paid, then Local 23-25, on behalf of the funds, shall be entitled to collect, and the delinquent Employer shall be liable to pay, interest at the annual rate of nine (9%) percent on the unpaid balance of said contributions chargeable from the first day such employee benefit fund contributions were due to be paid under this Article. 12. Local 23-25 shall be the proper party in interest to enforce 39 44 remittances of reports and payments of amounts due from any defaulting Employer and such remedy shall be in addition to any other rights that Local 23-25 or the Union may have under this agreement against such defaulting Employer. 13. The Board of Trustees or other body administering any of the benefit funds, except the ILGWU National Retirement Fund, is hereby authorized and empowered, in its sole discretion and upon such basis as it deems desirable, to transfer or mingle the assets now existing or hereafter established and provided for in a collective agreement with the International Ladies' Garment Workers' Union or an affiliate thereof. In the event of such mingling, transfer, or merger, the amounts hereinabove provided to be allocated towards the respective funds shall thereafter be paid over to the fund or funds with which there has been such mingling, transfer or merger. 14. Except as provided in Paragraph 13 of this ARTICLE FORTY-SECOND, the monies of each benefit fund shall be kept separate and apart from all other monies. 15. Periodic audits of each benefit fund shall be made by accountants designated by its Board of Trustees. A statement of the results of each audit shall be made available for inspection by interested persons at the principal office of each benefit fund and at such other places as may be designated by its Board of Trustees. 16. Each benefit fund shall be maintained in accordance with its by-laws and/or rules and regulations. 17. The by-laws and/or rules and regulations of each benefit fund provide that it shall be a continuing fund and provide the method of its operations if payments for or on its behalf are discontinued. 18. Only the assets of the respective benefit funds shall be available for the payment of benefits payable by that fund and only to the extent that such fund is solvent and able to make such payments. 19. No benefits or monies payable from any of the benefit funds shall be subject in any manner to anticipation, alienation, sale, transfer, or otherwise assign, pledge, garnishee, encumbrance or charge and any attempt to so anticipate, alienate, sell, transfer, or otherwise assign, pledge, garnishee, encumber or charge any benefit fund shall be void Nor shall any benefits be subject to or payable for the debts, contracts, 40 45 liabilities or torts of any person entitled to receive such benefits. Approval of an application for benefits by each fund constitutes an agreement between the covered worker and the fund that upon notice to each fund of any assignment, transfer, pledge, encumbrance, charge or loan against any benefits by such covered worker, or upon the issuance of any attachment, garnishee, or any other order or process of any court by which benefits payable by each fund to such covered worker shall be sought to be taken, in whole or in part, all rights of such covered worker to any and all benefits accrued, or whenever payable, shall forthwith cease and terminate until the notice of assignment, transfer, pledge, encumbrance, charge or loan against his benefits has been cancelled, or the attachment, garnishee, or other order or process of the court has been fully discharged. 20. The benefit funds shall have no power to anticipate or advance the payment of any benefits to any covered worker. 21. None of the corpus or income of any benefit fund shall revert to the Association or to any Employer or firm, or association of employers or firms, or to the Union or Local 23-25 or International or any of its affiliates. 22. No liability whatsoever shall attach hereunder to Local 10 or to Local 23-25, or to International, or to the Board of Trustees of the benefit funds, nor to any of the officers, agents and representatives of any of the foregoing by reason of any alleged obligation arising out of or in connection with any of the benefit funds. 23. No liability whatsoever shall attach hereunder to any association under collective agreement or employer under independent agreement with Local 10 and Local 23-25 or with Local 23-25 nor to any of the officers, agents and representatives of any of them by reason of any alleged obligation arising out of or in connection with any of the benefit funds, except that members of such association and independent employers shall be obligated to make payments regularly to Local 23-25 in the amount set forth hereinabove. 24. Only to the extent permitted by law, (i) neither the Board of Trustees of any of the benefit funds, its officers or members, nor any of the committees thereof, its officers or members, shall be liable for any error of judgement or for any act of omission or commission in the performance of their duties in connection with the administration of any of the respective benefit funds or by reason of any fact or circumstance 41 46 arising out of the premises, except for his own intentional default or willful misconduct if the same constitutes a willful breach of trust, and (ii) the officers and members of the Board of Trustees and of the Committees of the respective benefit funds shall be indemnified by the benefit fund that they serve for any loss, damage, liability or expense that they may sustain by reason of their services for or on behalf of such benefit fund provided the same did not result from and was not occasioned by their own intentional default or willful misconduct if the same constitutes a willful breach of trust. EASTERN STATES HEALTH AND WELFARE FUND 25. This Fund was established prior to January 1, 1946, and is hereby continued during the term of this agreement. 26. All monies allocated and paid over to the Eastern States Health and Welfare Fund and all income and accumulations derived therefrom are hereby constituted an irrevocable trust. 27. Monies of the Fund shall be used pursuant to law for the following purposes: (a) To provide eligible bargaining unit workers (except markers, graders, cutters and pressers) who are within the jurisdiction of Local 23-25, disability benefits; medical, surgical, hospital and post-hospital benefits; eyeglass benefits; contributions towards vacation benefits which shall be paid wholly independent of and without relation to any particular vacation week in the year arid irrespective of whether or not the worker takes a vacation. A specified vacation period for all or part of the shop or shops of a member of the Association shall require the approval of the Union; (b) to provide other services, care and benefit for and on behalf of such workers, their spouses and minor dependents as are permitted by law; (c) to make payments on a per capita basis for the maintenance and operation of Union Health Centers which service workers covered by the Fund and to pay such Centers for diagnostic and ambulatory health services rendered to such workers; (d) to make payments on a per capita basis to Unity House for its maintenance and operation to enable it to provide vacation facilities to workers who are covered by the Fund; (e) to contribute towards the maintenance and support of hospitals, sanitoria, centers, clinics, etc., which service workers covered by the Fund without charge or give them priority in 42 47 treatment; (f) to make payments to the I.L.G.W.U. Death Benefit Fund of its charges to provide death benefits to beneficiaries of eligible workers who are covered by the Fund; (g) to set aside sufficient reserves for ensuing years; (h) to invest the reserves; and (i) to pay the operating and administrative expenses of the Fund. 28. The Fund shall continue to be maintained and administered by representatives of Local 23-25 or other related I.L.G.W.U. affiliates through a Board of Trustees selected by Local 23-25 or representatives of other related I.L.G.W.U. affiliates. The Board of Trustees shall,among other things, have the power to determine the types and amounts of health and welfare benefits and other services,contributions toward vacation benefits to workers who are eligible therefor,and the services, care and benefits which eligible workers, their spouses and minor dependents, shall be entitled to receive, and to pay the same. 29. The Board of Trustees has adopted rules and regulations including the detailed basis upon which payments from the Fund will be made to eligible workers. The rules and regulations of the Fund are hereby incorporated herein by reference and made a part hereof and the parties hereto agree to be bound thereby. The Board of Trustees may add to, amend or modify the rules and regulations from time to time, without notice, whenever in its judgment it is necessary to do so to carry out more effectively the purposes of the Fund. Any additions, amendments or modifications when adopted shall supersede the previous rule and regulation involved and shall be deemed incorporated herein by reference and made a part hereof. The aforementioned powers and duties of the Board of Trustees shall not be considered in any way whatsoever as a limitation on the powers and duties of the Board of Trustees to do any and all other things that may be necessary or incidental to the proper operation, administration and maintenance of the Fund and to fully effectuate its purposes. 30. The Fund is intended to be permanent and continuing. If, at the expiration of this collective agreement and/or independent agreements entered into by Local 10 and Local 23-25 or by Local 23-25, new agreements are entered into providing for payments by employers to Local 23-25 intended for the Fund, the Board of Trustees shall continue to effectuate the purposes of the Fund, and shall continue to accept 43 48 applications for benefits subject to the rules and regulations of the Fund then in effect or any amendments which may thereafter be made thereto. However, if, at the expiration of the subsisting or any succeeding collective and independent agreements, employers should no longer be obligated to make payments to Local 23-25 intended for the Fund, the Board of Trustees shall make adequate provision to continue, out of the monies in the Fund, to pay benefits in conformity with the rules and regulations of the Fund then in effect or any amendments that may thereafter be made thereto; the balance, if any shall be used to provide benefits to any additional applicants therefor who are then qualified to receive the same in such amounts and in such form and manner and on such equitable and non-discriminatory basis as the Board of Trustees shall determine, until as many eligible workers have received benefits as the balance in the Fund will permit. HEALTH AND VACATION FUND OF LOCAL 10. 31. The parties hereto on behalf of themselves and their members hereby acknowledge that the Health and Vacation Fund of Local 10 was established prior to January 1, 1946, for the purpose of providing health and welfare benefits and contributions toward vacation benefits and other benefits not inconsistent with law applicable to health and welfare funds to markers, graders and cutters, and pay the operating and administrative expenses of that Fund. 32. The above Fund is an irrevocable trust. 33. The monies allocated and paid over by Local 23-25 to the above Fund shall be used by such Fund for the above purposes as set forth in its by-laws or rules and regulations. 34. The Health and Vacation Fund of Local 10 is administered by Amalgamated Ladies Garment Cutters Union, Local 10, I.L.G.W.U. through a Board of Trustees selected by its Executive Board. 35. The Board of Trustees of said Fund has adopted rules and regulations which include the detailed basis upon which benefit payments will be made to eligible workers entitled thereto and their minor dependents. The by-laws and/or rules and regulations of said Fund are incorporated herein by reference and are made a part hereof and the parties agree to be bound thereby. 44 49 36. The Board of Trustees of the aforesaid Fund shall have the power to modify, from time to time, its by-laws and/or rules and regulations, including the detailed basis upon which payments are made to eligible workers entitled to benefits therefrom and their dependents. The parties hereto agree to be bound thereby and such modifications, when adopted, shall be deemed incorporated herein by reference and become a part hereof. The aforementioned enumerated powers and duties of the Board of Trustees of the aforesaid Fund shall not be considered in any way whatsoever as a limitation on the powers and duties of the Board of Trustees of the aforesaid Fund to do any and all other things that may be necessary or incidental to the proper operation, administration and maintenance of the said Fund and to fully effectuate its purposes. OTHER INDUSTRY COLLECTIVELY BARGAINED HEALTH AND WELFARE FUNDS ESTABLISHED BY OR THROUGH INTERNATIONAL OR OTHER AFFILIATES THEREOF 37. The parties hereto on behalf of themselves and their members hereby acknowledge that the Eastern States ILGWU Health and Welfare Fund and other industry collectively bargained health and Welfare funds have been established as irrevocable trusts by or through International or other affiliates thereof either prior or subsequent to January 1, 1946, for the purpose of providing health and welfare benefits and contributions toward vacation benefits and other benefits not inconsistent with law applicable to health and welfare funds to workers covered by collective or independent agreements in such other industries and to pay the operating and administrative expenses of the said funds. 38. The monies allocated and paid over by Local 23-25 to each of the above Funds shall be used by such Funds for the purposes as set forth in their by-laws or rules and regulations. 39. Contributions towards vacation benefits shall be paid wholly independent of and without relation to any particular vacation week in the year and irrespective of whether or not the worker takes a vacation. 40. Each such Fund is administered by a Board of Trustees which has adopted by-laws and/or rules and regulations which include the detailed basis upon which benefit payments will be made to eligible workers entitled thereto. The by-laws and/or rules and regulations of each such Fund are incorporated herein by reference and are made a part 45 50 hereof and the parties hereto agree to be bound thereby. 41. The Board of Trustees of each of these Funds shall have the power to modify, from time to time, such by-laws and/or rules and regulations, including the detailed basis upon which payment from each of these Funds are made to eligible workers entitled to benefits therefrom. The parties hereto agree to be bound thereby and such modifications, when adopted, shall be deemed incorporated herein by reference and become a part hereof. The aforementioned enumerated powers and duties of the Board of Trustees of each of these Funds shall not be considered in any way whatsoever as a limitation on the powers and duties of the Board of Trustees of each of these Funds to do any and all other things that may be necessary or incidental to the proper operation, administration and maintenance of the aforesaid Funds and to fully effectuate their purposes. RETIREMENT FUND HEALTH SERVICE PLAN 42. The parties hereto on behalf of themselves and their members hereby acknowledge that there have been heretofore established the Retirement Fund and Health Services Plan, each of which constitutes an irrevocable trust. 43. The monies allocated and paid over by Local 23-25 to the Retirement Fund shall not be used for any purpose other than to provide benefits to workers on their retirement or to their beneficiaries on the death of such workers and to pay the operating and administrative expenses of the Fund. 44. The monies allocated and paid over by Local 23-25 to the Health Services Plan shall not be used for any purpose other than to provide drugs, medication and other health service benefits to eligible workers and to pay the operating and administrative expenses of the Fund. 45. Each of the aforesaid Funds is administered by a Board of Trustees composed of Union representatives and an equal number of representatives of employer contributors to each Fund. The Board of Trustees of each Fund has adopted by-laws, and rules and regulations which include the detailed basis upon which payments from each Fund 46 51 will be made to eligible workers entitled to benefits therefrom. These by-laws and rules and regulations are incorporated herein by reference and made a part hereof, and the parties hereto agree to be bound thereby. 46. The by-laws and rules and regulations of each Fund provide that in the event the Board of Trustees shall be deadlocked on any issue or matter arising in connection with such Fund, the same shall be decided by a neutral person and his decision shall be final and binding. 47. The parties hereto ratify, confirm and approve the composition and the membership of each Board of Trustees as now constituted, and the composition and membership of each Board of Trustees as hereafter constituted under said by-laws and rules and regulations of each of the aforesaid Funds. 48. The Board of Trustees of each of the aforesaid Funds shall have the power to modify, from time to time, such by-laws and rules and regulations, including the detailed basis upon which payments from each Fund are made to eligible workers entitled to benefits therefrom. The parties hereto agree to be bound thereby and such modifications, when adopted, shall be deemed incorporated herein by reference and become a part hereof. The aforementioned enumerated powers and duties of the Board of Trustees of each of the aforesaid Funds shall not be considered in any way whatsoever as a limitation on the powers and duties of the Board of Trustees of each of the aforesaid Funds to do any and all other things that may be necessary or incidental to the proper operation, administration and maintenance of the aforesaid Funds and to fully effectuate their purposes. RIGHTS IN, TO AND AGAINST THE FUNDS 49. No Employer shall have any right, title, interest or claim, legal or equitable, in or to any sum paid by it or by any other employer to any of the aforesaid Funds or in or to any of the aforesaid Funds themselves or to any of the monies thereof. 50. No individual worker shall have any right, title, interest or claim, legal or equitable, against his Employer or in or to his Employer's or any other employer's payments to the aforesaid Funds or against Local 10, Local 23-25, International, or any employer or any association 47 52 of employers. 51. An applicant for benefits from any of the aforesaid Funds shall be deemed to be bound by all of the rules and regulations of the Funds existing at the time of his application and he shall have no interest, legal or equitable, vested or contingent, in any rules or regulations which may have been in effect prior to the filing of his application. No rights shall accrue, in any event, unless and until the worker's application for benefits has been approved in which case the rights of such worker shall be limited to those specifically awarded by each of the aforesaid Funds. 52. Should the United States Congress enact National Health Care Legislation, the Association shall have the right to reopen and renegotiate ARTICLE FORTY TWO only, upon seven (7) days written notice to the Union. In no event shall the reopening result in reducing benefits which the employees enjoy under this agreement. ARTICLE FORTY-THIRD: NO-STRIKE, NO LOCKOUT PLEDGE 1. There shall be no strike, stoppage or lockout during the term of this agreement, but work shall proceed in operation pending the determination of any complaint, dispute or grievance as hereinafter provided. This provision, however, shall not apply in cases where wages, earnings, overtime or holiday pay or benefit fund contributions are not paid to workers on their due date, or where a joint decision of the managers of Local 23-25 and/or Local 10 and the Association, respectively, or their deputies, or a decision of the Impartial Chairman, has not been complied with within twenty-four (24) hours after rendition, or where an Employer is deemed to be in non-compliance under the express terms of any other provision of this agreement. 2. Should the workers of any shop or factory cause a stoppage of work or shop strike, for reasons other than those aforementioned, written notice shall be given by the Association to the Union. The sole obligation of the Union shall be, within twenty-four (24) hours after receipt of said notice, to post on the Employer's from door, or on another place designated by the Employer, a declaration that such action is unauthorized and that its striking members are to terminate such action and return to work immediately notwithstanding the existence of any picket line. 48 53 Upon written notification by the Employer to the Union that the action referred to in the preceding paragraph has not brought about a termination of the strike or stoppage, the Union shall send by first class mail to each of its members reported by the Employer to the Union to be engaged or participating in such strike or work stoppage, addressed to him or her at his or her last known address (which address shall be furnished by the Employer), the following notice signed by Local 23-25 and/or Local 10 which may also be posted by the Employer within the shop or factory affected thereby: Date_________________________________ "To all members of Local 23-25 and/or Local 10, I.L.G.W.U. You are advised that a work stoppage is in progress at _____________________________________________This action is unauthorized by Local 23-25 and/or Local 10. You are directed to immediately return to your respective jobs and to cease any action which may affect production. The matter in dispute will be processed as provided in your Union contract." Good faith compliance by the Union with the foregoing provisions shall be deemed full compliance with its obligation hereunder and the Union shall have no further obligation to the Employer under this ARTICLE FORTY-THIRD or any other provision of this agreement. No employee shall be deemed to have abandoned his or her employment until after the expiration of the twenty-four (24) hour period following written notification by the Association to the Union of said strike or stoppage. Upon failure of any employees to return to work after said twenty-four (24) hour period, the Employer may, at its option, consider that such employees have abandoned their employment; but should the Employer re-employ such employees, it shall treat all such employees alike and shall not discriminate against or among them. 3. Notwithstanding the foregoing, the Association recognizes the right of workers covered by this Agreement to stop work for any Employer and its contractors during the continuance of any labor dispute with, or strike or stoppage (not in violation of contract) declared by International or any affiliate thereof at any shop of any firm which is directly or indirectly affiliated with the Employer. The Impartial 49 54 Chairman shall have the right to determine whether any such firm is affiliated with the Employer. In determining whether such affiliation exists, the Impartial Chairman shall be guided by the proof of the facts tending to establish any mutuality or reciprocity of interest including whether such Employer has a substantial financial interest in such other firm. 4. Should any Employer cause a lockout in its shop or factory, notice thereof shall be given by the Union to the Association. The Association obligates itself, within twenty-four (24) hours after the receipt of such notice to terminate the lockout and to cause its member to re-employ the workers, and until the expiration of such time, it shall not be deemed that the Employer has forfeited its rights under this Agreement. In the event of a substantial violation of this ARTICLE on the part of the Association, Local 10 and Local 23-25 shall have the option to terminate this Agreement. The existence or non-existence of such substantial violation shall be determined by the Impartial Chairman based on all of the facts and circumstances. ARTICLE FORTY-FOURTH: ARBITRATION AND ADJUSTMENT OF DISPUTES 1. All complaints, disputes, claims or grievances between Local 10 and Local 23-25, or Local 23-25 and the Association, or between Local 10 and Local 23-25, or Local 23-25 and an Employer or any of its subsidiary, auxiliary and affiliated firms, or its or their successors and assigns, or between a worker and his Employer, that directly or indirectly arise under, out of or in connection with or in any manner relate to or involve questions of interpretation or application of any ARTICLE of this Agreement or any of the acts, conduct or relations between them, including, without limitation, any claim against an Employer arising out of any alleged dissolution or termination of its business prior to the expiration of this Agreement or any claim against its successors or assigns arising out of any alleged merger with or purchase by them of the business of the Employer prior to the expiration of this Agreement, shall be adjusted as follows: (a) A written complaint shall be submitted by Local 23-25 and/or Local 10 to the Association or by the Association to Local 23-25 and/or Local 10 depending upon who is aggrieved. (b) The managers of Local 23-25 and/or Local 10 and the 50 55 Association or their deputies, shall in the first instance, jointly investigate such complaint and attempt an adjustment. Decisions reached by the managers or their deputies shall be binding upon all the parties involved. (c) If they fail to dispose of the complaint within five (5) working days, it may be submitted to arbitration by the Impartial Chairman. (d) Five (5) days' written notice of the date, time and place of hearing before the Impartial Chairman shall be given by ordinary mail to the complainant and respondent through Local 23-25 and/or Local 10 and the Association. The statutory provision for eight (8) days' notice by registered or certified mail or by personal service is hereby expressly waived. (e) If the complainant or respondent fails to appear before the Impartial Chairman after it has been given such notice through the Association or Local 23-25 and/or Local 10, as the case may be, the Impartial Chairman is hereby authorized to render an award or decision upon the testimony of the party appearing. (f) If any issue should arise as to the validity of any ARTICLE of this Agreement or the arbitrability, substantive or procedural, of any written complaint, the Impartial Chairman shall have the exclusive jurisdiction to determine such issue. 2. The decisions reached by Local 23-25 and/or Local 10 and Association managers, or their deputies, and the decisions or awards of the Impartial Chairman, in addition to granting such other relief as they may deem proper, may contain provisions ordering or restraining acts and conduct of the parties in the matter before them. 3. (a) A decision by Local 23-25 and/or Local 10 and Association representatives, or their deputies, and a decision or award of the Impartial Chairman shall be final and binding upon the parties. (b) Each decision and award shall be complied with within twenty-four (24) hours after it is rendered, excluding Saturdays, Sundays and holidays. (c) In addition, the decision or award of the Impartial Chairman shall be enforceable by appropriate proceedings at law or in equity. 51 56 4. (a) If a decision or award has not been complied with within twenty-four (24) hours after it was made or rendered, Local 23-25 and/or Local 10 or the Association shall have the right, but shall not be required, to file a non-compliance complaint directly with the Impartial Chairman, instead of proceeding under Paragraph 3(c) above. If such a complaint is filed, the Impartial Chairman is hereby authorized to accept it, to give notice of its contents and of the date, time and place of hearing in the same manner as in an original complaint. (b) If the non-compliance complaint is based upon a decision by Local 23-25 and/or Local 10 and the Association managers, or their deputies, the Impartial Chairman shall take all relevant testimony offered for or against the original complaint. (c) The Impartial Chairman's decision or award on the non-compliance complaint shall be final and binding upon the parties. (d) If the Impartial Chairman's decision is not complied with within twenty-four (24) hours after it is rendered, the parties shall be entitled to proceed as set forth in 3(c) above. 5. If an Employer resigns or is suspended or expelled from the Association, any complaint, dispute, claim or grievance that the Union or Local 23-25 or any worker may then or thereafter have against such Employer or that the Employer may then or thereafter have against the Union or Local 23-25 or any worker shall be subject to the following procedures: (a) The complaint shall be submitted in writing to the Impartial Chairman by Local 23-25 and/or Local 10, on behalf of itself, or any worker, or by the Employer, depending upon who is aggrieved. (b) The Impartial Chairman shall give at least five (5) days' notice by certified mail to the Employer at this last known address, or to an owner or officer of the Employer at his last known address, and to Local 23-25 and/or Local 10 by regular mail. Such notice shall include the date, time and place of hearing and a copy of the complaint submitted to the Impartial Chairman. The statutory provision for eight (8) days' notice by registered or certified mail or by personal service is hereby expressly waived. (c) In all other respects, the provisions of this ARTICLE shall apply to such Employer. 52 57 6. This agreement shall be the basis upon which decisions shall be rendered. Each case shall be considered on its own merits. No decision shall be used as a precedent for any other case. 7. Subpoenas issued in an arbitration for the production of any Employer's books, records and documents shall be deemed to have been issued in a proper case. 8. The taking of the oath by the arbitrator required by Section 7506(a) of the New York Civil Practice Law and Rules is hereby expressly waived. 9. Decisions reached by the managers of Local 23-25 and/or Local 10 and the Association and the Impartial Chairman's decision shall have the effect of an award and any decision or award of the Impartial Chairman may be confirmed and enforced by the entry of a judgement in any court of competent jurisdiction. 10. The initial paper, notice or process in any application to a court to confirm and enforce an award of the Impartial Chairman, including process conferring jurisdiction upon the court of the parties involved, shall be made by certified mail or regular mail. In all cases such mail shall be directed to the address of the headquarters of Local 23-25 and Local 10 in the City of New York or to the address, within or without the State of New York, of the residence of an owner or officer of or the place of business of the respondent in such proceeding. The parties hereby expressly waive the requirements for personal service set forth in CPLR Section 403 regarding applications to the courts made in conformity with this Article. 11. The procedure herein established for the adjustment of disputes shall be the exclusive means for the determination of all the aforesaid complaints, disputes, claims or grievances whatsoever, expressly including discharge of workers, unauthorized strikes, stoppages, lockouts and any and all claims, demands or acts arising therefrom. Neither party shall institute any proceedings in a court of law or equity, state or federal, or before an administrative tribunal, other than to confirm and enforce an Impartial Chairman's decision or award or to compel the production of an Employer's books, records and documents for examination by the Impartial Chairman or his accountants. This provision shall be a complete and bona fide defense to any action or proceeding instituted contrary to the terms hereof. 53 58 12 (a) Marshall Rosenberg, Esq., or a deputy selected jointly by the parties to this agreement, shall be the Impartial Chairman during the term of this agreement. Marshall Rosenberg, Esq., shall have the exclusive power and jurisdiction to finally determine whether a specific dispute shall be submitted for determination by him or his deputy. (b) Should the Impartial Chairman resign, refuse to act or be incapable of acting or should the office become vacant for any reason, the parties shall within five (5) days thereafter jointly designate another person as Impartial Chairman. If they fail to agree, the Mayor of the City of New York shall, upon application by either party, summarily appoint the Impartial Chairman. A successor Impartial Chairman shall have all the rights and powers of the Impartial Chairman. (c) Each Employer, and each worker represented by Local 10 and Local 23-25, or by Local 23-25, assents to the appointment of the Impartial Chairman and his successor and to the selection of a deputy under this Agreement. 13. Any complaint, dispute, claim or grievance hereunder which Local 23-25 and/or Local 10, or a worker, or the Association, or an Employer may have, may be instituted and processed only by Local 23- 25, and/or Local 10 or the Association, as the case may be, in the manner herein provided. A worker or an Employer shall not have the right individually to institute or process any action or proceeding with reference to such matter, or to institute or compel arbitration. ARTICLE FORTY-FIFTH: WORKERS OF OUT-OF-TOWN SHOPS It is agreed that where the workers of an out-of-town shop covered by this Agreement are also represented by International or an affiliate thereof other than the Union parties hereto, International or such affiliate shall be entitled to all the rights and benefits of this Agreement and may, in its own name, use the machinery provided herein for arbitration and adjustment of disputes with respect to such shop. ARTICLE FORTY-SIXTH: NO WAIVER OR MODIFICATION OF PROVISIONS 1. The failure of either party to this Agreement to enforce performance of any provisions herein contained shall not be deemed a 54 59 waiver or abandonment of any of the rights or remedies provided hereunder for violation of the Agreement or any provisions thereof; nor shall it constitute a waiver or abandonment of any right or remedy hereunder provided for a subsequent violation of any provision of this Agreement. 2. No Employer and no worker or group of workers may modify or waive any provisions of this Agreement. ARTICLE FORTY-SEVENTH: EFFICIENCY - NEW MACHINERY 1. The Employer shall operate its shop at all times in an efficient and well-ordered manner; machinery and equipment shall be maintained in good working condition; the premises shall be kept clean, properly lighted, well ventilated, and adequate working room shall be provided for the workers, so as to enable the workers to devote their full time exclusively to the work of their craft and maximize earning opportunities. 2. The Employer agrees to maintain its shop at the level of efficiency that meets the requirements of the above provisions and workers agree to perform their work conscientiously and efficiently. 3. New machinery may be introduced upon consent of the Union. Should the parties fail to agree, the dispute shall be subject to arbitration hereunder. ARTICLE FORTY-EIGHT: PROVISIONAL REPLACEMENT WORKERS 1. Upon consent of the Union, the Employer may hire one (1) provisional replacement worker, upon notice to the said worker, for a period not to exceed ninety (90) days to take the place of a sample maker or a worker employed in or about the cutting room (excluding cutters, markers and graders) who is absent due to disability or leave of absence. During such period provisional replacement workers shall be entitled to all of the rights of regular workers under this Agreement. 2. Upon return to work, the absent worker shall be entitled to his or her regular job prior to such absence and shall not lose any rights and privileges under this Agreement. 55 60 3. Upon return to work of the absent worker, the Employer may terminate the provisional replacement worker. ARTICLE FORTY-NINTH: DISABILITY BENEFITS 1. The Employer shall pay and be directly responsible for the lawfully mandated disability benefits to be provided workers in its inside shop and in the shops of contractors under contract with Local 23-25, or any other affiliate of the I.L.G.W.U. in the State of New York, that provide garments or items for the Employer in the State of New York. Workers shall not be required to pay any of the cost of such benefit. 2. In order to assure disability benefit coverage for all workers employed in such contracting shops of the Employer, the Employer shall contribute towards a Disability Fund, to be established by the Association for such purpose, those amounts that are necessary to provide such coverage to the aforesaid workers. 3. Said Disability Fund may pay over monies received hereunder from an Employer on account of work performed for it by a contractor in the State of New York in contractual relations with another affiliate of the ILGWU to another similar disability fund providing coverage to the worker of such contractors, provided that such other Fund is authorized and agrees to pay over to the said Disability Fund any monies received by it on account of work performed by a contractor under collective agreement with Local 23-25. ARTICLE FIFTIETH: CONFORMITY TO LAW-SAVING CLAUSE 1. The interpretation and enforcement of this Agreement shall be governed by federal law and by the laws of the State of New York not inconsistent therewith. 2. If any provision of this Agreement or the enforcement or performance of such provision is or shall at any time be determined to be contrary to law by or enjoined by a court or administrative agency, then such provision shall not be applicable or enforced or performed except to the extent permitted by law. The Union and the Association shall thereupon negotiate a substitute provision. If they are unable to agree, the Impartial Chairman shall determine such substitute provision which shall be deemed incorporated into this Agreement. 56 61 3. If any provision of this Agreement or its application to any Employer, person or circumstance is so held invalid or enjoined, the remainder of this Agreement, or the application of such provision to other Employers, persons or circumstances, shall not be affected thereby. ARTICLE FIFTY-FIRST: PARENTING/FAMILY LEAVE In addition to any other leave of absence, the Employer shall grant, upon request of the Union or the worker, up to six (6) months leaves of absence without pay to male and female workers for the birth or adoption of a child (hereafter "parenting leave") or to care for a sick immediate family member (hereinafter family leave). (a) The Employer may hire one provisional worker for a period not to exceed six (6) months to take the place of any employee who is on parenting/family leave. Upon date of hire, the Employer shall give the Union and the provisional worker notice of the worker's provisional status. During such period, provisional workers shall be entitled to all the rights of regular workers under this Agreement. The Employer may retain a provisional worker as long as such action does not displace the worker on parenting leave or any other regular worker. (b) A worker on parenting/family leave shall be entitled to return to work on his or her regular job prior to such absence or an equivalent position, and shall not lose any rights and privileges under this Agreement. (c) The provisions of the Family and Medical Leave Act of 1993 ("FLMA") are incorporated into this Agreement and are enforceable through the grievance and arbitration procedure. This paragraph shall in no way diminish or impair any leave of absence benefit currently enjoyed by the employees under this Agreement. ARTICLE FIFTY-SECOND: COUNCIL FOR AMERICAN FASHION A (1) The parties hereto, on behalf of themselves and their members, hereby acknowledge the establishment of the Council For American Fashion pursuant to Section 302(c) (9) of the Labor-Management Relations Act of 1947, as amended, a Labor-Management Committee jointly established on an industry wide basis for the purpose of improving communication between representatives of labor and 57 62 management; to provide workers and employers with opportunities to study and explore new and innovative joint approaches to achieving organizational effectiveness; to assist workers and employers in solving problems of mutual concern to the garment industry not susceptible to resolution within the collective bargaining process; to study and explore ways of eliminating potential problems that reduce the competitiveness and inhibit the economic development of the garment industry; to enhance economic development, improve technology, increase competitiveness and efficiency in the garment industry; to enhance the involvement of workers in making decisions that affect their working lives; to expand and improve working relationships between workers and managers; to encourage collective bargaining; and to encourage committees designed to improve labor-management relationships, jobs security, and organizational effectiveness. (2) The monies contributed pursuant to this Agreement to the Council for American Fashion shall be used only for the purposes noted herein, and to pay the operating and administrative expenses of said Council. (3) The Council shall be administered by a Board of Directors consisting of an equal number of industry wide, Union and management designated Directors. The by-laws for the Council are hereby incorporated herein by reference and the parties agree to be bound thereby. (4) The parties hereto ratify, confirm and approve the composition and membership of the Board of Directors of the Council, as hereafter constituted under the said Council's by-laws. (5) No Employer, worker, or Union shall have any right, title, interest, or claim, legal or equitable, in or to any sum paid by it (or his/her Employer) to the Council. B. In addition to all other contributions required to be made under this Agreement, the Employer shall also pay monthly to Local 23-25, on behalf of the Council For American Fashion, a sum equivalent to.1% of its weekly payroll paid to its directly employed workers; and.075% of the gross amounts paid or due from the Employer to each of its union contractors whose workers perform work on the Employer's garments in the integrated process of garment production. C. The Union shall be the proper party in interest to enforce 58 63 remittances of reports and payments of amounts due to the said Council from any defaulting Employer; and such remedy is in addition to any other rights that the Union may have under this Agreement. ARTICLE FIFTY-THIRD: TERM 1. This Agreement shall go into effect June 1, 1994 and continue in effect until May 31, 1997. IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed by their respective officers the day and year first above written. NEW YORK SKIRT AND SPORTSWEAR ASSOCIATION, INC. By: ________________________________________________ ELI ELIAS, President BLOUSE, SKIRT, SPORTSWEAR, CHILDREN'S WEAR AND ALLIED WORKERS' UNION, LOCAL 23-25, I.L.G.W.U. By: ________________________________________________ EDGAR ROMNEY, Manager, Secretary-Treasurer AMALGAMATED LADIES' GARMENT WORKERS' UNION, LOCAL 10, I.L.G.W.U. By: ________________________________________________ RICHARD REMULT, Manager, Secretary 59 64 INDEX Article Page Accessories ................................ 35 31 Arbitration and Adjustment of Disputes ..... 44 50 Assignment ................................. 28 27 Association List ........................... 9 6 Bargaining Unit and Union Recognition ...... 3 3 Benefit Funds .............................. 42 34 Call-In Pay - Reporting to Shop ............ 29 28 Changes in Legal Minimums .................. 19 19 Check-off .................................. 21 20 Conformity to Law-saving Clause ............ 50 56 Contractor Designation-Integrated Production 12 9 Council for American Fashion ............... 52 57 Cutting .................................... 24 24 Definitions ................................ 1 1 Disability Benefits ........................ 49 56 Discharges ................................. 30 28 Division of Work ........................... 27 27 Efficiency-New Machinery ................... 47 55 Employers' Continuing Obligations .......... 7 5 Employers' Obligations ..................... 6 4 Employers' Responsibility for Contractors Payments ................................. 22 20 Holidays-Bereavement Pay ................... 17 15 Hours--Overtime ............................ 14 13 Imports and Purchases of Garments .......... 11 7 Jury Duty .................................. 38 32 Leave of Absence-Vacation .................. 31 28 Liquidated Damages ......................... 40 33 Minimum Wage Scales ........................ 18 17 Moving Shops ............................... 39 32 Mutual Obligations ......................... 5 4 New Applications for Membership in Association ........................... 41 33 No-Strike, No-Lockout Pledge ............... 43 48 No Waiver or Modification of Provision ..... 46 54 Obligation to Maintain and Deal Only with Union Shops .................... 10 7 i 65 Parenting/Family Leave ...................... 51 57 Piece Rates ................................. 20 19 Provisional Replacement Workers ............. 48 55 Reorganization-Discontinuance of Inside Shop or Reduction of Workers .............. 36 31 Rise in Cost of Living ...................... 16 14 Shop Chairperson ............................ 26 26 Shop Standards .............................. 23 22 Sportswear Industry Trust Fund .............. 32 28 Struck Work--Labor Dispute-Crossing Picket Lines .............................. 34 30 Subsidiary, Auxiliary and Affiliated Firms .. 8 6 Term ........................................ 53 59 Time Clocks--Maintenance of Records Examination-Falsification-Access to Shop .. 33 29 Trial Period ................................ 13 12 Union Label ................................. 37 32 Union Membership ............................ 4 3 Union Responsibility ........................ 2 2 Wage Increase ............................... 15 14 Workers of Out-Of-Town Shops ................ 45 54 Working Card ................................ 25 26 ii EX-10.I.I 3 SUMMARY OF EXTENSION 1 EXHIBIT 10(i)(i) SUMMARY OF EXTENSION OF THE EXECUTIVE LIABILITY AND INDEMNIFICATION POLICY NO. 81035379 (F) (THE "POLICY") The Policy has been extended from August 11, 1995 to August 11, 1996. The annual premium is $263,000. EX-10.J 4 EXCESS COVERAGE 1 [LLOYD'S POLICY LOGO] - -------------------------------------------------------------------------------- We, Underwriting Members of the syndicates whose definitive numbers and proportions are shown in the Table attached hereto (hereinafter referred to as 'the Underwriters'), hereby agree, in consideration of the payment to Us by or on behalf of the Assured of the premium specified in the Schedule, to insure against loss, including but not limited to associated expenses specified herein, if any, to the extent and in the manner provided in this Policy. The Underwriters hereby bind themselves severally and not jointly, each for his own part and not one for another, and therefore each of the Underwriters (and his heirs, Executors and Administrators) shall be liable only for his own share of his syndicate's proportion of any such loss and of any such expenses. The identity of each of the Underwriters and the amount of his share may be ascertained by the Assured or the Assured's representative on application to Lloyd's Policy Signing Office, quoting the Lloyd's Policy Signing Office number and date shown in the Table. If the Assured shall make any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this Policy shall become void and all claim hereunder shall be forfeited. In Witness whereof the General Manager of Lloyd's Policy Signing Office has signed this Policy on behalf of each of Us. /s/ LLOYD'S POLICY SIGNING OFFICE General Manager FOR EMBOSSMENT BY LLOYD'S POLICY SIGNING STAFF J(A) NMA 2421 (26/9/91) Form approved by Lloyd's Underwriters' Non-Marine Association Limited. Set and Printed by CBC City Print Limited. 071-353 1000 2 U.S.A. - ------ NEW SHORT RATE CANCELLATION TABLE ENDORSEMENT NOTWITHSTANDING anything to the contrary contained herein and in consideration of the premium for which this insurance is written it is agreed that in the event of cancellation thereof by the Assured the earned premium shall be computed as follows:-- SHORT RATE CANCELLATION TABLE A. For insurances written for one year:--
Percent Percent Days of Days of Insurance One Year Insurance One Year in force Premium in force Premium 1 ......................... 5 154--156 ......................... 53 2 ......................... 6 157--160 ......................... 54 3-- 4 ......................... 7 161--164 ......................... 55 5-- 6 ......................... 8 165--167 ......................... 56 7-- 8 ......................... 9 168--171 ......................... 57 9-- 10 ......................... 10 172--175 ......................... 58 11-- 12 ......................... 11 176--178 ......................... 59 13-- 14 ......................... 12 179--182 (6 months)............... 60 15-- 16 ......................... 13 183--187 ......................... 61 17-- 18 ......................... 14 188--191 ......................... 62 19-- 20 ......................... 15 192--196 ......................... 63 21-- 22 ......................... 16 197--200 ......................... 64 23-- 25 ......................... 17 201--205 ......................... 65 26-- 29 ......................... 18 206--209 ......................... 66 30-- 32 (1 month)................ 19 210--214 (7 months)............... 67 33-- 36 ......................... 20 215--218 ......................... 68 37-- 40 ......................... 21 219--223 ......................... 69 41-- 43 ......................... 22 224--228 ......................... 70 44-- 47 ......................... 23 229--232 ......................... 71 48-- 51 ......................... 24 233--237 ......................... 72 52-- 54 ......................... 25 238--241 ......................... 73 55-- 58 ......................... 26 242--246 (8 months)............... 74 59-- 62 (2 months)............... 27 247--250 ......................... 75 63-- 65 ......................... 28 251--255 ......................... 76 66-- 69 ......................... 29 256--260 ......................... 77 70-- 73 ......................... 30 261--264 ......................... 78 74-- 76 ......................... 31 265--269 ......................... 79 77-- 80 ......................... 32 270--273 (9 months)............... 80 81-- 83 ......................... 33 274--278 ......................... 81 84-- 87 ......................... 34 279--282 ......................... 82 88-- 91 (3 months)............... 35 283--287 ......................... 83 92-- 94 ......................... 36 288--291 ......................... 84 95-- 98 ......................... 37 292--296 ......................... 85 99--102 ......................... 38 297--301 ......................... 86 103--105 ......................... 39 302--305 (10 months).............. 87 106--109 ......................... 40 306--310 ......................... 88 110--113 ......................... 41 311--314 ......................... 89 114--116 ......................... 42 315--319 ......................... 90 117--120 ......................... 43 320--323 ......................... 91 121--124 (4 months)............... 44 324--328 ......................... 92 125--127 ......................... 45 329--332 ......................... 93 128--131 ......................... 46 333--337 (11 months).............. 94 132--135 ......................... 47 338--342 ......................... 95 136--138 ......................... 48 343--346 ......................... 96 139--142 ......................... 49 347--351 ......................... 97 143--146 ......................... 50 352--355 ......................... 98 147--149 ......................... 51 356--360 ......................... 99 150--153 ......................... 52 361--365 (12 months)..............100
B. For insurances written for more or less than one year:-- 1. If insurance has been in force for 12 months or less, apply the standard short rate table for annual insurances to the full annual premium determined as for an insurance written for a term of one year. 2. If insurance has been in force for more than 12 months: a. Determine full annual premium as for an insurance written for a term of one year. b. Deduct such premium from the full insurance premium, and on the remainder calculate the pro rata earned premium on the basis of the ratio of the length of time beyond one year the insurance has been in force to the length of time beyond one year for which the insurance was originally written. c. Add premium produced in accordance with items (a) and (b) to obtain earned premium during full period insurance has been in force. 3 U.S.A. - ------ NUCLEAR INCIDENT EXCLUSION CLAUSE--LIABILITY--DIRECT (BROAD) (Approved by Lloyd's Underwriters' Non-Marine Association) For attachment to insurances of the following classifications in the U.S.A., its Territories and Possessions, Puerto Rico and the Canal Zone:-- Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability), not being insurances of the classifications to which the Nuclear Incident Exclusion Clause--Liability--Direct (Limited) applies. This policy* - ----------- does not apply:-- I. Under any Liability Coverage, to injury, sickness, disease, death or destruction (a) with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or (b) resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been insured would be entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization. II. Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to immediate medical or surgical relief, to expenses incurred with respect to bodily injury, sickness, disease or death resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization. III. Under any Liability Coverage, to injury, sickness, disease, death or destruction resulting from the hazardous properties of nuclear material, if (a) The nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom: (b) the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or (c) The injury, sickness, disease, death or destruction arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories or possessions Canada, this exclusion ... applies only in injury to or destruction of property at such nuclear facility. IV. As used in this endorsement: "hazardous properties" include radioactive, toxic or explosive properties; "nuclear material" means source material, special nuclear material or byproduct material; "source material"; "special nuclear material", and "byproduct material" have the meanings given them in the Atomic Energy Act 1954 or in any law amendatory thereof; "spent fuel" means any fuel element or fuel component, solid or liquid, which has been used or exposed in radiation in a nuclear reactor; "waste" means any waste material (i) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; "nuclear facility" means (a) any nuclear reactor, (b) any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste, (c) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235, (d) any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste; and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; "nuclear reactor" means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical means of fissionable material. With respect to injury to or destruction of property, the word "injury" or "destruction" includes all forms of radioactive contamination of property. It is understood and agreed that, except as specifically provided in the foregoing to the contrary, this clause is subject to the terms, exclusions, conditions and limitations of the Policy to which it is attached. "NOTE:--As respects policies which afford liability coverage and other forms of coverage in addition, the words underlined should be amended to designate the liability coverage which this clause is to apply. 4 U.S.A. - ------ RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE -- LIABILITY -- DIRECT (Approved by Lloyd's Underwriters' Non-Marine Association) For attachment (in addition to the appropriate Nuclear Incident Exclusion Clause -- Liability -- Direct) to liability insurance affording worldwide coverage. In relation to liability arising outside the U.S.A., its Territories or Possessions, Puerto Rico or the Canal Zone, this Policy does not cover any liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from ionizing radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel. LINES CLAUSE This Insurance, being signed for 78.6506% of 100% insures only that proportion of any loss, whether total or partial, including but not limited to that proportion of associated expenses, if any, to the extent and in the manner provided in this Insurance. The percentages signed in the Table are percentages of 100% of the amount(s) of Insurance stated herein. 5 P13184 ATTACHING TO AND FORMING PART OF POLICY NO. ZKA9400406/D1767-2-94 ENDORSEMENT NO. 4. In consideration of the premium charged, it is hereby understood and agreed that: 1. Item G. of the Declarations is deleted and the following is substituted therefor: Item G. Primary Policy : Primary Insurer: Federal Insurance Company Policy No: 8103-53-79-F Applicable Primary Coverage: (1) Executive Liability and Indemnification Coverage Section (Form 14-02-0943) (2) Outside Directorship Liability Coverage Section (Form 14-02-0951) and any applicable terms and conditions pertaining thereto. Applicable Limit of Liability: (a) each Loss $15,000,000 (b) each Policy Period $15,000,000 Deductibles: Nil/Nil/$500,000 Participation/Co-Insurance: None Policy Period: from 11th August 1994 to 11th August 1995 2. Clause II DEFINITIONS A. is deleted and the following is substituted therefor: A. "Primary Policy" shall mean only the (1) Executive Liability and Indemnification Coverage Section (Form 14-02-0943) and (2) the Outside Directorship Liability Coverage Section (Form 14-02-0951) and any applicable terms and conditions pertaining thereto of the Executive Protection Policy issued by Federal Insurance Company as identified in Item G. of the Declarations, and shall not include any other coverage section contained in such policy. 3. Clause IV.B. is deleted and the following substituted therefor: B. The Primary Policy provides coverage under two separate sections with a separate limit of liability for each: (1) Executive Liability and Indemnification Coverage Section; and (2) Outside Directorship Liability Coverage Section. Underwriters however afford only a single limit of liability, and thus the amount shown in Item C. of the Declarations shall be the maximum aggregate Limit of Liability of Underwriters for all loss resulting from all claims made against the directors and officers during the Policy Period in excess of either and/or both coverage sections of the Primary Policy, together with all claims made against the directors and officers which, in accordance with Clause IV.E. or Clause V.B., shall be deemed to have been made during the Policy Period. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED 6 ATTACHING TO AND FORMING PART OF POLICY NO. ZKA9400406/D1767-2-94 ENDORSEMENT NO. 3. In consideration of the premium charged, it is hereby understood and agreed that Underwriters shall not be liable to make any payment for Loss in connection with any Claims based upon or arising out of facts alleged in Directors and Officers litigation as detained in Part II Item 1 of the form 10 Q dated 2nd April 1994. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED 7 ATTACHING TO AND FORMING PART OF POLICY NO. ZKA9400406/D1767-2-94 ENDORSEMENT NO. 2. In consideration of the premium charged for this Policy, it is hereby understood and agreed that the Policy is amended by the addition of the following: VIII. DISCOVERY CLAUSE If Underwriters shall cancel or refuse to renew this Policy the Named Insured shall have the right, upon payment of an additional premium of 100% of the full annual premium, to a period of 12 months following the effective date of such cancellation or non renewal (herein referred to as the Discovery Period) in which to give written notice to Underwriters of claims first made against the Named Insured during said 12 month period for any wrongful act occurring prior to the end of the Policy Period and otherwise covered by this Policy. As used herein, "full annual premium" means the premium level in effect immediately prior to the end of the Policy Period. The rights contained in this clause shall terminate, however, unless written notice of such election together with the additional premium due is received by Underwriters within ten (10) days of the effective date of cancellation or non renewal. The additional premium for the Discovery Period shall be fully earned at the inception of the Discovery Period. The Discovery Period is not cancellable. This clause and the rights contained herein shall not apply to any cancellation resulting from non-payment of Premium. The offer by Underwriters of renewal terms, conditions, Limits of Liability and/or Premiums different from those of the expiring Policy shall not constitute refusal to renew. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. 8 ATTACHING TO AND FORMING PART OF POLICY NO. ZKA9400406/D1767-2-94 ENDORSEMENT NO. 1. In consideration of the premium charged for this Policy, it is hereby understood and agreed that Underwriters shall not be liable to make any payment for loss in connection with any claim made against the directors or officers based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving: (1) any prior and/or pending litigation as of 11th August 1994 or (2) any fact, circumstance, situation, transaction or event underlying or alleged in such litigation, regardless of the legal theory upon which such claim is predicated. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. L(88)RL. 11.01 (Amended) 9 SEVERAL LIABILITY NOTICE The subscribing insurers' obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. LSW 1001 (Insurance) 08/94 10 Schedule - -------------------------------------------------------------------------------- Policy or Certificate No. ZKA9400406/ D1767-2-94 Contract No. (if any) - -------------------------------------------------------------------------------- The name and address of the Assured LIZ CLAIBORNE INC. 1 Claiborne Avenue, North Bergen, New Jersey 07047. - -------------------------------------------------------------------------------- The risk, interest, location and sum insured hereunder EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY AS MORE PARTICULARLY DESCRIBED IN THE ATTACHED WORDING WHICH IS HEREBY DECLARED TO BE INCORPORATED IN AND TO FORM PART OF THIS POLICY * * * * * * at Noon Standard Time at the Principal Address as stated herein - -------------------------------------------------------------------------------- The Premium US $74,718.07 part of US $95,000.00 - -------------------------------------------------------------------------------- The period of insurance from 11th August 1994 to 11th August 1995 both days and for such further period or periods as may be mutually agreed upon - -------------------------------------------------------------------------------- Dated in London the 28th November 1994 - -------------------------------------------------------------------------------- J or J(A) (Schedule) NMA 2422 for attachment to NMA 2420, NMA 2421, NMA 2461 or NMA 2462 11 DECLARATIONS EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY POLICY NOTICE: THIS POLICY SUBJECT TO ITS TERMS APPLIES ONLY TO ANY CLAIM MADE AGAINST THE DIRECTORS AND OFFICERS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED AS REASONABLE AND NECESSARY LEGAL FEES AND EXPENSES IN DEFENDING THE DIRECTORS AND OFFICERS. THIS POLICY DOES NOT PROVIDE FOR ANY DUTY BY UNDERWRITERS TO DEFEND THOSE INSURED HEREUNDER. These Declarations along with the completed signed Application, including attachments, and the Policy with Endorsements shall constitute the contract between those insured hereunder and Underwriters. Item A. Named Insured: LIZ CLAIBORNE INC. Principal Address: 1 Claiborne Avenue, North Bergen, New Jersey 07047. Item B. Policy Period: 11th August 1994 to 11th August 1995 both days at Noon Standard Time At The Principal Address stated in Item A. Item C. Limit of Liability: $ 10,000,000 in the aggregate, each policy year. Item D. Premium: $95,000.00 (100%) Item E. Notification to Underwriters pursuant to Clause V. shall be given to: Peterson and Ross, attention Theodore A. Boundas, 200 E. Randolph Drive, Suite 7300, Chicago, Illinois 60601-6969. DOXS - 89 12 Item F. Form numbers of endorsements attached at issuance: Nuclear Incident Exclusion Clause - Liability - Direct (Broad) Radioactive Contamination Exclusion Clause - Liability - Direct New Short Rate Cancellation Table Endorsement Endorsement No. 1 L(88)RL. 11.01 (Amended) Endorsement No. 2 Endorsement No. 3 Endorsement No. 4 Item G. Primary Policy : Primary Insurer: See Endorsement No. 4 Policy No: Limits of Liability: Retentions/Deductibles: Participation/Co-Insurance: Policy Period: from _________________ to ________________ Item H. Underlying Excess Policies: First Underlying Excess Insurer: Policy No: Limits of Liability: Retentions/Deductibles: Participation/Co-Insurance: Policy Period: from __________________ to _______________________ Second Underlying Excess Insurer: Policy No: Limits of Liability: Retentions/Deductibles : Participation/Co-Insurance: Policy Period: from ____________________ to _________________________ Third Underlying Excess Insurer: Policy No: Limits of Liability: Retentions/Deductibles: Participation/Co-Insurance: Policy Period: from _________________ to _____________________ Fourth Underlying Excess Insurer: Policy No: Limits of Liability: Retentions/Deductibles: Participation/Co-Insurance: Policy Period: from __________________ to ______________________ 13 EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY POLICY In consideration of the payment of the premium, in reliance upon the statements in the Application attached hereto and made a part hereof, subject to the Declarations made a part hereof and subject to all of the terms of this Policy, Underwriters agree as follows: I. CONFORMANCE WITH PRIMARY POLICY Except as regards: (1) the premium, and (2) the amounts and limits of liability, and (3) the subject matter of Clauses II., III., IV., V., VI., VII. and Endorsements as attached hereto, and (4) as otherwise may be provided herein, this Policy is subject to the same insuring clauses, definitions, terms, conditions, exclusions and other provisions, as those set forth in the Primary Policy as described in the materials submitted to Underwriters in connection with the application for this Policy. No changes to the Primary Policy as so described shall be binding upon Underwriters under this Policy unless specifically endorsed hereon. II. DEFINITIONS The following terms whenever used in this Policy shall have the meanings indicated. A. "Primary Policy" shall mean the policy identified in Item G. of the Declarations B. "Underlying Policies" shall mean the policies outlined in Item G. and H. of the Declarations. C. "Underlying Limit of Liability" shall mean the combined limits of liability of the Underlying Policies as set forth in Items G. and H. of the Declarations, less any reduction or exhaustion of said limits of liability due to payment of loss under said policies. 14 III. MAINTENANCE OF UNDERLYING POLICIES This Policy provides excess coverage only. It is a condition precedent to the coverage afforded under this Policy that those insured hereunder maintain the Underlying Policies with retentions/deductibles, participation/co-insurance and limits of liability (subject to reduction or exhaustion as a result of loss payments), as set forth in Items G. and H. of the Declarations. This policy does not provide coverage for any loss not covered by the Underlying Policies except and to the extent that such loss is not paid under the Underlying Policies solely by reason of the reduction or exhaustion of the Underlying Limits of Liability through payments of loss thereunder. In the event the insurer under one or more of the Underlying Policies fails to pay loss in connection with any claim as a result of the insolvency, bankruptcy or liquidation of said insurer, then those insured hereunder shall be deemed self-insured for the amount of the limit of liability of said insurer which is not paid as a result of such insolvency, bankruptcy or liquidation. IV. LIMIT OF LIABILITY A. Subject to Clause IV.B., Underwriters shall be liable to pay loss which is in excess of: (1) the Underlying Limit of Liability plus (2) the applicable retention or deductible under the Primary Policy: up to the Limit of Liability as shown under Item C. of the Declarations resulting from each claim made against the directors and officers. B. The amount shown in Item C. of the Declarations shall be the maximum aggregate Limit of Liability of Underwriters for all loss resulting from all claims made against the directors and officers during the Policy Period, together with all claims made against the directors and officers which, in accordance with Clause IV.E. or Clause V.B., shall be deemed to have been made during the Policy Period. C. Underwriters shall be liable only after the insurers under each of the Underlying Policies have paid or have been held liable to pay the full amount of the Underlying Limit of Liability. 15 D. Subject to Clause IV.B., in the event of the reduction or exhaustion of the Underlying Limit of Liability by reason of payment of loss, this Policy shall: (1) in the event of reduction, pay excess of the reduced limits, and (2) in the event of exhaustion, continue in force as primary insurance; provided, however that in the case of exhaustion this Policy shall only pay excess of the retention or deductible applicable to the Primary Policy as set forth in Item G. of the Declarations, which shall be applied to any subsequent loss in the same manner as specified in the Primary Policy. E. More than one claim involving the same wrongful act or related wrongful acts of one or more directors and officers shall be deemed to constitute a single claim and such single claim shall be deemed to have been made at the earliest of the following times. (1) the time the earliest claim involving the same wrongful act or related wrongful acts is first made, or (2) the time the claim involving the same wrongful act or related wrongful acts shall be deemed to have been made pursuant to Clause V.B., if applicable. V. NOTIFICATION A. If during the Policy Period or any optional extension period, if applicable, any claim is made against any director or officer, those insured hereunder shall, as a condition precedent to their right to be reimbursed under this Policy, give to Underwriters notice in writing as soon as practicable of any such claim, but in no event later than sixty (60) days after such claim is first made. B. If during the Policy Period or any optional extension period, if applicable, those insured hereunder first become aware of a specific wrongful act, and if those insured hereunder shall, during such period, give written notice to Underwriters as soon as practicable of: (1) the specific wrongful act, and (2) the consequences which have or may result therefrom, and (3) the circumstances by which those insured hereunder first became aware thereof, then any claim not otherwise excluded by the terms of this policy subsequently made against the directors and officers arising out of such wrongful act or any related wrongful act shall be deemed for the purposes of this Policy to have been made at the time such notice was first given. C. Notice to Underwriters provided for in this Clause V. shall be given to the firm shown under Item E. of the Declarations. 16 VI. WARRANTY CLAUSE It is warranted that the particulars and statements contained in the application for this Policy or contained in any application for any policy issued by Underwriters of which this Policy is a renewal thereof, a copy of which is attached hereto, and any material submitted therewith (which shall be retained on file by Underwriters and be deemed attached hereto, as if physically attached hereto), are the basis of this Policy and are to be considered as incorporated into and constituting a part of this Policy. This Policy shall be deemed to be a single unitary contract and not a severable contract of insurance or a series of individual contracts of insurance with each of the persons or entities insured hereunder. VII. SERVICE OF SUIT It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Insured (or Reinsured), will submit to the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of Underwriters' rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States or of any State in the United States. It is further agreed that service of process in such suit may be made upon Mendes & Mount, 750 Seventh Avenue, New York, N.Y. 10019-6829 and that in any suit instituted against any one of them upon this contract, Underwriters will abide by the final decision of such Court or of any Appellate Court in the event of an appeal. The above-named are authorized and directed to accept service of process on behalf of Underwriters in any such suit and/or upon the request of the Insured (or Reinsured) to give a written undertaking to the Insured (or Reinsured) that they will enter a general appearance upon Underwriters' behalf in the event such a Suit shall be instituted. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor. Underwriters hereon hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office , as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Insured (or Reinsured) or any beneficiary hereunder arising out of this contract of insurance (or reinsurance), and hereby designate the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof. 17 (THIS IS AN APPLICATION FOR A CLAIMS MADE POLICY) APPLICATION FOR DIRECTORS' AND OFFICERS' AND COMPANY REIMBURSEMENT INDEMNITY POLICY NOTICE: THE POLICY FOR WHICH APPLICATION IS MADE (THE "POLICY"), SUBJECT TO ITS TERMS, APPLIES ONLY To ANY "CLAIM" (As DEFINED IN THE POLICY) MADE AGAINST THE DIRECTORS AND OFFICERS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED AS "COSTS, CHARGES, AND EXPENSES" ("AS DEFINED IN THE POLICY") AND "COSTS CHARGES AND EXPENSES" SHALL BE APPLIED TO THE RETENTIONS. THE POLICY DOES NOT PROVIDE FOR ANY DUTY BY UNDERWRITERS TO DEFEND THOSE INSURED UNDER THE POLICY. GENERAL INSTRUCTIONS FOR COMPLETING THIS APPLICATION: 1. Please type or print in ink. 2. Please read carefully and answer all questions. If a question is not applicable, so state. If space is insufficient to answer any question fully, attach a separate sheet. 3. The original Application must be submitted. 4. The Chairman of the Board or the President must sign and date this Application. - 1 - 18 5. This Application and all exhibits shall be held in confidence. 6. Please read the Policy for which application is made (the "Policy") prior to completing this Application. 7. The terms as used herein shall have the meaning stated in Paragraph II, Definitions, of the Policy. - -------------------------------------------------------------------------------- 1. Name of Parent Company Liz Claiborne, Inc. Address One Claiborne Avenue (Number) (Street) North Bergen, NJ 07047 (City) (State) (Zip Code) 2. The Parent Company has continuously been in business since January/1976 (New York State Incorporation) (Month)(Year) April 1981 - Company went public and mergered into a Delaware Incorporation. 3. The Parent Company has continually paid cash dividends on its: (a) Common Stock since May 1984 (b) Preferred Stock since None - 2 - 19 4. Complete the following in respect of all classes of shares issued by the Parent Company:
1 2 3 4 Preferred Common Class of shares Stock Stock * Number of shares outstanding -0- ------ 78,576,834 ------ ** Number of shares owned by ------ ------ Directors (directly and/or -0- 2,929,936 beneficially) ------ ------ *** Number of shares owned by balance of Executive Officers who are not Directors (directly and/or beneficially) -0- 11,417 ------ ------
* From 10Q Statement for First Half ended 7/2/94 ** From Proxy Statement (less currently exercisable stock options included in proxy share figures) 5. (a) Total number of wholly owned Subsidiaries at the inception date of the Policy: 34 Domestic 19 Foreign 15 List all such Subsidiaries for which coverage is requested and the date created or acquired: See attached listing -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- (a) (1) Amity Dyeing & Finishing Partnership - 50% owned (b) Total number of controlled Subsidiaries (more than 50% but less than 100% owned) at the inception date of the Policy: None Domestic Foreign ------------- ------------- - 3 - 20 List all such Subsidiaries for which coverage is requested and the date created or acquired: ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- (c) Does the Company request coverage for any entity where: (i) more than 50% of the outstanding securities representing the present right to vote for the election of directors of such entity were owned by the Parent Company and/or one or more of its subsidiaries prior to the inception date of the Policy and (2) not more than 50% of outstanding securities representing the present right to vote for the ejection of directors of such entity will be so owned at the inception date of the Policy? Yes No x --- --- If the answer is yes list all such subsidiaries for which coverage is requested, the date created or acquired and the date such entity ceased to be a subsidiary: ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- PLEASE NOTE THAT THE POLICY DOES NOT PROVIDE COVERAGE FOR ANY SUCH FORMER SUBSIDIARIES OR THEIR DIRECTORS AND OFFICERS. A REQUEST THAT COVERAGE BE PROVIDED FOR ANY SUCH FORMER SUBSIDIARIES AND ITS DIRECTORS AND OFFICERS DOES NOT BIND UNDERWRITERS TO PROVIDE SUCH COVERAGE. - 4 - 21 6. (a) Does any person or entity (other than the Company) own 10% or more of any entity described in 5.(b) above? Yes No x --- --- If yes, give details: -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- (b) does any person or entity own 10% or more of any class of shares issued by the Parent Company Yes x No --- --- If yes, give details: See attached 13G filed by FMR Corporation (Fidelity Holding Company) -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -------------------------------------------------------------- -5- 22 7. (a) Complete the following for each of the Parent company's last four fiscal years (use consolidated figures): See attached Annual Reports.
Year (000) 1993 1992 1991 1990 Total Consolidated Assets 1,236,338 1,256,308 1,170,645 984,505 Current Assets 1,004,439 1,080,966 1,013,681 852,867 Current Liabilities 254,438 248,177 249,830 244,149 Shareholders Equity 978,291 997,775 909,599 713,149 Net Income 126,924 218,824 222,748 205,800 Net Income Per Share 1.56 2.61 2.61 2.37 Dividends Per Share .44 .39 .33 .24 Sales/Revenues 2,204,297 2,194,330 2,007,177 1,728,868 Long Term Debt 1334 1434 1615 15,131 Short Term Debt -0- -0- -0- -0-
(b) Has the company at any time over the last five years been in breach of any of its debt covenants or loan agreements? Yes No x --- --- 8. Has the Company at any time over the last five years been involved in any policy dispute with any of its insurers (on any class of business)? Yes No x --- --- If yes, give details: ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- - 6 - 23 9. Give details of the Company's current directors' and officers' insurance: Insurer: Federal Insurance Company (Chubb) Limit: $25,000,000 Period: June 11, 1993 to August 11, 1993 $0 Each/All Insured Persons Retention: $500,000 Insured Organization Premium: $218,750 (including $8,750 premium for an outside Directorship Policy) 10. (a) Has the Company under consideration at the present time or does it contemplate any acquisitions, tender offers or mergers Yes No x --- --- If yes, give details: However, Company regularly reviews potential acquisition Candidates. ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- (b) Complete the following for all acquisitions made over the last five years which have increased the total assets of the company by 5% or more: Two acquisitions less than 5%. 1992 Acquisition of three Russ Tog Trademarks. 1990 Acquisition of Shoes from Licensee.
Entity Date Asset Purchase Method Acquired Acquired Value at Price Payment Date Acquired ------- -------- ------------- -------- ------- ------- -------- ------------- -------- ------- ------- -------- ------------- -------- ------- ------- -------- ------------- -------- ------- ------- -------- ------------- -------- -------
- 7 - 24 11. Has the Company ever repurchased its own shares at a price in excess of the market value at the time? Yes x No --- --- If yes, give details: See attached Rider ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- 12. Has the Company at any time over the last five years changed its accountants or external general counsel? Yes No x --- --- If yes, give details: ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- 13. Has the Company: (a) filed within the past 18 months or contemplated filing within the next 12 months any registration statement with the Securities and Exchange Commission for a public offering of securities? Yes No x --- --- If yes, furnish copy of prospectus. -8- 25 (b) issued within the past 18 months or contemplated issuing within the next 12 months any shares (common or otherwise)? Yes No x --- --- If yes, give details: Other than (1) Stock Options granted. (2) Directors shares. (3) and certain restricted shares. ----------------------------------------------------------------------- ----------------------------------------------------------------------- 14. The following officer of the Parent Company is designated to receive any and all notices from Underwriters or their authorized representative(s) concerning this insurance: Robert McKean - Vice President and Treasurer Roberta Karp - Vice President - General Counsel ----------------------------------------------------------------------- ----------------------------------------------------------------------- 15. List the date at the end of each of the last eight calendar quarters and the corresponding closing price for shares of the Parent Company's common stock: DATE PRICE 07/02/94 $21.50 04/02/94 23.75 12/25/93 21.00 09/25/93 20.125 06/26/93 30.125 03/27/93 36.625 12/26/92 42.00 09/26/92 38.125
-9- 26 16. Have any filings been made concerning the Company pursuant to Section 13.(d) of the Securities Exchange Act of 1934 during the last two years? Yes No x --- --- If yes, attach a copy of each such filing. 17. Has the Company made any filing pursuant to Section 13.(d) of the Securities Exchange Act of 1934 during the last two years? Yes No x --- --- If yes, attach a copy of each such filing. 18. What percentage of the Parent Company's common stock was sold and purchased during the last 12 months? Average daily volume of Company Common Stock traded is approximately .5% in 1993 and 1994. 19. No Claim which, if insurance had been in force similar to that now proposed would have fallen within the scope of such insurance has been made or is now pending against any person(s) proposed for insurance in the capacity of either director or officer of the Company, except as follows (if answer is none, so state): (1) Fishbaum vs. Chazen et al* (2) Ressler vs. Liz Claiborne, Inc. et al ** (3) Goldberg Family Trust vs. Chazen, et al *** (4) Schneider vs. Chazen et al *** * Action dismissed. ** Class Action. (Includes Fishbaum individually) *** Derivative Action has been consolidated. -10- 27 20. No person proposed for this insurance is cognizant of any "Wrongful Act" which he/she has reason to suppose might afford grounds for any future Claim such as would fall within the scope of the Proposed insurance, except as follows (if answer is none, go state); None - The Company has no knowledge of any person proposed for this insurance who is cognizant of any wrongful act which might afford grounds for any future claim. 21. No similar insurance on behalf of the Company has been declined, cancelled or renewal thereof refused, except as follows (if answer is none, so state): None. ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- 22. The Company has not been involved in or had any knowledge of any pending anti-trust, price-fixing, tax, copyright, patent litigation or governmental regulatory or administrative proceedings except as follows (if answer is none, so state): (1) Folio Impressions, Inc. vs. Liz Claiborne, Inc. (Copyright action) (2) A Company called Park Schiffi has threatened a Copyright lawsuit. They have a demand of $60,000. We are having settlement discussions. -11- 28 23. No fact, circumstance or situation indicating the probability of a Claim against which indemnification would be afforded by the proposed insurance is now known by any person(s) or entity(ies) applying for this insurance other than that which is disclosed in this Application. It is agreed by all concerned that if any person(s) or entity(ies) to be insured under the Policy has any knowledge of any such fact, circumstance, or situation, any Claim subsequently emanating therefrom shall be excluded from coverage under the proposed insurance. No knowledge of any pending claim except previously disclosed in this application. 24. It is warranted that the particulars and statements contained in the Application for the proposed Policy and any materials submitted herewith (which shall be retained on file by Underwriters and be deemed attached hereto, as if physically attached hereto), are the basis for the proposed Policy and are to be considered as incorporated into and constituting a part of the proposed Policy. 25. It is agreed that in the event there is any material change in the answers to the questions contained herein prior to the effective date of the Policy, the applicant will notify Underwriters and, at the sole discretion of Underwriters, any outstanding quotations may be modified or withdrawn. 26. Attached and made a part of this Application by reference are the following materials regarding the Parent Company: (a) two copies of the Last Annual Report to Stockholders (b) two certified copies of the provisions of the Charter or By-Laws covering Indemnification of Directors and Officers, and (c) two copies of the Notice to stockholders and the Proxy Statement for either the last or the next annual meeting. Underwriters are hereby authorized to make any investigation and inquiry in Connection with this Application as they may deem necessary. -12- 29 27. The undersigned declares that to the best of his/her knowledge the statements herein are true. Signing of this Application does not bind the undersigned to complete the insurance, but it is agreed that this Application, shall be the basis of the contract should a Policy be issued, and this Application will be attached to and become a part of such Policy, if issued. Underwriters are hereby authorized to make any investigation and inquiry in connection with this Application as they may deem necessary. Signed /s/ Harvey Falk -------------------------------- Harvey Falk Must Be Signed By Chairman of the Board or President of Parent Company Capacity Vice Chairman of the Board and President ------------------------------- Company Liz Claiborne, Inc. ------------------------------- Date August 5, 1994 ------------------------------- Submitted by Frank Crystal & Co. -------------------------- (Agent) Date ------------------------------- -13- 30 SUBSIDIARIES OF LIZ CLAIBORNE, INC.
DATE OF NAME: DOMICILE: INCORPORATION: Claiborne Limited Hong Kong 02/26/85 Liz Claiborne Cosmetics, Inc. Delaware 06/19/85 Liz Claiborne Accessories, Inc. Delaware 12/12/85 Liz Claiborne Accessories-Sales, Inc. Delaware 12/27/85 Liz Claiborne Export, Inc. Delaware 12/27/79 Liz Claiborne Foreign Holdings, Inc. Delaware 11/27/85 Liz Claiborne International, Limited Hong Kong 10/18/77 Liz Claiborne (Israel) Ltd. Israel 06/16/65 Liz Claiborne (Italy) Ltd. Delaware 02/06/87 L.C. Licensing, Inc. Delaware 11/30/89 Liz Claiborne Sales, Inc. Delaware 11/03/82 Liz Claiborne-Texas, Inc. Delaware 05/13/87 LCI Investments, Inc. Delaware 06/30/88 LCI Holdings, Inc. Delaware 09/30/87 Liz Claiborne (Canada) Limited Canada 12/17/88 Liz Claiborne, S.A. Costa Rica 09/20/89 L.C. Caribbean Holdings, Inc. Delaware 09/17/89 Liz Claiborne Shoes, Inc. Delaware 07/18/90 L.C. Service Company, Inc. Delaware 04/25/90 Liz Claiborne (U.K.) Limited U.K. 07/16/90 LCI - Claiborne Limited Partnership New Jersey 05/23/85 Liz Claiborne do Brasil Ltda. Brazil 02/02/91 LC/QL Investments, Inc. Delaware 04/16/91 L.C. Dyeing, Inc. Delaware 07/31/91 L.C. Augusta, Inc. Delaware 07/31/91 Textiles Liz Claiborne Guatemala, S.A. Guatemala 07/03/91 Liz Claiborne (Malaysia) SDN.BHD Malaysia 04/27/91 Liz Claiborne B.V. Netherlands 09/10/92 RTVCH Holdings, Inc. Delaware 05/11/92 Liz Claiborne Foreign Sales Corporation US Virgin Islands 1/04/93 Liz Claiborne Operations (Israel) Israel 02/22/93 1993 Limited Liz Claiborne Apparel China 02/23/94 (Shanghai) Co., Ltd. Liz Claiborne Colombia Limitada Colombia 10/19/93 Liz Claiborne De El Salvador, S.A., El Salvador 06/13/94 de C.V.
31 [LOGO] The Table of Syndicates referred to on the face of this Policy follows :
FOR LPSO USE ONLY BROKER LPSO No. & DATE FOR LPSO USE ONLY BROKER LPSO No. & Date UXO1 0811 0501 61216 27/10/94 0501 61216 27/10/94 9 10 - ----------------------------------------------------------------------------------------------------------------------------------- AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE OR PROPORTION REFERENCE OR PROPORTION REFERENCE 1 2 PERCENT PERCENT 15.0000 79 425GA4BB284C 0.8505 991 0093294AA000 15.0000 839 8416BC799040 0.5443 546 TB600D94A414 10.0000 861 11A41817V02B 6.8037 1173 ALDPAA41004P 4.0000 484 XSP292D0012Q 0.6804 1003 C671C0062038 2.0000 858 XSP292D0012Q 4.0822 190 0837N01468 5.1028 1007 GC951N94A409 2.3813 623 L0799V94ANPD THE LIST OF UNDERWRITING MEMBERS 3.4018 435 25105800 OF LLOYDS IS NUMBERED 1994/ 10 1.3607 1047 Y0191Z94A 1.3607 205 481N00242FPA 1.0206 672 C75XAE30403D 0.5103 122 CN463D94A200 1.1906 1215 426FD00546AA 1.3607 1038 RCCN03658JPL 2.0000 204 066836356401
- ----------------------------------------------------------------------------------------------------------------------------------- TOTAL LINE No. of SYND. FOR LPSO USE ONLY TOTAL LINE No. of SYND. FOR LPSO USE ONLY 78.6506 20 NYE1 13592
[SEAL] [SEAL] 32 LLOYD'S POLICY ZKA9400406/D1767-2-94 Assured: LIZ CLAIBORNE INC. [LLOYD'S LONDON LOGO] Lloyd's, London 1 Lime Street, London EC3M 7HA ----------------------------------------- The Assured is requested to read this Policy and, if it is incorrect, return it immediately to your broker for alteration. In all communications the Policy Number appearing in line one of the Schedule should be quoted. [ ] [ ] J(A) 33 LIRMA POLICY *or having agreed to pay IN CONSIDERATION of the Insured named in the Schedule hereto having paid *the premium stated in the said Schedule to [LIRMA LOGO] the Insurers named herein who have hereunto subscribed their names ("the Insurers") THE INSURERS hereby severally agree each for the proportion set against its own name to indemnify the Insured or the Insured's Executors and Administrators against loss, damage or liability to the extent and in the manner set forth herein. Provided that the aggregate liability of the Insurers shall not exceed the Sum Insured or other limits as are set forth in the Schedule. If the Insured shall make any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this Policy shall become void and all claim hereunder shall be forfeited. IN WITNESS WHEREOF the Director of Policy Signing Services of LONDON INSURANCE AND REINSURANCE MARKET ASSOCIATION ("LIRMA") has subscribed his name on behalf of each of the LIRMA Companies and (where the Companies Collective Signing Agreement ("CCSA") is being implemented) on behalf of the Leading CCSA Company which is a LIRMA member and authorised to sign this Policy (either itself or by delegation to LIRMA) on behalf of all the other CCSA Companies. Signed: /s/ Maria Louise Rossi -------------------------------------- Director of Policy Signing Services Date as in the Schedule. 34
LIRMA Whether The Insurers Company CCSA Proportion Reference Numbers Number or not CNA INTERNATIONAL C4009 6.8037% 355527941 REINSURANCE COMPANY LTD. AEGON INSURANCE E2001 0.6804% K01SC0004435 COMPANY (UK LTD. ZURICH RE (UK) LTD. Z4508 2.7215% Z70003635494 LIBERTY MUTUAL INSURANCE L2805 5.4429% 0400420194 COMPANY (UK) LTD.
35 SEVERAL LIABILITY NOTICE The subscribing insurers' obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. LSW 1001 (Insurance) 08/94 36 ATTACHING TO AND FORMING PART OF POLICY NO. ZKA9400406/D1767-2-94 SCHEDULE OF SUM ASSURED LIMIT OF LIABILITY: US$10,000,000 in the Aggregate each Policy Period Excess of: US$15,000,000 in the Aggregate each Policy Period RETENTIONS: US$ NIL each of the directors and officers each claim but in no event exceeding US$ NIL in the aggregate each claim all directors and officers US$ 500,000 each claim under company reimbursement section.
37 THE SCHEDULE ================================================================================ The Insured LIZ CLAIBORNE INC. 1 Claiborne Avenue, North Bergen, New Jersey 07047 - -------------------------------------------------------------------------------- Premium US $14,866.08 part of US $95,000.00 Sum Insured As set forth in the attached schedule The Interest Insured Directors and Officers and Company Reimbursement Indemnity as more fully defined in the undermentioned policy. Insured Perils EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY. 15.6485% part of 100% of Limits as set forth herein - -------------------------------------------------------------------------------- Period of Insurance 11th August 1994 11th August 1995 both days at From To Noon Standard Time at the Principal Address stated herein and for such further period or periods as may be mutually agreed. - -------------------------------------------------------------------------------- COINSURANCE CLAUSE It is warranted that this Policy shall run concurrently with and be subject to the same terms, provisions, and limitations as are contained in Policy No. ZKA9400406/D1767-2-94 issued by CERTAIN UNDERWRITERS AT LLOYDS, LONDON covering the identical subject matter and risk. - -------------------------------------------------------------------------------- 38 No. ZKA9400406/D1767-2-94 LIRMA POLICY ================================================================================ Name LIZ CLAIBORNE INC. -------------------------------- Expiry Date 11th August 1995 ------------------------- EX-10.J.I 5 SUMMARY OF EXTENSION 1 EXHIBIT 10(j)(i) SUMMARY OF THE EXTENSION OF THE EXCESS COVERAGE DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY NO. ZKA9400406 (THE "EXCESS INSURANCE POLICY") The Excess Insurance Policy has been extended from August 11, 1995 to August 11, 1996. The annual premium is $90,000. EX-10.K 6 DESCRIPTION OF INCENTIVE BONUS PLAN 1 EXHIBIT 10(k) DESCRIPTION OF LIZ CLAIBORNE, INC. 1995 SALARIED EMPLOYEE INCENTIVE BONUS PLAN For the 1995 fiscal year, Liz Claiborne, Inc. maintained a bonus plan for full time salaried employees under which bonuses were earned based upon (i) the achievement of targeted levels of divisional direct operating income; (ii) where applicable, department performance consideration and (iii) growth in earnings per share, subject to certain terms and conditions. A similar bonus plan is anticipated for 1996. EX-10.M 7 AMENDED AND RESTATED STOCK OWNERSHIP PLAN 1 EX-10.M LIZ CLAIBORNE, INC. OUTSIDE DIRECTORS' 1991 STOCK OWNERSHIP PLAN As Amended and Restated Effective for Awards Granted On or After March 22, 1996 I. GENERAL 1.1 Purpose. The purpose of the Liz Claiborne, Inc. Outside Directors' 1991 Stock Ownership Plan (the "Plan") is to provide an incentive to those directors of Liz Claiborne, Inc. (the "Company") who are not employees of the Company (i) to serve on the board of directors of the Company (the "Board"), (ii) to make a long-term investment in the Company and (iii) to maintain and enhance the Company's long-term performance, and also to afford such directors an opportunity to defer part or all of their director fees and Common Stock Awards made pursuant to Article II hereof. 1.2 Administration. The terms of the awards under Articles II and III hereof are set forth herein and may not be varied other than by amendment of the Plan in accordance with Section 5.5. To the extent that any administrative action is required in connection with the Plan, such action shall be taken by the Board or, in the discretion of the Board, by a committee comprised of the members of the Board who are not Outside Directors (the "Committee"). The determination of the Board or the Committee, as the case may be, on all matters relating to the Plan shall be final, binding and conclusive. 1.3 Persons Eligible for Awards. Only Outside Directors shall be eligible to participate in this Plan. As of any applicable date, an Outside Director is a person who is a member of the Board, is not an employee of the Company or any subsidiary thereof, and is not eligible to participate in any other Company stock-related plan. 1.4 Shares Available for Awards. (a) Shares of common stock of the Company ("Common Stock") transferred pursuant to awards under the Plan shall be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company's treasury or acquired by the Company for purposes of the Plan. Subject to Section 1.4(b), the aggregate number of shares of Common Stock which may be transferred pursuant to awards under the Plan shall not exceed one-half of one percent (0.50%) of the number of shares issued and outstanding from time to time. For purposes of this Section 1.4(a), the number of shares transferred upon exercise of an option shall be calculated after deducting any shares tendered to the Company in payment upon such exercise. Any shares of Common Stock that are subject to an option under the Plan and that have not been transferred at the time such option is cancelled or terminated shall again be available for awards under the Plan. (b) If there is any change in the outstanding shares of Common Stock by reason of a stock dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or by reason of any merger, consolidation, spinoff or other corporate reorganization in which the Company is the surviving corporation, the Board or the Committee, as the case may be, shall equitably adjust the number of shares of Common Stock awarded thereafter in each grant under Article II, the number of shares subject to each stock option then outstanding or subsequently granted, and the exercise price of each such option. After any such adjustment, the number of shares subject to each award shall be rounded to the nearest whole number. 1.5 Fair Market Value. For all purposes hereunder, the Fair Market Value of a share of Common Stock on any date shall be the closing price of a share of Common Stock on the New York Stock Exchange on the last preceding day for which such a closing price was reported. II. AWARDS OF COMMON STOCK 2.1 Awards. (a) Awards of shares of Common Stock ("Common Stock Awards") shall be made to Outside Directors as follows: (i) An initial award shall be made to each Outside Director as of the date on which the stockholders initially approve this Plan. A-1 2 (ii) An award shall be made to each Outside Director newly elected to the Board on or after the date on which the stockholders approve this amended and restated Plan, effective as of the date of such election. (iii) An award shall be made to each Outside Director as of January 1, 1992 and the first business day of each fiscal year of the Company thereafter (each, an "Award Date"); provided, however, that effective December 30, 1996, no award under this subparagraph (iii) shall be made to an Outside Director who, as of the Award Date, has been an Outside Director for less than six months. (b) Each award shall comprise a number of shares of Common Stock equal to the quotient of $10,000 divided by the Fair Market Value of a share of Common Stock on the Award Date. Effective the date on which the stockholders approve this amended and restated Plan, $15,000 shall be substituted for $10,000 in the calculation described in the preceding sentence. If the award thus calculated is not a whole number of shares, it shall be rounded down to the nearest whole number. 2.2 Payment. In the event that any shares of Common Stock awarded pursuant to Section 2.1(a) are newly issued by the Company, the recipient shall pay to the Company, in cash, an amount equal to the par value of such shares. 2.3 Nontransferability. Shares of Common Stock awarded under this Article II shall be nontransferable for a period of three (3) years following the date of award; provided, however, that all restrictions on the transferability of such shares shall terminate on (i) the date of the holder's death or (ii) the first anniversary of the termination of the holder's membership on the Board. The Company shall take such measures as it deems advisable to implement the restriction on transferability, which measures may include the placing of an appropriate legend on any stock certificates issued to evidence shares awarded hereunder. III. AWARDS OF STOCK OPTIONS 3.1 Awards. Options to purchase shares of Common Stock shall be granted to Outside Directors as follows: (a) An option for 1,000 shares shall be granted to each Outside Director as of the date on which the stockholders approve this amended and restated Plan. Thereafter, an option for 1,000 shares shall be granted to each Outside Director newly elected to the Board, effective as of the date of such election. (b) An option for 1,000 shares shall be granted to each Outside Director as of December 30, 1996 and each Award Date thereafter. 3.2 Terms of Options. (a) The exercise price per share of Common Stock under each option shall be equal to the Fair Market Value of a share of Common Stock on the grant date. (b) Each option granted under the Plan shall have a term of 10 years and shall become cumulatively exercisable as to 25 percent of the shares subject thereto on each of the first and second anniversaries of the date of grant and as to the remaining 50 percent on the third anniversary. An option may be exercised from time to time for all or part of the shares as to which it is then exercisable. (c) Notwithstanding paragraph (b) of this Section 3.2, all options granted under this Plan shall become fully exercisable upon the grantee's termination of service on the Board on account of (i) death or (ii) retirement after at least five years of Board membership. 3.3 Exercise of Options. (a) An option shall be exercised by the filing of a written notice with the Company, on such form and in such manner as the Company shall prescribe, accompanied by payment for the shares being purchased. Such payment shall be made: (i) in cash, by certified or official bank check (or the equivalent thereof acceptable to the Company) for the full option exercise price; or (ii) by delivery of shares of Common Stock acquired at least six months prior to the option exercise date and having a Fair Market Value as of the exercise date equal to all or part of the option exercise price and cash or a certified or official bank check (or the equivalent thereof acceptable to the Company) for any remaining portion of the full option exercise price. A-2 3 (b) Promptly after receiving payment of the full option exercise price, the Company shall deliver to the Outside Director, or to such other person as may then have the right to exercise the option, a certificate for the shares of Common Stock for which the option has been exercised. (c) If an optionee's membership on the Board terminates for any reason other than cause, he may exercise any outstanding option to the extent that he was entitled to exercise it on the date of termination. Exercise must occur by the first anniversary of termination on account of death, by the third anniversary of termination on account of retirement with at least five years of Board membership, and otherwise within 90 days of termination, but in no event after the expiration date of the option. Exercise following the optionee's death shall be made only by the optionee's executor or administrator, unless his or her will specifically disposes of the option, in which case exercise shall be made only by the recipient of such specific disposition. Except as provided in this paragraph (c), any unexercised option held by a person who is no longer a member of the Board shall be null and void. (d) For purposes of this Plan, a "Change in Control" shall be deemed to have occurred upon the happening of any of the following events, unless the Board shall have within ten days thereafter resolved that such event was not a Change in Control for purposes of this Plan: (i) any "person," including a "group," as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act (as defined) and the rules promulgated thereunder, becomes the beneficial owner, directly or indirectly, whether by purchase or acquisition or agreement to act in concert or otherwise, of 20% or more of the outstanding shares of Common Stock of the Company; (ii) a cash tender or exchange offer for 50% or more of the outstanding shares of Common Stock of the Company is commenced; (iii) the shareholders of the Company approve an agreement to merge, consolidate, liquidate, or sell all or substantially all of the assets of the Company; or (iv) two or more directors are elected to the Board without having previously been nominated and approved by the members of the Board incumbent on the day immediately preceding such election. (e) Notwithstanding any other provision of this Plan, any option outstanding on the date of a Change in Control, whose grant date was at least one year prior thereto, shall become fully vested and immediately exercisable. IV. DEFERRAL OF FEES AND COMMON STOCK AWARDS 4.1 Election To Defer. (a) Prior to the beginning of any calendar year, each Outside Director may elect to defer receipt of all or any part of the retainer fees and meeting fees (collectively, "Director Fees"), and of the Common Stock Awards provided for in Article II hereof, that would otherwise become payable to him during such calendar year and succeeding calendar years. An individual who becomes an Outside Director during a calendar year and who was not a director of the Company on January 1 of such year may, prior to the commencement of his term as director, make the election described in the preceding sentence, applicable for the remainder of such calendar year and for succeeding calendar years. An individual who is an Outside Director on the date on which the stockholders approve this amended and restated Plan may make a similar election. (b) The Distribution Date on which payment of amounts deferred pursuant to an election hereunder (including imputed income) shall be made or commenced shall be the January 1 following termination of the Outside Director's membership on the Board, unless an alternative date is specified at the time of such election. Such alternative date may be any month end that is at least three years subsequent to the date of the election. (c) Each deferral election shall specify the method by which payment is to be made of all amounts deferred pursuant to such election (including imputed income). Such method shall be either a lump-sum payment or annual installments (not to exceed 10), as set forth in Section 4.4. If Director Fees otherwise payable in cash are deferred, the deferral election shall specify whether the deferred amounts shall be deemed invested in shares of Common Stock or shall be credited with interest, as set forth in Section 4.3. A-3 4 (d) Each deferral election shall be made by written notice in accordance with rules established by the Company, and shall remain in effect until terminated by written notice. A notice of termination shall be effective as of December 31 in the year in which such notice is given, and shall apply only with respect to Director Fees and Common Stock Awards becoming payable thereafter. An Outside Director who terminates a deferral election may make a new election pursuant to Section 4.1(a) effective for future calendar years. 4.2 Deferral Accounts. (a) All amounts deferred under Section 4.1 shall be credited to a bookkeeping account maintained by the Company in the name of the Outside Director (the "Deferral Account"), which shall have two subaccounts, called the "Cash Subaccount" and "Company Stock Subaccount." Deferred Director Fees which would otherwise be payable for attending a meeting of the Board or of a committee thereof shall be credited to the Deferral Account as of the day of such meeting; Director Fees which would otherwise be payable as a retainer shall be credited to the Deferral Account as of the day on which they would otherwise be payable. A deferred Common Stock Award shall be credited as of the day on which it would otherwise be payable. (b) Deferred Director Fees otherwise payable in cash shall be credited to the Cash Subaccount unless the Outside Director elects otherwise pursuant to Section 4.1(c), in which case the deferred amount shall be credited to the Company Stock Subaccount as a number of phantom shares (including any fractional share) of Common Stock equal to the quotient of (i) such amount divided by (ii) the Fair Market Value of a share of Common Stock on the date such amount is credited. Deferred Common Stock Awards and deferred Director Fees otherwise payable in Common Stock shall be credited to the Company Stock Subaccount as an equal number of phantom shares of Common Stock. 4.3 Imputed Income on Deferral Accounts. (a) The balance standing credited to each Cash Subaccount as of the last business day of each month shall be increased by an amount reflecting interest on such balance for such month calculated using one-twelfth of the then applicable Plan Interest Rate. The Plan Interest Rate applicable during any year shall be a rate one percentage point in excess of the highest prime rate (or base rate) reported for the first business day of such year in the money rates column or section of The Wall Street Journal as the rate in effect for corporate loans at large U.S. money center commercial banks (whether or not such rate has actually been charged by any such bank) as of such date. In the event The Wall Street Journal ceases publication of such a prime rate, the prime rate (or base rate) announced for the applicable date by Citibank, N.A. in New York City (whether or not such rate has actually been charged by such bank) shall be used. (b) Whenever a cash dividend is paid on Common Stock, each Company Stock Subaccount shall be credited as of the payment date with a number of phantom shares (including any fractional share) equal to the quotient of (i) an amount equal to the cash dividend payable on a number of shares of Common Stock equal to the number of phantom shares (excluding any fractional share) standing credited to such Subaccount at the record date divided by (ii) the Fair Market Value on such payment date. In the event of a stock dividend or distribution, stock split, recapitalization or the like, each Company Stock Subaccount shall be credited as of the payment date with a number of phantom shares (including any fractional share) equal to the number of shares (including any fractional share) of Company Stock payable in respect of shares of Company Stock equal in number to the number of phantom shares (excluding any fractional share) standing credited to such Subaccount at the record date. 4.4 Distribution. (a) On each Distribution Date, the Company shall pay (or commence installment payment of) the amount standing credited to the Outside Director's Deferral Account as the result of all deferrals for which such Distribution Date is applicable. Distributions from the Cash Subaccount shall be made in cash. Distributions from the Company Stock Subaccount shall be made in shares of Common Stock equal in number to the number of phantom shares to be distributed, with a cash payment for any fractional shares. If the Outside Director has elected installment payments pursuant to Section 4.1(c), each annual installment payment shall be an amount equal to the balance standing credited to the Deferral Account as of the payment date divided by the number of installments (including the one then due) remaining to be paid. Amounts standing credited to a Deferral Account during the period in which installments are paid shall be adjusted to reflect the crediting of income in accordance with Section 4.3. A-4 5 (b) In the event of an Outside Director's death while serving as a member of the Board, or after termination of service but while receiving installment payments, the entire amount standing credited to his or her Deferral Account shall be paid as soon as practicable in the manner set forth in Section 4.4(d)(ii). (c) Notwithstanding any other provision of this Plan, phantom shares credited to an Outside Director's Company Stock Subaccount on the date of a Change in Control shall be converted to cash and credited to the Outside Director's Cash Subaccount. Such conversion shall be made using the highest Fair Market Value during the period extending ten business days before and ten business days after the Change in Control. (d) Payments hereunder shall be made to the Outside Director except that: (i) in the event that the Outside Director shall be determined by a court of competent jurisdiction to be incapable of managing his or her financial affairs, and if the Company has actual notice of such determination, payment shall be made to the Outside Director's personal representative(s); and (ii) in the event of the Outside Director's death, payment shall be made to the last beneficiary designated by the Outside Director for purposes of receiving such payment in such event in a written notice delivered to the Company; provided, that if such beneficiary has not survived the Outside Director, or no valid beneficiary designation is in effect, payment shall instead be made to the Outside Director's estate. 4.5 Statements. The Company shall provide an annual statement to each Outside Director showing such information as is appropriate, including the aggregate amount standing credited to the Deferral Account, as of a reasonably current date. 4.6 Unfunded Status. The Company's obligation to make payments from a Deferral Account shall be a general obligation of the Company and such payments shall be made from the Company's general assets. An Outside Director shall be a general unsecured creditor of the Company, and the creation of a Deferral Account shall not create or be construed to create a trust or fiduciary relationship of any kind between the Company and the Outside Director, his or her designated beneficiary or any other person, or a security interest of any kind in any property of the Company in favor of the Outside Director or any other person. Deferral arrangements created hereunder are intended to be unfunded and no trust, security, escrow, or similar account shall be required to be established for the purposes of payment hereunder. However, the Company may in its discretion establish a "rabbi trust" (or other arrangement having equivalent taxation characteristics under the Internal Revenue Code or applicable regulations or rulings) to hold assets, subject to the claims of the Company's creditors in the event of insolvency, for the purpose of making payments hereunder. If the Company establishes such a trust, amounts paid therefrom shall discharge the obligations of the Company hereunder to the extent of the payments so made. V. MISCELLANEOUS 5.1 Nonalienation. Neither the right of an Outside Director to receive awards under the Plan, nor any option granted hereunder, nor an Outside Director's interest in his or her Deferral Account, shall be assignable or transferable in any manner. 5.2 Nature of Payments. All awards hereunder shall be in consideration of services performed for the Company or for its subsidiaries by the recipient. Such awards shall constitute special incentive payments to the recipient and shall not, unless otherwise determined by the Board, be taken into account in computing the amount of his or her fees for service on the Board. 5.3 Limitation of Rights. This Plan shall not be construed to confer on any Outside Director any right to be or remain a member of the Board or to receive any, or any particular rate of, director's fees. 5.4 Withholding. The Company shall deduct from any distribution hereunder any amounts required, in the opinion of the Company, for federal, state or local withholding tax purposes. 5.5 Amendment of the Plan. The Board may, at any time, suspend or terminate the Plan or revise or amend it in any respect whatsoever; provided, however, that Sections 1.3 and 2.1, and Article III, may not be amended more than once every six months except as may be necessary to comply with changes in the Internal Revenue Code, or as permitted under rules promulgated under Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"); and further provided, that no amendment shall be effective unless and until it has A-5 6 been duly approved by the shareholders if the failure to obtain such approval would adversely affect the compliance of the Plan or any other plan of the Company with the requirements of Rule 16b-3 under the Exchange Act or with the requirements of any other applicable law, rule or regulation. No amendment that materially impairs the rights or materially increases the obligations of a grantee under an outstanding award shall be made except with the consent of the grantee (or the grantee's successor hereunder). 5.6 Registration of Shares. Nothing in the Plan shall be construed to require the Company to register, under the Securities Act of 1933, any shares of Common Stock awarded, or transferred upon exercise of an option, under the Plan. 5.7 Section Headings. The section headings contained herein are for purposes of convenience only and are not intended to define or limit the contents of the sections. 5.8 Effective Date and Term of Plan. (a) The Plan as amended and restated was adopted by the Board on March 22, 1996, subject to approval by the Company's stockholders. If such approval is not obtained prior to the first anniversary of adoption of the amended and restated Plan, the amendments incorporated herein shall be without effect and the Plan shall remain in effect as adopted on November 21, 1991 and approved by the stockholders on May 14, 1992. (b) The Plan as amended and restated shall terminate on March 22, 2006. Awards outstanding upon Plan termination shall remain in effect in accordance with their terms. 5.9 Governing Law. All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflict of laws. A-6 EX-10.S 8 DESCRIPTION OF SUPPLEMENTAL LIFE 1 EXHIBIT 10(s) DESCRIPTION OF SUPPLEMENTAL LIFE INSURANCE PLANS Vice Presidents of the Liz Claiborne, Inc. (the "Company") receive universal life insurance policies which provide coverage equal to two times annual base salary. The Company pays the premiums on each policy during the employment period, enabling the employee to have a portable life insurance policy with a minimal cash surrender value. EX-10.W 9 DESCRIPTION OF BONUS DEFFERAL PLAN 1 EXHIBIT 10(w) DESCRIPTION OF THE LIZ CLAIBORNE, INC. BONUS DEFERRAL PLAN In 1995, the Board of Directors of Liz Claiborne, Inc. (the "Company") adopted a bonus deferral plan (the "Bonus Plan") for executives eligible to participate in the Company's Supplemental Executive Retirement Plan (the "SERP"). Similar to the SERP, the Bonus Plan is intended to cover a select group of management or highly compensated employees, and no executive may participate unless he or she is affected by the Internal Revenue Code ceiling on compensation that must be taken into account under the tax-qualified plans ($150,000 for 1995). The value of a participant's account is paid in cash following termination of employment, provided that participants can elect to defer all of part of their annual bonus for up to ten years after termination of employment. The Plan is unfunded, and participants have the status of general creditors of the Company. EX-10.X.I 10 AMENDMENT TO THE EMPLOYMENT AGREEMENT 1 Liz Claiborne, Inc. 1441 Broadway New York, New York 10018 November 20, 1995 Mr. Paul R. Charron 70 Oxridge Lane Darien, Connecticut 06820 Dear Paul, In light of your promotion to the positions of Chief Executive Officer and President of Liz Claiborne, Inc. ("Company"), you and the Company desire to amend certain aspects of your employment and compensation arrangements, including certain of those contained in your Employment Agreement with the Company dated May 9, 1994 ("Employment Agreement") and your Restricted Stock Agreement with the Company, dated as of May 9, 1994 ("RS Agreement"). Unless otherwise noted, capitalized terms used but not defined in this letter shall have the meanings given such terms in the Employment Agreement. We hereby agree as follows: 1. Section 1 of the Employment Agreement is hereby amended and restated to read in its entirety as follows: "The Company hereby employs you, and you hereby accept such employment and agree to serve the Claiborne Group, upon the terms and conditions hereinafter set forth, for a term commencing on May 9, 1994 ("your First Day") and (unless sooner terminated as hereinafter provided) expiring on April 30, 1998 ("your term of employment"). Thereafter, your term of employment shall be extended on each May 1 thereafter for an additional twelve month period, unless either you or the Company shall otherwise notify the other of an election not to so renew by the preceding March 1." 2. Section 2(a) of the Employment Agreement is hereby amended and restated to read in its entirety as follows: "During your term of employment, you will hold the titles and offices of, and serve in the positions of, President and Chief Executive Officer of the Company, or such more senior title(s) and office(s) as the Board of Directors of the Company (the "Board of Directors") may assign to you. You shall report to the Board of 2 Directors and shall perform such specific duties and services as President and Chief Executive Officer (including service as an officer, director or equivalent position of any subsidiary, affiliated company or venture of the Claiborne Group, without additional compensation) as the Board of Directors shall reasonably request consistent with your position. Your performance shall be reviewed periodically by the Board of Directors." 3. The first sentence of Section 4(a) of the Employment Agreement is hereby amended and restated to read in their entirety as follows: "Effective as of May 11, 1995, the Company will pay you a base salary at an annual rate of not less than Seven Hundred Twenty-Five Thousand Dollars ($725,000), subject to annual review by the Compensation Committee of the Board of Directors (the "Compensation Committee") and, in the discretion of such Committee, increase from time to time. 4. Section 4(b) of the Employment Agreement is hereby amended and restated to read in its entirety as follows: "During your term of employment, you will participate, in accordance with and subject to the terms and conditions thereof, in the Company's Section162(m) Cash Bonus Plan." 5. Section 7(b) of the Employment Agreement is hereby amended and restated to read in its entirety as follows: "In the event that your term of employment is terminated (other than upon your death or Disability) during your term of employment (i) by the Company other than for Cause or (ii) by you for Good Reason, then the Company shall pay to you an amount equal to your accrued but unpaid base salary through the date of such termination and, so long as you shall not have breached your obligations to the Claiborne Group under Sections 8 and 9 hereof (without limitation to any other remedy available to the Company), the Company shall provide you with coverages substantially identical to those provided to other similarly situated senior executives of the Claiborne Group in its medical, dental, long-term disability and life insurance programs (subject to insurability at standard rates) for 12 months following the date of such termination; in such event, the Company agrees that your rights to continued medical coverage pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (your "COBRA" rights) shall be deemed to commence after the expiration of such 12-month period. In addition, in the event that your term of employment is terminated (other than upon your death or Disability) during your term of employment (i) by the Company other than for Cause or 3 (ii) by you for Good Reason (A) prior to the occurrence of a Change of Control (as hereinafter defined), the Company shall pay to you, as and for a severance payment, the sum of $1,750,000; or (B) on or after the occurrence of a Change of Control, the Company shall pay to you, as and for a severance payment, the sum of $2,250,000. For the purposes of this Agreement, (a) termination of employment hereunder by you for "Good Reason" shall mean your termination of your employment, upon notice given by you to the Company within one (1) year following your being removed from, or the assignment to you of duties inconsistent with, your position as described in Section 2(a), in either case without your consent, which termination shall be effective 30 days after prompt notice of such circumstances by you to the Company, if such circumstances have not been cured prior to such date, and (b) the term "Change of Control" shall have the meaning ascribed to the term "Change in Control" in paragraph 3.7 of the Company's 1992 Stock Incentive Plan; provided that for the purposes of this Agreement, clause (ii) of such definition shall not apply." 6. The following Section 2.5 is hereby added to the RS Agreement: "2.5. Notwithstanding any provision to the contrary contained in this Agreement, upon your death, or Disability during your term of employment (as such terms are defined in your employment agreement with the Company as the same may be amended from time to time (your "Employment Agreement")), or in the event that your term of employment is terminated by you for Good Reason on or after the occurrence of a Change of Control (as such terms are defined in your Employment Agreement), restrictions shall thereupon lapse as to all theretofore unvested Restricted Shares, and such lapse date shall be deemed the Vesting Date of such shares for purposes of this Agreement." 7. Except to the extent specifically amended hereby, the provisions of the Employment Agreement and of the RS Agreement shall remain unmodified, and as amended herein the Employment Agreement and RS Agreement remain in full force and effect. If the foregoing correctly sets forth your understanding, please indicate your acceptance by executing the enclosed copy of this letter in the space provided below, 4 following which this will be a legally binding amendment to the Employment Agreement and RS Agreement as of the date first written above. Very truly yours, LIZ CLAIBORNE, INC. By:__________________________ Jerome A. Chazen, Chairman ACCEPTED AND AGREED: _____________________ Paul R. Charron EX-21 11 LIST OF SUBSIDIARIES 1 EXHIBIT 21 S U B S I D I A R I E S O F L I Z C L A I B O R N E, I N C. Claiborne Limited Hong Kong Liz Claiborne Cosmetics, Inc. Delaware Liz Claiborne Accessories, Inc. Delaware Liz Claiborne Accessories-Sales, Inc. Delaware Liz Claiborne Export, Inc. Delaware Liz Claiborne Foreign Holdings, Inc. Delaware Liz Claiborne International Limited Hong Kong Liz Claiborne (Israel) Ltd. Israel Liz Claiborne (Italy) Ltd. Delaware L. C. Licensing, Inc. Delaware Liz Claiborne Sales, Inc. Delaware Liz Claiborne-Texas, Inc. Delaware LCI Investments, Inc. Delaware LCI Holdings, Inc. Delaware Liz Claiborne (Canada) Limited Canada Liz Claiborne, S.A. Costa Rica L.C. Caribbean Holdings, Inc. Delaware Liz Claiborne Shoes, Inc. Delaware L. C. Service Company, Inc. Delaware Liz Claiborne Europe U.K. LCI - Claiborne Limited Partnership New Jersey Liz Claiborne do Brasil Ltda. Brazil LC/QL Investments, Inc. Delaware L.C. Dyeing, Inc. Delaware L.C. Augusta, Inc. Delaware Textiles Liz Claiborne Guatemala, S.A. Guatemala Liz Claiborne (Malaysia) SDN.BHD Malaysia Liz Claiborne B.V. Netherlands RTVCH Holdings, Inc. Delaware Liz Claiborne Foreign Sales Corporation US Virgin Islands Liz Claiborne Operations (Israel) 1993 Limited Israel Liz Claiborne Colombia Limitada Colombia Liz Claiborne De El Salvador, S.A., de C. V. El Salvador L.C.I. Fragrances, Inc. Delaware EX-23 12 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statements File Nos. 2-77590, 2-95258, 2-33661 and 33-51257. /s/ Arthur Andersen New York, New York March 29, 1996 EX-27 13 FINANCIAL DATA SCHEDULE
5 0000352363 LIZ CLAIBORNE, INC. 1000 YEAR DEC-30-1995 DEC-30-1995 54722 383128 126053 0 393363 1065211 442312 202845 1329243 306897 0 0 0 88219 900007 1329243 2081630 2081630 1290929 1290929 600471 0 689 203114 76200 126914 0 0 0 126914 1.69 1.69
EX-99.29 14 UNDERTAKINGS 1 EXHIBIT 29 To Be Incorporated By Reference Into Registration Statements on Forms S-8 (File Nos. 2-77590, 2-95258, 2-33661 and 33-51257) UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. -----END PRIVACY-ENHANCED MESSAGE-----